Kazakh move stuns Uranium One

Allan Seccombe | Wed, 27 May 2009 16:51
[miningmx.com] -- URANIUM One reckons its acquisition of a stake in a Kazakhstan project is above board and there has been a misunderstanding, after a statement from that country’s government that some uranium deposits had been sold to foreigners illegally.

The Kazakh authorities singled out Uranium One as one of those deals.

Trade in Uranium One's shares in Toronto has been halted by the Investment Industry Regulatory Organisation of Canada after they fell by a third.

All Uranium One’s operating interests are in Kazakhstan as it plans to develop a mining project in Australia and is looking to bring others in the United States into production. It has closed its South African uranium mine.

“As far as I’m concerned there’s absolutely nothing wrong with our assets, including the Kyzulkum one,” Nortier told Miningmx. “We had absolutely no inkling this was coming. We had no letter or phone call. We had no idea this was going to come.”

“There must be a complete misunderstanding,” he said.

Uranium One's shares on the JSE last traded at R17.90, down R7.42, a 30% fall. In Toronto, the share was C$2.32, down 97 cents, a 30% decline.

Uranium One achieved record production in the March 2009 quarter with the total of 708,500 lbs being 14% up on the 618,900 lbs produced in the March 2008; attributable commercial production was 62% up at 700,900 lbs (March quarter 2008 – 431,500 lbs).

Reuters reported that last week Kazakhstan's KNB, the successor security service to the Soviet-era KGB, arrested Mukhtar Dzhakishev, a long-serving head of state Kazakh uranium producer Kazatomprom, along with seven other executives.

"Preliminary results of the investigation show that Mukhtar Dzhakishev and other managers ... squandered state property in the form of Kazakhstan's largest uranium fields by handing them to a number of offshore companies," the KNB is quoted by the newswire as saying.

The KNB singled out the sale of a 30% stake in the Kyzylkum uranium joint venture, which runs the country's largest uranium mine, Khorasan, as an example of an illegal transaction. It said the stake was sold for 15.6 million tenge ($103,700), but did not name the buyer, Reuters reported.

Uranium One, which is listed on the Toronto and Johannesburg bourses, owns a 30% stake in Kyzylkum. It acquired the stake in the joint venture as well other projects in Kazakhstan through its February 2007 purchase of UrAsia, a Canadian uranium company.

The UrAsia directors who put the Kazakhstan transaction together are with Uranium One and maintain there was no problem with the deal, Nortier said.

“How do you end up paying $425m for assets and say it’s fraudulent? In addition, we put in $120m worth of loan finance to develop the assets,” he said. “There’s absolutely no issue from our side.”

He pointed out the 30% stake in Kyzylkum was purchased for $75m and another $80m in loan finance, while the media release from the Kazakh authorities refer to $103,000. "We put in $155m into that asset, so they're obviously not referring to us," he said.

The acquisition of the Kazakh assets was granted government approval, he said.

"We believe our title is in good standing and there is no issue from our perspective," he said.

Uranium One wants an interview with Kazakh officials to "clarify this obvious miscommunication."

"We'll seek a statement from them - a statement that everything we're doing in the country is acceptable and fine," he said.

All Uranium One's assets are in operation and the Khorasan mine is still open and working, he said.

Nortier has had an uphill battle to restore credibility to the company since he took over as acting CEO in February 2008 after the surprise resignation of Neal Froneman. The company had issued a slew of production downgrades, badly damaging investor sentiment.