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In 2022, our Company showed good financial performance. Our consolidated revenues reached KZT 1,001.2bn, an increase of 45% compared to 2021, while uranium oxide sales across the Group were similar to those of 2021. Operating profit soared by 91% to KZT 456.0 billion. Net profit showed strong growth of 115% to KZT 473 billion. We paid out a record dividend of KZT 227 billion to shareholders since IPO, up by 52% year on year. This impressive performance showcases a significant improvement in the uranium market as well as Management's success in implementing the Company's strategy.

Ruslan Beketayev
Chief Financial Officer

Significant Factors Affecting the Group`s Results of Operations

The significant factors that affected the Group’s results of operations during 2022 and 2021, and which the Company expects to continue to affect the Group’s results of operations in the future, include:

Geopolitical developments

In 2022, significant geopolitical events occurred in Kazakhstan and in Russia/Ukraine. These events have not had a material impact on the Group’s operations to date although the resulting market uncertainty has caused significant volatility in the tenge exchange rate and traded price of the Company’s securities. Management is unable to predict the consequences or future impacts of these events, if any, on the Group's financial position or operating performance. Management will continue to monitor the potential impact of the above events and will take all necessary steps to mitigate the risks and prevent adverse business impacts.

(a) January 2022 civil unrest in Kazakhstan

On 2 January 2022, protests triggered by a rise in fuel prices began in the Mangystau region of Kazakhstan which spread to other regions in the country. The protestors demanded a number of social, economic and political reforms. Although the Government took measures to respond to these demands, including a decrease in fuel prices, the protests escalated into significant social unrest in Almaty and southern regions of the country.

As a result, on 5 January 2022, a state of emergency was declared until 19 January 2022, and restrictions were imposed on the communication and transportation of people and vehicles, including railway and airline carriage.

By the end of January 2022, the situation in all regions of the country stabilised, and the state of emergency was lifted. Utilities and infrastructure were fully restored, and restrictions on communication and transportation were removed.

(b) Events in Ukraine

On 24 February 2022, the Russian President announced that Russia would recognise the independence of the Luhansk People’s Republic and Donetsk People’s Republic and the Russian military mobilised its troops over the border of Ukraine. As a response to the Russian actions, the United States, the European Union and a number of other countries imposed sanctions against Russia including the disconnection of a number of Russian financial institutions from SWIFT.

The Group’s financial position and results are currently unaffected by the events in Ukraine. The majority of Group revenues is earned in US dollars and funding is also raised in US dollars, creating a natural hedging effect on foreign exchange risk. Accordingly, fluctuations in the exchange rate of the national currency do not have a significant impact on the financial performance of the Group.

Because of the Russian/Ukraine conflict and its consequences, the Tenge exchange rate began to be more volatile and the annual inflation rate was 20.3% in 2022. To date, the National Bank of the Republic of Kazakhstan has taken a number of measures to maintain the stability of the Kazakhstan financial system.

Due to active international sanctions processes against Russian banks, including Sberbank, VTB Bank and other organisations, it is inappropriate for the Group to service or interact with these banks and their subsidiaries. The Group has taken measures to redistribute funds to banks that are not under current sanctions.

The Group has a Uranium Processing Agreement with the Uranium Enrichment Center (UEC) (a resident of the Russian Federation). At the date of the financial statements, the Group anticipates that the provision of services under this agreement will continue. A high-priority risk analysis is being carried out on a continuous basis with respect to compliance with the sanctions.

Some of the Group’s exported products are transported through the Russian Federation and, accordingly, there are risks associated with the transit through the territory of Russia, shipping insurance, and the delivery of cargo by sea vessels. The Group constantly monitors the situation with sanctions against Russia and the potential impact on the transportation of finished products. At the date of financial statements, there are no restrictions on the Group's activities related to the supply of the Group's products to end customers.

As part of its ongoing risk assessment program, management is reviewing the impact of anti-Russian sanctions on the Group's operations. To date, the sanctions have not had a significant impact on the Group's operations, although the resulting market uncertainty caused by the conflict between Russia and Ukraine has led to significant volatility in the spot uranium price, the exchange rate of the national currency and the quotations of the Company's securities. During 2022, the Company experienced some difficulties with certain bank payments, as described in Section 2.5.3 Working Capital and 2.5.4.1 Cash Flows from Operating Activities, which were resolved in January 2023.

Indicator 2021 2022
Cash flows from operating activities 118,729 283,859
Cash flows from/(used in) investing activities (71,241) (10,893)
Cash flows (used in) financing activities (1,843) (268,877)
Net increase/(decrease) in cash and cash equivalents 45,645 4,089

Price received for the sale of natural uranium and changes in natural uranium product prices

Spot market prices for U3O8, which is the main marketable product of the Group, have the most significant effect on the Group’s revenue. The majority of the Group’s revenue is derived from sales of U3O8 under contracts with price formulae containing a reference to spot price. In addition to spot prices, the Group’s effective realized price depends on the proportion of contracts in the portfolio with a fixed price component in a given period. The average realized price for each period can therefore deviate from the prevailing spot market price. More information regarding the impact of spot market prices on average realized price is provided in Section 2.7.1 Uranium sales price sensitivity analysis.

Average spot price and average sales price per pound U3O8

Indicator Unit 2021 2022 Change
Average weekly spot price (per lb U3O8)16 USD 35.05 49.61 42%
KZT 14,932 22,863 53%
Average realized price of the Group (per lb U3O8) USD 33.11 43.44 31%
KZT 14,108 20,021 42%
Average realized price of Kazatomprom (per lb U3O8) USD 32.33 42.50 31%
KZT 13,776 19,587 42%

The Company’s current overall contract portfolio price correlates to current uranium spot prices (see Section 2.7.1 Uranium sales price sensitivity analysis). However, the increase in average realized prices in 2022 was lower than the increase in the spot market price for uranium due to the significant spot price volatility in the uranium market in 2021-2022; during 2022, many deliveries were based on contract price mechanisms that established a contract price for the delivery, set earlier in the year when the market price was lower and prior to the sharp increase in the market price in September 2021.

Changes in the Group structure

In 2022 and 2021, the Group completed several transactions including:

In 2022:

In 2021:

In total, the number of the Group’s subsidiaries, JVs, JOs, associates and other equity investments remained 35 as of 31 December 2022.

