| Uranium products | The production of uranium and the processing and sale of uranium products |
| Beryllium products | Production based on beryllium and its alloys, the sale of beryllium products, and research and development |
| Tantalum products | The production and sale of tantalum products and research and development |
| Power resources | The production and sale of electric power and heat |
| Other operations | The production and sale of other products, providing services related to primary production |
Kazatomprom is the largest global producer of natural uranium, and has priority access to one of the world’s largest uranium resource bases. According to UxC data, the Company’s 2019 uranium production represented approximately 24% of global primary uranium production. As a country, Kazakhstan’s total production volume represented 42% of primary uranium supply
In 2019 the Company and its partners operated 13 mining assets with 26 deposits/areas located in Kazakhstan, mined using the ISR mining method, including:
| Treatment | Name | Share (%) |
| Uranium mining and processing | ||
| Subsidiaries | ||
| Ortalyk LLP | 100.00 | |
| Kazatomprom-SaUran LLP(1) | 100.00 | |
| RU-6 LLP (1) | 100.00 | |
| Appak LLP | 65.00 | |
| JV Inkai LLP (2) | 60.00 | |
| Baiken-U LLP (4) (5) | 52.50 | |
| JV Khorassan-U LLP (4) | 50.00 | |
| Joint ventures | JV Budenovskoye LLP | 51.00 |
| Semizbai-U LLP | 51.00 | |
| Joint operations | JV Akbastau JSC (3) | 50.00 |
| Karatau LLP (3) | 50.00 | |
| Energy Asia (BVI) Limited (4) (5) (6) | 50.00 | |
| Associates | JV Katco LLP | 49.00 |
| JV South Mining Chemical Company LLP | 30.00 | |
| JV Zarechnoye JSC | 49.98 | |
| Kyzylkum LLP (5) | 50.00 | |
| Zhanakorgan-Tranzit LLP (7) | 60.00 | |
| Nuclear fuel cycle and metallurgy | ||
| Subsidiaries | Ulba Metallurgical Plant JSC | 90.18 |
| ULBA-CHINA Co Ltd (7) | 100.00 | |
| Mashzavod LLP (7) | 100.00 | |
| Ulba-FA LLP (7) | 51.00 | |
| Nuclear fuel cycle | ||
| Joint ventures | Uranium Enrichment Centre JSC | 50.00 |
| Ural Electrochemical Integrated Plant JSC (7) | 25.00 | |
| JV UKR ТVS Closed Joint-Stock Company | 33.33 | |
| Investments | International Uranium Enrichment Centre JSC | 10.00 |
| Ancillary operations | ||
| Subsidiaries | High Technology Institute LLP | 100.00 |
| Kazakatom TH AG or THK | 100.00 | |
| KAP-Technology JSC | 100.00 | |
| Trading and Transportation Company LLP | 99.99 | |
| Volkovgeologia JSC | 90.00 | |
| Rusburmash-Kazakhstan LLP (7) | 49.00 | |
| Korgan-KAP LLP | 100.00 | |
| Joint ventures | SKZ-U LLP | 49.00 |
| Uranenergo LLP | 77.52 | |
| Shieli-Energoservice LLP (7) | 99.17 | |
| Taukent-Energoservice LLP (7) | 99.95 | |
| Uranenergo-PUL LLP (7) | 100.00 | |
| Associates | JV SKZ Kazatomprom LLP | 9.89 |
|
Treatment |
Name |
Share (%) |
|
Alternative energy sources |
||
|
Subsidiaries |
||
|
Kazakhstan Solar Silicon LLP (9) |
100.00 |
|
|
MK KazSilicon LLP (9) |
100.00 |
|
|
Astana Solar LLP (9) |
100.00 |
|
|
Uranenergo-PUL LLP (7) (11) |
100.00 |
|
|
Shieli-Energoservice LLP (7) (12) |
99.17 |
|
|
Taukent-Energoservice LLP (7) (12) |
99.95 |
|
|
Auxiliary operations |
||
|
Associates |
Caustic JSC (10) |
40.00 |
|
Nuclear fuel cycle |
||
|
Joint venture |
Uranium Enrichment Centre JSC (8) |
50.00 |
Uranium deposits in Kazakhstan are grouped into six uranium provinces.
