The Extract Complex

of course if the "Possible Problems Resolved" is actually "Problems Possibly Resolved" the end result won't be so pretty :(

db

Australian Financial Review - March 23 - Page 27

Uranium Play Extracting Some Gains

By David Ciampa

Investors in small uranium play Extract Resources may not be too deterred by the Indian central bank's decision late last week to raise interest rates, which accordingly caught the commodities markets off-guard. While the move may have clouded the global growth picture, Extract investors will be concentrating on the long-term demand for energy increasing - especially from countries like India - and the viability of the energy sources technology.

The stock was the standout performer in the S&P/ASX200 Resources index last week rising as much as 15 per cent, boosted by a 14 per cent jump on Friday amid reports that two Korean groups may make a joint bid for the Australian explorer. Extract owns the Rossing South deposit - considered on of the world's most promising uranium projects - adjacent to Rio Tinto's Rossing mine in Namibia, which both Korea Electric Power Corp and state-run Korea Resources Corp may make a joint bid for, or even extract itself.

As part of a soon-to-be completed strategic review, Extract has been talking to miners and uranium buyers about deals ranging from a stake in the project and an offtake agreement to a full takeover.

Extract, which is 16 per cent owned by Rio, was one of the best performers on the S&P/ASX200 index last financial year, surging more than six-fold.

But it has run out of puff in recent months and last week's gain had the stock at its best level in about two months. Among other fast-growing economies, South Korea is one of a group of Asian countries with soaring energy needs and plans to add eight atomic plants by 2016 and export 80 reactors by 2030.

Korea Electric Power vice president Chang Joe Ok said the company was interested in the Rossing South mine in Namibia owned by Extract, but added that "pricing is the most important factor". The South Korean group is reported to be undecided whether to bid for a stake in the Rossing South mine or Extract Resources itself.

Canadian broker Haywood Securities has placed a $10.10 price target on the company.

Rio Tinto-controlled uranium producer Energy Resources of Australia also rose last week after noting that the global financial crisis had created a slump in new mine development that may lead to improved prices for the nuclear fuel.


I assume the Haywood Price Targget is in C$?

If so would be ~A$10.80.

Regards

Steve

Hi All

New Brokers Note from WHIreland 23/03/2010.


Buy A$8.00, Valuation A$9.04, 3yr Target A$13.88

· Re-iterate EXT to be a potential takeover target

· Re-iterate our eventual 750Mlb U3O8 exploration target

· Included an additional US$25m capex for 120Mt pre-strip

· Increased projected stripping ratio from 4 to 7:1

· Retained valuation of after-tax NPV12% of A$9.04 ps

http://www.minesite.com/fileadmin/content/pdfs/Brokers_Notes_Jan_10/Brokers_Notes_feb10/Whireland%20-%20extract%20resources%2024.3.pdf


Regards

Steve

Link: http://uk.reuters.com/article/idUKSGE62O0IR20100325

(Reuters) - Japanese trading firm Itochu Corp (8001.T) will buy a 15
percent stake for 8.5 billion yen ($92.28 million) in London-based mining
company Kalahari Minerals Pl (KAH.L), the Nikkei business daily said.

The move will give Itochu an effective stake of 6 percent in Rossing South,
a 60 billion yen uranium mining project Kalahari is undertaking in Namibia,
one of the world's richest sources of the radioactive metal, the paper
said.

Itochu's investment in Kalahari Minerals is expected to ensure a stable
supply of uranium for Japan.

Kalahari Minerals is the top shareholder in Extract Resources
(EXT.AX)(EXT.TO), the Australia-based sole stakeholder in Rossing South.

The deal comes as a number of countries, including the United States, are
planning new nuclear power plants, it said.

Production is slated to begin in 2013 at 5,700 tons a year, the equivalent
of more than 10 percent of the uranium mined worldwide in 2008, the paper
said.

Output could eventually reach 220,000 tons, making the area the world's
second-most productive source of uranium, behind a deposit in Australia, the
paper said.

Itochu ranks second in the world in annual uranium sales, with about 4,000
tons.

