UK article Feb 9 Kalahari Minerals
http://www.investegate.co.uk/Article.aspx?id=200702090700359870Q
9 February 2007
Kalahari Minerals plc ('Kalahari' or 'the Company')
Notice of EGM and Substantial Transaction
Kalahari Minerals plc, the AIM listed mining exploration and evaluation group
with a portfolio of copper and uranium prospects in Namibia, is pleased to
announce that an Extraordinary General Meeting ('EGM') will be held on 27
February 2007 to approve the transaction with Extract Resources Ltd (ASX: EXT) ('Extract'), whereby the companies have conditionally agreed to consolidate their respective interests in their common uranium projects in Namibia.
Overview
• The Company has conditionally agreed that its wholly-owned subsidiary,
Kalahari Uranium Limited ('Kalahari Uranium'), a company incorporated and
registered in the Isle of Man, will dispose of the group's uranium assets
which are held through a Namibian incorporated company, Swakop Uranium (Proprietary) Limited ('Swakop'), for a consideration of 667 million new
ordinary shares in Extract ('the Disposal').
• The Disposal is subject to certain conditions including both Kalahari
and Extract obtaining shareholder approval.
• The directors of Kalahari believe that a single asset uranium company is
more likely to focus investors attention and more properly reflect the
underlying value of the assets.
• Following the Disposal, Kalahari will concentrate on its copper projects
and the directors intend to promote Kalahari as a base and precious metal
company.
• As a condition of the Disposal, Extract is to complete a capital raising
of a minimum of A$10 million and plans to accelerate exploration and
drilling programmes on the uranium projects.
• Under the share purchase agreement, Kalahari has the right to nominate
an independent director to the Extract board.
Kalahari Chairman Mark Hohnen said, 'We believe that by consolidating our
uranium assets we can realise their true value while remaining exposed to their potential upside though Kalahari's significant holding in Extract. We are
advancing our copper projects, which have recently yielded positive results and we are evaluating a number of other opportunities aimed at expanding our
portfolio. These are exciting times for Kalahari and with a significant cash
position of approximately £5 million we believe we can continue to increase the value of the Company.'
Introduction
On 21 December 2006 the Company announced that it had entered into a heads of agreement with Extract, whereby the companies had conditionally agreed to consolidate their respective interests in their common uranium projects in Namibia.
On 8 February 2007 the Company entered into a conditional share purchase
agreement with Extract (the 'SPA') pursuant to which it has been conditionally
agreed that Kalahari Uranium, a wholly owned subsidiary of the Company, will
sell to Extract its 49 per cent. interest in Swakop in consideration for the
issue of 667 million new fully paid ordinary shares in Extract.
The SPA is conditional upon a number of conditions including completion of an
asset sale agreement whereby, prior to completion of the SPA, Kalahari's
interest in its uranium projects comprising exclusive prospecting licence 3138
('EPL 3138') and the nuclear fuel rights in exclusive prospecting licence 3139
('EPL 3139') will be transferred by Kalahari's wholly owned subsidiary, West
Africa Exploration (Namibia) (Pty) Limited ('WAGE'), to Swakop (the 'Namibian
Asset Transfer Agreement').
It is intended that prior to completion of the Disposal, Extract shall seek
shareholder approval for a 1:10 share consolidation of its issued share capital.
Accordingly, subject to the passing of the appropriate resolution by the
shareholders of Extract, the number of shares issued to Kalahari Uranium shall
be 66.7 million ordinary shares.
Conditions precedent to the Disposal include:
1. Kalahari and Extract obtaining all requisite regulatory approvals, licence
transfers and shareholder approvals;
2. Extract completing a capital raising of a minimum of A$10 million, which
would be utilised to accelerate exploration and drilling on the uranium
projects; and
3. completion of the Namibian Asset Sale Transfer Agreement.
Pursuant to the terms of the SPA, Kalahari Uranium also has the right, subject
to Extract's constitution and applicable law, to nominate an independent
director to the Extract board.
