Uranium One acquires 50% interest in Karatau Uranium Mine for cash and shares

Uranium One (TSX:UUU) announced a strategic investment in the Karatau Uranium Mine in Kazakhstan for 117 million shares in Uranium One and US$90 million in cash. Uranium One will also pay up US$60 million between 2010 and 2012 if certain post-tax ‘related adjustments’ milestones are met.

Uranium One is acquiring the stake from JSC Atomredmetzoloto, the Russian state owned uranium company. The other 50% interest in Karatau is held by JSC Kazatomprom, the Kazakh-stated owned uranium mining company. The acquisition will boost Uranium One’s 2010 production guidance by 35% to 7.5 million pounds at an average cash operating cost of less than US$20 per pound.

“The acquisition is also expected to be accretive to Uranium One's net asset value, cash flow, earnings and production per share, based on the Company's internal evaluations,” the company stated.

As part of the agreement JSC Atomredmetzoloto will have the option to purchase the greater of 50% of Karatau’s annual production or 20% of Uranium One’s attributable production which it has the marketing rights.

Uranium One will also have the exclusive right to acquire a 50% interest in the Akbastau Uranium Project and first right of offer on all of JCS Atomredmetzoloto’s assets outside of Russia if it decides to divest any interests in the future.

“ARMZ has also agreed to assist Uranium One in the opening of accounts with Russian uranium converters and to use Russian uranium conversion and enrichment facilities for the benefit of Uranium One's customers,” the company added. “Since Uranium One currently receives payment for its production at conversion facilities located in North America and Europe, access to Russian facilities will potentially significantly shorten the time period required for the Company to turn production into sale proceeds, and assist utility customers with access to enrichment services, particularly those customers located in Europe and Asia.”

Post acquisition, JCS Atomredmetzoloto will hold approximately 16.6% of Uranium One and will be unable to increase its interest above 19.9% without Uranium One’ prior consent.

Vadim Zhivov, Director General of JCS Atomredmetzoloto will join the board of Uranium One, and will have the option to appoint a second board member in May 2010.

The Karatau Uranium Mine is part of the Budenovskoye complex and is located in close proximity to the Akdala and South Inkai Mines of Uranium One's 70% owned Betpak Dala joint venture. The mine commenced commercial production in 2008 and is expected to produce approximately 3.3 million pounds U3O8 at a total cash cost of approximately $15 per pound in 2009. The mine is targeting to reach full capacity of 5.2 million pounds per annum in 2011.As at November 2007 Karatau had indicated resources totalling 9.8 million tonnes, at a grade of 0.115% uranium, containing 11,273 tonnes of uranium, and inferred resources totalling 0.9 million tonnes, at a grade of 0.088% uranium containing 771 tonnes of uranium.

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