Kazakhstan, the Spot Price and Uranium Stocks

January 13, 2017

Recently, a single announcement from Kazatomprom, the Kazakh state-owned uranium mining company, sent the spot price up more than $2 in a single day and created substantial positive momentum for most uranium stocks, including Fisison. How can the actions of one company can have such an impact on an entire industry? It’s simple: Kazatomprom owns, solely or by joint venture, every mine in Khazakhstan, which supplies 43% of total worldwide production.

The announcement, as you are probably now aware, is that the company will be reducing production by 10% in 2017, which is approximately ~5.2Mlb U3O8. That’s 3% of global mined uranium production.

Unlike companies such as Cameco, which sells most of its production via long-term contracts, Kazatomprom sells most of its uranium into the spot market. In previous years, the company has increased production relentlessly. These increases have been one of the biggest reasons the spot price has remained suppressed, despite rising demand. This production cut signals to the market that there is a floor – a level below which the company will not allow prices to fall.

Wil this move alone lead to radically higher prices? It’s unlikely. However, the uranium market is very thin and Kazatomprom has just made it even more so. As more reactors come online in countries such as China, Russia and India, and we see more restarts in Japan, it won’t require much more of a push before we see the big upturn. In short, Kazatomprom’s actions are a very positive move for those of us in the uranium sector.

Dev Randhawa, CEO of Fission Uranium