Kazatomprom stock plunges 10% due to political turmoil in Kazakhstan caused by high energy prices

Kazatomprom (KAP.UK) is currently the largest uranium producer in the world, accounting for 23% of the raw material production in 2020. Kazatomprom mines uranium using ISR (In-Situ Recovery Mining) technology with health, safety and environmental standards (ISO 450001 and 14001 certificates). 

The company is based in Nur Sultan, from where it exploits and sells uranium and uranium-containing products. Using ISR technology, mining is done without the use of blasting agents and without sending miners underground to bring uranium ore to the surface. ISR mining of uranium deposits is efficient, has no negative impact on the surface: there is no land subsidence or ground disturbance, and no surface storage of low-grade ores; it is also the cheapest method.

The main processing steps in uranium mining take place deep underground (hence the term "in-situ"), resulting in lower production costs and inherently higher levels of health and safety due to very low mining risks. Once resources are depleted and mining is completed, remote areas of Kazatomprom's mines are restored to their pre-mining condition, both on the surface and underground.

Kazatomprom has a total of 24 deposit areas, all located in Kazakhstan.  Uranium mining using the ISR method was first applied in the 1960s, and by 2017 its use provided more than 50% of the world's uranium production. However, the ISR mining method can only be used in particularly favorable geological conditions.

All of Kazatomprom's production is through ISR mining. Eight of the ten largest ISR mines in the world are operated by Kazatomprom, giving the company a strategic position in the market. 

China General Nuclear Power Corporation (CGNPC) is working with Kazatomprom on a project to build a fuel assembly plant to meet China's future demand for finished fuel assemblies. China periodically enters into new agreements with the Kazakh corporation and appears to be its potential permanent customer, not least because of its geopolitical position.

Kazakh President Kassym-Yomart Tokayev accepted the resignation of his government today in an attempt to quell unrest in the country after protests against a sharp increase in fuel prices turned violent.

Tokayev also declared a two-week state of emergency in Central Asia's largest city, Almaty, and conveyed that some price caps would be reinstated after crowds of thousands gathered in the streets of several cities - including oil production centers.

Kazatomprom currently produces 43% of the world's uranium, so the eyes of many nuclear analysts are on Kazakhstan. Some analysts predict that political unrest could send uranium prices soaring.

Kazatomprom employees joined the protests of other energy companies in Kazakhstan, which resulted in a dynamic decline in the valuation of the company.

In 2021, the Company bought a 48.5% stake in an investment to purchase physical uranium in the Astana-based ANU Energy OEIC Ltd. fund. The other shareholders in the fund are:

- 48.5 % National Investment Corporation of the National Bank of Kazakhstan 

- 3 % fund manager Genchi Global Limited

The ANU Energy fund has indicated that it will operate in a tight supply environment, which is potentially profitable for its shareholders.

Analysts predict that the uranium price could top $140, with Kazatomprom already warning of problems with supplies of physical U308 worth almost $1 billion this year.

Kazatomprom (KAP.UK) - during today's session, the company's shares fell by 10% due to protests in Kazakhstan over high energy costs, which led to the government's resignation. There have also been reports of potential uranium delivery problems worth over $ 1 billion due to supply chain problems. Despite sharp pull-back buyers managed to halt declines around the lower limit of the wedge formation which coincides with the lower boundary of the 1:1 structure. As long as the price sits above this support zone further upward move is possible. On the other hand, if civil unrest in Kazakhstan intensifies, then downward correction may deepen. Source: xStation5