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KAZATOMPROM 29.11.2020

Kazatomprom is the world biggest uranium miner with a production of 11500 tons U/yr. (without corona panic). The uranium is mined by acid leaching ISR technology which happen to be a very cost-effective extraction method. I`m not aware about the impact of this type of mining on the environment but it seems that it would be challenging to get it permitted in Western Europe.  

The majority of KAZATOMPROM is owned by the governments "Sovereign Wealth Fund "Samruk-Kazyna" ("Samruk-Kazyna"). This share of the shares is reduced by a sell off on June 3rd. 2020 by 4.55%. It increased the free-float to 23.4% It increased the liquidy of the share (14). 

This is not a recommendation or proposal to do anything. The data written in this article is not guarranteed. It is my private personal opinion. I own a position of KAZATOMPROM shares that`s why I`m not independing.  

Risks & Opportunities

Kazatomprom production guidance (attributable) decreased to 10.600 tons/yr. for 2020. My personal assumption...the motivation for this production cut seems more logic by the high inventories and low uranium prices at the begin of 2020 rather than the corona panic.  The uranium price went up in the meantime to > 30$/lb. which allows a profitable production for KAZATOMPROM. KAZ is still highly profitable but reduced its capex and thus future production. And KAZ has inventories of nearly 1 year of production!

Companies/shares from Kazachstan are even less expensive than Russian companies. The risk is the political situation that everything as internal and external corruption, expropriation, asset stripping, arbitrary taxes might happen at any time. For an outsider it is not possible to evaluate the political risks for the company properly.  

The company is even with an extremly low uranium price profitable. The worldwide nuclear power generation and thus uranium consumption is on the other hand very stable, the uranium production is lower than consumption hence it seem obvious that the uranium price will increase sooner or later and thus the profits of the uranium mines will soar sooner or later. 

Due to the very low uranium prices the investment in existing and new mines decreased in the whole uranium business. Many mines were taken on care and maintenance or closed. The production of KAZATOMPROM did decrease as well slightly. It is planned to keep the production low till 2021 to align the production to the low demand. That means taking about 5600t from the market (8)

 

Some Numbers 2019

Exchange rate: 1$ = 419 KZT (aug 5th, 2020)

                                                                  2019     H1/20    9m/2020    2020 est.

Production volume (attributable basis) (tU)    13291    5790     8309          10500 - 10800

Exchange rate 1$/KZT                                  377        419        424

Group sales volume (tU)                               14148    4220      8724        14.000

Revenue - consolidated (USD bn.)                 1.300    0.365     0.841        1.41 

Net Profit (mio. US$)                                    495       158*      329

Net Profit/share (US c)                                 191        54         127

Operating Cash Flow (mio. US$)                    416        91         435

Net debt (mio. US$)                                     163       236

Average realized price (USD/lb)                    26.6      27.81    29.58

C1 cash cost (attributable basis) (USD/lb)      9.28     9.79                       10 - 11

All-in sustaining cash cost (USD/lb)               11.94   11.65                      13 - 14

Total capex (100% basis) ($ mio)                 175        38                           167

Inventory to                                               9906     11110

Number of shares outstanding/millions          259       259         259         259


Inconsistencies to other published numbers might result from the use of actual exchange rate at the time of the publication of the numbers.

*1/3 from the net result results from sale of investment in joint venture Uranium Enrichment Center JSC


Historical Key performance indicators 


Indicators2015201620172018
Uranium mining, total,
tons
23 60724 58623 32121 705
Uranium mining, by the share
of participation in all S&As,
tons
12 76613 09512 09311 476

Other mined Minerals 2018

Output of niobium products (tonnes of Nb)       25.6

Output of beryllium products (tonnes of Be)     1711

Output of tantalum products (tonnes of Ta)      131.7

Electrical power output (million kWh)               117.8

(3)



Cost Situation

 

The dividend for 2019 paid May 28, 2020 is KZT 381.72 per ordinary share. 1 USD = 413 KZT (21.05.2020).....0.92 $  

The dividend paid out in June 2018 is announced to be 308 Tenge (2) about > 0.81$ => 5.7% dividend yield

Withholding tax Kazachstan: 15%

 

Shareholders structure

  Shares and GDRs
Persentages
Samruk-Kazyna* 76.7%
Free float* 23.4%
Total issued shares
259 356 608100%

 

Some News

2020/08/19 Kazatomprom says it will continue to "flex down" production by 20% through 2022. The company is also maintaining its 20% reduction in 2021(15) I hope that a soaring uranium price will change KAZATOMPROM`s mind. 

