The Extract Complex

Wednesday, Jun 24 2009 by

This thread relates to companies, news etc that surrounds ASX listed uranium explorer Extract Resources (ASX:EXT) - Extract's latest investor presentation can be found here: . The attractions of Extract are:

a) It has consistently underpromised and overdelivered

b) It has made one of the most significant uranium discoveries in decades, in politically stable & mining friendly Namibia. [It now has Namibian govt linked directors on its Board]. Once fully scoped its undeveloped resources are likely to be at least 550Mlb of U3O8, according to Kalahari's chairman. 292Mlb of JORC resources are currently declared, with exceptional grades for the ore type (439ppm average). An independent estimate, based on drilling results released up to 18Feb2010, suggests that a total of at least 434Mlb  should be identified in the next JORC estimate. Recent trade sales indicate a value of US$6/lb is conservative for undeveloped resources - suggesting US$3bn as a conservative valuation.

c) It has attracted the interest of Rio Tinto, who have substantial shareholdings in Extract and Kalahari. If you study the 2007 and 2008 "stakeholder reports" for Rössing Uranium, you will see that the existing Rössing mine is in need to new ore sources: and 

d) The initial scoping study for developing a mine has indicated a target production rate of ~15Mlb U3O8 pa. This rivals production from the world's largest current U mine at McArthur River, Canada (which has reserves of 333Mlb by comparison to Rossing South's resources). Indicative cost figures will also place Rossing South amongst the world's lowest cost producers.








NB: The vast majority of U3O8 is sold on long term contracts and the spot market is small & illiquid.


Long Term Contract U3O8 Price


Linked Companies

All the following companies have significant investments in Extract (either directly or via investments in Kalahari, which owns 40% of Extract), hence understanding Extract and goings on surrounding it is rather important, if you have a direct interest or an interest in any of these companies:

Kalahari Minerals (AIM:KAH)

Polo Resources Ltd (AIM:PRL)

Emerging Metals (AIM:EML)

Niger Uranium Ltd (AIM:URU)

NWT Uranium (TSX-V:NWT) (33.8% shareholder of Niger Uranium)

AfNat Resources (AIM:AFNR) (11.7% shareholder of Niger Uranium)

Regent Pacific (HK:0575)

Brazilian Gold Corporation (TSX-V:BGC)


All of these companies have connections with the directors of Uramin, which was sold to Areva for US$2.5bn in 2007. Of particular note is the heavy involvement of Stephen Dattels (see and James Mellon (see See this thread: to keep up-to-date on SD's activities (and for further background).

*Ambrian is confident that the resource will exceed 560Mlb. See$/News.aspx?id=119


Forthcoming Events

I am now expecting the following newsflow over the next few weeks and months:


Links & Further Reading

Paydirt article on Extract's recent history:

Useful Wikipedia articles (these are excellent IMO):

Uranium supply & demand thread:

Illustration of Rössing South resouce drilling and results:

A website that dynamically calculates the discounts of KAH, URU and EML to the value of their tangible assets:


Recent Presentations by Extract & Related Companies

February 2010 Mining Indaba:

March 2010 Paydirt Uranium conference, Adelaide:

Kalahari update, February 2010:

Audio Interview with Kalahari's Mark Hohnen:


DISCLOSURE: I have shareholdings in Extract, EML and Polo. Together (even after topslicing) these consititute a significant part of my overall portfolio.

Filed Under: Asx, Uranium,


The author may hold shares in this company, all opinions are his own and you should check any statements that appear factual and not rely on them before making an investment decision. The author is NOT a qualified analyst nor authorised to give investment advice. Whilst the author is a director of ShareSoc, all views expressed are entirely his own and not necessarily those of ShareSoc.

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URU Metals Limited is engaged in exploration and development of mineral properties in South Africa and Sweden. The Company's segments include Exploration and Corporate office. The Exploration segments include obtaining licenses and exploring these license areas. The Company's projects include Zebediela Nickel Project, The Narke Oil-Uranium Project and Nueltin Lake Gold-Uranium Project. The Zebediela Nickel Project is located in the Limpopo Province of South Africa close to the platinum mining town of Mokopane. The Narke Oil-Uranium Project is located approximately 150 kilometers west-south-west of Stockholm. The exploration licenses cover approximately 7,087 hectares of land overlying prospective Alum Shale outcrops. The Nueltin Lake Gold-Uranium Project is located in the Kivalliq Region of the Territory of Nunavut, Canada. The Nueltin Project consists of 34 mineral claims and a mineral lease covering a combined area of approximately 27,279 hectares. more »

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433 Posts on this Thread show/hide all

marben100 11th Aug '10 394 of 433

JORC resource upgrade out:

Indicated resources for zones 1 & 2: 257Mlb @ 480ppm
+Inferred resources for zone 1,2,3 & 4: 110.3Mlb @ 400ppm

=367Mlb total for Rossing South (+ ~25Mlb @ Ida Dome)

...Mr Leslie also added: "The immediate priority remains completing the Definitive Feasibility Study on Zones 1 and 2 to bring these deposits into production within the shortest possible tome frame. Seveteen drill rigs remain on site with the current focus on completing the drilling required to define Measured resources within the Zones 1 and 2 starter pits.

