REG - JSC NAC Kazatomprom - Kazatomprom 1H22 Results and 2024 Production Plan
19/08/2022 08:30
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RNS Number : 5926W JSC National Atomic Co. Kazatomprom 19 August 2022
AIX: KAP, KAP.Y (GDR)
LSE: KAP (GDR)
Currency: KZT (₸), unless otherwise noted
19 August 2022, Nur-Sultan, Kazakhstan
Kazatomprom 1H22 Financial Results and 2024 Production Plan
JSC National Atomic Company "Kazatomprom" ("Kazatomprom", "KAP" or "the
Company") announces its consolidated financial results for the first half-year
ended 30 June 2022, prepared in accordance with International Financial
Reporting Standards (IFRS). The Company is also disclosing its 2024 production
strategy and changes in the Company's Management Board.
"Our financial results for the first half of 2022 were strong, reflecting a
uranium market that has improved considerably over the past year," said
Yerzhan Mukanov, Kazatomprom's Chief Operations Officer and acting Chief
Executive Officer. "Revenue doubled compared to the first six months of 2021
to nearly 500 billion tenge in 2022, driving a rise in operating profit of
182%, and a near tripling of adjusted net profit to 167.4 billion tenge, all
related primarily to customer-requested delivery timing and higher uranium
prices year-to-date. From an operational standpoint, production fell slightly
compared to the first half of last year, tracking slightly below the annual
production plan due to the supply chain issues that delayed wellfield
development work in 2021 - work that was required to support this year's
production plan. Therefore, as we have previously noted, the elevated risk
that 2022 production volumes could fall short of our expectations remains a
concern, though the Company continues to make progress in mitigating the
related risks and annual production guidance is unchanged at this time.
"The unprescedented global economic uncertainty and significant geopolitical
developments throughout the first half of 2022 have tested our corporate risk
management practices, which have proven to be resilient in several key areas.
However, the uncertainty and risk has presented an extraordinary challenge to
the Company's production planning and budgeting processes: in addition to
aligning future production with market demand and our contractual commitments,
we need to factor in the growing inflationary pressure and potential supply
chain delays that could affect our production plans. Although the uranium
market has improved, with an increase in long-term contracting interest, a
thinning near-term market, and substantially improved pricing, we believe the
fundamental shift in the supply-demand balance is still underway, with an
illusion of endless secondary supply, creating ongoing opportunities for
Kazatomprom as a primary supplier that maintains a disciplined approach.
Therefore, consistent with our market-centric strategy and accounting for
evolving mine development and production constraints, we expect to increase
potential production by about 2,000 to 3,000 tU in 2024 compared to our
planned range for 2023, representing continued production discipline and a
decrease of approximately 10% against our total Subsoil Use Contracts level in
2024.
"A key factor contributing to the improved uranium market conditions and the
bullish outlook for the nuclear power sector over the past several years, has
been the international debate around the social and environmental impacts of
energy infrastructure. Those discussions have become even more pronounced as
of late amid the growing focus on energy security and diversification in
relation to the Russia-Ukraine conflict. Various jurisdictions, including
several that had abandoned nuclear plans or were committed to a phase out of
clean nuclear energy, are now said to be reviewing policies and in some cases,
reconsidering nuclear alongside their renewables energy strategy. That shift
in support for nuclear energy would not only avoid the negative environmental
impacts of fossil fuel generation, but it could help mitigate the social- and
energy security-related risks that have emerged.
"Kazatomprom expects to fully participate in the mid- and long-term
contracting cycle associated with that anticipated demand growth for nuclear
fuel, backed by our now-proven commitment to building long-term value for our
stakeholders through continued production and sales discipline."
Corporate Update
2024 Production Plans
Kazatomprom's Board of Directors has approved a strategy to revise the
Company's 2024 production volume down by approximately 10% compared to the
total Subsoil Use Contract level of 28,691 tU, disclosed in its most recent
2021 Competent Person's Report ("2021 CPR").
The decision to shift production from minus 20% in 2023 to approximately minus
10% in 2024 is based primarily on Kazatomprom's continued success in signing
mid- and long-term contracts with new and existing customers. The current
contract book provides sufficient confidence that the additional volume in
2024 will have a secure place in the market and be needed to fulfill future
contractual obligations. However, the continued production discipline reflects
Kazatomprom's assessment of the supply-demand balance over the next two years
and factors in the challenges the Company is expecting to face in terms of
global supply chains and limited availability of certain key operating
materials and reagents.
