Rio ponders Rossing opitionsThe West AustralianTuesday,...

Rio ponders Rossing opitions

The West Australian
Tuesday, February, 2012
West Business, Page 35

Kate Emery
Cape Town

Rio Tinto faces a decision between selling its Rossing uranium mine to China Guangdong Nuclear Power Corp or pursuing a joint venture with the Chinese group over their neighbouring Namibian assets, according to analysts.

A sale would give CGNPC access to infrastructure that could slice hundreds of millions of dollars off the cost of developing Husab, the world-class uranium deposit 7km from Rossing.

Proceeds of the sale could go to developing Rio's recently acquired Canadian uranium assets, which it picked up through its takeover of Hathor Exploration.

A joint venture, on the other hand, would give Rio access to crucial higher-grade feed from Husab that could be used to prolong Rossing's life.

Investors will be looking for clues about Rio's plans for Namibia when energy boss Douglas Ritchie takes to the stage at the Mining Indaba conference in Cape Town today.

Mr Ritchie will be followed within hours by Jonathan Leslie, the head of Extract Resources, which owns the Husab deposit.

Extract is in the crosshairs of CGNPC, which has already taken control of its 42.7 per cent Londonlisted shareholder, Kalahari Minerals.

CGNPC's success in securing more than 50 per cent of Kalahari - on Friday it had 89.5 per cent - means that under Australian corporate law it has a little less than four weeks to table a bid for Extract. Pitched at $8.65-a-share the looming cash bid would value Extract at $2.2 billion.

Once considered a possible rival bidder for Extract, Rio last week sold its 11.1 per cent Kalahari stake into CGNPC's friendly bid, in the process dousing speculation it could mount a counter offer. If it did the same with its 14 per cent stake in Extract, Rio could deliver control to the Chinese.

Extract's other- cornerstone shareholder, Japan's Itochu Corp, has not gone public with its intentions but is understood to want a slice of offtake from Husab.

Rio and Extract were in talks about a Husab-Rossing joint venture last year but failed to reach an agreement.

Extract's board has yet to indicate if it would recommend CGNPC's bid. However, it is widely expected to, given the complications that would arise from having a potentially hostile 42.7 per cent Chinese shareholder and the fact that a rival bid is unlikely.

Husab is one of the world's biggest undeveloped uranium deposits.