November 15, 2010 / 11:50 AM / 7 years ago

UPDATE 2-Uranium One loss narrows; sees higher production

* Loss $0.02/shr vs loss $0.03/shr last year

* Sales rise more than threefold

* Shares dip 2.7 pct to C$4.66 (In U.S. dollars unless noted)

TORONTO, Nov 15 (Reuters) - Uranium One UUU.TO posted a narrower quarterly loss on Monday, helped by an increase in production, and forecast higher production in 2011.

Vancouver-based Uranium One, whose main operations are in Kazakhstan, expects to produce 10.5 million pounds of uranium in 2011. For 2010, the miner said its view remained unchanged at 7 million pounds.

The company also said it would increase production over the the next six to seven years, ramping up to 18 million to 20 million pounds annually, in order to meet rising global demand for nuclear fuel.

Uranium One Chief Executive Jean Nortier pointed to China’s commitment to build 16 new nuclear reactors at a cost of $5 billion each as big driver for demand and spot pricing.

“Why would they not buy every single pound of fuel they can get to fuel that fleet of reactors,” Nortier said in a conference call with investors. “We certainly remain extremely bullish.”

Revenue rose more than threefold to $73.1 million in the quarter, primarily due to volume sold increasing to 1.7 million pounds. The miner’s average cash cost fell to $12 a pound from $15 per pound last year.

The average realized uranium price dropped 14 percent to $43 a pound, even with spot uranium prices soaring in the quarter.

The company said it expected to see better realized prices in the fourth quarter.

Uranium One reported a third-quarter loss of $10.2 million, or 2 cents a share, compared with a loss of $11.9 million, or 3 cents a share, last year.

Analysts on average had expected earnings of 1 cent a share, according to Thomson Reuters I/B/E/S.

Uranium One shares, which rose more than 3 percent on Monday morning, were down 2.7 percent at C$4.66 by midday on the Toronto Stock Exchange.

ARMZ DEAL

In June, Uranium One announced that Russian state-owned miner ARMZ would take a controlling stake in the company in exchange for a 50 percent stake in two mines in Kazakhstan, along with $610 million in cash.

The deal has been approved by all regulators except for the U.S. Nuclear Regulatory Commission.

“The final closing of the ARMZ transaction is expected to occur before the end of this year,” executive vice-president Chris Sattler said. “The new mines will begin contributing to Uranium One’s production profile in 2011.”

The company expects its share from the Akbastau mine in 2011 to be 1.2 million pounds at a cash cost of $18 a pound, while its share from Zarechnoye will be 1 million pounds at a cash cost $21 a pound.

Once the deal is completed, Uranium One will pay a special cash dividend of $1.06 a share to shareholders other than ARMZ.

$1=$1.01 Canadian Reporting by Julie Gordon in Toronto and Isheeta Sanghi in Bangalore; editing by Rob Wilson

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