Canadian uranium company to list in London with £500m price tag

UrAsia Energy joins Aim as metal prices hit records· Move prompted by new interest in nuclear power Nick FletcherMonday August 14, 2006The Guardian
A Canadian mining business with operations in Kazakhstan plans to become Britain's biggest listed pure uranium company when it joins the London Stock Exchange next week.
UrAsia Energy, already quoted in Toronto, is expected to have a market capitalisation of around £500m when it comes to the junior London market Aim on August 21. Philip Shervington, the chief executive, said a UK listing would increase the company's profile at a time when metal prices - especially uranium - are close to record levels.




A recent resurgence in interest in nuclear power has led to a shortage of uranium to fuel the plants. "This is a very good time to get a profile," said Mr Shervington. "We are not raising money, but this listing gives us the option of seeking extra funds in future. We have very aggressive production plans, but we have sufficient funds at the moment for our capital investment programme, including good cash flow from our producing mine in Kazakhstan."
The company floated in Toronto in November and raised around Can$500m (£230m), with investors tapped for a further Can$140m (£50m) in February. It now has around £64m cash in the bank.
Apart from raising the company's profile, another reason for coming to London is that around 70% of UrAsia's existing investors come from the UK, brought in as part of the original Canadian flotation. "They are mainly institutional investors, and we know they would appreciate access to a London listing," said Mr Shervington. "It is also an opportunity for new investors - we are a pure uranium play."
The company is the fourth largest quoted pure producer of uranium in the world. It was formed in late 2004, and has secured seven exploration licences in Kyrgyzstan and three joint venture mining projects in Kazakhstan. It has proven reserves of 4.5m lbs, probable reserves of 15m, and 59m of further possible reserves. "We will produce 1.8m lbs of uranium this year, rising to about 10m by 2013," said Mr Shervington. "One of our projects in Kazakhstan is in production, the other two are due by the end of 2007."
In Kyrgyzstan, one of the areas where UrAsia has the licence was first used to supply uranium for Soviet nuclear missiles during the cold war. "It has not been touched for 30 years," said Mr Shervington, but he believed it could be reopened for production. He dismissed worries over the difficulties some had experienced operating in the former Soviet Union.
"In Kazakhstan we are in partnership with the state-owned uranium company [KazAtomProm], and the country is already the third biggest supplier of uranium in the world after Canada and Australia," he said. "I was the CEO of Energy Resources of Australia, the second biggest uranium producer in the world, and I have been dealing in Kazakhstan since 1992. I have always found those dealings to be straightforward. Our investors are confident in our ability to pull this off."
The timing for the flotation could hardly be better, with demand for uranium likely to continue rising sharply as new nuclear power plants are given the go-ahead. "There is a real supply and demand squeeze after 20 years of depressed uranium prices led to insufficient investment", said Mr Shervington.
"Existing mines supply around 100m lbs a year, while the demand is for 170m at the moment. The shortfall is filled from [government and commercial] stockpiles but these supplies are drying up. Two years ago, the price was $10 a pound. Now it is $47, and is predicted to go higher as the situation tightens between now and 2010. Beyond that, both China and India have ambitious plans to build more nuclear power plants."
China alone has plans to build as many as 30 by 2020. As well as organic growth, UrAsia also intends to look for acquisition opportunities around the world.
Backstory
Uranium was discovered in 1789 by a German chemist, Martin Klaproth, who named the element in honour of the planet Uranus which had been discovered eight years earlier. Canada is now the world's biggest supplier, followed by Australia and Kazakhstan. The largest single deposit is not in Canada, but at the Olympic Dam Mine in South Australia. Mining has proved controversial: the Jabiluka mine was sited on sacred Aboriginal land in Australia and has been closed by its operator, Rio Tinto. It also carries the risk of producing airborne radioactive dust.Special reportThe nuclear industryUseful linksBritish EnergyDepartment of Trade and IndustryBritish Nuclear Fuels LtdCampaign for Nuclear DisarmamentGreenpeaceCome Clean WMD awareness programmeUK atomic energy authorityNational Radiological Protection BoardFriends of the EarthWorld Nuclear AssociationWorld Nuclear Transport Institute