a bomb of a deposit

"""""""Presuming that Rio could cobble together a consortium, it might launch a bid for Extract itself, ignoring Kalahari. No wonder Hohnen talks of exercising the right to maintain or increase its holding in Extract. It might be wise to hurry."""""""""""




A bomb of a deposit

Wednesday, May 18, 2011

Nuclear may have become a swear word again ? but it won't last long. Energy remains king and nuclear in one form or another won't easily be trumped. The bad news out of Japan is indeed bad but Fukushima will be classified as another Chernobyl and the world will move on.

Which leads me to a first rate investment opportunity. Over the last two years I've been watching a company called Kalahari Minerals plc with increasing fascination. It is listed on London's AIM exchange and on the NSX (Namibia) and its really big value driver is its 43% stake in Extract Resources, a Perth-based company listed on the ASX, TSX and NSX.

Extract owns outright the Husab Uranium Project in Namibia. Husab is reckoned by one authoritative analyst to be "?the only asset in the uranium space that I deem to be world class and in the hands of the development/exploration stage company."

Here's the interesting stuff: Husab is virtually next door to Rio Tinto's Rossing uranium operation (it's 7km away). Rossing has produced more than 260 million pounds of uranium since 1976. And Rio holds a 14,3% stake in Extract as well as 11,5% in Kalahari.

Earlier this month the China Guangdong Nuclear Power Group (CGNP) withdrew a US$1,16bn bid for Kalahari after the UK Takeover Panel said it couldn't reduce its original offer. The Chinese were obviously trying to be extra clever on the back of the Japanese nuclear accident. In a move that signals the desire of Kalahari to maintain the relationship that has obviously built up between the companies, it has waived (for the time being) the payment by CGNP of a $7,7m break fee penalty.

Meanwhile, Rio turned up at Kalahari's AGM on Thursday May 12 and voted against resolutions intended to enable Kalahari to continue funding its share of Extract's capital development programme. This prompted an angry retort from Kalahari chairman Mark Hohnen: "?it is imperative that Kalahari remains unrestricted to maintain and, wherever possible, increases its current 42,79% interest in Extract?We are therefore disappointed that Rio Tinto?again voted against the resolution to increase the Company's headroom to allot additional shares. This is the third attempt by Rio Tinto to limit or disallow our ability to exercise our right to maintain or increase our interest in Extract."

Hohnen was coy about talking to us. Instead, his PR minder, Susie Geliher in London said, and I quote: "[Mr] Hohnen's comments were made because it is unusual for a shareholder to vote in a direction that would not be in the best interest of all the shareholders." Since PR spin doctors are usually mealy-mouthed when one of them says something as direct as that my ears grow very large.

Well, well. What could all this mean? Is Rio primping itself up to make a takeover offer? And, supposing it did, would that spark the return of the boys from Guangdong armed with more cash and ready for a nice little takeover fight?

Rio, of course, has an inside track. Though it holds only 14,23% in Extract a raft of other shareholders including Citi, JP Morgan, UBS, HSBC, Merrill Lynch and others hold 45,69% together. Presuming that Rio could cobble together a consortium, it might launch a bid for Extract itself, ignoring Kalahari. No wonder Hohnen talks of exercising the right to maintain or increase its holding in Extract. It might be wise to hurry.

Meanwhile, for those of us on the outside, a flutter on both stocks might do us very nicely.


http://www.newstime.co.za/column/DavidGleason/A_bomb_of_a_deposit/89/3447/