Kazatomprom, Kazakhstan’s state-owned uranium production company, will continue “flexing down” production by 20 percent through 2022, compared to the planned levels under subsoil use contracts, the company announced last week. It will also maintain its 20 percent reduction against subsoil use contracts in 2021, with no additional production planned to replace volumes lost in 2020 due to measures taken to combat COVID-19.
Kazatomprom does not expect to return to full subsoil use contract production levels until a sustained market recovery is evident and demand and supply conditions signal a need for more uranium, the company noted.
What they’re saying: “The decision to keep production similar year-over-year and extend production curtailment into 2022 is indicative of a global uranium market that is still recovering from a long period of oversupply,” said Galymzhan Pirmatov, Kazatomprom’s chief executive officer. “We are simply not seeing the market signals and fundamental support needed to ramp up mine development in 2021 and take our low-cost, tier-one production centers back to full capacity in 2022.
Pirmatov added that the market’s uncertainty attributed to the COVID-19 pandemic was significant and that despite the anticipated supply deficit in 2020, uranium prices and long-term contracting activity, while higher than in 2019, remain unsustainably low. Consequently, he said, in line with Kazatomprom’s market-centric strategy, the company intends to continue with the level of spending and operational activity commensurate with a 20 percent reduction in subsoil use contracts that have been maintained since 2018.
Pirmatov also warned that Kazatomprom could not rule out the possibility of further production disruptions due to the pandemic, declaring the health and safety of the company’s employees to be the top priority.
Effects: The full implementation of the decision would remove up to 5,500 metric tons uranium from anticipated global primary supply in 2022, the company said, with uranium production in Kazakhstan staying similar with the level expected in 2021. Kazatomprom’s 2022 production is expected to be from 22,000 to 22,500 tU (100 percent basis), a 20 percent reduction of the total expected subsoil use contract level of about 27,500–28,000 tU.
Kazatomprom’s total consolidated uranium production is expected to be reduced by more than 20,000 tU (100 percent basis) from its previous 2020–2022 production plans under subsoil use contracts.
Background: Kazatomprom is the world’s largest producer of uranium, with its attributable production representing approximately 24 percent of global primary uranium production in 2019, according to the company. It operates 24 deposits grouped into 13 mining assets, all of which are located in Kazakhstan and mined using in situ recovery technology.
In late 2017, Kazatomprom announced that it would be decreasing its uranium production by 20 percent over the next three years, beginning in January 2018.