25.12.2007 // Interfax

Production programs of world uranium companies are much too optimistic

The interest in the problem of uranium mining in Russia is growing due mostly to the large-scale reforms in the country’s nuclear industry, the ambitious plans for its development and the price boom on the world market. Atomredmetzoloto is Russia’s leading uranium prospecting and mining company. The director general of the company Vadim Zhivov has told Interfax about the company, its plans for cooperation with foreign partners and the prospects of Russia’s nuclear industry.

— Could you, please, tell me about the process of transfer of uranium mining assets into your company? Have the shares of TVEL and Tenex in uranium mining companies already been given to Atomredmetzoloto? If no, then, when will it happen?

— The formation of Atomredmetzoloto consists of several stages. The first stage is transfer of license for development of uranium deposits (mostly from Tenex) and transfer of Tenex’s feasibility reports, memorandums, contracts and agreements with potential investors. This process has been almost completed. We have already received all the intangible assets of Tenex and TVEL. Now, we are finalizing the transfer of mining licenses.

— When will Atomredpetzoloto receive all the shares of uranium mining companies?

— Today, de facto, we already have all the shares and have representatives in the boards of all uranium mining companies. Uranium Mining Company has already been placed under our control. We have already signed agreements for the transfer of the shares in Russian-Kazakh joint ventures. Now, we are drafting necessary documents for the transfer of the uranium mining shares of TVEL.

We have no problems here. I think that we will finish the whole process in the second quarter of the next year.

— Uranium Mining Company is already part of Atomredmetzoloto. What is it supposed to do?

— The company will manage the assets in the territory of Kazakhstan. (From the Kazakh side, the assets are managed by Kazatomprom).

— Are you planning to consolidate the companies and their shares? Will your company be able to take part in IPO or to sell part of its shares to a strategic investor? Most of uranium mining companies abroad have their shares listed on stock exchanges?

— For the present, our laws prohibit the sale of Atomredmetzoloto’s shares – 100% of our shares are owned by the state company Atomenergoprom. We are considering different scenarios but we have not yet decided on any of them. Hypothetically, this is possible but IPO is not an end in itself for us. Our priority is to attract strategic investors who will finance the construction of uranium mining plants. IPO is just one of the instruments, there are lots of other ways to attract investments.

— What stakes will private investors be able to obtain in your subsidiaries? Will there be any limitations?

— We will not give them more than 49% as we want to preserve the state control over the assets. In some cases, we may exchange of assets, in others we will consider the operational capacities of our strategic investors: if they have know-hows, if they can guarantee access to new markets, if they can help us to grow.

— Recently, you signed an agreement for establishment of JVs with Cameco. How are you going to develop your cooperation with that company? What specific actions are you planning in the coming six months?

— In the coming six months we are planning to register the JVs and to obtain licenses for prospecting and mining activities in both Canada and Russia.

— Cameco has offered Atomredmetzoloto to prospect uranium in the province of Saskatchewan and the territory of Nunavut. Could you say how much uranium, presumably, there is in those territories?

— Canada has allowed us to prospect two areas in the above-mentioned territories. It is early to say yet how much uranium there can be. We are just starting the prospecting. The key mission of the JVs is to find new deposits. As any uranium company, we should have uranium mining plants; deposits with confirmed reserves; and areas with possible reserves. Our cooperation with Cameco is aimed exactly at discovering new uranium deposits in both Russia and Canada.

— Are you planning any projects other than uranium mining?

— Of course, we are. For example, we have projects on zirconium, rare metals and other elements used in the nuclear fuel cycle. We are also planning to mine gold and other mineral resources.

— What can you say about Elkon deposit? Do you already know how much the project will cost, how much it will cost to build a mining plant, what a share Mitsui will have in the project, if other investors may take part in it?

