Good time of day, and welcome to Kazatomprom's conference call to discuss 2024 half-year operating and financial results. My name is Botagoz. I'm leading the investor relations team here at Kazatomprom, and thank you for taking the time to join us today. Our CEO, Mr. Yussupov, unfortunately cannot join today's call, as he's currently in Dushanbe, accompanying the head of state in his official visit to the Republic of Tajikistan. Our conversation will begin with a presentation by Mr. Kosherbayev, Chief Strategy International Development Officer, followed by an opportunity for investors to ask questions. At this time, and throughout the management presentation, all participants will be in a listen-only mode.
This call is open to all stakeholders, with the question and answer portion intended to be an opportunity for members of the investment community to engage with the management team and ask their questions through the phone lines in English. English line participants will also have an option to submit questions through the webcast page using the Ask a Question button. The simultaneous translation of English Q&A will be available for Russian-speaking line. For those joined through the company or the London Stock Exchange websites, there will be a slide presentation displayed during the remarks. These webcast slides will be available for download in English and in Russian shortly after the call.
Note that our press release full year version of the 2024 half year operating and financial review, along with the 2024 financial statements for the six months ended, thirtieth June 2024 , are now available on Kazatomprom's website. Participating in today's call, we have Dastan Kosherbayev, Chief Strategy and International Development Officer, Vladislav Baiguzin, Chief Commercial Officer. Financial questions will be covered by our managing directors, during today's call, as Sultan will not be participating due to his departure. Please note that this conference call may include forward-looking statements. These statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties, and they are not guarantees of future performance. The company does not make any representation, warranty, or prediction that the results anticipated by such forward-looking statements will be achieved. I am now passing the floor to Mr.
Kosherbayev.
Thank you, Botagoz. I'm delighted to welcome and thank everyone for joining our conference call today. First of all, I'd like to extend apologies on behalf of our CEO, Mr. Yussupov, for not being present today, but as you can imagine, his participation at the state delegation led by the President was absolutely required. Today, we have announced our CFO's decision to depart. On behalf of the management board and the company, I'd like to thank Sultan for his hard work and constant dedication to the company's growth and development, and wish him the best of luck in all his future endeavors. Fortunately, we were able to hunt a perfect candidate for this role, Mr. Marat Tulebayev, who is currently undergoing through the corporate approval processes. Marat expects to bring extensive experience to his new role, including 10 years in various positions at Kazatomprom.
He served as the Director of the Corporate Governance Department from 2014 to 2017, prior to becoming the Director of Economics and Budgeting Department in the 2017 to 2019 period, preparing the company to the IPO and playing a crucial role in the process. Like no other, he knows Kazatomprom inside and out, and his expertise, knowledge, and skills shall serve to the best interests of our shareholders. Today's call is focused on discussing Kazatomprom's 2024 half-year operating and financial results. Stakeholders' attention was kept on our 2025 production plans, which we've released earlier today, as previously iterated. Kazatomprom once again demonstrates its reliability and responsible approach in everything we do, from transparency in communications to operational sustainability and customer deliveries.
Prior to moving to the companies level discussion, we would like to reiterate the growing importance of nuclear energy, which has now become an integral part of the global green energy policy. This shift significantly bolsters the uranium market fundamentals, which are now stronger than ever. News from different jurisdictions about their plans to incorporate nuclear energy into their energy mix as a base load option to expand existing capacities by constructing new nuclear power plants or extending the lifespan of operating ones, continue to support the global nuclear agenda. This trend is often described by industry professionals as the second renaissance of nuclear energy. As the world's largest producer and seller of natural uranium, we at Kazatomprom fully recognize the vital role we play in supporting the global transition away from fossil fuels. We remain committed to delivering long-term value to all our stakeholders.
As shown on this slide, third-party forecasts remain to reveal a growing supply gap that current production volumes will not be able to meet in the foreseeable future. By 2030 , a supply deficit of 17,000,000 lbs of U3O8 is projected, with this shortfall expected to escalate dramatically to a 138,000,000 lbs by 2040 . In light of this, Kazatomprom's recent news about receiving a production license for pilot production at Inkai three and exploration license for the Vostochny block and the Zhalpak Mine, as well as the extension of the exploration period at the Inkai two deposit, are strategic moves aimed at addressing potential supply and demand imbalances.
