Kazakhstan, one of the world's biggest uranium producers, accused a key industry executive on Wednesday of illegally selling deposits to foreign companies, in a move certain to alarm investors in the strategic sector.

The former Soviet republic is home to a fifth of global uranium reserves and analysts expect Central Asia's biggest economy to become the world's top global producer this year.

Last week Kazakhstan's KNB, the successor security service to the Soviet-era KGB, arrested Mukhtar Dzhakishev, long-serving head of state Kazakh uranium producer Kazatomprom, along with seven other executives.

Preliminary results of the investigation show that Mukhtar Dzhakishev and other managers ... squandered state property in the form of Kazakhstan's largest uranium fields by handing them to a number of offshore companies, KNB said.

KNB singled out the sale of a 30 percent stake in the Kyzylkum uranium joint venture as an example of an illegal transaction. The stake was sold for 15.6 million tenge (about $100,000), it said without naming the buyer.

Canada's Uranium One (UUU.TO: Quote) owns 30 percent in the venture while a group of Japanese firms own another 40 percent. The rest belongs to Kazatomprom. The venture runs Kazakhstan's largest uranium mine, Khorasan.

None of the foreign firms could be reached for comment. A Kazatomprom spokesman said he had no information on the probe.

KNB said there were other cases of illegal asset sales in the uranium sector but gave no details.

Under Dzhakishev, Kazatomprom has expanded aggressively, forming joint ventures with foreign companies to develop uranium fields in exchange for access to foreign markets and rising among the ranks of top global producers.

It runs two other joint mining projects with Uranium One and also has joint ventures with Canada's Cameco (CCO.TO: Quote), France's Areva (CEPFi.PA: Quote) and several Japanese, Chinese and Russian firms.

Kazakhstan produced 8,521 tonnes of uranium last year, up from 6,637 in 2007. It planned to raise output to 12,200-12,300 tonnes this year. (Editing by Maria Golovnina and Erica Billingham)

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