CGNPC restarts Kalahari negotiations

Updated: 2011-10-12 07:52

By Julie Crust (China Daily)

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Nuclear power generator is likely to be successful in its latest attempt

LONDON - A top Chinese nuclear power generator has reentered talks to buy Kalahari Minerals PLC, the biggest shareholder in one of the world's largest uranium projects.

The move comes as commodity-hungry China steps up efforts to meet its growing energy needs.

Kalahari confirmed on Monday that discussions had restarted with the State-owned China Guangdong Nuclear Power Corp (CGNPC), after a deal earlier this year fell through in the aftermath of the Fukushima disaster in Japan. The company gave no details on price.

A source familiar with situation told Reuters on Friday that CGNPC was set to relaunch its offer of 270 pence ($4.22) a share, valuing Kalahari at about $1 billion, after a temporary ban imposed by UK regulators.

Several analysts said CGNPC is expected to be successful in its attempt to secure control of Kalahari and gain access to a world-class uranium project at a time when major economies are scrambling for alternative power sources.

However, much will hinge on the position taken by Rio Tinto Group, which holds about an 11 percent stake in Kalahari and 14 percent of its major asset, Extract Resources Ltd. Rio has long considered its options over Kalahari and Extract, but analysts said it was unlikely to pursue a hostile bid against the Chinese.

Rio, in which the Aluminum Corp of China is the largest shareholder, is instead expected to use any agreement with CGNPC to carve out a deal that will extend the life of its depleted Rossing mine and resolve its cross-shareholdings in Kalahari and Extract.

Rio Tinto officials declined to comment. Rio is one of the world's largest producers of uranium, responsible for about 16 percent of the global supply.

Kalahari holds 43 percent of Extract, owner of the Husab project in Namibia, which is potentially the second-largest uranium mine in the world. Exploration work is continuing on the project, currently the world's fourth-largest uranium-only deposit, with an updated resource estimate due next year.

In March, CGNPC was in talks to buy Kalahari for 290 pence a share. In the days following the Japanese earthquake and nuclear disaster, the companies agreed that CGNPC could cut the price to 270 pence. However, the companies failed to persuade UK regulators to allow them to lower the value.

Because more than three months have elapsed since CGNPC withdrew its possible offer, it is no longer restricted from making an offer on the same or better terms, Kalahari said on Monday.

"We believe that CGNPC will ultimately be successful in acquiring Kalahari," said analysts at Killik & Co. "The purchase of the asset by a Chinese State-backed company remains highly logical, given that China remains the fastest-growing market for uranium in the world."

China is building 28 reactors, representing about 40 percent of the total number under construction globally, Killik said.

Husab has an estimated resource of 221 million kilograms of uranium oxide, reserves of 145 million kg, and is expected to produce about 7 million kg a year.

Analysts have said that despite the short-term market impact of Fukushima, the long-term uranium market fundamentals are sound with growing demand for new nuclear power reactors.

Extract said on Sept 2 that it is in advanced financing talks to develop Husab. It is waiting for the mining license to be granted before it releases a detailed project timeline.


(China Daily 10/12/2011 page16)