We're also actively building an exploration portfolio for rare metals at our Ulba plant. As previously announced, Kazatomprom is currently undertaking a large-scale exploration in Kazakhstan, which is a top priority for replenishing its resource base and maintaining its leading position as a global nuclear fuel supplier. It is worth noting that this strategic initiative received full support at the highest governmental level. Our unique geology enables us to augment substantial volumes of our resource balance at a far lower investment scale in comparison. Such an advantage reaffirms our trust in investment to exploration of new territories, depreciating any efforts to acquire additional non-attributable reserves at our existing mines. Speaking about the production from other parts of the world, we're eager to hear more positive developments from new and previously idled mines.
We firmly believe that the current market conditions offer opportunities for every participant in the fuel cycle to thrive. As we have reiterated on numerous occasions, a significant factor driving the market structural shift is the production and sales discipline sustained by the key uranium producers. Specifically, our adherence to market discipline aligns with our strategy of generating long-term value for our shareholders, commitment to which we once again are eager to confirm. The market has remained quite steady over the past six months, though, after a surge in the uranium spot price to $106 per pound in January, a pullback to the mid-$80s followed in March. Yet this period has served as a transition phase for fuel buyers, who have come to recognize the inevitability of an approaching deficit. Recently, we have observed a shift in the market dynamics, with buyers increasingly making compromises to secure deals.
Amid our continued success in long-term contracting activity, Kazatomprom has initially intended to ramp up its 2025 production to 100% of subsoil use agreement levels. However, the uncertainty around the sulfuric acid supplies for 2025 needs and delays in the construction works at the newly developed deposits resulted in the need to reevaluate our 2025 plans. The company is now adjusting its initial intentions for 2025 production volumes of thirty and a half, thirty-one and a half thousand tons on a 100% basis. Kazatomprom's 2025 production is now expected to be between twenty-five and twenty-six a half thousand tons, an approximately 12% growth compared to its 2024 guidance. A significant portion of the adjusted 2025 production is attributed to JV Budenovskoye production delay.
The JV is expected to result in a nearly 80% miss from its 2024 production target under subsoil use agreement and more than 65% miss in 2025. Since Budenovskoye 2025 production is expected at 1,300 tons of uranium instead of the previously approved 4,000 tons, changes to its subsoil use agreement are to be introduced to prevent breach of subsoil use obligations. JV Budenovskoye is not the only mining entity that will be applying for changes to its subsoil use agreement. Appak has also initiated subsoil agreement revisions, while Baiken-U, KATCO and Semizbay-U have already validated their production mismatches.
I would like to once again highlight that in ISR mining, both the requirements for sulfuric acid and the consequences from its shortages have a different scale and impact due to different geological features of the deposits. All our uranium mining entities are supplied with acid volumes equally proportioned to their requirements to minimize the risk of harm to the uranium mining process and geological structure of the deposit. However, depending on the geological and technological condition of the deposits, the recovery process requires different efforts, meaning that the same amount of undersupply of sulfuric acid to different blocks can have varying negative effects on production rates. As a result, it is expected that in 2025 , mining entities will have different percentage rate decreases compared to the levels stipulated in the corresponding subsoil use agreements, with the acceptable 20% deviation.
For example, if the changes of Budenovskoye production targets are approved and corresponding amendments to subsoil use agreement are signed, this JV will potentially result in producing at 100% of its stated subsoil use agreement level, instead of a current more than 65% of its estimate. Despite 2025 production plan adjustments, Kazatomprom remains fully committed to fulfilling its existing 2025 sales commitments. We have a comfortable level of inventories to meet these commitments. Our sales strategy involves reserving a portion of our annual production as uncommitted. This strategic reserve allows us to seize emerging opportunities and adapt to fluctuations in the market landscape. Regarding legislative developments that directly affect the company's operations, we would like to address the upcoming changes to the mineral extraction tax, MET.