Apart from the Semyzbay field in Northern Kazakhstan, which is located in the North Kazakhstan and Akmola Regions, the Company’s fields are located in the south of Kazakhstan, in the Shu-Sarysu and Syrdarya Regions.
All mines are located in sparsely populated areas and have minimal vegetation cover; natural vegetation in mine areas varies from desert to shrub and steppes. Only six mines are located within 10 kilometres of populated centres, all of which are rural settlements and villages.
In all regions the climate is continental, with hot summers, harsh winters, and low rainfall levels (300 mm or less).
The sale of natural uranium and uranium products is Kazatomprom’s primary source of revenue and profit, with the uranium segment accounting for 87% of the Group’s consolidated revenue in 2019. As a result, the market prices for uranium products have a significant impact on the Company’s financial results.
As is the case for any commodity, the balance of supply and demand determines the market price for uranium products. However, the average sales price realised by any primary uranium producer is also highly dependent on the specific types of contracts they deliver into and the structure of their sales portfolio (terms, the price formulae used in each contract, the proportion of spot and term contracts, etc.). Kazatomprom expects that in years to come, nuclear power, as a reliable source of carbon-free, base-load electricity, will maintain and strengthen its position in the broader energy market, resulting in greater demand for uranium. Accordingly, uranium prices will need to rise from the current low levels, which represents a significant opportunity for Kazatomprom as a low-cost producer with a high degree of leverage to market prices.
In 2019 six nuclear reactors were commissioned globally (three in Russia, two in China, and one in South Korea), with a total capacity 5.2 GW, while 13 reactors (five in Japan, two in the USA, one each in Russia, Switzerland, Germany, Sweden, South Korea, and Taiwan), with a total capacity 10.2 GW, were officially shut down. In addition, the construction of four reactors (one each in Russia, China, Iran, and the UK) began in 2019 (total capacity: 4.8 GW). In total, 53 reactors are under construction.
Prices for uranium, 2002–2019, USD per pound of U3O8
Uncertainty in the uranium market, following an investigation by the US Department of Commerce under Section 232 of the 1962 US Trade Expansion Act, had a significant impact on the conclusion of long-term contracts on the uranium market in 2019. The investigation ended on 12 July, when the US President announced that trade restrictions would not apply to the uranium market. At the same time, however, the US President created a nuclear fuel working group to carry out a more comprehensive analysis. It was originally expected that respective recommendations would be submitted in mid-October, however, the initial deadline was extended.
The US Department of Commerce is also performing work to extend the licences of US reactors to 80 years. The US Nuclear Regulatory Commission authorised power units 3 and 4 at the Turkey Point nuclear power plant in Florida State to operate until 2053 – this is the first example of nuclear power plants receiving regulatory approval to operate for up to 80 years. The International Energy Agency contends that extending the service life of existing reactors is critical to facilitate a reduction in carbon emissions and improve energy security.
European Union leaders agreed to include nuclear power in the European Green Agreement, which aims to make Europe carbon neutral by 2050 and result in zero emissions of CO2 -equivalent by European economies by this year. Even though nuclear power will be considered green, a ruling that nuclear power projects do not qualify for financial support from the EU may jeopardise the attainment of the agreement’s goals. France, which has the secondlargest fleet of nuclear power plants globally, officially postponed plans to reduce by 2025 the share of electricity production from nuclear power plants from around 72% to 50%. The Climate and Energy Package of France, whose goal is to achieve zero carbon emissions by 2050, has deferred the planned reduction of nuclear power by at least 10 years until 2035.
Uranium production witnessed a number of changes in 2019. Rio Tinto sold a controlling stake in the Rossing uranium mine in Namibia to China National Uranium Corporation (CNUC). Compagnie minière d'Akouta (COMINAK), a subsidiary of Orano, announced an end to uranium production at its uranium mine in Niger in March 2021, owing to a depletion of reserves and high operating expenses. It was also announced that the Australian mine Ranger would cease operations in 2021.
