Kazakstan re-examines uranium privatization — US court to hear from spurned Canadian firm

The government of Kazakstan and an Israeli firm have signed a letter-of-intent for the sale of two state-owned mining firms at the same time that a Washington, D.C., court is preparing to hear arguments from a Canadian firm that the Kazakstani government reneged on an earlier privatization deal.

On the block are Tselinny Gorno-Kimicheskii (TGK), the country’s largest uranium producer, and Kazakhaltyn, a gold producer. Details of the sale of the companies to Africa Israel Investment are still being worked out, but the ministry says the deal may see the companies amalgamated, or broken up and spun into smaller enterprises.

Although Africa Israel is interested in acquiring all the assets of TGK, including a power plant and uranium and gold processing facilities, it says it wants only to buy particular Kazakhaltyn gold mines, including the Aksu and Bestyube operations. The remaining mine, Zholymbet, is deemed too distant from TGK to be operated at a profit; it will be sold separately by the government.

The Kazakstani government and Africa Israel are continuing to negotiate terms on the structure of the sale.

According to the country’s deputy prime minister, TGK and Kazakhaltyn should be amalgamated to increase production from the three mines and provide additional jobs. He admits, however, that only a significant capital investment could lift the operations out of insolvency and compensate Kazatomprom, the state-owned uranium producer that is currently keeping the operations afloat. TGK alone owes more than US$10 million in back wages and is facing several lawsuits, including one launched by the Canadian firm World Wide Minerals, a former manager.

A Washington, D.C., courtroom is preparing to hear the US$220-million lawsuit filed against the Kazakstani government by World Wide Minerals over the failed deal to operate TGK in 1997. Also named in the suit is a U.S. firm alleged to have infringed on World Wide’s rights to sell uranium to Kazatomprom, also a defendant.

The company spent US$23 million in 1997 in a bid to help revive the country’s moribund uranium industry. It acquired the rights to manage TGK and two underground uranium mines, and spent millions to refurbish and upgrade the operations. Only months later, the government cancelled the contract, revoked a sales licence and assumed control of the operation, declaring it bankrupt not long afterwards.

— With files from Interfax News Agency.