A Bright Future Beckons For Kalahari Minerals As Extract’s Uranium Resource Base Continues To Grow And Grow
By Charles Wyatt
minesite.com
Aim-traded Kalahari Minerals may have a portfolio of projects In Namibia that includes gold and base metal projects, but uranium via its 40 per cent holding in Extract Resources is key to its future. On the telephone from Perth executive chairman Mark Hohnen says the other assets, which include the Namib lead-zinc project, the Ubib copper-gold project and a couple of properties on the Kalahari copper belt are all being assessed at the moment, and that their future will be decided before the end of the year. Extract's main asset is the Husab uranium project, located approximately 45 kilometres north-east of Namibia's main port - Walvis Bay. The project is strategically located within what is called Alaskite Alley, which is named after the granitic rock there that’s composed mainly of quartz and alkali feldspar, the same rock that hosts the uranium mineralization for several world class uranium deposits that are in the area.
Two of these deposits are already in production – Rio Tinto’s 68 per cent owned Rossing Uranium deposit to the north, which supplies eight per cent of the world’s uranium, and the Langer Heinrich deposit to the east, owned by Paladin Resources. Rossing has been in production for the last 30 years, while Paladin Resources brought Langer Heinrich into production in early 2008. Both of these deposits are located within 30 kilometres of Husab, itself split into the Rossing South and Ida Dome deposits. The resources at Rossing South continue to grow and grow, and as the mineralization is open at depth and along strike there is no reason to believe that the end is yet in sight. Indeed, Mark Hohnen is prepared to suggest that Extract has the ground and potential to deliver a resource in the region of 500 million pounds U3O8. This would rank it near the top of the top ten of the world’s biggest uranium deposits.
Small wonder Rio Tinto is keeping a very close eye on progress and has shareholdings in both Kalahari Minerals and Extract Resources. At the moment these amount to only 13.9 per cent and 15 per cent respectively, but the UK giant must wish it had had the courage to make a pre-emptive move for both companies in the depth of the chaos that engulfed the junior mining sector at the end of last year. At that time the share price of Kalahari went as low as 25p, compared with the present 179p per share. Extract put up a similar performance. But at that time too, Rio Tinto had problems of its own with the Chinese, the Australian authorities, and BHP Billiton, so probably took its eye off the ball. Even the biggest mining companies are prone to do this when the world’s finances are in complete disarray.
At the beginning of July Extract announced a further 34 per cent increase in the resources at Zone 1 of Rossing South. At the time Mark Hohnen said: “These results yet again underpin that Rossing South is one of the world's most significant uranium discoveries. The increase in resource for Zone 1 to 145 million lbs of U3O8 at 449 ppm [parts per million] is fantastic news and in line with our estimates. Additionally we were hugely excited about the increase in grade which makes Rossing South the highest grade granite hosted uranium deposit in Namibia”. Mark was in danger of running out of superlatives, but later that month he had to dip into the barrel again when Extract announced a maiden resource for Rossing South Zone 2 of 122 million pounds U3O8 at 543 ppm.
This time he commented: "These are incredible results which ensure that Rossing South is now one of the largest uranium deposits in the world. The 82 per cent increase in the resource at Rossing South and the grade quality mean this project is truly world class. Including Ida Dome, Extract now has a JORC compliant resource in excess of 290 million pounds U3O8 of which 267 million pounds U3O8at an average grade of 487 ppm is from the two zones at Rossing South”. Ida Dome should certainly not be overlooked as it also has the potential to expand its resource, but Mark is now starting to get excited about the potential of Zone 3 at Rossing South. Extract has not said much about this to date, but exploration is taking place there and the initial feedback is very promising. No wonder the estimate of an eventual resource for Rossing South plus Ida Dome has now reached the 500 million pounds mark.
The latest announcement from Extract is that a preliminary costs estimate study has been carried out at Rossing South, and the result is positive. The conclusion was that the project can support a viable open pit mining operation developed to feed a 15 million tonnes per year agitated tank sulphuric acid leach processing plant. Annual production has been estimated at 14.8 million pounds U3O8, with capital costs estimated at US$704million and operating costs coming in at US$23.60 per pound of U3O8. As Peter McIntyre, managing director of Extract says, “this profitable operation could have a life of more than 20 years based on current resources. We are continuing with our metallurgical testwork and engineering optimization that will consider other options including a heap-leaching component.”
The current market capitalisation of Kalahari is £344.75 million (US$558.4 million). Now that the stage has been reached of carrying out cost estimates it is permissible to put a value on the company’s assets. At the moment Kalahari has a 40 per cent interest in Extract’s uranium resources and it would be reasonable to value these at US$6.00 per pound, compared with the current market price of US$48 per pound, based on the prices applicable in recent takeovers. On this basis a value of US$700 million emerges, but this only applies to the current resources. If and when the combined resources reach 500 million pounds the value for Kalahari would be US$1.2 billion. It is worth remembering this hefty discount as Extract gets steadily closer to production, as Mark Hohnen reckons it will reduce steadily over the months ahead.
Talking about production, it is certainly Extract’s intention to achieve this as soon as possible. Mark reckons that if everything goes to plan and schedule – feasibility, funding and construction – uranium could be produced from Rossing South by the end of 2012, with such a rapid startup being due to the prevalence of infrastructure and the project’s proximity to the coast. Mining projects rarely run on rails so the beginning of 2013 looks a safer bet, but either way a bright future beckons for both Extract and Kalahari. |
