National Atomic Company Kazatomprom JSC (KZAP) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to Kazatomprom's 2022 Analyst Day. My name is Cory Kos. I'm the company's international adviser to Investor Relations, and I'll be jointly presenting alongside Botagoz Muldagaliyeva, our Director of IR. So running today's event, as you can see from Astana, Kazakhstan, you heard me right, it is Astana, no longer Nur-Sultan, Kazakhstan, the Kazatomprom office has not been moved. We're in the same place we always were, but the city has been renamed back to what it was. And in reality, it's not too much of a change for most folks here because Astana and Kazakh does mean the capital. So it's been -- the capital has been renamed back to the capital. It's a beautiful city that you see behind us, and welcome to everybody that was able to come here in person. So to introduce today's host from the management team. First of all, we have our formal introduction of our new CEO, Mr. Yerzhan Mukanov. He's been in the role for about a month now. We have our Chief Commercial Officer, Mr. Askar Batyrbayev; and we have our Chief Financial Officer, Ms. Kamila Syzdykova. From our Board today, we have our Board Chairman, Mr. Neil Longfellow, as well as the group here we also have our independent Board members, Mr. Russell Banham and Mr. Marc Kasher. The usual warning that I have to give is that please note that this will include some forward-looking statements. Statements are including all matters that are not historical facts by their nature, they involve risk and uncertainty, and they are not guarantees of future performance. The company does not make any representation, warranty or prediction that the results of such forward-looking statements will be achieved. So this event is aimed at the investment community, of course, and that FLI warning, I think, is particularly relevant for today's discussion because we have intentionally called this an Analyst Day because of the somewhat modeling component we will have involved. Just to address some of the confusion, some of the specific questions that we've heard over the past few years, and that piece of it will use some disclosed CPR information, which we will highlight. In terms of long-term modeling and interpretation of a specific context of the question that we're covering is important because you have to take everything we see in the context of our overall value-focused strategy. And aside from the data that we -- the information we disclose on guidance for the current year, we don't disclose specific guidance beyond that, aside from the production strategy for '23 and '24 as you've seen. So just note that there will be information on the -- presented to you and discussed today that is from the CPR, which is not considered part of the guidance, I guess. So the plan this afternoon is to have the management team take us through a series of presentations, including the consolidation workshop at the end, and we'll conclude with a Q&A with our team today. So before we begin, in recognition of Kazatomprom's 25th anniversary, which was this past July, I give you 25 facts about Kazatomprom, a short video we have. [Presentation]

So as you can see, the company has come a very long way since producing about 800 tonnes, which is about 2 million pounds back when it was established in 1997. So at this point, to formally kick things off, although the entire event is intended to be somewhat informal. We have Mr. Neil Longfellow. I'll pass to him as Kazatomprom's Board Chair for his remarks.

Thank you, Cory. Thank you very much. That's a great video, isn't it? 25 facts, superb performance for Kazatomprom and very proud to be part of that business. It's a great business and a great place to be. So thank you, everybody, for coming today and online. It's great that we manage to be here in person, particularly the independent directors, as Cory's introduced Marc and Russell, and we're going to have the opportunity to discuss anything that you wish, informally and formally. And these guys have got great brains and have lots of intelligence to answer the questions, hopefully, that you'll bring to us. So it'll be -- I'm really looking forward to the day. I really appreciate your time. So I think starting back from that video, you can see that we've celebrated 25 years anniversary in past July. And also which is critically important marked in 4 years as a public company on November 14. And that launch at the LSE, I was there, it was absolutely a great time and opportunity for Kazatomprom. And without any doubt in the last 4 years, it's clear that the Board and the management team, we've remained dedicated that transparency, building credibility, keeping an open dialogue with the stakeholders and all the team worked really hard doing that. And most importantly following through the strategy at the time that we laid out of the IPO. And that's critical to our success. We review that value focused strategy on a frequent basis, particularly amid the industry developments over the past couple of years, volatility that we've witnessed over the last several months. It's vitally important for us as an organization that we focus on that. And we also monitor on a regular basis any growth opportunities in other segments of the fuel cycle. And just as a side issue for those who don't know me, I've worked in every part of the fuel cycle from mining now, but all the way through operating a nuclear facility to reprocess and decommission it. So it's great to be in the front end. And within those growth opportunities, an example is in the conversion market, pricing has reached historic highs, and it's something that we need to keep a close eye on. So it's a key part of the fuel cycle. And without it, we wouldn't operate this scale of nuclear reactors across the world, which we have the biggest set of uranium into. So without any doubt, I believe we can confidently state that our current mining focus strategy remains just as appropriate and valid today as when it was established 4 years ago. It's at the center of the 5 pillars supporting that strategy. We've signaled a focus on our core business of uranium mining. Today, that focus remains totally unchanged, absolutely critical in terms of success. And despite recent economic improvements in supply-demand developments across each component of the nuclear fuel cycle, there's no doubt in mind and the Board and the company's mind, the greatest value continues to be found in Kazakhstan's low cost, in situ recovery of uranium mines. Our position as a national operator with priority access to the country's uranium deposits continues to be a key competitive advantage, which is expected to continue driving substantial value for our shareholders. And I think we've proven and demonstrated that in terms of the value of the dividends that we've paid. Our focus on the business of uranium mining, we've actually laid out our plans with the strategy to optimize value from those assets by allowing market conditions in our sales portfolio to guide our production plans, which we believe is the right way to do this. We began by implementing a 3-year plan to maintain and decrease annual production level, reducing by maximum of 20% allowed under the subsoil use contracts with the Kazakh government. That decrease led a major role in bringing global uranium supplies back into balance, with demand gradually pushing into deficit to work through the inventories and other supply that built up in the previous decade. Again, critical to success in our mind. And our strategy has been wholly focused on that. While some parties may have initially questioned our commitment to that strategy and the market conditions changed, we are proven that we're a company that does what it says it will do. And as you know, we delivered on that plan but subsequently extended that minus 20 production strategy to '21, '22, '23. The Board approved that. And in '24, we're also pleased to announce that we've approved a shift in this production strategy to a decrease of 10% against the subsoil use agreements. And we again believe that that's driven for the right reasons and the right market position. And the key factor that we assessed in making that decision was the market condition and the company's success in building a strong sales portfolio. And as it is, the sales book that is driving our production and not the other way around, which I think is really important. The inventories are important, we need to maintain that, but the sales book drives our production. We are adjusting production according to our pipeline of negotiations and the value-added mid- and long-term contracts, we successfully signed utilities around the world. Askar just flown back in from America again with more success in his pocket. So that is to say that additional production has a place in the market. And we're not undertaking on the hedged approach of hoping sales will come to us if we produce more. So the overall value strategy to be effective, we needed to expand and build new customer relationships, requiring a concerted effort to enhance our marketing and sales activities. And you can see from the video how many customers we've achieved over the last 4 years. So the strength of our marketing team and their interaction with the market has matured substantially with the strong leadership of Askar, through the team's effort to engage broadly with the nuclear utilities from around the world, the company is delivering on our target to long-term value growth. In fact, the shift of production volumes up to minus 10% in '24 is only possible in fact to those contracting successes. While our prediction of sales have driven Kazatomprom's promise, economic success is little doubt, none of this will be possible without the efficient business processes and a corporate culture defined by robust safety is priority number one; environmental, social and government programs that make international standards and expectations, critically important to us. With the new global attention on nuclear energy, it's supply chain, it's new categories of ESG and sustainability-focused stakeholders has set high expectation for nonfinancial metrics. ESG has been well integrated into our business for a long time. with strong programs and high standards but reinforce ESG alignment and efficiency. And since the time of IPO, we've continued to do more and we'll continue to keep doing it. Environmentally, our mines employ the best-in-class in situ recovery mining method, which is the most environmentally friendly uranium production method that minimizes impact on the environment, biodiversity, water resources on public health. The source with all of our operations locating in Kazakhstan. The country and the Kazakh people have continued to benefit from the significant resource base that underpins our place as the largest low-cost producer in the world. And as Chair of the Board, I have prioritized along with the other independent directors, strong governance and alignment with international best practices in our strategic discussions, policies and decision making. And in terms of specific recent progress in 2022, Kazatomprom became a full member of the United Nations Global Compact, the world's largest corporate sustainability initiative. And we're in process of completing the development of medium and long-term ESG goals with specific quantitative and quality of targets. And the company continues to work on obtaining an independent ESG rating with a plan to have that rate in place in the very near future. Although 4 years, it's not really all that long in time, especially in the context of the nuclear industry, we are operating in where midterm can be nearly a decade. The company has indeed made a great deal of progress and come a very long way. And going forward, we expect to continue growing our business, to generate long-term value while maintaining a disciplined commercial approach, striving to meet and exceed expectations around HSE policies, sustainability and corporate governance. So at that point, I'd like to thank you all again for joining us today and look forward to our discussions. And I'll hand back to Cory. Thank you.

