Johannesburg — URANIUM One reported record second-quarter production yesterday and told investors it would spend C271,8m redeeming debentures held by a Japanese consortium as the Canadian uranium miner moves to close a deal with a Russian group.

Toronto Stock Exchange-listed Uranium One, which lifted its 2010 production forecast to 7-million pounds from 6,8-million pounds, is listed on the JSE but the company has no South African assets after selling its Dominion mine for 37m in April.

It has recommended shareholders approve a deal with Russia's ARMZ, a company within the state- owned Rosatom, which will see ARMZ taking a 51% stake in Uranium One in exchange for 610m in cash and stakes in two mines in Kazakhstan.

Uranium One will redeem C269m worth of convertible debentures held by Japan Uranium Management (JUMI), a consortium comprising Tokyo Electric Power, Toshiba, and Japan Bank for International Co-operation, at 101% of their face value.

A special dividend of C1,06 per Uranium One share, representing a change of control premium, would be paid to shareholders other than ARMZ once the deal was concluded later this year, Uranium One said.

"The proposed transaction with ARMZ is therefore expected to result in a net negative cash flow of approximately 130m," the company said.

The JUMI consortium's supply agreement has also been changed, giving it the option to buy up to 2,5-million pounds of uranium a year from Uranium One at market- related prices instead of having the right to buy 20% of its annual output. The new supply deal will run from 2014 to 2025.

Uranium One produced a record 1,8-million pounds of uranium in the three months to end-June 2010 and decreased its costs by a fifth to 15/oz compared to the March quarter.

Sales increased 294% to 1,5-million pounds from the same period a year ago, driving revenue up to 66m compared with 18,6m.

The increased output was a result of the inclusion of the recently acquired 50% stake in the Karatau uranium mine in Kazakhstan and ramp-up of the South Inkai mine. The other two mines in Kazakhstan are Akdala and Kharasan.

Uranium One expects to spend 25m on building its Honeymoon mine in Australia this year.

It holds a 51% stake in Honeymoon after selling a stake to Japan's Mitsui.

The total funding requirement for Honeymoon this year climbed by an extra 21m because of a delay in uranium sales into next year.