On July 10, Kazakhstan, the world’s largest uranium producer, announced a significant increase in the Mineral Extraction Tax (MET) for uranium mining, causing uranium prices to surge. Analysts suggest that the new tax law is essentially a penalty on increasing uranium production, which will suppress future growth in uranium supply. Coupled with rapidly growing demand, this will drive further increases in uranium prices.
In 2023, Mr. Alex Klenman, President, CEO and Director of the Canadian alternative energy exploration and development company Azincourt Energy Corp. (TSXV: AAZ, OTCQB: AZURF) , stated in an interview with “METALS 100” that the company’s core projects are in the clean energy field and that they are currently developing the East Preston uranium project located in the Athabasca Basin in Saskatchewan.
Canada is the world’s second-largest uranium producer, and in recent years, uranium mining has been booming, especially in the Athabasca Basin in Saskatchewan. According to the World Nuclear Association (WNA), Canada is expected to overtake Kazakhstan as the world’s largest uranium producer.
The new tax regime will be implemented in two phases. The first phase, starting from January 1, 2025, will raise the current 6% unified tax rate to 9%. From 2026 onwards, the MET tax rate will be divided into a base rate and an additional rate, adjusted based on production and the price of natural uranium concentrate (U3O8). When annual production is no more than 500 tonnes, the tax rate will be only 4%, after which it will gradually increase with production, up to a maximum of 18%. Furthermore, if the U3O8 price exceeds $70 per pound, there will be an additional rate of 0.5%, up to a maximum of 2.5%.
BMO analyst Alexander Pearce expressed surprise at the introduction of the new mining tax, as there had already been an increase in 2023. Additionally, the MET rate increases with the growth in uranium production, up to a maximum of 20.5% (18% base rate + 2.5% additional rate), which is essentially a penalty on large mining assets and will inhibit future increases in uranium production. This will change the global supply and demand dynamics in the uranium market, thereby supporting uranium prices.
Kazakhstan’s Minister of Economy, Alibek Kuantyrov, mentioned in an interview that Kazakhstan’s mineral extraction tax rate is one of the lowest globally and that it can be cautiously increased by 10% to 20% in the future.
As a result of this news, North American uranium-related stocks surged on Wednesday, with Uranium Royalty Corp (NASDAQ: UROY) rising by 11%, Forsys Metals Corp. (OTCPK: FOSYF) up by 10%, and Cameco Corp (NYSE: CCJ) increasing by 9.6%. Additionally, uranium exchange-traded funds (ETFs), such as the Global X Uranium ETF (URA), VanEck Vectors Uranium+Nuclear Energy ETF (NLR), and Sprott Uranium Miners ETF (URNM), also saw significant gains.
