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Top Uranium Miner Soars to Over $1Bln

Priargunsk, the country's largest uranium miner, has quietly become a billion-dollar business on the back of speculation about a possible nuclear fuel joint venture with Iran and expectations of imminent nuclear industry reforms that could see a sixfold increase in domestic uranium mining.

The Krasnoyarsk-based miner's off-bourse shares have rocketed 230 percent in the last four months, from $294 at the start of January trading to $680 this week.

Since January 2005, shares in Priargunsk — the world's sixth-largest uranium miner by output — have increased eightfold, and "to date, Priargunsk is still catching up with the market," Alfa Bank strategist Erik DePoy said.

"This is one of the main ideas of this year," said Maxim Gulevich, a trader with UBS. "It has developed into a pretty tidy business," he said, declining to reveal details or specify trading volumes.

State-controlled Priargunsk sells uranium to state fuel monopoly TVEL for processing into yellowcake, a fuel used at nuclear plants.

Although Priargunsk shares are not listed on the stock exchange, 16 percent of its shares are traded through RTS Board, an off-bourse information system run by the Russian Trading System.

A flurry of trading in the company's stocks could indicate that investment banks are buying up its stock on behalf of state organizations, which could then take the company private, some analysts said Thursday.

Demand for Priargunsk has picked up dramatically in the last three months, with several top Moscow investment banks leading the buying. UBS and Troika Dialog may have accumulated the most Priargunsk stock, with both regularly leading the bidding on the RTS Board, some market insiders said on condition of anonymity.

Alfa's DePoy and Alexander Kotikov, an analyst with Troika Dialog, said investors saw Priargunsk as a cheap buy relative to its foreign counterparts, such as Kazakhstan's UrAsia Energy.

"There's been great investor interest in uranium mining recently, and obviously Priargunsk is one of the companies in the spotlight. It has substantial reserves, while uranium prices have rocketed in the last year," Kotikov said.

Interest in Priargunsk stock has been matched by a notable rise in its analytical coverage. UBS initiated coverage of Priargunsk at the end of February, following up with a second report this week. The brokerage forecasts that Priargunsk's share price will appreciate another 7.9 percent. Alfa Bank values the miner at $1.2 billion, almost one-fifth more than its current market cap of $1.08 billion.

UBS this week forecast that Priargunsk's annual revenues would double from $144 million in 2004 to $302 million in 2005, while profits before interest, taxation, depreciation and amortization were expected to jump from 6.2 percent in 2004 to 59 percent in 2005, the report said.

Maria Kalvarskaya, an analyst with brokerage CIT Finance, said there could be other reasons for the surge in trading and share price. "It may be that the banks are scooping up the stock on behalf of the state," she said.


(The Moscow Times 08.v.06)

 
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