rbc latest valuation of ext

Unfortunately down on their previous valuation, (higher than some valuations posted here recently), still a significant improvement on current prices.

PRICE TARGET REVISION | COMMENT
July 12, 2010

Extract Resources Limited (ASX: EXT; TSX: EXT)
ITOCHU to Buy 10% Stake in Extract

Outperform

Speculative Risk

Price: 6.95
Shares O/S (MM): 242.9
Dividend: 0.00
NAVPS: 9.73
BVPS: 0.69
Float (MM): 82.6
Institutional Ownership: 66%
Price Target: $10.00 down from $12.00
Implied All-In Return: 44%
Market Cap(MM): 1,688
Yield: 0.0%
P/NAVPS: 0.7x
P/BVPS: 10.1x


Event
We are lowering our target price to A$10.00/sh from A$12.00/sh.

Investment Opinion
On July 9, 2010, ITOCH Corporation, a Japanese trading house, informed Extract that it had acquired a 10.3% equity stake in Extract from Polo Resources Limited (and others). The transaction will require Australian Foreign Investment Review Board approval before it can be completed. We think the proposed purchase by ITOCHU highlights the strategic value of the Rssing South project.

With the ITOCHU purchase, more than 65% of Extract's shares will beheld by strategic investors (Kalahari 41%, Rio Tinto 15% and ITOCHU 10%).

With the highly concentrated equity ownership of Extract, we are concerned that the potential for a takeover of Extract with a substantial market premium is greatly diminished. Therefore, we have lowered the multiple we apply to our NAV estimate to 1.0x from 1.25x resulting in a target price decrease to A$10.00 per share from A$12.50 per share.

In addition to the ITOCHU purchase, recent press reports indicate that Korea Electric Power Corp (Kepco) is looking to acquire a 15% equity stake in Extract (it is inclear what the source of those shares would be). This could serve to further concentrate the shareholding among strategic investors.

ITOCHU's proposed investment is in line with its strategy of acquiring stakes in uranium equities and projects. ITOCHU already owns a 15% stake in Extract's parent company, Kalahari, a stake in the Lake Maitland project, as well as stakes in other uranium projects.

We continue to believe that there is significant exploration potential at Rossing South and that the scope of the proposed project may increase coincident with a larger resource. A larger scope could significantly increase the value of the Rossing South project.

We are maintaining our Outperform, Speculative Risk rating.