Mikhail Fayno, transport chemistry expert of BrokerCreditService IC

– This agreement is a guarantee against possible uranium shortages in the future

ARMZ Uranium Holding Co. AKA Atomredmetzoloto, the corporation authorized and appointed by Rosatom State Corporation for Nuclear Energy to supply feedstock to the Russian nuclear industry, today announced that it has signed a definitive purchase agreement to sell a 50% interest in the Karatau Uranium Mine in Kazakhstan for consideration of 117 million common shares of Uranium One Inc. ( UUU – Toronto Stock Exchange, JSE Limited [Johannesburg Stock Exchange]) through a private placement and a cash payment of US$ 90 million. The agreement provides for an increase in the cash payment amount in the future depending on the financial results of the Karatau Uranium Mine over the next three years. Thus, ARMZ Uranium Holding Co. acquires a 16.6% interest in Uranium One Inc. with an option to increase it to 19.95%. Concurrently with the purchase agreement, ARMZ Uranium Holding Co. has also entered into a long-term offtake agreement and a framework agreement providing for a strategic relationship with Uranium One, both of which will become effective upon closing of the acquisition.

As you may know, Russia’s demand for natural uranium is steadily growing. So, by concluding this agreement, ARMZ is trying to solve the problem of uranium supply, i.e. to increase the amount of future supplies.

The agreement says that by 2014 the supply should be no less than either 50% of the output of Karatau or 20% of Uranium One Inc., i.e. we do not lose anything and can even gain something as Uranium One Inc. is the world’s ninth biggest uranium producer and is showing steady growth in its output. I think that these goals will be achieved despite the crisis. Today, the uranium prices are all—time high and are expected to go even higher. This is a good prerequisite for high profitability. The company has quite good shareholders (particularly, Japanese investors) and the crisis will hardly be fatal for it.

Uranium One Inc. is a dynamic company with good development prospects. It will certainly increase its uranium production and Russia will get part of its uranium. In such cases, the economic profit is not just buying cheap. Here we need stable and long-term supplies. Since the share of the feed material in the cost of nuclear fuel is not very big, we can afford paying market price in hope for stable supplies. The main thing here is stability of supplies and compliance with contractual obligations. We are planning to build a lot of nuclear power plants and they will need stable fueling. This agreement is a kind of guarantee against possible uranium shortages in the future.