Kazakh probe hits Uranium One stock

May 29, 2009. Independent Online 

By Justin Brown

Kazakh probe hits Uranium One stockUranium One’s shares have plunged about 41 percent on the JSE since Kazakhstan announced on Wednesday that the former head of its nuclear energy company was being investigated for embezzling shares in a company partly owned by Uranium One.

The group said yesterday it was aware that the Kazakh authorities were conducting an investigation into “certain activities” of Kazatomprom, the state-run nuclear energy firm.

“The terms of reference of this investigation have not been disclosed, but the company and its Kazakh joint ventures are co-operating with the Kazakh authorities in their investigation,” Uranium One said.

“Senior officials of Uranium One have requested a meeting with the new administration of Kazatomprom next week in Kazakhstan,” it added.

Bloomberg reported this week that Mukhtar Dzhakishev, who was arrested earlier this week, abused his position as Kazatomprom’s chief executive and embezzled state shares in large uranium deposits by transferring them to offshore companies.

Uranium One noted that reports indicated that the Kazakh authorities had said the group’s interest in the Kyzylkum joint venture might be probed.

The group holds a 30 percent interest in the Kyzylkum joint venture, which owns the Kharasan project in Kazakhstan.

The rest of the joint venture is owned by Kazatomprom (30 percent) and by a Japanese consortium consisting of power utilities and a trading company.

Uranium One’s Kazakh assets were acquired in April 2007 from UrAsia Energy, which had bought them from a group of Kazakh investors in November 2005.

The Kharasan project was expected to produce 5.2 million pounds of uranium a year by 2012. Last year it produced 31 200 pounds. Uranium One forecast output at Kharasan of 650 000 pounds this year.

The Financial Times reported that Kazakh opposition activists had said the arrest of Dzhakishev was politically motivated and reflected a rush by the Kazakh elite to assert control over strategic industries.

Kazakhstan has an authoritarian ruler in President Nursultan Nazarbayev, who has ruled the country since its independence from the Soviet Union in 1991.

Bloomberg quoted Kazakhstan’s National Security Committee as saying that in 2005, on Dzhakishev’s orders, Kazatomprom sold a 30 percent stake in Kyzylkum, a joint venture with Uranium One’s UrAsia, for 15.6 million tenge (R870 000 at yesterday’s exchange rate).

“Proof of illegal transfer of mining rights for other deposits was also uncovered,” the committee said.

In 2007 Dzhakishev and Kazatomprom denied media reports of alleged illegal sales of uranium mines to foreign companies, calling them “absurd”, Bloomberg reported.

Kazakhstan is the second-biggest producer of uranium, with 16 percent of global output in 2007.

Uranium One’s shares fell as much as 19 percent on the JSE yesterday before recovering to close 4.9 percent lower at R17.50, which valued the group at R8.26 billion.

The stock had closed at R25.32 on Tuesday, before the news of the Kazatomprom investigation broke.

One analyst, who wished to remain anonymous, said details of what was happening in Kazakhstan were sketchy and the sharp fall in Uranium One’s shares could be an overreaction.

Uranium One has a secondary listed on the Toronto Stock Exchange.

The only other Toronto-listed mining company with uranium interests in Kazakhstan is Cameco.

Over the past two days Cameco’s shares in Toronto have risen 1 percent to C$29.39 (R217).

A Canadian analyst said Cameco’s shares had been unaffected by events in Kazakhstan because only a small part of group’s profits were generated in the country.