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

Good time of the day, and welcome to Kazatomprom's conference call to discuss 2024 half year operating and financial results. My name is Botagoz. I'm leading the Investor Relations team here at Kazatomprom, and thank you for taking the time to join us today. Our CEO, Mr. Yussupov, unfortunately, cannot join today's call as he is currently in Dushanbe, accompanying the Head of the state in his official visit to the Republic of Tajikistan. Our conversation will begin with a presentation by Mr. Kosherbayev, Chief Strategy International Development Officer, followed by an opportunity for investors to ask questions. [Operator Instructions] The simultaneous translation of English Q&A will be available for Russian-speaking line. For those joined through the company or the London Stock Exchange website, there will be a slight presentation displayed during the remarks. These webcast slides will be available for download in English and in Russian shortly after the call. Note that our press release, full year version of the 2024 half year operating and financial review, along with the 2024 financial statements for the 6 months ended 30th of June 2024, are now available on Kazatomprom's website. Participating in today's call, we have Dastan Kosherbayev, Chief Strategy and International Development Officer; Vladislav Baiguzhin, Chief Commercial Officer. Financial questions will be covered by our Managing Directors during today's call as Sultan will not be participating due to his departure. Please note that this conference call may include forward-looking statements. These statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties, and they are not guarantees of future performance. The company does not make any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved. I am now passing the floor to Mr. Kosherbayev.

