UPDATE 3-Uranium One shares jump on narrower loss, forecast

Mon Aug 9, 2010 3:53pm EDT

* Q2 net loss $0.02/shr vs loss $0.57/shr year ago

* Boosts 2010 guidance on record production

* Shares up 8.8 pct at C$3.09 in Toronto (Adds CEO comments; in U.S. dollars unless noted)

By Julie Gordon

TORONTO, Aug 9 (Reuters) - Shares in Uranium One UUU.TO were up nearly 9 percent on Monday as the Canadian miner reported a narrower quarterly loss and increased its 2010 production forecast as output rose to a record high.

The Vancouver-based uranium miner posted a loss of $9.7 million, or 2 cents a share, for the quarter ended June 30. That compares with a year-before loss of $265.7 million, or 57 cents, when the company was hit by a $251 million writedown for a mine closure.

Analysts polled by Thomson Reuters I/B/E/S had expected, on average, a loss of 1 cent a share.

The adjusted net loss for the quarter was $1.3 million, or nil per share, compared with a year-before adjusted loss of $12.9 million, or 3 cents a share.

Revenue rose 256 percent to $66 million due to higher sales volumes, but was offset by a lower selling price for uranium, which dropped to $43 a pound in the quarter from $48 a year earlier.

"Our business is firing on all cylinders," Chief Executive Jean Nortier said in a telephone interview, adding that the company's Inkai South mine had performed better than expected in the quarter and that a deal to sell a controlling stake to Russia's ARMZ was on track to close by the end of the year.

Uranium One reported a record second-quarter production of 1.8 million pounds, up 119 percent from a year earlier. The increase was attributed to the acquisition of a 50 percent stake in the Karatau mine, as well as the continued ramp up at South Inkai mine. Both projects are in Kazakhstan.

The company also increased its production guidance for 2010 to 7.0 million pounds from 6.8 million pounds on better than expected performance at South Inkai.

Nortier said that the still shaky global economic climate was having little effect on the uranium business, which he sees booming over the next few years.

"So we're seeing an incredible amount of new nuclear reactors being constructed all over the world," he said. "So we think the nuclear renaissance is very much alive and happening as we speak."

Nortier also said that the company was not charged the Kazakh excess profits tax in 2009 and does not expect to be charged in 2010, as the tax is currently not applicable to uranium miners.

Shares in Uranium One were up 8.8 percent at C$3.09 on the Toronto Stock Exchange on Monday afternoon.

"The street likes it, the increased production forecast going forward," said analyst David Wargo of GMP Securities.

ARMZ DEAL

Uranium One announced in June that ARMZ, a division of Russian state-owned nuclear giant Rosatom, would increase its stake to 51 percent from 23 percent in exchange for $610 million in cash and stakes in two Kazakh mines.

Nortier said earlier in a conference call with shareholders that applications have been submitted to the involved governments, and that talks on the deal, which gives Uranium One a 50 percent stake in the Akbastau mine and 49.7 percent interest in the Zarechnoye mine, have been positive.

Rosatom, one of the largest builders of nuclear power plants outside of Russia, is depending on Uranium One to guarantee fuel to its facilities around the world.

With the deal, ARMZ will be entitled to 51 percent of available attributable material, meaning uranium not contracted to other parties.

Currently, most of Uranium One's production goes to Kazakhstan and the United States, with a small amount going to Europe.

Once current contracts have expired, up to 50 percent of Uranium One's product will go to Russia, Nortier said. He added the company will continue to provide a reliable source of uranium to the North American market.

Uranium One shareholders will vote on the transaction at the end of August. (Reporting by Julie Gordon; editing by Rob Wilson)

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