JSC National Atomic Company Kazatomprom

Hello everyone and welcome to Kazatomprom's conference call to discuss 2026 half-year operating and financial results. My name is Botagos and I'm leading the investor relations team at Kazatomprom. Thank you for taking the time to join us today. Traditionally, our conversation will begin with a management presentation which will be delivered by our CEO, Mr. Yusupov. At this time and through the management presentation, all participants will be in a listen-only mode. This call is open to all stakeholders with a question and answer portion intended to be an opportunity for members of the investment community to engage with the management team and ask their questions through the phone lines in English. English line participants will also have an option to submit questions through the webcast page using the Ask a Question button. The simultaneous translation of the English Q&A will be available for Russian speaking line. For those who joined through the company's or the London Stock Exchange website, there will be slides 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 version of the 2026 half-year operating and financial review along with the financial statements for three and six months and the 30th June 2026 are now available on Kazatomprom's website Participating in today's call, we have Kazatomprom's management team. Mirzhan Yusupov, chief executive officer, Marat Tulebaev, first deputy and chief financial officer, Dastan Kosherbaev, chief strategy and international development officer. 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 risk 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. Yusupov.

Thank you, Batagos. Welcome everyone and thank you for joining our conference call on 2026 Health Year Operating and Financial Results. Before we discuss our performance, I want to spend few minutes to outline the broader environment shaping our industry and illustrate why Kazatomprom's position is so vital to global energy security. Let's analyze the first half of 2026. Nuclear energy has officially transitioned from a policy debate on paper into operational execution. We see strong indication of this across the world. Consider the US market. The Department of Energy has committed a record $17.5 billion in federal funding. This capital allocation directly accelerates the deployment of up to 10 new reactors. Globally, 38 countries, including Kazakhstan, signed the plan to triple nuclear power by 2050. Together, these nations make up over 70% of global GDP. That is massive global change driving the real momentum. The proof is simple. More than 70 reactors are being built around the world right now. The market is executing as we speak. Now let's analyze the pricing dynamics. This acceleration in demand is meeting a highly disciplined commercial environment. Long-term indicators have been incredibly stable and reached maximum in 18 years, being in the mid to high $90 range per pound. This is a very strong foundation for any future term contracting. Additionally, financial investment funds continue to accumulate physical uranium. This consistent buying supported the spot market, driving the spot price up by roughly a quarter in the first half of 2026 compared to last year. The growing demand is clearly reflected in recent market data, which highlights a distinct shift in utility procurement strategy. Western utilities are actively transitioning from a just-in-time philosophy to a just-in-case strategy. They are moving away from short-term spot reliance towards long-term inventory security. This structural change confirms our macro outlook perfectly. According to Euratom, in 2025 utilities from the European Union actively optimize their fuel management. They prioritized the accumulation of strategic inventories alongside regular operational needs. Similarly, in the United States, total commercial inventories crossed 170 million pounds. This volume equals the total global primary demand seen in 2025. Meanwhile, the East is driving an unprecedented expansion, which creates an incentive for even more buying. In China, the State Council recently greenlit the construction of four new nuclear power projects, adding another eight reactors to this build-out. Simultaneously, India is pushing ahead with an ambitious goal to commission five new nuclear reactors within this decade. Let me be very clear. We must not mistake this inventory build-up as market oversupply. What is happening is that utilities are establishing substantial inventory reserves because they have to. This strategic buffer is a necessity, not a preference. This is institutional risk management, not a permanent market surplus. Remember that uranium from a mine takes a long journey before it enters the nuclear reactor in a fuel assembly. Going through conversion, enrichment and fabrication typically takes about two years. These lengthy lead times, combined with market uncertainties and supply risks, put heavy pressure on utilities to keep their reactors running. Ultimately, this highlights why maintaining reliable, ready inventories is absolutely critical. Our customers confirm this reality all the time. For several consecutive years now, our clients have identified supply security and the need for new production investments as their primary concerns. Within this very dynamic market framework, our strong and steady financial and operational results clearly demonstrate that our strategy is delivering exceptional value. At the same time, primary uranium production all over the world faces many challenges. Producers continue to battle inflation, operational risks, regulatory obstacles and delays. On top of that, recent legislative actions in key Western markets have intensified the demand for reliable independent supply. In this current market, Kazakhstan's role as a trusted global partner is absolutely clear. Accounting for approximately 39% of all primary production, our nation remains essential to sustaining the global nuclear fuel supply chain. We continue to prove the reliability of the Trans-Caspian International Transport Route, our middle corridor. Through this vital route to the West and our established networks to the East, we ensure secure physical delivery to our diverse customer base worldwide. The market is showing clear signals of a fundamental shift. Pricing power has returned to producers with proven and large uranium reserves. As the absolute leader in this category, Kazatomprom will not compromise the long-term value of our high-quality assets. As usual, we remain committed to our value over volume strategy. Let me be clear, we will sign new commercial commitments only when market terms fully reflect the core economic fundamentals of the industry. We will not sell our pounds underpriced. Now, shifting to our half-year performance in sales, group-level sales exceeded 7,500 tons, in line with our sales level from the same period last year. This demonstrates strong operational continuity. The slight year-on-year decline in sales volumes at the company level is just the result of delivery schedule shifts. In terms of production, performance in the first half of 2026 was higher across both group and company levels by 9% and 10%, respectively. These results keep us fully on track with subsoil use requirements for 2026. Significantly, our group's