Miners agree $5bn merger to create uranium powerhouse

Canada's Uranium One has agreed a $3.1bn (£1.6bn) reverse takeover of UrAsia Energy, which has a London listing, creating the world's second largest producer of uranium in a deal triggered by the rising demand for nuclear fuel.

The new company, which will retain the name Uranium One, will have a market capitalisation of $5bn, making it second only to fellow Canadian group Cameco, which is valued at $14m. It will be the only company operating in every one of the world's five largest resource areas - Kazakhstan, South Africa, Australia, the US and Canada. Over half of the world's production of uranium from mines is in Canada and Australia.

Uranium One is listed in Toronto and Johannesburg while UrAsia, also traded in Toronto, listed on London's AIM market last year. Due to a significant number of shareholders being based in London and Europe, the new company is likely to be listed on AIM. However, because of its size it could move on to the main market and edge into the FTSE 100, a company spokesman said.

Uranium One chief executive Neal Froneman, who will continue as president and chief executive of the combined company, said the tie-up "creates a new, globally diversified uranium company with compelling investment appeal".

One analyst said the need for nuclear energy was creating a "feeding frenzy" around mining. The price of uranium has doubled to $75 a pound over the past year due to growing demand from utilities as governments try to limit emissions of carbon dioxide under the Kyoto Accord. Over the past five years, prices have jumped tenfold, which has spurred a burst of activity across the sector. Current mines are being expanded, new mines built and old mines reopened. The upturn follows a period of decline in the 80s and early 90s. But fears of global warming are overtaking those surrounding nuclear power.

Uranium Ore offered 0.45 of its own shares for each UrAsia share. UrAsia shareholders will own 60 per cent of the new company and will nominate three people to the board while Uranium Ore will nominate six.