Kazakh tie-in for Uranium One and ARMZ

15 June 2009

Canadian-based Uranium One has announced a shares plus cash deal with Russia's AtomRedMetZoloto (ARMZ) to acquire a half share of the Karatau uranium project in Kazakhstan.


The Russian joint stock company thereby enters a strategic relationship with Uranium One, obtaining a 16.6% share of the company plus some $90 million in cash and a further $60 million depending on performance over the next three years.


Part of the deal is an offtake agreement which will give ARMZ an option to purchase up to 20% of Uranium One's production if this is greater than its 50% share from Karatau.


The Karatau project mines the southern part of the Budenovskoye orebody in the northern group of mines in the Chu-Sarysu basin of southern Kazakhstan. The mine has been known as Budenovskoye 2, and started production last year. Karatau was set up in 2005 and since mid 2006 it has been a 50-50 joint venture between KazAtomProm and Russia's Tenex, with that share being taken over by ARMZ, and now sold on to Uranium One.


In 2008 the mine produced 655 tonnes of uranium, and this year it is expected to produce about 1300 tonnes, ramping up to 2000 tonnes per year by 2011.  The mine has indicated resources of 11,273 tonnes of uranium and 771 tonnes as inferred resources compliant with the NI 43-101 reporting standard.


The Budenovskoye deposit is in the palaeochannel extending south from the South Inkai deposit which is one of two orebodies mined by the Betpak Dala joint venture. Betpak Dala is 70% owned by Uranium One already - Uranium One's predecessor paid C$350 million for it in 2006, trial production commenced in 2007 and commercial production in January this year.


Between Karatau and South Inkai, the Akbastau JV is mining the Budenovskoye 1, 3 & 4 deposits.  This is also a 50-50 joint venture between Kazatomprom and ARMZ, and the framework agreement for purchase of half of Karatau also provides Uranium One with an exclusive right to negotiate the acquisition of ARMZ's share of Akbastau. Pilot production from this operation is under way.


Another Uranium One project in Kazakhstan, the Kyzylkum joint venture of which it owns 30%, has been at the centre of an investigation regarding its previous ownership.


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