The Kazakhstan national atomic company Kazatomprom, the world’s largest uranium producer, announced on 7 April that all uranium mines in Kazakhstan will cease production for a three month period to slow the spread of the virus COVID-19.
In 2019, Kazakhstan accounted for more than 42% of the world’s uranium production.
“As the impact of COVID-19 continues to be felt around the world, Kazakhstan has taken strong steps to slow the spread of the virus,” said Kazatomprom CEO Galymzhan Pirmatov.
“Measures imposed by the government of Kazakhstan, including restrictions on the movement of people and strict hygiene directives, are now covering all regions where Kazatomprom operates and have been enforced at all of our sites and offices."
"Amid current conditions, Kazatomprom’s first priority is the health and wellbeing of our staff and their families, our partners, and the communities where we operate. In order to abide by local lock down requirements and reduce the risk of a localised outbreak, all of the Company’s subsidiaries are reducing the number of staff on site to minimum possible levels. All non-essential staff will return home with full pay, while those remaining on site will operate within strict social distancing and hygiene practices. We are now working with our joint venture partners on assessing the full impact and detailed implementation of this decision across all of Kazakhstan's uranium mines, and we appreciate their support during these challenging times.”
The restrictions are expected to remain in place for three months and will result in a lower level of wellfield development activity and, in consequence, a reduction in production volumes.
Based on that assumption, the Company expects Kazakhstan’s 2020 annual uranium production volume to decrease by up to 4000 tU from previous expectations (previously 22,750 tU to 22,800 tU on a 100% basis), although the precise impact on production may vary from this estimate.
The reduced production level is not expected to impact Kazatomprom’s 2020 sales obligations, and the company has informed all its customers that their full contractual requirements will be met. Kazatomprom said it remains financially stable with a strong, unlevered balance sheet and a commitment to its dividend policy, including the minimum $200 million payment expected in 2020.
Responding to Kazatomprom’s announcement, Canada’s Cameco said the reduction in activity will impact production from Joint Venture Inkai LLP (JV Inkai), jointly owned by Cameco (40%) and Kazatomprom (60%).
“Based on information provided by JV Inkai, Cameco’s preliminary assessment of the effects of Kazatomprom’s decision is a reduction in Inkai’s 2020 production of up to 12%, which translates into a reduction in Cameco’s 2020 purchases from JV Inkai of up to 600,000 pounds of U3O8,” Cameco said.”
Prior to this announcement, Cameco had expected to purchase 4.9 million pounds of U3O8 in 2020. Cameco said it will be in discussions with Kazatomprom and JV Inkai to determine the impact of Kazatomprom’s decision on output from the operation and Cameco’s purchases.
Cameco said: “The decision to temporarily decrease operational activity at JV Inkai is an unplanned event that may lead to variability in the 2020 outlook; however, it is too soon to quantify what the impact might be on the market. We will continue to assess the situation and will provide an update when we can better ascertain what the implications of this decision and other impacts on our business related to COVID-19 might be for this year’s outlook.”