Uranium miner’s Russian routes unnerve potential bond investors

Money managers are raising red flags about a planned $300 million bond sale by one of the world’s largest uranium miners, citing the company’s reliance on Russian transport routes.

Uzbekistan’s NavoiYuran provided almost one tenth of the global supply of the radioactive metal last year, exporting to Canada, Japan, US, South Korea and India. Neither NavoiYuran nor any of the firms transporting Uranium for it are subject to US, European Union or UK sanctions.

But its dependency on Russian infrastructure has raised concerns from some fund managers during the marketing process, according to people familiar with the debt offering, who spoke on condition of anonymity. They were unwilling or reluctant to invest in the deal because of the company’s high degree of exposure to Russia, the people said.

A significant proportion of the Uranium that NavoiYuran exports from Uzbekistan is transported by train to the port of St. Petersburg, according to the bond prospectus. While traveling through Russia, it is handled by JSC Atomspetstrans, a firm specializing in the transportation of nuclear materials and a subsidiary of Rosatom, the Russian state-owned nuclear energy company.

The US put senior officials at Rosatom, including chief executive officer Alexey Likhachev, on its sanctions list in January, freezing their US assets and preventing US citizens from doing business with them. A spokesperson for NavoiYuran said the firm adheres to all relevant laws and conducts thorough due diligence when doing business in high-risk jurisdictions.

NavoiYuran flagged the Russian sanctions risk in its bond prospectus for potential investors. If the penalties on Rosatom’s leadership are extended to the Russian company itself and its subsidiaries, this may force the Uzbek firm to re-route its exports and undermine its financial position, according to the document.

The firm has explained to potential investors that it’s prepared to use alternative routes if needed because of sanctions, the spokesperson said. The company has a plan in place to use the route of Kazakhstan’s uranium company Kazatomprom through Kazakhstan, the Caspian Sea, Azerbaijan, and Georgia via the Black Sea if needed.

Clients have agreed to cover any additional costs arising from route changes and the firm considers the risk of direct sanctions to be low, the spokesperson said.

Abu Dhabi Commercial Bank PJSC, Citigroup Inc. and Natixis SA are arranging the bond for NavoiYuran. Citigroup declined to comment, while ADCB and Natixis did not respond to requests for comment.

(By Edward Clark)