Energy

China seen retaining enthusiasm for Husab uranium resources

By James Paton (China Daily)
Updated: 2011-03-25 11:15

SYDNEY - Extract Resources Ltd expects China will remain keen to expand its nuclear power program and gain access to the explorer's Husab uranium project in Namibia after an earthquake and tsunami damaged reactors in Japan.

"There's strategic and political interest in securing uranium supplies," Chief Executive Officer Jonathan Leslie said in a telephone interview. "If Husab is regarded as being strategically important, which I'm sure it is, I don't think that objective has changed in the last two weeks."

While uranium price volatility and delays in the construction of nuclear power stations are possible after the March 11 earthquake and tsunami crippled the Fukushima Daiichi plant north of Tokyo, nuclear power will still be "a very important part of the energy mix", Leslie said on Wednesday.

Extract is among uranium explorers and producers whose shares tumbled last week amid concerns that countries will stop or suspend plans to build nuclear power plants because of the Japan crisis. Extract rose 19 percent in the last three days of Sydney trading after a 34 percent decline last week.

Difficulty in arranging financing after the earthquake in Japan will likely prompt some explorers to merge and Extract is "comfortably placed" to fund development of the Namibian venture as it moves toward a 2014 target for production to start, he said. "The world is a very different place today than it was before the incident in Japan."

"You would have to say that a number of juniors that rely on conventional financing will find it more difficult now. If financing is more of a problem, then consolidation may be the solution," he said.

Related readings:  CNNC begins trials at uranium mine in Niger  China should expedite safer nuclear plants  Approvals halted for new nuclear plants  Nuclear power standards come under scrutiny

China Guangdong Nuclear Power Group Co, China's second-largest reactor builder, made a 756 million-pound ($1.2 billion) bid earlier this month for Kalahari Minerals Plc to gain access to Extract's deposit. Kalahari owns about 43 percent of Extract, which calls Husab the fifth-biggest uranium deposit.

Leslie declined to comment on whether the incident in Japan may result in a lower Kalahari offer.

Mantra Resources Ltd, an Australian company with projects in Africa, agreed to a reduced takeover offer from Rosatom Corp, the Russian state-owned nuclear company. Rosatom's ARMZ Uranium Holding Co cut its offer for Mantra by 12 percent to A$1.02 billion ($1.03 billion) because of the Japan disaster.

Husab is about 7 kilometers from London-based Rio Tinto Group's Rossing mine and about 30 kilometers from Paladin Energy Ltd's Langer Heinrich project.

Extract continues to talk with Rio and other companies about development of the Husab uranium venture, he said. Extract said last month it was in talks with Rio about a potential combination of the Husab and Rossing projects.

"We're free to talk to anyone, and we are continuing the dialogue with all interested parties," Leslie said, declining to name any companies. "There are a variety of ways they could be involved. We're not constrained in who we talk to."

Bloomberg News