April 28 (Bloomberg) -- Uranium Holding ARMZ, Russia's state-owned mining company, may spend $8.6 billion to triple output with help from billionaire Oleg Deripaska, Canada's Cameco Corp. and Japan's Mitsui & Co. Ltd.

ARMZ, as the company is known, will use the money to produce 10,300 metric tons of uranium annually by 2015, equal to 25 percent of the global total last year, Chief Executive Officer Vadim Zhivov said. The company will raise the cash in part through stock and bond sales, he said.

Russia wants 25 percent of its electricity to come from nuclear power by 2030, up from 16 percent now. That'll require new mines because Russia now extracts less than a third of the uranium used by its 31 existing reactors and depends on shrinking stockpiles for the rest.

``Initially, we'd like to have strategic partnerships that would help us access new markets,'' Zhivov said in an April 21 interview in Moscow.

Petr Liden, a spokesman for the energy division of Basic Element, Deripaska's investment company, declined to comment, as did Tatsunari Asada, a spokesman for Mitsui in Tokyo.

Cameco agreed last November to form exploration ventures in Russia and Canada, updating an earlier accord with Tenex, the trading arm of Rosatom Corp., ARMZ's parent. Cameco will continue to ``pursue future ventures in uranium exploration, development and production'' with the Russians, Lyle Krahn, a spokesman for the Saskatoon, Saskatchewan-based company, said in a statement.

Earlier Sale

ARMZ, which is prohibited from selling securities directly to investors, raised 520 million rubles ($22 million) in a bond sale through its Dalur unit in February. Zhivov said the offering encouraged ARMZ to consider other sales of bonds and shares in units.

``Potentially, this could be interesting, giving greater access to Russia's uranium story,'' said Vsevolod Malev, a partner with the NRG Asset Management hedge fund in St. Petersburg. ``It'll depend on how much trust the state builds up with investors.''

Russia overlooked mining most of its uranium deposits for two decades as prices fell as low as $6 a pound, making extraction unprofitable.

The deposits will make money when uranium-oxide concentrate prices are at least $85 a kilogram, or $33 a pound, according to Rosatom. Uranium for immediate delivery sold for $65 a pound last week, Denver-based TradeTech LLC said April 25.

Growth Plan

ARMZ's growth plan hinges on expanding OAO Priargunsk Plant, its Krasnokamensk-based unit, to 5,000 tons a year from about 3,000 tons in 2007, Zhivov said. Output at two other units, OAO Khiagda and ZAO Dalur, would be increased to a total of 1,800 tons from a combined 400 tons last year.

ARMZ will need 67 billion rubles through 2015 to develop the three units. Another 135 billion rubles is required for the Olovskaya and Gornoye deposits near the Chinese and Mongolian borders, which together could add 1,300 tons of uranium a year, and the Elkonsky field in the republic of Sakha.

Elkonsky's development may cost 90 billion rubles and require other investors, including Tokyo-based Mitsui, Japan's second-largest trading company, Zhivov said. Mining at Elkonsky should start in 2013 and in time produce 5,000 tons a year.

``The ore grades are low, the mining challenging, but the total resources point to the deposit as the world's second- largest,'' Zhivov said.

Price Caps

Financing for Elkonsky and other projects may come from sources including Basic Element, billionaire Vladimir Potanin's Interros Holding Co. and Vasily Anisimov, co-owner of iron-ore producer OAO Metalloinvest, Zhivov said. The three investors already hold uranium mining licenses.

The scale of ARMZ's projects is ``encouraging,'' said Erik DePoy, a strategist with Moscow-based Alfa Bank. ``Investors will now be waiting for clarity on the ultimate profitability position of the company and its mining units.''

Rosatom may lift price caps on the uranium ARMZ units sell, previously enforced to limit fuel fabrication costs, Zhivov said. ARMZ intends to publish more data about Priargunsk's earnings and the prices at which it sells uranium and coal, he said.

``We hope that from 2011, the uranium selling price will be liberalized,'' Zhivov said. Priargunsk, Russia's only listed uranium mining company, will raise prices by 15 percent this year, he added.

Outside Russia, ARMZ plans to extract uranium in Kazakhstan and Namibia. A venture with the Armenian government will begin exploration this year and there are similar plans for Mongolia.

BHP Billiton Ltd.'s Olympic Dam in Australia is the world's largest uranium deposit.

To contact the reporter on this story: Yuriy Humber in Moscow at yhumber@bloomberg.net

Last Updated: April 28, 2008 08:26 EDT