Russia’s ARMZ to Gain Control of Canada’s Uranium One

Uranium Holding ARMZ, a unit of Russia’s state-owned nuclear company, agreed to purchase a controlling stake in Canada’s Uranium One Inc. in exchange for $610 million in cash and interests in two mines.

ARMZ will acquire 356 million new shares of Uranium One to raise its holding to at least 51 percent from 23 percent, Uranium One said today in a statement. The Toronto-based company will pay a special cash dividend of at least $1.06 a share to minority investors when the deal is completed, it said.

Uranium One will become the first North American mine operator controlled by a Russian state company, according to Troika Dialog, a Russian investment bank. ARMZ is part of Russia’s Rosatom Corp., which is seeking more sources of uranium to supply nuclear reactors it’s building outside the country. The company said last month it’s ready to invest $1 billion in deposits in Namibia, the fourth-biggest producer of uranium.

“We’ll use Uranium One as a platform for growth,” Rosatom Chief Executive Officer Sergei Kiriyenko said in Moscow, without giving a value for the stakes in the two mines.

Uranium One will gain 50 percent of the Akbastau mine and 49.7 percent of Zarechnoye, both in southern Kazakhstan. The agreement with ARMZ will increase Kazakh production at Uranium One, which also has assets in the U.S. and Australia, by about 60 percent.

Uranium One dropped 9 cents, or 3.4 percent, to close at C$2.53 in Toronto.

Uranium One will cut the size of its board to nine from 13, with most members to be independent directors, the company said.

Share Price

“One of the strategic objectives of ARMZ is to acquire uranium-producing assets abroad and ensure the self sufficiency of supplies to Russia in the longer-term,” said Mikhail Stiskin, an analyst at Troika Dialog in Moscow. “Publicly listed Uranium One, with world-class assets in Kazakhstan, is arguably the most alluring target for the company.”

Rosatom is in talks to build nuclear plants in the Czech Republic, Armenia, Vietnam, Egypt and Venezuela, while Argentine officials seeking to buy reactors will visit Moscow in three weeks, Kiriyenko said. The Russian company plans to take 40 percent of the new project in Armenia, he said.

Russia isn’t interested in diversifying Uranium One into processing and enriching uranium, or turning the metal into fuel, Kiriyenko said. Rosatom already has 40 percent of the world’s enrichment capacities and 17 percent of the fuel fabrication facilities, ARMZ said in an e-mailed statement.

Regulatory Approval

The Uranium One purchase, which may be completed this year, is subject to regulatory approval in nations including Kazakhstan, the U.S. and Canada, said ARMZ, which is the world’s fifth-largest uranium producer.

BMO Capital Markets is advising Uranium One on the deal and Goldman Sachs Group Inc. is advising ARMZ.

Sellers and operators of nuclear reactors are snapping up stakes in uranium miners in a global race to secure supplies. In May 2009, Korea Electric Power Corp. bought 20 percent of Denison Mines Corp. and said it would target Australian assets.

Kazakhstan’s state-run Kazatomprom owns the other 50 percent of the Akbastau mine and 49.7 percent of Zarechnoye.

Uranium One also said it sold “substantially” all of its stake in Paladin Energy Ltd., an Australian mining company. Paladin said May 11 that Uranium One had increased its interest to about 3 percent, from 1.3 percent.

Source: Businessweek.com