todays australian.

Extract surprised at speed of Rio swoop. Cath Hart | October 25, 2008


EXTRACT Resources head was "surprised" at mining giant Rio Tinto's speed in swooping on minor stakes in his company and partner Kalahari Minerals.

Peter McIntyre said last month's share raids -- which will see Rio emerge as the single largest shareholder once a merger between Extract and Kalahari is completed -- were a "great endorsement" of the group's Rossing South uranium project in Namibia which bordered Rio's long-running Rossing Mine.

Rio bought 22 million shares, or 14.4 per cent, in Extract and 25 million shares, or 14.9 per cent, in Kalahari in early September over "an eight-hour period" from troubled RAB Capital and would own just under 20 per cent of the newly merged company, Mr McIntyre said.

If Rio's stake in Extract increased marginally to 15 per cent, or more, it would trigger a need for Australia's Foreign Investment Review Board approval.

"When the two companies (Extract and Kalahari) come together, with the current shareholding that Rio has in Kalahari and Extract, they'll emerge as the single largest shareholder with just under 20 per cent of the merged company," Mr McIntyre said.

"I was surprised that the transaction took place when it happened. I mean, you don't often find a block of 22 million shares in Extract Resources and 25 million shares in Kalahari and it all happened in an eight-hour period. The seller was the same seller, RAB Capital."

Currently, Kalahari has a 39 per cent stake in Extract, which aims to begin producing uranium from its Namibian Rossing South uranium project by 2011.

The merger between Extract and Kalahari -- which Mr McIntyre said would eliminate Kalahari's blocking stake and reduce complexity -- would be completed by mid-January and would provide the new company with a post-merger cash position of about $32 million.

Under the merger, Kalahari would take over Extract and the new company would be primarily listed on the London Stock Exchange, with a dual listing on the Australian Securities Exchange.

Mr McIntyre said modelling of the size of the resource at the Rossing South project would "fill the MCG -- from one end to the other, including from grass level to the top of the grandstands -- about 50 times".

"It's our intention to begin development of one of the largest uranium projects in the world within the next three years, and I think that's what we're going to do. It's still very much in reach," he said. "We're chasing an upper target of confirmed resource here of about 200 million pounds of uranium."

Nuclear fuel market analyst TradeTech recently reported that extremely weak demand for uranium was putting downward pressure on spot prices.

Mr McIntyre said a high in the uranium spot price over the past 18 months had been driven by speculators such as hedge funds, which had begun unwinding their positions in recent months.

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