Impact of Changes in Exchange Rates

The Group's exposure to currency fluctuations is associated with sales, purchases and loans in foreign currencies. Significant cash flows of the Group are in USD because:

A significant portion of the Group’s expenses, including its operating, production and capital expenditures, are denominated in KZT. Accordingly, as most of the Group’s revenue is denominated in USD, while a significant share of its costs is KZT-denominated, the Group generally benefits from the appreciation of USD against KZT, which subsequently has a positive effect on the Group’s financial performance. However, the positive effect of an appreciating USD may be fully or partially offset given that the Group has outstanding USD-denominated liabilities, although the amounts of such liabilities at 31 December 2022 and 2021 are not significant. In addition, the Company purchases uranium and uranium products from its JVs and associates pursuant to KZT-denominated contracts, with the prices determined by reference to prevailing spot market prices of U3O8, which are denominated in USD. Accordingly, a significant appreciation of USD would result in a corresponding increase in the KZT-denominated price of such contracts.

The Group attempts to mitigate the risk of fluctuations in the exchange rate, where possible, by matching the currency denomination of its payments with the currency denomination of its cash flows. Through this matching, the Group achieves natural hedging without the use of derivatives.

In 2022, the KZT/USD exchange rate fluctuated between KZT 414.67 and KZT 512.19. Changes in exchange rates had a material impact on the Group’s financial performance in 2022. The Group’s net foreign exchange gain in 2022 amounted KZT 17,304 million (2021: KZT 3,345 million).

The following table provides the annual average and year-end closing KZT/ USD exchange rates, as reported by the National Bank of the Republic of Kazakhstan (NBK), as of 31 December 2022 and 2021.

Annual average and year-end closing rate for KZT/USD

Indicator Unit 2021 2022 Change
Average exchange rate for the period17 KZT / USD 426.03 460.85 8%
Closing exchange rate for the period KZT / USD 431.67 462.65 7%

Taxation and Mineral Extraction Tax (“MET”)

Before 01 January 2023, MET was determined by applying a 29% tax charge to the taxable base related to mining production costs (see footnote under the table below). Taxable expenditures were made up of all direct expenditures associated with mining operations, including wellfield development depreciation charges and any other depreciation charges allocated to direct mining activities, but excluded processing and general and administrative expenses. The MET is calculated separately for each subsoil use license. The resulting MET paid was therefore directly dependent upon the cost of mining operations.

In January 2022, the Government of the Republic of Kazakhstan announced that it intended to update the country’s tax code. On 11 July 2022, additions and amendments to the Kazakh tax code were adopted (Laws of the Republic of Kazakhstan On the Enactment of the Code of the Republic of Kazakhstan “On Taxes and Other Mandatory Payments to the Budget No. 135-VII LRK), which introduced changes in the MET base and rate for tax calculation. The amended tax code came into force beginning 01 January 2023 and it did not impact the 2022 results of the Company. In accordance with the introduced changes, the tax base for MET on uranium is determined as the weighted average price of uranium from public sources for the specific reporting period, multiplied by the amount of uranium mined and a MET rate of 6%. It is expected that the changes in MET calculation will lead to an increase in mineral tax expense due to the incorporation of the spot price into the formula.

Group taxes, KZT million

Indicator 2021 2022 Change
Corporate income tax18 85,345 118,853 39%
Mineral extraction tax19 23,659 29,616 25%
Other taxes and payments to budget20 62,572 111,051 77%
Total tax accrued 171,576 259,520 51%

Total tax accrued increased by 51% in 2022 compared to 2021, mainly due to increases in other taxes and payments to budget and corporate income tax. Corporate income tax expenses increased due to the increase in profit before tax, which was mainly due to growth in the average realized price associated with an increase in the market spot price for U3O8 and weakening of the KZT against the USD in 2022 (see Sections Consolidated revenue and other financial metrics and Profit before tax and tax expense). The increase in MET is related to the increase of mining costs, which was a tax base for the MET in 2022. The increase in other taxes and payments to the budget is mostly driven by the increase in VAT expense arising from an increased volume of intra-group sales in Kazakhstan.

Cost and availability of sulphuric acid

Extraction of uranium using the ISR mining method requires substantial amounts of sulphuric acid. If sulphuric acid is unavailable, it could impact the Group’s production schedule, while higher prices for sulphuric acid could adversely impact the Group’s profits.

The Group’s weighted average cost of sulphuric acid increased by 33% to KZT 30,263 per tonne in 2022 (2021: from KZT 22,740 per tonne) due to the increase in the price of raw materials and temporary shortages in the Kazakhstan market and the cost is expected to continue increasing in 2023. On average in 2022, expenses on sulphuric acid represented about 12% of the Group’s uranium production costs (2021: 13%).

The Group is evaluating sulphuric acid supply options and potential investment in a new sulphuric acid plant to be constructed to minimize future cost increases and ensure an additional, reliable, long-term source of acid supply is available.

Pandemic-related costs, as well as availability of critical operating materials caused by supply-chain disruption

The extraction of uranium using the ISR mining method requires the import of certain key operating materials and components. These items are either imported into Kazakhstan directly by the Group, or they are imported by local suppliers from whom the Group procures such materials. Due to global pandemicrelated shipping constraints and export restrictions imposed by some countries, the Group has encountered delays and/ or limited access to some key materials & equipment, such as certain types of pipes and pumps, specialised equipment and drilling rigs.

In some cases, shipping and availability constraints have resulted in a higher cost to acquire the necessary operating materials, including inflationary pressure as a result of commodity price changes, driving an increase in production costs and a negative impact on profitability. In other cases, there has been a nearcomplete loss of access to certain materials. Pandemic-related supply chain challenges have resulted in limited access to certain key operating materials and equipment, which had a material impact on the Company’s wellfield development and production schedules in 2021 and 2022.

Supply chain challenges are expected to continue in 2023, adding additional risk to production in 2023.

While Kazatomprom will make every effort to meet its uranium production plan, final production volumes for 2023 may still fall short of the target level.

Impact of changes in Ore Reserves estimates

The Group reviews its JORC-compliant estimates of Ore Reserves and Mineral Resources on an annual basis, including a review of the estimates by a qualified third party. As a result, certain Ore Reserves and Mineral Resources may be reclassified annually in accordance with applicable standards. Such reclassifications may have an impact on the Group’s financial statements. For example, if a reclassification results in a change to the Group’s life of mine plans, there may be a corresponding impact on depreciation and amortization expenses, impairment charges, as well as mine closure charges incurred at the end of the life of mine.

Transactions with Subsidiaries, JVs, JOs and Associates

The Company purchases U3O8 from its subsidiaries, JOs, JVs and associates, principally at spot price with marketbased discounts, which may vary by operation. Purchased volumes generally correspond to the Company’s interest in the respective selling entities.

The Group’s Uranium segment revenue is primarily composed of two streams:

Cost of sales of purchased uranium is equal to the purchase price from JVs and associates, which in most cases is the prevailing spot price with certain applicable discounts. The share of results of JVs and associates represents a significant part of the Group’s profits and should be considered in the assessment of the Group’s financial results. In 2022, U3O8 was purchased at a weighted average discount of 3.73% (2021: 4.09%) on the prevailing spot price.

