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Top uranium miner Kazatomprom ups production 16% in Q3, lowers 2021 guidance

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(Kitco News) - Kazakhstan's Kazatomprom (LSE: KAP), the world's largest uranium producer, announced today that the company produced 2,928 tonnes of uranium (as U3O8) in Q3 2021 on an attributable basis, which is 16% more than in Q3 2020 (2,518 tonnes).

Overall, uranium production in Kazakhstan (100% of KAP and its partners production) was 5,508 tonnes in Q3 2021, a 18% increase over Q3 2020 (4,657 tonnes).

"Production on both a 100% and attributable basis was higher for the first nine months of 2021 compared to the same period in 2020, and notably higher for the third quarter compared to the same period in 2020," the company said in a statement.

The pandemic-related safety measures that were implemented in 2020 impacted production volumes throughout the second half of that year – production in 2020 should therefore be considered exceptionally low, KAP added.

"Uranium sales at both the Group and KAP levels decreased for both the third quarter and first nine months due to the timing of customer requirements and differences in the timing of deliveries in 2020 and 2021," the company said.

Higher uranium prices in 2021 had a positive impact on KAP's average realized price compared to 2020, which increased 4% to $31.68/lb U3O8 in Q3 2021.

If prices remain higher than 2020 through to year-end, the trend of increasing average realized price is expected to continue, with the company's delivery schedule weighted to the second half of 2021, the company noted.

Importantly, Kazatomprom said its 2021 production expectations have decreased due to delays in exploration and wellfield development activity.

"Pandemic-related supply chain issues have resulted in limited access to certain key operating materials and equipment (production reagents, certain types of pipes and pumps, specialized equipment, drilling rigs), which has had a material impact on the company's production schedule," KAP pointed out.

On a 100% basis, the company now expects to produce between 21,700 – 22,000 (previously 22,500 – 22,800) and on an attributable basis, 11,800 – 12,000 (previously 12,100 – 12,400).

Expected annual sales at the Group level has increased to between 16,300 – 16,800 (previously 15,500 – 16,000) due to additional sales by consolidated subsidiaries to JV partners.

The company said it continues to target an ongoing inventory level of approximately six to seven months of annual attributable production. However, inventory could fall below these levels in 2021 and 2022, due to COVID-related production losses.

As such, the company noted that during the third quarter, several transactions to purchase material in the spot market were carried out and that the company will continue to monitor market conditions for opportunities to optimise its inventory levels.

Kazatomprom is the world's largest producer of uranium, with the company's attributable production representing approximately 23% of global primary uranium production in 2020.

The Group benefits from the largest reserve base in the industry and operates, through its subsidiaries, JVs and Associates, 26 deposits, located in Kazakhstan, grouped into 14 mining assets.

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