REG - JSC NAC Kazatomprom - Kazatomprom 2022 Financial Results
17/03/2023 08:15
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RNS Number : 3469T JSC National Atomic Co. Kazatomprom 17 March 2023
AIX: KAP, KAP.Y (GDR)
LSE: KAP (GDR)
Currency: KZT (₸), unless otherwise noted
17 March 2023, Astana, Kazakhstan
Kazatomprom 2022 Financial Results
JSC National Atomic Company "Kazatomprom" ("Kazatomprom", "KAP" or "the
Company") announces its consolidated financial results for the year ended 31
December 2022, prepared in accordance with International Financial Reporting
Standards (IFRS).
"2022 was a turbulent year for Kazakhstan and the global community in general.
Kazatomprom and the nuclear industry overall are not exceptions. We've seen
tremendous and tragic events unfolding in the region since the start of 2022,
and while the impact of Qantar has resulted in a wide range of liberal reforms
in Kazakhstan, it is difficult to predict the possible impact and consequences
of the Russian-Ukrainian conflict. We still hope for a peaceful resolution
very soon," said Yerzhan Mukanov, Kazatomprom's Chief Executive Officer.
"2022 has tested our risk management practices, which have proven to be
resilient in key areas of performance, such as finance, operations, and the
supply chain. Our risk management processes and mitigation plans have remained
robust, the Company continues to monitor the overall situation and responds to
the challenges of a changing environment."
"2023 has started with key Management role changes for Kazatomprom. We had two
new members joining the executive team - Ruslan Beketayev as the Chief
Financial Officer and Alisher Taizhanov as the Chief Commercial Officer - both
bearing extensive experience and expertise in their pertinent fields and the
competence to deliver on the Company's strategy. With that being said, we
reassure stakeholders that the Company's strategy remains the same, and we, as
management, are committed to the strategy's main pillars and focus on being
the partner of choice for the global nuclear fuel industry, as well as
sustainably developing our uranium deposits and their value chain components
to create long-term value for all stakeholders."
"In terms of 2022 results, I am proud to confirm that we once again delivered
on our guidance. Adjusted Net Profit and adjusted EBITDA almost doubled in
2022 compared to 2021. This is an outstanding achievement. Our production and
sales expecations for 2023 remain consistent with our market-centric strategy
in accordance with our long-term commitments and improving market
fundamentals. Despite the current volatile environment, we expect to deliver
on our guidance in 2023 established under our value-focused approach."
"Apart from the financial performance, we at Kazatomprom have a strong
commitment to ESG and fully endorse its prominence, which is once again proved
by our actions. In 2022, we joined the UN Global Compact, received an above
industry average rating from S&P Global, and introduced several
cornerstone initiatives within the Company aimed at achieving
carbon-neutrality, improving production safety, and enhancing the social
well-being of our employees."
"Amidst the unprecedented global economic uncertainty and significant
geopolitical developments in 2022, Kazatomprom is well-positioned to benefit
from the improving market dynamics and maximize the value for our stakeholders
through continued production and sales discipline more than ever."
Key financial metrics
(KZT billion unless noted) 2022 2021 Change
Group's consolidated revenue 1,001.2 691.0 45%
Operating profit 456.0 238.2 91%
Net profit 473.0 220.0 115%
Income from an associate development agreement(1) 7.7 - 100%
Adjusted net profit 465.3 220.0 111%
Earnings per share attributable to owners (basic and diluted), 1,342 543 147%
KZT/share(2)
Adjusted EBITDA(3) 630.9 350.3 80%
Attributable EBITDA(4) 495.4 276.5 79%
Cash flow from operating activities(5) 283.9 118.7 139%
(1) The "JV "Katco" LLP participants made amendments to the Partnership
Agreement on further development of "JV "Katco" LLP dated 11 August 2022,
under which the Group became entitled to compensation in the amount of
KZT 7,671 million from the second participant of "JV "Katco" LLP, which was
recognized as other income in 2022 and other receivables.
(2) Calculated as: Profit for the year attributable to owners of the Company
divided by Total share capital, rounded to the nearest KZT.