When uranium produced by the Company, consolidated subsidiaries and JOs, is sold, the cost of sales is predominantly represented by the cost of production. For those sales, the full margin for uranium products including uranium for export is captured in the consolidated results of the Group.

In 2022, the volume of U3O8 purchased from JVs and associates, JOs and Subsidiaries was comparable to 2021 and comprised 12,338 tonnes (2021: 12,121 tonnes).

In addition to the above volumes, the Company (including its trading subsidiary THK) also purchases volumes from third parties at variable prices.

Volumes of U3O8 purchased by the Company, tonnes

Indicator 2021 2022 Change
U3O8 purchased from JVs and associate 2,910 2,805 (4%)
U3O8 purchased from JOs and subsidiaries 9,211 9,533 3%
Total 12,121 12,338 2%

Key Performance Indicators Analysis

Consolidated financial metrics

The analysis in this section of the report is based on 12 months ended 31 December 2022 compared to 12 months ended 31 December 2021. The table below provides financial information related to the consolidated results of the Group for 2022 and 2021.

Financial indicators, KZT billion, unless otherwise indicated

Indicator 2021 2022 Change
Revenue 691,011 1,001,171 45%
Cost of sales (402,967) (475,097) 18%
Gross profit 288,044 526,074 83%
Selling expenses (15,706) (25,605) 63%
G&A expenses (34,105) (44,507) 30%
Operating profit 238,233 455,962 91%
Other income/(loss), including the following one-time effects: (8,172) 38,667 >100%
Income from an associate development agreement21 - 7,671 100%
Share of results of associates 47,294 75,736 60%
Share of results of JVs 4,289 13,340 211%
Pre-tax income 281,644 583,705 107%
Corporate income tax (61,618) (110,742) 80%
Net profit, attributable to: 220,026 472,963 115%
Owners of the Company 140,773 348,048 147%
Non-controlling interest 79,253 124,915 58%
Earnings per share attributable to owners (basic and diluted), KZT/share22 543 1,342 147%
Adjusted net profit (net of one-time effects) 220,026 465,292 111%
Adjusted EBITDA23 350,294 630,898 80%
Attributable EBITDA24 276,510 495,357 79%

Consolidated revenue and other financial metrics

The Group’s consolidated revenue was KZT 1,001,171 million in 2022, an increase of 45% compared to 2021, primarily due to an increase in the average realized price associated with an increase in the spot price for U3O8 and the weakening of KZT against USD in 2022, whereas sales volume were comparable to 2021.

An increase in overall revenue includes an increase in revenues from the UMP segment by KZT 61,179 million including revenues from external segments.

Consolidated revenues, KZT million

Indicator 2021 2022 Change Proportion
2021 2022
Uranium products (only U3O8)25 606,109 851,427 40% 88% 85%
Uranium products26 18,939 57,806 205% 3% 6%
Beryllium products 26,119 31,986 22% 4% 3%
Tantalum products 15,777 23,171 47% 2% 2%
Others 24,067 36,781 53% 3% 4%
Total Revenue 691,011 1,001,171 45% 100% 100%

Operating profit in 2022 was KZT 455,962 million, an increase of 91% compared to 2021. The increase was mainly due to an increase in the average realized price of uranium sold.

Net profit in 2022 was KZT 472,963 million, an increase of 115% compared to 2021 and the percentage increase is consistent with the increase in the operating profit in 2022. Adjusted net profit for 2022 was KZT 465,292 million, an increase of 111% compared to 2021, which is also due to the increase in the operating profit in 2022. In 2022, JV Katco LLP’s participants made amendments to the Partnership Agreement on the further development of JV Katco LLP dated 11 August 2022, under which the Group became entitled to compensation in the amount of KZT 7,671 million from the second participant of JV Katco LLP, which was recognized as other income, which is considered as a one-time effect.

Profit for the period attributable to non-controlling interest increased significantly in 2022 compared to 2021, impacted by the sale of a 49% share of ORTALYK LLP in July 2021 in addition to the explanations stated above. In 2021, the Company sold 49% of its interest in ORTALYK LLP, while Kazatomprom retains a controlling 51% interest, according to which, under IFRS, the financial effect of this transaction is reflected in the Financial Statements in cash flows and equity.

Adjusted EBITDA comprised KZT 630,898 million in 2022, an increase of 80% compared to 2021 due to a higher operating profit. Attributable EBITDA was KZT 495,357 million in 2022, an increase of 79% compared to 2021 mainly due to the higher operating profit, as well as an increase in the EBITDA of JVs and associates. Also, starting from 2022 and until the end of Katco’s operations, according to amendments to the Partnership Agreement of the entity, the Group also became entitled to an additional 11% of Katco’s annual profit allocation, with the ownership interest being unchanged. This additional 11% impacts the allocation of Katco’s dividends, therefore, in the financial statements the Group recognized a share in the results of JV Katco LLP for 2022 in the amount of 60%. Net assets are still recognized as 49% in accordance with the participants’ initial agreement.

Uranium segment

Uranium segment financial metrics

Uranium segment financial metrics

Indicator Unit 2021 2022 Change
Uranium segment revenue27 KZT million 621,706 920,093 48%
Including U3O8 sales proceeds (across the Group)28 KZT million 606,109 851,427 40%
Average exchange rate for the period KZT/USD 426,03 460,85 8%
Share of revenue from uranium products % 88% 85% (3%)

Consolidated U3O8 sales were KZT 851,427 million in 2022, an increase of 40% compared to 2021, mainly due to a higher spot price for U3O8 and weakening of the KZT against the USD in 2022, which resulted in a higher average realized price, while sales volume in 2022 were comparable with 2021.

Uranium segment production and sales metrics

Indicator Unit 2021 2022 Change
Production volume of U3O8 (100% basis)29 tU 21,819 21,227 (3%)
Production volume of U3O8 (attributable basis) tU 11,858 11,373 (4%)
U3O8 sales volume (consolidated) tU 16,526 16,358 (1%)
Including KAP U3O8 sales volume30,31 tU 13,586 13,572 (0%)
Group inventory of finished goods (U3O8) tU 8,824 9,352 6%
Including KAP inventory of finished goods (U3O8)32 tU 7,724 7,749 0%
Group average realized price KZT/kg 36,677 52,051 42%
Group average realized price USD/lb 33.11 43.44 31%
KAP average realized price33 USD/lb 32.33 42.50 31%
Average weekly spot price USD/lb 35.05 49.61 42%
Average month-end spot price34 USD/lb 35.28 49.81 41%

All annual operational and sales results in the uranium segment were in line with the updated guidance provided for 2022, which was adjusted in the Company’s Third Quarter 2022 Operations and Trading Update.

