Kalahari Minerals plc ('Kalahari' or 'the Company')
Notice of EGM and Substantial Transaction
Kalahari Minerals plc, the AIM listed mining exploration and evaluation group with a portfolio of copper and uranium prospects in Namibia, is pleased to announce that an Extraordinary General Meeting ("EGM") will be held on 27 February 2007 to approve the transaction with Extract Resources Ltd (ASX: EXT) ("Extract"), whereby the companies have conditionally agreed to consolidate their respective interests in their common uranium projects in Namibia.
Overview
• The Company has conditionally agreed that its wholly-owned subsidiary, Kalahari Uranium Limited ("Kalahari Uranium"), a company incorporated and registered in the Isle of Man, will dispose of the group's uranium assets which are held through a Namibian incorporated company, Swakop Uranium ( Proprietary) Limited ("Swakop"), for a consideration of 667 million new ordinary shares in Extract ("the Disposal"). • The Disposal is subject to certain conditions including both Kalahari and Extract obtaining shareholder approval. • The directors of Kalahari believe that a single asset uranium company is more likely to focus investors attention and more properly reflect the underlying value of the assets. • Following the Disposal, Kalahari will concentrate on its copper projects and the directors intend to promote Kalahari as a base and precious metal company. • As a condition of the Disposal, Extract is to complete a capital raising of a minimum of A$10 million and plans to accelerate exploration and drilling programmes on the uranium projects. • Under the share purchase agreement, Kalahari has the right to nominate an independent director to the Extract board.
Kalahari Chairman Mark Hohnen said, "We believe that by consolidating our uranium assets we can realise their true value while remaining exposed to their potential upside though Kalahari's significant holding in Extract. We are advancing our copper projects, which have recently yielded positive results and we are evaluating a number of other opportunities aimed at expanding our portfolio. These are exciting times for Kalahari and with a significant cash position of approximately £5 million we believe we can continue to increase the value of the Company."
Introduction
On 21 December 2006 the Company announced that it had entered into a heads of agreement with Extract, whereby the companies had conditionally agreed to consolidate their respective interests in their common uranium projects in Namibia.
On 8 February 2007 the Company entered into a conditional share purchase agreement with Extract (the "SPA") pursuant to which it has been conditionally agreed that Kalahari Uranium, a wholly owned subsidiary of the Company, will sell to Extract its 49 per cent. interest in Swakop in consideration for the issue of 667 million new fully paid ordinary shares in Extract.
The SPA is conditional upon a number of conditions including completion of an asset sale agreement whereby, prior to completion of the SPA, Kalahari's interest in its uranium projects comprising exclusive prospecting licence 3138 ("EPL 3138") and the nuclear fuel rights in exclusive prospecting licence 3139 ("EPL 3139") will be transferred by Kalahari's wholly owned subsidiary, West Africa Exploration (Namibia) (Pty) Limited ("WAGE"), to Swakop (the "Namibian Asset Transfer Agreement").
It is intended that prior to completion of the Disposal, Extract shall seek shareholder approval for a 1:10 share consolidation of its issued share capital. Accordingly, subject to the passing of the appropriate resolution by the shareholders of Extract, the number of shares issued to Kalahari Uranium shall be 66.7 million ordinary shares.
Conditions precedent to the Disposal include:
1. Kalahari and Extract obtaining all requisite regulatory approvals, licence transfers and shareholder approvals; 2. Extract completing a capital raising of a minimum of A$10 million, which would be utilised to accelerate exploration and drilling on the uranium projects; and 3. completion of the Namibian Asset Sale Transfer Agreement.
Pursuant to the terms of the SPA, Kalahari Uranium also has the right, subject to Extract's constitution and applicable law, to nominate an independent director to the Extract board.
Under the AIM Rules the Disposal will constitute a fundamental change of business and consequently requires the prior approval of shareholders of the Company ("Shareholders") at an EGM, to be held on 27 February 2007.