As previously disclosed, starting from 2025 , the MET rate for uranium is expected to increase to 9%, and beginning January 1st, 2026 , a differentiated production and spot price-based approach for determining applicable MET rate will be introduced. Uranium miners, including ourselves, have been historically enjoying a much more favorable tax framework compared to other extracting industries in Kazakhstan and in other jurisdictions. Such changes therefore seem inevitable. The company constantly reviews its disclosure framework to respond to evolving market and investor needs. Thus, to aid analysts and investors in estimating potential MET burden, we have prepared a sensitivity analysis of the MET rate to different uranium production and price scenarios. Turning to our half-year results, despite the challenges, the company has demonstrated strong performance, which reinforces our confidence in achieving our 2024 targets.
Production, both on a hundred percent basis and on attributable basis, showed a slight increase in the Q2 of the first half of 2024 , compared to the same periods in 2023 . This positive trend is largely due to a modest increase in both the full year of the Q2 of 2024 production plans, driven by higher subsoil use agreement requirements for 2024 compared to the previous year. In the Q2 of 2024 , both Group and Kazatomprom sales volumes were higher compared to the same period in 2023 , primarily due to the timing of customer scheduled deliveries. However, when we look at the first six months of 2024 , we see a lower sales volume compared to the same period in 2023 .
This is in line with our lower 2024 sales guidance and a reduced sales volume in the Q1 . It is important to note that sales volumes can vary substantially each quarter, and such variability is influenced by the timing of customer delivery requests and physical delivery activities throughout the year. Average realized prices for the Q2 and first half of 2024 were higher compared to the same periods in 2023 , reflecting a stronger uranium spot price. While our current overall contract portfolio pricing correlates to the uranium spot prices, deliveries under some long-term contracts in 2024 incorporated a proportion of fixed pricing components, including price ceilings that were negotiated during a comparatively lower price environment. Speaking about physical deliveries, we're pleased to report that both transportation routes are fully functional.
Kazatomprom continues to monitor the list of sanctions on Russia and their potential impact on transportation through Russian territory. To date, there are no restrictions affecting the company's activities related to the supply of its product to customers worldwide. Moreover, Kazatomprom is enhancing the quality of its physical deliveries via the Trans-Caspian route by building stronger relationships with the governments of transit countries and providing educational insights on handling Class 7 materials to transit permitting authorities. In addition to physical deliveries, the company has alternative options, such as location swaps and loans. This ensures that Kazatomprom is fully hedged, guaranteeing the availability of material in the required volumes and at preferred locations to meet customer needs. Allow me to draw your attention to our updated sensitivity analysis. Our estimate group's average realized price is on the level of the previous sensitivity table, with slight deviations.
Our average realized price continues to chase the spot price, and our sales portfolio demonstrates the strongest correlation with spot prices in the market. This positive trend is reflected in our financial results for the first half of 2024 , which have been exceptionally strong. While the average monthly uranium price was lagging slightly in the Q2 compared to the Q1 of 2024, our revenue in the first half of 2024 amounted to KZT 700 billion, in line with our 2024 annual guidance. Operating profit was down slightly, while net profit was 27% higher year-on-year, amounting to about KZT 283 billion tenge.
These impressive results reflect on the considerable improvement in the uranium market over the past year, as well as the company's strong position as the lowest cost producer and largest seller globally. Kazatomprom is also present in other stages of the nuclear fuel cycle, including uranium dioxide, ceramic powder production, fuel pellets, and fuel assemblies. C1 cash costs and all-in sustaining cash costs for the reporting period increased by 38% and 45%, respectively. The increase in C1 cash cost was driven by an increase in MET tax expenses and the cost of sulfuric acid increase. All-in sustaining cash costs increase is resulting from an overall increase in capital cost on an attributable basis. As you can see from the MET sensitivity table, from 2026 and onward, overall MET burden is expected to increase, continuing to affect our cash cost metrics.
