Russia to Buy 17 Percent of Canada’s Uranium One

Business Materials 15 June 2009 19:08 (UTC +04:00)

Russia's state-owned nuclear company, agreed to buy 17 percent of Uranium One Inc. in exchange for half a Kazakh mine, Bloomberg reports.

Rosatom's ARMZ Uranium Holding Co. will exchange its stake in the Karatau mine, which went into production last year, for 117 million Uranium One shares and as much as $150 million in cash, the Canadian company said today in a statement. Toronto- based Uranium One will sell half the uranium from Karatau to ARMZ or 20 percent of its total output, whichever is greater.

Russia, holder of the third-largest uranium resources after Australia and Kazakhstan, is seeking cheaper sources of the metal as it signs new enriched-uranium supply contracts in the U.S. and Japan. Globally, Rosatom accounts for 40 percent of enrichment capacity and 8 percent of uranium-mine production.

Rosatom is among companies competing for world uranium assets. Korea Electric Power Corp. agreed to buy 20 percent of Canada's Denison Mines Corp. in April and said in May it would target Australian miners. China has urged its companies to buy uranium reserves abroad as the nation expands nuclear-generating capacity, according to the National Energy Administration.

"In a situation when rivalry for uranium assets has been growing more acute, ARMZ started pursuing a proactive mergers and acquisition policy," the Russian company's Chief Executive Officer Vadim Zhivov said in the statement.

Uranium One rose 0.6 rand, or 2.9 percent, to 21.10 rand by 2 p.m. in Johannesburg trading. It has gained 71 percent this year, valuing the company at 10.1 billion rand ($1.3 billion).

Uranium One will also fund the Karatau deal in the fourth quarter with an equity placing to Japanese investors, CEO Jean Nortier said on a conference call today. The company agreed in February to place C$270 million ($239 million) of shares with Tokyo Electric Power Co., Toshiba Corp. and the Japan Bank for International Development, giving them a combined 20 percent.

Uranium One "will have no problem raising funds" should it fail to get money from the Japanese in time, Nortier said.

The Japanese investors' stake will shrink to 17 percent, the same as ARMZ, after Uranium One issues new shares under the Karatau deal, Oleg Fedyashin, ARMZ's corporate development chief, said in Moscow today. ARMZ also has permission to boost its stake to 20 percent by buying shares in the market, he said.

"This deal shows we made our choice and would like to make Uranium One the basis for our expansion abroad," Zhivov said. "We have every possibility to increase our share in Uranium One should that be of interest and meet with board approval."

Uranium One also has an option to buy ARMZ's 50 percent in the Akbastau project in Kazakhstan, Fedyashin said. Karatau's profit is forecast at $82 million in 2009, and $169 million in 2010 when it reaches planned capacity, he added.

Uranium-oxide for immediate delivery gained $2 to $52 per pound in the week ending June 12, according to Denver-based pricing service TradeTech LLC.

Uranium One, which already has deposits in South Africa, Australia, the U.S. and Kazakhstan, produced 2.86 million pounds of uranium oxide last year, while Karatau turned out 1.7 million pounds. Karatau is due to produce 3.6 million pounds at a cash cost of $15 per pound this year and 5.2 million pounds in 2010.

ARMZ bought its stake in Karatau from billionaire Vasily Anisimov for an undisclosed sum in January. The rest of Karatau is owned by Kazatomprom, the Kazakh state-owned nuclear company.