Thank you, Botagoz. I'm delighted to welcome and thank everyone for joining our conference call today. First of all, I'd like to extend apologies on behalf of our CEO, Mr. Yussupov for not being present today. But as you can imagine, his participation at the state delegation led by the President was absolutely required. Today, we have announced our CFO's decision to depart. On behalf of the Management Board and the company, I'd like to thank Sultan for his hard work and constant dedication to the company's growth and development and wish him the best of luck in all his future endeavors. Fortunately, we were able to hunt a perfect candidate for the role, Mr. Marat Tulebayev, who is currently undergoing through the corporate approval processes. Marat expects to bring extensive experience to his new role, including 10 years in various positions at Kazatomprom. He served as the Director of the Corporate Governance department from 2014 to 2017, prior to becoming the Director of Economics and Budgeting department in the 2017-2019 period, preparing the company to the IPO and playing a crucial role in the process. Like no other, he knows Kazatomprom inside and out and his expertise, knowledge and skills shall serve to the best interest of our shareholders. Today's call is focused on discussing Kazatomprom's 2024 half year operating and financial results. Stakeholders' attention was kept on our 2020 production plans, which we released earlier today, as previously iterated. Kazatomprom once again demonstrates its reliability and responsible approach in everything we do from transparency and communications to operational sustainability and customer deliveries. Prior to moving to the company's level discussion, we would like to reiterate the growing importance of nuclear energy, which has now become an integral part of the global green energy policy. This shift significantly bolsters the uranium market fundamentals, which are now stronger than ever. News from different jurisdictions about their plans to incorporate nuclear energy into their energy mix as a baseload option to expand existing capacities by constructing new nuclear power plants or extending the life span of operating ones continue to support the global nuclear agenda. This trend is often described by industry professionals as the second renaissance of nuclear energy. As the world's largest producer and seller of natural uranium, we at Kazatomprom fully recognize the vital role we play in supporting the global transition away from fossil fuels. We remain committed to delivering long-term value to all our stakeholders. As shown on this slide, third-party forecasts remain to reveal a growing supply gap that current production volumes will now be able to meet in the foreseeable future. By 2030, a supply deficit of GBP 17 million of U3O8 is projected with the shortfall expected to escalate dramatically to GBP 138 million by 2040. In light of this, Kazatomprom's recent news about receiving a production license for pilot production at Inkai 3 and exploration license for the [indiscernible] block and the Zhalpak mine as well as the expansion of the exploration period at the Inkai 2 deposit, our strategic moves aimed at addressing potential supply and demand imbalances. We're also actively building an exploration portfolio for rare metals at our Ulba plan. As previously announced, Kazatomprom is currently undertaking a large-scale exploration in Kazakhstan, which is a top priority for replenishing its resource base and maintaining its leading position as a global nuclear fuel supplier. It is worth noting that this strategic initiative received full support at the highest governmental level. Our unique geology enables us to augment substantial volumes of our resource balance at a far lower investment scale in comparison such as Advantage reaffirms our trust and investment to exploration of new territories, depreciating any efforts to acquire additional nonattributable reserves at our existing mines. Speaking about the production from other parts of the world, we're eager to hear more positive developments from new and previously idled mines. We firmly believe that the current market conditions offer opportunities for every participant in the fuel cycle to drive. As we have reiterated on numerous occasions, a significant factor driving the market structural shift is the production and sales discipline sustained by the key uranium producers. Specifically, our adherence to market discipline aligns with our strategy of generating long-term value for our shareholders commitment to which we, once again, are eager to confirm. The market has remained quite steady over the past 6 months, though after a surge in the uranium spot price KZT 106 per pound in January, a pullback to the mid followed in March. Yet this period has served as a transition phase for fuel buyers who have come to recognize the inevitability of an approaching deficit. Recently, we have observed a shift in the market dynamics with buyers increasingly making compromises to secure deals. Amid our continued success in long-term contracting activity, Kazatomprom has initially intended to ramp up its 2025 production to 100% of subsoil use agreement levels. However, the uncertainty around the sulfuric acid supplies for 2025 needs and delays in the construction works at the newly developed deposits resulted in a need to reevaluate our 2025 plans. The company is now adjusting its initial intentions for 2025 production volumes of 30,500, 31,500 tonnes on a 100% basis. Kazatomprom 2025 production is now expected to be between 25,000 and 26,500 tonnes and approximately 12% growth compared to its 2024 guidance. A significant portion of the adjusted 2025 production is attributed to JV Budenovskoye production delay. The JV is expected to result in a nearly 80% missed from its 2024 production target under subsoil use agreement and more than 65% mix in 2025. Since Budenovskoye 2025 production is expected at 1,000 tonnes uranium instead of the previously approved 4,000 tonnes, changes to its subsoil use agreement are to be introduced to prevent bridge of subsoil use obligations. JV Budenovskoye is not the only mining entity that will be applying for changes to its subsoil use agreement. Appak has also initiated subsoil agreement revisions while [indiscernible] and KATCO and Semizbai have already validated their production mismatches. I would like to once again highlight that in ISR mining, both the requirements for sulfuric acid and the consequences from its shortages have a different scale and impact due to different geological features of the deposits. All our uranium mining entities are supplied with asset volumes equally proportion to their requirements to minimize the risk of harm to the uranium mining process and geological structure of the deposit. However, depending on the geological and technological condition of the deposits, the recovery process requires different efforts, meaning that the same amount of undersupply sulfuric acid to different blocks can have varying negative effects on production rates. As a result, it is expected that in 2025 mining entities, we'll have different percentage rate decrease compared to the levels stipulated in the core spending subsoil use agreements with acceptable 20% deviation. For example, if the changes of Budenovskoye production targets are approved in corresponding amendments to subsoil use agreements are signed, this JV will potentially result in producing at 100% of its big subsoil use agreement level instead of occurring more than 65% estimate. Despite 2025 production plan adjustments, Kazatomprom remains fully committed to fulfilling its existing 2025 sales commitments. We have a comfortable level of inventories to meet these commitments. Our sales strategy involves reserving