— In Nov the governmental commission approved the project as part of the program for the complex development of Southern Yakutia. So, the money of the investment fund will be spent on the drafting of the design estimates and the construction of necessary infrastructure. The estimated cost of the project is 90bln RUR. Presently, we are conducting ecological, geological and engineering studies. We have already registered Elkon Mining Company and have applied for necessary licenses. Different investors have shown interest in the project. Today, Atomenergoprom is spending big money on enhancing the market cost of the project. For the present, it is spending own funds, but, at some point, when the project takes specific shape, we are ready to attract investors for both strategic development and financing purposes. I think that in the second half of the next year we will already know what exactly we will do.

— Recently, you went to Mongolia, as part of a Russian delegation. Do you have any specific projects with that country?

— We have told the Mongolian side about our plans and are now waiting for their response. Presently, the Great Hural (the Parliament) of Mongolia is considering a strategy for development of uranium industry in that country. We expect that this document will be approved in Jan 2008.

We already have a preliminary agreement. We exactly know what we want and the Mongolian side supports our plans. They have some problems with their legislation but they are actively working to this end. We have met with their leaders and they seemed to welcome our plans. So, we expect positive outcome.

— During his last visit to Ukraine in June 2007 the head of Rosatom Sergey Kiriyenko said that Russia was ready to finance uranium mining projects in that country, particularly, the development of Novokonstantinovsky deposit. Do you know how much exactly Russia is going to invest in the projects?

— We are negotiating this problem. However, Ukraine, too, has legislative restrictions. For example, they have a law that prohibits the establishment of joint ventures in the field of uranium mining. So, we are considering ways to cooperate in the framework of the existing legislation.

— And what about your cooperation with Armenia?

— We have provided the Armenian side with relevant archives and have sent a group for preliminary estimation of uranium reserves in Armenia. Now, we are waiting for the response of the Armenian side.

— Are you conducting negotiations with any other CIS or Eastern European countries?

— I think that, today, we have enough uranium projects. We have obtained licenses for developing big deposits in Russia and Kazakhstan, have set up a JV with Cameco and are negotiating with Mongolia and Ukraine.

— When will your JVs with Kazakhstan release their first products?

— Today, we have already registered two joint ventures with Kazatomprom: Zarechoye and Aqvastau. Zarechnoye released its first products in Dec 2006 and is planning to produce 2,000 tons of uranium a year by 2015.

Aqbastau is preparing for development of Budyonovskoye deposits. They are making relevant contracts and in late Jan are planning to start to prospect the deposit. The first products are expected to be released in 2009.

— Which of your foreign and Russian investors show the highest interest in Rosatom’s uranium projects? How do you choose partners?

— In any specific case, the share of an investor is determined according to the project’s needs and other specific factors.

— Do you have priority projects in Russia next year? How much do you expect to receive in investments?

— We don’t have unimportant projects. Of course, we will focus on existing productions. In 2008 we have to enhance the appeal of our Greenfield projects. We have to revise the program for development of Priargun Mining Chemical Combine, Khiagda and Dalur.

— You mean that next year you are going to prepare for strategic investment program?

— Yes, we are. The preparations for strategic investment program are quite costly. We are already starting to build local facilities at Elkon deposits, to prospect the deposits and to prepare technical documentation.

— How are you going to finance the investment program – from our funds or due to credits or, perhaps, by issuing bonds or using some other market instruments?

— We are planning to use all types of instruments but the greater part of the investments will be provided by Atomenergoprom. The issue of bonds is also possible — by our subsidiaries. 

— Could you make a forecast on uranium prices for the next year? In the late summer the prices fell on the spot market but now they are growing again. Will this tendency continue next year?

— The spot market is an indicator for both consumers and producers. When spot market quotations go up, consumers try to undercut their commercial offers in order to stabilize the situation, while mining companies seek to make use of it.

It is hard to make forecasts on long-term contracts – and most of uranium contracts are for a long term. But I think that because of the failure of a big number of production programs, the uranium prices will continue to grow. I think that the production programs of the world’s leading companies are much too optimistic. And this is not only my opinion. So, in the coming two years the prices will, probably, grow. The growth will be followed by stabilization, while further tendencies will depend on the progress with the ongoing programs.