Thank you very much, Neil, and thank you to the other board members who are able to join us in person here today as well. So focusing on our agenda now we'll move into the corporate presentations. And we're going to start with Mr. Mukanov, who will then hand off to each speaker from thereon. So I myself, I'm just coming up on 20 years in exclusively the nuclear industry, spanning a career in exploration geology, corporate strategy, ERM, insurance, now Investor Relations. And as the IRO here at KAP, I was extremely pleased to see the appointment of Mr. Mukanov as our new CEO, as his background is similarly diverse across different roles in the sector. So just a quick background on Mr. Mukanov, he took the CEO position in mid-September, as you know. He did so after being our Chief Commercial Officer since March. Kazakh citizen, he graduated in 1999 with a Degree in Metallurgy, and completed related postgraduate studies in 2003. In '09, he graduated from Paris School of Mines, Majoring in Economic Assessment of Mining Projects. And in 2021, he completed an executive MBA. He worked in a number of academic and technical roles prior to joining the Kazatomprom group in 2006 as a process engineer at JV KATKO. From 2012 to 2014, he worked as a production development coordinator at Ariba Mines in Paris, and then returned to Kazakhstan, holding several senior positions at a few of our Kazatomprom operations, including JV KATKO, Kazatomprom-SaUran, Karatau and Semizbay-U. So I'll hand it over to you, Mr. Mukanov.

I prepared that introduction, Cory. Thank you. Good afternoon, ladies and gentlemen, I'm pleased to welcome you in Kazakhstan 2022 Analyst Day. A special thanks again to those despite the relatively short notice for this event and the ongoing global travel challenges, you made it here to visit us in person. Today marks the third time since our London and Astana IPO in 2018 that we have engaged with the investment community by hosting an event like this. In the fall of 2019, we hosted a Capital Market Day in London. In March of 2020, we did the same for local audience in the Astana Stock Exchange. We had intended to make it an annual event, but we all know what happened after March 2020. Our business, along with every business in every sector across the globe was suddenly facing the pandemic risk. Regardless of how robust the enterprise risk management program and how carefully plans were laid, very few companies could have anticipated the deep impact nor did anyone expect such an event to have lasted as long as it was. At Kazatomprom, our ERM system were activated and we quickly adapted to protect the health and safety of our employees, while at the same time, keeping our commitments to our customers and proving to be a reliable supplier. Despite the upset conditions and we -- and a modest impact on well field development and production, we also continue to deliver meaningful value for our investors and stakeholders. In both 2020 and 2021, we exceeded dividend expectations and maintained a strong valuation. More recently, in 2022, we have faced new challenges as a country, as a company and across the nuclear industry. In general, the tragic events in Kazakhstan drove speculations that Kazatomprom could fail to meet its obligations, which I can probably say was not the case. The company once again adapted and succeeded. Although those events had little impact on the company itself, it was an extremely difficult time for our people, their families, local communities and the nation as a whole. It shook global perception regarding social stability in Kazakhstan, and as a national company operating in the country, Kazatomprom agreed to focus on perceived ESG-related risks. On a positive note, we have seen some good changes in the country as a result. Certainly afterwards in late February, the world saw the Russian conflict began in Ukraine where even now 244 days later -- 45 days later, we are still witnessing senseless and has breaking pain and suffering on a daily basis. It's a conflict has driven original attention to unprecedented high and once again shifted regional and industry risk profiles and increased economic uncertainty over the world. As was the case when we were managing through the pandemic, the supply chain shocks that follow it and the January events, Kazatomprom finds itself having to remind stakeholders that we will do that what is required to meet expectations and commitments. We have put a significant amount of time and effort in establishing a strong reputation for transparency and credibility. We believe that throughout these challenging developments and our precedent conditions, we have proven to our investors, customers and all stakeholders time and time again that we will deliver on the value strategies that Neil highlighted. Our governance system ensures our decisions, actions and disclosures are aligned with the high standard expected of any international public company. However, we also were aware that geopolitics have had a significant impact on stakeholders' perception of Kazakhstan, and that translates to consult about Kazatomprom's operating environment. I cannot sit here today and claim those risks and concerns are completely invalid. We have all seen how difficult social conditions are unrest can develop in even the most stable nations. Every stakeholder will have a different perspective and the risk tolerance based on their understanding and experience. Therefore, from a communication perspective, our job is to repetitively share our strong belief, that the balance of risk are lower, that it has shifted significantly in favor of Kazatomprom. The company has an exceptional opportunity to fuel nuclear power revival as a critical contributor to the global clean energy revolution, which is well underway. Neil provided an excellent summary of our production and sales strategy with a focus on health and safety. Under the value strategy, no company in the sector stands to benefit more than improving sentiment and higher uranium prices than Kazatomprom. And with a well-established and transparent dividend policy, our shareholders can expect to benefit from that improvement as well. Our commitment to delivering on that strategy should be clear and that drives Kazatomprom's value proposition in the investment thesis. Similar to the strategies, the investment thesis has not changed significantly since the IPO. We are the world's largest producer with over 40% of the world's primarily mined uranium coming from our mines. From our share of joint ventures and our 100% owned assets, we provide about 25% of the world's uranium, and we are delivering [indiscernible] from our low-cost operations that all use a flexible ESL method, which can quickly respond to changes in market conditions. As a national operator, we have priority access to Kazakhstan's uranium resource and lead resources, which is the largest reserve base in the world that can be extracted by ASR method. We continue to successfully expand our portfolio with the new existing customers from all over the world, and we remain well positioned for continued growth with room to expand production in line with sales. Our strong financial position is expected to become even stronger, based on the positive sentiment in the nuclear and uranium markets. And as I said, we are committed to sustainable returns. Our HEC record is among the best in the mining sector, and we continue to strengthen our ESG-related programs and policies. And finally, we take pride in the high governance standards that have guided our decisions and actions over the past 4 years. We continue to adjust and improve those standards as our operating environment evolves. We firmly believe the investors that see value in the uranium sector and believe in the very positive prospects for the future of the nuclear industry recognize that taken all together, these elements create opportunities for Kazatomprom to capture significant value, and this and those opportunities outweighed even today's increased regional risks. So thank you again for your audience and for your attention. I would like to invite our Chief Commercial Officer, Askar, who is also now in charge of Strategy and ESG. Mr. Askar, to take the floor, please.

