Russian state-owned nuclear giant Rosatom has secured a 17 per cent stake in Canadian rival Uranium One Inc. , acquiring another toehold in North America in exchange for a 50 per cent stake in the Karatau uranium mine in Kazakhstan.
For Uranium One, the deal, which was announced on Monday, will cost at least $390-million (U.S.) at current share prices and will increase its 2010 uranium output by about 35 per cent. Also, one analyst said, it may boost the chances it will emerge unscathed from a Kazakh government investigation into past uranium deals.
In exchange for the mine stake, Uranium One will issue 117 million shares to Rosatom - worth $340-million (Canadian) at Monday's prices - and also pay $90-million (U.S.) in cash. It could also pay up to $60-million in a contingency amount, depending on tax adjustments.
The two companies will also enter into a long-term agreement to allow Rosatom to buy Uranium One production.
The deal comes as several countries have sought to lock in supply of nuclear fuel to feed growing power industry demand.
Uranium One is also in the midst of finalizing a $270-million (Canadian) private placement with Japanese investors Toshiba Corp., Tokyo Electric Power Co., and the Japan Bank for International Co-operation.
In a similar vein, Canadian uranium producer Denison Mines Corp. has agreed to sell 19.9 per cent of itself to Korea Electric Power Corp.
"You're not going to spend billions of dollars in building nuclear power stations and not have uranium to feed them, or more importantly be held at ransom," said David Davidson, an analyst at Paradigm Capital in Toronto.
With one-fifth of the world's uranium reserves, Kazakhstan has seen a stampede of players from nations including Canada, Japan, China and South Korea hoping to mine its reserves.
However, a corruption scandal rocked the industry in May when state uranium company Kazatomprom head Mukhtar Dzhakishev was arrested and accused of illegally selling deposits to foreign companies.
Uranium One's stock fell nearly 40 per cent after the arrest when Kazakh officials singled out one of its deals for investigation, but Kazatomprom has said no existing agreements would be changed.
Uranium One chief executive officer Jean Nortier said he expected the outcome of the investigation would have little impact on the company, while Paradigm's Mr. Davidson said the company's alliances with Japan and Russia make it unlikely Kazakhstan would want to alter terms of the company's assets in the country.
"If they changed the ground rules and took assets away, that would jeopardize their entire uranium industry... I don't think it would happen at all," he said.
The deal marks the latest stage in what has become a year of unprecedented expansion for Rosatom, already one of the largest players on the nuclear market.
After agreeing to co-operate with two major rivals this year - Germany's Siemens AG and Japan's Toshiba - Rosatom overcame legal barriers to the U.S. market by striking landmark deals with U.S. utilities in May.
Those deals will allow Russia to supply uranium directly to U.S. companies for the first time in two decades. The logical follow-up will be to access nuclear infrastructure that can feed into the U.S. market, Rosatom said.
Uranium One, which is based in Vancouver but is focused in Kazakhstan, will see its 2010 production rise to 7.5 million pounds from its earlier forecast of 5.6 million pounds as a result of the deal.
The Karatau mine promises low-cost output at about $15 a pound and should produce 5.2 million pounds of yellowcake a year when it reaches full production in 2011.
It holds resources of nearly 30 million pounds under Canadian standards, but Mr. Nortier said that under Russian standards, the resource is more than 100 million pounds.
"The resource is significantly larger than what we can declare under Canadian... standards at this state. Obviously we'll be working at improving on that," he said.