Great write up, curious why you haven't included the revised SUA starting 2027 for Karatau: 3,600 tU vs 3,200 tU & Akbastau: 2,194 tU vs 1,931 tU? You also don't believe they will come anywhere near their guidance for Bud6&7?
Appreciate you taking the time to read it all. You have great questions. Yes, in Nov '24, KAP announced updated SUAs for Karatau and Akbastau to the levels you mentioned. This is the art of forecasting. Can I be wrong about what they will produce? Absolutely. The flipside is that 18 months ago, the midpoint of their 2025 guidance was 80.6M-lbs vs. 67M-lbs today. As a result, I can't just take what the company says at face value- they need to prove that they can do it. On Budenovskoye 6&7, there are clearly ramp up issues and if they prove me wrong, I am too low on that production. But, taking a wait and see approach.
Fair points, it's not easy! I've been using the average production since 2018 to inform my personal forecasts as well. At this point I'm personally going with the assumption those two JV's will increase because they're Russian, and increased in 2024 compared to 2018-2023 trend. Bud6&7 will hopefully become more clear as the databook is released throughout the year to see how they're tracking against their 3.4Mlb guidance for this year.
Thanks for your time and effort to put all this info on a page for everyone!
It's tricky to understand some of the moving pieces there. To your point, Russian JVs have seen some increases- is this because they are bringing in their own materials/acid themselves to aid the JV which in turn, is helping production? Some of the nuance around how they operate isn't totally clear to the market and don't pretend that I am on the ground there. So, we wait for the data to come in as you accurately state. I really appreciate the feedback and your views. We're all trying to get as smart as we can on these topics.
I wonder what's your take on the supply deficit going fwd if one assumes KAP does manage to ramp up to say 80Mlbs/y by '27 or '28. Just for the sake of conservatism. To what extent do you think the bullish thesis on uranium would get invalidated or delayed in that scenario? Thanks for the great article
At this point, it will be tough to derail higher long-term prices going higher simply as there isn't enough mining supply capacity in the 2028-2035 (and beyond) period. We have total Kazakh supply getting close to 80M-lbs by early 2030s, so that's baked in from our side. To your point, maybe they beat our models to those levels. However, a lot of Kazakh lbs are staying East anyway. The marginal Western buyer is what will set the price with Western projects and the Kazakhs will benefit from all this. I think the sooner that this market understands that 'supply' isn't a scary word anymore, the better. My suspicion is investors continue to stare at spot and the volatility makes them think there is a lot of supply out there. When spot raced from $55 to $107 (peaking Feb '24) and then moved back down to $64, the moves were in a highly, highly illiquid market the entire time. There simply isn't a lot of pounds floating around out there. But, like all market participants, we change when the data changes. We are not permabulls, but we are bullish today.
Thanks for your thoughtful answer. As of the Kazakh lbs going East, I wonder to what extent isn't uranium fungible... I mean, won't Kazakh production going East just mean that Canadian, Australian, American production will increasingly stay in the West and it will all amount to a mere realignment of global uranium trade without necessarily impacting prices, other than adding short-term volatility? In that case, couldn't the scenario where KAP meets guidance much sooner (say, they solve their s. acid shortages and meet 80Mlbs/y by '27-'28; they do seem to be ramping up capex significantly lately) lead to a closer to balanced market, at least for a few years? Just trying to play devil's advocate here! I understand the long thesis and I've been invested in the sector since '18, but I admit I've started to feel somewhat uneasy about the KAP production issue recently
Thanks Geoffrey! Glad you enjoyed it. To your point, there is so much to cover just in this one jurisdiction. However, there will be more to come as this piece just scratches the surface. Looking forward to their Q1 update tomorrow.
Great write up, curious why you haven't included the revised SUA starting 2027 for Karatau: 3,600 tU vs 3,200 tU & Akbastau: 2,194 tU vs 1,931 tU? You also don't believe they will come anywhere near their guidance for Bud6&7?
Appreciate you taking the time to read it all. You have great questions. Yes, in Nov '24, KAP announced updated SUAs for Karatau and Akbastau to the levels you mentioned. This is the art of forecasting. Can I be wrong about what they will produce? Absolutely. The flipside is that 18 months ago, the midpoint of their 2025 guidance was 80.6M-lbs vs. 67M-lbs today. As a result, I can't just take what the company says at face value- they need to prove that they can do it. On Budenovskoye 6&7, there are clearly ramp up issues and if they prove me wrong, I am too low on that production. But, taking a wait and see approach.
Fair points, it's not easy! I've been using the average production since 2018 to inform my personal forecasts as well. At this point I'm personally going with the assumption those two JV's will increase because they're Russian, and increased in 2024 compared to 2018-2023 trend. Bud6&7 will hopefully become more clear as the databook is released throughout the year to see how they're tracking against their 3.4Mlb guidance for this year.
Thanks for your time and effort to put all this info on a page for everyone!
It's tricky to understand some of the moving pieces there. To your point, Russian JVs have seen some increases- is this because they are bringing in their own materials/acid themselves to aid the JV which in turn, is helping production? Some of the nuance around how they operate isn't totally clear to the market and don't pretend that I am on the ground there. So, we wait for the data to come in as you accurately state. I really appreciate the feedback and your views. We're all trying to get as smart as we can on these topics.
I wonder what's your take on the supply deficit going fwd if one assumes KAP does manage to ramp up to say 80Mlbs/y by '27 or '28. Just for the sake of conservatism. To what extent do you think the bullish thesis on uranium would get invalidated or delayed in that scenario? Thanks for the great article
At this point, it will be tough to derail higher long-term prices going higher simply as there isn't enough mining supply capacity in the 2028-2035 (and beyond) period. We have total Kazakh supply getting close to 80M-lbs by early 2030s, so that's baked in from our side. To your point, maybe they beat our models to those levels. However, a lot of Kazakh lbs are staying East anyway. The marginal Western buyer is what will set the price with Western projects and the Kazakhs will benefit from all this. I think the sooner that this market understands that 'supply' isn't a scary word anymore, the better. My suspicion is investors continue to stare at spot and the volatility makes them think there is a lot of supply out there. When spot raced from $55 to $107 (peaking Feb '24) and then moved back down to $64, the moves were in a highly, highly illiquid market the entire time. There simply isn't a lot of pounds floating around out there. But, like all market participants, we change when the data changes. We are not permabulls, but we are bullish today.
Thanks for your thoughtful answer. As of the Kazakh lbs going East, I wonder to what extent isn't uranium fungible... I mean, won't Kazakh production going East just mean that Canadian, Australian, American production will increasingly stay in the West and it will all amount to a mere realignment of global uranium trade without necessarily impacting prices, other than adding short-term volatility? In that case, couldn't the scenario where KAP meets guidance much sooner (say, they solve their s. acid shortages and meet 80Mlbs/y by '27-'28; they do seem to be ramping up capex significantly lately) lead to a closer to balanced market, at least for a few years? Just trying to play devil's advocate here! I understand the long thesis and I've been invested in the sector since '18, but I admit I've started to feel somewhat uneasy about the KAP production issue recently
Thanks for the thorough write up
Thanks for reading!
Great writeup, thanks! KAP production often seems like an opaque monolith, always good to dive into the nuance and stakeholders of constituent JVs
Thanks Geoffrey! Glad you enjoyed it. To your point, there is so much to cover just in this one jurisdiction. However, there will be more to come as this piece just scratches the surface. Looking forward to their Q1 update tomorrow.