Kazakhstan's National Atomic Company Kazatomprom said that it will maintain a 20% reduction in uranium production in 2021. This will result in the removal of up to 5500tU from the estimated volume of global primary uranium production in 2022.
“Our decision indicates that the global uranium market is still recovering after a long period of oversupply,” said Galymzhan Pirmatov, head of Kazatomprom's board.
In 2021, Kazatomprom will keep uranium production 20% below the planned volumes under subsoil use contracts and does not intend to increase production in order to recover the losses incurred in 2020 due to measures taken to combat COVID-19. Kazatomprom also said it also intended to cut production by 20% in 2022 compared with the planned level under subsoil use contracts.
Kazatomprom said it is starting to work with joint venture partners to assess the impact of the decision and to implement the plan at all uranium mines in Kazakhstan. “We simply don’t see the market signals and fundamental support needed to recover the pace of pre-production in 2021 and return our mines, which have one of the lowest costs in the industry, to full capacity in 2022,” said Pirmatov.
“The market uncertainty associated with the COVID-19 pandemic is significant, but despite the expected supply shortage in 2020, uranium prices and contract volumes in the long-term market, while higher than in 2019, still remain precariously low,” he added. “Therefore, in line with our market-oriented strategy, we intend to continue to maintain costs and mine preparation at a level in line with production, taking into account the 20% decrease from the planned targets for subsoil use contracts, which we maintain from 2018. We cannot rule out the possibility of further disruptions to production due to COVID-19, given that taking the steps necessary to ensure the health and safety of our employees will continue to be our top priority.”
As in previous years, Kazatomprom is announcing its plans well before the end of the fiscal year so that uranium subsidiaries and joint ventures have the opportunity to include in their 2021 budgets the necessary CAPEX changes, taking into account the revised production for 2022. No decision has been made on the volume of production after 2022, and the company will continue to monitor the development of the market situation. However, a return to full production (under subsoil use contracts) is not expected until the market demonstrates an obvious sustainable recovery, and the situation between supply and demand signals a need for more uranium.
Production in 2022 is expected at the level of 22,000-22,500tU (on a 100% basis), which is 20% less than the planned under subsoil use contracts. After reducing the number of employees at its mine sites between April and July in response to the COVID-19 pandemic, Kazatomprom announced earlier this month that it planned to return staffing levels at its uranium mines to normal by around the end of August.
Uranium output during the first half of 2020 was 10,434tU, down 3% from 10,800tU in the first half of 2019. Kazatomprom said uranium production levels for the second-half of 2020 are expected to be "severely impacted" by mine shutdowns. It expects to produce 19,250tU in 2020, down 16% compared with 2019's output of 22,808tU. In February, the company said it expected its 2020 uranium output to remain at about 22,750-22,800tU.