Capital expenditures on the mining entities increased by 64%, primarily due to an expansion of well field development activities, increase in costs of construction in wells, and infrastructure for new facilities commissioned, as well as a rise in purchase prices for materials, supplies, equipment, and cost of drilling. Consequently, we are now adjusting our 2024 CapEx estimates upwards. Earlier this month, the company has also increased its 2024 full-year production guidance on both 100% and attributable basis, as the half-year operational results show that the production rates with which the mining entities are now progressing will result in higher than initially expected volumes. The company's sales guidance remains unchanged. Uranium expected to be produced as a result of production guidance increase will be used for replenishing the company's inventories.
Beyond our operational and financial results, we would like to highlight some major corporate developments. The company continues to prioritize ESG principles in its operations. Notably, we have achieved a B score in 2024 CDP Climate Change Assessment, which is above the average for both the region and the industry.
Kazatomprom remains dedicated to maintaining a strong ESG record and will continue to focus on further improvements. In June, we completed the payment of dividends for the year 2023, totaling KZT 315 billion, or $2.6 per share. This represents more than 50% increase compared to the previous year, and our dividend yield for 2023 remains to be the highest in the industry. Concluding this presentation, I want to reaffirm the company's ongoing dedication to a market-focused strategy, which represents a key milestone in our development. Kazatomprom, with its top-tier assets, sustainable reserve base, diverse sales portfolio, and robust contract agreements, is optimally positioned to seize future market growth opportunities. We value our role in the energy security landscape.
Given the ongoing geopolitical uncertainties, market bifurcation discussions, and our adherence to ESG standards with a low-risk jurisdiction, Kazatomprom is well-equipped to maintain its leadership as a dependable supplier of natural uranium. We are prepared to meet utilities' needs in diversifying their supply sources, and we are proud to be succeeding in securing a strong presence in a new up trending cycle of long-term contracting activity. Thank you for your attention. I'll now ask operator to open the line to allow questions from this call's participants.
We will now begin the question and answer session. Please limit yourself to two questions at a time. If you have any additional questions, you are welcome to rejoin the queue. And as a reminder, you can also submit questions using the Ask a Question button on the webcast page. To ask a question on the phone, please press star followed by the number 1 on your telephone keypad. And when to withdraw that question, again, press star 1. Your first question comes from the line of Alexander Pearce with BMO. Please go ahead.
Great. Thank you, and, good evening, all. My first question is just around Budenovskoye, and obviously, you know, you've lowered the subsoil agreement level there. Maybe you can just give us a bit more detail on the current situation in terms of construction of infrastructure and where you're at the minute, when you think the processing plant is going to be fully built, and also, are you still shipping uranium through this period to some of the other assets for processing?
Yes. Hi, this is Dastan. Thank you for your question. Well, currently, one of the issues we're experiencing with Budenovskoye is the bureaucratic process with obtaining all the necessary licenses, especially with the design documentation and all these things. There are a lot of iterations going on between the relevant authorities and, like, the government itself and then the mining entity. That's why it's taking a lot of time. And with regards to its shipping, its product to the nearby, entities, yeah, you're, you're absolutely correct. They're utilizing Karatau's infrastructure for the moment being.
Okay, thanks. And then just maybe a follow-up on that. I think you suggested this in the presentation, but can you just confirm to me you're still expecting to deliver the full CPR production volumes from Budenovskoye, even though your actual production rate is going to be lower? Is that correct?
No, no, no. We're gonna implement amendments to the subsoil use agreement, so we're gonna adjust it accordingly to the schedule.
So your offtake partner will get whatever's in the new subsoil? Okay, you won't have to deliver those additional volumes from inventory or from other assets to the JV partner.
Yes, for the upcoming years, yeah, you're absolutely correct. They'll get whatever the mining entity will be able to produce.
Great. Okay. Thank you.
Your next question comes from the line of Jason Fairclough with Bank of America. Please go ahead.
Good evening. Thanks for taking my question, Dastan. Then, just in terms of the new guide, so plus 12% roughly year on year, could you just give us a feel, is this 80% of the current subsoil use agreement, or how are you thinking about this number? And then, I guess, you know, the follow-up to that is, you know, over the last couple years, production has consistently missed versus the targets at the beginning of the year. The acid problem isn't solved. So I guess my question is, what is your level of confidence of actually hitting this new guidance?
