mark hohnen talks to minesite

From Minesite.com

February 05, 2009

Rio Tinto Adopts Some Questionable Tactics In Its Efforts To Get Its Hands On The Rossing South Uranium Discovery

By Charles Wyatt

“Devious” and “duplicitous” are not words you often find used in any description of Rio Tinto. At the time the bid from BHP Billiton came in, Rio appeared more like a gentle old elephant which did not quite know where it was going after taking a stunning blow to the head. And now it has picked on quite an opponent in Mark Hohnen, executive chairman of Aim-traded Kalahari Minerals. He is determined that, no matter what tactics Rio Tinto adopts, it will not get its hands on the Rossing South uranium project on the cheap. The attraction for Rio, of course is that Rossing South lies just seven kilometers south of its own Rossing mine, down in Namibia. ASX-listed Extract Resources is the owner of the Rossing South discovery, which is part of the Husab uranium project, and Kalahari Minerals has a 39 per cent shareholding in Extract.
The current situation is that Rio Tinto has a 15 per cent holding in Extract and a 13.9 per cent interest in Kalahari. At one time there was a plan that the two smaller companies might merge. This came to nothing when it was realized that Rio Tinto would end up with too big an interest in the merged company. Kalahari then requisitioned an EGM to remove Bob Buchan as chairman of Extract as he favoured some sort of deal with Rio Tinto. It was also felt that Bob’s plan to promote the company in North America with a listing in Toronto was likely to be a waste of time and money. Prior to this EGM, however, Extract had a board meeting and decided to invite a man called John Main onto the board to replace Buchan. The voting was 3:3 and the chairman, presumably Bob Buchan himself, had the casting vote.

So John Main, according to the press release, would act as an independent non-executive director. However, a little delving around casts doubts on this claim of independence. In a 40 year career as a geologist it is said that he has been a senior executive with a number of major mining companies, with extensive overseas experience. Two of the mines with which he admits to being involved are interesting, as the Resolution copper mine in Arizona is owned by Rio Tinto, and the Century lead-zinc mine in Queensland was discovered by CRA, which merged with Rio Tinto back in 1995. In addition to this he was introduced to Extract by Andy Lloyd who is described as Rio Tinto’s uranium man in Melbourne. Main is also said to benefit from a pension from the multinational.

Mark Hohnen is considering requisitioning another EGM to remove Main, and to bring in a transparently independent non-exec instead. This is a game that could go on for a long time, but the prize is a big one. The initial resource at Rossing South Zone 1 totals108 million pounds U3O8, grading 430 parts per million (ppm). Peter McIntyre, managing director of Extract, describes Rossing South as an “outstanding deposit”. And he’s pretty pleased with Extract’s progress on it too. “To go from discovery to 108 million pounds of U3O8 in 12 months, is a remarkable result. The size and grade of this resource puts it into a world-class category as the resource grade exceeded the exploration target expectations by a considerable margin, and the maiden resource is only the beginning for Rossing South.”

Indeed it is, as the Zone 1 mineralization is still open along-strike and down-dip. The initial resource estimate for Zone 2 has also yet to come in, but it’s showing mineralisation over a strike length of two kilometres, also open along-strike and down-dip. Peter McIntyre goes on to say that the grade of 430 ppm U3O8 has confirmed Rossing South as the highest grade, granite-hosted uranium deposit in Namibia. “We will now drill out Zone 2 to establish an even larger resource base over the next six months”, he says.

This fits with the expectation held by Mark Hohnen that come August Extract will be able to confirm that Zone 2 is easily as big as Zone 1, brining the total up to around 200 million pounds of U308. George Forrest International Afrique recently bought Forsys Metals, in a deal that put a value of US$9.00 on each pound of uranium that Forsys held in its Valencia uranium deposit, also in Namibia. On that metric, Rossing South would have a value of US$1.8 billion, and that’s even before considering that the Valencia is lower grade. No wonder Rio Tinto is trying every trick in the book, as the value will only go up over the months ahead as feasibility is carried out on Zone 1. The trouble with dozy elephants is that if you get under their feet, they tend to squash you flat. So Mark Hohnen will have to stay on his toes to make sure that Extract stays independent of Rio Tinto as long as possible, because that is how maximum value will accrue to his