World Wide, Kazakstan start talks over cancelled deals

World Wide Minerals (WWS-T) and the government of Kazakstan are in negotiations to settle a dispute surrounding the government’s cancellation of a management contract for the Stepnogorsk uranium mine.

The talks follow months of behind-the-scenes negotiations among a number of Kazakstani ministries and their counterparts in Canada and the U.S., as well as petitioning by the company itself.

At issue is a contract secured by World Wide in late 1996 to manage the Stepnogorsk uranium operation of state-owned Tselinny Gorno-Khimicheskii Kombinat (TGK). The deal was part of the country’s goal of privatizing its resource industry. In addition to the management rights, which were granted to its 95%-owned subsidiary KazUran, World Wide was also granted the option to purchase a 90% equity interest in TGK for more than US$47 million.

However, the government opted in August 1997 to retain control of TGK, but not before World Wide spent $25 million on redevelopment of several uranium projects in the country, including restarting the uranium processing plant at the Stepnogorsk mine, as well as on loans to TGK.

The government has agreed that it is obliged to compensate World Wide for its lost investment and has formed a committee to verify the company’s expenditures at uranium projects in Kazakstan.

World Wide has faced numerous obstacles in its bid to become a uranium producer in the country. KazUran gained control of TGK and the Stepnogorsk operation, in north-central Kazakstan, in October 1996 and restarted the uranium processing plant there the following April. The company anticipated production at Stepnogorsk during 1997 of 1.8 million lbs. of U3O8, as well as the processing of an additional 1.7 million lbs. of U3O8 for Kazatomprom, a state-owned company with which KazUran had signed a separate joint-venture agreement to develop at least three other mines in the country (that agreement has also been cancelled by the government). However, World Wide was denied a uranium export licence to sell its product on the international market.

The company has since withdrawn from the country, and is seeking compensation from the government for not only its lost investment, but for the value of lost profits and market capitalization. The company’s share price has dropped from a high of about $1.02 last May to the 30cents range.