Russian State-owned Atomredmetzoloto (ARMZ) plans to use Uranium One, in which it has agreed to take a stake of at least 51%, as a vehicle for future global expansion in the uranium-mining sector, director-general Vadim Zhivov said last week.

The two companies announced that ARMZ would take a controlling stake in Uranium One, in exchange for stakes in two uranium mines in Kazakhstan and $610-million in cash.

“We would like to use Uranium One as a global platform for future growth, and all the future acquisitions and all [merger and acquisition] activity will be on the basis of Uranium One,” he said on a conference call.

The deal would make the company one of the top five producers of the nuclear fuel by 2011, Uranium One CEO Jean Nortier said.

ARMZ falls under Rosatom – the Russian State company controlling the nation’s nuclear activities – and already holds 23% of Uranium One, most of which was acquired when it sold its 50% of the Karatau mine, also in Kazakhstan.

Rosatom, like other nuclear utilities around the world, is actively looking to secure supplies of uranium to feed the growing number of nuclear reactors in operation and under construction.

The Karatau deal, which closed in December last year, included an option for ARMZ to buy a certain percentage of annual output from Uranium One, and this would likely be revised upwards after the latest transaction closes, Nortier said last week.

The company’s annual production is largely sold out for 2010 and 2011, but ARMZ would likely end up with an option to buy around half of Uranium One’s available production after 2011, he said.

The current offtake agreement, as well as any future contracts, would all be based on market-related prices at the time of delivery, he added.

Besides the 50% in Karatau, Uranium One owns 70% of the Akdala and South Inkai mines, in Kazakhstan, as well as 30% of the Kharasan mine, also in Kazakhstan. The company also has assets in the US, where it plans to start production next year, as well as in Australia.

Under the deal, Uranium One will buy ARMZ’s 50% interest in the Akbastau uranium mine and its 49,67% interest in the Zarechnoye uranium mine, which will together boost the firm’s steady-state pro- duction from its Kazakh assets by around 60% to some 16-million pounds a year.

TSX- and JSE-listed Uranium One also planned to pay a special dividend to shareholders other than ARMZ of at least $1,06 a share, the company said.

Nortier said the dividend should be viewed as a “change of control premium”.

ARMZ has also agreed to an 18-month standstill on Uranium One’s shares, and Zhivov said he believed retaining the 51% interest in Uranium One as a public com- pany, was the best way forward.

Uranium One’s strategy, which included a stated aim of acquisitive growth, particularly in Africa, would not change, he said.

There were still “one or two” more uranium opportunities available in Kazakhstan, Nortier commented.

The transaction, which still required several approvals, including approval by Uranium One investors, was expected to close by the end of this year.

Uranium One also announced that it had sold all the shares it bought in rival Paladin Energy.

Nortier said the primary reason for the sale was to strengthen the company’s balance sheet ahead of the minority shareholders dividend payment.

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