That is an excellent question, but, I'd like to first of all state that, due to mentioned, aforementioned situation with the Budenovskoye and the difference between the geological deposits, it's not as it we used to be previously when we had, like, the 80%, the-- I mean, of the, the production volume of 80%. And it differs, for example, Budenovskoye is gonna fall behind, like, we've said to the, to the current levels, 80% in this year is 67%, 67% in the next year. Whereas, several other entities would be able to reach 100% basis, cause their geology is more favorable and, for example, the overground infrastructure and these things are, Well, better equipped to be able to deliver.
Also, with regards to the sulfuric acid issue, it is a dynamic process that is occurring basically daily. We're trying to secure all the required volumes, but so far, we're pretty confident that we'll be able to achieve all the desired results. Nevertheless, if we stumble upon any problems, we'll do like we did last time when we signaled the market, basically, or in advance, saying the-- or updating the market of the current situation, like, like we did in January.
Look, could I just ask a follow-up question on the acid? How does management think about the trade-off between using acid to produce today versus using acid to invest in future production? Because it feels like maybe you're trading off production today against future production growth. Is that the right way to think about it?
But with the acid, you see, it's the process, like, come and go, basically. Once the acid arrives, we use it to acidify. We cannot store it, like, in large quantities or bulk it up.
Okay.
And the-
I guess my question, though, then, was, Sorry, just to be clear, you know, do you have sometimes a choice, which is, we can either allocate this acid to growth projects, or we can allocate this acid to existing producing? Like, is that a, an active discussion, where the acid is going, which acids get the acid?
It is a valid question. It is a valid point, basically. Yes, it depends on the geology, and depends on the life cycle of each particular block, because I don't know whether you've been to one of our IR calls, we always demonstrate, like, we have a separate slide that demonstrates the life cycle of each particular block. So depending on the stage at which the mining is happening at the moment, basically, it defines the amount of acid consumed, and this is different from each deposit to each deposit, and each mine has different conditions that need to be taken into account once this goes.
Okay, thank you. I'll go back in the queue.
Your next question comes from the line of Andrew Wong with RBC Capital Markets. Please go ahead.
Hi, thank you for taking my questions. Could you provide some details on your outlook for sulfuric acid availability over the next several years? And can you kind of just talk about where your sulfuric acid that you're getting extra for 2025 is coming from?
Basically, yeah, we're currently, as I've said, it's a dynamic process, everyday process. We're negotiating with all local suppliers, trying to secure all available volumes. And with regards to our plant, we expect it to go online in 2027 . It's been like in, it initially was planned to go online in 2026 , but now we expect in the beginning of 2027 . And by then, I think we'll be able to sort all our outstanding issues with this critical material or reagent.
Has construction on that plant started yet?
It's at the early stages, and the documentation is still being approved by the relevant authorities as well, the design documentation for the construction.
Okay, thank you. And then just on your inventories, they've come down for the past couple of years, and I think in the past, you've mentioned about six months is the normal target, but it looks like we're below that now. Six months of sales, I mean. So are you concerned that the current level maybe doesn't give enough of a cushion? What are your plans around inventories potentially coming back? Thank you.
It is a valid observation, and thank you. But with regards to that, I'd say you need to look at us at the end of the year, cause given the schedule of deliveries and the way we deliver our product and the customer demands and whether they want the product now and then, it's best, like, the data is best represented at the end of the year, cause the half year results are not really representative in terms of their accuracy. I mean, it may look like they've dropped right now, towards the end of the year, they'll, like, we'll replenish our inventories, basically.
Okay, thank you.
Your next question comes from the line of Ephrem Ravi with Citi. Please go ahead.
Thank you. So my two questions, firstly, are there any costs or penalties that you incur when you renegotiate amendments to subsoil agreements? I just want to know how automatic a process is, because you are negotiating with the government as a predominantly kind of government-owned entity. And secondly, on the sensitivity table on uranium prices that you helpfully give, you know, does 2027 and 2028 imply kind of Budenovskoye at 6,000 tons? Or are you taking some haircut to that in that implied sensitivity table? Thank you.
