Kazatomprom Reports 2023 Financial Results, Warns of Uranium Supply Shortfall

Major mining company Kazatomprom (LSE:KAP,OTC Pink:NATKY) released its financial results for 2023 this past Friday (March 15), showing a strong response to much-improved uranium market dynanics.

The company's consolidated revenue grew by KZT 1,434,635 million (US$3.19 billion), up 43 percent from 2022.

This robust performance was influenced by various factors. Firstly, the uranium sector experienced an overall improvement, with the average annual price increasing by slightly over 20 percent in 2023. The period was significant for the industry as a whole, with the commodity hitting 15 year highs and closing the year at US$90 per pound.

While Kazatomprom's U3O8 production experienced a slight 2 percent decline from 2022, its sales volume rose 10 percent. The company attributes this discrepancy to buyers choosing to "flex up" their purchases.

Kazatomprom CEO Meirzhan Yussupov also commented that changes in energy security sentiment have led to increased demand for uranium as a stable, low-carbon energy source.

"The Company appreciates being a part of the energy security agenda. With the continuing global geopolitical uncertainty and risks, and continuous talks on the bifurcation of the market, Kazatomprom is located in an ESG-compliant and low-risk jurisdiction is fully capable of keeping its leadership position as a reliable supplier of natural uranium and is ready to secure utilities' needs in diversifying their supply sources," he said in a press release.

Kazatomprom’s current market position also remains stable — it said it is hedging the effects of the Russia-Ukraine conflict by receiving its revenue and financing in US dollars, mitigating currency risks.

However, the company is not without headwinds. On February 1, it cut its 2024 production guidance to 10,900 to 11,900 metric tons of U3O8 on an attributable basis. The reduction was first mentioned in January, and Kazatomprom has primarily attributed it to difficulties in sourcing sulfuric acid, which plays a key role in uranium extraction.

Moving forward, Kazatomprom said it is fully committed to pursuing its role as a stakeholder in sustainable energy development. As part of its 2023 to 2030 agenda, the company has approved radioactive waste and water resource management policies to be integrated with its existing processes and operations.

Uranium's recent strong price action comes after a long slump caused following the Fukushima nuclear accident. However, with the depletion of excess supply and growing global interest in nuclear energy, prices have improved.

Looking forward, Kazatomprom warned that it has concerns about the ability of uranium producers to meet demand.

"Although some of the producers made decisions to restart idled capacity and launch new production in the mid-2020s, including ourselves, it will not be sufficient to cover uranium requirements post-2030, especially amid current geopolitical uncertainties, inflationary pressures, and supply chain challenges worldwide," the firm said.

In anticipation, Yussupove said that Kazatomprom is focusing on launching various exploration programs and strengthening its reserve replenishment infrastructures, “In the current pricing environment another Kazatomprom-sized supply source will be needed to cover future market needs," he said.

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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.