(3) Adjusted EBITDA is calculated by excluding from EBITDA items not related
to the main business and having a one-time effect. Calculation: Profit before
tax - finance income + finance expense +/- Net FX loss/(gain) + Depreciation
and amortisation + Impairment losses - reversal of impairment +/- one-off or
unusual transactions.
(4) 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, "Ortalyk"
LLP and JV "Khorasan-U" LLP, less any changes in the unrealized gain in the
Group.
(5) Includes income tax and interest paid
Operating and Financial Review and Financial Statements
The Operating and Financial Review, and Audited Consolidated Financial
Statements provide detailed explanations of Kazatomprom's results for the year
ended 31 December 2022, as compared to the same period in 2021, with guidance
for 2023. This press release should be read alongside these documents, all of
which are available at www.kazatomprom.kz (https://www.kazatomprom.kz/) . All
abbreviations, links and references provided below are related to respective
abreviations and sections used in the Operating and Financial Review.
Geopolitical events
During 2022 significant geopolitical events occurred in Kazakhstan and in
Russia/Ukraine. These events have not had a material impact on the Group's
operations to date although the resulting market uncertainty has caused
significant volatility in the tenge exchange rate and traded price of the
Company's securities. Management is unable to predict the consequences or
future impacts of these events, if any, on the Group's financial position or
operating performance. Management will continue to monitor the potential
impact of the above events and will take all necessary steps to mitigate the
risks and prevent adverse business impacts.
(a) January 2022 civil unrest in Kazakhstan
On 2 January 2022 protests triggered by a rise in fuel prices began in the
Mangistau region of Kazakhstan which spread to other regions in the country.
The protestors demanded a number of social, economic and political reforms.
Although the Government took measures to respond to these demands, including a
decrease in fuel prices, the protests escalated into significant social unrest
in Almaty and southern regions of the country.
As a result, on 5 January 2022 a state of emergency was declared until 19
January 2022, and restrictions were imposed on communication and
transportation of people and vehicles, including railway and airline carriage.
By the end of January 2022, the situation in all regions of the country
stabilised, and the state of emergency was lifted. The functioning of
utilities and infrastructure were fully restored, and restrictions on
communication and transportation were removed.
(b) Events in Ukraine
On 24 February 2022, the Russian President announced that Russia would
recognise independency of the Luhansk People's Republic and Donetsk People's
Republic and the Russian military mobilised its troops over the border of
Ukraine. As a response to the Russian actions, the United States, the European
Union and a number of other countries imposed sanctions against Russia
including the disconnection of a number of Russian financial institutions from
SWIFT.
In connection with the Russian/Ukraine conflict and its consequences, the
Tenge exchange rate began to be more volatile and the annual inflation rate
was 20.3% in 2022. To date, the National Bank of the Republic of Kazakhstan
has taken a number of measures to maintain the stability of the Kazakhstan
financial system.
The Group's financial position and results are currently unaffected by the
events in Ukraine. The majority of Group revenues is earned in US dollars and
funding is also raised in US dollars, creating a natural hedging effect on
foreign exchange risk. Accordingly, fluctuations in the exchange rate of the
national currency do not have a significant impact on the financial
performance of the Group.
Due to active international sanctions processes against Russian banks,
including Sberbank, VTB Bank and other organisations, it is inappropriate for
the Group to service or interact with these banks and their subsidiaries. The
Group has taken measures to redistribute funds to banks that are not under
current sanctions.
The Group has a Uranium Processing Agreement with the Uranium Enrichment
Center (UEC) (a resident of the Russian Federation). At the date of the
financial statements, the Group anticipates that provision of services under
this agreement will continue. A high-priority risk analysis is being carried
out on a continuous basis with respect compliance with the sanctions.
Some of the Group's exported products are transported through the Russian
Federation and, accordingly, there are risks associated with the transit
through the territory of Russia, shipping insurance, and the delivery of cargo
by sea vessels. The Group constantly monitors the situation with sanctions
against Russia and the potential impact on the transportation of finished
products. At the date of financial statements, there are no restrictions on
the Group's activities related to the supply of the Group's products to end
customers.
