Kazatomprom’s 2022 profit doubles as it lowers 2023 production guidance

Kazatomprom (LSE: KAP) reported a 115% increase in full-year 2022 earnings on Friday, thanks to a 31% increase in the average realized uranium price.

Despite the solid financial performance, the Kazakhstan company – the world’s largest producer of uranium – tempered its production forecast for 2023, saying continued delays and/or limited access to certain vital materials, including sulphuric acid and equipment, impacted the wellfield commissioning schedule last year.

In 2023, the company expects to produce between 20,500 – 21,500 tonnes of uranium on a 100% basis and between 10,600 and 11,200 tonnes of uranium on an attributable basis.

Kazatomprom produced 11,373 tonnes of uranium last year, 4.1% lower year-on-year. Kazakhstan’s total uranium output was 21,227 tonnes, down 2.7% over 2021.

The company attributed the declining production profile to the Covid-19 pandemic, which impacted wellfield development in 2021. Compared with 2021, in 2022, the attributable net direct (C1) cash cost was at 16% to US$10.25 per lb., mainly due to a payroll increase of production personnel and an increase in the cost of materials driven by inflationary pressure.

All-in-sustaining cash costs increased by 28% to US$16.19 per lb. in 2022 due to increased capital expenditures of mining companies. The results were, however, said to be within the guidance.

The average realized price in 2022 was US$43.33 per lb., giving it a healthy margin.

Revenue for the year jumped 45% to US$2.2 billion, resulting in a net profit of US$1 billion.

Canaccord Genuity UK mining analyst Alexander Bedwany highlights in a note to clients that a key takeaway is that the spot market will likely continue to be tight, with costs continuing to rise for producers.

Kazatomprom’s attributable production represented about 24% of global primary uranium production in 2021.

The company benefits from the most extensive reserve base in the industry and operates – through its subsidiaries, JVs and associates – 26 deposits in Kazakhstan, grouped into 14 mining assets. All of the company’s mining operations are located in the Central Asian country and it extracts uranium using in-situ recovery technology.

Canaccord’s Bedwany flags attention to Kazatomprom’s language in its press release about its ties to Russia, through which some exports are channelled and processed, with the company acknowledging sanctions against Russia could materially impact its business. However, it stressed there were no impacts to date.

The company said a high-priority risk analysis is being carried out continuously concerning compliance with the sanctions.

Kazatomprom said it is well-positioned to benefit from improving market dynamics and maximizing value for stakeholders through continued production and sales discipline. Kazatomprom’s global depository receipts last traded at US$27.00, having traded between US$23.22 and US$36.62 over the past 12 months.