– I am delighted to announce our agreement to achieve a strategic relationship and acquire an interest in Uranium One

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, has 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%.

— Mr.Zhivov, what do you think about this deal, what is its structure?

I am delighted to announce our agreement to achieve a strategic relationship and acquire an interest in Uranium One.

In a situation when rivalry for uranium assets has been growing more and more acute in the international arena, when concentration trends in uranium mining are getting more and more visible, when the devaluation of uranium miners’ equity caused by the world financial crunch and economic crisis has now been replaced by growth over the last few months, ARMZ Uranium Holding Co., supported by Rosatom, started pursuing a proactive mergers and acquisitions policy. We are sure it is time to move while conditions are in place to get a hold of promising uranium assets.

The structure of this deal is as follows: we sell a 50% interest in the Karatau Uranium Mine in Kazakhstan for consideration of 117 million common shares of Uranium One Inc. through a private placement and a cash payment of US$ 90 million. The agreement provides for an increase in the cash payment amount (some US$ 60 million) 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%. The agreement also provides ARMZ Uranium Holding Co. with an option to purchase, on industry-standard terms, the greater of 50% of uranium concentrate produced by the Karatau Uranium Mine (equal to 1000 tonnes at full capacity) or up to 20% of Uranium One’s available attributable production from assets in respect of which Uranium One has the marketing rights, including Karatau. 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.

– How did you determine the cost of Karatau’s interest? How much is it?

The cost of Karatau has been determined as a result of negotiations on the basis of mutual comparative fundamental appraisal of Karatau and Uranium One.

We believe that the fair cost of our interest in Karatau is no less than US$ 486 million while that of Uranium One is no less than US$ 2 billion.

— What a share of Uranium One’s production will you be able to purchase?

The offtake agreement provides ARMZ Uranium Holding Co. with an option to purchase, on industry-standard terms, the greater of 50% of uranium concentrate produced by the Karatau Uranium Mine (equal to 1000 tonnes at full capacity) or up to 20% of Uranium One’s available attributable production from assets in respect of which Uranium One has the marketing rights, including Karatau. Therefore, the offtake agreement allows ARMZ Uranium Holding Co. to access – as of 2014 — an amount of uranium greater than that secured by ARMZ’s 50% interest in the Karatau Uranium Mine in Kazakhstan.

— Where are you planning to supply these products? Who will be the key consumers?

We are not going to limit our sales markets. But our priority is and will be to meet the growing demand of the Russian nuclear industry.

— Why have you decided to sell exactly Karatau’s interest?

This deal will allow us to start partnership with Uranium One as early as this year. We have diversified our uranium sources by having acquired a stake in a company already mining uranium at three deposits in Kazakhstan and having projects in the United States, Australia and South African Republic. In the long run this partnership will help us to increase our uranium production at both Karatau and other Uranium One’s facilities and to make it less costly than in Russia.

— What regulatory authorities have to approve this deal?

The Ministry of Energy and Mineral Resources of the Republic of Kazakhstan, the Competition Protection Agency of the Republic of Kazakhstan, the Committee on Foreign Investment in the United States, Foreign Investment Review Board of Australia, Toronto Stock Exchange as well as certain other regulatory and stock exchange regulatory authorities.

— When are you planning to close the deal?

In the fourth quarter of 2009.

— Is there an option to increase the share in Uranium One?

ARMZ has an option to increase the interest to 19.95%. Further increase will have to be negotiated with Uranium One. This is a standstill agreement. It will be effective for 5 years or within 1 year after the fall of ARMZ’s stake in Uranium One to less than 10%.

— Are you going to further increase your interest in Uranium One?

If the directors and the shareholders of ARMZ and Uranium One find it expedient.

— Are you going to take part in the management of Uranium One?

The framework agreement grants ARMZ the right to appoint two representatives to the Uranium One board of directors. We will try to make the best of our big experience of work in Kazakhstan. We have also agreed that ARMZ Uranium Holding Co. will second two representatives to Uranium One, with one position in Kazakhstan. One of the directors will be appointed right upon the closing of the acquisition, the other – by no later than the next annual meeting of Uranium One.