a portion of our annual production as uncommitted this strategic reserve allows us to seize emerging opportunities and adapt the fluctuations in the market landscape. And regarding legislative developments that directly affect the company's operations, we would like to address the upcoming changes to the mineral extraction tax, MET. As previously disclosed, starting from 2025, the MET rate for uranium is expected to increase to 9% and beginning January 1, 2026, a differentiated production and spot price-based approach for a determined applicable MET rate will be introduced. Uranium minus, including ourselves, have been historically enjoying a much more favorable tax framework compared to other extracting industries in Kazakhstan and in other jurisdictions. Such changes are, therefore, seem inevitable. The company constantly reviews its disclosure framework to respond to the evolving market and investor needs, thus to aid analysts and investors in estimating potential MET burden. We have prepared the sensitivity analysis of the MET rate of different uranium production and price scenarios. Turning to our half year results despite the challenges the company has demonstrated strong performance, which reinforces our confidence in achieving our 2024 targets. Production, both on a 100% basis on an attributable basis showed a slight increase in the second quarter of the first half of 2024, compared to the same periods in 2023. This positive trend is largely due to a modest increase in both the full year of the second quarter of 2024 production plans, driven by higher subsoil user agreement requirements for 2024 compared to the previous year. In the second quarter of 2024, both group and Kazatomprom sales volumes were higher compared to the same period in 2023, primarily due to the timing of customer scheduled deliveries. However, when we look at the first 6 months of 2024, we see a lower sales volume compared to the same period in 2023. This is in line with our lower 2024 sales guidance and a reduced sales volume in the first quarter. It is important to note that sales volumes can rise substantially each quarter and such variability is influenced by the timing of customer delivery requests and physical delivery activities throughout the year. Average realized prices for the second quarter and first half of 2024 were higher compared to the same periods in 2023, reflecting a stronger uranium spot price while our current overall contract portfolio pricing correlates to the Uranium spot prices, deliveries under some long-term contracts in 2024, incorporated the proportion of fixed pricing components, including price ceilings that were negotiated during a comparatively lower price environment. Speaking about physical deliveries, we are pleased to report that both transportation routes are fully functional. Kazatomprom continues to monitor the list of sanctions on Russia and their potential impact on transportation through Russian territory. To date, there are no restrictions affecting the company's activities related to the supply of its product customers worldwide. Moreover, Kazatomprom is enhancing the quality of its physical deliveries via the trans-Caspian route by building strong relationships with the governments of transit countries and providing educational insights on handling Class 7 materials to transit permitting authorities. In addition to physical deliveries, the company has alternative options such as location swaps and loans. This ensures that Kazatomprom is fully hedged, guaranteeing the availability of material in the required volumes and add preferred locations to meet customer needs. Allow me to draw your attention to our updated sensitivity analysis, our estimate group's average realized prices on the level of the previous sensitivity table with slight deviations. Our average realized price continues to chase the spot price, and our sales portfolio demonstrates the strongest correlation with spot prices in the market. This positive trend is reflected in our financial results for the first half of 2024, which have been exceptionally strong, while the average month and uranium price was lagging slightly in the second quarter compared to the first quarter of 2024, our revenue in the first half of 2024 amounted to KZT 700 billion in line with our 2024 annual guidance. Operating profit was down slightly, while net profit was 27% higher year-on-year amounting to about KZT 283 billion. These impressive results reflect on the considerable improvement in the uranium market over the past year as well as the company's strong position as the lowest cost producer and largest seller globally. Kazatomprom is also present in other stages of the nuclear fuel cycle, including uranium dioxide, ceramic powder production, fuel pellets and fuel assemblies. C1 cash costs and all-in sustaining cash costs for the reporting period increased by 38% and 45%, respectively. The increase in C1 cash cost was driven by an increase in MET tax expenses and the cost of sulfuric acid increase All-in sustaining cash cost increase is resulting from an overall increase in capital cost on an attributable basis. As you can see from the MET sensitivity table, from 2026 and onward, overall MET burden is expected to increase, continuing to affect our cash cost metrics. Capital expenditures on the mining entities increased by 64%, primarily due to an expansion of well field development activities, increasing cost of construction in wells and infrastructure for new facilities commissioned as well as the rise in purchase prices for materials, supplies, equipment and cost of drilling. Consequently, we are now adjusting our 2024 CapEx estimates upwards. Earlier this month, the company has also increased its 2024 full year production guidance on both 100% on an attributed basis, as the half year operational results show that the production rates with which the mining entities are now addressing will result in a higher than initially expected volumes. . The company's sales guidance remains unchanged, uranium expected to be produced as a result of production guidance increase will be used for replenishing the company's inventories. Beyond our operational and financial results, we would like to highlight some major corporate developments. The company continues to prioritize ESG principles in its operations. Notably, we have achieved a B score in 2024 CDP climate change assessment which is above the average for both the region and the industry. Kazatomprom remains dedicated to maintaining a strong ESG record, and we'll continue to focus on further improvements. In June, we completed the payment of dividends for the year 2023, totaling KZT 315 billion or $2.6 per share. This represents more than 50% increase compared to the previous year, and our dividend yield for 2023 remains to be the highest in the industry. Concluding this presentation, I want to reaffirm the company's ongoing dedication to a market-focused strategy, which represents a key milestone in our development. Kazatomprom with its top tire assets sustainable reserve base, diverse sales portfolio and robust contract agreements is optimally positioned to seize future market growth opportunities. We value our role in the energy security landscape given the ongoing geopolitical uncertainties, market bifurcation discussions and our adherence to ESG standards with a low-risk jurisdiction. Kazatomprom is well equipped to maintain its leadership as a dependable supplier of natural uranium. We are prepared to meet utilities needs in diversifying their supply sources, and we are proud to be succeeding in securing a strong presence in a new uptrading cycle of long-term contracting activity. Thank you for your attention. I'll now ask operator to open the line to allow questions from this call's participants.

