A point to bear in mind also is that Steve Galloway, the Namibian chairman of Extract, probably has some reservations about Rio/Rossing because there have been some issues between Rio/Rossing and the Nam govt.
Four years or so ago the Nam govt published its plans for royalties on non-diamond minerals. A 10% royalty (known before independence in 1990 as an export levy) had been paid on gross diamond sales revenue from time immemorial.
The government's decision to apply royalties to other minerals because it needed more revenue for the government budget was opposed by Rossing on the grounds that after independence the first finance minister said that a royalty would only be chargeable on UNPROCESSED minerals and there is no provision for it in the 1992 Minerals Act (about to be replaced by one that does makes reference to royalties). Because Rossing challenged the principle of the government's right to charge royalty on semi-processed minerals (like uranium oxide), the government in 2008 slapped a punitive royalty on Rossing of 6%- double the standard 3% (which Paladin pays and extract would pay) for uranium production! That's one reason that (according to Rio Tinto's 2010 AR), while sales revenue for Rossing was up at 493 million US dollars, Rio's 69% share of Rossing net earnings of 162 million US in 2009 became a net loss of 3 million US last year! So all is not well at Rossing. Does Extract want to tie itself to an ageing operation- Rio has prevaricated for most of the past decade over extending Rossing's mine life (which it eventually did) and investing in a much-needed plant upgrade. Its a 40-year old plant that has seen much better days. State of the art once but not any more.
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$8.55 Sentiment: None Disclosure: Not Held
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