[miningmx.com] — KALAHARI Minerals, major shareholder in uranium developer Extract Resources, expects its Chinese suitor would eventually make a takeover offer for Extract, a $2bn company, if it goes ahead with a bid for Kalahari.
“I don’t think there is any suggestion ever that they would not want to do that. It’s a matter of timing I would have thought,” Kalahari Chairman Mark Hohnen told reporters on the sidelines of the Commonwealth Business Forum.
State-owned China Guangdong Nuclear Power Corp (CGNPC) is in talks for a potential takeover of Kalahari, with an announcement due by November 11 on whether a deal will go ahead.
Kalahari’s main asset is its 43% stake in Extract, coveted for its Husab uranium project in Namibia, which could become the world’s second-largest uranium mine.
Under Australian rules, CNGPC would be required to make a full takeover offer once it owns more than 20% of Extract, but the securities regulator can grant exceptions.
Extract last traded at A$7.86 share, and earlier this year hit a high of A$10.80 a share on speculation of a Chinese bid. However Hohnen said based on the valuation implied by Rio Tinto’s takeover offer for Hathor Exploration, Extract was worth A$16 a share.
“If you look at a see-through on what Rio Tinto’s bid for Hathor was, that puts a price of A$16 on an Extract share,” he said.
Kalahari and Extract’s shares were knocked after the Fukushima disaster in Japan in March hit uranium demand, but the two companies remain confident that uranium demand will be strong in the medium- to long-term, underpinned by demand from China, India, South Korea and Russia.
“We think the fundamentals of the uranium market are very strong,” Extract Chief Executive Jonathan Leslie said at the Commonwealth Business Forum.
The Husab mine is due to start producing in 2014, just when supply gap is expected to emerge with new nuclear power stations coming on line in China, he said.
Hohnen and Leslie said they were confident Extract would be able to raise the $2 billion needed to fund development of Husab, even in the current tough market, given the attractiveness of the project and its access to infrastructure.
“So from our perspective, we’re really very, very relaxed. The stand alone option’s a fantastic option,” Hohnen said.
Extract is in advanced negotiations on project finance, Leslie said, adding that the only question is whether it would involve less debt and more equity financing.
“No one’s give us any doubt you could get this away,” Leslie said.
He said the company was talking to a range of players on project financing, including Japanese shareholder Itochu Corp.
“We’ve never confirmed that, but it wouldn’t be surprising to talk to one of our major shareholders,” Leslie said.
Extract had hoped to receive the mining license for Husab earlier this year, and still hopes to secure approval from the Namibian government by the end of 2011.
Namibia’s Mines and Energy Minister Isak Katali said he saw no big hurdles to the mining license being approved.
“The process is on and there seem to be no major issues,” Katali told Reuters in an interview.
“We believe the license will eventually be granted,” he said, declining to put a time frame on it.
