rio likely future partner

Apologies if this has already been posted ...

Rio Tinto a likely future partner at Husab
André Janse van Vuuren | Fri, 09 Dec 2011 17:38

[miningmx.com] -- RIO Tinto could enter into another partnership with a Chinese firm, this time in Namibia, where its Rossing uranium mine would give it an edge to be the preferred partner as China swoops on another strategic asset.

A consortium consisting of the China Guangdong Nuclear Power Group (CGNPC) and the China-Africa Development Fund on Thursday made a £632m bid for Kalahari Minerals, which has a 42.74% stake in ASX-listed Extract Resources as a key asset.

Extract owns the Husab uranium project in Namibia – the world’s fourth largest uranium deposit - and was last week granted a mining licence to proceed with the $1.65bn development of the mine, which would produce 15 million pounds uranium per year for an initial 16 years.

In addition to its offer for Kalahari, the bidding consortium said it would make an A$8.65/share bid for Extract should the majority of Kalahari’s shareholders accept its price. Kalahari’s board has recommended the consortium’s offer.

Rio, which in the past has been touted as another potential suitor for Kalahari and Extract, already owns a stake of 11% and 14% in the two companies respectively.

The Husab project was known as Rössing South until Extract renamed the project late last year to avoid confusion with Rio’s existing Rössing uranium mine, six kilometres to the north. Rio saw Rossing’s latest life of mine plan continuing operating to 2023; although it would require a large increase in stripping for the next three years to open up new areas of the pit.

RBC Capital Markets analyst Des Kilalea, told Miningmx on Friday it would be unlikely for Rio to turn hostile with a counter bid for Husab, saying some tie-up between CGNPC and Rio would make the most sense for both parties - with Rossing able to offer cost-saving synergies to future operations at Husab.

“At some point they may come in as a partner in the transaction,” said Kilalea. “How that will come to be is unclear. But I would thought that in an ideal world Rio would be the operator and provide some of the capital.”

Fairfax analyst John Meyer concurred, saying the share price of both Extract and Kalahari suggested the market was not expecting an offer from a third party.

“There may…be a way for Rio to be involved in the Extract uranium asset as an operator through some joint arrangement with CNGPC, whose main business is a utility and not an operator of mines,” Meyer said in a note to clients.

Kilalea pointed to Rio’s well-established relationships with Chinese firms – Chinalco is Rio’s biggest single shareholder and partner at the Simandou iron ore project in Guinea, as an example.

Uranium also forms part of Rio’s core commodities. Kilalea branded Rossing as getting “long in the tooth”, and described the recently acquired Hathorn – with significant uranium exploration assets in Saskatchewan, Canada - as a “long dated” prospect.

“They would be able to get going at Husab much sooner,” he said.

http://www.miningmx.com/news/energy/Rio-Tinto-a-likely-Husab-partner.htm