business

Uranium One Says New Russian Owners Are No ‘Cowboys’

Uranium One Inc., which slumped in Toronto trading this month after agreeing to a takeover by Moscow-based Uranium Holding ARMZ, said shareholders have nothing to fear from Russian state control.

“There were some concerns with having a controlling Russian shareholder,” Jean Nortier, chief executive officer of Canada’s Uranium One, said in a Bloomberg Television interview in London. “Shareholders are starting to understand it’s not a bunch of cowboy Russians but it’s a very responsible entity.”

ARMZ, as the unit of state-run Rosatom Corp. is known, said June 8 it plans to raise its stake in Uranium One to at least 51 percent from 23 percent for $610 million in cash and stakes in two Kazakh mines. Russia, seeking more uranium to supply planned reactors abroad, said June 19 it would staff embassies around the world with nuclear officials to win more orders for Rosatom.

Uranium One and ARMZ are seeking to benefit from a global revival of nuclear power as nations promote the technology to meet energy demand while curbing carbon output. Techsnabexport, another Rosatom unit, sold $8.8 billion of uranium to the U.S. from 1993 to 2009 as part of the so-called HEU Agreement. Shipments under the deal will be sufficient to fuel about half the U.S.’s reactors for 20 years, according to the company.

“If you look at the amount of uranium that Rosatom has been shipping off to the United States and Canada, you can effectively say that a portion of America’s lights have been kept on by Russia,” Nortier said.

Industry Expansion

The U.S. is among governments seeking to reduce dependence on fossil fuels, and the heightened concern triggered by BP Plc’s oil spill in the Gulf of Mexico can only aid the growth of the nuclear industry, according to ARMZ CEO Vadim Zhivov.

“I am 100 percent positive that it will serve as an additional help for expansion of the nuclear deals, especially in the United States,” Zhivov told Bloomberg Television in London. “There are more and more filings for licenses for new nuclear power plants in the United States.”

Uranium One will become the first North American mine operator controlled by a Russian state company, according to Troika Dialog, a Moscow-based investment bank. That shouldn’t concern shareholders because “the nuclear industry is very highly regulated and all the major players are one way or another controlled by governments,” Zhivov said, citing the example of France’s Areva SA.

More Transparent

“Russia’s nuclear industry went through significant reform, and all the divisions within Rosatom right now are fully market-oriented,” Zhivov said. “This transformation will make Rosatom much more transparent for the whole world.”

Uranium One rose 18 cents, or 7.4 percent, to close at C$2.61 in Toronto, the biggest one-day gain in three weeks. The stock tumbled 16 percent in the two days after the takeover was announced.

The Toronto-based company plans to pay a special cash dividend of at least $1.06 a share to minority investors when the deal is completed.

“It’s a complex transaction,” Nortier said. “Shareholders didn’t entirely understand that the change-of-control premium is coming to them in cash through the dividend.”

Stockholders will benefit as uranium prices recover because demand will outstrip supply as the industry expands, Nortier said. More than 50 reactors are under construction in 13 countries, according to the World Nuclear Association.

Uranium Prices

Uranium oxide concentrate for immediate delivery traded at $40.75 a pound in the week through June 21, Ux Consulting Co. said in a report. Prices have sunk 8.4 percent since the start of the year, according to the Roswell, Georgia-based company.

“The new supply that’s coming in on the uranium side is not filling all these new reactors that are being built, so we’re still operating in a supply shortage environment,” Nortier said. “We need a significantly higher uranium price to actually fill that gap. We’re certainly bullish on uranium prices going forward.”

Uranium One expects the transaction with ARMZ, subject to approval from regulatory bodies in Kazakhstan, Canada, the U.S. and Australia, to close by the end of the year.

(Updates closing share price in 10th paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE