Kazatomprom Revises Production Targets as Supply Chain Issues Persist

National Atomic Company Kazatomprom JSC (KAP), the world’s largest uranium producer, has released its consolidated financial results for the first half of 2024, prepared in accordance with International Financial Reporting Standards (IFRS). Alongside the financial update, the Company has also announced significant adjustments to its 2025 production plans, changes in subsoil use agreements, and a key management transition.

Corporate Update: Adjustments in Subsoil Use Agreements

Kazatomprom has been navigating challenges related to delays in the construction of surface facilities and infrastructure at several newly developed uranium deposits. These delays, primarily due to extended timelines for project design approval, have significantly impacted production schedules. As a result, the Company is revising its production volume obligations under the Subsoil Use Agreements for specific entities.

Notably, JV Budenovskoye LLP and Appak LLP are expected to introduce changes to their current Subsoil Use Agreements, subject to governmental approval. If approved, these adjustments will be reflected in the upcoming Competent Person’s Report (CPR). The revised production schedules are as follows:

• JV Budenovskoye LLP:
• 2024: 500 tonnes (revised from 2,500 tonnes)
• 2025: 1,300 tonnes (revised from 4,000 tonnes)
• 2026: 3,750 tonnes (revised from 6,000 tonnes), with nameplate capacity of 6,000 tonnes now expected no earlier than 2027.
• Appak LLP:
• Annual mining capacity: 800 tonnes (revised from 1,000 tonnes).

Additionally, Semizbay-U LLP and Baiken-U LLP have signed addendums to their Subsoil Use Agreements, adjusting production schedules to align with actual output. Semizbay-U LLP's agreement has also been extended until 31 December 2030. Moreover, JV KATCO LLP, on 30 April 2024, signed Amendment 12 to its Subsoil Use Agreement with the Ministry of Energy of the Republic of Kazakhstan, updating the 2024 production schedule to 2,500 tonnes (down from 3,400 tonnes) and setting a target to return to the 4,000-tonne level by 2026.

2025 Production Plan: Revisions Amid Sulphuric Acid Supply Uncertainty

Kazatomprom had previously indicated that its 2025 production intentions might be affected if construction delays and limited access to sulphuric acid persisted. Given the ongoing challenges, the Company has revised its 2025 production forecast, lowering it from the initial range of 30,500-31,500 tonnes of uranium (tU) to a new estimate of 25,000-26,500 tU, representing approximately 12% growth compared to the 2024 guidance.

The significant reduction in the 2025 production plan is largely attributed to the delays at JV Budenovskoye LLP, where production is now expected to be 1,300 tU, a decrease of more than 65% from the previously approved 4,000 tU. Additionally, the continued uncertainty surrounding sulphuric acid supplies poses a risk to production rates across different mining entities, with varying impacts depending on the geological structure of the deposits.

Despite these challenges, Kazatomprom remains committed to fulfilling its 2025 contractual obligations to all existing clients. The Company maintains a comfortable level of inventory to ensure it can meet delivery commitments while optimizing resource utilization. Furthermore, Kazatomprom typically reserves a portion of its annual production as uncommitted, allowing for flexibility in responding to market changes and capitalizing on new opportunities.

Given the high level of uncertainty related to sulphuric acid supply and construction delays, no decisions have been made regarding mine development activity and production volumes for 2026 and beyond. The Company plans to announce its 2026 production plans no earlier than mid-2025, as part of its 2025 half-year financial results disclosure.

Management Transition: New Chief Financial Officer

Kazatomprom has announced that Sultan Temirbayev, Chief Financial Officer (CFO) and member of the Management Board, has resigned from his role effective 19 August 2024. Mr. Temirbayev has served as CFO since August 2023.

Marat Tulebayev is expected to succeed Mr. Temirbayev as CFO, pending corporate approval. Mr. Tulebayev brings 18 years of extensive experience to the role, including a decade in various positions at Kazatomprom. He played a key role in preparing the Company for its initial public offering (IPO) and most recently served as the CEO of the Kazakhstan Investment Development Fund. His expertise and deep understanding of Kazatomprom's operations are expected to be invaluable as the Company navigates its current challenges and pursues its strategic objectives.