The Group's exported products are transported through Russia which creates
risks associated with both transit through the territory of Russia and the
delivery of cargo by sea vessels, logistical constraints could also increase
import costs. The Group constantly monitors the potential impact of sanctions
on the transportation of finished products. At the date of Financial
Statements, there are no restrictions on the Group's activities related to the
supply of the Group's products to end customers. Kazatomprom also has
permission to transit uranium through the Trans-Caspian International
Transport Route (TITR), which Kazatomprom has successfully used as an
alternative route since 2018 to help mitigate the risk of the primary route
being unavailable, for any reason.
As part of its ongoing risk assessment program, management is reviewing the
impact of anti-Russian sanctions on the Group's operations. To date, the
sanctions have not had a significant impact on the Group's operations,
although the resulting market uncertainty caused by the conflict between
Russia and Ukraine has led to significant volatility in the spot uranium
price, the exchange rate of the national currency and the quotations of the
Company's securities. During 2022, the Company experienced some difficulties
with certain bank payments, but these were resolved in January 2023.
Management update
In March 2022, Mr. Aslan Bulekbay, Kazatomprom's Chief Operating Officer
(COO), has decided to pursue other opportunities and resigned from his
position.
In September 2022 the Company's Board of Directors approved the appointment of
Mr. Yerzhan Mukanov as Chief Executive Officer (CEO) and Chair of
Kazatomprom's Management Board. Mr. Mukanov had been acting CEO since July
after Mr. Mazhit Sharipov departed from his position in the Company.
Ruslan Beketayev and Alisher Taizhanov joined the executive team as CFO and
CCO respectively in the beginning of the 2023, after Mrs. Kamila Syzdykova and
Mr. Askar Batyrbayev have decided to leave their roles in the Company at the
end of 2022.
ESG at Kazatomprom
As the world's largest uranium mining company and a nuclear industry leader,
Kazatomprom recognizes its role in the sustainable development and its
potential impact on the environment, population and people in the areas of
presence. Therefore, sustainable development represents a crucial part of the
Group's Development Strategy and by extension, ESG-related targets and
objectives are integral to the Company's plans, including:
· Reducing the environmental impact of subsidiaries, associates and
joint ventures;
· Environmental protection, including effective water and land
resources management, ecosystem and biodiversity conservation, and the
reduction of emissions;
· Ensuring resources are extracted in a way and at a rate that
minimizes subsoil impact;
· Progress in production, energy and resource efficiency
· Growth of socio-economic prosperity in the regions where the
Company operates; and
· Facilitation of access to affordable, reliable, sustainable and
modern energy sources, and enhancement of energy security.
Kazatomprom continuingly fosters and advances its management of sustainable
development and integration of ESG principles in core business areas and
processes. As part of the Corporate Policy on sustainable development, the
Company is focused on nine key sustainable development areas, delineated based
on an analysis of core ESG risks facing the business. Active engagement with
stakeholders aims to define and prioritize the various ecological, social and
government issues that are most impacted by the Company's activities.
Kazatomprom recognizes and accepts responsibility in designing the foundations
for a sustainable future and support the Global 2030 Sustainable Development
agenda.
ESG Updates in 2022
In December 2022, the international rating agency S&P Global Ratings ("
the Agency") assigned Kazatomprom its first independent ESG rating at a score
of 51 (the global average score for the mining sector is 50). The Agency's
assessment was based upon an in-depth analysis of Kazatomprom's exposure to
mining, environmental and social risks. The Agency noted Kazatomprom's
contribution to the global efforts in achieving decarbonization, highlighted
the effective management of ESG-related risks. Moreover, according to Agency's
assessment, compared to global peers Kazatomprom is relatively better
positioned due to the environmentally friendly and progressive uranium mining
method (ISR) and KAP's HSE risk management practice is in line with the
world's leading practices. Noteworthy, Kazatomprom's disclosure practices are
rated as "strong" by the Agency.
The current ESG assessment is the result of dedicated joint efforts performed
by both Kazatomprom and its subsidiaries, aiming at maturing their practices,
including sustainable development-oriented practices.
Health, safety and environment (HSE) results
Health, safety, and environmental protection, including nuclear and radiation
safety, are priorities for the Company. The Company is continuously improving
the management system of its industrial HSE programs as it strives to a goal
of zero injuries.