The full implementation of this decision could remove approximately 3,500 tU
from anticipated global primary supply in 2024. Kazatomprom's 2024 production
is therefore expected to be between 25,000 tU and 25,500 tU (100% basis),
compared to the total Subsoil Use Contracts level for 2024 of 28,691 tU,
disclosed in the 2021 CPR. Although the year-over-year production increase
from 2023 to 2024 is modest, the Company may face significant challenges to
any increase above current production levels based on the current state of
global supply chains.
The Company will now begin working with joint venture partners and mining
subsidiaries to incorporate the required changes into the 2023 budgets and
development plans, accounting for the revised production levels in 2024.
Kazatomprom will continue to monitor ongoing market developments and maintain
the flexibility to react quickly to changing conditions. No decision has been
taken regarding mine development activity and production volumes beyond 2024.
Management Board Changes
Yerlan Tuleugozhin, Kazatomprom's Chief Strategy & Development Officer and
Member of the Company's Management Board, decided to resign from his position
effective 15 August 2022, in order to pursue a Masters Degree in Leadership
and Strategy from the London School of Business. The Board has decided to
reduce the number of senior management positions and not fill the vacancy,
instead, redistributing the position's responsibilities among the other
company Officers. As a result, the number of Management Board members has
decreased from eight to seven.
Full biographies for all members of the Management Board are available on the
Company's website, www.kazatomprom.kz
(https://kazatomprom.kz/en/page/pravlenie)
Extraordinary General Meeting of Shareholders (EGM)
The Board of Directors has initiated to convene an absentee EGM. A separate
press release and corresponding EGM notice has been filed and disclosed on 18
August 2022, in accordance with regulatory requirements, and are available on
the Company's website, www.kazatomprom.kz
(https://kazatomprom.kz/en/media/view/notice_of_extraordinary_general_meeting_of_shareholders_of__kazatomprom)
Key financial metrics
Six months
ended 30 June
(KZT billion unless noted) 2022 2021 Change
Group's consolidated revenue 493.7 235.5 110%
Operating profit 172.8 61.3 182%
Net profit 167.4 58.1 188%
Earnings per share attributable to owners (basic and diluted), 467 184 154%
KZT/share(1)
Adjusted EBITDA(2) 224.5 99.4 126%
Attributable EBITDA(3) 182.8 96.7 89%
Operating cash flow(4) 256.2 80.8 217%
(1) Calculated as: Profit for the period attributable to owners of the Company
divided by total share capital, rounded to the nearest KZT.
(2) Adjusted EBITDA is calculated by excluding from EBITDA items not related
to the main business and having a one-time effect.
(3) Attributable EBITDA (previously "Adjusted Attributable EBITDA") is
calculated as Adjusted EBITDA less the share of the results in the net profit
in JVs and associates, plus the share of Adjusted EBITDA of JVs and associates
engaged in the uranium segment (except JV "Budenovskoye" LLP's EBITDA due to
minor effect it has during each reporting period), less non-controlling share
of adjusted EBITDA of "Appak" LLP, JV "Inkai" LLP, "Baiken-U" LLP and JV
"Khorasan-U" LLP, less any changes in the unrealized gain in the Group.
(4) Includes income tax and interest paid.
Operating and Financial Review and Financial Statements
The Operating and Financial Review, and Consolidated Financial Statements
(unaudited, reviewed) provide detailed explanations of Kazatomprom's results
for the first half-year ended 30 June 2022, as compared to the same period in
2021, with guidance for 2022. This press release should be read alongside
these documents, all of which are available at www.kazatomprom.kz.
(https://www.kazatomprom.kz/en/investors/finansovaya_otchetnost/page-1)
Changes in the Group structure
In the first half of 2022 the Group completed the following transactions:
· As previously announced, according to a Framework Agreement signed
on 22 November 2021 by the Group and Genchi Global Limited to participate in
ANU Energy, created on the Astana International Financial Center, the Group
made an investment of KZT 12,368 million (USD 24.25 million) in ANU Energy in
March 2022, which constitutes a 32.7% share from the joint investment of the
investors. The purpose of ANU Energy is to store physical uranium as a
long-term investment. The Group does not have a representative on ANU Energy's
Board of Directors and does not take part in decision-making. Accordingly, the
Group does not have significant influence on the management operations of ANU
Energy, and the Group therefore recognizes this investment at fair value
through profit or loss and does not increase the number of entities within the
Holding. In accordance with the Framework Agreement, the Group and ANU Energy
signed a short-term contract for the sale and purchase of natural uranium
concentrates, under which the Group delivered natural uranium concentrates on
12 May 2022. As at the reporting date, the Group classifies ANU Energy as
"Other investment".