Production volumes on a 100% basis and attributable basis for both Q4 2022 and throughout 2022 were slightly lower compared to 2021, as the COVID-19 pandemic had an impact on wellfield development in 2021. This had a lagged effect on production in 2022, it usually takes from eight to ten months between wellfield development and the resulting uranium extraction by in-situ recovery. As a consequence, delays and/ or limited access to certain materials and equipment in 2021, resulted in lower production in 2022 compared to the same period in 2021. Additionally, attributable production was impacted by the sale of a 49% share of ORTALYK LLP to CGN Mining UK Limited in July 2021.

Uranium sales at the Group and KAP levels in 2022 were on the same level as in 2021. Shipments through the TITR (that included the JV Inkai-owned portion of material) were successfully delivered in 2022.

Consolidated Group inventory of finished U3O8 products amounted to 9,352 tonnes as of 31 December 2022, which was 6% higher year on year. At the Company level, the inventory of finished U3O8 products was 7,749 tonnes, comparable to 2021. Consistent with the Company’s value strategy, Kazatomprom’s inventory levels vary based on the timing of customer requirements and the resulting differences in the timing of deliveries and mining and sales volumes, in alignment with changing market conditions.

The Group’s average realized price in KZT in 2022 was KZT 52,051 per kg (43.44 USD/lb), an increase of 42% compared to 2021 due to an increase in the average spot price for uranium products, and the weakening of the KZT against the USD. The average sales prices at the KAP level were also higher and for the same reasons.

The Company’s current overall contract portfolio price is correlated to uranium spot prices.

However, the increase in average realized prices in 2022 was lower than the increase in the spot market price for uranium due to the spot price volatility in the uranium market in 2022 and 2021: low of 42.48 USD/lb and high of 63.75 USD/lb (2021: low of 27.35 USD/lb and high of 50.38 USD/lb). For shortterm deliveries to end-user utilities, the spot price can vary between the time contract pricing is established according to Kazakh transfer pricing regulations, and the spot price in the general market when the actual delivery takes place. The impact of market volatility during the time lag between price-setting and delivery becomes more pronounced as volatility increases, in both rising and falling market conditions. In addition, some long-term contracts incorporated a proportion of fixed pricing negotiated prior to the sharp increase in spot price in the second half of 2021. As a result, increases in both the Group and KAP’s average realised prices in 2022 compared to 2021 were lower than the increases in the spot market price for uranium over the same intervals.

Uranium segment production by operation

The information presented in the table below provides the total uranium production level at each asset (100% basis). The impact of delays and/or limited access to some key materials & equipment in 2021 and 2022 and the reduction in wellfield development activity due to the COVID-19 pandemic in 2020-2021 were not equal across all operations due to the nature of the ISR mining process, and differences in the mine plans and development phase at each operation.

Production volume of uranium oxide concentrate, (U3O8 tonnes)

Enterprise Ownership 2021 2022 Change
Kazatomprom-SaUran LLP 100% 1,493 1,273 (15%)
RU-6 LLP 100% 800 830 4%
Appak LLP 65% 805 803 (0%)
JV Inkai LLP35 60% 3,449 3,201 (7%)
Baiken-U LLP 52,5% 1,230 1,315 7%
ORTALYK LLP36 51% 1,579 1,650 4%
Semizbay-U LLP 51% 962 940 (2%)
Karatau LLP 50% 2,561 2,560 (0%)
JV Akbastau JSC 50% 1,545 1,545 0%
JV Khorassan-U LLP 50% 1,579 1,580 0%
JV Zarechnoye JSC 49,98% 655 741 13%
JV Katco LLP 49% 2,840 2,564 (10%)
JV SMCC LLP 30% 2,321 2,225 (4%)
Total 21,819 21,227 (3%)

UMP Segment

In 2022, the fuel pellets output was 198.2 tonnes, up significantly from 2021 thanks to higher production for Ulba-FA LLP and CJNF (China).

UMP segment uranium product sales

UO2, uranium powder and fuel pellets

Indicator 2021 2022 Change
Fuel pellets 43.5 198.2 >100%
Uranium powder 10.7 88.9 >100%
Uranium dioxide from scraps 50.6 22.8 (55%)

The increase in sales of fuel pellets soared to 198.2 tonnes due to an increase in sales to Ulba-FA LLP and CJNF (China). The increase in uranium powder sales in 2022 resulted from a contract made with PJSC MSZ (Russia) for the sale of uranium powders in 2022-2023.

Uranium dioxide from scrap was sold in accordance with customer demand.

UMP segment rare metal product sales

Rare metals products Unit 2021 2022 Change
Beryllium products Sales, tonnes 1,529.31 1,332.46 (13%)
KZT/kg 17,074 24,005 41%
Tantalum products Sales, tonnes 165.40 165.52 0%
KZT/kg 95,351 139,990 47%
Niobium products Sales, tonnes 8.24 13.45 63%
KZT/kg 20,655 24,572 19%

Sales volume of beryllium products decreased by 13% in 2022 compared to 2021, due to a decrease in the number of orders from customers. Realized price increased by 41% in 2022 mainly related to the product mix changing to highly refined products, higher price in the non-ferrous metal market as well as the weakening of KZT against USD.

Realized prices for tantalum products were higher in 2022 compared to 2021, mainly related to the product mix that changed to more highly refined products at higher prices, higher price in the non-ferrous metal market and the weakening of KZT against USD.

Sales volumes and prices for niobium products in 2022 increased compared to 2021 due to an increase in the quantity of orders for niobium hydroxide, also in 2022 higher prices in the non-ferrous metal products market resulted in a higher selling price.

Cost of sales

Indicator 2021 2022 Change Proportion
2021 2022
Materials and supplies 241,695 261,825 8% 60% 55%
Depreciation and amortisation 66,429 79,037 19% 17% 17%
Wages and salaries 33,294 49,348 48% 8% 10%
Taxes other than income tax 25,474 32,216 26% 6% 7%
Processing and other services 17,404 31,361 80% 4% 7%
Other 18,671 21,310 14% 5% 4%
Cost of Sales 402,967 475,097 18% 100% 100%

The cost of materials and supplies was KZT 261,825 million in 2022, an increase of 8% compared to 2021 due to an increase in the purchase price of materials and supplies as a result of an increased inflationary pressure. In 2022 the purchase price of uranium from JVs and associates, as well as from third parties was higher than in 2021 caused by an increase in the spot price for U3O8 and the weakening of KZT against USD in 2022. When such uranium is sold, the cost of sales is predominantly represented by the cost of purchased uranium (accounted in materials and supplies) at the prevailing spot price with certain applicable discounts.

Depreciation and amortisation totalled KZT 79,037 million in 2022, an increase of 19% compared to 2021, mainly due to an increase in the costs of repayment of the PGR and the increased number of wells commissioned in 2022.

