Yesterday NAC Kazatomprom, the world leader in the extraction of uranium, announced its intention to reduce planned uranium production by 20%, in order to better align its output with demand.
The scheduled cuts will be enacted for a period of three years commencing January 2018. In 2018, production in Kazakhstan is expected to decline by 4ths tonnes, which according to Kazatomprom corresponds to 7.5% of the projected world production in 2018. Together, over the three-year period, the Company expects the cut in production of about 11ths tons.
At the same time, the Company notes that the decision taken will not affect future commitments for the supply of uranium.
As we already wrote earlier in our report, the reduction in uranium mining by Kazakhstan was expected. Measures to stabilize the uranium market are being undertaken by Kazakhstan, as the largest producer of uranium (more than 37% of world production), not for the first time. This year, Kazatomprom has already reduced uranium production by approximately 10%, which is 2ths tons of uranium and corresponds to 3% of the total world uranium production. Recall that after the announcement of plans to reduce in January this year, the price of uranium and Cameco shares for the day went up by 18%. Taking into account the retrospective reaction of the market, we refer the news of further decline in uranium production to short-term driver growth in Cameco shares. As the decision to cut production was expected by us, we maintain our BUY recommendation with12M TP CAD14.39/share.