2020/06/04 The Kazakhstan "Sovereign Wealth Fund "Samruk-Kazyna" ("Samruk-Kazyna") sold off a 4.55 % stake on June 3rd 2020. It increased the free-float to 23.4% increases the liquidy of the share (14). The share price decreased these days due to the surplus shares that entered the market. 

2020/01/31 Kazatomprom announced today it intends to sell its 50% interest (minus one share) in Uranium Enrichment Centre JSC (UEC) to its partner in the joint venture, TVEL, for RUB6.253 billion (about USD100 million).(12)

2019/10/14 Due to low uranium prices many uranium only mines owned by private mining companies are on maintenance & care due to the low uranium price. For ex. it would cost about USD80 million to restart production of Langer Heinrich in Namibla at an average capacity of 5.2 million pounds per year. All-in sustaining cost (AISC) are estimated to USD33 per pound U3O8. This could be achieved during the planned restart within a 12-month commissioning time. (10)

2019/09 Samruk-Kazyna placed 9,863,021 GDR. Prior to the Placing it owned approximately 85 per cent of the /Company's issued share capital and following the completion of the Placing Samruk-Kazyna will own approximately 81.2 per cent of the Company's issued share capital.5,023,021 GDRs were placed through the AIX, of which 1,660,000 GDRs were placed to international investors and 3,363,021 GDR were placed to domestic investors, thereby satisfying domestic demand in full. (9)

2019/07 President Donald Trump decided to implement no new trade restrictions on uranium imports into the United States (6).

Kazatomprom sold 75% of solar manufacturing business. The Kazakh state-owned national atomic energy company has sold its three manufacturing units to an international consortium (5).

Some References:

KAZATOM Investor Relation https://www.kazatomprom.kz/en/investors/novosti

(15) 2020/08/19 https://world-nuclear-news.org/Articles/Kazatomprom-extends-uranium-production-cuts-into-2

(14) 2020/06/04 https://www.investegate.co.uk/jsc-nac-kazatomprom--kap-/rns/kazatomprom-responds-to-secondary-offering/202006031618358698O/

(13) 2020/04/07 https://www.miningweekly.com/article/kazatomprom-slashes-2020-uranium-guidance-2020-04-07

(12) 2020/01/31 https://world-nuclear-news.org/Articles/Kazatomprom-sells-stake-in-enrichment-JV

(11) 2019/11/02 https://www.investegate.co.uk/jsc-nac-kazatomprom--kap-/rns/kazatomprom-3q19-operations-and-trading-update/201911010700039437R/

(10) 2019/10/14 http://www.world-nuclear-news.org/Articles/Paladin-looks-to-rapid-restart-for-Langer-Heinrich

(9) 2019/09/26 https://www.investegate.co.uk/jsc-nac-kazatomprom--kap-/rns/samruk-kazyna-announces-results-of-gdrs-placement/201909260752377576N/

(8) 2019/08/20 http://www.stockmarketwire.com/article/6553616/Kazatomprom-to-extend-production-cuts-to-offset-oversupply.html

(7) 2019/08/01 https://www.investegate.co.uk/jsc-nac-kazatomprom--kap-/rns/kazatomprom-2q19-operations-and-trading-update/201908010706305185H/

(6) 2019/07/14 http://www.globenewswire.com/news-release/2019/07/14/1882283/0/en/Cameco-Pleased-with-Section-232-Decision-on-U-S-Uranium-Imports.html

(5) 2019/05/20 https://www.pv-magazine.com/2019/05/20/kazatomprom-sells-75-of-solar-manufacturing-business/

(4) 2019/05/03 http://www.world-nuclear-news.org/Articles/Quarterly-uranium-output-decreases-in-Kazakhstan-a

(3) 2019/04/30 https://www.investegate.co.uk/jsc-nac-kazatomprom--kap-/rns/integrated-annual-report-2018/201904300720425221X/

(2) 2019/04/30 https://www.investegate.co.uk/jsc-nac-kazatomprom--kap-/rns/agm-ar-and-dividend-recommendation-news-release/201904301248355916X/

(1) http://www.kazatomprom.kz/en/content/investoram/investoram/key-performance-financial-indicators-millions-kazakhstani-tenge

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