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Rosatom will keep Uranium One public, sees nuclear power plants doubling by 2030
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24th August 2010
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TORONTO (miningweekly.com) – Rosatom, Russia's State nuclear group, sees increasing the market value of Vancouver-based Uranium One as a top priority for its mining arm Atomredmetzoloto (ARMZ), and has no intention of buying out minority investors in the Canadian firm, Rosatom director-general Sergei Kirienko said in Toronto on Tuesday.

Rosatom expects the number of nuclear power plants in the world to at least double by 2030, and demand for uranium could "double or even triple" over the next 15 to 20 years, Kirienko said in a translated speech to analysts and investors.

Demand for the nuclear fuel will exceed total supply within the next decade or two, he predicted, as above-ground stocks are diminished.

Uranium being mined actually already falls short of global demand, but the balance is made up by supply from inventories held by governments, mainly the US and Russia.

Kirienko, who served as Prime Minister of Russia for five months in 1998 under President Boris Yeltsin, is meeting with analysts and investors ahead of a Uranium One shareholder vote next week on a deal to give ARMZ a controlling interest in the firm.

Mining Weekly Online understands that the votes submitted so far indicate the transaction will succeed.

The companies revealed on June 8, that ARMZ had agreed to boost its stake from 23% to 51% of Uranium One, in exchange for stakes in two uranium mines in Kazakhstan and $610-million in cash.

Kirienko said that Uranium One, which will rank among the top five uranium producers after the ARMZ transaction closes, will be able to attract higher levels of financing for growth from capital markets as a public company.

In fact, the success or failure of the investment by ARMZ will lie in the growth of Uranium One's market value, he said.

Rosatom, the biggest State-owned entity in Russia, accounts for 40% of global nuclear enrichment capacity and a 17% market share in nuclear fuel fabrication and supply, but controls just 7% of uranium mine supply, creating a "disproportion" in the group structure.

That is where Uranium One comes in; ARMZ has said it plans to use the TSX- and JSE-listed miner as a platform for international growth in the uranium-mining business.

The investment announced in June is more a first step than an end goal in the group's international growth strategy, Kirienko said.

ARMZ and Uranium One executives have indicated they see Kazakhstan and Africa as the main regions for future growth.

Despite its size and influence in the nuclear sector, Rosatom, including ARMZ, was relatively unknown in North America, and investors were taken aback when Uranium One announced in June it was selling control to the Russian government company.

Kirienko's visit this week to meet with analysts and investors follows a marketing tour earlier this month by ARMZ director-general Vadim Zhivov, who also said he expects a rerating in Uranium One's share price.

Beyond the Uranium One deal, Kirienko said Rosatom is looking for alliances and strategic partnerships across the nuclear cycle.

Shares in Uranium One slipped 4,7% on Tuesday, to C$3,24 apiece by 15:33 in Toronto.

The stock has lost a bit of ground in the last couple of days, but is still well above the C$2,62 a share it was trading at the day before the ARMZ deal was announced.

Uranium One expects to produce seven-million pounds of uranium this year, CEO Jean Nortier said earlier this month. The firm raised its guidance after a better-than-expected performance from the new South Inkai mine in Kazakhstan.

Once the ARMZ deal closes, the Russian firm will be entitled to up to 51% of Uranium One's available attributable production.

Edited by: Liezel Hill

 

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Rosatom director-general Sergei Kirienko
 
Picture by: Bloomberg
Rosatom director-general Sergei Kirienko