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MINING REPORTER

Uranium One Inc. UUU-T says it doesn't know who previously owned the company's stake in a uranium deposit that is now at the centre of a national scandal in Kazakhstan, raising concerns about the miner's ownership of the lucrative property.

Uranium One owns a 30-per-cent stake in the Kyzylkum joint venture, which was purchased for $75-million (U.S.) in 2005 from a privately held company, Jeffcott Group Ltd. But the Vancouver firm says the shareholders behind Jeffcott were never specifically identified, nor does it know how Jeffcott initially obtained rights to the project.

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"We dealt with corporations and entities that had title to the assets. In fact, we dealt with their representatives in the case of Kyzylkum. Therefore, we have no knowledge of the beneficiaries or shareholders behind Jeffcott," Chris Sattler, Uranium One's executive vice-president of corporate development and investor relations, said in an interview yesterday.

The fact that Uranium One doesn't know who used to own one of its key assets adds to the already murky situation in Kazakhstan. The uranium-rich country, ruled by President Nursultan Nazarbayev for 20 years, has been a magnet for foreign mining firms eager to extract vast reserves of the metal used to make nuclear fuel.

But the sudden fall from grace of a key government mining official is threatening to spook foreign investors. Uranium One's shares plummeted nearly 40 per cent Wednesday after its stake in Kyzylkum was linked to a widening scandal involving the long-time head of the state-run nuclear energy company, Kazatomprom.

Mukhtar Dzhakishev was arrested this week and accused of embezzling stakes in major uranium fields and "handing them" to offshore companies.

Authorities singled out the sale of a 30-per-cent stake in Kyzylkum that was allegedly sold for little more than $100,000 in 2005.

Uranium One inherited its 30-per-cent share in Kyzylkum in 2007 when it took over UrAsia Energy Ltd. in a deal originally valued at $3.1-billion. UrAsia was founded by Vancouver mining financier and philanthropist Frank Giustra. In 2005, Mr. Giustra and UrAsia officials acquired interests in three Kazakh uranium properties, including the stake in Kyzylkum.

According to documents filed with Canadian securities regulators, UrAsia bought the share in Kyzylkum from a private company incorporated in the British Virgin Islands, Jeffcott Group.

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"Jeffcott is owned and controlled by 1900 Trust Company Limited (the "Trustee") acting as trustee of the Jeffcott Family Trust. ... The control of Jeffcott, as shareholder, is carried on by the Board of Directors of the Trustee," the documents say. The filings identified "Eugene Charyshkin" as a Jeffcott director and his signature is on the agreements.

In an e-mail, Mr. Giustra, who is not involved with Uranium One, said he was unable to shed more light on the identity of the seller from whom UrAsia bought the stake.

"The person who acted for Jeffcott was Eugene Charyshkin. That's as much as I know. In addition, we were never privy to Jeffcott purchase price. As you can appreciate, I'm not a representative of [Uranium One]and can't speak on their behalf. Our negotiations with Eugene were pretty straightforward and involved counsel on all sides. In addition, we paid full price at the time of acquisition. The transaction was subsequently blessed twice by the [Kazakhstan]Mines Ministry when UrAsia was given a waiver under the subsoil law and again when Uranium One acquired UrAsia," Mr. Giustra wrote.

One source close to the original sale said Kazatomprom officials facilitated and promoted the transaction with Jeffcott, which gave UrAsia confidence in the deal. "The government encouraged us," said the industry source, who spoke on condition of anonymity.

In addition to the Kyzylkum asset, UrAsia paid $350-million in 2005 for 70-per-cent stakes in the South Inkai and Akdala uranium mines. The seller of those assets has been identified as Mukhtar Ablyazov, a Kazakh oligarch with banking and real estate interests who fled the country after falling out of favour with the Nazarbayev regime.

Uranium One's chief executive officer Jean Nortier is slated to meet with government officials in Kazakhstan next week to discuss the situation.

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URANIUM ONE (UUU)

Close: $2.41 (Cdn.), up 42¢

***

Players at a glance

THE COMPANIES

Uranium One Inc. is a Vancouver-based mining company formed by the 2007 merger of SXR Uranium One and UrAsia Energy Ltd. Key assets are three holdings in Kazakhstan. Two assets are 70-per-cent stakes in producing uranium mines (Akdala and South Inkai). The third is a 30-per-cent share in Kyzylkum, a joint venture that operates the Kharasan uranium project.

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The Kyzylkum share was inherited in the UrAsia merger. In 2005, UrAsia paid $75-million (U.S.) for the rights from a private company, Jeffcott Group Ltd. Jeffcott is owned and controlled by 1900 Trust Company Ltd., acting as trustee of Jeffcott Family Trust. The trustee is registered in the British Virgin Islands; control of Jeffcott is carried on by the board of directors of the trustee.

THE INDIVIDUALS

Jean Nortier: Uranium One CEO.

Ian Telfer: chairman of Uranium One; chairman of Vancouver-based Goldcorp Inc.; long-time friend of Frank Giustra.

Frank Giustra: Vancouver mining financier, founder of UrAsia and negotiator of its purchase of Kazakh assets; friend of former U.S. president Bill Clinton.

Bill Clinton: Friend and philanthropic partner of Mr. Giustra; visited Kazkhstan and had dinner with Kazakh leader Nursultan Nazarbayev along with Mr. Giustra shortly before UrAsia's Kyzylkum deal was finalized.

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Eugene Charyshkin: A director of Jeffcott who signed the deal documents with UrAsia.

Nursultan Nazarbayev: President of Kazakhstan since 1989.

Mukhtar Dzhakishev: Head of state-run nuclear company Kazatomprom. Arrested this week and accused of illegally selling uranium properties to foreigners.

Mukhtar Ablyazov: Former energy minister and former bank owner who sold stakes in the Akdala and South Inkai deposits to UrAsia. Fled the country after Mr. Nazarbayev nationalized the bank in February.

Staff

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