Orano signed a partnership agreement with the National Committee of the Republic of Uzbekistan for Geology and Mineral Resources (Goskomgeologiya) to develop exploration and production in Uzbekistan. The agreement prescribes the creation of a joint venture, with 51% owned by Orano and 49% by Goskomgeologiya. The parties will operate jointly on uranium mining projects in Uzbekistan.
Kazatomprom announced an intention to continue to reduce output in 2021 by 20% compared to planned levels under subsoil use contracts. This decision will enable Kazatomprom to maintain output in 2021 at similar levels to 2019 and 2020.
On 10 December 2019 Kazatomprom performed the final shipment of low-enriched uranium to the IAEA LEU Bank at Ulba Metallurgical Plant JSC. The concept behind the IAEA LEU Bank is to enable IAEA member countries, using nuclear energy for peaceful purposes, to access IAEA LEU reserves if uranium cannot be acquired on the commercial market. The Fuel Bank, owned by the IAEA and located in Kazakhstan, is one of the most ambitious and complex projects ever carried out by the IAEA since it was founded in 1957.
In 2019 the Company sold its uranium products, directly and through its Swiss trading subsidiary Trade House Kazakatom AG (“THK”), to 23 customers in 11 countries, an increase of six customers and two countries compared to 2018. In 2019 Kazatomprom’s top-three and top-five customers accounted for 54% and 68% of uranium segment revenues, respectively.
The table shows the geographical division of customers for the Group’s uranium products by revenue, for the calendar years 2015 to 2019.
|
Regions |
2015 |
2016 |
2017 |
2018 |
2019 |
|
China |
44% |
47% |
60% |
34% |
40% |
|
Europe |
19% |
16% |
18% |
9% |
18% |
|
India |
— |
11% |
8% |
23% |
9% |
|
Russia |
— |
— |
— |
— |
8% |
|
South Korea |
3% |
6% |
4% |
— |
— |
|
USA |
20% |
12% |
4% |
5% |
6% |
|
Canada |
— |
— |
— |
7% |
8% |
|
Other* |
14% |
8% |
6% |
22% |
12% |
|
TOTAL |
100% |
100% |
100% |
100% |
100% |
In 2017 Kazatomprom established Trade House Kazakatom AG (THK), a subsidiary trading company based in Switzerland, to improve the Company’s marketing function, bolster its work with partners, facilitate sales of uranium and uranium products in Kazakhstan and, more generally, to boost the Company’s global reach. THK’s key activities consist of:
Since its launch, THK has helped the Company extend its customer base and achieve sales volume growth. THK also acquired new customers for the Company during this period, and concluded a number of long-term uranium supply contracts.
The scope of THK’s activity and its frequent interaction with the spot market allows the Company to better understand the market, thereby improving its analytical abilities and allowing management to make more informed decisions.
Kazatomprom deploys safe, secure, and reliable logistics solutions to deliver uranium products to its customers across the globe. Uranium products are shipped by rail or sea in 20-foot sealed containers and physically protected by armed guards and convoys until they reach their destination. All shipments are insured against any risks associated with the transportation of uranium products.
In 2019 Kazatomprom delivered U3O8 and finished uranium products to various destinations, based on customer needs and requirements:
Kazatomprom is seeking to grow and consolidate its position as the leading company in the uranium industry, focusing on reliability, technical excellence, high occupational health and safety indicators, and good business practices with stakeholders.
In accordance with the Development Strategy of Kazatomprom for 2018–2028, which is based on sustainable development principles, the Company is committed to attaining the following strategic goals:
In 2019 the Company elaborated an action plan to implement its Development Strategy over 2019–2020, with a focus on enhancing core business operations, continuing with a digital transformation, and improving corporate governance and human resource management processes. 98% of action plan items for 2019 were successfully implemented.
As part of the Development Strategy implementation action plan, Kazatomprom will continue to dispose of non-core assets. Based on a detailed analysis of services and works that can be moved to a more competitive environment, decisions will be taken vis-à-vis the medium-term development strategies of Kazatomprom service companies, in line with long-term Kazatomprom interests and development priorities.
Kazatomprom’s core business activity is the mining and sale of uranium. The Company has priority access to the largest uranium in-situ leach recovery (ISR) reserves in the world, and the second-largest uranium reserve base in the world if taking all mining methods into account.