Yes. Thank you, Mr. Mukanov for your introduction and for your presentation. So before going into the discussion over the market and over the transportation issues, which I think now is of the most interest for everyone, I'll just briefly show a couple of slides on my new role about strategy in ESG, which is the part of the strategy and sustainable development of the company. So as was noted by all the previous speakers, Kazatomprom has joined the UN Global Impact in March 2022. We highlighted or identified 6 priority directions which we are going to focus. So you can see all of them on the slides and kind of being the part of that UN Global is a big event for Kazatomprom, and we will keep that high part that we've committed. So -- on the next slide, we will see the key figures of our ESG. We have a strong ESG performance. We have been highlighting this for 10 years after we came on IPO. We've been disclosing most of that factors there. But it was in the different sectors of our annual financial report or integrated report. But this year, we would be doing our best to acquire the first ESG rating. We already have a contract and contact with the company, which we are working with. So these figures will be the foundation for that -- for applying that is grating. So -- on the next slide, that's the Q3 update, which we are showing in our trading update. I mean we would most probably make a better and bigger report whenever we acquire an ESG rating, and then we will show the qualitative metrics, what we are having now and where are we going throughout the global plan, which Kazakhstan will also have in terms of decarbonization by [indiscernible] as the government and as the company will definitely satisfy some of those parameters that the government would be taking as well. So with this, I mean, we will definitely go for the market now. Again, as was indicated many times, we are committed to the market discipline, what it has given for ourselves. We made an approach and made the first announcements back in 2017 that we will be decreasing. It wasn't -- the reaction of the market was when we made our first mentioning about decrease of the uranium, I mean, the price didn't move single digits at that time. So no one has actually believed that we would be doing this. After we made an IPO and made a 3-year plan, we've made a decrease within the subsidiaries contracts at the maximum lower level of minus 20%. And we showed the commitment within 3 years and extended it for the next 3 years, or '21, '22 and '23, as Neil noted. And again, we've added 2024, but already at minus 10%. So all these efforts in total, I mean, we removed like 44,000 tonnes of the uranium. We removed them, we will be removing by the end of 2024. And I mean it's equivalent to like 70% of the global demand by nuclear power plants annual demand, which is a huge amount. I mean, no other companies in the world did the same thing. And we -- as responsible producers had to do this step to make sure that we will have a healthy market in the future that will benefit for all the participants of the market, especially for utilities and for producers as well. So kind of a little bit showing up for the decision of 2024 for minus 10%. Again, as Neil and as Mr. Mukanov noted, we did it just for the reasons that we were talking about with all the investors for so many times. We had a good impact on our sales portfolio, which was the main trigger for us to increase the production, which is still decreased in comparison to subsoil use levels. So we're seeing good signals from the market in terms of supply and demand, but also we are seeing the interest from utilities, which is transferred in increased contract portfolio for our side. So we have shown that shift in the sentiment of utilities in our production plants for 2024. We hope that maybe we will have a better impact in 2025, but we'll see. So we have a good belief of what we were telling to the market how we were acting. Actually, we are showing that consistency in all our guidances and plans. So in terms of supply and demand, which you're seeing here, we've engaged UxC and also asked their permission to share the kind of the supply and demand outlook as long as we are not using our outlook, and we are not sharing it as the biggest producer, we are using a third-party data. All of you know, UxC, it's a credible well-known company, along with TradeTech as well. So what we're seeing and what we can tell now for sure is the oversupply period is over. That's done. We have some small shifts in terms of supply and demand and -- but generally, I mean, we can see that there is no oversupply in the market already. That's a good sign. We are moving along with the demand. And the gray area which you are seeing there is actually so-called secondary demand or unconventional demand as we're seeing. So it's coming as an interest from financials. So whenever in any market, we see an interest for financials, that means that the product is becoming hot and becoming interesting, not by those who use it, but by those who also see a very good potential of the growth of that market. So our internal view here is that secondary demand from financials is a little bit more kind of pessimistic from the UxC. What we hear and what we see on the financial part of the market is actually it has much more demand on the uranium than it's shown here and we had a lot of conversation during various conferences. And -- I mean WNA conference this year had, I think, the record number of financial institutes attending and requesting meetings and requesting kind of exposure to natural uranium. So I might guess that with their arrival to the market and kind of capitals market being back and they are being able to raise the capital there, I mean they could create much more demand and excitement over that midterm. So I don't think that it will be for the long term. But in the short and midterm, I'm pretty sure that they will have -- or they will create a great competition to utilities in terms of any available pounds on the spot market, which will also kind of most probably push utilities to consider a long-term supply kind of securities that they have to make in order to make sure that they will have an operation that cannot be interrupted for the future. So generally, that's all for the supply and demand here. As long as we've mentioned kind of secondary demand, One of the latest -- and we are receiving a lot of questions from all the stakeholders about the announced physical uranium fund in Kazakhstan. The ANU Energy fund has already been established. It's at AFC international -- Astana International Financial Center. The first stage has passed. They have attracted USD 74 million from the cornerstone investors. And now they are engaged with different discussions with other private and small investors considering a different type of attracting investors with the private ones and going for IPO as well. So what we would like to say, I mean, we are not controlling the fund. The fund is completely independent. We are just an investor, cornerstone investor. And we -- what we would like to show here is not that we would like to sell all the balanced material to them, but rather than we would like to establish a similar uranium fund in Kazakhstan, attracting investors to Kazakhstan and helping them to grow here, which makes sense as long as 40% of the global uranium is produced in Kazakhstan. So they have their own website. They have a good team. They are already responding to all the investors and engaging them. So what we can give as an update is that part, but we are not aware of where they are now, how much they attracted. So they have their own team. You can access them and discuss. I think they have an office in Nur-Sultan or in Astana here. We're also still managing these parts. So if you have any questions, we would be very happy to give their contacts, link for their website. You can go to them if you have an interest to be a part of their investment portfolio. We are more than happy to connect you to them. Another part that is not in the UxC's kind of model, also discussed potential future uranium trading hub that was announced by CNNC at one of the conferences in 2021. So they've notified that they will be building storage, a huge storage at the border of China and Kazakhstan. By 2026, that storage will grow to 23,000 tonnes. And actually, their idea is not just having a storage or an inventory buildup as they were always doing, but also to create a kind of trading opportunity for all the participants there. I mean, we all know that China is one of the biggest at the moment, but will become the biggest market in the future with the -- with their construction tempos that they have, with the nuclear power plants that they are building and they already got all the approvals. So they will become the biggest market. And that single point on the map that you are seeing there is actually having much more material passing through that point on the map than globally in the world, I guess. So it's just a comparison. So it's very interesting how they will be able to adopt the trading idea there. How it will work? I guess that they will need to change a lot of the laws and allowing the investors to come and hold physical uranium is still not very well known, but what we can also update is they have already completed the first stage, which is construction of the area for 3,000 tonnes. It's been done. And actually, the storage area is already full. So they've put their own material there. So now they are in the process of building or expanding the area for 13,000 tonnes, which is already huge. I mean it's 4x more than they already have there. And actually, by the end of 2023, they are considering to bring that idea of trading hub. And that might add an additional demand in terms of what we have seen on that model. So kind of competition for the free volumes, I guess, would be very, very tough and very interesting. So we are weighing with an excitement to see what this idea could be. In terms of nuclear fuel procurement, that's also well shared by UxC. I mean you can see that the kind of procurement of conversion and enrichment is much better than the procurement volumes of natural uranium. It makes sense, especially in the current geopolitical part when the consideration of the utilities to replace Russian capacities, they will definitely start from the conversion and enrichment, and then the turn will come to natural uranium. It's not a secret that natural uranium is available in the world. There is no shortage of that, but the issue is the price of recovery of this uranium. So whenever the issue of securing the volumes for conversion and enrichment, especially if the decision is taken to replace the Russian capacities is solved, I mean the high demand will come to the primary producers to secure the volumes to substitute or even to reach those volumes. So we're seeing that the actions from the utilities in terms of making a security of supply for future is already started, but they have a long way to go to make sure that they have these volumes especially after 2030. So the next decade would be tough for utilities if we don't start this conversation in the middle of this decade. I mean all producers have to make their investment program to make sure that we are well invested and well developing our resources, to make sure that they have the fuel that they will need for the next decade and to fulfill the commitments that they have already taken in terms of decarbonization and kind of all the plants by 2015 and 2016. So on the next slide, we would like just to show or give a very brief sales overview and see how we are trying to diversify our sales portfolio. It's not a secret that we have a well geographical position in terms of our neighbors -- kind of 2 big markets are actually our boundary neighbors, like China and Russia. And the dependence on Chinese deliveries is understandable somehow, but we wanted to, as we went to IPO and try to go for Western markets, we try to diversify our portfolio as much as possible. And you can see that kind of in American market, if you take only Kazatomprom, we were like 10% of our sales were in U.S. And by 2021 we've reached 23%, and we are trying to sign as much contracts as possible to make our portfolio well diversified, not depending on a single customer or a single country. So that work is still continued. We are not sitting in Kazakhstan, the whole marketing and sales team are meeting all the customers, and we would like to keep that portfolio as diversified as possible, especially in the current, kind of, geopolitical environment. So with -- with this, we would like to also show the price sensitivity table. What we would like to stress here is don't use it as a prediction or as a commitment. It's the current portfolio. So whenever any new long-term contract is signed, it changes this, so. That's how it looks now. And we have received some questions on the conference, on the calls with investors, with some of our stakeholders that there is a decoupling of average realized price and the market price. On the next slide, we will show how the TPL is working. But generally, at some point of time, there could be an increase in the -- a sharp increase in the market price. And some of the contracts could be already priced in the period before, which is causing that misunderstanding when actually it's like the price is going up, and why is your average realized price is not there. But if you look for financial results, not only Kazatomprom but chemical, you see the same situation. So it's the unique feature, I guess, of the market, which we are having here. So within the next slide, we've -- after we got all the questions from the investors, how the transfer pricing works as we were saying that we are having market-related pricing, they were saying, well we're not seeing it in your results, in your kind of sales. That's our transfer price legislation. So we have the market-related contracts, but the set of the contracts is a little bit different. So we have a short-term contract, which is using a market-related price at the time when you send an offer, and it's still market-related price. Some of the investors are calling it, I don't know, fixed price, but the price is fixed on the market basis at the time of sending an offer. And actually, the delivery might happen within 8 to 9 months after the price is fixed. So that might cause kind of different pricing, and it actually causes this difference between average realized price and market price whenever we can have some sharp increase at some certain period of time. This slide is available on our website. We are sharing it. If you have any questions, I myself or our marketing team can go into the details and explain how it works. On another slide, there is, I think, one of the top and hot topics after the February, so -- and after the January as well. So we were receiving a lot of questions about how we are going to secure or make sure that our customers will receive the product. We were not -- till this year, we were not disclosing that we have an alternative route just because, I mean -- we didn't need to disclose the normal commercial route via St. Petersburg, was working perfectly and is working now. Our last shipment through St. Petersburg was done in July and it successfully was delivered to one of the conversion facilities. However, from 2018, we're looking for an opportunity to see if there is any alternative. And considering the kind of the specific quality of our cargo, which is kind of Class 7 cargo. Not every country or every region would accept or allow to make that transportation. So there was a World Cup in Russia. For 3 months, we couldn't move our material to St. Petersburg because the venues had to close that areas and did not allow any Class 7 transportation. So it was applicable for ourselves, for all Russian producers and Uzbekistan. So these are the 3 countries that were hurt by this decision. So we started to look. There was already an established route from China to Europe, which was avoiding Russia. So it was Trans-Caspian international route. It was well established from 2015. It was accepting all general cargo, so we just extended that route for Class 7 cargos. We explained to all the countries on the transit route that we have all the measures in place. So we had a hard work in 2018. And by the end of 2018, we've managed to do the first shipment to Orano, to France. And actually, we've seen the transportation time through this route to Orano is actually much shorter than if you go through St. Pete. Since 2018, we've made at least one shipment a year, and we've made the deliveries to all possible destinations that we could. After February this year, we decided to disclose and show how it is done, where it is done. On WNA, we showed some photos of the delivery process, what ferries, what vessels we used, where it's stored in the port of the Black Sea. So this has been shared. So we would like to be as transparent as possible. But also as a plan for next year, we are not just sitting and hoping that this would be just the only route or only alternative route, but also we are in close discussions with China for several years already to make sure that we could be using their territory to be as another alternative to make shipments of our material. But also in terms of Georgia and Black Sea, we understand that there is much more potential on Mediterranean Sea. So -- and Turkey, sooner or later, will become the country that will be using nuclear power plant, so they will allow the nuclear goods transportation. So we would like to help them and maybe just set up some legislation -- legislative documents maybe a little bit earlier than it will be when they will have a first nuclear power plant. So we're in discussion with Turkey, maybe just to turn the route from Georgia to Turkey and go to Mersin Seaport, which has much better location in terms of access to all destinations we would like to send. And also, as we were saying on all last conferences, we are also considering the possibility to use air shipments. We have one successful air shipment in our history. I mean, with the current price improvement and with the current kind of sharp increase in the sea transportation fees that we're seeing across the world, I mean these prices at some point could be comparable. And we might consider using an air shipment if that's required, and that would also give additional alternative and variety to our company. And we have to remember that we also have the swap, location swaps, which is kind of normal or good practice in our industry. So it could be, let's say, delivered to China, with one of the customers giving the similar volumes at one of the Western converters, which is a normal thing and which we are using at least for the last 10 years. So in that sense, we are very well diversified and kind of feeling comfortable to make sure that we will be delivering the quantities to our customers. And for me, the last but not the least slide, is just kind of a short slide on our FA plant. So we are also well diversified within the front end of the nuclear fuel cycle. So we also have a fuel assembly plant, which already made the first delivery of the fuel assemblies to Chinese customer. We made a successful delivery to them. I think in our annual report, we will disclose much more information. But we're also keeping our feet in every part of the nuclear fuel cycle. In case it becomes hot and interesting and will have a long-term interest from other industry participants from the utilities. And if that interest will be -- we'll have some long-term commitments from them. We might consider going into other parts of the nuclear fuel cycle, as Neil said, especially kind of currently, we're seeing a spike in conversion. We have a conversion technology, we have a possibility to build a conversion plant. If that's translated into the great value, we might be coming to the board to discuss this issue. With this, I would like to pass the floor to Kamila.

