paladin 2.0, page-2

EXTRACT TO RAISE CAPITAL
Paladin Energy 2.0?

Extract Resources Ltd now plans to raise A$91 million ($C83.3 million) for its major Rossing South uranium project - a move seen by some analysts as putting the company on the same growth track as another Australian in Africa, Paladin Energy.

Author: Ross Louthean
Posted: Tuesday , 01 Sep 2009

PERTH -

The promotional bandwagon is now running for Extract Resources (ASX & TSX: EXT) with a brittle peace pipe apparently having been smoked over a schism between the company and its major shareholder AIM-listed but Perth-domiciled Kalahari Minerals that drew blood.

The bandwagon has in recent days seen the announcement of the massive capital raising to accelerate exploration at Rossing South, along strike from the famous Rossing mine controlled by Rio Tinto, as well as promising work on the Zone 3, seen as an extension of Zone 2 which has raised investor interest with medium to high grade and wide uranium intercepts.

Linked to this positive fanfare has been the release of a bullish study on Extract by London broker WH Ireland that cites blue sky for Zone 3, projections of lowered operating costs and a projection of an after-tax net present value of A$9.43 (£4.96) a share and a three year target share price of A$15.20 (£4.96). Extract's share price at close on the Australian Stock Exchange today was A$10.

Drawing a comparison between Paladin Energy Ltd (ASX & TSX: PDN) and Extract does provide some analogies - Paladin became the world's biggest new uranium miner in Namibia with the Langer Heinrich mine operation and is moving forward with its second mine in Malawi. Paladin had marvelous market timing through its perceptive managing director John Borshoff, which saw the company transform from a truly struggling penny stock to a multi billion dollar concern.

While Extract got into the Namibian field with excellent timing it did so early in the uranium boom and made a series of discoveries of profound uranium systems.

WH Ireland estimated that the Zone 1 and Zone 2 deposits at Rossing South and the nearby Ida South deposit contain, using a 100 ppm cut-off grade, 302 million tonnes grading 439 ppm U308for a contained 292 million lbs U308.

The London broker estimates that by 2014 the project could produce A$309.1 million in revenue for an operating surplus and EBIT of A$201 million, rising the following year to A$672 million for an operating surplus of A$472.8 million and an EBIT of A$436.8 million. The uranium price projection for both years was $US65/lb, with an exchange rate for A$1 in both years rated at US$0.75.

The production rate was estimated at 15 million tonnes per annum and operating costs at US$23.60/lb U308.

Extract's managing director Peter McIntyre said there would be two tranches of capital raised:

•A one-for-35 non-renounceable offer of ordinary shares at A$7.75/share, seen as a 19.9% discount to raise A$50.7 million ($C46.43 M).
•Sale on an underwritten private placement basis of 5.2 M special warrants at A$7.75 per special warrant for a gross proceed of A$40.3 million (C$36.9 M). This placement would be made outside Australia and was expected to be made mainly in Canada and the United States.