With regards to the first one, no, we have not incurred any penalties, to the best of my knowledge, and if there were some penalties, they're very minor and not substantial to mention. With regards to Budenovskoye... The sensitivity table basically reflects the adjusted data with the Budenovskoye volumes decreased.
Thank you.
Your next question comes from the line of Grace Symes with Energy Intelligence. Please go ahead.
Hi. Thanks for taking my question. I think my first question is, will the Mineral Extraction Tax change have any impact on production plans, given that it is linked to the amount produced under the subsoil use agreement?
Hi, Grace. Glad to hear you. Basically, no, no, no adjustments to the production plans with regards to MET. I mean, it doesn't have any impact. We remain committed to our strategy, value over volume.
Okay. Thank you. And then one more. I saw there was a recommendation from the Kazakh Antitrust Authority to privatize Kazatomprom sulfuric acid plants, and I was wondering if you have any comment on that at all.
The comment was. This is only a recommendation, it's not an actual instruction, so I mean, you can just view it as the way it is. It's not an order or-
Okay. Thanks very much.
The decree is by the government. Thank you.
Your next question comes from the line of Anna Antonova from J.P. Morgan. Please go ahead.
Good afternoon. Thanks for taking my question. Many questions have been answered already, but I have maybe a remaining one for about kind of 2026 production plans. How should we think about them? I remember in the press release, you said that you will update the market with half-year results next August, but maybe at this stage, could you provide some additional color on that? For example, what factors will you take into account when kind of looking at 2026 mine plans? And for example, will you need to renegotiate subsoil use agreements kind of and adjust volumes upward again for selected mines, even when you see the situation improving? And if you would need to do that when thinking about 2026 production, how long would that normally take?
It's pretty apparent with the Inkai, as I already mentioned. We know what is gonna be for 2026 . With the remaining entities, basically, the sulfuric acid issue still remains a big uncertainty. When I say, like, we're pretty confident that we'll be able, all various factors need to be taken into account, cause history taught us that this is a rather dynamic process with a lot of implications that may come into play, like, unforeseeably. With regards to that, we decided to be a bit more careful and perhaps give a shorter vision going on forward, because too many factors are to be taken into account and geopolitical risks as well, these sorts of things.
Understood. Thanks. And you commented that even when the new subsoil use agreements are approved for the mining entities, those will be reflected in the updated CPR. Any timelines on when can we potentially see the updated CPR release? Is that potentially could be in the end of this year or next year, or kind of... What could be the potential timeline for the market to get additional insight and information?
We expect this to be completed by February of the next year.
Understood. Thank you so much.
Your next question comes from the line of Jason Fairclough with Bank of America. Please go ahead.
Thanks for the follow-up question. Just wanted to come back on the acid plant. Is there any change in the urgency here in terms of getting this thing approved, getting it designed, getting it built? My understanding is that this is something you should be able to buy off the shelf, so I don't quite understand what's taking so long.
In terms of right now, in general, the legal framework in Kazakhstan has been a bit, like, liberalized in a lot of sense. Too many factors been taken into account. In terms of health and safety and the environmental issues, there were a lot of regulations that were updated, and right now the government itself in the process of integrating this. Maybe you've seen, like, I don't know, like, those who are familiar, they've seen that we have a separate ministry for water resources, we have a separate ministry for ecology, we have a separate ministry for health and safety and labor, and quickly align their framework, adjust and take a unified stance. That's why it's taking a lot of time, it's basically a lot of man-hours.
Okay. Thank you.
That concludes the question-and-answer session from the audio line. I will now pass the call back to Botagoz to take questions from the webcast participants. Please go ahead.
Thank you, operator. The first question from the webcast page is coming from Borja Gonzalez, the retail investor. The question: Good afternoon. First of all, congratulations for these results. Once again, it has shown the great margins with which Kazatomprom operates. During this year, there have been several tenders from some JVs, as well as from KAP Logistics regarding the supply of sulfuric acid. I assume that the assets required by each JV is all directed to the operations of that JV. My question is, when it is KAP Logistics that requires sulfuric acid, how is this asset supply distributed among the different JVs? Thank you.
