BOCI has released a research report maintaining a BUY rating on CGN MINING (01164). If the company's first-half losses were solely due to seasonal factors, the firm believes investor sentiment could recover. The bank still views CGN MINING as a key beneficiary of the uranium price upward cycle. The company is expected to announce its interim results tomorrow after market close.

Kazatomprom released its interim results last Friday. Updates on its operational situation have implications and insights for both natural uranium supply-demand fundamentals and CGN MINING's interim results. BOCI's main observations are as follows:

**Production Guidance** The most notable adjustment in Kazatomprom's results was the downward revision of its 2026 nominal capacity (100% basis). The company reduced its capacity ceiling by 10% from 32,777 tonnes of uranium (85 million pounds of uranium) to 29,697 tonnes of uranium (77 million pounds of uranium). Management indicated that this reduction of approximately 3,000 tonnes of uranium was primarily due to adjustments at the Budenovskove joint venture.

Although actual production will still depend on negotiations with Kazatomprom's joint venture partners, this downward revision sends a clear signal to the market: the world's largest uranium producer is not prepared to resume full-capacity production at current market prices. Kazatomprom has maintained discipline over the past few years, adjusting its production based on market conditions. The bank believes the new guidance also reflects that natural uranium mining companies are gaining greater bargaining power in pricing negotiations, as more tender activities have emerged recently in the market, which is unusual during the summer period in previous years.

**Infrastructure Readiness** The downward revision of 2026 capacity guidance contrasts with the progress Kazatomprom has made in production infrastructure. On one hand, joint venture KATCO has commissioned a new processing plant with a capacity of 2,000 tonnes of uranium. On the other hand, construction of a new sulfuric acid plant has begun and is expected to commence operations in the second quarter of 2027. The company believes the sulfuric acid shortage issue has been largely resolved, and future challenges are more likely to be related to sulfuric acid pricing rather than supply volume.

**Seasonal Sales Fluctuations** Despite a 13% year-on-year increase in total production, Kazatomprom's natural uranium sales volume in the first half of 2025 declined 2% year-on-year to 7,625 tonnes of uranium due to customer delivery timing arrangements. Although Kazatomprom did not provide a breakdown of sales volumes at the joint venture and subsidiary level, the bank believes seasonal sales factors may also be one of the reasons for CGN MINING's profit warning in the first half of 2025. Given that Kazatomprom maintained its full-year sales volume guidance of 17,500-18,500 tonnes of uranium unchanged, the bank expects sales volume to catch up in the second half of 2025.