Payroll costs totalled KZT 49,348 million in 2022, an increase of 48% compared to 2021, mainly due to an increase in the payroll of main production personnel and introduced standardisation of remuneration packages across the Group as well as an increase in the proportion of sales in 2022 of uranium produced by consolidated subsidiaries.

The taxes other than income tax totalled KZT 32,216 million, which is comprised mostly of MET, increased by 26% compared to 2021 due to an increase in the cost of production as well as an increase in the proportion of sales of uranium produced by consolidated subsidiaries.

The cost of processing and other services was KZT 31,361 million in 2022, an increase of 80% compared to 2021, mainly due to a significant increase in volumes of processed U3O8 required for the production of fuel pellets from KAP’s U3O8.

The other categories of costs totalled KZT 21,310 million in 2021, an increase of 14% compared to 2021 due to an increase in maintenance and repair and other overheads.

Uranium segment C1 cash cost, all-in sustaining cash cost, and capital expenditures

Indicator 2021 2022 Change
C1 Cash cost (attributable basis) USD/lb 8.80 10.25 16%
Capital cost (attributable basis) USD/lb 3.83 5.94 55%
All-in sustaining cash cost (attributable C1 + capital cost) USD/lb 12.63 16.19 28%
Capital expenditures of mining companies (100% basis)37 91,087 146,499 61%

Compared to 2021, in 2022 C1 Cash cost (attributable) increased by 16% mainly due to an increase in the cost of materials driven by inflationary pressure and increase in the payroll of production personnel. All-insustaining cash costs (“AISC”) (attributable C1 + capital cost) increased by 28% in USD equivalent in 2022 due to an increase in capital expenditures of mining companies.

The results were within the guidance ranges provided for 2022 (guidance of US$9.50 – 11.00 for attributable C1 cash cost, US$16.00 – 17.50 for AISC).

Capital expenditures of mining companies (100% basis) comprised KZT 146,499 million, an increase of 61% compared to 2021, primarily due to a shift in wellfield development activities, as well as higher purchase prices for materials, supplies, equipment and cost of drilling.

Kazatomprom’s attributable C1 cash cost categories are generally broken down as follows (proportions vary year-to-year, and vary between operations, deposits and regions):

C1 Cash Cost

General Attributable Cash cost (C1) Categories 2021 2022
Material and supplies 22% 24%
MET 21% 22%
Processing and other services 17% 15%
Wages and salaries 17% 19%
General and administrative expenses 8% 7%
Selling expenses 3% 3%
Others 12% 10%
Total 100% 100%

Distribution expenses

Selling expenses, KZT million

Indicator 2021 2022 Change Proportion
2021 2022
Shipping, transportation and storing 11,110 20,331 83% 71% 79%
Wages and salaries 1,456 1,744 20% 9% 7%
Materials 306 199 (35%) 2% 1%
Rent 105 214 104% 1% 1%
Depreciation and amortisation 65 56 (14%) 0% 0%
Others 2,664 3,061 15% 17% 12%
Selling expenses 15,706 25,605 63% 100% 100%

Selling expenses totalled KZT 25,605 million in 2022 and significantly increased compared to 2021. The increase was mainly due to changes in the delivery destination points for uranium products, an increase in transportation tariffs as well as by using the TITR and the weakening of the KZT against the USD, as a significant portion of shipping, transportation and storing expenses are denominated in foreign currency.

General & Administrative expenses (G&A)

Indicator 2021 2022 Change Proportion
2021 2022
G&A expenses 34,105 44,507 30% 100% 100%
Incl. Depreciation and amortisation 2,493 2,110 (15%) 7% 5%

In comparison to 2021 G&A expenses increased due in part to a compensation liability to the tax authority of the Republic of Kazakhstan in the amount of KZT 7,310 million for overproduction by JV Akbastau JSC compared to its approved subsoil use agreement for 249 tonnes of uranium, as well as an increase in wages and salaries.

The share of associates’ and JVs’ results

The share of results of associates and JVs in 2022 was KZT 89,076 million, an increase of 73% compared to 2021. The increase was related to an increase in uranium spot prices and the weakening of the KZT in 2022, which positively impacted the operating results of the associates and JVs and their resulting contributions to the Group.

Profit before tax and tax expense

Profit before tax and tax expense, KZT million

Indicator 2021 2022 Change
Profit before tax 281,644 583,705 107%
Total income tax expense, including: 61,618 110,742 80%
Current income tax 85,345 118,853 39%
Deferred income tax (23,727) (8,111) (66%)

The Group’s profit before tax was KZT 583,705 million in 2022, significantly higher than in 2021 which is mainly due to increase in operating income driven by the growth in the average realized price with an increase in the market spot price for U3O8, and weakening of the KZT against the USD.

In 2022, corporate income tax expense was KZT 110,742 million, a significant increase compared to 2021 related to the increased current income tax and increase in profit before tax in 2022.

The corporate tax rate applicable to the Group's profits was 20% in 2022 and 2021. Effective income tax rates were 19% and 20% for 2022 and 2021, respectively. The effective tax rate differs from the corporate income tax rate primarily due to certain elements of reported income and expenses that are not recognised in tax accounting. In general, the difference between the effective tax rate and the applicable Kazakhstani corporate tax rate of 20% is insignificant.

Capital Expenditures Review

Most capital expenditures of the Group are incurred by subsidiaries, JO’s, JVs and associates engaged in the mining of natural uranium. Such expenditures are comprised of the following key components:

The following table provides the capital expenditures for the Group’s subsidiaries, JOs, JVs and associates engaged in uranium mining for the periods indicated. Capital expenditure amounts shown were derived from stand-alone management information of certain entities within the Group on an unconsolidated basis, and they are therefore not comparable with or reconciled to the amounts of additions to property, plant and equipment as presented in the Financial Statements. Investors and analysts are strongly cautioned to not place undue reliance on capital expenditure information, as it represents unaudited, unconsolidated financial information on an accounting basis that is not in compliance with IFRS. In 2022 most of the Group’s entities have their internal policies and increased their contributions to the liquidation funds to match an increase in liabilities and site rehabilitation costs.