Yeah, I'll take that question. Thank you, thank you, Boria. Basically, KAP Logistics does not consume acid on its own. It proportionally distributes acid among the JVs and mining entities based on their needs, but it always takes into account their needs, and it's a process that, like, a negotiation between the JV and the KAP Logistics. So it's a dynamic process as well.
The next question is coming from Roland Vetter of Praxis Alpha Partners. Your accounts show that your inventories have declined. Do you intend to increase inventories again to the level you indicated previously, six months of production? This question will be answered by Vladislav, our CCO.
Yes, thanks for the question. The inventory levels throughout the year may vary based on delivery schedules requested by our clients, and therefore may not reflect the overall situation. In 2024 production forecast, while sales projections remain unchanged, we anticipate maintaining a sufficient inventory level at the end of the year in order to fulfill our future obligation under the sales contracts.
Thank you, Vladislav. The next question is coming from Ben Finegold, Ocean Wall. The question is, what is the estimated asset requirements to ramp up to 100% subsoil use levels? And what is the estimate for asset usage in 2024 to achieve your guidance? The question will be answered by Ulan Khassanov, the Managing Director of Economics and Finance.
Actually, related to the question, we would say that we don't disclose the volume of sulfuric acid that we are being consumed, and that is why we would like to say that all the contracts related with the 2024 supply of sulfuric acid has been already conducted, and now we do... We did have some challenges related with the sulfuric acid supply in the beginning of the year. Can you hear us?
Yes, we can hear you now.
Okay, okay. Sorry, we had some technical difficulties. With regards to transportation route through China, as I've said, this is a sensitive topic. The negotiations are slowly progressing, let's put it this way, and should we come to an agreement, an appropriate announcement will be made in due course, but so far, there are no updates. With regards to our need to go onto the market, onto the spot market, as I've said, we've heard these rumors and insinuations through the past couple of years, but so far, we never had no need, no urgency to go into the spot market and to buy any pounds externally.
Thank you, Dastan. The next question is coming from Katie Hayden, retail investor. The question is: can you please provide further detail on your strategy to secure sufficient levels of sulfuric acid to support production levels in 2025 and thereafter? The question is directed to Ulan Khassanov.
Thank you for your question. As we, as Dastan has already mentioned, we, actually, you know, we have our own in-house production, about seven hundred thousand tons, and also we do have copper miners who also produce sulfuric acid as a by-product. So we are now having the negotiation with them related with the supply of the sulfuric acid. Also, Kazakhstan has some imports from Russia, so we do have sufficient sulfuric acid for this year, and now negotiations are going on to 2025 . But related to the furthermore plans and strategy of securing the sulfuric acid, now we have started the construction of the sulfuric acid plant, which is about eight hundred thousand tons.
We will be enough to secure our most of the consumption needs of 2027, and furthermore, sulfuric acid needs. Now, I would like just also add to the comments of Dastan that nowadays the contracting related with the drilling water wells are being now prepared, and the design works to the sulfuric acid plant has been started and is going on. We are trying our best to maximize the construction and go through the construction as soon as it is possible.
Thank you, Ulan. The next question is coming from Daniyar Serikov, retail investor. It relates to the recommendation from the anti-monopoly body here in Kazakhstan with regards to the recommendation on sale or decrease of the company's share in existing sulfuric acid plants. Since the similar question has been already asked, I'll just probably take the question myself and say this is just a recommendation. So the report issued by the anti-monopoly agency has just a recommendation there. So it's not. We are not required to follow these recommendations. We, as a company, are not really planning to decrease our shares in the sulfuric acid plants that we have within our asset perimeter.
The next question is coming from Craig Hutchison, from TD Cowen. The question is: What are your sales commitment volumes for 2025 ?
Thanks for the question, but unfortunately, we cannot disclose the information right now. But, at the end of the year result, we expect to provide the guidance for the sales, 2025.
Thank you, Vladislav. The next question is coming from Julian Butcher, from Fiera Capital. The question: Can you clarify if the inventory loan from ANU Energy is reflected in the inventory number? Is the material from ANU available future loans? The question will be taken by Ulan Khassanov.