· In accordance with the privatisation plan of non-core assets as
presented in the Company's 2018 IPO Prospectus, Kazatomprom and "United
Chemical Technologies Trading House" LLP entered into an Agreement on 30
December 2021, for the sale of the Company's 40% share in "Caustic" JSC. On 31
January 2022, partial payment was made for 30% of the Company's total interest
in "Caustic" JSC, therefore "United Chemical Technologies Trading House" LLP's
interest in "Caustic" JSC increased by 12% (30% of the Company's 40% share).
The remaining portion of the Company's shares were transferred to trust
management of "United Chemical Technologies Trading House" LLP until full
payment for the Company's remaining interest is completed, expected not later
than 2023.
Revenue, net profit, EBITDA
During the first half of 2022, the Group's consolidated revenue was
KZT 493,716 million, an increase of 110% compared to the same period of
2021. The increase is mainly due to:
· a significant increase in sales volume in the first half of 2022 in
comparison to the same period of 2021 mainly related to the timing of customer
requirements and the resulting differences in the timing of deliveries for
first halves of 2022 and 2021;
· growth in the average realized price associated with an increase
in the market spot price for U(3)O(8); and
· weakening of the KZT against the USD in the first half of 2022.
Operating profit in the first half of 2022 was KZT 172,818 million, an
increase of 182% compared to the same period of 2021. The increase was
mainly due to higher revenues in 2022 as indicated above.
Net profit in the first half of 2022 was KZT 167,374 million, an increase
of 188% compared to the same period of 2021. The increase was mainly due to
higher operating profit in the first half of 2022 as indicated above. There
were no significant adjusting one-time effects during the first halves of 2022
and 2021. Profit for the period attributable to non-controlling interest
increased significantly during the first half of 2022 compared to the same
period of 2021, impacted by the sale of a 49% share of "Ortalyk" LLP in July
2021 in addition to the explanations stated above.
Adjusted EBITDA totalled KZT 224,457 million in the first half of 2022, an
increase of 126% compared to the same period of 2021, while attributable
EBITDA was KZT 182,825 million in the first half of 2022, an increase
of 89% compared to the same period of 2021. The changes were mainly driven
by higher operating profit.
Operating cash flows for the first half of 2022 totalled
KZT 256,227 million, a significant increase compared to KZT 80,833 million
during the same period of 2021 mainly due to:
· a KZT 425,691 million increase in cash receipts from customers
during the first half of 2022 compared to the same period of 2021, due to
differences in the timing of the sales schedule for the first halves 2021 and
2022, growth in the average realized price associated with an increase in the
market spot price for U(3)O(8) and the weakening of the KZT against the USD;
· offset by a KZT 188,811 million increase in payments for accounts
payable to suppliers during the first half of 2022 mostly due to change in
timing of the purchases schedule for the first halves 2021 and 2022 and growth
in the average purchase price associated with an increase in the market spot
price for U(3)O(8) and the weakening of the KZT against the USD;
· a KZT 31,254 million increase in income tax paid due to the
increase in profit before tax.
Cost of sales
Cost of sales totalled KZT 291,532 million in the first half of 2022, an
increase of 89% compared to the same period of 2021 mainly due to higher
sales volume in the first half of 2022 and an increase in the share of
U(3)O(8) purchased from JV and associates, and from third parties.
The cost of materials and supplies was KZT 206,039 million in the first
half of 2022, an increase of 122% compared to the same period of 2021 due to
a significant increase in the proportion of sales of uranium purchased from
JVs and associates, as well as from third parties. When such uranium is sold,
the cost of sales is predominantly represented by the cost of purchased
materials and supplies at the prevailing spot price with certain applicable
discounts. Also, the purchase price of materials and supplies, including
U(3)O(8,) increased as a result of inflationary pressure, the increase in the
spot prices and the weakening of the KZT against the US dollar.
Selling expenses
Selling expenses totalled KZT 10,592 million in the first half of 2022, a
significant increase compared to the same period of 2021. The increase was due
to a much higher shipment volume in the first half of 2022 in comparison to
the same period of 2021 as well as changes in the delivery destination points
for uranium products, an increase in transportation tariffs, as well as the
weakening of the KZT against the USD, as a significant portion of shipping,
transportation and storing expenses are denominated in foreign currency.
General & administrative expenses (G&A)
G&A expenses totalled KZT 18, 774 million in the first half of 2022 (KZT
16,499 million KZT during the same peiod of 2021). The increase in G&A
expenses was partly related to the increase in provision on liabilities for
uranium products to KZT 3,900 million during the first half of 2022 (six
month period ended 30 June 2021: KZT 2,932 million).
