Uranium production in Kazakhstan has grown significantly over the last three years, which has made the central Asian nation the top uranium producer in recent times, last year producing 17,803 tonnes.
With 15 percent of global uranium resources and an expanding mining sector, Kazakhstan became the world's leading uranium producer in 2009, with almost 28 percent of total uranium production, followed up by 33 percent of global uranium production last year.
As uranium production totals have tripled, Sergei Yashin, Vice President of Kazatomprom, the national atomic energy company is expecting annual uranium production to increase to a range of between 25,000 to 30,000 tonnes annually over the next decade. In October the company announced it would be revising uranium production expectations for next year reducing the guidance to approximately 20,000 tonnes in order to avoid further suppressing uranium spot market prices.
Kazatomprom operates more than 20 uranium mines including existing partnerships with Cameco (TSX:CCO,NYSE:CCJ), Areva Group (EPA:AREVA), Rosatom among others. The company has actively engaged a strategy of obtaining downstream interests in order to generate earnings from processing operations, in addition to its uranium mining and fuel distribution activities.
Economic and geopolitical context
Kazakhstan is the second largest former Soviet republic by area after Russia. In addition to vast uranium supplies, the country possesses expansive oil, gas and coal deposits and plentiful resources including gold, copper, chromium, lead and zinc. In September 2002 Kazakhstan became the first country in the Former Soviet Union to receive an investment grade credit rating, and in November, Standard & Poor's rated it higher than Russia for the first time since 2005 due to its relative marginal export-to-consumption ratio compared to its northern neighbor. Kazakhstan's economy grew more than 9 percent, annually, for the first seven years of the current century.
Over the previous 14 years, the Fraser Institute has published an annual survey of mining and exploration companies in order to evaluate the impact of policy factors including the legal system and taxation affecting capital investment in mine production and exploration targets. The survey's Policy Potential Index (PPI) is a composite index that measures the overall policy attractiveness of the 79 jurisdictions. Kazakhstan is ranked 63 falling between China and Papua New Guinea, and above some mineral rich destinations including Russia and South Africa. This year, Kazakhstan did not score as well as last year when it had finished at its highest relative ranking at 51 out of 72.
Nuclear power plant industry and ambition
Kazakhstan has no national electricity grid; however, a northern grid connects Russia and additional links to the south adjoin Kyrgyzstan and Uzbekistan. The country has two proposed and planned nuclear power plants. In the past, Kazakhstan had operated a nuclear power plant from 1973 until 1999, surpassing its original expected lifetime by six years. Kazakhstan's nuclear power plant ambitions include large light-water reactors for the southern region. The proposals are for a new nuclear power plant near Lake Balkhash in the south of the country near the capital city of Almaty.
Although the country does not supply any of its domestic electricity supply from nuclear power, its close proximity to the tremendous growth markets of both China and India are certainly noteworthy for uranium investors. China and India have a total of 228 reactors in the official planning or proposal stages, which represent 46 percent of the total reactors in these categories.
Uranium spot price movement
Uranium spot market prices moved slightly higher by fifty cents to a reported $52.25 per pound of uranium on December 5, as indicated by Ux Consulting uranium consultants. The demand was considered to be highly discretionary generating only constricted attention from buyers of necessity or electric utility operators. A total of eight transactions were reported last week by TradeTech. The participants included electric utility operators, producers, traders and financial entities.