The Company conducts its production activities in compliance with both Kazakh
and international requirements for labour protection and industrial safety,
implementing comprehensive measures to prevent incidents and accidents. Health
and safety management systems that meet international standards (ISO 45001)
have been implemented and annually confirmed by results of external audit, and
the Company carries out systematic work to improve the safety culture among
employees and managers at all levels.
The measures undertaken in 2022 to enhance the focus on safety awareness
helped to prevent major industrial accidents (including uncontrolled
explosions, emissions of dangerous substances or destruction of buildings) at
Kazatomprom's enterprises. In 2022, Kazatomprom and it's enterprises spent
more than KZT 8.08 billion (in 2021: KZT 8.29 billion) within its
occupational health and safety programs. The table below reflects the safety
results of 2022 and 2021:
Indicator 2022 2021 Change
Industrial accidents(1) - - -
LTIFR (per million man-hours)(2) 0.11 0.55 (80%)
Unsafe conditions, unsafe actions, near-miss reporting 36,913 44,271 (17%)
Number of accidents(3) 3 9 (67%)
Fatalities 1 2 (50%)
(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.
Notwithstanding the continuing actions taken to improve workplace health and
safety, three accidents occurred in 2022. The accidents included: one case of
cut injury on hand, one case of road accident and one case resulting from the
impact of a moving object. The fatal case occurred as a result of a road
accident.
Following each accident, thorough investigations were completed, the main
causes were identified, preventative measures were developed and procedures
were changed to prevent similar incidents in the future. The investigation
results were reported to other Group entities to ensure all operations could
learn from the event and adjust their processes accordingly. The Company will
continue working to increase the level of involvement and awareness of
employees in industrial safety.
Revenue, net profit, EBITDA
The Group's consolidated revenue was KZT 1,001,171 million in 2022, an
increase of 45% compared to 2021, primarily due to an increase in the
average realized price associated with an increase in the spot price for
U(3)O(8) and the weakening of KZT against USD in 2022, whereas U(3)O(8) sales
volume was comparable to 2021 (see Section 6.3.2 Uranium segment production
and sales metrics). An increase in overall revenue includes an increase in
revenues from UMP segment (see Section 6.4 UMP Segment and Note 7 "Segment
Information" in Financial Statements) by KZT 61,179 million including
revenues from external segments.
Operating profit in 2022 was KZT 455,962 million, an increase
of 91% compared to 2021. The increase was mainly due to an increase in
average realized price of uranium sold.
Net profit in 2022 was KZT 472,963 million, an increase of 115% compared
to 2021 and the percentage increase is consistent with the increase in the
operating profit in 2022. Adjusted net profit for 2022 was
KZT 465,292 million, an increase of 111% compared to 2021, which is also due
to the increase in the operating profit in 2022. In 2022 the "JV "Katco" LLP
participants made amendments to the Partnership Agreement on further
development of "JV "Katco" LLP dated 11 August 2022, under which the Group
became entitled to compensation in the amount of KZT 7,671 million from the
second participant of "JV "Katco" LLP, which was recognized as other income,
which is considered as a one-time effect.
Profit for the period attributable to non-controlling interest increased
significantly in 2022 compared to 2021, impacted by the sale of a 49% share of
"Ortalyk" LLP in July 2021 in addition to the explanations stated above. In
2021, the Company sold 49% of its interest in "Ortalyk" LLP, while Kazatomprom
retains a controlling 51% interest, according to which, under IFRS, the
financial effect of this transaction is reflected in the Financial Statements
in cash flows (see Section 9.4.3 Cash Flows from financing activities) and
equity.
Adjusted EBITDA comprised KZT 630,898 million in 2022, an increase of 80%
compared to 2021 due to a higher operating profit. Attributable EBITDA was
KZT 495,357 million in 2022, an increase of 79% compared to 2021 mainly due
to the higher operating profit, as well as an increase in the EBITDA of JVs
and associates. Also, starting from 2022 and until the end of
"JV "Katco" LLP operations, according to amendments to the Partnership
Agreement of the entity, the Group also became entitled to an additional 11%
of the "JV "Katco's" LLP annual profit allocation, with the ownership
interest being unchanged. This additional 11% impacts the allocation of
"JV "Katco" LLP dividends, therefore, in the financial statements the Group
recognized a share in the results of the "JV "Katco" LLP for 2022 in the
amount of 60%. Net assets are still recognized as 49% in accordance with the
participants' initial agreement.
