Kazakhstan is causing a stir in the market with plans to raise its mineral extraction tax (MET) by 18%, starting in 2026. The government has proposed amendments to the tax code, which includes changes to the MET rate for uranium, as announced by Kazatomprom, the powerhouse of all uranium producers.
At present, uranium is trading at approximately US$85.95/lb, yet some market observers anticipate that the price could surge to US$90/lb by the end of the year due to decreased supply incentives and growing uncertainty.
In 2023, Kazakhstan’s uranium tax was calculated based on the weighted average price of natural uranium concentrate (U3O8) from public price reporting sources. This was then multiplied by the volume of uranium mined and a 6% tax rate was applied. This methodology will remain in effect until 2025, but the applicable MET rate for uranium will rise to 9%.
Starting from 1 January 2026, a differentiated MET approach will be implemented. The tax rate will then be determined by the actual annual U3O8 production volume under each subsoil use agreement. If the U3O8 price surpasses certain thresholds, the tax rate could climb to as much as 18%.
These tax alterations are projected to affect Kazatomprom’s future earnings. However, as these changes will only take effect from 1 January 2025, they will not influence the company’s 2024 tax-related guidance or expectations. Kazatomprom also noted that its various joint ventures and subsidiaries are likely to have different MET rates from 2026 onwards.
BMO Capital Markets Equity Research analyst Alexander Pearce in a report for Yahoo Finance, the new mineral extraction tax “is a surprise given it was increased in 2023.” Noting that “the new rates are not marginal, thus the new MET penalizes large mining assets with potential MET of up to 20.5% (18% for anything over 4KtU, or ~10.4Mlb U3O8, plus an additional 2.5% if the uranium price is >US$110/lb).
The report states that Pearce calculates the potential impact to cash flow and concludes that the new MET could impact Kazatomprom’s NPV10% by 5-10% and 2025 EBITDA by up to 5%, and that “from 2026 onwards the EBITDA impact could be ~8-12%.”
More significantly, however, he warns that the new rates “appear to provide less incentive for Kazatomprom to increase production, in our view, with less penalty for higher uranium prices than production, which could add to support for the uranium price.”