Rival trading companies Sumitomo Corp (8053.T), Marubeni Corp (8002.T),
Mitsubishi Corp (8058.T) and Mitsui & Co (8031.T) are involved in
uranium mining projects in Kazakhstan, Australia and other countries, the
paper said. ($1=92.11 Yen) (Reporting by Shailesh Kuber in Bangalore;
Editing by Ratul Ray Chaudhuri)

Confirmation of the Reuters report from Kalahari

Interesting reading from the Nippon Uranium release

*For the purposes of Rule 2.8 and other relevant provisions of the City Code on Takeovers and Mergers (the "City Code"), Itochu reserves the right to announce an offer or possible offer or make or participate in an offer or possible offer for Kalahari and/or take any other action which would otherwise be restricted under Rule 2.8 of the City Code within the next six months, in the event that:

(i) an agreement or recommendation from the board of Kalahari is or will be forthcoming; or

(ii) there is an announcement by a third party of a possible offer or a firm intention to make an offer for Kalahari or Kalahari announces that it has received an approach in relation to a possible offer from a third party; or

(iii) Kalahari announces a "whitewash" proposal for the purposes of Rule 9 of the City Code or a reverse takeover; or

(iv) there is a material change of circumstances.

I wonder who sold those shares to Nippon Uranium?

Chris

In reply to xigris, post #338

Emerging Metals it would appear.

http://www.investegate.co.uk/article.aspx?id=20100326104533PCE0C&fe=1

The Company is pleased to announce that it has disposed of 50% of its entire
holding of 17,835,294 shares in Kalahari Minerals plc ("KAH Shares") at a price
of 185p per KAH Share and furthermore has entered in to an agreement, subject
only to shareholders consent, to dispose of the remaining 50% of its holding at
a price of 185p per KAH Share. The gross proceeds of the sale of the entire
holding 17,835,294 KAH shares will be £32,995,293.90.

The first tranche of 8,917,647 KAH Shares (being 50% of EML's holding) was
unconditionally sold on 25 March 2010 for a gross cash consideration of £
16,497,646.95 ("Tranche 1") to Nippon Uranium Resources (Australia) Proprietary
Limited, a wholly owned subsidiary of Itochu Corporation for settlement on 1
April 2010.

...and Regent Pacific. Mr Dattels seems to be losing his appetite for uranium. Now we await an announcement regarding Polo's stake in Extract.

On 25 March 2010 (and after Hong Kong market close) the Company

executed an order with its Broker to sell its entire remaining stake in

Kalahari on AIM to the Purchaser for GBP 1.85 (or approximately

US$2.775 or HK$21.645) per Kalahari Share, by way of an over the

counter block trade. The block trade will settle and all cash

consideration will be received on 1 April 2010.

 

Immediately prior to executing the order to sell our remaining Kalahari stake, the Company held 6,325,123 Kalahari Shares, representing approximately 2.81 per cent. of the issued share capital of Kalahari.

In reply to StrollingMolby, post #339

Thanks,

The total issued share capital in KAH is 225million shares.

Nippon Uranium appear to be acquiring 33.75million shares, 17.8million from EML (assuming the vote goes that way at the EGM). I suspect the remaining 16million shares will come from the Coronet deal. Seems to be roughly correct and , if so, then KAH will receive approx £30m.

If Extract mine Rossing South, the CAPEX is estimated at A$1b. I've read that this is likely to be in the form of a 70:30 debt:equity split. So, if they wanted to maintain their current % holding, KAH would have to pay 40% of A$300 = A$120, or £72m (exchange rate A$1.65:£1). The £30m KAH might have just acquired would be very nice, but I can't help thinking that the EXT/KAH shareprice will be significantly higher after the JORC upgrade and the DFS. If so, then maybe there's been a bit of short-termism in this deal.

Conversely, if EXT don't mine Rossing South, then we now know that we have 3 players competing : Koreans, Japanese and RIO.

The next month looks interesting.

Chris

In reply to xigris, post #341

Didn't see your post earlier today Mark, this one was cross posted, but I was amused by this bit

Not a Connected Transaction
 
As at  the date of  this announcement,  to  the best of  the Directors’ knowledge, information and belief  and  having  made  all  reasonable  enquiries,  each  of  the Purchaser,  the  Brokers  and its/their respective beneficial owner(s) are third parties independent of the Company and are not connected persons of the Group.
 
The transaction disclosed in this announcement is not a connected transaction for the purposes of Chapter 14A of the HK Listing Rules.

