China Guangdong makes Kalahari offer
08 March 2011
A deal in the offing could give China Guangdong Nuclear Power Corporation's (CGNPC's) uranium subsidiary a major stake in the Husab uranium project in Namibia.
Kalahari Minerals owns some 43% of Husab developer Extract Resources and has revealed it is in discussions with CGNPC-Uranium Resources Company (CGNPC-URC) over a possible cash offer of £2.90 ($4.68) per Kalahari share. This would value the company at about £756 million ($1.221 billion), which Kalahari describes as an attractive price.
The offer is subject to a number of preconditions, including clearance from both Chinese and Australian authorities. Kalahari's board has said that it intends to recommend that its shareholders accept such an offer if it is made.
Kalahari recently announced that it was holding discussions with Extract to explore various different options that might simplify the Extract/Kalahari shareholding structure to facilitate a combination of Husab with the neighbouring Rössing uranium mine owned by Rio Tinto. These discussions are still ongoing, Kalahari noted, while pointing out that "there is no certainty that the parties will reach any agreement."
Kalahari is Extract's major shareholder, whereas Rio Tinto holds 14% of Extract and 11.5% of Kalahari. Other shareholders in Kalahari include Japanese trading house Itochu, with 14% through its Australian subsidiary Nippon Uranium Resources (Australia).
CGNPC-URC managing director Zhi Ping Yu expressed delight at securing the support of the Kalahari Board, saying it highlighted "both the attractive value of the possible offer and CGNPC-URC's status as an excellent partner for the future development of the Husab project." His sentiments were echoed by Kalahari executive chairman Mark Hohnen, who said that CGNPC-URC's "pre-eminent position in the uranium sector" would make it a fitting partner for the realisation of the Husab uranium project.
Australia-based Extract has been working towards starting uranium production from its wholly-owned Husab project in 2014, reaching full capacity of 5700 tonnes of uranium per year from open-pit operations in 2015. According to Extract, the project has the potential to become the world's second largest uranium mine after Canada's McArthur River. Rio Tinto's neighbouring Rössing mine has been in operation since 1976 and is currently ranked as the world's third largest.
China's domestic uranium production currently only meets about a fifth of the needs of its burgeoning nuclear energy sector, and Chinese interests have been actively working to secure foreign supplies of uranium as well as interests in overseas uranium projects in recent years.
CGNP-URC was set up by CGNPC in March 2009 to take responsibility for its uranium supply and has since then embarked upon a 50-50 joint uranium exploration venture with Uzbekistan's Goskomgeo and signed a framework agreement with Cameco under which the two companies will negotiate long-term uranium purchase agreements and potential joint development of uranium resources. It has also signed a memorandum of understanding on a possible long-term sales framework with Australian uranium company Paladin.
CGNPC currently operates five nuclear power reactors. It is construcing 15 and planning over 17 more.
Researched and written
by World Nuclear News