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. Last Updated: 07/27/2016

Rosatom Buys 17% Of Canadian Miner

Rosatom on Monday agreed to buy 17 percent of Canadian rival Uranium One in exchange for half of a Kazakh mine, giving the Russian state corporation another foothold in North America as it pursues an aggressive program of global expansion.

ARMZ Uranium Holding, a Rosatom unit, will exchange its stake in the Karatau mine for 117 million Uranium One shares -- worth 331 million Canadian dollars ($295 million) at Friday's closing price -- and as much as $150 million in cash, the Canadian company said Monday in a statement.

Uranium One will sell half the uranium from Karatau, which went into production last year, to ARMZ or 20 percent of its total output, whichever is greater.

Russia, holder of the third-largest uranium resources after Australia and Kazakhstan, is seeking cheaper sources of the metal as it signs new enriched-uranium supply contracts in the United States and Japan. Globally, Rosatom accounts for 40 percent of enrichment capacity and 8 percent of uranium-mine production.

"In a situation when rivalry for uranium assets has been growing more acute, ARMZ started pursuing a proactive mergers and acquisition policy," chief executive Vadim Zhivov said in the statement.

"This deal shows we made our choice and would like to make Uranium One the basis for our expansion abroad," he said. "We have every possibility to increase our share in Uranium One should that be of interest and meet with board approval."

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 cooperate with two major rivals this year -- Germany's Siemens 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, has assets in the United States as well as in Australia and South Africa. Its efforts, however, are focused on Kazakhstan -- home to one-fifth of the world's uranium reserves. The company said in Monday's statement that it now expects 2010 production of 7.5 million pounds of uranium after closing the deal, up about 35 percent from its earlier guidance of 5.6 million pounds.

Uranium One will also fund the Karatau deal in the fourth quarter with an equity placing to Japanese investors, CEO Jean Nortier said on a conference call. The company agreed in February to place 270 million Canadian dollars of shares with Tokyo Electric Power, Toshiba and the Japan Bank for International Development, giving them a combined 20 percent.

The Japanese investors' stake will shrink to 17 percent, the same as ARMZ, after Uranium One issues new shares under the Karatau deal, said Oleg Fedyashin, ARMZ's corporate development chief. ARMZ also has permission to boost its stake to 20 percent by buying shares in the market, he said.

Uranium One also has an option to buy ARMZ's 50 percent in the Akbastau project in Kazakhstan, Fedyashin said. Karatau's profit is forecast at $82 million in 2009 and $169 million in 2010, when it reaches planned capacity, he said.

The Canadian company produced 2.86 million pounds of uranium oxide last year, while Karatau turned out 1.7 million pounds. Karatau is due to produce 3.6 million pounds at a cash cost of $15 per pound this year and 5.2 million pounds in 2010.

ARMZ bought its stake in Karatau from billionaire Vasily Anisimov for an undisclosed sum in January. The rest of Karatau is owned by Kazatomprom, the Kazakh state-owned nuclear company.