I'm sure its legally correct, but coming out on the same day as EML's RNS...

Hi All

The link below is for a 16 page "Namibian Uranium Focus" supplement in the March 2010 issue of Mining Journal

http://www.mining-journal.com/__data/assets/supplement_file_attachment/0003/207642/Namibia_scr.pdf

Gives good background information on all the main players including Extract.

Regards

Steve

Does anyone think that dattels exiting cos he thinks extract are going to go mining and he's not going to get his big payday so he's selling up and moving on or is he just making sure there are enough players at the table? With him apparently off the decision making team at polo where does his interests lie? i know he's holding a stake in ext directl but who's to say he's not about to sell that to the koreans? any thoughts?

Polo have made it clear that their preference is to focus more on coal than uranium at present. I suspect that if/when Polo sells its stake in Extract, means will be found for Dattels' personal stake in Extract to be sold at more or less the same time. ;0)

Cheers,

Mark

Hi All

I posted the answer below on HC to a question with regards to a sp valuation for EXT, based on 15% sale of KAH to Itochu.

Regards

Steve


Hi Skip


QUOTE

"March 26 (Reuters) - Japanese trading firm Itochu Corp will buy a 15 percent stake for 8.5 billion yen ($92.28 million) in London-based mining company Kalahari Minerals Plc , the Nikkei (news) business daily said.

The move will give Itochu (Munich: 855471 - news) an effective stake of 6 percent in Rossing South, a 60 billion yen uranium mining project Kalahari is undertaking in Namibia, one of the world's richest sources of the radioactive metal, the paper said."


So effectively Itochu is paying US$92.28 for an indirect 6% stake in EXT. Which would equate to paying an EXT SP of ~A$7.06.

Now it is important to remember that this is not the same as buying a direct stake in EXT. There is a far greater risk buying a stake in KAH as apposed to a direct stake in EXT. Also Itochu's power to influence decisions of EXT is far less, as they do not have a seat on EXT's board, only one vote on KAH's board.

Historically KAH has trade at 20% discount to the NAV of its 40% stake in EXT.

Therefore if you apply the historical discount of 20% to the A$7.06 paid we get a figure of ~A8.83. Which fairly close to the A$9.04 current valuation that WHIreland gave in their March 24 Brokers Note on EXT.

However even at A$8.83, it still seem very cheap, and a great deal for Itochu!

Regards

Steve

POLO Rns out.

Neil Herbert appointed Co-Chairman


Polo Resources (AIM: PRL), is pleased to announce that Neil Herbert, a Director
of the Company since 2008, has been appointed Co-Chairman of the Board of
Directors together with Stephen Dattels, Chairman of the Board since 2008.

Neil Herbert, Chairman of Polo Resources, said:

"Over the last year Polo has transformed itself into a company with cash and
near-term investments valued at US$187.6 million* together with coal mining
interests in Australia, Bangladesh and Mongolia. The Company is now set to
embark on a new growth strategy and I am pleased to join Stephen Dattels in
chairing the Company, as we enter this phase of development."

* Based on the closing prices on 26 March 2010



"The Company is now set to embark on a new growth strategy and I am pleased to join Stephen Dattels in
chairing the Company, as we enter this phase of development."

More news re KAH holding due very soon IMO.

Japanese trading house ITOCHU to acquire 15% equity interest

Ambrian 26 March 2010

Nippon Uranium Resources (Australia), a wholly-owned subsidiary of the Japanese trading house ITOCHU Corporation, has agreed to acquire a 15% equity interest in Kalahari. ITOCHU has stated that this is a long-term strategic shareholding, and that it currently does not intend to make an offer for Kalahari. ITOCHU is a 150-year old major Japanese trading house, with a long history in the uranium market. It has activities in Namibia, where it has an interest in the offshore Kudu gas field.

While the announcement does not make the source of the stock clear, we assume the stake will be bought in the market from existing shareholders (ie, 62.6m shares). There was some 21.5m turned over overnight at 185p, and Nomura - which acts as financial adviser to ITOCHU and Nippon Uranium Resources - has advertised having traded 43m shares (and UBS 26m shares). Kalahari has requested ITOCHU nominate a director to its Board to ensure this strategic relationship is maximised to the benefit of all its stakeholders.