[Operator Instructions] Your first question comes from the line of Alexander Pearce with BMO.

My first question is just around Budenovskoye. And obviously, you've lowered the subsoil agreement level there. Maybe you can just give us a bit more detail on the current situation in terms of construction of infrastructure and where you're at the minute, when you think the processing plant is going to be fully built. And also, are you still shipping uranium through this period to some of the other assets for processing?

Yes. This is Dastan. Thank you for your question. Well, currently, one of the issues we're experiencing Budenovskoye is the bureaucratic process with obtaining all the necessary licenses, especially with the design documentation and all these things, there are a lot of iterations going on between the relevant authorities and like the government itself and the mining entity, that's why it's taking a lot of time. And with regards to its shipping its product to the nearby entities, yes, you're absolutely correct. They're utilizing Karatau's infrastructure for the moment being.

Okay. And then just maybe a follow-up on that. I think you suggested this in the presentation, but can you just confirm you're still expecting to deliver the full CPR production volumes from Budenovskoye, even though your actual production rate is going to be lower. Is that correct?

No, no. We're going to inflect amendments to the subsoil use agreement. So we're going to adjust it accordingly to the schedule.

So your offtake partner will get whatever is in the subsoil. You won't have to deliver those additional volumes from inventory or from other assets. to the JV partner?

Yes, for the upcoming years, yes, you're absolutely correct. They'll get whatever the mining entity will be able to produce.

Your next question comes from the line of Jason Fairclough with Bank of America.

The -- just in terms of the new guide, so plus 12% roughly year-on-year. Could you just give us a feel, is this 80% of the current subsoil use agreement? Or how are you thinking about this number? And then I guess the follow-up to that is over the last couple of years, production has consistently missed versus the targets at the beginning of the year. The acid problem is installed. So I guess my question is, what is your level of confidence of actually hitting this new guidance?

That is an excellent question, but I'd like to, first of all, state that due to mentioned -- aforementioned situation with the Budenovskoye and the difference between the geological deposits, it's not as it used to be previously when we had like the 80%, I mean, the production volume of 80%. And it defers, for example, Budenovskoye is going to fall behind, like we've said to the current level, 80% in this year is 67% in the next year, whereas several other entities would be able to reach 100% basis because their geology is more favorable. And for example, their overground infrastructure, and these things are better equipped to be able to deliver. Also, with regards to the sulfuric acid issue, it is a dynamic process that is occurring basically daily. We're trying to secure all the required volumes. But -- so far, we're pretty confident that we'll be able to achieve all the desired results. Nevertheless, if we stumble upon any problems, we'll do like we did last time when we signals the market basically in advancing the -- updating the market of the current situation like we did in January.

Can I just ask a follow-up question on the acid. How does management think about the trade-off between using acids to produce today versus using acids to invest in future production. Because it feels like maybe you're trading off production today against future production growth. Is that the right way to think about it?

But with the acid you see, it's the process like come and go, basically, once the acid arrives, we use it to acidify. We cannot start it like in large quantities or bulk it up.

Okay. I guess my question though, Dastan, was -- sorry, just to be clear, do you have sometimes a choice, which is we can either allocate this acid to growth projects or we can allocate this acid to existing producing. Like is that an active discussion where the acid is going, which acids get the acid?

It is a valid question. It is a valid point. Basically, yes, it depends on the geology and depends on the life cycle of each particular block because I don't know whether you've been to one of our IR calls, we always demonstrate like we have a separate slide that demonstrates the life cycle of each particular block. So depending on the stage at which the mining is happening at the moment, basically, it defines the amount of acid consumed, and this is different from each deposit to each deposit and each mine has different conditions that need to be taken into account once this goes.

Your next question comes from the line of Andrew Wong with RBC Capital Markets.

Did you provide some details on your outlook for sulfuric acid availability over the next several years? And can you kind of just talk about where your sulfuric acid that you're getting extra for 2025 is coming from?

Basically, we're currently, as I've said, it's a dynamic process, everyday process. We are negotiating with all local suppliers to cure all available volumes. And with regards to our plant, we expect it to go online in 2027. It's been like -- initially it was planned to go online in 2026, but now we expect in the beginning of 2027. And by then, I think we'll be able to sort all our outstanding issues with this critical material or reagent.

