I think on either a DCF or "lbs in the ground" basis EXT are worth US$3.5b minimum - at the current long term U price and stage of development = A$14 / share. Of course the U price will no doubt keep going up and the DFS could suprise with early production of 20m lb per year so $3.5b may seem VERY cheap in 5 years. RIO may be prepared to pay more especially considering they could save on CAPEX with synergies of the Rossing mine and RIO aready cant fulfil existing supply contracts at both the Rossing & Ranger mines. However Itochu and APAC holdings in KAH & EXT make it difficult even for RIO to execute a TO.
Based on the current T20 lists and recent EXT CR I calculate holdings: RIO = KAH x 12.49% + EXT x 14.25% = 19.6% effective EXT Itochu = KAH x 14.93% + EXT x 12.89% = 19.28% effective EXT APAC = KAH x 12.13%
Itochu & APAC have a combined 27% of KAH so can block a full TO of KAH. And KAH + Itochu have a combined 55.72% direct holding in EXT. I dont think Itochu or APAC will sell out at any cost as they are in it for the long term supply agreements. To mount a sucessful TO, RIO would need to satisfy all 3 on price and negotiate supply contracts to the satisfaction of both Itochu & APAC. But RIO have plenty of incentive with falling production and increasing demand so I'm sure they could pull it off.
EXT Price at posting:
$8.97 Sentiment: LT Buy Disclosure: Held
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