The Australian Financial Review PRINT EDITION: 3 May 2011 Street Talk Edited bu Paul Garvey and Khia Mercer
With the hurdles mounting almost by the day for China Guangdong Nuclear Power's $1.2 billion tilt at Kalahari Minerals, the biggest shareholder in uranium explorer Extract Resources, Rio Tinto, has had the luxury of being able to sit back and wait.
Certainly as of yesterday, Rio was in little immediate danger of being locked out of the development of Extract's huge Husab deposit in Namibia, which is set to be one of the world's biggest producers of uranium oxide.
The Chinese nuclear giant has a deadline of late today to proceed with a formal offer for Kalahari but it was still working through the approvals it needs in China and Australia to go ahead.
Price aside, China Guangdong and London-listed Kalahari are understood to be interested in proceeding with a deal, so an extension of the cut-off date for meeting the preconditions was looking likely yesterday.
In the absence of a deferral, China Guangdong, advised by Deutsche Bank, faces having to pay a break fee of GBP7.5 million ($11.4 million) to Kalahari if it can not proceed with a formal offer by 5pm London time today.
China Guangdong might look to two major external events to wriggle out of the break fee, or at least cut its 290 pence per share proposed offer price, which is now 27 per cent above Kalahari's close last week.
The Fukushima nuclear crisis in Japan has knocked almost a third off the value of some uranium stocks. Those such as Extract that are closest to going ahead with investments in new mines are among the hardest hit.
Russia's ARMZ set a precedent by shaving over 12 per cent off its offer for Mantra Resources.
Confusion over plans announced by the Namibian mining minister to reserve exploration and mining rights for uranium for state miner, Epangelo, wiped another 20 per cent of Extract's shares last week, although Extract was adamant yesterday that its Husab project would not be affected.
The Chinese are understandably nervous about the price but are aware of Rio Tinto waiting in the wings. Extract, advised by Rothschild, halted its shares from trading yesterday pending news on the Chinese proposal.
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)