Matt Chambers | September 09, 2009 Article from: The Australian.
CHINA will make its biggest investment to date in Australian uranium, agreeing to pay up to $96 million for effective control of a Northern Territory uranium project that its owners say could to become one of Australia's next uranium mines.
State-owned nuclear giant China Guangdong Nuclear Power yesterday offered to buy up to 70 per cent of Perth-based junior Energy Metals, which itself has a 54 per cent stake in the Bigrlyi uranium and vanadium project, 350km northeast of Alice Springs.
Guangdong Nuclear also plans to underwrite a rights issue if the proportional takeover bid is successful.
Despite the Howard government lifting a ban on uranium exports to China in 2006, and China's ambitions to build 20 nuclear plants in the next decade, sales to and investment by China have been slow.
To date, Rio Tinto subsidiary Energy Resources of Australia has made the only export of Australian uranium to China: a small, token shipment to an undisclosed nuclear plant.
BHP Billiton plans to make its first shipment this half.
While China has been making big investments in Australian iron ore ground, China has only made very small attempts at investments in Australian uranium -- apart from the indirect investment state-owned Chinalco has through its 9 per cent stake in Rio Tinto.
In 2007, the Howard government approved Sinosteel's $28.5m purchase of a 60 per cent stake in PeppinNini Resources, along with a commitment to spend $11m developing the project.
Chinese state-owned investment company Citic also has an 8.7 per cent stake in minnow Southern Uranium. Under the Energy Metals deal, Guandong Nuclear will pay $84m, or $1.02 a share, for up to 70 per cent of Energy Metals, which is a 19 per cent premium to where the shares last traded on August 26 before they were suspended pending announcement of the deal.
Guandong Nuclear will then underwrite a one-for-nine rights issue by Energy Metals at 90c a share, which would raise about $11.7m.
The deal is subject to Foreign Investment Review Board approval and Chinese government approval.
Shareholders reacted well to the deal yesterday, pushing up the stock 10c, or 12 per cent, to 96c.
Energy Metals employed investment bank Gresham Advisory Partners in July last year to seek out prospective partners or buyers.
The proportional takeover was Guangdong Nuclear's proposal, allowing the company to remain listed in Australia.
"CGNPH (Guandong) felt that keeping Energy Metals listed would make it (the deal) more palatable," Energy Metals executive director Lindsay Dudfield said yesterday.
Mine planning at Bigrlyi is at pre-feasibility stage.
It currently has a resource of about 30 million pounds of uranium, with heap leaching the most probably mining method.
A scoping study last year said resources of 16 million pounds of uranium could be mined for 12 years, which works out at a rate of about 600 tonnes of uranium a year.
By comparison, Australia's biggest uranium mine, Ranger, produces about 5000 tonnes a year.
EME Price at posting:
$1.09 Sentiment: None Disclosure: Not Held
