Kazakhstani entrepreneur has uranium at his fingertips
April 27, 2008
By Elliot Blair Smith
Former cognac and car salesman Mukhtar Dzhakishev said he planned to triple production at the Ulba metallurgical plant in Oskemen, a formerly secret city south of Siberia known in Russian as Ust Kamenogorsk.
With 15 percent of world uranium under his control, Dzhakishev is trading domestic mineral rights to joint venture partners in China, Japan and Russia for the technology he needs to make Kazakhstan the world's biggest supplier of atomic fuel for civilian nuclear reactors.
He seeks to become, in effect, the John D Rockefeller of nuclear power. "We don't want to be just a sack of uranium," said Dzhakishev, president of the state-owned mining enterprise JSC National Atomic Company Kazatomprom.
He has proposed to invest $850 million (R6.5 billion) at Ulba, six-and-a-half times the plant's projected annual cash flow, according to the company's 2006 audited financial statement. Dzhakishev said he aimed to integrate the four-stage atomic fuel chain at the guarded industrial complex just as Rockefeller once controlled crude oil from wellhead to petrol tank.
If successful, Kazatomprom would consolidate the market for its 983 million pounds (445 million kilograms) of recoverable uranium deposits, second only to Australia's, and become less reliant on the raw ore's spot market price by supplying higher-value products to fuel the next generation of reactors.
Dzhakishev's plan puts Kazatomprom in direct competition with some of the state enterprise's largest customers and partners, including Areva of Paris and OAO Techsnabexport of Moscow, a state-owned nuclear fuel trading company.
Ux Consulting of Georgia projects that global nuclear fuel demand will grow 29 percent to $26.3 billion by 2020. Dzhakishev said he wanted a third of that.
Ux Consulting analyst Masha Katsva said: "I'm optimistic about Kazatomprom meeting the objectives." She returned on April 8 from an inspection of the state company's mines.
Critics said Kazatomprom's nuclear ambitions heightened the dangers posed by the proliferation of bomb-making technology.
Success would also enrich the regime of Dzhakishev's boss, President Nursultan Nazarbayev, a US ally whose government the state department criticised for "pervasive corruption", restrictions on free speech, prisoner abuse and violence against women in a report on Kazakhstan's human rights released last month.
Gaukhar Mukhatzhanova, a research associate at the James Martin Centre for Nonproliferation Studies in California, said: "Whatever its human rights and corruption record may be, Kazakhstan so far has been practically a model nonproliferation citizen in the international community."
When the Soviet Union collapsed in 1991, Dzhakishev had just finished a doctorate in law at the Moscow Physics Engineering Institute and was weighing an offer to lead a police academy back home. Instead, he and friends launched an import sales company.
With no sales training beyond the Russian-language memoirs of former US automobile executive Lee Iacocca and Sony founder Akio Morita, the young men set up a showroom in the windowless basement of a movie theatre in Almaty, the largest Kazakhstani city.
Customers complained that one of their first imports, German shoes, crumbled in their hands.
The products were cardboard props used in funeral homes to sheath cadavers' feet.
"We had all these paper shoes and threw them away," Dzhakishev said with a laugh. The young entrepreneur and his colleagues went on to profit from importing French cognac and cosmetics, Japanese televisions and German BMWs.
In 1998, Dzhakishev said, he attended the 35th birthday party of President Nazarbayev's eldest daughter, Dariga.
"What are you doing now?" Dzhakishev said the president asked him. He had left the trading company to run a liquid petroleum gas utility.
A presidential aide called a few days later, and Dzhakishev found himself running Kazatomprom.
Uranium's price runup to a peak of $138 a pound last June from a low of $6.75 in March 2001, has since put the Silk Road country at the front line of the nuclear renaissance.
Even after the ore's drop to $69 this month, Kazakhstan has a competitive advantage because its extraction costs are among the world's lowest, about 15 percent of today's price.
Jack Fuller, the chief executive of Global Nuclear Fuel, a joint venture of Toshiba and GE-Hitachi Nuclear Energy, is another customer of the Ulba plant.
While GE-Hitachi declined to comment on Kazatomprom as a competitor, Fuller said he admired Dzhakishev's ambition.
"He's got this real vision he wants to get to," Fuller said. "How he gets there, and how effective he is, we'll have to wait and see. But he's making some real neat moves right now."
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