And as construction on that not started yet?

It's at the early stages and documentation is still being approved by the relevant authorities as well, the design documentation for the construction.

Okay. And then just on your inventories, they've come down for the past couple of years. And I think in the past, you've mentioned about 6 months as a normal target, but it looks like we're below that now, 6 months of sales, I mean. So are you concerned that the current level maybe doesn't give enough of a cushion? What are your plans around inventories potentially coming back?

Yes. It is a valid observation. Thank you. But with regards to that, I'd say you need to look at us at the end of the year. Because given the schedule of deliveries and the way we deliver our product and the customer demands and whether they want a product now and then it's best like the data is best represented at the end of the year because the half year results are not really representative in terms of their accuracy. I mean it may look like they've dropped right now towards the end of the year, they'll -- like we'll replenish our inventories basically.

Your next question comes from the line of from Ephrem Ravi with Citi.

So my 2 questions. Firstly, are there any cost or penalties that you incur when you renegotiate amendments to subsoil agreements? I just want to know how automatic a process is because you are negotiating with the government as a predominantly kind of government-owned entity. And secondly, on the sensitivity table on uranium prices that you helpfully give, does 2027 and 2028 imply kind of Budenovskoye at 6,000 tonnes? Or are you taking some haircut to that in that light sensitivity table?

With regards to the first one, no, we have not incurred any penalties to the best of my knowledge. And if there were some penalties, they are very minor and not substantial to mention. With regards to Budenovskoye, the sensitivity table basically reflects the adjusted data with Budenovskoye volumes decreased.

Your next question comes from the line of Grace Symes with Energy Intelligence.

I think my first question is will the mineral extraction tax change have any impact on production plans, given that it is a link to the amount produced under the subsoil use agreement?

Grace, glad to hear you. Basically no adjustments to the production plans with regards to MET. I mean it doesn't have any impact. We remain committed to our strategy, value over volume.

Okay. And then one more. I saw there's a recommendation from the Kazakh antitrust authority to privatize because that improve sulfuric acid plant. And I was wondering if you have any comments on that at all?

The comment was -- this is only a recommendation. It's not an actual instruction. So I mean you can just view it the way it is. It's not an [indiscernible] by the government.

Your next question comes from the line of Anna Antonova from JPMorgan.

Many questions have been answered already, but I have maybe a remaining one for about kind of 2026 production plans. How should we think about them? I remember in the press release, you said that you will update the market with half year results next August. But maybe at this stage, could you provide some additional color that? For example, what factors will you take into account when kind of looking at 2026 mine plan? And for example, will you need to renegotiate subsoil use agreements kind of -- and the adjust volumes upward again for selected mines even when you see the situation improving. And if you would need to do that when thinking about 2026 production, how long would that normally take?

Well, it's pretty apparent with Budenovskoye. As already mentioned, we know what it's going to be for 2026. With the remaining entities, basically the sulfuric acid issue still remains a big uncertainty. And when I say like we are pretty confident that we'll be able, all various factors need to be taken into account because history taught us that this is a rather dynamic process with a lot of implications that may come into play like unforeseeably. So with regards to that, we decided to be a bit more careful and perhaps give a shorter vision going forward because -- well, too many factors have to be taken into account and geopolitical risks as well, these sort of things.

Understood. And you commented that if and when the new subsoil use agreements are approved for the mining entities, those will be reflected in the updated CPR. Any time lines on when can we potentially see the updated CPR release? Is that potentially could be in the end of this year or next year or kind of what could be the potential time line for the market to get additional information there?

We expect this to be completed by February of the next year.

Your next question comes from the line of Jason Farlow with Bank of America.

Just wanted to come back on the acid plant. Is there any change in the urgency here in terms of getting this thing approved, getting it design, getting it built. My understanding is that this is something you should be able to buy off the shelf. So I don't quite understand what's taking so long.

Well, in terms of right now, the -- in general, the legal framework in Kazakhstan has been a bit like liberalized in a lot of sense, too many factors have been taken into account. And in terms of health and safety and the environmental issues, there were a lot of regulations that were updated. And right now, the government itself in the process of integrating this. Maybe you've seen like, I don't know, like those who are familiar, they've seen that we have a separate ministry for water resources. We have a separate Ministry for ecology. We have a separate ministry for health and safety and labor and quickly align their framework, adjust and take a unified stance. So that's why it's taking a lot of time. It's basically a lot of man hours.

