ARMZ takes hold of Uranium One

Wednesday, 9 June 2010

Russia's AtomRedMetzoloto (ARMZ) and Toronto- and Johannesburg-registered Uranium One have signed an agreement that will place Uranium One among the top five global uranium producers and see ARMZ take a controlling interest in the company. Meanwhile, Russia may be about to open an enrichment plant to part-foreign ownership.

 

Zarechnoye yellowcake (Image: ARMZ)

ARMZ will contribute to the deal its interests in two Kazakh in-situ leach uranium mines - its holdings of 50% in the Akbastau mine and 49.7% in the Zarechnoye uranium mine - plus $610 million in cash. In return, the mining division of Russia's Rosatom state nuclear corporation will receive 356 million common shares in Uranium One, which along with ARMZ's existing 23.1% holding will give it an interest of at least 51% in the company.
 
The addition of ARMZ's assets to Uranium One's existing projects will see the company's production in Kazakhstan increase by about 60% from its current 10 million pounds U₃O₈ per year to 16 million pounds U₃O₈ per year, at consolidated cash costs of less than $20 per pound, according to Uranium One. Akbastau is contiguous to the Karatau operation in which Uranium One has a 50% holding, giving scope for management and operating systems synergies.

Uranium One CEO Jean Nortier said the deal would position the company "to be among the world's top 5 uranium producers by 2011," while ARMZ director general Vadim Zhivov said that developing and operating projects in Kazakhstan was a priority for the Russian company. "We are confident that Rosatom’s controlling interest in Uranium One will allow it to further strengthen its excellent relationship with its partners in Kazakhstan and to open up new promising avenues for cooperation," he said.
 
The transaction is subject, among anti-trust and other conditions, to Kazakh regulatory approvals, approval under Canadian investment law, clearance by the US Committee on Foreign Investment, and approvals from both the Toronto and Johannesburg stock exchanges, but is expected to be finalised by the end of 2010. It also contains various protections covering the possible future sales of ARMZ's common shares in the company.
 
The board of Uranium One will be reduced from thirteen to nine, with five independent directors, two of whom will be nominated by ARMZ. Ian Telfer will continue as chairman and Jean Nortier as CEO, and ARMZ will also be entitled to nominate three additional board members. It is not yet clear how Uranium One's Japanese shareholders, which together hold 20% of the company through Japan Uranium Management Inc, will be affected by the transaction.
 

Kazatomprom to buy into Russian enrichment? Rosatom is planning to sell a stake in one of its uranium enrichment plants to Kazakh national nuclear corporation Kazatomprom, according to reports in the Russian and Kazakh media.   According to Interfax, Rosatom departmental deputy chief Vladislav Korogodin told reporters that Rosatom was prepared to sell Kazatomprom up to 49% one of its enrichment plants, either the Urals Electrochemical Combine or the Electrochemical Plant. The Moscow Times and Interfax both cited Kazatomprom chief Vladimir Shkolnik as saying that he hoped the deal would be completed before the end of September.   According to press reports, it would appear that the deal could supersede the 50-50 joint venture set up by Kazatom and Tenex in 2008 to finance a 5 million SWU/yr increment to the Angarsk plant.   Shkolnik also confirmed that he hoped that Russia and Kazakhstan would sign an intergovernmental agreement on the construction of nuclear power plants in Kazakhstan by the end of 2010.   The comments were made during the ATOMEXPO-2010 forum being held in Moscow.

Uranium One also confirmed that it has recently sold "substantially all" its shares in Paladin Energy, and will use the proceeds to help fund the cash outflows needed for the proposed transaction with ARMZ. The company had recently acquired about 3% of Paladin, which has uranium interests in Australia and Africa. Uranium One sold its Dominion uranium mine in South Africa in April, but it has US holdings in Utah and Wyoming which are likely to come on line in 2011, and is bringing the Honeymoon mine in South Australia into production at the end of this year in a joint venture with Mitsui of Japan.
 
Earlier this year, Canadian-based Khan Resources, currently embroiled in legal wranglings over its uranium mining licences in Mongolia, rejected a hostile takeover bid from ARMZ in favour of a bid from Chinese company CNNC Oversees Holdings. The CNNC bid subsequently fell through.
 

Researched and written

by World Nuclear News