The long-term fundamentals of the nuclear industry remain strong, and among the various processing stages of the fuel cycle, uranium mining is set to deliver the greatest value.
Kazatomprom’s competitive edge lies within that uranium mining stage, underpinned by both our exclusive use of the in-situ recovery (ISR) mining method, which offers an unparalleled structural cost advantage and production flexibility, and by our sales structure with geographic proximity to the fastest-growing nuclear markets.
Taken together, these advantages position the company to realise significant benefits from the potential recovery of uranium prices, whilst being highly resilient to adverse market movements.
With the successful initial public offering of Kazatomprom shares on the Astana International Stock Exchange and London Stock Exchange in 2018, interested investors can now access unparalleled exposure to the front-end of the fuel cycle.
Kazakhstan is the largest uranium producing country in the world, accounting for 44% of the global uranium supply in the 2018. In addition, due to their geological characteristics, the majority of uranium deposits in Kazakhstan are ISR conducive, meaning Kazakhstan accounts for approximately two-thirds of the total global reserves suitable for ISR extraction.
In 2018, Kazatomprom was the largest uranium producing company globally, with its attributable production accounting for 23% of the total global primary uranium production. We have maintained our share in the global uranium production at the level of at least 20% since 2011.
Our extensive asset portfolio comprises 13 uranium assets across Kazakhstan and we are able to grow our resource base with relatively limited investment.
As the national atomic company, Kazatomprom enjoy statutory pre-emptive rights over uranium-holding deposits in Kazakhstan.
Nuclear generation has some key intrinsic advantages over other sources of electricity. It is able to provide baseload capacity, unlike most other renewable sources of energy, and is associated with minimal environmentally-damaging air emissions such as greenhouse gases, compared to fossil fuel-based generation.
Demand for uranium products is overwhelmingly driven by nuclear power generation, which is expected to remain robust in the coming decades. According to UxC, the global nuclear generation capacity is expected to increase by 10% to 434 GWe in 2030 from 394 GWe in the year 2018. At the end 2018, there were 416 operating nuclear reactors globally and 51 nuclear reactors were under active construction in 16 countries.
The Company believes that the supply side of the uranium market is undergoing a structural shift, following a prolonged period of depressed spot prices and oversupply, underpinned by the prevalence of legacy long-term contracts, the majority of which were concluded in the period between years 2005 and 2012.
Gradually expiring legacy long-term contracts, combined with production cuts by leading industry players, as well as declining secondary supplies from enrichers and government inventories are all expected to put significant constraints on the supply stack.
The Company believes its average costs are consistently in the first quartile of the global uranium production cost curve (based on UxC data). These low production costs are primarily driven by the geological structure of our deposits, which enables cost-efficient ISR extraction technology that also benefits from a smaller environmental footprint. Our cost advantage is further underpinned by a lower cost base (cost of services, personnel, utilities) in Kazakhstan compared to more developed markets such as Canada and Australia, which are the other major uranium producing countries.
Together with our partners, Kazatomprom operates 8 out of the 10 largest ISR mines in the world and as the largest ISR producer, we have accumulated extensive experience and knowledge, that allows us to constantly increase the efficiency of our mining operations.
Kazakhstan as a whole accounts for 67% of the world’s measured and indicated resources suitable for ISR mining.
At 31 December 2018, the Group’s attributable Proved and Probable Ore Reserves totaled 305.6 thousand tonnes of Uranium Metal Content Equivalent (UME), and attributable Measured and Indicated Mineral Resources (inclusive of those Mineral Resources modified to produce the Ore Reserves) totaling 476.7 thousand tonnes of UME (reported in accordance with the terms and definitions of the JORC Code).
Like the rest of the nuclear fuel cycle, the uranium mining industry is characterised by the particularly long-term nature of supplier-customer relationships compared to other commodities.
Kazatomprom has proven to be a reliable supplier to the industry for more than 20 years, and has created a global sales and distribution footprint including THK in Switzerland and a representative office in the United States. As the world’s largest uranium producer, we have established relationships with the majority of global consumers of civil uranium and developed a high quality blue chip customer base.
As at 31 December 2018, Kazatomprom had 22 customers from 11 countries and supplies uranium to 8 of the 10 largest operators of nuclear generation capacity globally.
We also benefit from Kazakhstan’s physical proximity to China, which is expected to be the fastest growing nuclear power market in the world.
The health and safety of our employees is our first priority, and we have established and implemented advanced health and safety, as well as environmental, policies and controls at all of our operations.
We have adopted an ISO-14001-based environment management system and OHSAS-18001-compliant health and safety management systems.
ISR technology is considered by the IAEA to have environmental and safety advantages as compared to conventional mining and milling. This, among other things, is demonstrated by the absence of any major environmental accidents in Kazatomprom’s operations since inception. We maintain robust monitoring systems over groundwater and soil in the ISR process, radiation protection and other environmental risks.
Supporting the International Social Security Association (ISSA)’s initiative of improving industrial safety, health and well-being, we became a partner of the Vision Zero international program, confirming our intention to reach zero injuries through adherence to the seven “golden rules” promulgated by the program.
The average dose of personnel radiation exposure was 1.55 mSv that includes the natural background radiation. At the same time, in 2018 the values of natural background radiation at the production areas of the Company's enterprises ranged from 0.3 to 1.2 mSv/year. The average dose less the natural background radiation in 2018 was 0.76 mSv/year. Our LTIFR amounted to 0.31 for the 2018.
Kazatomprom’s leading market position, with a prudent financial policy, low-cost operations, and the ability to quickly adjust production to meet the market’s needs, allows us to sustain strong financial performance in varying market conditions and uranium price environments.
We are committed to a sustainable dividend policy aimed at ensuring predictable and equitable distribution of free cash flow to shareholders, while preserving financial stability and prudent leverage levels.
Our experienced management team has a proven track record of delivering on a focused strategy and achieving robust performance amidst a volatile industry and macroeconomic environment, as evidenced by its operating and financial results in recent years.
Kazatomprom benefits from the Company’s experienced and balanced Board of Directors, which includes three highly regarded independent directors with extensive international experience in the uranium and broader nuclear industry.
The Board of Directors, as well as each of its committees, are chaired by independent directors.
Although our primary focus is on our core business of uranium mining, we also provide downstream services (fuel powder and pellets) at our subsidiary - Ulba Metallurgical Plant, which has been in operation as a reliable supplier for almost 70 years including more recent contracts to supply fuel pellets for nuclear reactors in China
Kazatomprom is also well positioned to capture potential opportunities in other segments of the front-end nuclear value chain should the market demand more capacity, primarily through selected business partnerships with our international peers.
The Company's primary customers are operators of nuclear generation capacity, with principal export markets including China, South and East Asia, Europe, and North America.
The Company sells uranium and uranium products under long-term contracts, short-term contracts, and in the spot market, both directly and through its wholly owned Switzerland-based trading subsidiary, Trading House KazakAtom (THK).
The Company has partnered with many leading global players in the uranium mining and nuclear industry, including strong asset-level partnerships with Cameco Corporation, China General Nuclear Power Group, The Kansai Electric Power Company, Inc., Marubeni Corporation, Orano SA, The State Atomic Energy Corporation Rosatom and Sumitomo Electric Industries, Ltd, as well as the Energy Asia Holdings (BVI) Ltd. consortium. These partnerships demonstrate the prominence of the Group’s asset base on a global scale, while allowing the Group to gain access to and share in the partners’ technologies and management expertise.
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