Chinese Move to Control World's Fourth-Largest Uranium Mine in Namibia

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Swakop Uranium, a wholly owned subsidiary of Extract Resources Limited (ASX:EXT) (South Perth, Australia), has been issued with a mining license by Namibia's Ministry of Mines and Energy. This signals the go-ahead for Extract to develop the world's fourth-largest uranium deposit at Husab in Namibia.

The mining project is situated in the mineral-rich Erongo region, 300 kilometers west of the capital Windhoek. The site is near Swakopmund on the South Atlantic coast and 45 kilometers from Walvis Bay, Namibia's main port. There are a number of other uranium mining projects in the area.

The mine will have a 20-year life and will contribute 5% to Namibia's GDP and 20% of the country's exports. Swakop's chief executive, Norman Green, said that the $1.5 billion project would create more than 3,000 temporary jobs during construction and about 1,200 permanent operational jobs.

An open-pit mining operation is planned, with ore from the mine feeding a conventional agitated acid leach process plant at a rate of 15 million tons of ore annually. Extract claims that with an anticipated annual production of about 15 million pounds of uranium, the Husab project will become the second largest uranium mine in the world after the McArthur River Mine in Canada.

China Guangdong Nuclear Power Group Uranium Resources Company (CCNPG-URC) (Beijing) had been discussing, prior to December, the acquisition of a 10% stake in Namibia's state-owned mining company Epangelo and then, together, buying into Husab. The Namibian company was already in talks to take a 10% stake in Husab, whether the deal with the state-owned Chinese company went through or not.

Extract had said that discussions were taking place and that any agreement between CGNPG-URC and Epangelo would need to be conditional on the Chinese company's having acquired a controlling interest in Extract's 100%-owned Husab project.

CGNPG-URC moved separately to take over Kalahari Minerals (LSE:KAH) (London, England), which owns 43% of Extract. The company's £632 ($983 million) cash offer was accepted in the second week of December. This offer by the Chinese was then followed by an offer for Extract in line with Australian securities regulations.

Kalahari Executive Chairman Mark Honan said that in the light of the unexpected circumstances in Japan and their impact on uranium equities, the Kalahari directors recognized the altered market dynamic and subsequently viewed the offer from CGNPC-URC as attractive.

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