Kazatomprom reports a production miss

The world’s largest uranium producer, Kazakhstan’s Kazatomprom (LSE: KAP), saw its attributable output fell by 4.1% last year to 11,373 tonnes of uranium, down from 11,858 tonnes in 2021.

On the news, announced Friday, the company’s shares closed marginally higher at £24.46, reducing the 12-month to slightly more than 7%.

In total, uranium production in Kazakhstan (100% of KAP and its partners’ production) was 21,227 tonnes in 2022, down 2.7% from the previous year’s 21,819 tonnes. During the December quarter, the company produced 3,064 tonnes of uranium, in line with the year-earlier figure.

BMO Capital Markets mining analyst Alexander Pearce notes production was broadly in line with forecasts, but a stronger realized price offset weaker sales.

The analyst however expects the market focus to likely be on the company’s detailed 2023 guidance, which is 8%/7% (mid-point) lower than prior high-level guidance and the bank’s current estimate given ongoing wellfield development and supply chain issues “that are likely negative to earnings,” he wrote in a note to clients.

This year, the company expects to produce between 20,500 and 21,500 tonnes on a 100% basis and between 10,600 and 11,200 tonnes on an attributable basis.

The analyst notes that the guidance disappoints amid the high uranium price environment but could provide price support.

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

The company benefits from the most extensive reserve base in the industry and operates 26 deposits located in Kazakhstan, grouped into 14 mining assets. All of the company’s mining operations are in Kazakhstan, extracting uranium using in-situ recovery technology.

“A widening supply deficit could drive increased support for the uranium price and provide a tailwind to the stock,” Pearce noted.

“We currently forecast a total deficit of 56 million lb. (uranium) this year (26% demand), thus removing 3.1-5.7 million lb. from primary supply likely exacerbates the deficit and could add additional support to the near-term uranium price, given that spot prices are currently sitting at ~US$50 per lb.,” Pearce said.