Matthew Smith's  Instablog

When we saw the news regarding Kazakhstan’s announcement that some foreign uranium deals were illegal, and named one of Uranium One’s (SXRZF) mines in their probe we simply shook our heads.  It was hardly surprising considering all that we have been through before.  Although one of our favorite companies because of their commitment to bringing supply online and aggressively expanding their operations, they conduct business in risky areas and seem to consistently bet the farm.

This all brings us to today.  The Kazakhstan government has said that they will not renegotiate any contracts after talking with their partners in the country, but investors seemed hardly moved by this announcement and the damage was done.  Many still felt that the government was going to somehow increase its grip on the mines in the country and that its previous announcement indicated that the Kazakhs were interested in not only being the world’s largest producer of uranium, but owning the production as well.

It seems that Uranium One has raised the stakes.  They entered into an agreement to purchase half of another uranium mine in Kazakhstan, which will increase the company’s production in 2010 by 35%.  In exchange for this ownership stake, Uranium One will issue 117 million shares and US$90 million to JSC Atomredmetzoloto, a Russian state-owned uranium miner (another US$60 million payment is contingent on whether certain tax issues can be worked out).  The other 50% of the mine is owned by JSC Kazatomprom, the Kazakh state-owned uranium miner, who also holds stakes in Uranium One’s other mines.