Thank you, Askar. Hello, everyone, and first of all, I would like to thank you all for coming on our online and offline audience. It's really great that you shared your time with us. And I must say that for us, for the team, your interest is one of the biggest motivation and drivers behind our operational changes, so thank you very much. I think what I will start from is just really briefly what our businesses are about. It's our 14 mining entities that like it -- where we have 24 deposits in total, all of them are located in the Southern Kazakhstan, and all of them are producing uranium, natural uranium using ISR approach. So the basic idea and our Chairman and CEO noticed about the ISR approach. The idea is that we would inject lower solidified solutions on the ground, dissolve the uranium and pump the pregnant solution, up-process it and then re-solidify the solutions back and inject them back. So it's really close circulation process. And we have the studies proven that upon decommissioning the groundwater, they returned to its premining chemistry and it goes through it s natural process. So basically, today, we will walk you through some financial modeling in that hints that can be useful for you. So I just would like to start that part saying and reminding that Kazatomprom has 14 mining entities, each entity having its own approach to consolidation, like mainly the idea that we have subsidiaries, joint ventures, joint operations and associates. And you have seen the respective interest in each of the entity. There is a slight note that for Budenovskoye, maybe you don't see just a note, we will be starting full consolidation from 2024. On the dividend policy, since the company went public in 2018, we have developed a policy that would address the interest and balance carefully the interest of all the stakeholders. So basically, this is the main document for us and the main principle that guides our capital allocation decisions. And I must say that it's a very careful need balance in between current profitability and really free cash flow the company generates and our future growth needs and growth opportunities. So as Neil and Yerzhan point out, our strategies to maximize value and benefit from significantly raising uranium prices. So dividend policy is the core instrument that would allocate those free cash flows between company and its stakeholders. And here also on this slide, you can see very impressive picture of how dividends more than doubled in 3 years. So a company initially promised at the time of IPO to pay not less than $200 million, and we have exceeded it right away from 2018 paying KZT 227 billion for our 2021 results. Just today, we have announced our Q4 -- sorry, Q3 highlights, and I don't know if some of you had a chance to look at it. so basically, the idea that on a production level, we are almost at the same level as for the 9 months of the last year, doing more than 15,000 tonnes on a 100% basis. The small deviation is mostly because we are still experiencing issues related to the shortage of some of the key components such as sulfuric acid. And we also have a lower attributable production. And partly, it is due to the fact that the company has changed it's structure by selling Ortalyk, so attributable production would change as well. For the sales volumes on a group level, we have 58% more sales for this year than for the same period of the last year. And on headquarters levels, it's almost 80% higher. The main idea is that we work according to the customer request. So as the request change, the deliveries would change as well. On the realized price as Cory really did a great job explaining how our contracting strategies and pricing strategies work, so we had a higher 40% increase in our realized price. And we had 55% increase in the related spot price. So as you know, for the quarterly result, we mostly report on the physical numbers, not the financial indicators. So on this slide, I just would like to take this opportunity to remind one more time how strong financial Kazatomprom is and for 6 months, company reported a net cash position of almost USD 600 million. And well as a CFO personnel, and we have been discussing this with many of you that I admit that capital structure isn't really ideal in terms of the VAC company, like the -- I mean the internal rate of return. At the same time, we're very carefully balancing and reviewing the investment projects to make sure they're compelling enough and the returns they generate would satisfy all of our stakeholders. At the same time, I think I would take this opportunity to say that we are considering a couple of projects along the supply chain. So last week, our CEO has introduced the new sulfuric acid plant project to the Prime Minister of the Republic of Kazakhstan. So we are going to build a sulfuric acid plant in Turkestan that would allow us to secure supply of this key component that is required in our production process. We will be announcing on the -- like giving you more details on the required capital expenditures when we received the project design. So I just can say that the expected duration of the implementation of this project is 4 years from 2022 to 2026. We also have in mind one important project where we would modernize and add additional processing facilities to UMP, to the uranium processing plant. So basically, the idea is to increase capacity, but at the same time, change the technology so that we would minimize the liquid waste from the uranium production at our UMP plant. This is after the rest was announced, this is the second biggest project that will be implemented at UMP, and this is very important to develop from ESG perspective as well. So again, once we finalize the details in terms of the cost structure, we will announce it separately. And also you should know that every year along the line, respective share of the capital expenditures will be included in the annual guidance as usual. And reiterating 2022 guidance, as we are almost close to the year-end, again, we are reiterating our commitment to the value strategy. Mostly, our guidance for this year stays unchanged. We -- on C1 level, we expect to stay closer to the lowest part of the range. Yet, it might be just slightly within the range but closer to the lowest part of it. The only guidance we have been reviewed this time in the trading update we published today is the capital expenditures. We have revised them downwards by KZT 10 billion, and it is mostly related to the fact that, as I explained before, and as I mentioned before, we have an issue with -- related to the shortage of the sulfuric acid. And sulfuric acid is used in our acidification process. That is treated as capital expenditures. Those expenses are capitalized. And so that's why we have lower expenditures there. And there are also some delays in the modernization projects that we have. So basically, that leads to the slight revision of the capital expenditure guidance downwards. So I think with that, I would like to complete the introductory part related to Kazatomprom's financials, an overview of this. In the following presentation, we will be doing the analysis and give you some hints on the financial modeling. Before that, I would ask IR to start that part of our presentation. Thank you.

