Japanese companies secure uranium purchase rights

Three Japanese companies have secured long-term uranium purchase rights with Uranium One or U1. The new agreement signed by Tokyo Electric Power Corporation, Toshiba and the Japan Bank for International Corporation also ends their investment in U1, a major Canadian-listed producer and marketer of uranium.

With a view to securing stable supply of uranium for civil-use nuclear power plants, the three companies signed a strategic relationship agreement with U1 in February 2009, under which they agreed to subscribe
to U1's issue of 117 million new common shares for allocation to third parties. This was amended in December 2009 when the Japanese companies agreed to take up U1's convertible debentures instead of common shares, and that transaction was completed in January 2010.

The new agreement allows the Japanese companies to receive purchase rights for up to 2.5 million pounds of natural uranium a year from 2014 to 2025, against the current right to up to 20 percent of U1's annual attributable production. On the other hand, U1 will buy back the convertible debentures for US$259.78 million, which is equal to 101 percent of the US$257.2 million principal amount originally paid by the three companies.

A June 2010 proposal by JSC Atomredmetzoloto, a Russian uranium mining company, to acquire a majority stake in U1 was accepted by U1's board in July subject to shareholder approval and relevant government approval.

The Japanese companies and U1 have reviewed their relationship and confirmed that the Japanese companies could achieve their original objective of securing uranium purchase rights without holding the convertible debentures in U1, and agreed to the new arrangement.

The mechanics of the agreement - the sale of the convertible debentures and confirmation of purchase rights - are expected to be effective by December this year, subject to the completion of ARMZ's acquisition of U1's common shares.