WOOD Flash – Kazatomprom: Petition 232 – a radiant development?

Last week, a number of business media reported that the US Department of Commerce (DoC) had made its recommendation to the White House on possible restrictions on US uranium imports, which could see a requirement for 5% of supply to be sourced locally or a potential ban on imports from selected countries. While the official decision is unlikely to be announced before 15 July, we are moderately positive on this potential outcome. We estimate that the ultimate impact on the global market from lower US imports could be as low as 0.8% of the current supply; however, most importantly, the final decision should remove the uncertainty that has held back major utility consumers from signing new long-term contracts and delayed the rebalancing of the global uranium market. We reiterate our BUY rating on Kazatomprom, with a USD 22.6/GDR price target (PT) (KZT 8,600/share), as this is the largest and lowest-cost producer in the world, committed to a minimum of USD 200m of annual dividend payments and trading at over a 50% discount to its major global peer (Cameco).