Thank you, Kamila. Good afternoon, everyone. As you know, my name is Botagoz. I'm the Director of IR here at Kazatomprom. Before we start the actual workshop, we'd like to give some background. So as you see on this slide, in 2021, we conducted a perception study. And I think some of you actually participated in it. And as you can see, we obviously can't disclose the full results of the perception, but we wanted to highlight some key areas that the investment community was focused on related to the importance of ESG, which Askar and our Board Chair have already addressed, and the clarity of our strategy and capital allocation. While geopolitical risk remains the most important concern, we, as a company, obviously, located where we are located, we cannot avoid it. But we have been focusing on communication, as Mr. Mukanov pointed out and working on other areas that we have the ability to address and improve. So since that perception study was conducted, as was noted by Mr. Longfellow, Kazatomprom has always focused on ESG, but we are constantly working on improving, formalizing and adequately disclosing our ESG data. So today, what we would like to introduce that now, ahead of receiving our first independent ESG rating, we have our ESG data book, which is launched on our website and is now available under the Sustainable Development section. And going forward, all the data was already in the integrated annual report for each year, and you can see where the annual reports are. But now for the convenience of the investor community, now all the data for the -- starting from the IPO period is available on our website, and the Excel data book of ESG data will be -- downloadable Excel file will be also accessible soon, probably even by the beginning of the next week. Also in March, we published our first IR data book with all key financial and operational metrics since IPO to make the modeling easier. I think it's actually available on our website since March, but for some reason, not everyone saw it, and we kept receiving the question where to pull out the data. So here, you can see where the actual file is, and it is updated regularly. Every quarter we try to update it based on our financial results. And also, you can see the CPR report where you can find it. And in the CPR report is basically the key information on our production and resource, which is very vital for modeling. Just so you note, when you're looking at the production profile, please note that the data is not intended as guidance, it is just for convenience of the investor community. And it shows the summary of the subsoil use production data taken from 2021 CPR report and is subject to change based on the actual plans of the company. It reflects the approved decision on production in '22 and '23 only. So the 2024 level, which is shown in the data book, is still at 100% level. So as you know, the decision has been only made, so we have to take it into account. Beyond that, the information just shows 100% subsoil use contract values as per the CPR reports of 2021 and 2018, and the investment community is welcome to make their own assumptions on how potentially the company might decide in terms of its production strategy. With that, I will now pass back to Kamila to take you through a very detailed questions so that you understand. We would like to remind you that -- and would like to stress that of the information provided in this section of the presentation should be considered -- should not be considered as a company guidance. We're not guiding you on any of the numbers. We're just showing you the trends and how to understand the information that is provided by Kazatomprom. And also just the way how we structured the presentation, it is based on the most frequently asked questions, which we realize are not really clear to our investors and analysts. Kamila?

Yes. Thank you, Bota. Now like turning to the technical fancy part. So I hope it's going to be interesting for you. Just a reminder, the basis of preparation of our financial statements, they are IFRS based. I'll just explain how each entity is consolidated under what rule into our financial statement. Our functional currency is tenge. In the OFR, we provide information also in U.S. dollars for your convenience. We have 4 general segments and Uranium One is the main segment that generates revenue. It accounts for less than 90% of the total company's revenues. And today, in our modeling section, we will mostly be concentrated on how to approach the Uranium segment. So as just Botagoz mentioned, we have pulled together in our IR data book the production profile of the company from CPR for your convenience. And here on this slide, it's an illustration of how much company reserves. We have 625,000 tonnes of the uranium reserves, and they all are distributed among existing mining companies. We also have the resources amounted to 784,000 tons of uranium. And the difference is made up from the greenfield projects that are not online yet, and then they are not included within the current operational profiles. So this information can be obviously used for the modeling purposes. Whenever you do the analysis on the company basis, then you have the information to pull in terms of the production volumes. And as just Bota said, it is CPR data from 2025. It assumes we go to subsoil use level. But if it changes, we provide information on a timely basis. So question number one, if demand increases and KAP's contractual commitments increase, how much of the production can be added? This is the question we received probably the most often. So in this slide, we tried to pull together what the upside potential is. So first, as Askar mentioned in his part, totally from the period from 2018 to 2024 inclusive, we will be taking off the global uranium supply, 44,000 tonnes of the uranium. At the same time, the previous slide, we had the contractual volumes. And they would end until year 2057, roughly. On this slide, we are showing that potentially the existing legal allowance of 20% could add up more, but would lead to early depletion of the mine. So we would expect that if that decision is taken that depletion would occur somewhere around to 2050. And this is how we can be addressing the need if it's required. So well, obviously, we should take into account current operational issues. Like since pandemic, we have had more issues related to operational constraints, but yet provided company has been successfully able to overcome them. This is how much theoretical it could be added up to the supply from Kazatomprom. At the same time, we are demonstrating this difference. Remember I told you in between reserves and resources, there's basically 3 greenfield projects, the East-Zhalpak, Blocks 2 and 3 of JV Inkai, from Block 2 and 3 Kazatomprom already doing exploration. For East-Zhalpak, we have a firm commitment and plan to apply for the exploration license there. So in total, it would make up of additional 160,000 tons of the reserves that could be added when and if necessary. But this is really far along the line. This is like theoretically, we'll just keep up the production at the time when the old mine production depletes. Question number two, and this is probably the most complicated one, is how to model and how to estimate your cost of sales. And I admit, this is complication -- this complication, and it is mostly due to disclosure restrictions we have. We are not disclosing the structure of our portfolio. We're not disclosing the sources that go in. Conceptually, I would like to state one more time, as we've been explaining post IPO, that there are 3 main sources of the uranium in our sales plan. So this is the uranium that comes from subsidiaries and joint operations. And this uranium comes at all-in sustaining costs. Like, this is at what price we received it. This is the uranium that we purchased from our joint ventures and associates. So we would usually purchase according to our equity stakes and at a spotless applicable discount. And there is a short fraction, our purchases from the market. They can be assumed at spot. We are not disclosing and we're not giving guidances on how much company will be purchasing from the market. Just theoretically, I mean, looking backwards from the historical information we provide, you can estimate how much we have purchased in the past based on the simple inventory roll forward formula like beginning, plus purchases from joint ventures and subsidiaries that we report, less the sales of KAP and the THK that we also report, and then the ending inventory and the balance would be purchases from the market. But again, the limitation on this approach and formula is that it can only be applied retrospectively to the historical, and it has no reference to the future. So if you need to model the cost of sales, it is better for you just to use assumption as to what this blend could be. Just from the information we have, the highest portion would be from our own uranium and the rest is split in between uranium purchased from joint ventures and associates and the market transactions. In this slide, we reiterate one more time, again, the structure of our costs, our also C1 and all-in sustaining costs. We have provided for your convenience the historical retrospective, like, when we started -- when the company went public in 2018, I remember on -- during our road shows, we would say that our CapEx per pound is $4. When tenge depreciated heavily in 2019 and '20, that amount decrease. Plus in 2020, we had less spending due to COVID restrictions that we had to stop wellfield development works. And now we are -- in 2021 and '22, we are back to the amount of $4 and $5 per pound. It is driven by inflation mostly. And I also explained the main drivers during some of our calls like increasing prices of pipes, sulfuric acid, et cetera. In terms of the structure, when you look at our total cost, 24% will be made up from material, 21% is the salary, then its processing cost and all the other components. So from material side, it's the sulfuric acid. It's probably the most expensive part in terms of our cost component. In this slide, we have provided some additional information for you. And Askar mentioned many potential transportation opportunities available to us. In this slide, we are demonstrating how much it actually cost today for us to transport the uranium. So we have done some analysis in terms of blended cost of transportation, which is the part taken from C1 plus headquarters transportation cost. That would make slightly more than $1 per pound, $1.1 per pound. This is how much it costs today to transport the uranium on a 100% basis on a holding basis, taking into account all the approaches that we use, like swaps, routes, existing route, et cetera. So you always had this information available when -- and if you need us to maintain the structure in the future, you can let us know. But generally, just stating again how our cost structure looks at JV level. This is like basically the mining cost, I mean. Question number three, very important, very conceptual for modeling purposes is how much CapEx we need and how adjustable and how -- what is the scale up and scale down in terms of the capital expenditure cost? So here, I would like to say that, first of all, if IR didn't iterate it too many times, I will repeat one more time. This is not a guidance. This is for illustrative purposes only. And we just really wanted to share and do some correlation analysis for you. So here in the gray area is the actual number of the drilling wells we have. And this bar represented with yellow and blue is actually all-in sustaining cost, with yellow part being that capital expenditure as part of that. So as you can see when production moved down in 2019 and '20, the cost per pound decreased as well. In 2022, the increase, I wouldn't really take this into account related to the volumes because from 2021 to 2022 volumes didn't change much, but this increase is mainly attributable to all the shortfalls that we have experienced in 2020 and inflation. So what I really want to demonstrate on this slide, that change from 2024 to 2023 to bring up additional 10% of the production that we have announced for 2024 makes up approximately 25% of additional capital expenditures per pound. And as I have been explaining during our calls that it is very important to understand KAP's CapEx profile because the idea is that we incur cost in advance, like a year in advance. But when the actual volumes come in, then the cost per pound will smooth out again. So this is exactly as you can see in this slide. So provided that after 2024 production profile stays flat, then cost per unit after 2025 -- '24 and '25 will smooth out a little bit. So this is basically the idea of how KAP operates in terms of its capital expenditures. We're also receiving a lot of questions on like how much it would cost to bring up new mine? This is a very relevant question taking into account the greenfield reserves we have. And so we have provided some benchmarks based on the existing projects we have. So basically, if we have projects roughly around 500 tonnes, then we would expect the capital expenditure of USD 30 million to USD 50 million; for 2,000 tonnes, USD 70 million to USD 100 million; and for 6,000 tonnes, it's like USD 120 million to USD 150 million. This is based on current estimates we have, like no guidance as to what this may be -- may look like in the future. Yet, I think it provides you with some useful information based on your models, how -- what demand you forecast. And if you see if there is additional need to bring up new volumes, then you can see like approximately how much it would be required to spend. And I also would like to note that those expenditures, it is mainly processing capacity, all the required infrastructure like power grids, all the pumping infrastructure, but it does not include the wellfield development costs. On this slide, it's just a reminder that like historical data is always a safe one. So we have developed -- when we went public in 2018, we have developed a special note disclosure in our consolidated financial statements that allows users to make the estimate of the EBITDA at each mining unit level and then estimate -- come to the estimate of the adjusted attributable EBITDA. This notion has been implemented by Kazatomprom since 2018, and we keep maintaining this information. So it is really another way of looking back at how a company performed in terms of its adjusted attributable EBITDA. And I would like to conclude my part with that East KAP's current market value fare -- well, I think I might not be objective here. So that's why I want just to illustrate the KAP's share performance since the company went public in 2018. So we did our in ternal analysis and just sharing it with you that for the first year, 1.5 years, we really saw almost no correlation between the share price and the price of the U3O8. And it was mostly attributable to the internal discounts applied to company's price based on -- that we had yet to prove that we are strong on committing on our strategy and delivering the results. So in the second half of 2021 with the increased focus on the uranium market, and this is what we called uranium renaissance, we started to see higher correlation. And actually, we saw many of you have enjoyed this with us that price peaked almost to $48 per share, indicating higher correlation and higher investment, I believe, and sentiment in the uranium market, and Kazatomprom is one of the biggest player in that market. However, since January and following by February Russian-Ukrainian conflict, that discount related to external factors appeared back again. And we saw increasing like gap between -- or in correlation between share price and the price of the uranium. And even though now we see constantly increasing price of the uranium, it's not reflected in our share price because of the high geopolitical risks and the current environment. So we believe that this just gives you better understanding that what kind of factors drive the share price now. And I'm sure most of you have analysis on this in terms of the equity markets in general. So with that, I would like to conclude my part related to company's valuation and would be happy to take any questions. Again, thank you very much.