All the Company’s uranium deposits lend themselves to the ISR extraction method, which is the cheapest and most environmentally friendly method of extraction. This is also the most flexible production method, allowing increases and decreases in production within shorter timescales and more cost-effectively than the traditional open cast and underground methods.
As a result, Kazatomprom enjoys a natural competitive advantage and ranks as the world’s leading uranium mining companies in terms of production and sales, and has among the lowest production costs globally.
Kazatomprom plans to focus on uranium mining, while retaining an ability to expand operations in other pre-reactor nuclear fuel cycle stages, should they become economically attractive in the future.
The Company is also engaged in the manufacture of rare metals. In 2019 it maintained a presence in target beryllium, tantalum, and niobium product market segments (commodities used in the building of condensers, aeronautics, high-purity tantalum, niobium for alloying, etc.). Also, Kazatomprom successfully passed a Responsible Minerals Assurance Process (RMAP) audit for compliance with Responsible Business Alliance (RBA) requirements.
At the end of 2019 the situation on the global market was most favourable for beryllium products; thus against a backdrop of high demand for traditional types of products (beryllium-containing ligatures) there was a shift in production focus towards products with high profit margins.
The Company, together with the Chinese company China General Nuclear Power Group (CGN), completed site construction and began installing and commissioning equipment for a fuel assembly manufacturing plant in Kazakhstan. This project will enable the Company to supply nuclear fuel to China’s nuclear power plant market, which in turn will expand Kazatomprom’s product offering in the front end of the fuel cycle.
In February 2018 Kazatomprom revised its traditional strategy, switching from a focus on everincreasing production and sales volumes towards having a more market-centric approach, and adjusting production and sales targets in response to supply and demand dynamics on the market: there was a shift in strategy from a focus on volumes to a focus on long-term value creation for stakeholders.
The Company currently focuses on setting production targets and sales volumes based on market forecasts, and adjusting uranium production and processing plans to take into account changing market conditions.
For 2018–2021 the Company is implementing a phased programme to reduce uranium output by 20% against planned volumes under subsoil use contracts.
As Kazatomprom’s uranium is ISR amenable, the change in production volumes had no significant impacts on per-unit costs of production; this is a significant commercial advantage over conventional mining methods.
The Company enjoys technical and legal flexibility when it comes to maintaining production at lower levels if market conditions dictate as, within the parameters set under the mining code and respective subsoil license agreements. These allow for an annual deviation of +/-20% against set annual production volumes. Changes beyond 20% would necessitate amendments to subsoil use agreements that require government approval.
The Company continues to consolidate its position in a number of areas within its sales and distribution system. The Company is diversifying its contract portfolio, which is testament to the success of the market-centric approach it adopts. During the implementation of the Development Strategy, Kazatomprom expanded the reach of its sales representatives and bolstered the sales network in each of its main target geographical regions.
On 14-16 May 2019 Kazatomprom successfully accessed a new sales market, after signing a commercial agreement to supply uranium products to the Spanish company ENUSA. This was an important event within Kazakh-Spanish collaborative efforts to promote the peaceful use of nuclear power. The Company also expanded its working relationship with Indústrias Nucleares do Brasil (INB), which is responsible for the nuclear fuel cycle in Brazil, by winning a tender to supply it with uranium hexafluoride. Kazatomprom’s first supplies to INB were in 2018, when the Company delivered natural uranium concentrates – this represented a significant step in Kazatomprom’s efforts to develop its business in South American markets.
The new 2019 agreement enhances the Company’s reputation as a responsible manufacturer and reliable supplier in the global nuclear supply chain. In addition, with assistance from the trading company Kazakatom TH AG (ТНК), Kazatomprom has since 2017 been able to offer flexible salesformula pricing terms to customers. The Company plans to further develop these capabilities and to offer customers a wider range of pricing options than was previously available, due to domestic legislative restrictions.
Kazatomprom is the world’s leading uranium mining company and it will seek to consolidate this position in terms of scale, operating efficiency, and innovation. Access to highquality uranium deposits enables the Company to provide production facilities for many decades to come with the resource base that its entities need. The Company plans to continue investing in reserve exploration and in the development of deposits, in order to facilitate sustainable low-cost and long-term production at its mines. Kazatomprom intends to maintain low production costs by simultaneously streamlining production plans and implementing stringent cost controls, with a focus on creating value and ensuring a healthy economic return.
