Tanzania will issue a licence to a Russian firm to commence uranium mining in the country, after months of false starts.

The government said it is in the final negotiations with JSC Atomredmetzoloto (ARMZ) on the licence that will allow the firm to construct a plant at Mkuju River uranium mining site early in 2013.

Ministry of Energy and Minerals said the firm will be required to first meet several procedures among them the proposed programme for mining operations, a forecast of capital investment, the estimated recovery rate of ore and mineral products as well as the proposed treatment and disposal of ore and minerals recovered.

The firm, officials at the Ministry of Energy said, will also be required to furnish the government with plan for relocation, resettlement and compensation of people within the mining areas.

In July 2012, the government became involved in a dispute with ARMZ over Tsh 330 billion ($205 million) in income tax and stamp duty resulting from ARMZ’s acquisition of Mkuju River uranium mining project site from Uranium One. However, officials said the row has since been resolved.

In October, Tanzania issued an environmental impact assessment certificate to Mantra Tanzania in respect of the Mkuju River Project thus allowing the Russian firm to start uranium mining in the country.

The issuance of the certificate completes Mantra’s application for a special mining license for the Project and represents a significant permissions milestone.

Uranium One and ARMZ are parties to an option agreement which allows Uranium One to acquire Mantra from ARMZ with its core asset in Mkuju River Project in Tanzania.

As the operator of the Mkuju River Project, Uranium One is responsible for providing funding for the project in which the loan agreement totalling $150 million is guaranteed by ARMZ.

Chris Sattler, chief executive officer of Uranium One, said a further drawdown of $12.4 million has been made against the facility during the third quarter of 2012, bringing the total funds extended to Mantra to $35.9 million since June 2011.

Mr Sattler said the total purchase price, including the $150 million already paid, for 100 per cent of the Mantra share will be equal to ARMZ’s original acquisition cost of Mantra — approximately $1 billion together with any additional expenditures contributed by ARMZ to Mantra.

According to the 2012 Mining Act, extraction of uranium ore will be carried out under the strict control of the government of Tanzania and the corresponding ministries and departments that will provide safety during extraction of deposits in Mkuju River Project, to minimise possible contamination of the environment.

The Tanzania government expects to generate direct and indirect cash flows in excess of $640 million (Tshs 1 trillion) during the life span of the new uranium mining slated for next year.