Value Microcaps Motherboard

[micham2012]

re Uranium:

Interesting article on developments in Russia:

"Russian uranium champion asks BHP Billiton to wait
John Helmer
'08-NOV-06 10:00'


MOSCOW (Mineweb.com) --Following recent talks in Australia with BHP Billiton (BHPB), Russia's uranium processing group Techsnabexport (Tenex) say it is expecting new Russian legislation to be enacted soon, which will facilitate cross-border ore shipments and uranium processing deals with several foreign uranium miners, including the Australians.

A Tenex mission to South Africa, scheduled for this month to discuss expansion of two nuclear reactor fuel supply contracts already under way there, has been postponed until next year.

The Russian legislation, submitted last week to the State Duma (parliament), would create a single state owned holding, to be known as Rosatomprom ("Russian Atomic Industry", Atomprom for short). Until the legislation is finalized and signed, it is not certain whether the holding will incorporate the full cycle of nuclear services from uranium mining to enrichment services. If so, the holding would consolidate four uranium mines and concentrators; two chemical plants; TVEL, the Russian monopoly producer of nuclear fuel; and Tenex, the exporter of nuclear fuel cycle products and services.

In the global uranium market, Atomprom would become the seventh largest holder of uranium ore reserves, trailing Australia, Kazakhstan, US, Canada, South Africa, and Brazil; the third largest producer of nuclear fuel, after Areva of France and British Nuclear Fuel; and the fifth largest uranium miner, well behind the world leader, Cameco of Canada, but ahead of current output from BHPB's Olympic Dam mine.

There are enormous special, not so private interests, and speculative stock positions at stake in how the Atomprom holding would tie together mining, processing and marketing enterprises, and how, in future, these units, once subordinated to the holding management and the state, might be free to make their own capital-raising, shareholding, and other financing arrangements.

In charge of this mighty hen house is one of Russia's most retiring foxes, Sergei Kirienko. He made his name synonymous with state toleration of financial manipulation, when in August 1978, as prime minister under President Boris Yeltsin, the Russian government defaulted on its financial obligations, causing a national bank crash that wiped out small savings, while allowing some of the country's richest men to escape.

Kirienko himself disappeared to Australia for a time after the crash. He has since been rehabilitated by President Vladimir Putin, who first assigned him as the presidential overseer of the Volga federal region; and now, this year, the nuclear energy chief - formally head of the Federal Atomic Energy Agency (Rosatom).

In June, Kirienko announced that the Atomprom holding would be limited to mining assets, and not include nuclear fuel processing enterprises. Investors already view this limited holding as the Unified Uranium Mining Corporation (UUMC). In that option, the holding would be owned by two state shareholders, TVEL and Tenex.

This month the holding proposed for legislative enactment looks more like a full-cycle combination. But only after several parliamentary readings, votes, and the presidential signature, will it be possible to judge what the small print of the Atomprom charter will allow, or disallow.

Through a spokesman, Kirienko, who acts as the president's adviser on the bill, has said he wants all nuclear activities to be self-sufficient and run like businesses, not as part of the state. That implies a backdoor privatization plan or initial public offering that would follow, once the enterprises have been brought under Kirienko's management. In the current overheated mining share market, and fired by the expectation of a steadily rising uranium price, a Kirienko spinoff of state uranium assets could generate a bigger financial windfall than his banker friends made off with in 1998.

Clearly, there are opponents within the government, and also within the holding units, to any move Kirienko might try towards privatization. Tenex believes there will be no dilution of the state ownership of Russia's uranium industry. But with that limitation, Tenex is nonetheless interested in strategic partnerships with foreign uranium miners, and may buy foreign uranium mineral assets itself. "We will never become a classical transnational corporation," Tenex spokesman Dmitri Evstaviev cautions.

A contrasting view has been aired publicly by TVEL. The government may sell shares in the uranium mining companies to help fund expansion, according to Anton Badenkov, acting chief executive of TVEL. In particular, he is reported as calling a proposal to sell stock in the two small Russian uranium mines Khiagda and Dalur as "very attractive''.

A public float of shares in Russian uranium mines would be bound to put pressure on mine management, and the Atomprom holding, to end the transfer pricing arrangement which keeps fuel supplied to the domestic reactors relatively cheap, and thus keep the lid on electricity supply prices for the sector. In this way, Kirienko is attempting to do to Russia's domestic power pricing what foreign energy rivals and energy consumers have so far failed to achieve with pressure on Russia's principal energy producer, Gazprom.

Tenex isn't certain whether foreign investment will be allowed in the holding in the form of a float of holding shares; or in the form of stakes in specially designated joint ventures. Although Atomprom will be fully controlled by the state, the companies in its holding will be free to form joint ventures with private businesses, Kirienko said recently through spokesman, Sergei Novikov.

In 2005, the Russian mines were delivering yellowcake to the domestic processing factories for just over $17 per pound. In recent days, the international spot price for yellowcake hit an all-time high of $60/lb.

Memoranda of intention for the type of limited project partnerships Tenex has in mind have already been agreed with Mitsui and Cameco. As for BHPB, a Tenex source told Mineweb, "it is still far off before we will have concrete agreements. During [last month's] meeting we agreed that we must cooperate - they have 40% of global uranium and we have 50% of enrichment facilities. It is impossible not to co-operate. We’ve reached an in-principle agreement." It is planned that Kirienko will go to Australia next February, following enactment of the Atomprom legislation. Without the provisions in the bill allowing uranium miners to retain ownership of uranium concentrates sent to Russia for processing and re-export by Tenex, the trade which BHPB is contemplating with Tenex would be impossible.

"If all goes to plan, without too many corrections, then the bill could be approved by parliament within this year,'' a Duma deputy piloting the bill said this week.

Kirienko also has ambitions to partially privatize the state's expanding nuclear reactor business, allowing powerful metal interests, such as the aluminium owners Oleg Deripaska and Victor Vekselberg, to receive long-term discounted energy supplies in exchange for financing reactor construction.

The federal government has set a target of increasing nuclear power generation in the country from 15% of total energy at present to 25%, turbo-driven by the construction of some 40 new reactors.

This construction target, announced by Putin last January, implies a build rate of one a half reactors per annum. At the moment, however, according to Stanislav Golovinsky, vice-president of TVEL, "we cannot talk about launching one new unit each year because it is too costly."

In determining the coefficients for the exchange of finance for tariff discounts, a great deal of money is at stake. Kirienko has placed himself in the same well-known position that regional governors and the federal electricity monopoly UES have placed themselves in the supply of power to the smelters until now."

http://www.mineweb.net/energy/394121.htm

Steve