Kazakhstan, the world’s top uranium producer, is cutting output of the commodity by 10% this year due to poor market conditions triggered mostly by a global oversupply of yellowcake.
State-owned uranium company and global production leader, Kazatomprom, said production for 2017 will be reduced by 2,000 tonnes, which is about 3% of the total global output, according Cantor Fitzgerald Canada Research’s figures.
“These strategic [uranium] assets are far more valuable to our shareholders and stakeholders being left in the ground for the time being, rather than adding to the current oversupply situation,” Kazatomprom Chairman Askar Zhumagaliyev said in the statement.
He added the production would pick up pace once market conditions improve.
Cantor Fitzgerald’s analysts Rob Chang qualified the move as a “game changer,” adding he expected to see across the board strength in the uranium space very soon.
“Kazatomprom’s relentless increases in production over the years was one of the top causes for uranium price weakness,” Chang said in a note to investors.
He added market observers had given up on expecting Kazakhstan to exercise production restraint as its mines were the world’s lowest cost operations and constant output hikes appeared to be a cultural focus for the country. “This news is a definite surprise and may be the inflection point for the uranium space to head higher across the board,” he said.
Kazakhstan’s uranium is produced by Kazatomprom, its subsidiaries and joint ventures with international partners. The exact change in production levels vary by mine and were approved through the respective management boards. This includes joint ventures with Cameco’s (TSX:CCO-TSX, NYSE:CCJ) Inkai mine that was expected to produce 5.8 million pounds this year prior to today’s announcement.
Kazatomprom said that even with the announced output cuts, the company will continue to be the world’s No.1 uranium producer.
Kazakhstan climbed to the top position on the uranium production ranking in 2009 with almost 28% of the total world’s output, then 33% in 2010, rising to 41% in 2014, and 39% in 2015.