Liquidity
The Group manages its liquidity requirements to ensure the continued
availability of cash sufficient to meet its obligations on time, avoid
unacceptable losses, and settle its financial obligations without jeopardizing
its reputation.
(KZT million) As of June 30, 2022 As of December 31, 2021 As of June 30, 2021 Change for six months of 2022
Cash and cash equivalents 380,394 161,190 151,762 136%
Current term deposit 8 43,220 - (100%)
Total cash 380,402 204,410 151,762 86%
Undrawn borrowing facilities 165,560 177,902 255,450 (7%)
(1) Includes income tax and interest paid.
The Group's total cash and cash equivalents, including current term deposits
at 30 June 2022 were KZT 380,402 million, increasing by 86% compared to KZT
204,410 million as at 31 December 2021 and higher in comparison to KZT 151,762
million as of 30 June 2021, mainly due to the accumulation of cash prior to
the distribution of the 2021 dividend.
Undrawn borrowing facilities are the credit lines available to the Group and
considered as an additional liquidity source payable within 12 months,
primarily used to temporarily cover cash deficits related to uneven receipts
of trade receivables. As at 30 June 2022, the Group's fully available
revolving credit lines comprised a total of KZT 165,560 million (USD 352
million), while as at 31 December 2021, the figure amounted KZT 177,902
million (USD 412 million), and as at 30 June 2021, the figure amounted KZT
255,450 million (USD 597 million). The decrease is primarily related to the
closure of unused credit lines.
As at 30 June, 2022, the Group has no current or long-term bank loans.
The amount of non-bank loans as of 30 June 2022 totalled KZT 97,971 million
and predominantly includes long-term USD-indexed Company coupon bonds with a
nominal amount of KZT 70 billion and maturity in October 2024, issued in
September 2019 on the Kazakhstan Stock Exchange (KASE).
Debt leverage ratios
The following table summarises the key ratios used by the Company's management
to measure financial stability. Management targets a net debt to adjusted
EBITDA of less than 1.0.
(KZT million) As at June 30, 2022 As at December 31, 2021 As at June 30, 2021 Change for six months of 2022
Total debt (excluding guarantees) 97,971 89,308 90,410 10%
Total cash balances (380,402) (204,410) (151,762) 86%
Net debt (282,431) (115,102) (61,352) 145%
Adjusted EBITDA* 475,356 350,294 344,117 36%
Net debt / Adjusted EBITDA (coefficient) (0.59) (0.33) (0.18) 79%
* For the purposes of "Net debt/Adjusted EBITDA (coefficient)" calculation
Adjusted EBITDA for the first six months of 2022 and 2021 was calculated as
for 12 months (the first half of the reporting period and the second half of
the previous period). Adjusted EBITDA is calculated as Profit before tax -
finance income + finance expense +/- Net FX loss/(gain) + Depreciation and
amortisation + Impairment losses - reversal of impairment +/- one-off or
unusual transactions.
Uranium segment production and sales metrics
Six months
ended 30 June
2022 2021 Change
Production volume of U(3)O(8) (100% basis) tU 10,070 10,451 (4%)
Production volume of U(3)O(8) (attributable basis)(1) tU 5,414 5,864 (8%)
U(3)O(8) sales volume (consolidated) tU 9,017 6,193 46%
Including KAP U(3)O(8) sales volume(2, 3) tU 8,032 5,179 55%
Group inventory of finished goods (U(3)O(8)) tU 9,276 8,864 5%
Including KAP inventory of finished goods (U(3)O(8))(4) tU 7,156 6,773 6%
Group average realized price KZT/kg 47,807 32,675 46%
Group average realized price USD/lb 40.88 29.63 38%
KAP average realized price(5) USD/lb 39.70 29.63 34%
Average weekly spot price USD/lb 50.31 29.95 68%
Average month-end spot price(6) USD/lb 50.09 30.18 66%
(1) The Production volumes of U(3)O(8) (attributable basis) is not equal to
the volumes purchased by Company and THK.
(2) KAP U(3)O(8) sales volume (incl. in Group): includes only the total
external sales of KAP HQ and THK. Intercompany transactions between KAP HQ and
THK are not included.
(3) Group sales volume and KAP sales volume (incl. in Group) does not include
approximately 32 tU equivalent sold as UF(6) in 2Q22.
(4) KAP inventory of finished goods (incl. in Group): includes the inventories
of KAP HQ and THK.
(5) KAP average realized price: the weighted average price per pound for the
total external sales of KAP and THK. The pricing of intercompany transactions
between KAP and THK are not included.