Peter McIntyre, a director of Kalahari is also a director of Extract and the Disposal is therefore a related party transaction (as defined) under the AIM Rules. After careful consideration, Mark Hohnen and Glyn Tonge, the independent directors of Kalahari ("the Independent Directors"), having consulted with Corporate Synergy, believe that the terms of the Disposal are fair and reasonable as far as the Shareholders are concerned and have concluded that the Disposal is in the best interests of the Company and Shareholders.
Background to and reasons for the disposal:
In May 2005 Extract's wholly owned subsidiary Extract Resources (Namibia) Pty Limited ("Extract Namibia") and WAGE entered into an unincorporated joint venture pursuant to which the parties agreed to exploit the mineral rights derived from EPL 3138 (the "Husab Project") in Namibia. The northern boundary of this licence is only 5 kilometres from the Rossing Uranium Mine, which is one of the world's largest uranium producers, having been in operation for over 30 years.
Airborne radiometrics over the Husab Project lead to ground based radiometrics, which in-turn has confirmed outcropping uranium anomalies over various areas. Diamond-drilling commenced on the Ida Dome target in April 2006, with positive results. The evaluation of Ida will continue throughout 2007, and drill testing will also commence on two other targets known as Hildenhof and Rossing South.
In December 2006 it was agreed that, subject to the approval of the Namibian government mining authorities, Extract Namibia and WAGE would transfer their rights in the unincorporated joint venture to Swakop, a Namibian company incorporated for the purpose of holding the uranium assets. Completion of the transfer pursuant to the terms of the Namibian Asset Sale Agreement will occur on receipt of the relevant approvals.
Following the Disposal, which remains conditional upon Extract's proposed capital raising of not less than A$10 million, Extract has indicated that it intends to position itself as a wholly focused uranium company and should have sufficient funds to continue drilling at the Husab Project with a view to commence resource definition followed by a pre-feasibility study.
The principal reason for the Disposal is that the Directors believe that a single asset uranium company is more likely to focus investors attention and more properly reflect the underlying value of the assets, leaving Kalahari to concentrate on its copper and other base metal assets.
Extract has identified the acceleration of work on the Husab Project as a priority, especially in light of the progress made on the project in 2006. Subject to Extract completing the capital raising referred to above, the exploration and drilling programmes will be accelerated on the uranium projects. The directors of Extract and the Kalahari board believe that the fund raising will support the consolidation strategy and enable the Husab Project to be brought to resource definition and feasibility more quickly than if the Husab Project remains as a joint venture. It is understood that the ultimate objective of Extract's strategy is to bring the Husab Project to development whilst there continues to be a worldwide strong demand for uranium.
The Independent Directors believe that the Disposal will increase the visibility of the uranium licences at the Husab Project and as a result increase the value of the Husab Project, which the Independent Directors believe is not currently reflected in Kalahari's share price. Kalahari will remain active in the development programme with an additional representative on the board of Extract and will also be able to benefit from any additional projects that the Extract management bring to Extract.
On completion of the Disposal and assuming a A$10 million capital raising at Extract's closing share price on ASX at A$0.092 on 7 February 2007, being the last practicable date prior to publication of the circular sent to Shareholders, Kalahari Uranium will hold approximately 38.3 per cent. of Extract's issued capital. However, there can be no guarantee that Extract will not raise funds in excess of A$10 million and/or do so at a price below the current mid market price, either of which would reduce Kalahari Uranium's interest in Extract. Extract's shares have traded in a range over the past 3 months of A$0.081 to A$0.13. At a price of A$0.092 per share, Kalahari Uranium's interest in Extract would be worth approximately A$61.36 million (£24.25 million).
Terms of the Disposal
Under the terms of the SPA, Kalahari Uranium will dispose of its 49 per cent. interest in Swakop to Extract. Kalahari and Extract have agreed that in consideration for the Disposal Extract shall issue to Kalahari Uranium 667 million fully paid ordinary shares at the mid market price of Extract's shares quoted on the ASX on the date of completion. It is intended that Extract will seek shareholder approval for 1:10 consolidation of its issued share capital which means that the amount of shares to be issued will be 66.7 million new ordinary shares.
