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Russian Uranium Miner to Privatize Uranium One (TSX: UUU)

Brian Hicks

Written By Brian Hicks

Posted January 15, 2013

Atomredmetzoloto—better known as ARMZ, the Russian state uranium company—will pay $1.32 billion to take over Canadian company Uranium One (TSX: UUU) in a move that seeks to extend Russia’s control over nuclear supplies.

ARMZ, which comprises Atomredmetzoloto and its affiliate, Effective Energy N.V., will collectively buy what Uranium One shares ARMZ doesn’t already own. This deal puts the major uranium producer at a valuation of about $2.8 billion.

Presently, ARMZ owns 51.4 percent of Uranium One in common shares. ARMZ is the mining division of Rosatom, Russia’s nuclear regulator.

After the deal is completed, Cameco Corp. (TSX: CCO) and Areva SA (EPA: AREVA) will be the only two significant publicly listed, pure-play uranium producers around, Reuters reports.

Uranium demand has fallen in recent times due in large part to worldwide concern after Fukushima. While Germany and Japan have moved away outright from nuclear investments, developing powers India, China, and Russia are courting nuclear power cautiously.

Uranium prices have dropped to just $43 per pound from $68 before Fukushima.

The world’s largest reserves of uranium are found in Kazakhstan, where Uranium One has most of its operations.

Currently, Russia is developing 10 nuclear reactors to add to its 33 operational ones. But privatizing Uranium One could mean supply constraints for consumers other than Russia.

Reuters quotes Rob Chang, Cantor Fitzgerald analyst in Toronto:

“Technically the supply is still there,” said Chang. “But now that ARMZ has full control, I’m not sure what’s going to stop them from sending all that material into Russia.”

The U.S., China, and Japan are among nations who were counting on Uranium One for supplies. Those markets are going to scrutinize developments closely.

The ARMZ/Uranium One deal is expected to close by Q2 this year. Uranium One’s board has already signified approval.

Uranium One shares rose more than 14 percent yesterday on the Toronto exchange.

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