The battle to control the Fukushima Nuclear Power Plant crippled by Japan's massive earthquake and tsunami on 11 March continues.
Some nuclear advocates argue that the fact the reactor withstood such an unprecedented natural disaster at all is a feather in the cap for nuclear power.
But with radiation in Tokyo tap water, politicians from Germany to China putting nuclear programmes under review, and the plight of the core team of engineers only getting worse, such opinions seem rather Panglossian, especially in the short term.
The dimming prospects for nuclear has been reflected in sharp price falls in the wake of the disaster, for both uranium and the companies that mine and exploit it.
Radioactivity killed a takeover star
One interesting company for opportunity-seekers still intent on looking through the current crisis is Kalahari Minerals (LSE: KAH).
At Monday's price of 237p per share, Kalahari is valued at �580 million. That's hefty for an AIM-listed company, yet it's far short of the �735 million sported by the uranium miner just days before the Japanese earthquake struck.
What makes Kalahari especially interesting is that on 7 March, the Kalahari board gave its blessing to a 290p per share offer for the company from China Guandong Nuclear Power Group (CGNPG) -- one of China's largest nuclear reactor builders.
Kalahari shares topped �3 after the takeover offer was announced, as traders bet on a counteroffer. But by 17 March the price had slumped beneath �2, as the deteriorating situation at the Fukushima plant made global headlines.
Even after recovering some losses, Kalahari shares present a potential 22% upside, given the 290p that was agreed just weeks ago. Brave investors might therefore see an opportunity to pick up a pound for less than 80p.
African action
Of course, few people would pick up a gold coin if they discovered it not via a metal detector but using a Geiger counter.
So is Kalahari irredeemably tainted? Not if we continue with nuclear power.
The company's primary asset is a 43% stake in Extract Resources, an Australian-listed miner valued at over AUD$2 billion. Extract's main asset is the high-grade Husab Uranium Project in Namibia. Already the fifth largest uranium deposit in the world, this resource base is expected to grow on more drilling in the region. And just to the north is Rio Tinto's (LSE: RIO) key R�ssing uranium mine.
Rio owns sizeable stakes in both Kalahari and Extract Resources, and it had been in talks with Extract about a joint venture to exploit the Husab Project. It was also one company previously touted as potentially making a counterbid for Kalahari following the Chinese move.
Shares leak value
The case for buying Kalahari shares is clear then -- though that's not to say it's right!
Through its holding in Extract, Kalahari owns a world-class uranium resource, and its share price is supported by the CGNPG offer. Should the China's company withdraw, there's potential for other interested parties like Rio to step in. At 237p, investors get this action at a discount.
The stock market rarely gives away free money, though, and the bear case is equally straightforward. Though there's been no official comment, an unnamed CGNPG insider was quoted last week saying the company was back in discussions with Kalahari's board.
Presumably the talk is more about lowering the agreed price than the weather in Beijing.
Worse, Russia's state-owned nuclear outfit Rosatom has successfully reduced its offer for Australian uranium explorer Mantra Resources by 12%. Mantra's board acquiesced to the reduced price, which sets a poor precedent for Kalahari.
Still, unlike oil-flush Russia, few believe China can meet its energy needs without nuclear expansion. Perhaps the famously long-term outlook of China's mandarins will see the current weakness in the sector as more a chance to secure assets without a costly bidding war, rather than an opportunity to chisel down the price?
Kalahari's executive chairman Mark Hohnen has a �7 million holding in the company, aligning his interests with other shareholders. He and the rest of the Kalahari board know they potentially have the strategically well-placed Rio as a fallback, too. Finally, any of these companies may look to ride out the bad headlines before revisiting a takeover, especially given Extract's view that its resource base is set to grow; if nuclear fission is going to play a role in our future energy needs, Extract's assets will surely be in the mix.
All that said, a decade or more of 'temporarily' shelved nuclear expansion plans would test the patience of even the most dedicated investors. Kalahari is therefore probably only a buy if you believe the agreed offer from China will go ahead.
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