Russia's Rosatom State Atomic Energy Corporation (Rosatom), the country's monoply controller of all activities related to nuclear power both for civilian and defense use in Russia, is set to buy a 16.6-per cent stake in Canada's Uranium One Inc – one of the world's largest uranium producers, in exchange for a 50-per cent stake in a uranium mine.

Uranium One announced on Monday that the company signed a definitive agreement with Atomredmetzoloto (ARMZ) the Russian state-owned uranium mining company (under Atomenergoprom which manages all civil nuclear assets and in turn part of Rosatom) to acquire 50 per cent stake in its Karatau uranium mine in Kazakhstan in a cash-and-stock deal.

The deal comprises issue of 117 million common shares of Uranium One which will account for 16.6 per cent stake in the company and a cash payment of $150 million.

A long-term off-take agreement has also been signed by both the parties under which ARMZ has an option to purchase, on industry-standard terms, the greater of 50 per cent of uranium concentrate produced by the Karatau uranium mine (equal to 1000 t at full capacity) or up to 20 per cent of Uranium One's available attributable production.

Russia is world's third-largest holder of uranium resources after Australia and Kazakhstan with 10 per cent of recoverable reserves. It accounts for 8 per cent of mine production and has around 40 per cent of the world's uranium enrichment capacity. Rosatom is on the lookout for cheaper uranium assets worldwide.

Uranium One CEO Jean Nortier said, ''The acquisition adds another long-life, large-scale and high-margin asset to our portfolio and will significantly enhance Uranium One's production profile and cement its position of leadership in the Kazakh uranium mining industry.''

Vancouver-based Uranium One has its resources in Kazakhstan, the United States, South Africa and Australia. The company produced 2.86 million pounds of uranium oxide (1100 t) in 2008. Karatau mine produced almost 60 per cent of the total production of 1.7 million pounds and the targeted production for 2009 is 3.3 million pounds which will be further augmented to 5.2 million pounds in 2010.

Under the deal, Uranium One will enter into another project with JSC Kazatomprom, a Kazakhstan state-owned uranium mining company which holds the other 50 per cent stake in Karatau mine.

The company has increased its overall production guidance for 2010 to 7.5 million pounds, 35 per cent higher than its earlier forecast

In February, Uranium One agreed to give $239 million worth shares to a Japanese group comprising Tokyo Electric Power Co., Toshiba Corp. and the Japan Bank for International Development, giving it 20 per cent.

Further to issue of new shares as per the ARMZ deal, the Japanese stake will reduce to 17 per cent. ARMZ will be permitted to raise its stake up to 19.95 per cent in Uranium One.

ARMZ chief executive Vadim Zhivov said, ''I am delighted to announce our agreement with Uranium One to become a significant shareholder and to enter into a long-term relationship.''

''This transaction meets all the strategic objectives of ARMZ, including increasing our access to uranium reserves and resources, diversifying our ownership interests in production assets and increasing our ability to supply uranium to the Russian nuclear industry'' Zhivov added.

Under the agreement, Zhivov will get a seat in the Uranium One board. In addition, a second representative would also be added subject to the shareholders approval.

The deal has to obtain all necessary regulatory and customary approvals and expected to be completed by December.

Other countries are also looking for uranium assets. Korea's Electric Power Corp. in April agreed to buy Canada's Denison Mines Corp. China too is looking for uranium assets as the country expands its nuclear power generation.

According to World Nuclear Association data for 2008, Kazakhstan is the world's second largest producer of uranium oxide, with a production of 8521 t (19.4 per cent), second only to Canada which produced 9000 t (20.5 per cent) and closely followed by Australia with 8430 t (19.2 per cent).