Kalahari sees Rössing South as number two uranium deposit

LONDON – AIM-listed Kalahari Minerals expects the Rössing South project in Namibia to become the world’s second-largest uranium deposit following recent exploration results, Executive Chairman Mark Hohnen said.

Extended zones 1 and 2 at the project could contain more than 500 million pounds of uranium oxide, making the deposit the biggest after BHP Billiton’s Olympic Dam in Australia, Hohnen told Reuters in an interview.Additional resources could also be added from Zones 3 and 4. Early test results from Zone 3, released last Monday, confirmed strong uranium mineralisation.Kalahari holds around 40 per cent of Extract Resources , the owner of Rössing South, and sees itself as a key player if there is a takeover of the project.’They (a potential buyer) can’t do anything with Extract or the resource without having Kalahari on side,’ Hohnen said on Thursday.Extract shares have jumped more than seven-fold this year on upbeat news from the deposit and speculation of a takeover.’I guess they are all scratching their heads working out what they are going to do,’ said Hohnen, referring to potential buyers. ‘Of late there has been interest. We have talked to Rio and I think they would love to do it.’Rio Tinto has a 67 per cent holding in the nearby Rössing mine, supplier of about eight per cent of the world’s uranium and which is located seven km from Rössing South.Analysts have said European utilities could also be looking, although Areva, the world’s biggest maker of nuclear reactors, might struggle to raise sufficient funding. In 2007, the French group bought UraMin, owner of the Trekkopje mine in Namibia, for US$2,5 billion.Asia is also interested and countries in the region may consider offtake agreements, Hohnen said.’The Koreans, the Chinese and the Indians are all trying to guarantee supply,’ he said.GROWING DEMANDDemand for uranium is growing. More nuclear power plants being built as countries scramble to cut emissions by reducing their dependence on fossil-fuel generated energy.There are 436 nuclear power reactors in operation globally and 49 under construction, Resource Capital Research said in its September uranium sector review. It said 413 new reactors were planned as of August, up 30 per cent in the last year alone.Keith Watson, an analyst at Mirabaud Securities, valued Rössing South at US$1,56 billion as a stand alone project or US$2,02 billion assuming a combination with the neighbouring Rössing mine.Speculation has also surrounded the timing of a potential deal, with some analysts saying buyers will wait until a feasibility study is completed. A full feasibility study is expected in mid 2010 and production is set to start in 2013.Kalahari is also interested in raising its stake in Extract, Hohnen said.Shares in Kalahari have jumped to 190 pence from 44 pence at the end of 2008 on hopes for the deposit, but Hohnen said there should still be a takeover premium in the price.Ambrian Capital estimates total resources at Extract’s Husab project – consisting of Rössing South, Ida Dome and a new Salem prospect – at around 560 million pounds of uranium oxide.Spot uranium prices are currently around US$46 a pound after hitting a record US$136 in June 2007 due to revived interest in nuclear energy.Rössing South has current estimated resources of 267 million pounds of uranium oxide.- Nampa-Reuters