Uranium shares soared after Kazakhstan, the world's largest producer of uranium, unexpectedly raised mining taxes.

On Thursday, EFT Sprott Uranium Miners, the largest uranium mine, performed strongly. US stocks closed at $52.11, up $2.01 from the previous day, or 4.01%.

Kazakhstan raises uranium mining taxes

The most direct reason for the surge in uranium stocks is Kazakhstan's decision to raise uranium mining taxes. As the world's largest producer of uranium, Kazakhstan accounted for 45.96% of the world's natural uranium production in 2021.

On the 10th, President Kasim Jomart Tokayev signed new tax legislation amendments. Under the new regulations, the new mineral extraction tax (MET) will increase from 6% in 2025 to 9%.

The biggest change, however, is that starting in 2026, the government introduced two-tier METs, calculated based on production and spot uranium prices (see table below).

This move is likely to have a significant impact on the supply pattern in the uranium ore market. BMO analyst Alexander Pearce (Alexander Pearce) calculated the potential impact on the cash flow of Kazatomprom, a subsidiary of Samruk-Kazyna, the world's largest uranium producer:

The new MET is likely to have a 5-10% impact on KazatomProm's NPV 10%, an impact of up to 5% on EBITDA (profit before interest, tax, depreciation and amortization) in 2025, and the impact on EBITDA is likely to be 8-12% starting in 2026.

More importantly, he warned that the new MET provides less incentive for uranium mining companies to increase production because the impact of new taxes on corporate profits exceeds the potential benefits of increasing production.

Therefore, this policy is likely to limit the growth of uranium production, thereby supporting the rise in uranium prices.

Global uranium reserves are uneven, and the US-Russia ban exacerbates supply and demand tension

Currently, global demand for uranium is rising. As the main fuel for nuclear power plants, uranium's clean, stable, and safe characteristics make it increasingly important in global energy planning. In 2023, the spot price of uranium began to rise at an accelerated pace and became one of the best-performing energy commodities of the year.

Currently, global reserves are unevenly distributed, mainly in countries such as Australia, Kazakhstan, Canada, Russia, etc. Among them, Kazakhstan has proven that uranium deposits are mainly low mining costs, and uranium ore with a cost of less than 130 US dollars accounts for 70% of the country's reserves.

Currently, the instability of the international situation has further exacerbated the uncertainty of uranium production and prices, and increased the risks in the global supply chain. In May 2024, US President Joe Biden officially signed a bill prohibiting the import of unirradiated enriched uranium produced in Russia. If Russia takes anti-sanctions measures, global uranium enrichment capacity will face greater shortages and mismatches between supply and demand.