U1 is not ready to buy a mine in Tanzania

Uranium One (U1, controls the foreign uranium assets of Rosatom) refused to purchase the Australian Mantra Resources, which owns the Mkuju River mine in Tanzania, from its parent ARMZ (also part of Rosatom). Full consolidation of the uranium mining company was provided for in the option agreement between ARMZ and U1, but the latter decided to terminate it. With low global uranium prices, investment in a new mine is not feasible. Its development has been suspended.

Uranium One (U1) notified ARMZ of the termination of the option agreement to purchase 86% in the Australian Mantra Resources from June 10, 2014, according to the holding’s reporting. Mantra Resources' key asset is the Mkuju River uranium mine in Tanzania. The refusal of the option is connected with the general strategy of U1 to suspend investments in new projects due to low uranium prices, explains a Kommersant source in the market. Rosatom, due to low prices at the end of 2013, has already suspended a number of uranium projects abroad and in Russia.

ARMZ closed the deal to purchase Mantra for $1 billion in June 2011. U1 became operator of Mkuju and was responsible for financing. ARMZ also helped with this by issuing loan guarantees for $150 million, of which by the end of 2013 Mantra chose $79.4 million. Under the terms of the option, U1 had the right to buy out 100% of Mantra for $1 billion plus additional expenses for the project and another 2.65% per annum. In March 2013, U1 closed the deal to purchase 13.9% of Mantra for $150 million. U1 says that the need to exercise the option disappeared after the consolidation of 100% of U1 shares by Rosatom structures in October 2013. The agreement between ARMZ and U1 did not provide for any penalties, the company notes. She also remains the cinematographer for Mkuju.

But the project is “in the optimization stage,” they say at U1, and its implementation will begin after the situation on the global uranium market changes. The spot price of uranium oxide (U308) has fallen by half to $34 since 2010, however, according to Fitch forecast, this year it may return to “an acceptable level for producers of $40–45 per pound.” U1 assures that Mkuju “is among the most effective uranium mining projects both for Rosatom and among new promising projects abroad.” However, the cost of production at the mine has not yet been determined. According to Ilya Platonov, editor-in-chief of the Nuclear.Ru portal, in the current conditions of the global uranium market, taking into account the launch of the large Cigar Lake mine in Canada, the development of Mkuju “looks impractical.”

Anastasia Fomicheva

Atomredmetzoloto will retain Mantra