China Guangdong Nuclear Power Group Co.’s A$2.2 billion ($2.4 billion) offer for Extract Resources Ltd., owner of the world’s fourth-largest uranium deposit, was endorsed by the board of the Perth-based explorer.
The directors recommended that shareholders accept the A$8.65-a-share cash offer from Taurus Mineral Ltd., a venture of the state-owned Chinese company and the China-Africa Development Fund, Extract said today in a statement.
The approach was triggered by Guangdong Nuclear’s bid for Kalahari Minerals Plc, which owns 43 percent of Extract. China’s second-largest reactor builder, seeking new supplies of uranium to feed demand for nuclear power, offered 632 million pounds ($1 billion) for the London-based company in December.
“You can be sure that all the serious players we’ve engaged with,” Extract Chief Executive Officer Jonathan Leslie said by phone today from London. “The appetite wasn’t there to trump the Guangdong bid, even though very strong interest has been shown” in its Husab project in Namibia.
Rio Tinto Group, owner of the world’s third-biggest uranium mine at Rossing, 7 kilometers (4.4 miles) from Extract’s deposit, said last month it has held talks with Guangdong Nuclear on jointly developing the two sites. London-based Rio Tinto owns 14.2 percent of Extract and in January accepted Guangdong Nuclear’s offer for its stake in Kalahari.
“Because of the proximity, there are synergies there” with Rio Tinto, Leslie said. “It’s obvious to look at that.”
Australian regulators ruled Guangdong Nuclear must offer A$8.65 a share should the bid for Kalahari succeed. The Chinese company said yesterday its offer closed after receiving about 98 percent of valid acceptances from Kalahari shareholders.
Extract closed unchanged today at A$8.60 in Sydney trading.
Uranium prices slumped 17 percent last year to about $52 a pound after the March 2011 disaster at the Fukushima Dai-Ichi power station in Japan prompted a global review of nuclear power. Prices of about $80 are needed to make new projects attractive to developers, according to JPMorgan Chase & Co.
“No doubt Fukushima has had a very bad effect in the near term,” Leslie said. “A lot of projects are not going to make it, at least on the old time-frame. The medium-term outlook though remains pretty good for uranium projects.”