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Kazatomprom may draw down uranium inventory if coronavirus cuts output

Kazatomprom, the world’s largest uranium producer, said Monday it could rely on inventories to meet future physical deliveries in the event U3O8 production is reduced or suspended at operations in Kazakhstan due to the coronavirus outbreak.

“In the event that mine production or the ability to physically deliver material is impacted, Kazatomprom’s production decisions and contractual obligations are backed by inventory,” the company said in a statement Monday.

The company’s uranium inventory totaled 8,500 mtU as of December 31, equal to roughly eight months of the company’s share of production from operations it owns outright or in joint ventures, it said in the statement.

The company said no production or processing operations have been affected, but one or more operations could see an impact. All Kazakh uranium operations use the in-situ recovery method to extract the mineral.

Galymzhan Pirmatov, Kazatomprom’s CEO, said in the statement the company remains committed to its 2020 production and sales plans, “but the situation is changing rapidly, and we are preparing for various scenarios accordingly.”

Kazatomprom’s uranium production sites are mostly in remote areas of the southern regions of Kazakhstan, the company said. Those locations require staff to stay on site and live in close quarters, Kazatomprom said.

The virus could pose a significant health and safety concern if an outbreak were to occur in such a setting or if key staff were restricted to quarantine and unable to work, the company said.

Kazatomprom produced 22,808 mtU in 2019, an increase of 5% compared with the 21,705 mtU produced in 2018, according the company’s 2019 earnings, which were released March 5. It plans to produce about 22,775 mtU in 2020, the report said.

Kazatomprom made the announcement after Kazakh President Kassym-Jomart Tokayev declared a state of emergency Sunday, following the World Health Organization’s decision to designate the outbreak a pandemic and confirmation of the first cases of novel coronavirus in Kazakhstan, the company said.

The decree is expected to remain in effect between March 16 and April 15, the company said.

Source: S&P Global Platts