That concludes the question-and-answer session from the audio line. I will now pass the call back to Bogarts to take questions from the webcast participants. Please go ahead.

Thank you, operator. The first question from the webcast page is coming from Boris Gonzalez, the retail investor. The question, first of all, congratulations for these results. Once again, it is shown the great margins with which Kazatomprom operates. During this year, there have been several tenders from some JVs as well as from cap logistics regarding the supply of sulfuric acid. I assume that the assets required by each JV is all directed to the operations of the JV. My question is, when it is cap logistics that require sulfuric acid? How is this acid distributed among the different JVs.

Yes, I'll take that question. Thank you. Thank you, Botagoz. Basically, cap logistics does not consume acid on its own. It proportionately distributes acid among the JVs and mining entities based on their needs, but it always takes into account their needs. And it's a process that -- like a negotiation between the JV and the cap logistics dynamic process as well.

The next question is coming from Roland Wetter, the practice Alpha Partners. Your accounts show that your inventories have declined. Do you intend to increase inventories again to the level you indicated previously, 6 months of production. And this question will be answered by Vladislav, our CCO.

Yes. Thanks for the question. The inventory levels throughout the year may be based on delivery skills requested by our clients and therefore, may not reflect the overall situation. In 2024 production forecast, while sales projections remain unchanged. We anticipate that -- we anticipate maintaining a sufficient inventory level at the end of the year in order to fulfill our future obligation under the sales contracts.

Thank you, Vladislav. The next question is coming from Ben Finegold, Ocean wall. The question is, what is the estimated asset requirements to ramp up the 100% subsoil use levels? And what is the estimate for asset usage in 2024 to achieve your guidance? The question will be answered by Ulan Khassanov, the Managing Director of Economics and Finance.

Actually, related to the question, we will say that we don't disclose the volume of sulfuric acid that we are being consumed. That is why we would like to say that all contracts related with the 2024 supply of sulphuric acid has been already conducted. And now we did have some challenges related with the sulfuric asset supply in the beginning of the year. Can you hear us?

Yes, we can hear you now.

Okay. Okay. Sorry, we had some technical difficulties. Well, with regards to transportation route through China, as I said, this is a sensitive topic. The negotiations are slowly progressing, let's put it this way. And should we come to an agreement, an appropriate announcement will be made in due course, but so far, there are no updates. . With regards to our need to go on to the market under the spot market, as I've said, we've been -- we've heard these rumors and insinuations through the past couple of years. But so far, we never had no need, no urgency to go into the spot market and to buy many pounds externally.

Thank you, Dastan. The next question is coming from Katy Hayden, retail investor. The question is, can you please provide further detail on your strategy to secure sufficient levels of sulfuric acid to support production levels in 2025 and thereafter. The question is directed to Ulan Khassanov.

Thank you for your question. As Dastan has already mentioned, we -- actually, we have our own in-house production about 700,000 tonnes. And also, we do have copper miners who also produce sulphuric acid as a byproduct. So we are now having the negotiation with them related with the supply of the sulphuric acid. Also Kazakhstan has some imports from Russia. So we do have a sufficient sulfuric acid for this year, and now negotiations are going on to 2025. But related to the consumer plans and strategy of securing the sulphuric acid. Now we have started the construction of the sulfuric acid plant, which is about 800,000 tonnes. So we will be enough to secure our most of the consumption needs of 2027 and furthermore, sulphuric acid needs. Now I would like to just also add to the comments of the Dastan, that nowadays contracting related with drilling water wells being now prepared and the design works to the sulphuric acid plant is now has been started and it's going on. We are trying our best to maximize the construction and go through the construction as soon as it is possible.

Thank you, Ulan. The next question is coming from Daniel Serkov, retail investor. It relates to the recommendation from the antimonopoly body here in Kazakhstan with regards to the recommended -- recommendation on sale or decrease of the company's share in existing sulphuric acid plants since this -- the similar question has been already asked, I'll just probably take the question myself and say, this is just a recommendation. So the report issued by the anti-monopoly agency has -- just has recommendations there. So it's not -- we are not required to follow these recommendations. We, as a company, are not really planning to decrease our shares in the sulfuric acid plants that we have within our perimeter. The next question is coming from Craig Hutchison from TD Cowen. The question is, what are your sales commitment volumes for 2025?