(6) Source: UxC, TradeTech. Values provided represent the average of the
uranium spot prices quoted at month end, and not the average of each weekly
quoted spot price, as contract price terms generally refer to a month-end
price.
Production volume on both a 100% and attributable basis was lower in the first
half of 2022 compared to the same period in 2021, due to the impact of the
COVID-19 pandemic on wellfield development in 2021. There is typically an
eight- to ten-months lag between wellfield development and uranium extraction
by in-situ recovery, therefore in 2021, delays and/or limited access to
certain key materials and equipment impacted the wellfield commissioning
schedule at the time, resulting in lower production a half-year later in 2022.
Production on an attributable basis in the second quarter and first half of
2022 was lower compared to the same period in 2021 primarily due to the sale
of a 49% share of "Ortalyk" LLP to CGN Mining UK Limited in July 2021.
In the first half of 2022, both Group and KAP sales volumes were significantly
higher compared to the same period in 2021, primarily due to the timing of
customer-scheduled deliveries. Sales volumes can vary substantially each
quarter, and quarterly sales volumes vary year to year due to variable timing
of customer delivery requests during the year, and physical delivery activity.
Consolidated Group inventory of finished U(3)O(8) products as at 30 June 2022
amounted to 9,276 tonnes, which was 5% higher than as at 30 June 2021. At the
Company level, inventory of finished U(3)O(8) products was 7,156 tonnes, an
increase of 6% compared to 30 June 2021. The increase in inventory was
related to a higher purchase volume from subsidiaries, JVs, JOs and associates
in the first half of 2022 as well as procurement from the market and swap
deals.The Company continues to target an inventory level of approximately six
to seven months of annual attributable production. However, inventory could
fall below these levels due to pandemic-related production delays. As such,
during the first half of 2022, several transactions to purchase material in
the spot market were carried out and the Company will continue to monitor
market conditions for opportunities to optimize its inventory levels.
The Group's average realized price in the first half of 2022 was
KZT 47,807 per kg (40.88 USD/lb), an increase of 46% compared to the same
period of 2021 due to a higher average spot price for uranium products, and
the weakening of the KZT against the USD. The average realized prices at the
KAP level for the first half of 2022 were also higher than in the same period
of 2021 due to same reasons. The Company's current overall contract portfolio
pricing correlates to uranium spot prices. However, for short-term deliveries
to utilities, the spot price can vary significantly between the time contract
pricing is established according to Kazakh transfer pricing regulations, and
the spot price in the general market when the actual delivery takes place. The
market volatility during that time lag between price-setting and delivery
becomes more evident as volatility increases, in both rising and falling price
conditions. In addition, some long-term contracts incorporate a proportion of
fixed pricing that was negotiated prior to the sharp increase in spot price.
As a result, increases in both the Group and KAP's average realized prices in
the first half of 2022 compared to the same period in 2021 were lower than the
increase in the spot market price for uranium over the same intervals.
In the uranium market, the trends in quarterly metrics and interim results are
rarely representative of annual expectations; for annual expectations, please
see the Company's guidance metrics for 2022 below, and the price sensitivity
table from Section 12.1 Uranium sales price sensitivity analysis, in the
Company's Operating and Financial Review for 1H2022.
Uranium segment costs and capital expenditures
Six months
ended 30 June
(KZT million unless noted) 2022 2021 Change
C1 Cash cost (attributable basis) USD/lb 9.97 8.99 11%
Capital cost (attributable basis) USD/lb 5.33 3.59 48%
All-in sustaining cash cost (attributable C1 + capital cost) (1) USD/lb 15.30 12.58 22%
Capital expenditures of mining companies (100% basis)(2) 56,293 33,444 68%
(1) Significant CAPEX for investment and expansion projects are excluded.
(2) Excludes liquidation funds and closure costs.
ESG Update at Kazatomprom
In March 2022, the Company became a full member of the UN Global Compact, the
world's largest corporate sustainability initiative that aligns more than
16,000 member companies from 158 countries in taking positive actions to
advance societal goals. Joining this initiative reinforces the commitment of
participating companies to consistently implement the ten universal principles
of the UN Global Compact in their activities, covering the fields of human
rights, labour, environment and anti-corruption.
Kazatomprom aspires to introduce the best sustainability-related industry
practices, including the leading principles of the International Council on
Mining and Metals (ICMM) and the World Nuclear Association (WNA). By the end
of 2022, Kazatomprom expectes to obtain its first independent ESG rating and
consequently, during the current year, expects to focus on measures of
increased energy efficiency, greater levels of environment protection and
negative impact prevention, labour protection and production safety, further
development of human resources in the context of ESG, social and economic
development in its areas of presence, and importantly, high quality
information disclosure with improved ESG-related transparency and
accountability.