Capital expenditures of subsidiaries, JOs, JVs and associates of the Group, KZT million

Enterprise Ownership 2021 2022
WC38 S&E39 LF/C40 Total WC38 S&E39 LF/C40 Total
Kazatomprom-SaUran LLP 100% 6,094 865 542 7,501 11,286 2,249 1,857 15,392
RU-6 LLP 100% 3,392 657 260 4,309 5,050 1,165 382 6,597
APPAK LLP 65% 6,769 495 1,331 8,595 7,260 630 2,009 9,899
JV Inkai LLP 60% 4,815 3,925 6 8,746 10,637 1,385 18 12,040
Baiken-U LLP 52.5% 2,679 590 167 3,436 5,161 847 246 6,254
ORTALYK LLP 51% 4,487 594 219 5,300 12,246 453 1,427 14,126
Semizbay-U LLP 51% 4,231 561 177 4,969 6,399 1,699 1,987 10,085
JV Budenovskoye LLP 51% 1,599 320 (4) 1,915 1,143 1,610 71 2,824
Karatau LLP 50% 4,667 579 112 5,358 2,571 1,122 1,478 5,171
JV Akbastau JSC 50% 4,648 291 222 5,161 6,750 638 742 8,130
JV Khorassan-U LLP 50% 7,645 1,781 171 9,597 11,364 1,222 1,362 13,948
JV ZARECHNOYE JSC 49.98% 3,878 291 1,281 5,450 6,426 135 913 7,474
JV Katco LLP 49% 14,391 5,037 1,467 20,895 20,150 18,068 2,879 41,097
JV SMCC LLP 30% 3,927 1,879 374 6,180 6,458 2,376 1,040 9,874
Total 73,222 17,865 6,325 97,412 112,901 33,599 16,411 162,911

In order to achieve the planned levels of production, the Group’s mining companies assess the required level of wellfield and mining preparation based on the availability of reserves. These costs relate to the capitalised costs of maintaining the sites, with the main component being wellfield construction.

Wellfield construction and sustaining costs, KZT million

Indicator 2021 2022 Change
Well construction 73,222 112,901 54%
Sustaining41 13,427 22,735 69%
Total wellfield construction and sustaining costs 86,649 135,636 57%
Expansion 4,438 10,863 >100%
Capital expenditures of mining companies (100% basis)42 91,087 146,499 61%

Capital expenditures of mining companies (100% basis) for the 14 mining entities in 2022 comprised KZT 146,499 million, which is significantly higher than in 2021 due to:

Total capital expenditures of mining companies in 2022 were slightly below the updated guidance range provided for 2022 (KZT 150 – 160 billion) due to the shift in the schedule of drilling works, piping and acidification as a result of limited access to certain key operating materials and equipment, including sulphuric acid and pipes.

The information presented in the table below reflects the wellfield development depreciation (commonly known as PGR), property, plant and equipment, and depreciation and amortization data for each mining asset in 2022.

Redemption of mining and preparatory operations, KZT million, unless otherwise indicated

Enterprise PGR volumes (tU) PGR at the end of period Exploration value at the end of period Historical cost of PPE (excl. wellstock) at the end of period Carrying amount of PPE (excl. wellstock) at the end of period D&A (excl. wellstock)
Kazatomprom-SaUran LLP 2,765 17,987 2,433 23,056 11,714 1,198
RU-6 LLP 2,595 8,175 - 10,765 7,064 580
APPAK LLP 1,682 11,366 1,787 10,684 5,680 387
JV Inkai LLP 4,400 25,420 16,380 103,985 59,951 2,363
Baiken-U LLP 1,914 8,219 5,219 21,264 9,669 966
ME ORTALYK LLP 2,809 16,405 1,106 20,165 11,281 897
Semizbay-U LLP 1,877 8,764 36 18,012 8,237 916
JV Budenovskoye LLP - 1,465 11,935 2,020 1,827 125
Karatau LLP 1,702 6,340 2,461 30,019 14,685 1,328
JV Akbastau JSC 2,114 10,819 5,888 11,146 6,556 452
JV Khorasan-U LLP43 3,149 13,423 8,253 18,115 10,879 782
JV Katco LLP 4,374 35,456 3,147 73,818 36,201 2,215
JV ZARECHNOYE JSC 1,702 8,451 2,838 9,054 1,908 441
JV SMCC LLP 4,082 11,937 5,743 24,692 11,544 1,480

Reserves and Geological Surveys

In accordance with the SRK Consulting (UK) Limited letter (dated 16 January 2023), the Ore reserves of all mining assets at 31 December 2022 (including annual depletion) totalled 588.8 thousand tU, (100% basis), with 312.9 thousand tU attributable to the Company (2021: 625.4 thousand tU on 100% basis, 332.6 thousand tU attributable). Total mineral resources (including ore reserves) were estimated at 761.6 thousand tU (100% basis), with 464.8 thousand tU attributable to the Company (2021: 784.4 thousand tU on 100% basis, 477.5 thousand tU attributable). In comparison to 2021, total mineral resources decreased by about 22.8 thousand tU mainly due to 2022 mining activities of 21.2 thousand tU on a 100% basis.

Reserves and resources, `000 tU

Liquidity and Capital Sources

Kazatomprom’s management aims to preserve financial stability in a constantly changing market environment. The Group’s financial management policy is intended to maintain a strong capital base to support existing operations and business development.

The Group’s liquidity requirements primarily relate to funding working capital, capital expenditures, service of debt, and payment of dividends. The Group has historically relied primarily on cash flow from operating activities to fund its working capital and long-term capital requirements, and it expects to continue to do so, although it maintains the option to use external financial resources when required. It is expected that there will be no significant change in the sources of the Group’s liquidity in the foreseeable future. If required, the Company will consider entering into project financing arrangements to fund certain investment projects.

Cash and available source of financing

The Group manages its liquidity requirements to ensure the continued availability of cash sufficient to meet its obligations on time, avoid unacceptable losses, and settle its financial obligations without jeopardizing its reputation.

Cash and available source of financing, KZT million

Indicator 2021 2022 Change
Cash and cash equivalents 161,190 169,536 5%
Term deposit 43,220 930 (98%)
Total cash 204,410 170,466 (17%)
Undrawn borrowing facilities 177,902 84,665 (52%)

Total cash at 31 December 2022 comprised KZT 170,466 million, compared to KZT 204,410 million at 31 December 2021, due to explanations that are presented below in the Section 2.5.4. Cash Flows.

Undrawn borrowing facilities are the revolving corporate credit lines available to the Group and are considered as an additional short-term liquidity source to cover temporary cash deficit related to uneven receipts of trade receivables.

As of December 31, 2022, the Group's fully available revolving credit lines comprised a total of USD 235 million, out of which USD 183 million were available for use (as of 31 December 2021 available credit lines totalled USD 412 million). The decrease is primarily related to the closure of unused credit lines.

In October 2022, the Company's Board of Directors approved four issues of unsecured commercial bonds totalling USD 200 million on the Kazakhstan Stock Exchange JSC (KASE). The interest rate (coupon) is fixed for each bond issue and determined as the Secured Overnight Financing Rate (SOFR) published on the official website of Federal Reserve Bank of New York five business days prior to the date of the first auction.

