UPDATE 3-Russia swaps mine stake for 17 pct of Uranium One

* Uranium One gets 50 percent of Kazakh mine

* Deal worth at least $390 million

* Uranium One ups 2010 production forecast by 35 percent

* Uranium One shares up 8 Canadian cents at C$2.91 (Adds details from conference call and analyst quotes. Changes dateline to add TORONTO. In U.S. dollars unless noted)

By Alfred Kueppers and Cameron French

MOSCOW/TORONTO, June 15 (Reuters) - Russian state-owned nuclear giant Rosatom has secured a 17 percent stake in Canadian rival Uranium One UUU.TO, acquiring another toehold in North America in exchange for a 50 percent stake in the Karatau uranium mine in Kazakhstan.

For Uranium One, the deal, which was announced on Monday,will cost at least $390 million at current share prices and will increase its 2010 uranium output by about 35 percent. Also, one analyst said, it may boost the chances it will emerge unscathed from a Kazakh government investigation into past uranium deals.

In exchange for the mine stake, Uranium One will issue 117 million shares to Rosatom -- worth C$340 million ($300 million) at Monday’s prices -- and also pay $90 million in cash. It could also pay up to $60 million in a contingency amount, depending on tax adjustments.

The two companies will also enter into a long-term agreement to allow Rosatom to buy Uranium One production.

The deal comes as several countries have sought to lock in supply of nuclear fuel to feed growing power industry demand.

Uranium One is also in the midst of finalizing a C$270 million private placement with Japanese investors Toshiba Corp 6502.T, Tokyo Electric Power Co 9501.T, and the Japan Bank for International Cooperation.

In a similar vein, Canadian uranium producer Denison Mines DML.TO has agreed to sell 19.9 percent of itself to Korea Electric Power Corp 015760.T.

“You’re not going to spend billions of dollars in building nuclear power stations and not have uranium to feed them, or more importantly be held at ransom,” said David Davidson, an analyst at Paradigm Capital in Toronto.


With one-fifth of the world’s uranium reserves, Kazakhstan has seen a stampede of players from nations including Canada, Japan, China and South Korea hoping to mine its reserves.

However, a corruption scandal rocked the industry in May when state uranium company Kazatomprom head Mukhtar Dzhakishev was arrested and accused of illegally selling deposits to foreign companies.

Uranium One’s stock fell nearly 40 percent after the arrest when Kazakh officials singled out one of its deals for investigation, but Kazatomprom has said no existing agreements would be changed.

Uranium One’s shares were up 8 Canadian cents at C$2.91 on the Toronto Stock Exchange on Monday afternoon.

Company Chief Executive Jean Nortier said he expected the outcome of the investigation would have little impact on the company, while Paradigm’s Davidson said Uranium One’s alliances with Japan and Russia make it unlikely Kazakhstan would want to alter terms of the company’s assets in the country.

“If they changed the ground rules and took assets away, that would jeopardize their entire uranium industry... I don’t think it would happen at all,” he said.


The deal marks the latest stage in what has become a year of unprecedented expansion for Rosatom, already one of the largest players on the nuclear market.

After agreeing to cooperate with two major rivals this year -- Germany’s Siemens and Japan’s Toshiba -- Rosatom overcame legal barriers to the U.S. market by striking landmark deals with U.S. utilities in May.

Those deals will allow Russia to supply uranium directly to U.S. companies for the first time in two decades. The logical follow-up to will be to access nuclear infrastructure that can feed into the U.S. market, Rosatom said.

Uranium One, which is based in Vancouver, British Columbia but is focused in Kazakhstan, will see its 2010 production rise to 7.5 million pounds from its earlier forecast of 5.6 million pounds as a result of the deal.

The Karatau mine promises low-cost output at about $15 a pound and should produce 5.2 million pounds of yellowcake a year when it reaches full production in 2011.

It holds resources of nearly 30 million pounds under Canadian standards, but Nortier said that under Russian standards, the resource is more than 100 million pounds.

“The resource is significantly larger than what we can declare under Canadian... standards at this state. Obviously we’ll be working at improving on that,” he said.