Uranium - Yes, Kazatomprom can
Kazakhstan sulphuric acid situation – where we stand
We believe Kazatomprom (KAP) will be able to meaningfully ramp up in 2026 and 2027 as the sulphuric acid shortage alleviates, all else equal.
Russian fertilizer company Eurochem is building a 800kt sulphuric acid plant in Kazakhstan as part of a wider fertilizer production facility and half of that sulphuric acid plant’s production would be allocated to KAP. Latest information suggests the plant could be built end 2025.
In our view, the entry into operation of the Eurochem plant would allow Kazakhstan to ramp up uranium production to a level in 2026 that: 1) delivers on the Budenovskoye JV’s ramp up plans to c10Mlbs next year and 2) say, an additional 4Mlbs yoy production growth in 2026 vs 2025 for the remainder of the mines in country. And all this, without having to resort to additional sulphuric acid imports yoy vs 2025.
Kazakhstan uranium production and sulphuric acid
Source: Asymmetric Research, company reports
But it should be stressed that Kazakhstan’s capacity to import acid should further improve in any case with any resolution to the Russia/Ukraine conflict.
From 2027, the entry into operation of KAP’s own new 800kt sulphuric acid plant would sustain Kazakh uranium production of more than 80Mlbs/yr, we argue.
KAP capex growth hinting production ramp up on track in 2025 despite Inkai
We would highlight that in FY2024, KAP’s capex came in 8% higher than guided to and was up c40% yoy in real terms. After upping its capex forecasts a couple of times last year and coming to beating it again, we believe the surprise that came in H224 has to do with an easing of the sulphuric acid situation. Given the time-lag between money spent and production growth, we think KAP’s 2024’s c10% production growth doesn’t fully capture in the capex ramp up of H2 last year yet.
KAP’s capex is now guided to grow by a further c21-31% higher yoy in 2025. Ex inflation of say 10%, the real increase in capex guided to by the firm in 2025 is 11-21%, therefore. The company targets production growth of 8%-14% in 2025: to a range of 65-69Mlbs at 100%. We think given both capex figures for 2024 and 2025, the company’s mid-range remains within reach, despite Inkai. Recall, Inkai has had lost production earlier this year. Unlike other mines in country, it faced difficulties by its voluntary choice to avoid buying Russian sulphuric acid – a problem which we believe is set to resolve with any détente in Russia/Ukraine.
KAP capex vs production growth
Source: Asymmetric Research, company reports
Our assumption that KAP can hit the 2025 mid-range despite Inkai, given the capex spend, means the production delta can be directed to fill inventory – just as it was the case last year. What we learned following KAP’s production cuts early 2024, is that the company is conservative on its communication at the start of the year to then beat.