Subsequently, in December 2022 the Company placed the first out of four issues of commercial bonds with nominal value of USD 50 million, interest rate (coupon) of 4.32% and maturity of 30 calendar days. The bonds were redeemed on 23 January 2023 with a payment in the amount USD 50.18 million, including a coupon amount of USD 0.18 million. Yield to maturity of the bonds comprised 4.6%.

Dividends received and paid

The Company is the parent for the Group, and in addition to revenue from its business operations, it receives dividends from JVs and associates, and from other investments. In 2022 and 2021, the Group received dividends of KZT 45,346 million and KZT 17,108 million, respectively, from its JVs and associates, and from other investments. The increase in 2022 is mainly due to a growth in the operating results of joint ventures and associates, and other investments. The Company balances dividend maximisation and sustainable development goals at subsidiaries, JVs and associates. Dividends received by the Company from investees domiciled in the Republic of Kazakhstan are exempt from dividend tax.

In the first half of 2022, the Company accrued a dividend of KZT 227,388 million which was paid to its shareholders in July 2022 based on the results of 2021 operations. This dividend represented an increase of 52% compared to 2021, when dividends of KZT 150,082 million were paid to shareholders in July 2021 based on 2020 financial results. The increase was mainly due to higher operating cash flow and the inclusion of proceeds from the sale of the Group’s 49% interest in ORTALYK LLP in the Free Cash Flow (FCF) calculation methodology in accordance with the Company’s dividend policy.

Working capital

Working capital of the Group, KZT million

Indicator 2021 2022 Change
Inventory 275,856 392,621 42%
Receivables 220,138 270,921 23%
Recoverable VAT 46,447 62,389 34%
Other financial assets44 9,029 19,748 119%
Other non-financial assets 7,137 19,274 170%
CIT prepayment 7,526 11,451 52%
Payables (66,014) (98,809) 50%
Employee remuneration liabilities (215) (325) 51%
Income tax liabilities (5,096) (4,221) (17%)
Other taxes and compulsory payments liabilities (17,973) (24,688) 37%
Other current liabilities (57,338) (83,883) 46%
Net working capital 419,497 564,478 35%

An increase in receivables was mainly due to the growth of revenues in 2022.

As per 2.1.1 Geopolitical the Company has been managing the risk of financial sanctions by implementing mitigation measures to ensure mutual settlements do not face restrictions. However, other current financial assets as of 31 December 2022 includes short-term restricted cash payments of USD 32.3 million, adjusted for foreign exchange gains as of 31 December 2022, amounting to KZT 14,956 million, made by the Group in March 2022 to a uranium enrichment service provider whose Russian bank was subsequently included in the list of legal entities that fell under the sanctions of the Office of Foreign Assets Control of the US Department of the Treasury (OFAC). Later OFAC issued a license to return blocked funds. The correspondent bank, which initially erroneously blocked the payment funds, returned the amount to the Group (including interest) in January 2023.

Other current liabilities as of 31 December 2022 include:

On 19 May 2022, the Group obtained a uranium loan totalling USD 113.5 million from ANU Energy that was concluded under the Framework Agreement between the Group and Genchi Global Limited. On 20 December 2022, the Group returned the inventory, the fair value of which amounted to KZT 53,802 million on the date of return.

The Group’s net working capital remained positive during all periods under review.

Group inventories, KZT million

Indicator 2021 2022 Change
Finished goods and goods for resale 223,750 309,950 39%
Including uranium products 222,195 308,168 39%
Work-in-process 30,409 40,899 34%
Raw materials 14,879 19,633 32%
Materials in processing 3,091 15,198 >100%
Spare parts 789 989 25%
Fuel 479 1,488 >100%
Other materials 5,709 7,486 31%
Provision for obsolescence and write-down to net realizable value (3,250) (3,022) (7%)
Total inventories 275,856 392,621 42%

The Group constantly monitors the uranium market and may pursue a strategy of increasing its inventories in certain market conditions.

The Group’s largest inventory item is finished goods and goods for resale, which primarily consists of U3O8. The Group’s work-inprocess and raw materials increased by 34% and 32% respectively.

An increase in the inventory balance was mainly due to an increase in spot price of U3O8 and weakening of KZT against USD during 2022, which increased the cost of purchased uranium from JVs, associates and third parties and an increase in inventory volume.

Consistent with the Company’s value strategy, Kazatomprom’s inventory levels vary based upon timing of customer requirements and the resulting differences in the timing of deliveries, and mining and sales volumes, in alignment with changing market conditions.

Cash Flows

The following cash flow discussion is based on, and should be read in conjunction with the Financial Statements and related notes.

Consolidated cash flows of the Group, KZT million

Indicator 2021 2022
Cash flows from operating activities45 118,729 283,859
Cash flows from/(used in) investing activities (71,241) (10,893)
Cash flows (used in) financing activities (1,843) (268,877)
Net increase/(decrease) in cash and cash equivalents 45,645 4,089

Cash Flows from Operating Activities

Operating cash flows in 2022 totalled KZT 283,859 million, a significant increase compared to 2021 mainly due to:

Cash Flows from Investing Activities

Net cash outflows from investing activities were KZT 10,893 million in 2022 compared to outflows KZT 71,241 million in 2021.

Changes in investing cash flows in 2022 were due to:

As part of normal investment activities, the Group also invests in term deposits, government and corporate bonds held to maturity, a change in net movement of which in sum comprises KZT 72,983 million in 2022 compared to 2021.

Cash Flows from financing activities

Net cash outflows from financing activities were KZT 268,877 million in 2022 and KZT 1,843 million in 2021. The increase in outflow was primarily due to a growth of dividends paid to shareholders of KZT 77,306 million,

as well as an increase in dividends paid to non-controlling interest of KZT 59,083 million. Also, in 2021 Group received cash from the sale of a noncontrolling 49% interest in ORTALYK LLP of KZT 185,858 million (a one-time effect occurred in July 2021). Cash outflows were partially covered by a change in the net movement of loans and borrowings balances in 2022 of KZT 54,933 million compared to 2021.

Indebtedness

The total debt and guarantees of the Group as of 31 December 2022 were KZT 157,381 million (KZT 110,462 million in 2021).

Total debt, KZT million

Indicator 2021 2022 Change
Bank loans - 23,953 >100%
Non-bank loans 89,308 114,491 28%
Off-balance sheet guarantees 21,154 18,937 (10%)
Total debt and guarantees 110,462 157,381 42%

The following table summarises the Group’s debt for the years ended 31 December 2022 and 2021.

Total Group’s indebtedness, KZT million

Indicator 2021 2022 Change
Non-current 77,850 83,441 7%
Bank loans - -
Non-bank loans, including: 77,850 83,441
Bonds issued 77,700 83,300
Lease liabilities 150 141
Current 11,458 55,003 >100%
Bank loans - 23,953
Non-bank loans, including: 11,458 31,050
Promissory note issued 10,514 7,002
Lease liabilities 141 32
Bonds issued 803 24,016
Total debt 89,308 138,444 55%

As of 31 December 2022, the Group has no long-term bank loans.

