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Kalahari Minerals Escapes The Frying Pan, As Rossing South Tempts In Rio Tinto


By Rob Davies



These days having RAB Capital on your shareholder list gives you as much kudos as saying you work for Lehman Brothers. Until last week 16 per cent of Kalahari Minerals was held by the troubled hedge fund, and Philip Richards held a slug of stock as well. The market is well aware of the liquidity problems that RAB is suffering from and it is known to be an active seller. That can be problem these days, as trading on Aim has been very thin for a long time now, as we pointed out here on Minesite in our recent article on the deficiencies of the Aim market. For many of the smaller companies there are simply no buyers to take the shares that are being offloaded by forced sellers.
This could have been a major problem for Kalahari Minerals, with so much of its equity held by a loose holder. Fortunately, a sharp-eyed broker for Rio Tinto saw the opportunity and bid for 25 million shares, equivalent to 14.9 per cent of the company. It would be nice to think that Rio Tinto, or its large competitors, would be willing to do this for a lot more juniors. Alas that is not the case as the big miners, and Rio Tinto in particular, have always been cautious about buying rivals.

What makes Kalahari different from all the rest is the Husab exploration project, which includes as one of three uranium targets the highly prospective Rossing South property. This lies six kilometres south of Rio Tinto’s own world-famous Rossing Uranium mine in Namibia, long at the top of the premier league of uranium mines. Over its lifetime Rio has mined over one billion tonnes and probably produced about 700 million pounds of uranium from Rossing. Like the mine, the Rossing South prospect is an alaskite hosted uranium deposit, and recent assays have confirmed the width and strike extension of the zone. Intersections such as 95 metres at 780 parts per million (ppm) U3O8 and 158 metres at 552 ppm U3O8 demonstrate that this is a sizeable body. Zone 1 now has a strike length of 1.8 kilometres and remains open to the south and at depth. And Kalahari’s executive chairman, Mark Hohnen, says that his geologists have been in close contact with the geologists from Rossing and there is general agreement on the similarities between the two deposits. So Rio Tinto certainly knows what it is buying into.

In fact at the moment Husab is held by Kalahari’s 39.1 per cent owned subsidiary Extract Resources. But Extract is itself in the process of merging with Kalahari. This deal takes the form of a scheme of arrangement in which Kalahari is offering 1.6 of its shares for every one Extract share. Rio Tinto also bought 23 million shares in Extract, equating to a 10.9 per cent stake.

The next major piece of news Mark is expecting to release is a JORC complaint resource for Rossing South, due out in the first quarter of 2009. To that end three large capacity RC rigs are drilling Zone 1 on 100 metre by 100 metre spacing to provide the data for the calculation. At this stage the best guess is that the initial figure will be 15 million pounds, although the total potential could be up to 200 million pounds.

That deposit alone would be enough to keep most junior explorers happy, but Kalahari also has two copper properties as well, at Witvlei and Dordabis. Witvlei is the more prospective of the two, and already has a resource of 250,000 tonnes of copper. An intensive drilling programme of this sediment-hosted deposit should result in a new resource estimate in the first quarter of 2009, and Mark thinks that it will be a lot bigger than the current one. He is obviously very pleased to have such a positive vote of confidence in the prospects of his company. Especially as insiders own about 50 per cent of the shares, so if Rio Tinto want to get even closer it knows who to call.