Kazakhstan’s National Atomic Company Kazatomprom on 3 August announced its operating results for the 2nd quarter and 1st half of the year ending 30 June. Kazatomprom, world's biggest uranium producer, uses in situ leach methods at 26 deposits grouped into 13 mining assets in Kazakhstan. The company covered 25% of global uranium output in 2019.
It noted that the COVID-19 pandemic continued to have a significant impact on the global economy during the second quarter of 2020. The slowdown in manufacturing and commercial activity affected the energy sector, along with oil and other energy sources, with demand in the electricity sector falling by about 20% in most countries.
The second quarter saw a significant increase in transaction volumes in the spot market for uranium after reports from several manufacturers that a global pandemic would impact primary production in 2020. During the quarter, the market saw a sharp rise in the spot price from $ 27.50 / lb U 3 O 8 in early April to $ 34.00 / lb U 3 O 8in the end of May. Utilities were not active in the spot market and focused on ensuring safety and continuity of operations in the COVID-19 environment. Thus, throughout the quarter, the main buyers in the spot market were producers and intermediaries, who made up for the lost production volumes in the spot market in order to secure supply commitments.
Contract volumes in the long-term market were about 3.5 million pounds U3O8 (1,350 tonnes U), compared with about 17.7 million pounds in the second quarter of 2019. Despite a sharp decline in long-term market activity, the average long-term price rose by about $3.00 per pound U3O8 to $35.50 per pound.
In order to reduce the risk of an outbreak of COVID-19 at Kazatomprom enterprises and to ensure that all government restrictions and recommendations are met, it was decided to reduce the number of workers at the mines for a four-month period, from April to July 2020. However, with carefully designed social distancing and hygiene plans during shift shifts and daily activities, Kazatomprom believes it can safely begin to gradually return personnel to the mines. “It is expected that in the first half of August, activities will begin to mobilise workers to the mines after their mandatory testing for COVID-19. It is expected that the return of production personnel to their jobs will be made within two to three weeks. To reduce the risk of a potential outbreak in the field, the resumption of production activities will be carried out in accordance with strict health and safety protocols,” the company said. “However, the four months suspended development activities are expected to have a significant impact on production in the second half of the year.”
At the moment, the company's expectations for 2020 remain unchanged. Kazatomprom said it will only update those expectations (in annual terms) in terms of operating indicators and internal changes that are under its control. The Company said it continues to strive to maintain the current level of inventory (stock balances), which corresponds to approximately six to seven months of production on a pro rata basis. “However, inventories in 2020 and 2021 are expected to be below current levels, and it will not be possible to compensate for production losses in these periods. The company will continue to monitor the market situation in order to find opportunities to optimise its reserves, as at the end of the 2nd quarter the Company acquired some volume on the spot market.”