Home > Market change, Mergers & Acquisitions > China Guangdong withdraws offer for Kalahari Uranium Deposit

China Guangdong withdraws offer for Kalahari Uranium Deposit

May 12, 2011

“China Guangdong Nuclear Power Holding Co. withdrew its two-month-old, £756 million (US$1.24 billion) bid to acquire a big stake in an African uranium deposit, after the Japanese nuclear crisis damped enthusiasm for nuclear power.

CGNPC, one of China’s two largest nuclear-power generators, late Tuesday withdrew its offer for U.K.-based Kalahari Minerals PLC after Britain’s Takeover Panel said the Chinese company couldn’t reduce its offer. Kalahari’s main asset is its nearly 43% stake in Australia-based Extract Resources Ltd., which is developing the US$1.48 billion Husab project in Namibia, one of the world’s largest untapped uranium deposits.”

Source: Wall Street Journal, January 18 2011

Observations:

  • CGNPC owns 5 nuclear power plants in China and is trying to secure access to uranium. It did a $1.2bln bid for Kalahari Minerals on March 8, 3 days before the earthquake in Japan. Global uranium market has been hit severely by the nuclear problems caused by the earthquake, reducing the value of Kalahari Minerals.
  • Kalahari minerals owns 43% of Extract Resources, which owns the Husab uranium deposit in Namibia (Rossing South). Rio Tinto is the third important player as shareholder of both Kalahari and Extract and owner of the Rossing uranium project close to the Husab deposit.

Implications:

  • Although the offer was withdrawn it is likely that CGNPC will still try to buy the deposit at a lower price. An new offer or a deal via an allied company at a lower price would force the British Takeover Panel to look at the case again. As Kalahari’s board agreed with the earlier price offered, it is likely they will be open to a new offer.
  • Rio Tinto has 3 options: divest its interest in Kalahari and Extract in a move to get away from uranium mining; try to gain control over Extract and merge the Rossing and Husab projects, potentially signing CGNPC as key customer; or leave the situation as it is, potentially partnering with CGNPC in the future.

©2011 | Wilfred Visser | thebusinessofmining.com

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