controlling stake, page-24

CommSec retains its BUY / OUT PERFORM recommendation.

Energy resources and materials
EXT3
11/09/08 Extract Resources: Rossing South - More, higher grade
Last Traded: $1.25 Market Cap: $2.570b Sector: Energy
Summary of
report dated
08/09/08
BUY/ OUT PERFORM Valuation: $1.37
Analysis
Rossing South mineralisation extended
On 2 September 2008, Extract Resources (EXT) announced that the results from
further drilling at Rossing South show 95m at 780ppm within zone 1 and 158m at
552ppm and 146m at 388pm in zone 2.
CommSec’s base-case valuation estimates for Rossing South are:
�� average grade 270ppm, and
�� mineralisation to a depth of 260m below the surface, under 80m to 100m of cover.
Compared with CommSec’s estimate, EXT’s recent announcement reflects:
�� a higher grade,
�� greater depth,
�� and increased strike.
The new results suggest that CommSec’s valuation could be increased, however
further information is required and therefore at this stage we retain our $1.37 per share
valuation.
Outlook: EXT to become KAH
On 5 September 2008, the directors of EXT and its major shareholder Kalahari
Minerals Plc (Listed on AIM: KAH) announced a proposed restructure by means of a
merger of the two companies. In accordance with this agreement, Kalahari is to offer
1.6 Kalahari shares for every EXT share. The merged entity will be both AIM and ASX
listed.
A meeting of EXT shareholders to approve the scheme of arrangement is to be held in
November 2008.
Valuation & Recommendation
CommSec’s valuation and recommendation CommSec’s base case valuation for EXT
is $1.37 per share. The new assay results suggest the grade for Rössing South is
likely to be higher
CommSec’s valuation is more sensitive to grade than volume and so there is
significant upside risk to our valuation.
CommSec retains its BUY / OUT PERFORM recommendation.