Uranium One ups Kazakh exposure

Allan Seccombe and Brendan Ryan | Mon, 15 Jun 2009 07:24
[miningmx.com] -- URANIUM One is acquiring a 50% stake in the Karatau uranium mine in Kazakhstan for shares and cash that will bring in the Russian state-owned ARMZ as a large shareholder and boost production.

The acquisition comes despite the fallout after a a statement from Kazakh authorities that some uranium deposits had been sold to foreigners illegally and singled out Uranium One. The government has subsequently said it will honour all transactions in the uranium sector agreed with foreign companies.

Uranium One CEO Jean Nortier told a conference call held from Toronto today that, "I do not expect anything else from the Kazakh authorities other than this commitment to honour foreign transactions which is why I am very confident in going ahead with the deal with ARMZ. " Uranium One will acquire the 50% stake in Karatau from JSC Atomredmetzoloto (ARMZ), for 117 million shares and US$90m cash, making ARMZ a 16% shareholder in the TSX- and JSE-listed company.

Uranium One has agreed to provide for a contingent payment to ARMZ of up to $60m, payable in three equal tranches over the period between 2010 and 2012 subject to certain post-closing tax related adjustments.

Uranium One expects to have attributable production of 7.5 million pounds by 2010, a 35% increase over its previous forecast for that year. Its cash operating cost will be below $20/pound.

Kazakhstan's state-owned Kazatomprom holds the other half of Karatau.

Uranium One has an exclusive right to negotiate the purchase ARMZ's 50% stake in the Akbastau uranium project, which is in pilot production and is nextdoor to Karatau.

"I have just returned from a business trip to Kazakhstan to discuss this transaction where I am pleased to say that this agreement with Uranium One is viewed positively," said Vadim Zhivov, Director General of ARMZ.

Uranium One has struck an offtake deal with ARMZ for the Russian group to buy at industry-standard terms 20% of Uranium One's attributable production from assets for which it has the marketing rights.

Uranium One in turn will open accounts with Russian uranium converters to enrich uranium for its clients.

"Since Uranium One currently receives payment for its production at conversion facilities located in North America and Europe, access to Russian facilities will potentially significantly shorten the time period required for the Company to turn production into sale proceeds, and assist utility customers with access to enrichment services, particularly those customers located in Europe and Asia," Uranium One said.

ARMZ will, after a C$270m investment by a Japanese consortium in Uranium One, hold an indirect stake of 16.6% stake in the uranium group and may not for five years buy more than 19.9% of the company.

Karatau, which is near the mines in Uranium One's 70% held Betpak Dala joint venture with Kazatamprom, started commercial production last year and production 1.7 million pounds of U3O8.

Karatau is forecast to produce 3.3 million pounds of U3O8 this year at a total cash cost of around $15/lb, and it is expected to reach steady state production of 5.2 million pounds by 2011.