Holger Narrog

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KAZATOMPROM update 27.08.2023

Kazatomprom is the world biggest uranium miner with an attributable production of 11.000 tons U/yr. (2023 estimate). The uranium is mined by acid leaching ISR technology which is 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 region it is applied is mostly desert.

Kazakhstan is part of the GUS (former states of the Soviet Union). It tries to keep the balance between its big neighbours China and Russia. It does not support Putin in his war efforts in Ukraine.

The majority of KAZATOMPROM is owned by the Kazakhstan governments "Sovereign Wealth Fund "Samruk-Kazyna" ("Samruk-Kazyna"). This fund owns 75% of the shares. The free-float is 25%.

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

The realized uranium prices differ from spot market prices as most of the uranium is sold by long term contracts. The uranium price recovered in 2021 and went up further with the war in Ukraine. KAZ is very profitable. KAZ has inventories of more than 1/2 year of production!

Companies/shares from Kazachstan are similar inexpensive as that of Russian companies before the war in Ukraine. The biggest risk is the political situation that includes the risk of 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 and its shareholders.

The company has very low production costs and is thus even with a very 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.

With the high inflation of the after covid panic period production costs are rising quickly. KAZ estimates a rise of the production costs from 12.6$/lb to 16.2$/lb in 2022 and perhaps 20$/lb in 2023. A main cost driver is the cost of sulphuric acid that is about 13% of the Group’s uranium production costs. It rose from KZT 27,751 per tonne in H1/22 to KZT 39,786 per tonne in the first half of 2023.

Some Numbers

Inconsistencies of this table comüared to other published numbers might result from the use of actual exchange rates at the time of the publication of the numbers.

KAZ increased its profitability strongly in Q1/23. It seems likely it is a strong year for KAZ

Shares and GDRs %

Samruk-Kazyna 194,517,456 75

Public free-float 64,839,152 25

Total share capital 259,356,608 100

Uranium Reserves

the uranium reserves/production ratio is nearly 30 years which is quite comfortable.

These number depend very much on the grades that are considered and are fluctuating. It is an indication only. Some mines will become exhausted in a few years others will last very long.

Uranium Price

The uranium price is strongly fluctuating. After a nuclear power plant accidents most of the Japanese nukes went out of operation. Japanese utilities sold off their surplus quantities. The market got out of balance. Now it seems to be back.

Cost Situation 2022. The absolute numbers rose but the relative numbers might not have changed significantly in the last couple of years.

Source: https://www.kazatomprom.kz/storage/24/kap_investor_handout.pdf Originally UxC

The dividend for 2021 was 878 KZT, 1 USD = 430 KZT.... 2.04$

The dividend for 2020 was 578 KZT 1 USD = 421 KZT ....1.37 USD

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%

Some News

2023/05/04 Kazatomprom subsidiary to start exploring for tantalum, niobium, beryllium in Aktobe region

2023/04/24 Kazatomprom plans to increase its production of sulfuric acid - the main reagent used in its in-situ leach (ISL) uranium operations - with the construction of a new 800,000 tonnes per year plant in the Sozak district of Kazakhstan's Turkestan region. (21)

2021/04/25 Kazatomprom on Friday announced that it would sell a 49% interest in Ortalyk to China General Nuclear Power Corporation (CGNPC) for $435-million (17,18). under the Kazatomprom-CGN cooperation agreements, the parties agreed to construct a fuel assembly plant (Ulba-FA) at the Ulba Metallurgical Plant. CGN provided a guarantee that Ulba-FA’s production will be purchased by CGN, in exchange for Kazatomprom agreeing to sell to CGN or its affiliates a 49% interest in Kazatomprom’s wholly owned subsidiary, Ortalyk LLP.

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).

The Uranium Market

The last 10 years uranium prices suffered from the practical shutting down of nearly 50 nukes in Japan. Japanese utilities sold the uranium already bought. The uranium price saw lows of 20$/lb.

China and other Asian countries are increasing their nuclear power generation. Europa was shutting down nuclear power plants due to the green religion till the Ukraine war. Now some European countries announced a change in their position. Belgium announced to keep its nukes longer in service. France, UK announced efforts to build new nukes. All in all it seems that the demand for uranium will increase in the next 20 years. A uranium price of 50 - 100 $/lb seems realistic in the next 10 - 20 years.

Some References:

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

(22) 2023/05/04 https://interfax.com/newsroom/top-stories/90274/

(21) 2023/04/24 https://www.world-nuclear-news.org/Articles/Kazatomprom-plans-new-acid-plant

(20) 2022/04/10 https://www.xtb.com/de/Marktanalysen/Trading-News/kazatomprom-aktien-steigen-aufgrund-des-exportwachstums

(19) 2021/07/03 https://www.world-nuclear-news.org/Articles/Kazatomprom-uranium-production-to-remain-flat-in-2

(18) 2021/04/26 https://www.world-nuclear-news.org/Articles/Kazatomprom,-CGN-sign-agreement-for-Ortalyk-stake

(17) 2021/04/25 https://www.miningweekly.com/article/kazatomprom-sells-49-of-ortalyk-to-chinas-cgnpc-2021-04-23/rep_id:3650

(16) 2021/02/03 https://fred.stlouisfed.org/series/PURANUSDA

(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