UPDATE 2-Areva, Kazatomprom to set up uranium, fuel JVs

(Adds detail on KATCO uranium fields)

ALMATY/LONDON, June 11 (Reuters) - French state-owned nuclear group Areva (CEPFi.PA) and Kazakh uranium miner Kazatomprom agreed on Wednesday to boost joint uranium output and set up a nuclear fuel assembly line.

"Under the terms of the protocol, KATCO, a 51-49 percent joint venture between Areva and Kazatomprom, should produce 4,000 tons of uranium per year until 2039, sales of which will be made entirely by Areva," the companies said in a statement.

A source at Kazatomprom told Reuters on Wednesday KATCO was producing 1,500 tonnes of uranium a year at the South Moinkum and Tortkuduk fields in southern Kazakhstan.

The two companies said Areva would also help state-owned Kazatomprom build plants to produce nuclear fuel assemblies with a capacity of 1,200 tonnes a year at its Ulba plant.

Kazatomprom now produces only nuclear pellets, one step short of the full production cycle.

Another joint venture, in which Areva will have a 51 percent stake, will sell 400 tonnes of assemblies while the rest will be marketed separately.

Agreements should be finalised by September 2008, the companies said.

Kazakhstan is home to a fifth of global uranium reserves and wants to become the world's top producer by 2010, surpassing Australia and China.

The company is expected to maintain its strong position in the world market for uranium, the basic fuel for nuclear power, as spot prices remain volatile due to weak global production.

Kazatomprom has emphasised cooperation with foreign majors, including from Japan, in developing new fields and raising value-added production.

In February, Kazatomprom said it expected to raise this year's output of the metal to 9,405 tonnes from last year's 6,637 tonnes. (Reporting by Anna Stablum and Olzhas Auyezov; editing by Christopher Johnson)