Conditions precedent to the Disposal include:
1. Kalahari and Extract obtaining all requisite regulatory approvals, licence transfers and shareholder approvals; 2. Extract completing a capital raising of a minimum of A$10 million, which will be utilised to accelerate exploration and evaluation on the uranium projects; and 3. completion of the Namibian Asset Sale Agreements.
Kalahari Uranium has undertaken not to dispose of any of its shares in Extract for a period of 12 months post completion of the Disposal unless otherwise agreed by both parties.
Kalahari Uranium also has the right to nominate an independent director to the Extract board.
It is anticipated that Extract will post its circular to shareholders on or before 15 February 2007 and that the Disposal will be completed prior to the 30 March 2007.
Kalahari post the Disposal:
Following completion of the Disposal, in addition to the shares held in Extract, Kalahari will retain its copper projects at Dordabis and Witvlei and will continue with its exploration programme and strategy to develop and explore the oxide and sulphide copper potential at these projects.
In addition to this, the Directors intend to promote Kalahari as a base and precious metals company through the identification of other resource projects, which the Board believes will have considerable exploration potential and significant value for any proposed investment. The Company will also look for advanced projects within Namibia which have the potential to be in production within two years. Any further such agreements, licence awards or joint ventures will be announced at the relevant time.
As at 31 December 2006, the Company still had approximately £5 million of cash in the bank with which to work on its existing projects as well as to identify and seek other suitable resource projects with which to grow the business.
Update on Kalahari's copper projects:
Dordabis
Reverse circulation drilling has substantially been completed on the Koperberg Prospect, with extensions to the copper mineralisation located to the north and south of the known mineralisation. Assays from a number of holes are awaited, following which a resource calculation can be made. It is anticipated that an initial resource estimate for the Koperberg Project will be competed within the next two months.
Field mapping and geophysical surveying has identified further targets to the south east of the Koperberg Project. Prior to the cessation of drilling in December 2006, drilling carried out on one of these targets (known as the RK Prospect) encountered strong indications of copper mineralisation over considerable widths. Assay results for this hole are awaited. Drilling of this target has now re-commenced.
A number of other targets within the immediate Dordabis area will be tested as soon as rig availability permits. In addition, an additional licence application has been made in the Dordabis area, which captures a known copper occurrence on the farm Harmis.
Witvlei
A field office and associated infrastructure has been established within Witvlei township prior to the commencement of drilling operations in January 2007. Initial drill targets are the high grade copper mineralisation previously defined by other parties at the Christiadore and Okasewa Prospects, followed by the Malachite Pan Prospect on the recently granted exclusive prospecting licence 3261. The large number of known copper occurrences within the Witvlei Project licences will require systematic drilling and assessment over the remainder of the year.
Further developments and drilling results at Dordabis and Witvlei will be announced at the relevant time.
Update on the uranium projects:
On 15 January 2007, the Company announced further positive assay results from an additional four Ida Central diamond-drill holes on the Husab Project in western Namibia. These results reinforced the Company's view that the area has strong potential to house an economic deposit and returned significant zones of uranium mineralisation.
These results were important as, along with results previously reported, they demonstrated apparent continuity of uranium mineralisation within the licence area. Drilling to date has now taken place on 6 by 160 metre spaced lines with approximately 800 metres of strike extent drilled. Significantly, the results from both the northern and southern most lines of drilling indicate that the alaskite hosted uranium mineralisation is open along strike, beyond the limits of current drilling. All this further highlights the rationale for consolidating the uranium projects into one focused and well funded company, which should increase the overall value of the projects.
The Namibian Ministry of Mines and Energy also recently granted to Extract Namibia exclusive prospecting licence 3439, which adjoins the Husab Project to the south, and exclusive prospecting licence 3327 and exclusive prospecting licence 3328 located in the Uis Region, approximately 150 kilometres north of the Husab Project.
Information on Extract:
Extract (ASX code: EXT) is an ASX listed mining and exploration company based in Perth, Western Australia. In addition to its interests in the uranium projects, Extract has been developing and mining the Burnakura Gold Project in Western Australia (the "Burnakura Project").
