China's Guangdong Nuclear Plans 756 Million-Pound Bid for Kalahari Minerals

Published on Tuesday March 08 2011

China's Guangdong Nuclear Power Group, the nation’s second-largest reactor builder, plans a 756 million pound ($1.2 billion) bid for Kalahari Minerals Plc to secure uranium as the government seeks to boost atomic generation.

State-owned CGNPC made a “possible offer” of 290 pence a share, 11 percent above the March 4 close, it said yesterday in a statement. Kalahari rose 9.5 percent to a record 285 pence after earlier saying it was in talks with an unidentified group.

“The Kalahari board believes this represents attractive value for Kalahari shareholders,” Mark Hohnen, chairman of the London-based company, said in the CGNPC statement. CGNPC said Kalahari will recommend the proposal to its stockholders.

Kalahari’s main asset is 43 percent of Extract Resources Ltd. (EXT), which is seeking to develop the Husab uranium project in Namibia described by the company as the world’s fifth-largest primary deposit. Rio Tinto Group owns the neighboring Rossing mine and has 14 percent of Extract and 11.5 percent of Kalahari.

China is expected to raise its 2020 target for atomic power generation to 86 gigawatts, with annual investment of 70 billion yuan ($10.7 billion), the state-run China Daily said Jan. 26. In comparison, capacity may total 11.7 gigawatts by the end of 2011, according to the National Energy Administration.

CGNPC “has established strong relationships with domestic and overseas manufacturers and suppliers of natural uranium,” it said in the statement. “An acquisition of Kalahari is therefore in line with its ongoing strategy to support development of important new sources of natural uranium.”

Regulatory Approval

The plan is subject to regulatory approval in China and Australia as well as securing funding, it said. CGNPC would seek relief from the Australian Securities & Investments Commission as a deal would give it more than 20 percent of Extract.

Kalahari’s stake in Extract is valued at about A$1 billion ($1 billion) based on the unit’s A$9.26 a share closing price in Sydney trading yesterday, giving it a market value of A$2.3 billion. Rio Tinto is the world’s third-largest mining company.

Extract said last month it was in talks with Rio on merging their uranium projects in Namibia. Rio owns the Rossing mine, while Extract owns the adjacent Husab deposit. That followed comments in June from Extract Chief Executive Officer Jonathan Leslie that there would be “synergies” between the two mines and his company would study cooperation with Rio’s project.

Rossing is the third-biggest producer of the nuclear fuel, accounting for 7 percent of world supply, according to World Nuclear Association figures. Illtud Harri, a spokesman for London-based Rio, declined to comment yesterday.

Husab is about 7 kilometers (4.4 miles) from Rossing and 30 kilometers from Paladin Energy Ltd.’s Langer Heinrich project.

Extract is in talks with Rio “with a view to capturing the significant potential synergies that could be generated from a joint development of the two projects,” the Perth-based company said last month. “Extract is also holding discussions with Kalahari Minerals Plc (KAH) to explore various options that might simplify the Extract/Kalahari shareholding structure.”