Cameco and Kazakhstan push ahead on fuel plant

TORONTO, June 4 (Reuters) - Cameco Corp (CCO.TO) and Kazakh government-owned uranium company Kazatomprom are pushing ahead with a plan to build a 12,000-tonne nuclear fuel conversion plant in Kazakhstan, part of the Canadian company's strategy to increase its presence in the uranium-rich central Asian country.

The companies are establishing a legal entity, called Ulba Conversion LLP, to do development work on the project, and have begun the first stage of a feasibility study.

The plant would be 51 percent owned by Kazatomprom and 49 percent owned by Cameco.

"I think it's significant that we're strengthening our relationship with a significant player in the industry in a region that will be one of the largest uranium supply centers in the world," Cameco spokesman Lyle Krahn said on Wednesday.

Kazakhstan is home to a fifth of global uranium reserves.

Cameco and Kazatomprom are already joint-venture partners in the Inkai mine in Kazakhstan, which has faced delays coming to production due to a sulphuric acid shortage in the country. Sulphuric acid is used to leach uranium from from mined ore.

Production is expected to begin later this year, and is seen at 5.2 million pounds in 2010.

The companies reiterated on Wednesday they expect to eventually raise Inkai's production to 10.4 million pounds a year, although they were unable to give a time frame.

Cameco's shares were down 20 Canadian cents at C$40.98 on the Toronto Stock Exchange. ($1=$1.01 Canadian) (Reporting by Cameron French; Editing by Peter Galloway)