Efforts to trim Extract bid may come to nilAustralian Financial...

Efforts to trim Extract bid may come to nil

Australian Financial Review
PRINT EDITION: 25 Mar 2011
Street Talk
Edited by Paul Garvey and Khia Mercer

Supporters of uranium play Extract Resources have found reason to hope that a cut to the takeover bid price proposed by China Guangdong Nuclear Power may not be the lay-down misere it appears to be.

China Guangdong has indicated it could look to trim back its offer for Extract's 47 per cent shareholder Kalahari Minerals, citing the changed outlook for the uranium sector on the back of Japan's nuclear issues.

Judging by Extract's share price since the Japan disaster, the market appears to have been betting China Guangdong will follow the lead set by Russia's ARMZ, which earlier this week used the Japanese crisis and falling uranium prices to trim more than

12 per cent from its bid for uranium play Mantra Resources.

The nervousness over the China Guangdong offer has been reflected in the fact Extract has been trading at around $8.25 a share, still well short of the $10.75 see-through price indicated by the Chinese group's existing offer for Kalahari.

Despite overtures from China Guangdong that it could trim its bid, Extract supporters are believed to be taking heart from regulations in Britain - where Kalahari is listed - which are understood to prevent a reduction in an offer price, even if it is only a proposed bid.

It would appear that the only way for China Guangdong to lower its price would be to drop the takeover bid altogether, in which case it would be barred from returning with another offer for three months.

The Chinese may well be reluctant to embark on such a course of action, given any such move would leave the door open for Rio Tinto to finally consummate its long-awaited deal to incorporate Extract's Namibian deposit into Rio's neighbouring Rossing mine.

Given the advanced stage discussions between Extract and Rio had already reached prior to the China Guangdong offer, a three-month delay could be more than enough for Rio Tinto to move in and lock Extract Resources away for itself.

http://www.afr.com/p/opinion/efforts_to_trim_extract_bid_may_LVkBuPl8RBwRUDEgbAKorM?hl