Operating cash flows in 2022 totalled KZT 283,859 million, a significant
increase compared to 2021 mainly due to:
· a KZT 433,508 million increase in cash receipts from customers
during 2022 compared to 2021, mainly due to 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 188,775 million increase in payments for
accounts payable to suppliers during 2022, mostly due to the weakening of the
KZT against the USD and an increase in the market spot price for U(3)O(8) ;
· a KZT 29,706 million increase in 2022 inflows from VAT refunds
from the budget.
· a KZT 38,377 million increase in other taxes paid mostly due to
the increase in VAT expense arising from increased volume of intra-group sales
in Kazakhstan (see Section 5.4 Taxation and Mineral Extraction Tax ("MET"));
· a KZT 28,167 million increase in income tax paid due to the
increase in profit before tax (see Section 6.9 Profit before tax and tax
expense);
· payments as part of operating cash flows include: payment held as
restricted funds in amount KZT 14,812 million paid to a supplier earlier in
the year whose bank account was subsequently included in the list of legal
entities that fell under U.S. Department of the Treasury Office of Foreign
Assets Control (OFAC) sanctions, the correspondent bank which initially
erroneously blocked the payment returned funds in January, 2023 in full with
interest; compensation paid under subsoil use agreement by JV Akbastau JSC in
amount KZT 7,310 million for 249 tonnes of overproduced uranium based on
current uranium spot prices.
Cost of sales
Cost of sales totalled KZT 475,097 million in 2022, an increase of 18%
compared to 2021.
The cost of materials and supplies was KZT 261,825 million in 2022, an
increase of 8% compared to 2021 due to increase in the purchase price of
materials and supplies as a result of an increased inflationary pressure. In
2022 the purchase price of uranium from JVs and associates, as well as from
third parties was higher than in 2021 caused by an increase in the spot price
for U(3)O(8) and the weakening of KZT against USD in 2022. When such uranium
is sold, the cost of sales is predominantly represented by the cost of
purchased uranium (accounted in materials and supplies) at the prevailing spot
price with certain applicable discounts.
Distribution expenses
Distribution expenses totalled KZT 25,605 million in 2022 and
significantly increased compared to 2021. The increase was mainly due to
changes in the delivery destination points for uranium products (see Section
3.2 Sales), an increase in transportation tariffs as well as by using the TITR
and 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)
In comparison to 2021 G&A expenses increased due in part to a compensation
liability to tax authority of Republic of Kazakhstan in the amount of
KZT 7,310 million for overproduction by JV Akbastau JSC compared to its
approved subsoil use agreement for 249 tonnes of uranium, as well as an
increase in payroll costs.
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) 2022 2021 Change
Cash and cash equivalents 169,536 161,190 5%
Current term deposit (deemed as cash equivalent) 930 43,220 (98%)
Total cash 170,466 204,410 (17%)
Undrawn borrowing facilities 84,665 177,902 (52%)
Total cash at 31 December 2022 comprised KZT 170,466 million, compared to
KZT 204,410 million at 31 December 2021, due to explanations that are
presented below in the Section 9.4 Cash Flows.
Undrawn borrowing facilities are the revolving corporate credit lines
available to the Group and are considered as an additional short-term
liquidity source to cover temporary cash deficit related to uneven receipts of
trade receivables.
As of December 31, 2022, the Group's fully available revolving credit lines
comprised a total of USD 235 million, out of which USD 183 million were
available for use (as at 31 December 2021 available credit lines totalled
USD 412 million). The decrease is primarily related to the closure of unused
credit lines.
In October 2022, the Company's Board of Directors approved four issues of the
unsecured commercial bonds totalling USD 200 million on the Kazakhstan Stock
Exchange JSC (KASE). The interest rate (coupon) is fixed for each bond issue
and determined as the Secured Overnight Financing Rate (SOFR) published on the
official website of Federal Reserve Bank of New York five business days prior
to the date of the first auction in the trading system of KASE.
Subsequently, in December 2022 the Company placed the first out of four issues
of commercial bonds with nominal value of USD 50 million, interest rate
(coupon) of 4.32% and maturity of 30 calendar days. The bonds were redeemed
on 23 January 2023 with a payment in the amount USD 50.18 million, including
a coupon amount of USD 0.18 million. Yield to maturity of the bonds
comprised 4.6%.