Kalahari owns a 40.44% stake in Extract Resources, which intends to release a resource upgrade for its Rossing South uranium project in Namibia in 3Q10 to incorporate drilling since July 2009, with a DFS to be released in 4Q10.

This event not only adds a major new strategic shareholder to the Kalahari register, but also effectively mops up the short-term investment positions in the market. This should support Kalahari moving towards target price levels.

We expect, given the size of the resource, an expansion on the base case 15Mtpa plant (~15Mlbs U3O8/US$523m EBITDA pa). Specifically, we think 20Mtpa is highly likely (~20Mlbs U3O8/US$697m EBITDA pa), or even up to 25Mtpa in the longer term (~25Mlbs U3O8/US$871m EBITDA pa).

http://www.kalahari-minerals.com/News/Analyst_Research/Japanese_trading_house_ITOCHU_to_acquire_15~_equit/News.aspx?id=178


This is the second time Ambrian has mentioned a possible increase in production levels.

The first was on the 18/02/2010.

QUOTE
"Key share price drivers for Kalahari will be the release of a resource upgrade and following pre-feasibility data around mid-year. We expect the pre-feasibility will indicate production throughput higher than the 15Mtpa in the scoping study given the size of the resource, and note that even at a conservative US$50/lb, 6x EBITDA lifts from 2.69GBP/KAH share at 15Mtpa to 3.58GBP at 20Mtpa. For energy bugs, 6x EBITDA at 25Mtpa and US$60/lb equates to 6.20GBP/KAH share, although it is probably too early to be banking on reaching 25Mtpa!"

http://www.kalahari-minerals.com/News/Analyst_Research/Infill_Drilling_Results_-_More_wide~_high-grade_zo/News.aspx?id=165


Could it be that Dattels has done a deal with Itochu with regards to an off-take agreement?

Perhaps Itochu did not want to get into a bidding war with Kepco, for a stake in EXT, and have done a deal with Dattels, with regards to Itochu making a substantial off-take agreement offer to EXT, in return for the stake in KAH?

Should Kepco be successful in acquiring a stake in EXT, which would no doubt include a substantial off-take agreement, this would then make it economically viable for EXT to invest in a larger plant to increase production levels.

After all it is no good increasing production levels to 20 or even 25Mlbs, if there is no guarantee of a purchaser.

Could this be the reason for the delay in resource upgrade and DFS?

Regards

Steve

Emerging Metals have released a Notice of Meeting of Shareholders and Disposal

From that notice:

...the Company's other significant asset will continue to be its
interest in the Tsumeb Slag Stockpiles Project...

No comment on the 360000 EXT shares held, which I feel would be a significant asset. I assume that these have been sold.

AIUI, EML and PRL  (and SD) are considered to be associated by the ASX. Therefore a sale that pushed the joint holding below 10% of EXT should be reported.

Chris

And Polo commences dual trading on the TSX today and becomes ISA-able:

Polo dual lists on the Toronto Stock Exchange

Polo Resources, the mining company with coal and uranium interests in Africa, Australia and Asia, is pleased to announce that its Ordinary Shares will today commence trading on the Toronto Stock Exchange ("TSX") under the trading symbol "POL". This follows the announcement regarding a conditional listing made by Polo on 9 March 2010.

The Company's shares which previously traded under the symbol PRL on the Alternative Investment Market ('AIM') of the London Stock Exchange, will also trade under the symbol "POL" on AIM effective from 6 April 2010.

Hi xigris,

I think the stake in EXT is amongst the 'liquid current assets' part of the $15m post-dividend NAV, with Tsumeb being the 'major mining asset' referred to in Investment Policy going forward.

In reply to extrader, post #351

Hi extrader,

You're probably right, but I don't see the logic of holding on to EXT and selling KAH.

If SD and JM have got that great an investment opportunity, then why hang on to the EXT.

I know it'll all come out in the wash. Maybe PRL (aka POL) is going to sell its EXT and buy GCM just before the Bangladeshi govt gives them a mining licence. ;-)

Anyway, I'm mainly in KAH, so happy to watch from the sidelines. Waiting for JORC and the DFS, then I'll re-assess.

Chris

Would PRL purchase of GCM be possible, privileged information and all that.