Rio, Guangdong Nuclear Held Talks on Namibia, Ritchie...

Rio, Guangdong Nuclear Held Talks on Namibia, Ritchie Says

February 07, 2012, 3:58 PM EST

By Jesse Riseborough and Matthew Campbell

Feb. 7 (Bloomberg) -- Rio Tinto Group, the world's third- largest mining company, said it's held talks with China Guangdong Nuclear Power Group Co. on a possible venture in Namibia, where it owns the Rossing uranium mine.

Guangdong Nuclear last week said it had purchased 89.5 percent of Kalahari Minerals Plc after bidding 632 million pounds ($1 billion) for the mining company last year. Acquiring more than 50 percent of Kalahari triggers a A$2.2 billion ($2.4 billion) offer for Extract Resources Ltd., Australian regulators have ruled, due to Kalahari's 43 percent stake in Extract.

Extract's Husab uranium project in Namibia is located 7 kilometers (4.4 miles) from Rio Tinto's Rossing mine, the third- biggest producer of uranium. Rio owns a 14.2 percent stake in Perth-based Extract and last month accepted Guangdong Nuclear's offer for its 11.1 percent share of Kalahari.

"There's strong industrial logic for Husab and Rossing to be jointly developed," Doug Ritchie, chief executive officer of Rio Tinto's energy unit, said today in an interview. "We've had discussions going back some time. We have other relations with them as well as a customer."

Demand for uranium is rising as developing countries including China construct new nuclear power plants, coinciding with a deficit in supplies. The price of the nuclear fuel may rise 15 percent to $60 a pound this year after a slump that followed the Fukushima nuclear disaster, according to the median of five analysts surveyed by Bloomberg last month.

Extract is seeking to develop Husab at a cost of about $1.7 billion with a mine that may last for more than 20 years. The company raised its estimate of reserves at the project in August by 37 percent to 320 million pounds of uranium oxide. Extract said a year ago it was in talks with Rio Tinto on a potential combination of the two assets.

"It physically makes sense and financially obviously there would be benefits in not duplicating," Ritchie said today. "You don't end up with two uranium mines with processing facilities sitting next door to one another."

--Editors: Stephen Cunningham, John Viljoen.

To contact the reporters on this story: Jesse Riseborough in London at [email protected] Matthew Campbell in Paris at [email protected].

To contact the editor responsible for this story: John Viljoen at [email protected]

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