canadian miner defies rio tinto over namibia

Canadian miner defies Rio Tinto over Namibia
Peter Koven, Financial Post
Published: Wednesday, April 01, 2009

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Rio Tinto plc

Extract Resources Ltd.

Materials Sector

Stephen Dattels

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A group of investors are engaged in a battle of wills with mining giant Rio Tinto Ltd., which they feel is trying to get control of a prized uranium deposit without paying a full price for it.

The group includes Canadian mining entrepreneur Stephen Dattels, who has invested heavily in the project in recent days and wants to see it properly auctioned off. Also lingering in the background is the government of Iran, which is involved with Rio Tinto and has a controversial nuclear program.

The project in question is the Rossing South deposit in Namibia. It is controlled by a Toronto-listed company, Extract Resources Ltd., which is based in Perth and is 40%-owned by London-based Kalahari Minerals PLC.

Recent drilling has confirmed that Rossing South is a world-class resource. That drew the interest of Rio Tinto, which already owns the nearby Rossing uranium mine (together with the Iranian government and other investors).

Rio acquired stakes in Extract and Kalahari last year. It then supported a merger between the two miners, which would have allowed it to buy shares in the combined company without being subject to a 20% cap under Australian takeover provisions. The merger was called off over concerns that Rio could get control of the company without paying a premium for it.

Now Rio is talking to other Extract and Kalahari shareholders to try to gain support for a joint venture that would allow it to run Rossing South. But it is having little success.

"Why should Rio Tinto be able to muscle the shareholders of Extract and Kalahari around to suit its own benefit? In my point of view there is a much better alternative, which is to have both companies sold to the highest bidder," Mr. Dattels, one of the key executives at Toronto-based Barrick Gold Corp. in its formative days, said in an interview.

Mr. Dattels sold uranium company UraMin Inc. for US$2.5-billion in 2007, and he is convinced that Rossing South is the next big thing. He bought major interests in Extract and Kalahari through two mining companies that he runs, and believes there are many potential buyers for the deposit.

"This could easily wind up being the most valuable uranium deposit in the world," he said.

One of the shareholders Rio Tinto was talking to is Toronto-based NWT Uranium Corp., which has an indirect stake in Kalahari. But those talks broke off abruptly, and NWT issued an extraordinary statement on Monday night saying it had "concern with certain questionable acts by Rio management which were not in keeping with the spirit of the discussions."

John Zorbas, managing director at NWT, said that he would also like to see Rossing South sold through a "serious bid" or an auction. He declined to comment on Rio Tinto's conduct.

The unusual situation is further complicated by the government of Iran, which is Rio's joint venture partner on the Rossing mine. In Rio's last annual report, the company stated that is transferring its interest in Extract into the Rossing mine joint venture, effectively putting it in the hands of the Iranian government and other investors.

http://www.financialpost.com/story.html?id=1453493