Debt leverage ratios
The following table summarises the key ratios used by the Company's management
to measure financial stability in 2022 and 2021. Management targets a net debt
to adjusted EBITDA of less than 1.0.
(KZT million) 2022 2021 Change
Total debt (excluding guarantees) 138,444 89,308 55%
Total cash balances (see Section 9.1) (170,466) (204,410) (17%)
Net debt (32,022) (115,102) (72%)
Adjusted EBITDA* (see Section 6.0) 630,898 350,294 80%
Net debt / Adjusted EBITDA (coefficient) (0.05) (0.33) (85%)
*Adjusted EBITDA is calculated by excluding from EBITDA items not related to
the main business and having a one-time effect. Calculation: 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
2022 2021 Change
Production volume of U(3)O(8) (100% basis) tU 21,227 21,819 (3%)
Production volume of U(3)O(8) (attributable basis)(1) tU 11,373 11,858 (4%)
U(3)O(8) sales volume (consolidated) tU 16,358 16,526 (1%)
Including KAP U(3)O(8) sales volume(2), (3) tU 13,572 13,586 (0%)
Group inventory of finished goods (U(3)O(8)) tU 9,352 8,824 6%
Including KAP inventory of finished goods (U(3)O(8))(4) tU 7,749 7,724 0%
Group average realized price KZT/kg 52,051 36,677 42%
Group average realized price USD/lb 43.44 33.11 31%
KAP average realized price(5) USD/lb 42.50 32.33 31%
Average weekly spot price USD/lb 49.61 35.05 42%
Average month-end spot price(6) USD/lb 49.81 35.28 41%
(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 and 225 tU equivalent
sold as UF(6) in 4Q21.
(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.
All annual operational and sales results in the uranium segment were in line
with the updated guidance provided for 2022, which was adjusted in the
Company's Third Quarter 2022 Operations and Trading Update.
Production volumes on a 100% basis and attributable basis for both fourth
quarter of 2022 and throughout 2022 were slightly lower compared to 2021, as
the COVID-19 pandemic had an impact on wellfield development in 2021. This had
a lagged effect on production in 2022, it usually takes from eight to ten
months between wellfield development and the resulting uranium extraction by
in-situ recovery. As a consequence delays and/or limited access to certain
materials and equipment in 2021, resulted in lower production in 2022 compared
to the same period in 2021. Additionally, attributable production was impacted
by the sale of a 49% share of "Ortalyk" LLP to CGN Mining UK Limited in July
2021.
Uranium sales at the Group and KAP levels in 2022 were on the same level as in
2021. Shipments through the TITR (that included the JV Inkai-owned portion of
material) were successfully delivered in 2022.
Consolidated Group inventory of finished U(3)O(8) products amounted to
9,352 tonnes as at 31 December 2022, which was 6% higher than at 31 December
2021. At the Company level, inventory of finished U(3)O(8) products was
7,749 tonnes and were comparable to 2021. Consistent with the Company's value
strategy, Kazatomprom's inventory levels vary based on the timing of customer
requirements and the resulting differences in the timing of deliveries and
mining and sales volumes, in alignment with changing market conditions.
The Group's average realized price in KZT in the 2022 was KZT 52,051 per kg
(43.44 USD/lb), an increase of 42% compared to 2021 due to an increase in
the average spot price for uranium products, and the weakening of the KZT
against the USD. The average sales prices at the KAP level were also higher
and for the same reasons.
The Company's current overall contract portfolio price is correlated to
uranium spot prices (see Section 12.1 Uranium sales price sensitivity
analysis). However, the increase in average realized prices in 2022 was lower
than the increase in the spot market price for uranium due to the spot price
volatility in the uranium market in 2022 and 2021: low of 42.48 USD/lb and
high of 63.75 USD/lb (2021: low of 27.35 USD/lb and high of 50.38 USD/lb).
