UraMin, the Aim-listed uranium mining company formed just two years ago and brought to the market last year with a value of £120m, has accepted a bid valuing it at more than £1.2bn.

The company's value could yet go higher. Its shares were trading Friday night above the offer made by Areva, the French state-owned nuclear engineering group, suggesting hopes of a rival bid from other companies also scrambling for uranium, whose price has soared in recent years.

Areva's cash offer is worth $2.5bn, or $7.75 a share. It has secured lock-up agreements to accept the bid from UraMin directors and other shareholders speaking for about 25 per cent of the company, and said it had retained the right to raise its bid to match any higher rival offer.

Friday night UraMin's shares were trading at $8.06, or 408p, 4 per cent above Areva's offer price They opened the week at 328.5p, before the company revealed it was in talks about a possible bid.

The steep rise in UraMin's value over the past year is the latest sign of the heated market for uranium, which has risen from about $20 a pound at the start of 2005 to $138 on Saturday.

Demand has been driven by expectations that a new wave of nuclear power stations will be built around the world to meet concerns about energy security and climate change. New reactors typically require a lot more uranium than those that have been in operation for some time.

There have also been fears of shortages following floodings in mines in Canada and Australia.

Stephen Dattels, UraMin's executive vice-chairman, founded the company in 2005, and set about acquiring mining assets in Namibia, South Africa and the Central African Republic; most of them formerly operated by international oil and chemicals companies, but abandoned in the 1980s and 1990s. The assets have yet to start production.

Areva will not welcome another bid contest. It was the loser in the recent battle for Repower, a German wind company, that was won by Suzlon of India. This month, Areva managed to prevent Paladin, an Australian mining company, winning full control of Summit, another miner that is co-owner, with Paladin, of a large uranium deposit in Australia.