ARMZ Uranium Holding Co. Announces Acquisition of Substantial Interest in Uranium One Inc., Carries On Uranium Asset Diversification Strategy

News Release

Moscow, Russia — ARMZ Uranium Holding Co. AKA Atomredmetzoloto, the corporation authorized and appointed by Rosatom State Corporation for Nuclear Energy to supply feedstock to the Russian nuclear industry, today announced that it has signed a definitive purchase agreement to sell a 50% interest in the Karatau Uranium Mine in Kazakhstan for consideration of 117 million common shares of Uranium One Inc. (UUU — Toronto Stock Exchange, JSE Limited [Johannesburg Stock Exchange]) through a private placement and a cash payment of US$ 90 million.  The agreement provides for an increase in the cash payment amount in the future depending on the financial results of the Karatau Uranium Mine over the next three years. Thus, ARMZ Uranium Holding Co. acquires a 16.6% interest in Uranium One Inc. with an option to increase it to 19.95%.

Concurrently with the purchase agreement, ARMZ Uranium Holding Co. has also entered into a long-term offtake agreement and a framework agreement providing for a strategic relationship with Uranium One, both of which will become effective upon closing of the acquisition.

The offtake agreement provides ARMZ Uranium Holding Co. with an option to purchase, on industry-standard terms, the greater of 50% of uranium concentrate produced by the Karatau Uranium Mine (equal to 1000 tonnes at full capacity) or up to 20% of Uranium One’s available attributable production from assets in respect of which Uranium One has the marketing rights, including Karatau. Therefore, the offtake agreement allows ARMZ Uranium Holding Co. to access — as of 2014 — an amount of uranium greater than that secured by ARMZ’s 50% interest in the Karatau Uranium Mine in Kazakhstan.

Resource-wise, ARMZ Uranium Holding Co. will contribute 24,901 tonnes of reserves and resources of uranium (through its 50% interest in the Karatau Uranium Mine), in return for a 20% interest in Uranium One’s total resource base equal to 52,266 tonnes.  This represents a 4,9% increase in the total resource base of ARMZ Uranium Holding Co. from 561,835 tons to 589,200 tons.  Furthermore, this growth is being achieved with ARMZ gaining access to uranium resources that are lower cost than Russia’s current uranium reserves and provides broader geographical diversification.

The framework agreement providing for a strategic relationship between ARMZ Uranium Holding Co. and Uranium One Inc. grants ARMZ the right to appoint two representatives to the Uranium One board of directors. The parties have also agreed that ARMZ Uranium Holding Co. will second two representatives to Uranium One, with one position in Kazakhstan.

Closing of the acquisition is subject to the approval of regulatory authorities as follows: the Ministry of Energy and Mineral Resources of the Republic of Kazakhstan; the Competition Protection Agency of the Republic of Kazakhstan; Foreign Investment Review Board (FIRB) of Australia, as well as certain other regulatory and stock exchange regulatory approvals. The aforementioned regulatory and stock exchange regulatory approvals are expected no later than Q4 of 2009.

The Russian nuclear industry is presently bringing to life large-scale plans of nuclear power plant construction in Russia and abroad. The acquisition will allow Rosatom State Corporation to diversify its uranium resource base and gain access to new high quality and high potential sources of uranium. This provides Russia with additional competitive advantages in the world nuclear fuel cycle market, as well as in nuclear power plant construction. Development of overseas uranium mining is likely to positively affect Russia in geopolitical terms, as this country has been traditionally reliant on domestic deposits with respect to mining.

Vadim L. Zhivov, ARMZ Uranium Holding Co.’s Director General, said:
«I am delighted to announce our agreement to achieve a strategic relationship and acquire an interest in Uranium One.
In a situation when rivalry for uranium assets has been growing more and more acute in the international arena, when concentration trends in uranium mining are getting more and more visible, when the devaluation of uranium miners’ equity caused by the world financial crunch and economic crisis has now been replaced by growth over the last few months, ARMZ Uranium Holding Co., supported by Rosatom, started pursuing a proactive mergers and acquisitions policy. We are sure it is time to move while conditions are in place to get a hold of promising uranium assets.
We are experts in uranium mining, and we are keenly interested in both quantitative and qualitative growth of our resource base, reserve diversification by recovery costs and geography, ramping up of uranium output and access to new markets.
The acquisition of an interest in Uranium One contributes to all of the above strategic goals of ARMZ Uranium Holding Co.
As part of a State Corporation, we strictly comply with agreements secured by Rosatom and intergovernmental accords. I once again returned from a business trip to Kazakhstan just a couple of days ago: I must say that our new relationship with Uranium One is being viewed positively by our Kazakhstan partners.»

The Karatau Uranium Mine

Karatau is located in close proximity to the Akdala and South Inkai Mines of Uranium One’s 70% owned Betpak Dala joint venture.  Karatau commenced commercial production in 2008 and produced 1.7 million pounds U3O8 in that year.  For 2009, Karatau is expected to produce approximately 3.6 million pounds U3O8, at a total cash cost per pound sold of approximately $15 per pound.  Karatau is expected to reach steady state production of 5.2 million pounds of U3O8 per year by 2010. 

The other 50% interest in Karatau is held by Kazatomprom, the Kazakh-stated owned mining company which also holds joint venture interests in Uranium One’s other Kazakh mines and projects.

In 2008, the Kazakhstan State Committee on Reserves approved a resource at Karatau of 28.3 million pounds U3O8 in the C1 category, 19.0 million pounds U3O8 in the C2 category and additional P1 resources of 82.2 million pounds U3O8.

About ARMZ Uranium Holding Co.

ARMZ is the world’s fifth largest uranium producer with operating mines in Russia and Kazakhstan.  During 2008, operations in which ARMZ is involved produced 3.687 tonnes of uranium (9.6 million pounds of U3O8). It is owned by Rosatom, the Russian State Corporation for Nuclear Energy, and is appointed and authorized by Rosatom to supply fuel for the Russian nuclear industry.

About Uranium One

Uranium One is one of the world’s largest publicly traded uranium producers with a globally diversified portfolio of assets located in Kazakhstan, the United States, South Africa and Australia.   

For further information, please contact:

Vadim L. Zhivov
Director General
Tel.: +7-495-508-8808, Ext. 138-9
Dmitry O. Shulga
Director, External Affairs & Investor Relations
Tel.: +7-495-508-8808, Ext. 310