Thank you, Kamila. I think it was very, very useful, and I believe that everyone thinks the same way. We will start our Q&A session now.

The first, we would like to start with the questions from the audience here in -- who are present in the room. Then who -- for those who joined us via the Zoom or YouTube, for the Zoom participants, please just raise your hand in Zoom and make sure you're in a queue, and we will give you an opportunity to ask a question. For those who joined through YouTube, also you can either provide a Google form or type the question in the chat box. And same for the Zoom participants, you can also type the questions in the chat box, and we will take them from there. So first, we would like to start with the questions from the audience. Just raise your hand and you will be provided with a mic.

And I have 2 questions, if I may. First of all, does your major shareholder, Samruk namely, have any plans for further placements of the stock this year or maybe next year?

If I may take this question. There are no current plans to increase company's free float. And we have been mentioning during our calls that according to the current legislation, 75% of company's ownership are within Samruk-Kazyna strategic assets. So even if they wanted to increase the free float, they would have to change it first, and we obviously would inform you on that. But as far as we know, there is no current plans to increase the free float.

Okay. And the second question is considering that your production profile will go in line with CPR -- well, let's consider that scenario. In this case, if you would like to kind of keep your production levels at peak of 40,000 tonnes, would you have to increase your CapEx levels from current levels to maintain the production profile? Or will it be broadly in line with current levels?

Well, in terms of the wellfield development cost, as I just said, at the time when we actually decide to increase, there is going to be a onetime increase related to the fact that we need to keep up our coefficient of the reserve preparation. But once the volumes are there, then the cost will smooth out, I mean, and somehow offset. In terms of the processing capacities, it actually may require. And as I mentioned in my presentation, there is one project at UMP that we are considering to be implemented by the end of 2027, so '26, '27. So basically, this is one of our ways to mitigate the risk if we would need to go as high and would require additional processing capacity. So actually, processing capacity could be a bottleneck. But we're already thinking about that and this new investment project that we will be announcing soon is one of our ways to address it.

And in long term, for the next like 20 years, if you would like to keep your production levels as high as they will be in '25, '26, will you have to invest a lot more? Or would it require only like small investments to further explorate and continue production on current assets. Just -- I wouldn't require an exact number, just overall understanding.

Well, first of all, I would like to say that if you saw the CPR profile, keeping the same production for 25 years probably wouldn't be feasible, I mean, unless we add additional exploration projects to the pipeline. This is first. And second, really hard to say. The benchmarks we have provided in the presentation is how much it would do to do the infrastructure. So let's say, it's 6,000 tonnes, then we would say, USD 150 million. And for wellfield development cost, I just -- let's take a proxy of current $4, $5 per pound. But again, all of that is market driven. So it is really hard to say that production profile will be just staying flat for 25 years. And that's why you will see some adjustments there mind the actual adjustments that would increase the price because production will go down. I would say that such kind of estimate at this stage is just not possible to do. You just -- for your modeling purposes, you can refer to the benchmarks we provided.

Sort of 2 questions from me. The first one was regarding the sort of correlation -- the market value correlation to the spot price. It was quite clear that, that had really changed at the start of this year. So you can probably conclude that there's a geopolitical risk, obviously, associated with that. With that in mind, would the company ever consider self-sanctioning, if you were able to increase the quota through the trans-Caspian route to a sufficient volume to be able to supplement St. Petersburg? And then a sort of follow-up on that would be how far down the line are you on those conversations in increasing the trans-Caspian quota?

Yes. Well, I didn't still -- whether it will be considered self-sanctioning or whatsoever, I mean, what we have from the routes at the moment and for the energy sector globally. I mean, there is no direct sanctions on the energy sector, especially on the uranium. So there is no restrictions in Canada and in European Union. There is -- there are exceptions made for the uranium shipments and for the vessels that are carrying any uranium products. So there is an exception in any sanctions which are there. So uranium could be freely coming. There are some bureaucratical things just to send pre-notice and so on and so on. So currently, the St. Petersburg part is working. However, in case we will be asked by our customers or anyone else to send only through the trans-Caspian route, it's also possible. I mean, if you have seen our sales distribution, so the Asia, which is obviously China, is like 40%, and the rest is Europe and America. So if we divert full quantities from what we're delivering through St. Pete to trans-Caspian route, in the maximum capacity at the moment, it will be like 1,000, 1,200 containers per year. I mean that's the size of a big vessel, container vessel at the moment. So it will not make a big impact in terms of the cargo turnover at the trans-Caspian route. So when we first approached and checked, so it's not going to impact significantly the capacities at that route, and it will not create any bottleneck there. In terms of the nature of our cargo and the discussions that we had, we have a firm belief that we will have a priority of delivery of our cargo, and we have well-established partners on the route. So if that's required by the customers to deliver only through trans-Caspian route, that's possible, and it's not going to make significant difficulties in terms of the capacity. The other part or the other side of that coin is it's hard to create a commercial route, if you know what I mean. I mean, we don't have a dedicated shipping line that's going to pick up the Class 7 cargo from a port at the Black Sea and deliver it to Canada as it is in St. Pete to Canada. So in terms of using trans-Caspian route, we always have a chartered ship or dedicated ship. So that's the limitation. But in terms of the capacity, we are not expecting any difficulties there.

Just one more, if I may. The current route from Baku up to Poti, and considering the ongoing conflict between Azerbaijan and Armenia, is there any anticipated conflict or any anticipated friction on that route, given the ongoing conflict there? Or no?

Well, not to our knowledge, and we were not notified by our partners on that route or by the governments of the transit countries. So as for now, we are not expecting any kind of impact on the possibility to use that route.