— Do you have plans to use the interest in Uranium One for further activities in the field of M&A?

This is a strategic agreement. ARMZ and Uranium One have established strategic partnership implying joint development. We are not planning to sell our interest in Uranium One.

Uranium One Inc. is a Canadian-based uranium producing company with a primary listing on the Toronto Stock Exchange and a secondary listing on the JSE Limited (the Johannesburg stock exchange). The Corporation has a 70% interest in a Joint Venture in Kazakhstan that owns the Akdala Uranium Mine, which is currently in operation and the South Inkai Uranium Project, which commenced pre-commercial production in 2007. The Corporation also has a 30% interest in a Joint Venture in Kazakhstan that is developing the Kharasan Uranium Project. In the United States, the Corporation has applied for a licence to construct and operate an ISR facility at Moore Ranch in the Powder River Basin and at JAB/Antelope in the Great Divide Basin of Wyoming. In addition, Uranium One owns the Dominion Uranium Project in South Africa and the Hobson – La Palangana ISR project in Texas.

Akdala Uranium Mine

Akdala is an operating acid in situ recovery uranium mine located in the Suzak region of South Kazakhstan Oblast, approximately 470 km north of Shymkent, Kazakhstan. Commercial operations at Akdala commenced in January 2004, following a 2.25 year pilot-plant testing program.

Akdala is owned 100% by the Betpak-Dala Joint Venture, in which Uranium One has a 70% interest. The balance of the interest in the Betpak-Dala Joint Venture is owned by KazAtomProm, the Kazakh State uranium company.

Akdala is currently producing at a rate of 1,000 tonnes uranium (2,600,000 lbs U3O8) per year, with Uranium One’s share of production being 700 tonnes uranium (1,800,000 lbs U3O8) per year.

South Inkai Uranium Project

South Inkai is an advanced development in situ recovery project located in the Suzak region of the South Kazakhstan Oblast, approximately 450 km northwest of Shymkent, Kazakhstan.

South Inkai is owned 100% by the Betpak-Dala Joint Venture, in which Uranium One has a 70% interest. The balance of the interest in the Betpak-Dala Joint Venture is owned by KazAtomProm, the Kazakh State uranium company.

Pilot production from South Inkai commenced in October 2007 with the first circulation of fluid through the adsorption columns.

Kharasan Uranium Project

The Kharasan uranium project is an advanced development in situ recovery project located in the Suzak region of the South Kazakhstan Oblast, approximately 250 km northwest of Shymkent, Kazakhstan.

Kharasan is owned 100% by the Kyzylkum Joint Venture, in which Uranium One has a 30% interest. The balance of the interest in the Kyzylkum Joint Venture is owned by KazAtomProm (30%) and by a Japanese consortium (40%).

Pilot production from Kharasan is expected to commence in 2008.

Honeymoon Project

The Honeymoon Uranium Project, located in the uranium-producing state of South Australia, is an advanced in situ recovery (ISR) project. Planned technical processes for uranium extraction have been confirmed through the operation of a demonstration plant and a field leach trial over an 18 month period.  Steady state production levels are expected to be 880,000 pounds U3O8 per year.

Hobson Uranium Processing Facility

Located in the United States near the town of Hobson and 120 kilometres (75 miles) west of Corpus Christi, Texas, the Hobson Uranium Processing Facility and the La Palangana Uranium Project are 100%-owned by the South Texas Mining Venture LLP (“STMV”), which is a partnership between Uranium One (99%) and Everest Exploration Inc. (1%).  The refurbishment of the Hobson ISR processing facility to a capacity of a nominal 1,000,000 pounds of U3O8 per year was completed in July 2008. 

Dominion Uranium Project

The Dominion Uranium Project is a shallow underground project located approximately 150 kilometres southwest of Johannesburg. On October 22, 2008 Uranium One announced that it had placed the Project on care and maintenance.