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UPDATE 3-Uranium One loss widens; to buy Areva assets

Published 08/10/2009, 03:37 PM
Updated 08/10/2009, 03:39 PM
AREVA
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* Q2 adj loss $0.03/shr vs estimates of nil

* Agrees to buy Wyoming assets from Areva for $35 mln

* Shares down 11 Canadian cents at C$2.83 (Updated throughout; changes dateline from London; in U.S. dollars unless noted)

By Cameron French

TORONTO, Aug 10 (Reuters) - Uranium One Inc posted a larger than expected second-quarter loss on Monday, and said it would pay $35 million to buy Areva's Malco joint venture, consisting of processing plants and resources in Wyoming.

Meanwhile, Chief Executive Jean Nortier said he expected no negative impact on the Canadian company from a Kazakh government investigation into past uranium asset sales, which has continued to weigh on Uranium One's shares.

The company reported a second-quarter net loss of $265.7 million, or 57 cents a share, due to a $251 million writeoff on the Dominion mine in Australia, which was closed last year due to low uranium prices and is now up for sale.

The loss compared with year-before loss of $68.2 million, or 15 cents a share.

Stripping out the Dominion writedown, the loss was 3 cents a share, which fell short of analysts' expectations of nil.

The proceeds from the Dominion sale are expected to offset the cost of the Wyoming assets, which include the Irigaray and Christensen Ranch processing plants, and related uranium resources in the Powder River Basin of Wyoming.

The acquisition means Uranium One will no longer have to contemplate building a plant to take feed from its other uranium properties in the state.

The company's shares, which at times have been among the most heavily traded on the Toronto Stock Exchange in recent months, were down 11 Canadian cents at C$2.83, about 32 percent below their 2009 high hit in May.

TWO DEALS, ONE INVESTIGATION

Uranium One has signed two major deals this year that will link it with countries that are hungry for nuclear fuel to feed their growing power needs.

The company agreed in June to sell a 17 percent equity stake to Russia's state-owned Rosatom in exchange for a 50 percent holding in the Karatau mine in Kazakhstan.

It is also finalizing a C$270 million private placement with Japanese investors Toshiba Corp <6502.T>, Tokyo electric Power Co <9501.T>, and the Japan Bank of International Cooperation, which should close by the end of the year.

But Uranium One's shares have remained under pressure, in part due to the Kazakh investigation, despite assurances from both the company and state uranium producer Kazatomprom that existing agreements with foreign partners will be honored.

Speaking on a conference call, Nortier said the company has gotten questions "from time to time" from investigators.

"We've complied with all the laws of the country, we've been a good citizen in Kazakhstan, and we don't expect that this investigation will have an adverse impact on our operations," he said, adding that he expects the investigation to wrap up by the end of the year.

He said he was optimistic on the outlook for the uranium market, where prices have struggled to regain the heights of recent years. Uranium spot prices charged to a record high of $136 a pound in 2007 due to concerns of a supply shortage.

Current prices -- uranium was at $48.50 a pound this week -- are insufficient to bring higher-cost mines to production, meaning the price should benefit from tight supply for some years to come, he said.

David Davidson, an analyst at Paradigm Capital, said the Kazakh investigation still was a concern, saying it has the potential to derail the Russian and Japanese deals.

"It's not as transparent as you'd like," he said.

"Until these perceived risks are settled, I think the market's going to be nervous."

($1=$1.09 Canadian) (Additional reporting by Julie Crust in London; editing by Rob Wilson)

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