* Severstal may offer A$2.00/share cash for Berkeley
* Also gets option for 16.3 mln shares at A$1.70 each
* Main Berkeley asset is Spain’s Salamanca uranium project
* Berkeley shares up 10.78 pct in London
(Adds analyst comment, details)
By Eric Onstad and Polina Devitt
LONDON/MOSCOW, Oct 29 (Reuters) - Severstal (CHMF.MM), the largest steelmaker in Russia, has made a bid approach for its first uranium asset in Spain, seeking to diversify its mining business and benefit from an expected rise in European demand for nuclear power.
Severstal has approached Berkeley Resources Ltd (BKY.L) (BKY.AX) about a possible takeover of the uranium exploration company worth about A$304 million ($294.9 million), sending Berkeley shares sharply higher in London.
Severstal is considering a cash bid for Berkeley, also listed in Sydney, at A$2.00 (122 pence) per share, Berkeley said in a statement on Friday.
Berkeley shares in London jumped 15.2 percent to a record 117.5 pence, and were up 10.78 percent at 110 pence at 1440 GMT.
A Severstal spokesman said the Russian company will decide whether to invest in Berkeley, whose main asset is the Salamanca uranium project in Spain, only after due diligence.
The big due diligence question will concern the start-up of a uranium concentrate line that is part of the Salamanca project, Renaissance Capital analyst Boris Krasnojenov said.
The line operated for 16 years before closing in 2000 due to low uranium prices.
“Some people believe that nuclear generation is the future for Europe because regulation measures linked to coal generation emissions will increase,” Krasnojenov said.
“If this plant starts to work (again), the acquisition will look rather cheap at about 6-7 times EV/EBITDA, but the main question is how quickly the start-up can be done.”
Berkeley has also granted Severstal an option that expires on Dec 10 to subscribe to 16.3 million new shares in Berkeley at A$1.70 each, if it says it intends to bid for the whole company.
“We are confident that we can recommence mining operations at one of the leading undeveloped uranium deposits in the world, and plan to enter into production towards the end of 2012,” said Berkeley Managing Director Ian Stalker.
Berkeley, being advised by BMO Capital Markets, added that if Severstal decides not to bid, it will continue discussions over financing alternatives with third parties, which may include Korean Electric Power Corporation (KEPCO). (Editing by David Holmes and David Hulmes) ($1=1.019 Australian Dollar)