Julius Bottcher from Fiera Capital here. I thought that was a fantastic presentation. My question, Askar, I think you showed a very, very interesting -- you made some very interesting comments on financial buyers in the market and the potential demand. And then I think you showed the ANU Energy slide and the potential IPO or public or private sale of up to USD 500 million. I think ANU Energy are communicating that they have a framework agreement with you in place to purchase that material, and that is at current price is GBP 10 million. I wonder if you could maybe speak to that framework agreement and how you operate with that sort of overhang of maybe we buy 25% of your annual production this year or maybe we don't in place?

Yes. Well, for ANU's framework agreement, to the extent that we can disclose within the commercial contract that we have, I mean what we can say is the idea to become the cornerstone investor and helping to create a financial institution within Kazakhstan. So what it gives to us is here, we have an option to sell. So we are the -- kind of if they will raise the funds, the first company they have to come under that agreement is a Kazatomprom. And then it's our choice or decision if we have volumes, then we sell it to them. And if we don't, then they go to the market or other suppliers to buy those volumes. So it's not like if they are coming with USD 500 million, we were going to sell GBP 10 million. We have a contract with utilities. We have a certain guidance in terms of our sales plans. We're not going to kind of move and exceed everything that -- just because they came. So the -- we are the priority seller there. At the same time, we have restrictions and limitations within the framework that make sure that this material is not going to return back to the market and compete with ourselves or it's not going to flow back to the market. So there is a certain period where they cannot sell back the material. And if they are going to do so, we have the priority right to purchase the material. And also, they have an annual cap to sell, which is limited to the price and the kind of this holding period that they have to hold. So whenever the period is passed and the price is right, they have the right to sell some certain amount to the market if they decide to do so. But we have the priority right to buy these volumes to make sure that kind of it's not going to create the same environment as we have seen at the -- after Fukushima kind of period when there was a lot of uranium. So these mechanisms are there, and that's kind of -- that was the conditions for us to set up this kind of framework agreement with ANU Energy.

That's very clear. One follow-up, if I may. Because that is quite a substantial amount, I wonder in your budgeting, are you taking that into account at all?

No. I mean none of the financial players are in the budget, not Yellow Cake, not ANU Energy. So kind of they have to raise the money. And if they do so, then they come to us to discuss the possibilities to buy the material. And again, we have another possibility to approach the market ourselves, buy it from the market and sell it to them if we see the arbitrage opportunity as well. I mean, we've experienced, and we've done that sale once to Yellow Cake already.

Any more questions in the room? If not, I think we got -- oh, one more here. Go ahead.

[indiscernible] of Investment Bank [ Sinarom ]. So I have a question related to your sales volume, which has spiked like 60% in 9 months of this year. So the question is, do you think it's still not clear to expect high revenue this year related to the sales growth, given that the price has gone up significantly, tenge has devalued to U.S. dollar plus sales volume has increased, while the price -- sorry, the revenue guidance is stating for just 50% increase. And also, what were the factors driving this, apart from higher demand, of course? But I mean, was it mainly related to the market transactions where you're buying it from the -- the volume from the third parties and this translated into higher sales volume?

Yes. Thank you. I think I will start, and Askar if you want to add. Well, first of all, this 58% should not be really misleading because on -- for the annual guidance, the volumes, total sales volumes stay almost unchanged. And so basically, what happens that we would deliver according to customers' requests. So basically, the idea is that last year, the delivery request was shifted for Q4. While this year, we had shipment request falling -- more shipment, again, falling within the first 9 months of this year. So this is the first. Second, the reason why we have not restated the guidance for this year is because when we we're budgeting and providing the guidance, as we already accounted for a higher price that we should expect for the uranium and the volumes, so we didn't really see much reason to increase. I mean, we might see actually a high amount, but it is not really drastically high so that it would change total investors' perception, how much company would earn in terms of its revenue this year. Maybe, if you...

Yes. Well, Kamila, very well said. In the presentation now, we should not be misleaded by that increase. It's all the customer requests. And if in previous years, you had seen that the fourth quarter in Kazatomprom was historically very -- kind of very busy with a lot of sales, that was just because some -- most of the customers were willing to put the sales in Q4, with the seasonality of our market and expectation that the market price would be maybe lower. But in the current environment, with the changes on the market, more utilities would like to shift it earlier so that they would try to capture the lower price because the price is -- if you see that the trend of the price is actually going up. So I guess that's what had driven the utilities to seek for the deliveries earlier this year than it was in the previous years.

Understood. So in other words, basically, we should expect to see a much weaker fourth quarter this year in terms of volume, sales volume as compared to the previous years?

Yes. When we will report Q4 this year, Q4 last year, the sales volume should be lower. But we also will be reporting same time 12 months this year and 12 months of the last year, and it should be approximately the same based on the sales guidance we provided for the year of 2021 and 2022. Yes.

And one more follow-up question. So this 60% increase in sales volume will not translate into the corresponding increase in EBITDA, right, because a significant part of this volume was basically a trading activity. Am I right? Like we saw similar to the second quarter numbers when the margin has gone down a bit because of that, I guess.

Yes. This is exactly to what I've been talking about on the modeling section part, that you know the EBITDA is a driver of what we record as our cost of sales. And cost of sales depends on the mix. So I can't tell if this, like, 9 months result gives us any indication of like how the impact -- what impact should be on Q4 or the annual result. Generally, we expect strong results and strong EBITDA based on the price and based on that we are able to keep our cost guidance. So that's probably all I can tell in terms of the expectations of EBITDA. The only thing I would like to stress one more time that the shift in the sales schedules doesn't have a direct impact on the ultimate annual EBITDA expectation.

Any questions from the room?

Nothing in the room. Maybe a reminder if anybody on the Zoom call wants to raise their hand or if there's anything up right now? No. On the YouTube side, maybe just a brief broader question, perhaps for Mr. Mukanov and Neil, "From a strategic perspective, with the change in CEO and of course, CEO guiding and leading the strategy overall, do you expect any change in the overall value strategy that you have been focused on since the IPO?

Okay. Thank you for the question. Yes, as CEO of Kazatomprom, in general, the role of the CEO is to implement the global strategy that's, in general, to be validated and approved by Board of Directors. And as the Chairman of the Board of Directors, I'll Neil...

Yes. So the answer is no.

Excellent. Okay. And another one that -- I mean one that we also, I guess, here on the road fairly often at the moment. Again, back to Askar is where is this -- what is the status of the current shipment that is on the way on the TITR. We did disclose some information on that today in our trading update, but maybe just a bit of trying to follow up.

Yes. So to the extent that we can disclose. So first part of the cargo -- of the joint cargo -- as I said, we are chartering a vessel, so to make it economically interesting, we have to have a minimum number of containers to make sure that the economics are right there. So the first part of that delivery, based on what we have disclosed today, which was owned by ourselves, is already sitting at the Black Sea, and we are waiting for the second part of that cargo, joint cargo, which is actually the share of our -- one of our partners. So that has created a little bit of additional questions from the authorities issuing the transit approvals. So we're kind of working together with our partner to submit all set of documents that is required by the authorities. But we are expecting that, that part will be also resolved very soon and kind of we will receive the second part of the cargo, which is currently just awaiting the permit at Baku's sea port. So once it's done, it will join our cargo, and we will start the sea transportation from the Black Sea.

There is a question coming from Zoom from Chintan. If the operator can unmute Chintan. So Chetan, please go ahead with your question.

This is Chintan Khamar from Credit Suisse. Can you guys hear me?

Yes.

Great. So my question was, again, on the transport. I noticed in the Q3 report this morning that you have a quota for 3,500 tonnes right now. And in terms of increasing this quota, is it a commercial negotiation with the parties involved in the transport? Or is it with governments on the transport route?

It's with governments on the transport route. So we were taking -- we applied for this quota well before all the events in kind of January and February, before geopolitical issues. So that's an initial quota we've got and it well covers the amount that we were planning to deliver through trans-Caspian route regardless of the geopolitics. That could be increased. We have to send an additional note and additional pack of documents to do so as we did for our partner to help them. So it's been discussed there. But I mean, with the previous question from Cory, the confusion is that this is the share of the second shareholder within the material, which is owned by Kazatomprom or going to be sold by Kazatomprom. We have no particular issues. And we have the approval in place. We can increase it, but it might be done for the next year because for this year, I mean, we are quite comfortable with the quota that we have.

Great. And if I could maybe just follow up with one kind of broader strategic question. Looking into the future, do you see value in entering other parts of the front end of the nuclear fuel cycle, such as maybe conversion?

