Kalahari agrees to new, lower £632m China bid

8th December 2011 By: Matthew Hill

TORONTO (miningweekly.com) – London-listed Kalahari Minerals said on Thursday it agreed to an offer from China Guangdong Nuclear Power Corp (CGNPC) valuing it at £632-million, or $993-million.

The £2.4355-a-share cash offer represented a 16.1% premium to the average closing price of Kalahari’s shares for the six months up to March 4, when the Chinese firm first announced it wanted to buy the uranium hopeful.

If CGNPC is successful in its bid, it would have to offer to buy all of Australia-based Extract Resources, in which Kalahari owns a 43% stake, unless Australian regulators were to make an exception to the regulations.

Extract said in a statement it woud "carefully review the details of the proposed offers and consider all available alternatives for maximising shareholder value before making any recommendation to shareholders".

The CGNPC bid implied a value of A$8.65 for each Extract share.

BMO Capital Markets analyst Ed Sterck said it was likely that the Chinese company would end up with ownership of Kalahari and Extract, and thereby the giant Husab uranium deposit in Namibia.

CGNPC initially offered £2.90 a share to buy Kalahari on March 4, before renegotiating a lower £2.70-a-share bid in the aftermath of the Japanese nuclear disaster, which obliterated values of uranium producers and juniors.

London’s Takeover Panel, however, said CGNPC was not allowed to lower its bid for six months.

“In the light of the unexpected circumstances in Japan and their impact on uranium equities, the Kalahari directors recognise the altered market dynamic and subsequently view the offer from CGNPC as attractive,” said Kalahari chairperson Mark Hohnen.

Sterck said the lower bid was also reflective of the broader market volatitility in recent weeks that had driven share prices down.

Rio Tinto, which emerged as victorious in a bidding war with Cameco for Canada's Hathor Exploration last month, owns 11% of Kalahari and 14% of Extract.

Sterck said Rio Tinto may not sell its ownership in the two companies to CGNPC, and could strike a deal with the company to operate the Husab mine, anticipated to start producing in 2014, building up to 15-million pounds yearly of uranium oxide.

"In my view, CGNPC is a nuclear utility, they are not miners. They would want Rio as an operator," he commented in a telephone interview.

Rio Tinto is running out of ore at its Rossing operation located next to Husab, and has eyed the deposit as a potential feed replacement.

The world's third-largest miner could strike a deal with CGNPC to treat Husab's ore at the Rossing mill, in return for some of the offtake, said Sterck.

CGNPC was making the bid, which is conditional on shareholders representing at least 50% of Kalahari's shares accepting it, through a vehicle called Taurus Minerals, which it indirectly owns with the China Africa Development Fund.

The Namibian government last week awarded Extract a mining licence to build Husab. The State-owned Epangelo Mining is also in talks with the company to buy a 10% stake in the project.