What I'm Seeing With Uranium
Implications of Kazatomprom's issues and positioning.
It's interesting to look back at forecasts and compare them to where we have ended up. Take this one from BMO with actual numbers for 2017 and forecast the rest.
In hunting out this table, I found this piece I wrote back in 2019: Digging into Assumptions 25/5/2019, where I expanded on why I thought Kazatomprom was going to struggle ever to hit these numbers (if you don’t have time to read it the quick summary is Kazatomprom have been overstating their extraction rates/understating coming declines).
The above Kazatomprom BMO forecast had consistently overestimated production, with it sitting in the 55-60Mlbs range until the 2020s when it was to ramp to ~70Mlbs and maintain that level through to 2027 (vs reality of being stuck around ~46Mlbs)
Cameco was forecast by BMO to have ramped to ~37Mlbs by 2021 and maintained that level to 2026 (vs reality of 18.7Mlbs last year and 22.4mlbs estimate for 2024).
It’s all easy with hindsight, but we obviously now know production never got close to subsoil use agreements (empty white boxes below).
Understanding all of this meant I am pretty sceptical of this excuse for missing 2024 and 2025 targets: Kazatomprom expects adjustments to its 2024 Production Plans.
If it was an acid issue, they could resolve it quickly unless, say, there was a global shortage, which price action doesn’t support; hell, Chinese sulfuric acid prices are at their lowest level in a decade.
It shares parallels with shale in high grading resources has played a significant role in maintaining production through the commodity bear market.
Take this quote:
“One American executive who read my book, came up to me to introduce himself and stated to me he spent years in Kazakhstan working in the uranium mines, and he couldn’t emphasise enough how bad the coming decline to their production will be.”
- Marin Katusa
Kazatomprom’s guidance to date.
So, there has been 60% cost inflation since 2020 and an inability to achieve previous guidance.
Kazatomprom has 12 joint ventures all banking on those additional pounds which are failing to materialise.
My take on the equities vs physical debate.