REFERENCE: NAC Kazatomprom (Kazakhstan) - comments of KASE Listing commission

04.04.02 00:00
/IRBIS based on information of the KASE Listing commission, Apr 04, 02/ - At the admittance of the first issue indexed inscribed coupon bonds of National atomic company Kazatomprom CJSC into official list of the Kazakhstan Stock Exchange (KASE) under category "A" the Listing commission of the exchange decided to draw attention of potential investors to the following aspects. COMPETITION AND SALES MARKETS OF THE PRODUCTS Uranium market By the data of NAC Kazatomprom, its share in the world production of uranium is 5% and will reach 7% by 2005. The basis for the stability and effectiveness of the company is the unique raw materials base of uranium, since Kazakhstan is the leading state in the world on reserves of uranium. In 1991 the government of USA, fearing the loss of control over the market due to sales of cheap uranium by CIS countries and protecting the interests of western producers, started antidumping investigation. During the investigation (beginning from November 1991) imports of uranium to the USA from former USSR countries was completely banned. In 1992 the countries of the European Union joined the ban. In 1999 all restrictions on imports of Kazakhstani uranium were lifted and it allowed NAC Kazatomprom to expand the sales markets and take the solid positions on the world uranium market. Till now the prices on uranium were quite low, which is explained by the pressure of the uranium reserves accumulated during the cold war period. Today stable growth of uranium prices is observed. By the estimates of the analysts it will continue due to expected deficit of natural uranium and the decrease in reserves. Under such condition NAC Kazatomprom can react to the market accordingly. The strategy of NAC Kazatomprom is directed to offering more deeply processed goods as the deficit of uranium appears on the market, which will help to increase the income from extraction and processing of uranium. Besides, the company extracts uranium using the underground leaching method, which ensures low cost. Similar low cost production exists only in Uzbekistan, in fields of Canada and at copper and gold fields of Australia and Africa, where uranium is a by-product. All other sources of uranium supplies for the nuclear energy have high costs and can not compete with the Kazakhstani uranium. Apart from this, NAC Kazatomprom began the program of offering services to western companies to process hardly processed uranium containing products, which will allow the company to go into new markets and increase the extraction of uranium for a certain buyer, including through the establishment of joint ventures with the leading world-class companies. Objective analysis of the world nuclear energy condition and the tasks set for the energy sectors indicate that now the nuclear energy is the most perspective sector. By taking into account this situation, new nuclear power plants in developed countries of America, Europe and South-East Asia are going to be built, which will increase the orders for fuel of nuclear stations. Thus, in upcoming ten years there are all grounds for the existence of a solid and guaranteed sales market for the company's uranium and the increase in demand for fuel of nuclear stations. Tantalum market Tantalum market is characterized by a quite favorable situation. Especially in developed countries the production and consumption of tantalum products will grow about at 8-10% a year. Forecasted level of prices for tantalum raw materials will increase by 5-10% in upcoming 2-3 years. Now, the production of tantalum items at UMZ OJSC accounts for more than 8% of the world production. Until now the main sales were based on exchange production basis. The major consumers of such services are Nottington Trading Ltd (Switzerland), Metallurg International Resources GMBH (USA) and others. Here comes the risk of interruptions in the production of this products due to the absence of stable sources of raw materials. Now, the inspection and re- evaluation of tantalum-niobium raw material base of Kazakhstan is being carried out. Beryllium market Beryllium market is highly monopolized, but demand for beryllium bronze will keep growing, and major producers will increase the production to satisfy the demand. There are only three producers of beryllium in the world with complete cycles: UMZ OJSC, American Brush Wellman and Chinese NNMS, which mostly sells on domestic market. Brush Wellman is the major producer of beryllium and produces about 260 tons a year. Of this number more than 200 tons are alloys of beryllium with copper, aluminum and nickel. The production volume of beryllium by NAC Kazatomprom will reach 23% of the world's production, and UMZ OJSC is the major supplier of alloys on the bases of copper, aluminum and nickel. Now the production capacity of UMZ OJSC is going to be increased. In September 2000 long-term contract was signed with Brush Wellman to supply significant volumes of beryllium which guarantees stable production and possibility of increasing the production. The risk of beryllium production for NAC