http://www.thisismoney.co.uk/news/columnists/article.html?in_article_id=473020&in_page_id=19&in_author_id=1822
Midas Extra share tips: Kalahari Minerals & Patsystems
5 February 2009
The stockmarket keeps showing tentative signs of life, only to be brutally forced into retreat by bad news either on the economic front or the corporate front, or both.
Fears about bank bad debts remain at the forefront of many brokers' minds and the banking results season, which kicks off later this month, will be the most keenly watched in over a decade. Most chief executives are extremely nervous about the environment here and overseas.
They are worried about fundamental trading conditions and they are worried about securing the necessary finance to keep their businesses going. In such a climate, self-confidence is particularly noteworthy.
This week, as we finally leave behind the gloomiest month of the year, Midas is focusing on two companies whose chief executives are extremely upbeat about the coming year.
They have money in the bank, they have a clear strategy in place and they are convinced their companies have first-class growth prospects.
Kalahari Minerals
The first is Kalahari Minerals, an Aim-traded company, which was one of only five London-listed mining stocks whose share price actually rose last year.
The company is run by Mark Hohnen, a plain-speaking Australian who was also founder chairman of the famous Cloudy Bay wine company.
Kalahari Minerals mines copper and lead in Namibia but its main attraction is a 40% stake in an Australian company, Extract Resources. This business has extensive uranium interests in Namibia and recent findings have been described as 'phenomenal' by industry experts.
Last week, Extract revealed it had found 108m pounds of uranium in its key Rossing South mine. The finding has been independently verified and is expected to be followed by another one of similar magnitude in July or August of this year. Not only are these discoveries some of the largest in years, but the uranium that Extract has found is particularly high-grade.
This means that the costs of mining it and turning it into a usable commodity are relatively low. Uranium is chiefly used in nuclear power stations, which used to be utterly frowned upon but are now being seen as a viable and attractive alternative to fossil fuels, such as oil and gas.
China and India have shown a marked interest in nuclear energy and the US is expected to become more enthusiastic, following the inauguration of President Obama last month.
Kalahari Minerals offers London investors easy access to a uranium story that is likely to become increasingly excited this year and beyond.
The appeal of the stock can be seen by its share register, which includes the mining giant Rio Tinto and Stephen Dattels, who was formerly involved with UraMin, a Midas recommendation which sold out at a tremendous premium to the French company Areva two years ago.
Kalahari may only have a 40% stake in Extract but the two companies are closely involved with each other and Hohnen would like to increase his company's holding in the Australian business.
The Rossing South mine is just a few miles away from a Rio Tinto-owned mine, which has been producing uranium since the 1970s. This is regarded as evidence of Rossing South's pedigree.
Midas verdict: Kalahari shares are trading at 43p but brokers believe they are worth at least double that figure. The company has cash in the bank and its involvement with Extract means there is a fundamental growth story to the business. Extract is expected to deliver increasing amounts of uranium from its Rossing South mine and this should steadily increase the value of Kalahari shares. That aside, Kalahari is a classic takeover target. Buy.
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