Yes. As you mentioned, as I also said, well, it might be very attractive to go to conversion, but we shouldn't be misleaded by the current price. The current price is mainly because the conversion became a bottleneck at the moment. But we have to see. And we have to bear in mind that kind of ConverDyn is out of the market now. Orano has some reserves that they might add. I think Cameco has also already started the discussions about increasing their capacities within the existing plant. So with all the existing players kind of returning back or putting all their expansion plans in place, if we see that the market is still attractive, we might come there. But again, we would like to see the long-term commitment of the utilities to incentivize us to build a conversion where we have a technology. And if we see that it makes value, similar value to what our production of natural uranium does, I mean, why not? We are open to consider this.

Yes, I think that's a good way of answering it. I mean, watching brief is the way I would put it, that we keep a close eye on the market and what the movements are as Askar rightly pointed out. The people who were in conversion that came out of it are now looking to go back in. So whilst it's a current shortage, that might not be the case in 12 months' time. But without any doubt, we would keep an eye on it, and that's very important for us.

Okay. Again, one more chance here. Maybe a one last chance for anyone to raise their hand in the Zoom queue. On the YouTube side, just maybe one last question is from M&A perspective, "Is there ever any consideration given to investment in M&A outside of Kazakhstan?"

I might try to start. Well, if we are considering, I mean, production, we know that the best values in the world are wells which are in Kazakhstan. So as we've communicated when we were going for IPO, it doesn't make sense to invest into other productions, which are -- which have less value than the ones that we have in Kazakhstan. So in other parts of the nuclear fuel cycle, I mean, we're also looking for any potential possibilities, but I think it's too early to say something on that part.

And just to add to that, that whenever we consider M&A deal, it's not just really about like selling and buying the mine. It's about the combination that gives us some anchor into some strategic aspect that would allow us to develop around in the future. So there, to look at example is the deal that like combined together mining that fuel fabrication like uptakes. So that kind of M&As that we would particularly be focused on especially. When Askar said, we're talking about entering mining that's definitely less competitive than our current mining.

Thank you, Kamila. There is a question from Anna Antonova in Zoom. Please Anna, unmute yourself, and you can ask your question.

Maybe a quick question from our side. Could you please maybe comment or shed some additional light on the current situation in Kazakhstan? I remember your comments on the full year results call in early and spring this year after the recent events in the country and with political reforms gaining pace and overall governmental stance shifting with changes in taxation for the sectors, different social events, et cetera. Could you please comment whether your earlier comments still hold? Well, how do you expect the situation within the country to evolve going into 2023, including any potential additional changes to tax regime, including to the uranium mining sector, specifically, whether you would expect any additional social obligations or expenses on top of what you currently have? So any color or guidance on this front would be much appreciated.

Anna, yes, sure. I think I was giving this comment in March, so just follow up on that. From a taxation point of view, the framework has been defined, and it will be applied since January of the next year. So basically, within the new taxation from work, MET would be charged on top of the spot, and it's a 6% rate. In absolute terms, provided the current high spot price, we expect in absolute terms the MET charge would increase. At the same time, we think better framework. It is more fair in terms of the distribution and the comparability between our mines because under old scheme, the high cost mines would be charged even more, making them incomparable in terms of that profitability. So this is, regarding framework, we have certainty on this. Regarding my comments in general, yes, January has been a very difficult times for our nation, and I believe we are recovering from that situation. As I mentioned, has stabilized at that time and it keeps stabilizing over time. We expect with the upcoming elections, it's going to be the -- more stability in terms of the usual question that relates to our region is likely the transition of the power. So with that, we expect that issue to be resolved and like actually even more stability in terms of the improved investment climate coming to the region. Well, at the same time, we understand the geopolitical situation is difficult in terms of the Russian-Ukrainian conflict. With that, we would really abstain from making any forecast and comments for -- and I think it is clear why because with all we do, we hope for the soonest and peaceful resolution. And as a company, we are building and enhancing our risk mitigation plans to make sure there are different types of risk that would potentially stem from the current situation, and we have our internal plans on how to address each category of the risk. So with that, Anna, I think the general situation since January is definitely much better. We have much more stability and clarity on the overall policy, and the global situation, we are all aware of that. And as a company, we are prepared to mitigate those risks. Thank you.

Thank you, Anna. No other hands raised. And if there's nothing else in the room, thanks Bota, thanks to the team. I think a good discussion. Anyone on the line again, if you didn't get through or if technology was a limitation in terms -- oh, one more. Absolutely, [ Benia ]. Go ahead. we have one more in the room, and I think we'll conclude with that.

Just a quick question on your dividend policy and maybe relevant to ask for the Board. In what situation or a scenario would you consider paying a higher dividend as a percentage of your free cash flow from the minimum level? So like in what situation would you consider paying higher dividends given, as you have mentioned, you have some projects you're looking at, but any other factors that you would take into consideration?

Thank you, [ Benia ]. It's a good question. I think that current payout ratio, to be honest, is the maximum one. Even though it's stated as the least. I'm explaining why. Because dividend policy is not only including company's consolidated free cash flow base, but it also includes the dividends that we receive from joint ventures and associates, and it's quite a big chunk of it. So it means that in the free cash flow, we are not eliminating share of minorities we consolidate, but we're adding the share of dividends that we receive from JVs and associates. So I mean, this is a very important adjustment. So basically, the idea when we developed the policy was that company distributes the actual cash it has received. So if we take about cash, then we should have potentially adjusted this free cash flow but it's not possible because there should be some measurable metrics, which is the consolidated free cash flow. So from that extent and from the current perspective, again, I would really think as a CFO of the company, the current policy is really well balanced and is maximizing the value to its stakeholders and the same time, leaving company with some proxy to keep it separate in activity to make sure it is able to face any challenges and upcoming investment opportunities. And at the same time, we also need to make sure that the last thing we would want to do is to borrow debt to pay the dividend. So we always -- like in terms of our internal analysis, we would always look into how much we're actually distributing to shareholders from the dividends that we receive from JVs and associates, and we are not offsetting the part that is included into our free cash flow that is actually relating to the other minority shareholders. So I think this is very important, maybe technical but yet very important consideration. That's why this current percentage, in my opinion as the Chief Financial Officer, is really balanced.

There's a question from [ Alexander Nefedov ] in Zoom. Alexander, please unmute yourself and go ahead with the question.

Yes. I have 3 questions. One is about perhaps the loss. You mentioned that CapEx guidance was lowered by 6%. Could you please tell if the company now expects some risks to pension guidance in 2023, 2024? Meaning, could be there a 6% downside risk to output outlook? This is the first one. The second one is if the company plans to participate in expanding trans-Caspian route infrastructure? And the last one is about company's plans relating to electricity generation, does the company plan to enter this market?

Okay. Thank you for your question. Regardless of production plans and the risk and 6% lack of CapEx. No, for the coming next year, we are still keeping our production goals the same as we already mentioned that. And we have mitigation plans that are already in place, and we put all our efforts to meet the production goals for coming years and meet all our customers', clients' and stakeholders' expectations. Regarding increasing of transportation, I think...

Yes. Well, in terms of participating in increasing infrastructure at trans-Caspian route, I guess that's the government level of issues. I mean, with our volumes -- maximum volumes that we might transport, I mean, there is no sense for ourselves to invest into infrastructure because we are just a small part of that increase. So generally, we are not going to participate in increasing infrastructure because we quite successfully fit into the current infrastructure levels. So I guess that's more a government level. In terms of going to electricity business. I mean, we are not going to dilute our strategy. But if the customer would be the electricity company that has a partnership with the nuclear power plant, who is our main customers, that could be some sort of the consideration to have that electricity generating company as our customer, but not as a part where we are going to invest. So as a customer, yes. As an investment opportunity, I don't think so.

Thanks. And I'll just throw in there as well that in the disclosure today, when we're talking about the CapEx, we did note that there is risk, obviously, from underspend, how it impacts future years. But future guidance, specific detailed guidance on the ranges for production, that's obviously something we do on an annual basis. So that's something that would come out in our first quarter trading update -- I guess, our Q4 trading update that would come out in 2023. So thanks Alexander. Thank you, everyone, in the room. And I guess we're going to conclude with that. I would like to thank everyone who is in the room with us today, everyone who is watching live online, and anyone who picks up this workshop in our Investor Day or Analyst Day in the days to come and watches it online. I think it's becoming clear every single day that the market environment that we're seeing today for our nuclear fuel products is more positive, and that's been, absolutely, for over a decade. And in some respects, we're hearing it a lot at the industry conferences that by many who have been in the industry for a long time, it's better than it's ever been before. And we believe at Kazatomprom, we're positioned, very well positioned to benefit from that positive sentiment like no other company in the sector. I believe that there's an exceptional opportunity for investors who take the time to fully understand our company, our place in this market as the market leader, the factual developments around the risks specific to Kazatomprom. And in Kazakhstan, I think there's an exceptional opportunity here for us. So thank you again. Thank you, everyone, and have an excellent day.

Thank you.