Under the AIM Rules the Disposal will constitute a fundamental change of
business and consequently requires the prior approval of shareholders of the
Company ('Shareholders') at an EGM, to be held on 27 February 2007.
Peter McIntyre, a director of Kalahari is also a director of Extract and the
Disposal is therefore a related party transaction (as defined) under the AIM
Rules. After careful consideration, Mark Hohnen and Glyn Tonge, the independent directors of Kalahari ('the Independent Directors'), having consulted with Corporate Synergy, believe that the terms of the Disposal are fair and reasonable as far as the Shareholders are concerned and have concluded that the Disposal is in the best interests of the Company and Shareholders.
Background to and reasons for the disposal:
In May 2005 Extract's wholly owned subsidiary Extract Resources (Namibia) Pty Limited ('Extract Namibia') and WAGE entered into an unincorporated joint
venture pursuant to which the parties agreed to exploit the mineral rights
derived from EPL 3138 (the 'Husab Project') in Namibia. The northern boundary of this licence is only 5 kilometres from the Rossing Uranium Mine, which is one of the world's largest uranium producers, having been in operation for over 30 years.
Airborne radiometrics over the Husab Project lead to ground based radiometrics, which in-turn has confirmed outcropping uranium anomalies over various areas. Diamond-drilling commenced on the Ida Dome target in April 2006, with positive results. The evaluation of Ida will continue throughout 2007, and drill testing will also commence on two other targets known as Hildenhof and Rossing South.
In December 2006 it was agreed that, subject to the approval of the Namibian
government mining authorities, Extract Namibia and WAGE would transfer their
rights in the unincorporated joint venture to Swakop, a Namibian company
incorporated for the purpose of holding the uranium assets. Completion of the
transfer pursuant to the terms of the Namibian Asset Sale Agreement will occur on receipt of the relevant approvals.
Following the Disposal, which remains conditional upon Extract's proposed
capital raising of not less than A$10 million, Extract has indicated that it
intends to position itself as a wholly focused uranium company and should have sufficient funds to continue drilling at the Husab Project with a view to
commence resource definition followed by a pre-feasibility study.
The principal reason for the Disposal is that the Directors believe that a
single asset uranium company is more likely to focus investors attention and
more properly reflect the underlying value of the assets, leaving Kalahari to
concentrate on its copper and other base metal assets.
Extract has identified the acceleration of work on the Husab Project as a
priority, especially in light of the progress made on the project in 2006.
Subject to Extract completing the capital raising referred to above, the
exploration and drilling programmes will be accelerated on the uranium projects. The directors of Extract and the Kalahari board believe that the fund raising will support the consolidation strategy and enable the Husab Project to be brought to resource definition and feasibility more quickly than if the Husab Project remains as a joint venture. It is understood that the ultimate objective of Extract's strategy is to bring the Husab Project to development whilst there continues to be a worldwide strong demand for uranium.
The Independent Directors believe that the Disposal will increase the visibility
of the uranium licences at the Husab Project and as a result increase the value of the Husab Project, which the Independent Directors believe is not currently reflected in Kalahari's share price. Kalahari will remain active in the
development programme with an additional representative on the board of Extract and will also be able to benefit from any additional projects that the Extract management bring to Extract.
On completion of the Disposal and assuming a A$10 million capital raising at
Extract's closing share price on ASX at A$0.092 on 7 February 2007, being the
last practicable date prior to publication of the circular sent to Shareholders,
Kalahari Uranium will hold approximately 38.3 per cent. of Extract's issued
capital. However, there can be no guarantee that Extract will not raise funds in excess of A$10 million and/or do so at a price below the current mid market
price, either of which would reduce Kalahari Uranium's interest in Extract.
Extract's shares have traded in a range over the past 3 months of A$0.081 to
A$0.13. At a price of A$0.092 per share, Kalahari Uranium's interest in Extract
would be worth approximately A$61.36 million (£24.25 million).