Kazatomprom is minimized by the existing long-term contracts and reserves that ensure the company's production for at least 20 years. ENVIRONMENTAL RISKS Geological survey NAC Kazatomprom conducts geological survey of the uranium reserves, extracts, processes and produces more deeply processed products from uranium, but does not service the nuclear reactors that exist in Kazakhstan. Geological survey of the uranium reserves does not carry much environmental risks because the specifics of Volkovgeologya OJSC activities which the geological survey of the uranium fields and study of radioactivity situation in the country. Extraction of uranium Extraction of uranium at all fields of NAC Kazatomprom is conducted by the most progressive method - underground well leaching, where the minimum damage is made to the landscape and subsoil. Based on generally accepted international estimates, the risk of radiation hazards at the enterprises which are engaged in extraction of uranium using UWL method does not exist at all in case of emergencies, and under the external influence is very low (the emission of radionuclids creates additional radiation which is almost not detected due to natural radiation level). Solid radioactive waste, which is collected during the production, is characterized as low radioactive. The enterprises of NAC Kazatomprom dispose them in special burial grounds based on the norms adopted in Kazakhstan. Contamination of underground water The monitoring of the underground water is the key issue under UWL extraction. There are number of wells used to monitor the waterbearing levels, where the samples of water are taken constantly to make necessary measurements. The extraction site is blocked by sanitation zone, which stretches for 500m around the ore field. In water samples taken from the monitoring wells at the enterprises of NAC Kazatomprom there is no radionuclide contamination over the norms (NRB - 99). Besides, it should be mentioned that all uranium mines developed by the companies are located in deserted regions of Kazakhstan, far from dwelling places. Air pollution Air pollution is constantly monitored both by NAC Kazatomprom and the specialists of Environment Protection Committee of the Ministry of Natural Resources and Environment Protection of Kazakhstan. The main sources of the pollution are the boilers used to heat the settlements of the miners and other facilities of the plant. Other sources - are vehicles and diesel stations. In this case noxious emissions to the air by the regular vehicles of the company and boilers does not exceed the norms. Therefore, there is no environmental hazard to the nature and people. Processing and production of more deeply processed goods The most of hazardous production is focused at UMZ OJSC. Considering the specifics of the production at the plant, in order to continue the working process, and to meet the requirements of environment protection legislature and other norms of Kazakhstan all necessary normative-permissions on limits of emissions and wastes were obtained, the permission on special use of the resources was obtained, where the limits of emissions, wastes and disposals of production wastes are set, production monitoring over the environment and the influence of the UMZ OJSC production on the environment are organized. There were no claims from the state bodies of Kazakhstan over the environmental danger of UMZ OJSC during the last 10 years. Based on the legislature acts UMZ OJSC signed an agreement to insure against the environmental pollution for KZT20.0m and for further recultivation of the land used during the production the liquidation fund amounting to 1% of the cost of sold goods was founded. NAC Kazatomprom had taken and keeps taking all necessary measures to maintain all environmental and radioactive protection measures, including conducting independent international environmental expertise, which concluded of satisfactory condition of the environment at its enterprises after the investigation of uranium production of NAC Kazatomprom. The company plans to conduct an Environmental certification of all the production by independent international organization in 2002. TECHNICAL RISKS As of October 1, 2001 wearout of fixed assets of all enterprises of NAC Kazatomprom was about 51% on average. Investments into the renewal of worn out equipment during the last three years reduced the wearout degree of major extraction and production facilities of the enterprises by 7% on average. The capital investments in 1998-2000 and in 9 months of 2001 equaled KZT8.2bn. Major technological equipment of NAC Kazatomprom enterprises have also a high degree of wearout. The company is conducting coordinated policy on renewal and modernization of the major production facilities, which will eliminate the risks of interruptions and stable work of all technological equipment of NAC Kazatomprom and it will lead to the improvement of the quality of products and cut their volumes. After considering the facts mentioned above the management of NAC Kazatomprom guarantees to minimize the risks related to full or partial halt of the company's production. [2002-04-04]