Health, safety and environment (HSE) results
Active measures continued to be undertaken in the first half of 2022 to focus
on safety awareness, which helped to prevent major industrial accidents
(including uncontrolled explosions, emissions of dangerous substances or
destruction of buildings) and production injuries at the Company's
enterprises.
The following table reflects safety results of the first half of 2021-2022:
Six months
ended 30 June
Indicator 2022 2021 Change
Industrial accidents(1) - - -
LTIFR (per million man-hours)(2) - 0.71 (100%)
Unsafe conditions, unsafe actions, near-miss reporting 17,870 19,023 (6%)
Number of accidents(3) - 5 (100%)
Fatalities - - -
(1) Defined as uncontrolled explosions, emissions of dangerous substances, or
destruction of buildings.
(2) Lost-Time Injury Frequency Rate (LTIFR) per million hours.
(3) Defined as impact on the employee of a harmful and (or) dangerous
production factor in performance of his work (job) duties or tasks of the
employer, which resulted in an industrial accident, sudden deterioration of
health, or poisoning of the employee that led to temporary or persistent
disability, or death.
The Group maintains a strong focus on improving workplace health and safety.
There were no fatal accidents or incidents causing injuries in the first half
of 2022.
As part of the continuing work to improve the industrial safety systems, the
Company completed the following activities in the first half of 2022:
· the Group has approved an "Occupational Safety Management System"
standard, which includes sections on safety culture, management of risks,
contractors, incidents, information and training, and industrial safety
processes in all areas (labour protection, industrial safety, nuclear and
radiation safety, environmental protection, health protection);
· a survey was conducted on employee satisfaction with the state of
industrial safety in the Group;
· monthly meetings were held with the heads of the Group's industrial
safety divisions to discuss topical issues in the field of industrial safety;
· training was conducted for the employees of the Group on the topic of
"Effective methods for safety briefing";
· analysis of the frequency and nature of detected hazardous conditions,
hazardous actions, potentially hazardous situations, and Near Miss to
determine the adequacy of the corrective measures taken;
· comprehensive measures were taken to combat COVID-19 at the
Group's enterprises
These activities are focused on the implementation of preventative measures, a
risk-based approach to the organization of the production process and an
increased awareness of the safety procedures (safety culture) among the
Company's employees.
Kazatomprom's 2022 Guidance
(exchange rate 460 KZT/1USD) 2022
Production volume U(3)O(8) (tU) (100% basis)(1) 21,000 - 22,000(2)
Production volume U(3)O(8) (tU) (attributable basis)(3) 10,900 - 11,500(2)
Group sales volume (tU) (consolidated)(4) 16,300 - 16,800
Incl. KAP sales volume (incl. in Group) (tU)(5) 13,400 - 13,900
Revenue - consolidated (KZT billions)(6) 930 - 950
Revenue from Group U(3)O(8) sales, (KZT billions)(6) 790 - 810
C1 cash cost (attributable basis) (USD/lb)(7) $9.50 - $11.00
All-in sustaining cash cost (attributable C1 + capital cost) (USD/lb)(7) $16.00 - $17.50
Total capital expenditures of mining entities (KZT billions) (100% basis)(8) 160 - 170
(1) Production volume U(3)O(8) (tU) (100% basis): Amounts represent the
entirety of production of an entity in which the Company has an interest; it
disregards that some portion of production may be attributable to the Group's
JV partners or other third-party shareholders.
(2) The duration and full impact of the COVID-19 pandemic and the
Russian-Ukrainian conflict is not yet known. Annual production volumes could
therefore vary from internal expectations.
(3) Production volume U(3)O(8) (tU) (attributable basis): Amounts represent
the portion of production of an entity in which the Company has an interest,
corresponding only to the size of such interest; it excludes the portion
attributable to the JV partners or other third-party shareholders, except for
JV "Inkai" LLP, where the annual share of production is determined as per
Implementation Agreement as disclosed in Company's 2018 IPO Prospectus. Actual
drummed production volumes remain subject to converter adjustments and
adjustments for in-process material.
(4) Group sales volume: includes the sales of U(3)O(8) by Kazatomprom's sales
and those of its consolidated subsidiaries (companies that KAP controls by
having (i) the power to direct their relevant activities that significantly
affect their returns, (ii) exposure, or rights, to variable returns from its
involvement with these entities, and (iii) the ability to use its power over
these entities to affect the amount of the Group's returns. The existence and
effect of substantive rights, including substantive potential voting rights,
are considered when assessing whether KAP has power to control another
entity). For consistency, Group U(3)O(8) sales volumes do not include other
forms of uranium products (including, but not limited to the sales of fuel
pellets).