Kazatomprom remains focused on the ongoing streamlining and digitisation of its business processes and on further bolstering its sales and marketing functions.
The Company pays close attention to corporate responsibility; in this area, profit is not the key performance indicator. In 2019 the corporate governance model was augmented by the inclusion of sustainable development principles. The creation of the Kazatomprom sustainability policy, whose approval is scheduled for 2020, was an important step in this direction.
During 2019 Kazatomprom continued work to develop its corporate culture, paying particular attention to creating a working environment of reliability, continuous improvement, proactive interaction, robust corporate governance, and a universal safety culture.
In its operations Kazatomprom focuses on improving employee awareness and understanding in relation to occupational health and safety. The Company also plans to pay greater attention to environmental protection, industrial safety, and environmental responsibility.
The Company supports an International Social Security Association (ISSA) initiative to improve safety, health, and well-being at work and has registered with the Vision Zero programme, whose goal is to achieve “zero accidents”. This reflects the Company’s conviction that a strong culture of preventative action can reduce the number of work-related accidents, workplace damage, and occupational diseases. Kazatomprom is constantly working with employees and managers at all levels to improve occupational health and safety and to ensure compliance with respective industrial safety requirements, and to help make a transition to proactively responding to risk factors arising as a result of violations of safe working conditions. The Company seeks to maintain the LTIFR at a low level and to curb the level of industrial accidents.
Kazatomprom launched an occupational health and safety investment programme in 2016, and since then has been continually increasing its level of investment in it. In 2019 total costs related to occupational health and safety measures stood at KZT 7.23 billion.
|
Strategic goals |
Key actions to achieve strategic goals in 2019 |
|
Focus on uranium mining as the core business |
|
| Optimising production, processing, and sales volumes based on market conditions |
|
| Creating value by enhancing the marketing function and expanding sales channels |
|
| Implementing best-practice business processes |
|
| Developing a corporate ethics culture that is commensurate with an industry leader |
|
The Company has high-margin and cash-generating operations, with a relatively limited capital-expenditure profile for expansion, and low leverage. The Company strives to uphold its main commitment to stakeholders – to create long-term value. One of Kazatomprom’s strategic priorities is to generate significant cash flows for shareholders, while at the same time retaining a conservative balance sheet structure and a comfortable borrowing level, so that it is ready to leverage market opportunities, if any, and to respond proactively to adverse changes in commodity prices.
Kazatomprom’s shares have been trading on the AIX and LSE since November 2018. At the annual General Meeting of Shareholders of the Company, which was held on 30 May 2019 in Nur-Sultan, shareholders approved a dividend size per ordinary share (one GDR equals one ordinary share) of KZT 308.46, payable from 2018 profits. The total size of dividend payments, based on 2018 results, was KZT 80 billion.
Kazatomprom’s goals for Transformation Programme include maximising long-term shareholder value, profitability and financial stability through building a culture of adoption and use of best practices throughout the Company.
Projects implemented within the programme have made the Company one of the most advanced international uranium mining companies in terms of technical and technological equipment. The Company’s Management Board and Board of Directors participate in the programme on a quarterly basis, and the CEO reports on the main lines of business of the Company.
Transformations at Kazatomprom are primarily carried out in the following areas:
During the first half of 2019 the Company’s Transformation Programme switched to being the Digital Transformation Programme, in accordance with Samruk-Kazyna’s wish to roll out the Transformation Programme at portfolio companies (which can also implement their own projects that enable them to attain respective strategic KPIs).
An updated Digital Transformation Portfolio was created and approved, based on the results of analysing the Company’s Development Strategy Implementation Plan at the beginning of the second half of 2019. The key factors taken into account during its creation were those indicators that impact the strategic KPIs of the Company.
The portfolio consists of six projects and 15 events. Some of these were initiated as part of SamrukKazyna synergy drivers to achieve a cumulative effect from the scale of implementation at Samruk-Kazyna group companies.
Based on the performance in 2019 of the four projects aimed at resolving key production and operational tasks faced by the Company, the following results were achieved:
Kazatomprom has been a member of the World Nuclear Transport Institute (WNTI) since 2019.
