Russia's ARMZ makes all-cash $33m bid for Dornod JV partner Khan Resources

To establish the first modern uranium joint venture between Russia and Mongolia, Russia's ARMZ is trying to oust its Dornod uranium project partner Khan Resources through an unsolicited takeover bid.

RENO, NV - 

State-owned Russian uranium miner AtomRedMetZoloto (ARMZ) Tuesday announced it was launching a formal all-cash US$33 million bid to acquire Toronto-based junior explorer Khan Resources (TSX: KRI) for Cdn 65-cents (US62-cents) per share.

Both companies are battling over who controls the exploration license for the Dornod uranium deposit. ARMZ is moving to end the conflict over the first joint venture between Russian and Mongolian state uranium companies by making a hostile takeover bid for Khan Resources.

In July the Mineral Resources Authority of Mongolia suspended the mining license of the joint venture company Central Asia Uranium Corporation United, which was one of two primary licenses for the Dornod uranium deposit. CAUC is a joint venture between a Khan subsidiary (58% ownership), ARMZ subsidiary Priargunsky (21%) and the Mongolian government (21%).

Dornod is also the site a former Russian open-pit uranium mine.

 Inspectors from Mongolia's State Inspection Agency claimed a number of violations existed when they visited Dornod in April. By August Khan was pushed aside in order to permit the Mongolian Government to set up a 50-50 joint venture between ARMZ and Mongolia's MonAtom. Dornod was chosen for the first joint venture between the Russian and Mongolian state companies because it has more than 50,000 tons of uranium reserves and resources and could begin mining within a short time.

A study by P&E Mining Consultants for Khan estimated a probable mineral reserve of nearly 53 million pounds of U3O8 at Dornod. At an expected mine life of 15 years, the average annual production rate is estimated at 3 million pounds at an average cost of US$23.22 per pound. The initial project capex is believed to be US$333 million.

In a news release Tuesday, ARMZ said its offer represents a 48% premium over the closing price on the TSX on November 26, 2009. ARMZ is the world's fifth largest uranium producer.

On November 27^th, Khan Resources said it was aware of ARMZ's offer but would not comment until it had received the offer and related takeover information.

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