• Kazatomprom confirms production issues, putting a rocket up spot uranium market
  • Aussie players BOE, PDN, BMN, DYL, PEN and LOT among those rising this morning
  • Glencore reveals Murrin Murrin output for 2023 amid nickel plunge

 

The biggest hot diggity dog in the uranium market is Kazakhstan’s Kazatomprom, an entity with more clout in the former Soviet Socialist Republic than even Borat Sagdiyev.

Its quarterly production flew out the door last night and in a telling decision the first two pages is dedicated to bullish commentary on the uranium market.

As the old adage goes (not really an old adage) when your mines are borked talk about the market.

Kazatomprom has been struggling with high prices of sulphuric acid, a key input in its in situ recovery method. Prices rose some 33.6% in 2023 after a 33% lift in 2022.

Ouch. Production fell 1% to 21,112t in 2023, with Kazatomprom’s attributable production down 2% to 11,169t. It’s already revealed a reduction in output for 2024 from 90% of its approved capacity (around 23,500t) to 21,000-22,500t, with consolidated sales expected to fall from 18,000-18,500t to 15,500-16,500t.

At the same time average prices rose 27% from US$44.46/lb to US$55.06/lb. And Kazatomprom’s production woes have seen more bullishness in the spot market today.

It’s back at 16-year highs of US$106/lb U3O8, with London-listed KAP saying contracting from utilities rose from 114Mlb (43,800t) to 160Mlb (61,500t) in 2023. That say long term prices rise US$16/lb YoY to US$68/lb at the end of 2023.

That has stocks on our uranium watchlist humming.

Deep Yellow (ASX:DYL) gained an enthusiastic 17.79% with Peninsula Energy (ASX:PEN) 7.69% higher and Lotus Resources (ASX:LOT) up 4.35%.

Dual-listed NexGen Energy (ASX:NXG) surged 6.56% with Boss Energy (ASX:BOE) peaking above $6 for the first time ($2.5b market cap) and Paladin Energy (ASX:PDN) hitting a five-year high of $1.36 ($4b MC).

Namibia-focused Bannerman Energy (ASX:BMN) has also cracked the $500m market cap mark this year. It’s up 29% YTD and almost 7% today.

 

Murrin Murrin still in action despite nickel crunch

Glencore’s Murrin Murrin is one of just five major nickel operations in WA which haven’t yet been curtailed in response to a halving in prices over the past year and a bit.

Andrew Forrest’s Wyloo has announced plans to shutter its Kambalda operations, while IGO (ASX:IGO) has already seen one of two mines at its Forrestania operations (Flying Fox) reach the end of its useful life with the larger Cosmos development placed on ice on Wednesday.

Ravensthorpe will cut a third of its workforce and cut output by a similar amount by halting mining and only processing stockpiles, while bust Panoramic (ASX:PAN) has closed its Savannah mine.

Now the ~35,000tpa Murrin Murrin, also Australia’s largest cobalt producer, BHP’s (ASX:BHP) Mt Keith and Leinster ops, and IGO’s Nova and Spotted Quoll are the only operations in action. All of those mines were able to scrape through the far more severe nickel crunch from 2015-2017, when prices dipped as low as US$7600/t.

They are now a touch over US$16,000/t, but inflation, ageing mines and maintenance have made margins tighter.

BHP has flagged cost-cutting measures for its loss-making Nickel West operations, which employ around 2500 people in WA’s Goldfields both residentially and FIFO out of Perth and the South West. It’s all been prompted by a flood of supply from Indonesia, including a Chinese-led technical breakthrough which enabled the country’s nickel pig iron producers to produce nickel matte from laterite ore.

Unlike nickel pig iron, nickel matte can be converted into LME grade nickel metal — the ‘class 1 nickel’ used as feed for battery nickel products and high quality stainless steel. Indonesian companies have also started making Murrin Murrin style high pressure acid leach plants, which produce a mixed hydroxide precipitate also suited to lithium ion battery production.

According to Glencore’s 2023 production report yesterday, Murrin Murrin produced 31,100t of nickel metal and 2100t of cobalt, down 12% and 30% YoY, heavily influenced by maintenance.

That translated to 36,400t of nickel and 2400t of cobalt once third party feed is taken into account.

Glencore’s overall nickel output fell from 108,000t in 2022 to 98,000t in 2023, with output to drop further to 80-90,000t in 2024. However, that is largely because it will stop funding its share of the 27,000t Koniambo mine in New Caledonia from the end of this month, something flagged last year.

Glencore expects to produce 1.1-1.2Mt of ferrochrome, 950,000-1.01Mt of copper, 35,000-40,000t cobalt, 900-950,000t zinc and 105-115Mt coal in 2024, largely in line with 2023 numbers.

However, it is planning to ramp up and spin out its coal business after buying 77% of Teck’s Elk Valley met coal operations in Canada as part of a US$9b deal with minority partner Nippon Steel.

Last month Glencore said Murrin Murrin remained an important part of its international operations, but supported calls from the sector for government assistance to weather the current storm of low prices.

The WA Government has been asked to run the ruler over potential royalty relief and tax breaks for the nickel and lithium industries to prevent further job losses.

Rebounding gold prices and a weaker US dollar helped the materials sector to a 1.18% gain this morning, with the big iron ore miners all in and around that level.

 

Ground Breakers share prices today

 

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