For short-term deliveries to end-user utilities, the spot price can vary
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 impact of market volatility during the time lag
between price-setting and delivery becomes more pronounced as volatility
increases, in both rising and falling market conditions. In addition, some
long-term contracts incorporated a proportion of fixed pricing negotiated
prior to the sharp increase in spot price in the second half of 2021. As a
result, increases in both the Group and KAP's average realised prices in 2022
compared to 2021 were lower than the increases in the spot market price for
uranium over the same intervals.
Uranium segment costs and capital expenditures
(KZT million unless noted) 2022 2021 Change
C1 Cash cost (attributable basis) USD/lb 10.25 8.80 16%
Capital cost (attributable basis) USD/lb 5.94 3.83 55%
All-in sustaining cash cost (attributable C1 + capital cost) USD/lb 16.19 12.63 28%
Capital expenditures of mining companies (100% basis)(1) 146,499 91,087 61%
(1) Excludes liquidation funds and closure costs.
Compared to 2021, in 2022 C1 Cash cost (attributable) increased by 16% mainly
due to a payroll increase of production personnel and an increase in the
cost of materials driven by inflationary pressure. All-in-sustaining cash
costs ("AISC") (attributable C1 + capital cost) increased by 28% in USD
equivalent in 2022 due to an increase in capital expenditures of mining
companies (see section 7.0 CAPITAL EXPENDITURES REVIEW). The results were
within the guidance ranges provided for 2022 (guidance of US$9.50 - 11.00 for
attributable C1 cash cost, US$16.00 - 17.50 for AISC).
Capital expenditures of mining companies (100% basis) comprised
KZT 146,499 million, an increase of 61% compared to 2021, primarily due to
a shift in wellfield development activities, as well as higher purchase prices
for materials, supplies, equipment and cost of drilling.
Kazatomprom's 2023 Guidance
2023 2022
470 KZT/1USD 460.85 KZT/1USD
Production volume U(3)O(8), (tU) (100% basis)(1, 2) 20,500 - 21,500(2) 21,227
Production volume U(3)O(8), (tU) (attributable basis)(3) 10,600 - 11,200(2) 11,373
Group sales volume, (tU) (consolidated)(4) 15,400 - 15,900 16,358
Incl. KAP sales volume (included in Group sales volume), (tU)(5) 12,100 - 12,600 13,572
Revenue - consolidated, (KZT billions)(6) 1,080 - 1,090 1,001
Revenue from Group U(3)O(8) sales, (KZT billions)(6) 820 - 840 851
C1 cash cost (attributable basis) (USD/lb)* $12.00 - $13.50 $10.25
All-in sustaining cash cost (attributable C1 + capital cost) (USD/lb)* $20.00 - $21.50 $16.19
Total capital expenditures (KZT billions) (100% basis)(7) 240 - 250 146
(1) Production volume (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 Russian-Ukrainian conflict and the
COVID-19 pandemic is not yet known. Annual production volumes could therefore
vary from our expectations.
(3) Production volume (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 IPO Prospectus. Actual drummed production volumes
remain subject to converter adjustments and adjustments for in-process
material.
(4) Group sales volume: includes Kazatomprom's sales and those of its
consolidated subsidiaries.
(5) KAP sales volume: includes only the total external sales of KAP HQ and
THK. Intercompany transactions between KAP HQ and THK are not included.
(6) Revenue expectations are based on uranium prices taken at a single point
in time from third-party sources. The prices used do not reflect any internal
estimate from Kazatomprom, and 2023 revenue could be materially impacted by
how actual uranium prices and exchange rates vary from the third-party
estimates.
(7) Total capital expenditures (100% basis): includes only capital
expenditures of the mining entities, including significant CAPEX for
investment and expansion projects. Excludes liquidation funds and closure
costs. For 2023 includes well construction and mine development costs of JV
Budenovskoye LLP and JV Katco LLP (South Tortkuduk) for a total amount of
approximately KZT 70 billion.
* Note that the conversion of kgU to pounds U(3)O(8) is 2.5998.
Kazatomprom's production expectations for 2023 remain consistent with its
market-centric strategy and the intention to flex down planned production
volumes by 20% for 2018 through 2023 (versus planned production levels under
Subsoil Use Agreements). Production volume in 2023 is expected to be between
20,500 tU and 21,500 tU on a 100% basis and between 10,900 tU to 11,500 tU
on an attributable basis. The decrease in production guidance for 2023 in
comparison to 2022 is mainly due to continued delays and/or limited access to
certain key materials, including sulfuric acid, and equipment impacting the
wellfield commissioning schedule in 2022.
