Kazakh uranium output growth set to decline
Dec 8. Reuters. ALMATY
By Olzhas Auyezov
* Further growth constrained by technology, infrastructure
* Kazatomprom may be unwilling to flood the market
Kazakhstan’s uranium output growth is set to moderate in 2010 after a leap in recent years that has made it the world’s largest producer, analysts said, citing technological and economic considerations.
The former Soviet republic, which sits on a fifth of global uranium reserves, plans to produce 13,800 tonnes this year, up from 8,500 tonnes in 2008. But 2010 production is seen at 15,000 tonnes, a much smaller increase.
Analysts said the slowdown is partially due to technical bottlenecks such as the deficit of sulphuric acid which Kazakhastan’s main state firm is trying to overcome by setting up its own production.
Poorer ores at newly developed fields are another factor.
“Our main reason to question production estimates from Kazakhstan stems from the fact that a significant proportion of new mines is slated to come from the more geologically problematic Syrdarya uranium province,” Bart Jaworski, an analyst at brokerage Raymond James said in a note last month.
Jaworski said this less developed region could contain high carbonate content which neutralizes acid before it can dissolve uranium, and abundant fine grain content which causes clogging of filters and deeper deposits.
“In addition to geological issues, leading concerns… include shortage of engineers and other skilled workers (and foreign worker restrictions), electricity shortages (already affecting operations) and uncertainty of the successful stewardship of Kazatomprom… which is now under new management.”
Kazakhstan’s uranium industry was shaken this year by the sacking and arrest of Kazatomprom’s veteran chief executive Mukhtar Dzhakishev who has been credited with turning his company into top league producer.
Dzhakishev has been accused of illegally selling uranium deposits for personal benefit, a charge he has denied. He has yet to face trial.
FLOODING THE MARKET
However, Kazatomprom itself may not be keen to maintain high production growth rates due to oversupply concerns. Spot uranium prices have dropped to about $45 per pound from a record of around $136 in June 2007.
“Prices are low enough to want to stop the Kazakhs from raising production further from here because they need huge investment in infrastructure… before they can raise production much from where they are today,” Macquarie analyst Max Layton said.
“They have been responsible for all of the growth in global production over the last six or seven years. They’re the ones who brought the market into surplus.”
Kazatomprom has long said its ultimate goal was to diversify away from uranium production and move higher up the technological chain towards producing ready-for-use fuel assemblies.
It has been moving towards this goal by forging alliances with companies such as France’s Areva, offering partners stakes in uranium deposits in exchange for access to their technologies.
“To maximise those kinds of deals they want to do, having a $40 uranium price is not ideal,” Layton said.
“So I don’t think it’s in their best interest to flood the market… The Kazakh production growth profile flattens out dramatically from today’s level at today’s prices.”