Matt Chambers From: The Australian June 18, 2010 12:00AM
EXTRACT Resources needs to secure a mining licence for its huge South Rossing uranium deposit in Namibia by April or risk losing it as Russia and other major developers show interest.
The Perth-based company has been looking for a partner to develop the $US1 billion mine since May last year and says it is on track to complete a feasibility study by the end of 2010, but analysts say the company has a big task ahead of it.
Observers are divided on whether any delay could prompt the government to hand the project to another developer, such as Russia's state-owned Rosatom, which has signed an agreement to develop uranium mines in the sparsely populated southern African country and submitted a mine plan for South Rossing.
Extract says it is taking nothing for granted but is confident it can do enough work on the project to satisfy the Namibian government.
"Extract will have applied for a mining licence by April," a spokesman said. "The company is well on track to achieving this and doesn't envisage any difficulties being granted a mining licence."
Extract wants to start mining up to 6700 tonnes of uranium in South Rossing in 2013.
This would make it the second-biggest uranium mine, after Canada's McArthur River project.
The prospect of gaining a slice of one of the world's biggest and best undeveloped uranium deposits has attracted a long and intriguing list of parties interested in Extract and/or South Rossing.
Extract's biggest shareholder, Kalahari Resources, recently revealed Apac Resources had taken a 9.55 per cent in Kalahari.
Apac, a Hong Kong company that owns 20 per cent of Mt Gibson iron, has been linked to controversial businessman and corporate raider Lee Ming Tee.
Rio Tinto, which controls the nearby Rossing mine, has a 15 per cent stake in Extract and a 12.5 per cent stake in London-listed Kalahari (whose only major asset is its Extract stake). Japan's Itochu has taken a 15.5 per cent stake in Kalahari, while French nuclear company Areva, state-owned Korea Resources and Paladin Resources have also been seen as potential white knights for Extract in the project. Despite the interest, Extract's 13-month search for a partner, which has been led by Rothschild, has failed to throw up an offer acceptable to the company and Kalahari, which owns 40 per cent of Extract.
Doubts over Extract's hold on the project were raised last month when talks between Russian Prime Minister Vladimir Putin and President Dmitry Medvedev and Namibian President Hifikepunye Pohamba resulted in a five-year memorandum of co-operation over uranium between the two nations.
It also led to a statement from Rosatom that it had put in an application to develop South Rossing and would be prepared to spend $US1bn on uranium development. BBY analyst Gavin Van Der Wath said he did not see the Namibian government handing over the ground, even if it did not make the deadline for the application. "People will try to scoop this project up, but do I think Extract will lose the project? No," he said. "But it will weigh on their share price until there is something definite."
Yesterday, Extract reaffirmed its target of a third-quarter resource upgrade and a fourth-quarter definable feasibility study.
Another analyst, who didn't want to be named, said the company would struggle to have studies and financing in place by the time a mining licence was needed, which could place the project at risk. "I don't think they will have a bankable feasibility study in the fourth quarter -- their rigs are still drilling like mad," he said. "I think the government might be prepared to look at other developers, particularly with the Russians saying we're prepared to spend $US1bn ($1.1bn) and Kalahari seen as a bunch of gunslingers."
The emergence of Apac could make matters more volatile.
In 2008 the Australian Takeovers Panel found Mr Lee had used Apac and Shougang Concord, who claimed to be independent entities, to try to get control of Mt Gibson Iron.
Sources close to Extract said there had been no known case of a company in Namibia fulfilling the terms of an exploration licence and not being granted a mining licence. Extract's newly installed managing director, Jonathan Leslie, a former Rio director, has said the company has seen no evidence of Rosatom trying to muscle in on the asset.
It had also been assured at the highest level that the Namibian government would not interfere with negotiations. Extract chairman Steve Galloway has strong contacts in the government, having worked in a number of senior positions there.
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