Sales volume guidance for 2023 is aligned with the Company's market-centric
strategy as well. The Group expects to sell between 15,400 tU and 15,900 tU,
which includes KAP sales of between 12,100 tU and 12,600 tU. The decrease in
U(3)O(8) sales volume guidance for 2023 in comparison to 2022 both at the
Group and KAP levels is due to the expected lower production and higher sales
in forms other than U(3)O(8), including but not limited to fuel pellets
produced from KAP's U(3)O(8).
Revenue, C1 cash cost (attributable basis) and All-in Sustaining cash cost
(attributable C1 + capital cost) may vary from the guidance provided if the
KZT to USD exchange rate fluctuates significantly during 2023. Ranges for C1
cash cost (attributable basis) and All-in Sustaining cash cost (attributable
C1 + capital cost) remained flat to reflect the uncertainty in the current
geopolitical situation and widening offsetting effects of current KZT
devaluation and potential inflationary impacts (see Section 1.2 Geopolitical
events). Guidance will be updated if the recent fluctuations and geopolitical
uncertainties persist throughout 2023.
Wellfield development, procurement and supply chain issues, including
inflationary pressure on production materials and reagents, are expected to
continue throughout 2023, impacting the Company's financial metrics and giving
rise to an expectation that C1 cash cost and All-in Sustaining cash cost will
be higher in 2023 than in 2022 Changes to the tax code of the Republic of
Kazakhstan on Mineral Extraction Tax, which came into effect in 2023, will
have an additional impact on the Company's financial performance. The
expenditures related to the local social funding requests are possible as
well. However, these risks cannot be quantified or estimated at this time.
Total capital expenditures on 100% basis guidance for 2023 increased
significantly in comparison to 2022 results to cover the shift in wellfield
development activities (see Section 7.0 CAPITAL EXPENDITURES REVIEW), increase
in purchase prices for materials, supplies, equipment and cost of drilling, as
well as increasing of well construction and mine development costs of JV
Budenovskoye LLP and JV Katco LLP (South Tortkuduk) for a total amount of
approximately KZT 70 billion.
The Company continues to target an ongoing inventory level of approximately
six to seven months of annual attributable production The Company may purchase
uranium from the spot market, while continuing to monitor market conditions
for opportunities to optimise its inventory.
Conference Call Reminder - 2022 Full-Year Operating and Financial Review
Kazatomprom has scheduled a conference call to discuss the 2022 year operating
and financial results later today, 17 March 2023. The call will begin at 17:00
(Astana) / 11:00 (GMT) / 07:00 (ET). Following Management remarks, an
interactive English Q&A session will be held with investors (remarks in
Russian/English, with a simultaneous Russian translation of the Q&A
available on a listen-only line).
For the English live webcast (participants on the webcast can 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/40370bbb-481b-40a3-abbc-ae59a58aee2e
(https://www.lsegissuerservices.com/spark/JSCNationalAtomicCoKazatomprom/events/40370bbb-481b-40a3-abbc-ae59a58aee2e)
For the Russian live webcast (participants on the webcast can also submit
questions during the event, after English Q&A session ends) and
corresponding dial-in details, please visit:
https://www.lsegissuerservices.com/spark/JSCNationalAtomicCoKazatomprom/events/1c2c2682-cb47-4f97-8941-79402d232fc7
(https://www.lsegissuerservices.com/spark/JSCNationalAtomicCoKazatomprom/events/1c2c2682-cb47-4f97-8941-79402d232fc7)
A recording of the webcast will also be available at www.kazatomprom.kz
(https://www.kazatomprom.kz/) shortly after it concludes.
For further information, please contact:
Kazatomprom Investor Relations Inquiries
Yerlan Magzumov, Director of Investor Relations
Tel: +7 (7172) 45 81 80
Email: ir@kazatomprom.kz
Kazatomprom Public Relations and Media Inquiries
Sabina Kumurbekova, Director, Government and Public Relations
Gazhaiyp Kumisbek, Chief Expert, Government and Public Relations
Tel: +7 (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 environment
standards.
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
(https://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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