(5) KAP U(3)O(8) sales volume: includes only the total external sales of
U(3)O(8) of KAP HQ and THK. Intercompany transactions between KAP HQ and THK
are not included.
(6) Revenue estimates have only been updated to account for a change in
expectations for uranium price and exchange rate for the Kazakhstani Tenge.
Revenue expectations are based on a uranium prices taken at a single point in
time from third-party sources and on an internal exchange rate assumption of
KZT460:USD1. There continues to be significant volatility in both uranium
price and the tenge exchange rate. Therefore, 2022 revenue could be materially
impacted by how actual uranium prices and exchange rates vary from the
third-party and internal estimates respectively.
(7) Note that the conversion of kgU to pounds U(3)O(8) is 2.59979.
(8) Total capital expenditures (100% basis): includes only capital
expenditures of the mining entities, excludes significant CAPEX for investment
and expansion projects.
At this time, all 2022 guidance metrics remain unchanged from previously
disclosed expectations.
COVID-19 disrupted the overall production supply chain in 2021, resulting in a
shortage of certain production materials, such as reagents and piping,
affecting exploration and development activities, which led to a shift in the
commissioning schedule for new wellfields. Because of the shift, uranium
production volumes through the first half of 2022 fell short of internal
expectations. In addition to the delays in the commissioning schedule for new
wellfields, shortages of certain materials, including sulfuric acid, also have
a negative impact on development and production activities. Despite these
challenges, the Group is maintaining its 2022 production plan and making every
effort to achieve it, though final year-end volumes could fall short if
wellfield development and supply chain issues continue or worsen throughout
the second-half of the year.
Revenue, C1 cash cost (attributable basis) and All-in Sustaining cash cost
(attributable C1 + capital cost) guidance may vary from the ranges shown, to
the extent that the KZT-to-USD exchange rate and uranium spot price differ
significantly from the Company's assumptions.
The Company only intends to update annual guidance in relation to operational
factors and internal changes that are within its control. Key assumptions used
for external metrics, such as exchange rates and uranium prices, are
established using third-party sources during the Company's annual budget
process in the previous year; such assumptions will only be updated on an
interim basis in exceptional circumstances.
The Company continues to target an inventory level of approximately six to
seven months of annual attributable production. However, inventory could fall
below these levels due to Pandemic-related production losses. As such, during
the first half of 2022, several transactions to purchase material in the spot
market were carried out and the Company will continue to monitor market
conditions for opportunities to optimize its inventory levels.
Changes to the Tax code of Kazakhstan
In January 2022, the Government of the Republic of Kazakhstan announced that
it intended to update the country's tax code. On 11 July 2022, additions and
amendments to the Kazakh tax code were adopted (Laws of the Republic of
Kazakhstan "On the Enactment of the Code of the Republic of Kazakhstan "On
Taxes and Other Mandatory Payments to the Budget" No. 135-VII LRK), which will
change the calculation of the MET base and rate for uranium extraction in
2023. The new tax code comes into force beginning 01 January 2023 and it does
not impact 2022 guidance or the Company's expectations related to taxation in
2022. In accordance with the introduced changes, the tax base for MET on
uranium will be determined as the weighted average price of uranium from
public sources for the specific reporting period, multiplied by the amount of
uranium mined and a MET rate of 6%. MET expenses in absolute terms are
expected to increase due to the incorporation of the corresponding spot
price into the formula. However, the ultimate impact cannot be estimated at
this time as the new formula will only be applied from 01 January 2023.
Conference Call Reminder - 2022 Half-Year Operating and Financial Review
Kazatomprom has scheduled a conference call to discuss the 2022 half-year
operating and financial results, after they are released on Friday, 19 August
2022. The call will begin at 17:00 (Nur-Sultan time) / 11:00 (GMT) / 07:00
(EDT). Following management remarks, an interactive English Q&A session
will be held with investors.
For the English live webcast (participants on the webcast can also submit
questions during the event), conference call dial-in details and for
information on how to participate in the Q&A, please visit:
https://www.lsegissuerservices.com/spark/JSCNationalAtomicCoKazatomprom/events/e09a0dd0-bf9b-4243-8ebb-495e0c20b91a
(https://www.lsegissuerservices.com/spark/JSCNationalAtomicCoKazatomprom/events/e09a0dd0-bf9b-4243-8ebb-495e0c20b91a)
For the Russian live webcast (listen-only, no Q&A) and corresponding
dial-in details, please visit:
https://www.lsegissuerservices.com/spark/JSCNationalAtomicCoKazatomprom/events/967e35ee-4cf5-4f80-8cff-91beb6511a68
(https://www.lsegissuerservices.com/spark/JSCNationalAtomicCoKazatomprom/events/967e35ee-4cf5-4f80-8cff-91beb6511a68)
A recording of the webcast will also be available at www.kazatomprom.kz
(http://www.kazatomprom.kz) shortly after it concludes.