Thanks for the question. But unfortunately, we cannot disclose the information right now. But at the end of the year result, we expect to provide the guidance for the sales.

Thank you, Vladislav. The next question is coming from Julius Bottcher from her Fiera Capital. The question, can you clarify, is the inventory loan from ANU Energy is reflected in the inventory number? Is the material from ANU available future loans? The question will be taken by Ulan Hassan.

Actually, the loan between ANU Energy and the Kazatomprom has already closed. It was disclosed in the financial statement of the first quarter. So we don't have any loans between ANU Energy and Kazatomprom now.

Thank you, Ulan. The next question is also coming from Daniel Serkov. With regards to the Oxitec payment expectation of TRY 5 billion. So what's the current status? The question will be also answered by Ulan?

Actually, the good job was done by us. And so that's why -- the Oxitec like was by 95% to date by them. So that's why we can say that the question has been almost close.

Thank you, Ulan. The next question is coming from John Farah from [indiscernible]. So the question Mr. Kosherbayev and management back in at full year results suggested they believed uranium prices were structurally on the way up. Do you still believe this is the case?

Yes. Thank you for this question. This is Dastan here. Yes, we believe that this is still the case, but I'd like to note that over continues -- over relatively long period of time, we always iterated that even though that the structural deficit is approaching, which is supporting the prices going up, there's still -- the market itself is a bit inflated and the spot price and the term price need to come in to -- need to align and adjust. So what we're witnessing right now is the process basically corresponding with this notion. But nevertheless, going on forward, we believe that structurally, the prices will keep on going up.

Thank you, Dastan. The next question is coming from John Ciampaglia from Sprott. The question is, based on UxC, utilities so far this year have signed long-term contracts at half of annual replacement rate. How do you think your production guidance will change their mindset and procurement strategy?

Yes. Thanks for the question. We are already seeing the change in procurement behavior of utilities where they become much more flexible in contracting terms and more and more asset condition provided by suppliers.

Thank you, Vladislav. The next question is coming from Jason Fairclough with Bank of America. The question is to what extent was the company surprised by the MET change? It was a complete surprise to the market.

Yes. Thank you for your question. We understand that it was very surprising. It was very surprising also to us. But in the extent, we would say that in Kazakhstan, there are several taxations for the subsoil use contractors. So for example, if you see in the oil sector, there are several taxes like royalty tax, exporting custom tax, also MET, also the CIT and also excess profit tax. All of them, some vision of them is about the 50% or 60% of the expenses. That is why due to that oil sector has a good peak amount of margin. There are several taxes. Also, we did have heard that the government wanted -- had an intention to implement excess profit tax for uranium sector and the other mining sectors. But it goes through the mineral extraction tax. We did have some calculations, and we can now see that the -- if it was implemented, excess profit tax to uranium sector, so it would cost us much more, more than it is having now through the mineral exception tax. We are also, of course, surprised by it, but we can say that now we are being more favorable, more fair taxation in the Kazakhstan because there are several sectors which are being taxed a lot and there are several sectors that have been taxed smaller. So now uranium sector is more fairly taxed we can say.

Thank you, Ulan. The next question is coming from Daniel Serkov, the retail investor. That's -- it comes in Russian, so I'll just translate it. Does Kazatomprom expect to sell uranium to uranium funds this year? If yes, what would be the volumes?

Yes. We have fulfilled our obligation under option of YCPO year 2023, as they have disclosed in their press release. And further sales and with the Iranian funds, we cannot say more now. But as we have stated many times, we mostly focus on sales to end users and utilities.

Thank you, Vladislav. These are all the questions that team are through the webcast line. I would like the operator to once again check if there is any questions from the live line. If not, we will pass the floor to the management for closing remarks.

[Operator Instructions] We have no questions at this time.

Thank you. Since there are no questions, I would like to pass the floor to Dastan again for closing remarks.

Yes, I'd like to thank on behalf of the team and our CEO, who is unfortunately absent today. But as previously mentioned, he left with the government deligation on the state visit to the Tajikistan. And on behalf of entire Kazatomprom team, the company itself, I thank you for your interest. Thank you for your participation and would like to reiterate that despite all the rumors and insinuations going on in the market, facts always speak louder than words, and the company is doing pretty well. We believe that we have all the strong fundamentals and all the factors that will support our growth going on to the future. So thank you very much. Have a nice day.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.