Actually, the loan between ANU Energy and Kazatomprom has already closed. It was disclosed in the financial statement of Q1 , so we don't have any loans between ANU Energy and Kazatomprom now.
Thank you, Ulan. The next question is also coming from Daniyar Serikov with regards to Dioxitek. Payment expectation of KZT 15 billion . So what's the current status? The question will be also answered by Ulan.
Actually, the good job was done by us, and so that's why the Dioxitek, like, was by 95% paid by them. So that's why we can say that the question has been almost closed.
Thank you, Ulan. The next question is coming from John Farrah from Praxis. So the question: Mr. Kosherbayev and management, back in, at the full year results, suggested they believed uranium prices were structurally on the way up. Do you still believe this is the case?
Yes, thank you for this question, this is Dastan. Yeah, we believe that this is still the case, but, I'd like to note that, over continued, like, over a relatively long period of time, we always iterated that, even though that the structural deficit is approaching, which is supporting the prices going up, there is still a bit of... The market itself is a bit inflated, and the spot price and the term price need to come into- need to align and, adjust. So what we're witnessing right now is the process basically corresponding with this notion, but nevertheless, going on forward, we believe that, structurally, the prices will keep on going up.
Thank you, Dastan. The next question is coming from John Ciampaglia from Sprott. The question is: Based on UxC, utilities so far this year have signed long-term contracts at half or less of annual replacement rate. How do you think your production guidance will change their mindset and procurement strategy? Thank you.
Yes, thanks for the question. We are already seeing the change in procurement behavior of utilities, where they become much more flexible in contracting terms.
... and more and more accept condition provided by suppliers.
Thank you, Vladislav. The next question is coming from Jason Fairclough at Bank of America. The question is: To what extent was the company surprised by the MET change? It was a complete surprise to the market.
Yeah, thank you for your question. We understand that it was very surprising. It was very surprising also to us, but in the extent, we would say that in Kazakhstan, there are several taxations for the subsoil use contractors. So for example, if you see in the oil sector, there are several taxes like royalty tax, exporting custom tax, also MET, also there is a CIT and also excess profit tax. All of them, summation of them is about 50% or 60% of their expenses. That is why, due to that, oil sector has a good, big amount of margin. There are several taxes.
Also, we did have heard that the government wanted, has an had an intention to implement excess profit tax for uranium sector and the other mining sectors, but it goes through the mineral extraction tax. We did have some calculations, and we can now see that if it was implemented, excess profit tax to uranium sector, so it would cost us a much more than it is having now through the mineral extraction tax. We are also, of course, surprised by it, but we can say that now we are being more favorable, more fair taxation in Kazakhstan because there are several sectors which are being taxed a lot, and there are several sectors that are being taxed smaller. So now uranium sector is more fair, fairly taxed, we can say.
Thank you, Ulan. The next question is coming from Daniel Serikov, the retail investor. It comes in Russian, so I'll just translate it. Does Kazatomprom expect to sell uranium to uranium funds this year? If yes, what would be the volumes?
Yeah. We have fulfilled our obligation under option of YCP of year 2023, as they have disclosed in their press release. And, on further sales and with uranium funds, we can, we cannot say more now, but as we have stated many times, we mostly focus on sales to end users and utilities.
Thank you, Vladislav. These are all the questions that came through the webcast line. I would like the operator to once again check if there is any questions from the live line. If not, I will, we will pass the floor to the management for closing remarks.
If you would like to ask a question, please press star 1 on your telephone keypad. We have no questions at this time.
Okay.
Thank you. Since there are no questions, I would like to pass the floor to Dastan again for closing remarks.
Yes, I'd like to thank on behalf of the team and our CEO, who's unfortunately been absent today, but as previously mentioned, he left with the government delegation on the state visit to Tajikistan. And, on behalf of entire Kazatomprom team, the company itself, I thank you for your interest, thank you for participation, and would like to reiterate that, despite all the rumors and insinuations going on in the market, facts always speak louder than words, and the company is doing pretty well. We believe that we have all the strong fundamentals and all the factors that will support our growth going on to the future. So, thank you very much. Have a nice day.
This concludes today's conference call. Thank you for your participation, and you may now disconnect.