The amount of current bank loans was KZT 23,953 million and mainly included debt repayable for up to 12 months under short-term revolving credit lines. As of December 31, 2022, the total limit on the Group's revolving credit lines was USD 235 million, of which USD 52 million were borrowed (USD 183 million were available for use).The amount of non-bank loans as of 31 December 2022 comprised KZT 114,491 million and includes:

Guarantees represent off-balance sheet irrevocable obligations of the Group to effect payment in the event that another cannot meet its obligations.

Other liabilities of the Group are finance leases, other debt and leases.

According to its loan and guarantee agreements, the Group is required to comply with certain financial covenants based upon the Group's consolidated information, such as debt to equity ratio, and debt to EBITDA ratio. The Group complied with all applicable covenants during the year and as of 31 December 2022.

Weighted average interest rate of the Group, %

Indicator 2021 2022
Weighted average interest rate, including: 3.37 3.62
Fixed interest rate 3.52 3.62
Floating interest rate 0.97 -

As of 31 December 2022, the weighted average interest rate was 3.62%, which was higher compared to the prior year. The Group's weighted average interest rate on loans and borrowings in 2022 was mainly influenced by the Group's long-term fixed-interest rate liabilities (bonds with a coupon of 4% per annum).

As of the end of 2022, the Group's debt is fully comprised of fixed-interest rate loans.

The Company has credit ratings assigned and affirmed by international agencies:

Net debt / Adjusted EBITDA

The following table summarises the key ratios used by the Company’s management to measure financial stability in 2022 and 2021. Management targets a net debt to adjusted EBITDA of less than 1.0.

Net debt/adjusted EBITDA ratio, KZT million

Indicator 2021 2022 Change
Total debt (excluding guarantees) 89,308 138,444 55%
Total cash balances (204,410) (170,466) (17%)
Net debt (115,102) (32,022) (72%)
Adjusted EBITDA46 350,294 630,898 80%
Net debt / Adjusted EBITDA (coefficient) (0.33) (0.05) (85%)

Guidance for 2023

Guidance for 2023

Indicator Actual for 2022 Guidance for 2023
460.85 KZT/1USD 470 KZT/1USD
Production volume U3O8, (tU) (100% basis)47,48 21,227 20,500 – 21,500
Production volume U3O8, (tU) (attributable basis)49 11,373 10,600 – 11,200
Group sales volume, (tU) (consolidated)50 16,358 15,400 – 15,900
Incl. KAP sales volume (included in Group sales volume), (tU)51 13,572 12,100 – 12,600
Revenue – consolidated, (KZT billions)52 1,001 1,080 – 1,090
Revenue from Group U3O8 sales, (KZT billions) 851 820 – 840
C1 cash cost (attributable basis) (USD/lb)53 $10.25 $12.00 – $13.50
All-in sustaining cash cost (attributable C1 + capital cost) (USD/lb)54 $16.19 $20.00 – $21.50
Total capital expenditures (KZT billions) (100% basis)55 146 240 – 250

Kazatomprom’s production expectations for 2023 remain consistent with its market- centric strategy and the intention to flex down planned production volumes by 20% for 2018 through 2023 (versus planned production levels under Subsoil Use Agreements). Production volume in 2023 is expected to be between 20,500 tU and 21,500 tU on a 100% basis and between 10,900 tU to 11,500 tU on an attributable basis.

The decrease in production guidance for 2023 in comparison to 2022 actuals is mainly due to continued delays and/or limited access to certain key materials, including sulphuric acid, and equipment impacting the wellfield commissioning schedule in 2022.

Sales volume guidance for 2023 is aligned with the Company’s market-centric strategy as well. The Group expects to sell between 15,400 tU and 15,900 tU, which includes KAP sales of between 12,100 tU and 12,600 tU. The decrease in U3O8 sales volume guidance for 2023 in comparison to 2022 both at the Group and KAP levels is due to the expected lower production and increased sales in forms other than U3O8, including but not limited to fuel pellets produced from KAP’s U3O8.

Revenue, C1 cash cost (attributable basis) and All-in Sustaining cash cost (attributable C1 + capital cost) may vary from the guidance provided if the KZT to USD exchange rate fluctuates significantly during 2023. Ranges for C1 cash cost (attributable basis) and All-in Sustaining cash cost (attributable C1 + capital cost) remained flat to reflect the uncertainty in the current geopolitical situation and widening offsetting effects of current KZT devaluation and potential inflationary impacts (see Section 2.1.1 Geopolitical development). Guidance will be updated if the recent fluctuations and geopolitical uncertainties persist throughout 2023.

Wellfield development, procurement and supply chain issues, including inflationary pressure on production materials and reagents, are expected to continue throughout 2023, impacting the Company’s financial metrics and giving rise to an expectation that C1 cash cost and All-in Sustaining cash cost will be higher in 2023 than in 2022. Changes to the tax code of the Republic of Kazakhstan on Mineral Extraction Tax, which came into effect in 2023, will have an additional impact on the Company’s financial performance.

Total capital expenditures on 100% basis guidance for 2023 increased significantly in comparison to 2022 results to cover the shift in wellfield development activities,

increase in purchase prices for materials, supplies, equipment and cost of drilling, as well as growth in the well construction and mine development costs of JV Budenovskoye LLP and JV Katco LLP (South Tortkuduk) for a total amount of approximately KZT 70 billion.

The Company continues to target an ongoing inventory level of approximately six to seven months of annual attributable production The Company may purchase uranium from the spot market while continuing to monitor market conditions for opportunities to optimise its inventory.

Uranium sales price sensitivity analysis

The table below indicates how the Group’s U3O8 annual average sales price may respond to changes in spot prices (shown in the left column), for a given year (shown across the top row). At present, the table clearly indicates that the Group’s U3O8 average sales prices are closely correlated with the uranium spot market price.

This sensitivity analysis should be used only as a reference, and actual uranium market spot prices may result in different U3O8 annual average sales prices than those shown in the table. The table is based upon several key assumptions, including estimates of future business opportunities, which may change and are subject to risks and uncertainties outside the Group’s control.

Values are rounded to the nearest dollar. The sensitivity analysis above is based on the following key assumptions:

Correlation between the spot price and the U3O8 average sales price

Average Annual Spot Price (USD) 2023E 2024E 2025E 2026E 2027E
20 33 26 27 25 26
30 37 33 34 33 33
40 42 40 41 41 41
50 47 48 48 49 49
60 52 56 56 58 58
70 57 63 63 66 66