China Guangdong Walks Away From Big Uranium Mining Deal
11 May 2011 - 1:31PM
Dow Jones News
China Guangdong Nuclear Power Holding Co. has walked away from a
US$1.24 billion deal for Kalahari Minerals PLC (KAH.LN), a move
that could flush out other suitors caught blindsided by China's
largest uranium bid to date.
CGNPC, one of China's two largest nuclear power generators and
owner of the huge Daya Bay reactor complex near Hong Kong, withdrew
its offer for Kalahari after the U.K. Takeover Panel ruled it
couldn't cut the bid price despite global uncertainty over the
immediate future for atomic energy.
Kalahari's main asset is a near-43% stake in Extract Resources
Ltd. (EXT.AU), which is developing the US$1.48 billion Husab
project in Namibia, one of the world's largest untapped uranium
deposits. Extract's shares fell on the news that CGNPC was dropping
its bid, trading 30 cents lower, or 4%, at A$7.40 at 0300 GMT.
CGNPC had offered 290 pence a share for Kalahari, valuing the
London-listed company at GBP756 million just days before a
devastating earthquake hit northeast Japan on March 11, crippling
several reactors and prompting fresh scrutiny of the safety of
nuclear power that weighed heavily on the share prices of uranium
miners.
Late Tuesday, CGNPC said it had abandoned its recommended cash
offer after the Takeover Panel earlier in the day rejected its
appeal to renegotiate the deal at a lower price of 270 pence a
share.
In a statement, the regulator said it would publish its reasons
for the ruling in due course, adding the announcement of the
takeover offer hadn't contained a clause allowing CGNPC the right
to lower the bid price.
China, which doesn't have sufficient uranium reserves of its
own, is in the midst of a major expansion of nuclear power to
reduce its reliance on coal. CGNPC had sought to acquire Kalahari
and with it control of Extract.
Extract's Husab project is located a few kilometers from the
operating Rossing uranium mine of London-based Rio Tinto PLC
(RIO).
Rio owns a 14% stake in Extract and 11.5% interest in Kalahari.
Perth-based Extract and Rio Tinto have been in discussions to
possibly combine Husab and Rossing.
Further complicating CGNPC's acquisition of Kalahari was the
possibility it would also have to launch an offer for Extract. It
had been awaiting for a decision from the Australian Securities and
Investments Commission on an application to be exempted from
regulations that require any company gaining a greater than 20%
shareholding to make a takeover offer.
Extract separately said Wednesday it is pushing ahead with
Husab's development as well as conducting exploration drilling, and
is also continuing to evaluate development and partnership options
for the uranium project.
Mining executives continue to expect rising demand for uranium
as countries develop nuclear energy programs. Jacques Nasser,
chairman of mining giant BHP Billiton Ltd. (BHP), last week told an
industry event in Melbourne he expected nuclear power to form part
of the global energy mix needed to meet rapidly rising demand for
electricity.
China has 13 operational civil nuclear reactors, including five
owned by CGNPC, and has another 27 under construction. In 2010,
China's uranium imports tripled to 17,136 metric tons.
-By Robb M. Stewart, Dow Jones Newswires; +61 3 9292 2094;
robb.stewart@dowjones.com
-Razak Musah Baba in London contributed to this article
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