Saturday, July 13, 2013

Uzbekistan: In Search for Uranium, Japan Enters Risky Market

Originally published by

Uzbekistan: In Search for Uranium, Japan Enters Risky Market

by Murat Sadykov

A Japanese minerals outfit has signed a deal with Tashkent to begin prospecting for uranium in northern Uzbekistan.

Russia’s state-run RIA Novosti news agency reported this week, citing a source close to the Japan Oil, Gas and Metals National Corporation (JOGMEC), that the company and the state-run Navoi Mining Combine had signed a five-year uranium exploration license for two blocks in Navoi Region. A minimum investment is set at $3 million. 

The deal does not cover extraction: "If [uranium] deposits are found on the contract area, JOGMEC will be granted exclusive rights to hold direct talks and sign a production sharing agreement with Uzbekistan," the source told RIA Novosti.

According to the source, this would be the first agreement for a foreign firm to explore for uranium in Uzbekistan. Currently, Navoi Mining Combine has a monopoly to extract and export uranium.

In the past five years, Uzbekistan has tried to attract foreign investors to develop its black-shale uranium deposits, which require sizeable investment and expertise, RIA Novosti said. According to the London-based World Uranium Association, a trade group, Uzbekistan is the world's seventh-largest uranium producer with an annual output of around 2,400 metric tons. 

Should it find any uranium, other international outfits’ experience working in Uzbekistan might be instructive for JOGMEC. For several years, Uzbekistan has tried, with little success, to lure foreign investors to explore its oil and gas deposits. In May, Malaysia's Petronas quit its gas exploration projects altogether, without citing a reason. 

Some believe their pullout is related to Uzbekistan’s hostile investment climate. For example, last year, Russian telecoms giant MTS had its local assets expropriated during an opaque tax dispute that looked like a pretext to seize the company. UK-based Oxus Gold was forced out in 2011 amid sustained pressure from its local partners to sell its stake at below-market value. And, in 2007, Tashkent canceled its contract with the country's largest mining investor, Newmont, and seized some of its assets. 

So many eyes will be on the Japanese company. Will it have more luck working in Uzbekistan?