For further information, please contact:
Kazatomprom Investor Relations Inquiries
Cory Kos, International Adviser, Investor Relations
Botagoz Muldagaliyeva, Director of Investor Relations
Tel: +7 (8) 7172 45 81 80
Email: ir@kazatomprom.kz
Kazatomprom Public Relations and Media Inquiries
Gazhaiyp Kumisbek, Chief Expert of GR & PR Department
Tel: +7 (8) 7172 45 80 63
Email: pr@kazatomprom.kz
About Kazatomprom
Kazatomprom is the world's largest producer of uranium, with the Company's
attributable production representing approximately 24% of global primary
uranium production in 2021. The Group benefits from the largest reserve base
in the industry and operates, through its subsidiaries, JVs and Associates, 26
deposits grouped into 14 mining assets. All of the Company's mining operations
are located in Kazakhstan and extract uranium using ISR technology with a
focus on maintaining industry-leading health, safety and environmental
standards (ISO 45001 and ISO 14001 compliant).
Kazatomprom securities are listed on the London Stock Exchange, Astana
International Exchange, and Kazakhstan Stock Exchange. As the national atomic
company in the Republic of Kazakhstan, the Group's primary customers are
operators of nuclear generation capacity, and the principal export markets for
the Group's products are China, South and Eastern Asia, Europe and North
America. The Group sells uranium and uranium products under long-term
contracts, short-term contracts, as well as in the spot market, directly from
its headquarters in Nur-Sultan, Kazakhstan, and through its Switzerland-based
trading subsidiary, Trade House KazakAtom AG (THK).
For more information, please see the Company website at www.kazatomprom.kz
(http://www.kazatomprom.kz)
Forward-looking statements
All statements other than statements of historical fact included in this
communication or document are forward-looking statements. Forward-looking
statements give the Company's current expectations and projections relating to
its financial condition, results of operations, plans, objectives, future
performance and business. These statements may include, without limitation,
any statements preceded by, followed by or including words such as "target,"
"believe," "expect," "aim," "intend," "may," "anticipate," "estimate," "plan,"
"project," "will," "can have," "likely," "should," "would," "could" and other
words and terms of similar meaning or the negative thereof. Such
forward-looking statements involve known and unknown risks, uncertainties and
other important factors beyond the Company's control that could cause the
Company's actual results, performance or achievements to be materially
different from the expected results, performance or achievements expressed or
implied by such forward-looking statements. Such forward-looking statements
are based on numerous assumptions regarding the Company's present and future
business strategies and the environment in which it will operate in the
future.
THE INFORMATION WITH RESPECT TO ANY PROJECTIONS PRESENTED HEREIN IS BASED ON A
NUMBER OF ASSUMPTIONS ABOUT FUTURE EVENTS AND IS SUBJECT TO SIGNIFICANT
ECONOMIC AND COMPETITIVE UNCERTAINTY AND OTHER CONTINGENCIES, NONE OF WHICH
CAN BE PREDICTED WITH ANY CERTAINTY AND SOME OF WHICH ARE BEYOND THE CONTROL
OF THE COMPANY. THERE CAN BE NO ASSURANCES THAT THE PROJECTIONS WILL BE
REALISED, AND ACTUAL RESULTS MAY BE HIGHER OR LOWER THAN THOSE INDICATED. NONE
OF THE COMPANY NOR ITS SHAREHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES, ADVISORS
OR AFFILIATES, OR ANY REPRESENTATIVES OR AFFILIATES OF THE FOREGOING, ASSUMES
RESPONSIBILITY FOR THE ACCURACY OF THE PROJECTIONS PRESENTED HEREIN.
The information contained in this communication or document, including but not
limited to forward-looking statements, applies only as of the date hereof and
is not intended to give any assurances as to future results. The Company
expressly disclaims any obligation or undertaking to disseminate any updates
or revisions to such information, including any financial data or
forward-looking statements, and will not publicly release any revisions it may
make to the Information that may result from any change in the Company's
expectations, any change in events, conditions or circumstances on which these
forward-looking statements are based, or other events or circumstances arising
after the date hereof.
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