rio's rossing to produce till 2023, page-5

Monday, November 30, 2009

Rio Tinto's Rossing can produce uranium at current rate ‘til 2023
by Lawrence Williams, Mineweb.net

Reports from Namibia suggest, perhaps hardly surprisingly, that mining giant Rio Tinto (ASX: RIO) is very keen to purchase the Rossing South project from Australian explorer, Extract Resources (ASX: EXT) and develop it in conjunction with its existing major mining operation some 7 km to the north.

Rio already owns 14.7% of Extract directly and also has 14.1% of Kalahari Minerals (LSE: KAH) which in turn owns 40% of Extract - which perhaps puts it in the driving seat with respect to taking on what is turning out to be one of the world's great uranium deposits - and given the proximity of its own operation, this would seem to make sense.

But perhaps Rio has missed the boat in picking up the project at a reasonable price as Extract and Kalahari stock has soared as more and more good grade uranium is turned up by Extract's exploration team. The current total resource for Rossing South is put at 267 million lbs U3O8 at 488ppm with almost definitely much more to come. Indeed Kalahari puts the anticipated potential at over 500 million lbs.

Jerome Mutumba, Rossing Uranium's manager of corporate communications and external relations, has been reported as telling Namibia Economist "Rio Tinto and Rössing see great potential for Rössing South to be developed and operated together with Rössing as this will provide value to both Rössing and Extract Resources.... the mines could share significant infrastructure... Rössing Uranium remains interested in discussing with the board of Extract how it might maximise value for all shareholders in both Extract and our Rössing mine.... Rössing produces 8% of global primary uranium production and is already a world class mine. Rössing South has the potential to be a similar scale."

Other shareholders in Extract and Kalahari may well be holding out for a higher price than Rio may be prepared to pay though. A significant player in this is Stephen Dattels who, through Polo Resources and various other companies with which he is associated is believed to have built up a significant stake in both Kalahari and Extract.

Dattels, and his associates are perhaps best known for the huge sale of Uramin, which has the Trekkopje uranium mine, also in Namibia, to French nuclear giant Areva for over $2 billion in 2007. He is very much a believer in Namibian uranium and has already made a fortune backing this belief.

Meanwhile Rossing itself, which had been looking at running operations down only three years or so ago, now reckons it can maintain its annual production rate of 4,000 tonnes of U3O8 a year until 2023 - indeed it should be able to increase it by 500 tonnes a year if it builds a new heap leach facility for which a feasibility study will be completed early next year.

Rossing Uranium is owned as to 68.6% by Rio Tinto.

The mine is also exploring around its own operation and reckons its potential for expanding its own resource remains, although the Rossing South resource has very obvious attractions. But, the very fact that the mine can continue operating for another 10 years or more at its current rate, even without finding new ore on its own ground, means that it may not be in a rush to pay a high premium for Rossing South.

It is still very much the obvious developer for the project and its big shareholding in Extract and Kalahari may mean it can successfully prevent its sale to other parties and hold out for a deal which satisfies all parties.



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