Extract in talks over funding, offtake for uranium project By:...

Extract in talks over funding, offtake for uranium project

By: Matthew Hill
18th July 2011

TORONTO (miningweekly.com) - Extract Resources, hoping to build the world's third-biggest uranium mine at its Namibian Husab project, said on Monday it is talking to "several" companies about potential offtake and funding deals."The partnership process remains ongoing, with discussions taking place with several parties regarding their potential involvement in the project. These conversations include discussion of possible offtake deals, as well as provision of financing to facilitate the project's development," a spokesperson said.

TSX- and ASX-listed Extract completed a feasibility study for the project in April, after having applied for a mining licence to the Namibian government in December.

The feasibility study outlined a 15-million-pounds-a-year operation that would cost $1.5-billion to build.

In reply to emailed questions, the spokesperson declined to comment on when the company's mining licence might get approval, saying only it was under "active consideration, and we look forward to receiving approval in the near future".

Last month, Extract CEO Jonathan Leslie said his company was in talks with the Namibian government for it to take up a stake in Husab, located east of the coastal town of Swakopmund, on a commercial basis, after the State said it would only issue licences to its newly formed Epangelo Mining.

The spokesperson declined to comment on these talks, citing confidentiality, and also wouldn't say whether the negotiations regarding the mining licence and the Epangelo stake were linked.

Stocks of companies with mining assets in Namibia shed value earlier this year, after Namibian Minister of Mines and Energy Isak Katali said that exploration and mining rights for all "strategic minerals" including uranium, copper, gold, zinc and coal would go to the State.

He later said this wouldn't affect rights already awarded.

The Extract spokesperson said that the company would take Husab to its board for approval once the mining licence had been granted and financing arranged.

An analyst, who asked to remain anonymous, said it was likely the mine would start producing in mid-2015, though this was not clear until the company had the mining licence in hand.

She said Epangelo would likely seek a maximum stake of 20% in Husab, and that the talks over the mining licence and the government's holding in the project would probably "go hand in hand".

CHINA'S NUCLEAR APPETITE

Earlier this year, China Guangdong Nuclear Power Corp (CGNPC) made a friendly bid for LSE-listed Kalahari Minerals, which is Extract's biggest shareholder, with 43%.

The State-owned company then pulled out after London's Takeover Panel disallowed a revised lower bid after the Japanese nuclear disaster wiped billions off the values of uranium companies.

"It is likely that they will come back," the analyst said, saying that CGNPC would most probably approach Kalahari first again, and then go on to make a bid for the rest of Extract.

According to the takeover panel's rules, the soonest it could do this would be early November*, unless another company were to bid for Kalahari before that date.

On Sunday, China's Sichuan Hanlong bid $154.9-million for Bannerman Resources, which also owns a uranium project in Namibia.

The analyst said that China needed to secure future uranium supplies for its ambitious nuclear power build programme.

"They have now sourced about as much as they can from existing producers through long-term contracts. The next phase is to go out and buy new producers," she said.

Sichuan Hanlong also this week made a $1.4-billion bid for Australia's Sundance Resources, developing an iron-ore project in West Africa.

Cameco's McArthur River is the biggest uranium producer, with the company's Cigar Lake to follow in close second after it starts producing in 2013.

Extract was trading at C$7.91 a share on the TSX on Monday, valuing the firm at C$1.7-billion.

Edited by: Liezel Hill

http://www.miningweekly.com/article/extract-in-talks-over-funding-offtake-for-uranium-project-2011-07-18

* Not sure about the 'early November' my understanding is the CGNCP can come back after 3 Months (10 August).