WNTI is an international organisation that represents the collective interests of the nuclear power and packaging industries as well as any entity that relies on them for the safe, effective, and reliable transportation of radioactive materials.
The Company participates in WNTI events to discuss best practices in this area. These events act as a platform for meetings with key representatives from the radioactive substances transportation market.
In 2019 the Company participated in semi-annual WNTI meetings (in the summer in St. Petersburg, and in the winter in London), where the issues discussed included cargo transit in Europe, the transportation of enriched uranium products for the IAEA LEU Bank project, and other issues related to the transportation of radioactive substances.
Membership of business communities enables Kazatomprom to receive support from the organisations in relation to legal matters and regarding the guaranteed protection of the Company’s rights and legal interests in state bodies, as their respective powers are stipulated by the Company’s Charter and accreditation with respective ministries. The associations also facilitate participation in the drafting of legislative and other commercial regulations.
| Name of document | Place and date of signing | Date document came into effect |
| Agreement on the Privileges and Immunities of the IAEA |
Vienna, 1 July 1959 |
Law No. 178-I of the Republic of Kazakhstan
dated |
| Convention on the Physical Protection of Nuclear Material |
Vienna, New York, 3 March 1980 |
Law No. 17 of the Republic of Kazakhstan dated |
| Convention on the Early Notification of a Nuclear Accident |
Vienna, 26 September 1986 |
Law No. 243-IV of the Republic of Kazakhstan
dated |
|
Convention on Assistance in the event of a Nuclear Accident or Radiological Emergency |
Vienna, 26 September 1986 |
Law No. 244-IV of the Republic of Kazakhstan
dated |
|
Agreement on Basic Principles of Cooperation in Peaceful Uses of Atomic Energy (of member states of the CIS) |
Minsk, 26 June 1992 |
Became effective on the date of signing |
| Treaty on the Non-Proliferation of Nuclear Weapons (NPT) (Washington, London, Moscow, Geneva, 1 July 1968) | 13 December 1993 |
Resolution No. 2593-ХІІ of the Supreme Soviet of
the Republic of Kazakhstan dated |
| Convention on Nuclear Safety |
Vienna, 17 June 1994 |
Law No. 245-IV of the Republic of Kazakhstan
dated |
|
Memorandum on security guarantees in connection with the accession of the Republic of Kazakhstan to the Treaty on the Non-Proliferation of Nuclear Weapons |
5 December 1994 | Became effective on the date of signing |
|
Agreement between the Republic of Kazakhstan and the IAEA for the Application of Safeguards in connection with the Treaty on the Non-Proliferation of Nuclear Weapons |
Almaty, 19 June 1995 |
Decree No. 2344 of the President of the Republic of Kazakhstan dated 19 June 1995 |
| Comprehensive Nuclear-Test Ban Treaty |
New York, 30 September 1996 |
Law No. 270 of the Republic of Kazakhstan dated |
|
Joint Convention on the Safety of Spent Fuel Management and on the Safety of Radioactive Waste Management |
Vienna, 5 September 1997 |
Law No. 246-IV of the Republic of Kazakhstan
dated |
|
International Convention for the Suppression of Acts of Nuclear Terrorism (General Assembly of the United Nations, 13 April 2005) |
New York, 14 September 2005 |
Law No. 33-IV of the Republic of Kazakhstan
dated |
| Central Asian Nuclear-Weapon-Free-Zone Treaty |
Semipalatinsk, 8 September 2006 |
Decree No. 176 of the President of the Republic
of Kazakhstan dated |
|
Additional Minutes to the Agreement between the Republic of Kazakhstan and the IAEA for the application of Safeguards in connection with the Treaty on the Non-Proliferation of Nuclear Weapons |
2007 |
Law No. 229 of the Republic of Kazakhstan dated |
|
Vienna Convention on Civil Liability for Nuclear Damage of 1997 (Consolidated text of the Vienna Convention on Civil Liability for Nuclear Damage dated 21 May 1963 as amended per the Minutes dated 12 September 1997) |
February 2011 |
Law No. 405-IV of the Republic of Kazakhstan
dated |