average realized price increased by 16% year-on-year to $67.88 per pound. This performance highlights the overall strength and stability of our commercial portfolio. Turning to our financial performance, the Group delivered strong top-line growth and resilient results throughout the first half of 2026. This happened despite significant global economic instability and currency fluctuations. Consolidated revenue showed a 9% year-on-year growth to almost 718 billion tenge compared to 660 billion tenge in the first half of 2025, reflecting financial discipline and favorable market conditions. Our core performance remained fundamentally stable. Operating profit reached almost 253 billion tenge, effectively matching the results from the last year and highlighting the consistency and reliability of our business model. Similarly, adjusted EBITDA stood at 371 billion tenge, 2% up from the last year's six-month period, illustrating the stability of core operations. Due to unfavorable foreign exchange appreciation, we saw a slight decrease in our net profit for the first half of 2026 to 240 billion tenge compared to 263 billion last year. This change was primarily driven by non-operational factors, specifically the negative impact of higher net foreign exchange losses and increased finance costs during the period. attributable EBITDA landed at roughly 265 billion tenge, representing a 12% decline. This was mainly the result of a higher share of sales and EBITDA of mining subsidiaries attributable to non-controlling partners. Thus, a larger share was allocated to non-controlling partners of such subsidiaries, reducing the proportion directly attributable to the owners of the company. From an inventory perspective, we maintain a solid position that provides strong buffer and gives us a competitive edge in the market. We can ensure both fulfillment of all our delivery obligations and the flexibility to changing market conditions. As of 30 June 2026, consolidated group inventory slightly exceeded 8,200 tons, representing a 23% increase year-on-year. At the company level, inventory rose by 15% to 6,200 tons. The increase in inventory balance resulted from a higher 2026 production plan as per the company's guidance and in line with the company's efforts in building up and maintaining a comfortable level of inventories. Our financial results clearly reflect a healthy growth and sustained profitability. This performance provides us with reliable leverage to navigate through the changing macroeconomic landscape over the rest of the year. Challenging factors have impacted uranium production costs industry-wide, with us experiencing similar pressures. In the first half of 2026, our C1 cash costs rose by 37%, and our all-in sustaining costs increased by 25% in US dollar terms compared to the same period in 2025. The main drivers of the increase in C1 cash costs were a higher mineral extraction tax rate, rising sulfuric acid prices, as well as the appreciation of Kazakh tenge against the US dollars. On average, the cost of sulfuric acid increased by 39%. This reflects the ongoing price uncertainty in the market. However, and I want to highlight this fact, despite the increase in price, sulfuric acid represented only 15.3% of the group's uranium production costs, practically on the same level as a year ago, which was 15.4%. The supplies for 2026 will be stable. The company would also like to mention the regulatory pause at one of the TQZ construction sites, as was announced today. At present, we expect that the delay would shift the project timeline by approximately 6 to 12 months. This is unfortunate, but represents the harsh realities of the mining industry. At this stage, we do not expect that the schedule shift will have a material impact on our uranium mining operations. we have established reliable sulfuric acid supply channels from both domestic and cross-border producers, which we expect to continue utilizing. In other words, we have a large toolbox for solving those issues. While we maintain standard commercial confidentiality regarding our exact contract terms, our updated sensitivity table clearly demonstrates how effectively our sales structure captures upward market movements. This strong alignment with market prices, which stands as a key competitive advantage within our sector, confirms the structural flexibility and resilience of our commercial framework. As the uranium market continues to improve, Kazatomprom remains uniquely positioned to capture further upside unlike anyone else. The company confirms its production sales volume guidance for 2026 at this time. We continue to execute effectively on our operational targets and remain fully committed to our clients and shareholders. We are, however, adjusting our financial outlook for the year. This update incorporates revisions to our revenue, C1, all in sustaining costs and capex ranges. It is important to provide some key context regarding the underlying drivers for these adjustments. Our revised revenue outlook reflects real macroeconomic realities, specifically the strengthening of the Kazakh tenge against the US dollar. This currency change creates an immediate direct impact on our numbers, forcing us to adjust our initial budget assumptions. On the cost side, in addition to tenge appreciation, there is persistent inflation driven by sharp price increases for sulfuric acid. Because our accounting policy capitalized the asset used for initial oil preparation, this inflation directly drives our capital expenditure guidance higher. Importantly, our revised 2026 CAPEX guidance is a proactive choice. We are deploying capital now to secure long-term growth ahead of the demand. We handle cost realities with absolute commercial discipline. New realities are signaling that the era of cheap uranium is fading away. But the fundamental urgency for secure, baseload, emission-free power is stronger than ever. Global utilities completely recognize this shift. We are certain that long-term uranium demand is going to be consistent and powerful. Every single pound we produce will have a clear, committed, and waiting buyer. To conclude, I would like to emphasize once again that our commitment to a market-focused strategy is firm. This focused approach remains the solid foundation of our long-term success. Kazatomprom manages world-class assets, a highly reliable and extensive reserve base, and a stable diverse sales portfolio. It's been 29 years as we remain a trusted primary partner for global utilities looking to secure and diversify their supply. Thank you for your attention. I will now ask the operator to open the line to allow questions from this call's participants.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Please submit yourself to two questions at a time. If you have additional questions, you are welcome to rejoin the queue. As a reminder, you can also submit questions using the ask a question button on the webcast page. To ask a question on the phone lines, please press star followed by the number one on your telephone keypad. Once again, if you are dialed into the conference, and would like to ask a question, please press star followed by the number one on your telephone keypad. We will now pause for a moment as callers join the queue. Our first question comes from the line of Amy Lee with UBS. Please go ahead.