rio deal not essential for extract

Rio deal not essential for Extract

The Australian Financial Review
Online 03 Mar 2011
Jamie Freed

Extract Resources chief executive Jonathan Leslie has told investors his company can finance the giant Husab uranium project in Namibia on its own if talks with neighbouring miner Rio Tinto fall over.

Extract confirmed joint venture discussions were being held with Rio, the owner of the Rossing uranium mine, following a report in The Australian Financial Review's Street Talk column last week.

In a presentation to the BMO Capital Markets Metals & Mining Conference in Florida on Wednesday, Mr Leslie said the "base case" option was for Extract to develop the $US1 billion-plus Husab project without a partner.

"There are some variations on the base case as well," he said. "With our current market cap [of $2.3 billion] and the appetite that is out there at the moment we could to a significant fundraising, with obviously a significant equity component plus project financing."

He said Japanese trading house Itochu, which owns a 10.3 per cent stake in Extract had "made no secret they'd like to do [the] marketing".

"We would only do that in return for a significant break on funding - equity and financing - which would be a suboption of the standalone case."

Extract has not released the final capital cost forecast at Husab. A bankable feasibility study is due to be completed by the end of the month, although Mr Leslie admitted that target was looking "tight".

He said if no deal was reached with Rio soon, Extract was more likely to go it alone of the project, which is set to start production in 2014.

"We obviously don't want to interfere with the schedule," he said. "We would either want to have those discussions completed or terminated so we can get on and deliver this project in the timeframe we've talked about."

In addition to the talks with Rio, Extract has also been talking to its 40 per cent shareholder, Kalahari, about tidying up the ownership structure. Rio has stakes in Kalahari and Extract.

"I think we all recognise the structure needs simplifying," Mr Leslie said. "It is a message I got from investors. There was a reason the existing structure is what it is, and it makes sense to simplify it. We are working on it."

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