Battle for Khan ~ Azaa's Weblog

Russian and Chinese state companies are competing in quest for uranium resources in Mongolia. Mongolia’s two superpower neighbours, Russia and China, are eyeing huge uranium resources in the Central Asian nation to meet growing demand and maintain geopolitical supremacy. Russia, the world’s fifth largest uranium producer and holder of the world’s third largest uranium reserves, signed an agreement in May last year with Mongolia on establishing a joint venture to develop Mongolia’s uranium deposits. Almost in half year time in December 2009, Russia’s state-owned AtomRedMetZoloto (ARMZ), the world’s fifth largest uranium producing company, made a hostile bid to acquire Khan Resources, a Canadian company that holds a 58% stake in the Dornod property, the largest uranium deposit in Mongolia. Along with Russian, Chinese companies have also expanded their foreign resource acquisitions to uranium miners in Mongolia. CNNC, China’s state-owned company, acquired a 69% stake in Western Prospector, a Toronto-listed uranium exploration company with assets in Mongolia, for US$25mn on June last year. And the Chinese nuclear company has bid for Khan Resources, the same target for Russian ARMZ.

Khan Resources – a battle between ARMZ and CNNC. Khan entered into a Memorandum of Understanding with the Mongolian Government on January 14 2010, in response to ARMZ’s bid, which Khan believes as “an opportunistic and inadequate offer”. The new non-binding memorandum suggests that MonAtom, the state-owned company, will acquire a 51% in each majority Khan-owned Central Asia Uranium Company (CAUC) and Khan Mongolia in accordance with the Nuclear Energy Law. Along with ARMZ, CNNC agreed on 1 February 2010 to acquire all of Khan’ outstanding common shares for cash consideration of C$0.96 per share, a 48% premium to ARMZ’s bid price. Khan’s management recommended shareholders accepting CNNC’s offer that comes with more favorable conditions than those of ARMZ. In response to the Chinese rival’s bid, ARMZ is expected to announce that it has increased its bid to C$1.01 per share, a 5.2% premium to the CNNC’s offer price, Associate Press reported yesterday.