Uranium One buys Kazakh mine stake

15 December 2009

Canada-based Uranium One has completed its purchase of a 50% stake in the Karatau uranium project in Kazakhstan from Russia's Atomredmetzoloto (ARMZ), following receipt of all necessary governmental and regulatory approvals.


In June, Uranium One announced a shares-plus-cash deal with ARMZ to acquire a half share of the Karatau project. 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 that 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 acquisition was approved by Kazakhstan's ministry of energy and mineral resources in mid-November and included a waiver of the pre-emptive right of the Kazakh state under the Subsoil Use Law of Kazakhstan. The deal has subsequently been approved by the Kazakh Anti-Monopoly Commission and the Australian Foreign Investment Review Board.


Uranium One has now issued 117 million common shares to ARMZ, representing a 19.9% ownership interest in the common shares of the company, as well as a $90 million promissory note due not later than 12 months from closing. The purchase agreement also provides for a contingent payment to ARMZ of up to $60 million, payable in three equal instalments over the period 2010 to 2012, subject to certain post-closing tax-related adjustments.


Registration of the transfer of the Karatau interest with the South Kazakhstan Region Department of Justice is expected to be completed later this month.


Uranium One's share of production at Karatau in 2010 is expected to be 2.3 million pounds U3O8 (885 tU) at an average cash cost of $14 per pound sold. At full production levels, the company’s share of output from Karatau should be 2.6 million pounds U3O8 (1000 tU).


In addition, under the terms of the framework agreement, Uranium One has been granted a right of first offer on ARMZ's assets outside of Russia, in the event that ARMZ determines to offer any of these for sale in the future. Also, ARMZ has agreed to assist Uranium One in the opening of accounts with Russian uranium converters and to use Russian uranium conversion and enrichment facilities for the benefit of Uranium One's customers.


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.