Kazatomprom uranium sales lag behind production

The world’s top uranium producer, Kazatomprom (LSE: KAP), reported a 10% increase in production in its first quarter results, while sales were down by more than a half compared to last year’s first quarter.

Output came to 7.2 million lb. uranium oxide (U₃O₈) on an attributable basis, up from 6.4 million lb. U₃O₈ last year, Kazatomprom said on Thursday.

However, group sales volumes of 7.2 million lb. U₃O₈ were 55% lower than last year’s first quarter total of 15.8 million lb. U₃O₈, according to a release.

The results were generally a disappointment for BMO Capital Markets mining analyst Alexander Pearce, who said in a note on Thursday that by most measures the company’s results were below his previous estimates.

Pointing out that group sales were 31% lower than BMO’s estimate, Pearce said “quarter on quarter shipments variability is normal, thus deliveries are likely to rebalance over the remainder of the year.”

The quarterly results from the Kazakhstan-based miner come just days after major Canadian uranium producer Cameco (TSX: CCO; NYSE: CCJ) released its own earnings, which also painted a mixed picture. Both companies’ quarters coincided with the first significant rise in spot uranium prices since 2007, which went over US$100 per lb. in January. They sat at US$89 per lb. on Friday.

Below spot price

For Kazatomprom, the spot price is generally higher than its own contract portfolio pricing for uranium, known as the average realized price, which was at US$62.53 per lb. in the quarter, up 34% from last year’s US$46.75.

That measure and the spot price do correlate, but the producer said the growth of its average realized price, calculated as the revenue from sales of uranium concentrate, transportation and storage fees divided by the volume of concentrates sold, was lower than the rise in spot prices over the last several months.

“Deliveries under some long-term contracts in 2024 incorporated a proportion of fixed pricing components, including price ceilings that were negotiated during a comparatively lower price environment,” it said.

Pearce noted that price measure was 19% lower than BMO estimates of US$77.07 per lb., and 2% lower than in last year’s fourth quarter.

“(As Kazatomprom highlighted), ‘interim results are rarely representative of annual expectations’. This suggests we should see improvement through the course of the year as per its prior realised pricing guidance,” he said.

In terms of other external developments, Kazatomprom cited the United States Senate’s passing of a bill on Tuesday that would ban imports of Russian uranium. Despite Kazakhstan’s historic closeness with Moscow as a former Soviet state, if the bill becomes law, it’s not expected to have any effect on Kazatomprom since its primary business is producing natural uranium, the company said.

“Whether shipped by Kazatomprom or its JV partners, Kazakh-origin uranium retains its origin until its arrival at a conversion facility,” it said. Shares in Kazatomprom were down 1.7% Friday in London, to US$40, valuing the company at £8.5 billion (US$10.6 billion). Its shares traded in a 52-week range of US$25 and US$47.60.