rio tints set to clinch uranium deal

Rio Tints set to clinch uranium deal

Australian Financial Review
Street Talk
21 Feb 2011

Edited by Sarah Thompson and Paul Garvey

Rio Tinto could finally be about to get its hands on the Rossing South uranium deposit in Namibia -the company is believed to be closing in on a joint venture deal with the $2.5 billion uranium player Extract Resources.

Rio Tinto is understood to be deep in discussions with Extract and its 40 per cent shareholder Kalahari Uranium. The trio is in the final stages of negotiations that could see Extract's Rossing South deposit incorporated into Rio's existing Rossing mine.

The proximity of the two deposits means Rio has long loomed large as a likely acquirer of Extract.

However, rather than pushing for 100 per cent control of Extract, Rio is believed to be more focused on finally establishing the joint venture that would see Rossing South incorporated into Rossing.

The likelihood of a deal was originally bandied about before the financial downturn, but the huge turnaround in Rio's fortunes and the improved outlook for uranium means the time is right for a deal.

While there has been some talk of Rio acquiring Kalahari's stake - which would deliver majority control of the company to Rio when coupled with Rio's existing 14.7 per cent stake in Extract - that is thought to be wide of the mark for now.

Macquarie is believed to be advising Rio in the discussions, Rothschild is working with Extract, and Azure Capital is advising Kalahari.

Extract shares have rallied almost 60 per cent since last October but are still short of the record high of $11.17 a share reached in September 2009.

Rio Tinto chief Tom Albanese was talking up the outlook for uranium in the wake of the company's recent results and said it was looking to make up for 20 years of underinvestment in the space. He even told investors to "watch this space".

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