The Burnakura Project area is located on the eastern flank of the historic Reedy's mining area near Meekatharra in Western Australia. The 51 sq km project area contains a number of deposits with historic production of 2.1mt at 4.5g/t for 300,000 ounces. It is located in the Meekatharra-Wydgee greenstone belt with gold mineralisation found along a series of NNE-trending shears, collectively referred to as the Burnakura-Federal City Shear Zone. Extract is a joint venture partner in the Burnakura Project, which developed an underground mine at NOA2 and constructed a 200,000 tonne per annum gold plant for processing ore. Recent gold production has been averaging 3,000 ounces per month.
Mine development has recently been suspended, with production continuing through to March 2007. Extract recently announced its intention to divest its gold interests in order to focus on its uranium interests in Namibia.
Board and Management:
Following completion of the Disposal, Kalahari Uranium will be a substantial shareholder in Extract and it is intended that Peter McIntyre will step down as an executive director of Kalahari but remain as a non-executive director and will continue to be actively involved in Kalahari's day-to-day operations.
Kalahari has built a strong management team in Namibia and is seeking to appoint a general manager to be based permanently in Namibia to oversee the Company's projects. In the meantime, Mark Hohnen, the executive chairman, will be more actively involved in the day-to-day operations of Kalahari. In addition, the Company has been actively seeking to appoint a further non-executive director with relevant experience
Irrevocable undertakings:
Mark Hohnen, Philip Richards, City Natural Resources High Yield Trust Plc, Geiger Counter Limited and RAB Special Situation Fund, who together hold 32,620,929 Existing Ordinary Shares in aggregate, representing approximately 32.8 per cent. of the current issued share capital in the Company, have irrevocably undertaken to vote in favour of the Resolution to be proposed at the EGM, in respect of those shares.
Extraordinary General Meeting:
The Company posted a circular to Shareholders on the evening of the 8th February 2007, convening the EGM to be held at the offices of Lawrence Graham LLP, 190 Strand, London WC2R 1JN at 11.30am on 27 February 2007 at which, in accordance with Rule 15 of the AIM Rules, the Resolution set out in the notice of meeting will be proposed as an ordinary resolution. Copies of the circular are available free of charge from the offices of Corporate Synergy Plc, 30 Old Broad Street, London EC2N 1HT.
Recommendation:
The Disposal constitutes a related party transaction for the purposes of the AIM rules. The Independent Directors having been so advised by Corporate Synergy, the Company's nominated adviser considers that the terms of the Disposal are fair and reasonable insofar as the Shareholders are concerned. In providing advice to the Board, Corporate Synergy has taken into account the Independent Directors' commercial assessments.
The Independent Directors consider that the Disposal is in the best interests of the Company and its shareholders as a whole and accordingly recommend that Shareholders vote in favour of the Resolution to be held at the EGM at 11.30 on 27 February 2007 at the offices of Lawrence Graham LLP, 190 Strand, London WC2R 1JN.
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For further information please visit www.kalahari-minerals.com or contact:
Kalahari Minerals Plc is an AIM listed mining and exploration group with a portfolio of copper and uranium prospects covering approximately 3,000 sq km within western and eastern central Namibia. Two of the project areas, Dordabis and Witvlei, are prospective for sediment hosted copper mineralisation consistent with the world class Zambian Copper Belt. Kalahari has undertaken significant drilling at its Dordabis copper target and has returned copper intersections of 47 metres at 1.46%, 21 metres at 2.09% and 38 metres at 1.28%
The third project, the Husab Project (49% interest), is primarily prospective for primary and/or secondary uranium mineralisation. Significantly, the property is strategically located between the major Rossing uranium mine and Langer Heinrich development, which are positioned on significant uranium deposits. The remaining project, Ubib, is believed to be prospective for gold mineralisation, and is nearby the operating Navachab gold mine.
Note:
The information in this announcement that relates to geology, geochemistry and geophysics, has been prepared and reviewed by Mr. M Spivey who is a competent person as described in Appendix 5A to the ASX Listing Rules and Part two of the AIM Guidance Notes for Mining and Oil and Gas Companies.
This information is provided by RNS The company news service from the London Stock Exchange
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