Kazakhstan output cut fuels uranium stocks rise

Move by world’s largest producer worth about 7.5 per cent of global production

Plans by Kazakhstan, the “Saudi Arabia” of uranium production, to cut output for the next three years gave the struggling industry its second jolt in a month and sent competitors’ shares soaring.

State-owned Kazatomprom said Monday it will reduce planned output by 20 per cent, resulting in production deferral of 11,000 tons, including 4,000 tons in 2018. That’s the second supply shock in the past month after Cameco Corp. said it planned to shut the world’s biggest uranium mine for most of 2018 due to weak prices.

“To put Kazakhstan production in context, it represents about four times what Saudi Arabia does to the oil market,” Travis McPherson, vice-president of corporate development at Nex Gen Energy Ltd., a uranium explorer backed by Hong Kong billionaire Li Ka-shing, said Monday in an email. “This total cut by Kazakhstan would amount to Saudi Arabia completely coming offline in the oil space.”

Uranium stocks surged, with Saskatoon-based Cameco among the biggest gainers, climbing as much as 18 per cent in Toronto to the highest since April 28. It closed at $13.59, up 12.9 per cent. Torontobased Denison Mines Corp. rose as much as 19 per cent, the most intraday in three years. It ended the day at 72 cents, up 14.3 per cent.

The 2018 production deferral represents about 7.5 per cent of forecast global primary production, Rob Chang, head of metals and mining at Cantor Fitzgerald in Toronto, said in a note.

“Kazatomprom has informed all its major customers of its decision, and confirmed that future contractual delivery obligations will not be affected by these measures,” the company said in a statement on its website. It will reduce production to “better align its output with demand.”

Earlier this year, Kazakhstan said it would reduce output by 10 per cent in 2017.

A uranium glut has weighed on the industry since the Fukushima disaster in 2011 led to the shuttering of Japan’s nuclear reactors and a rethink of nuclear power worldwide.