Uranium One Inc. (“Uranium One” or the “Company”) announced that the Special Inter-District Economic Court for the City of Astana (Republic of Kazakhstan) on March 26, 2014 issued an order having the effect of invalidating the original transfers in 2004 and 2005 from Kazatomprom to the Company’s Betpak Dala and Kyzylkum joint ventures of the subsoil use contracts for the Akdala, South Inkai and Kharasan fields.
While the proceedings before the Court were held behind closed doors and only limited information has been made available, Uranium One understands that the ruling was made orally in proceedings brought by the State Prosecutor of the Saryark District of the City of Astana against Betpak Dala, Kyzylkum and Kazatomprom, among other parties, and relates to events which occurred two to three years before Uranium One acquired its interest in the two joint ventures.
Under Kazakh law, the order is automatically stayed and may not be enforced for a period of 15 days and such additional time as it may take to hear an appeal therefrom, and is also subject to further appeals. Both joint ventures intend to vigorously defend themselves in the Kazakhstan courts and plan to file notices appealing the order. The Company considers the lawsuit to be without merit.
Neither Uranium One nor its shareholders are parties to the proceedings. Kazatomprom, the Company’s Kazakh state-owned joint venture partner in Kazakhstan, has, however, assured the Company and its shareholders that their legal rights and economic interests will be fully preserved. The Company and its shareholders are now in discussions with Kazatomprom with a view to obtaining new subsoil use rights to the Akdala, South Inkai and Kharasan fields in the event that the order becomes effective. While those discussions are underway, and in order to mitigate the impact on the Company’s interests, Kazatomprom, Betpak Dala and Kyzylkum are putting in place temporary arrangements designed to ensure that, notwithstanding the court order, Betpak Dala and Kyzylkum carry on normal business operations and the rate of return to the Company from existing operations is unaffected during this period. The Company’s shareholder, Uranium One Holding N.V., and Kazatomprom have signed protocols to this effect and are taking the steps necessary to ensure that scheduled production and deliveries to customers are not affected.
The Company and its shareholders have reserved their rights to take all such steps, and exercise all such remedies available to them, including proceedings under international investment treaties, as they may consider necessary or advisable to protect their legal rights and economic interests in this matter.