"Once the resource update has been optimised additional drilling will be planned, aimed at converting additional Inferred Resource material to Indicated status amd defining additional resources down plunge of high grade domains. An updated resource is expected within Q1 2011.

"Significant exploration potential remains to be tested throughout the Husab Uranium project, with 7 of the 15 km Rossing South trend yet to be drilled. Although Extract's priority remains resource definition and project development, exploration of this large mineralised system is expected to continue for some time."

Easily justifies a 15Mlb p.a. operation IMO - which is the key to NPV determination & financial negotiations. Also good to see this released in the middle of Q3, not at the end. Let's hope the DFS, due in Q4, is done in an equally timely fashion.

Audio interview & presentation by Jonathan Leslie on:



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marben100 7th Sep '10 395 of 433

A comprehensive AV presentation by Jonathan Leslie, given at the current Australian "Africa Downunder" conference has been made available today, here:

Nothing dramatically new but JL confirms that the current CAPEX estimate is for plant construction only and does not include infrastructure or mining costs (CAPEX for these is assumed to be met by third parties and included in the OPEX).


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marben100 15th Sep '10 396 of 433

Added a few Kalahari  @ 157p today...

The spot U price is rising:

Buyers have shown a willingness to pay higher prices, but sellers are limited and current supply for 2010 delivery is relatively thin. As a result, TradeTech’s Uranium Spot Price Indicator is $48.00 per pound U3O8, an increase of $1.25 from last week’s value.

EXT's SP is also rising from a recent low, after it appears that a fund sold out  (see for further details - sulla's comment has been indepedently verified to me) . The DFS approaches, together with the mining licence application. IMO these will need to be accompanied by some clarity on funding for mine development - at which point I am confident that Extract & Kalahari will combine, eliminating Kalahari's 10% discount to NAV.

Extract's annual report was published today:



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zangdook 30th Sep '10 397 of 433

I'm thinking of taking advantage of the current KAH shareprice weakness to swap my shareholding for spread bets, with a view to repurchasing in an ISA if in due course KAH and EXT merge and take a main market listing.

Does anyone have an idea how long it might take this to happen? IG give a choice of Dec '10, Mar '11 and June '11, with steadily worsening spreads. I'm inclined to go for March. Is that too optimistic?

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marben100 1st Oct '10 398 of 433

In reply to zangdook, post #397

At the AGM, Mark Hohnen indicated in a conversation that early 2011 was on the cards... but, as with all such statements, there are no guarantees.

However, I do find this comment in today's interim results interesting:

...With this in mind, we will continue to utilise our significant 41.12% stake in Extract to ensure that all stakeholders work together to advance the Project and crystallise the value of a world class asset...

"crystallise the value" is an interesting choice of phrase...



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xigris 1st Oct '10 399 of 433

Worth pointing out that IMO Kalahari is currently trading at a 15% discount to NAV:

Extract holding: £1.66 per KAH

North River Resources: £0.04 per KAH

Cash (£23.67m - from interims): £0.10 per KAH

Total NAV £1.80

FWIW, I make Extract's NPV A$9 (ish) based on the current U3O8 spot price and not using the long term U price (for caution's sake). Assumptions: US$1b borrowings (30:70 equity/borrowing split to fund mine development, US$1.3b estimated to fund mine + water, power, etc), 80% working ownership of Husab (BEE involvement - assuming no financial contribution), commercial mining commencing in last Q2013, and taking 30 months to ramp up to full production.

Waiting for the DFS and trying to ignore the daily fluctuations. Ho hum, back to the day job.


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marben100 1st Oct '10 400 of 433

In reply to xigris, post #399

Good work Chris, esp on NPV - and I think your assumption re U pricing is probably overly conservative. However, a) what discount rate have you assumed?; b) have you taken Namibian profits tax into account? I believe this is likely to be 37.5% for a U producer - but there may be tax losses from work to date to bring forward against early production.

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xigris 2nd Oct '10 401 of 433

Hi Mark,

Thanks. Sorry for the delay in answering your questions (day job intervenes):

  • My reason for using the spot price is that Cameco is achieving an average price close to the spot price (link to Cameco second quarter results)
  • I'm using a discount rate of 12%
  • Earnings in USD. Exchange rate 1.1:1 ASD:USD (currently closer to 1:1)
  • I assume that the tax losses are used during the time to full production, with taxation at 37.5% thereafter (I agree with your interpretation of Namibia's tax regimen)

I think it likely that Extract will achieve a higher U price, and I also think that the BEE process will result in significant funding of the mine development. But I am deliberately being pessimistic to minimise the downside risk of my model. I hope that there is a takeover in the short term for a healthy premium. But, if Extract goes onto mine Husab, I suspect I will never sell a single share of my current position and will enjoy the dividend income!

Best wishes,


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marben100 2nd Oct '10 402 of 433

Thanks Chris,

...then I agree that your A$9/share figure is highly conservative. I don't see that the BEE process will directly bring in funding. However, it is possible that a consortium, including Epangelo, will take a stake in the project in exchange for funding it.

The 12% discount rate is very high, considering a) the current low interest rate environment; b) relatively low technical risk in the project. I note how ee complains that analysts are using unrealistically high 10% discount rates when valuing oil assets! Though, admittedly, I don't entirely agree with him, I do feel that 10% is a sufficiently conservative figure for this project.



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xigris 2nd Oct '10 403 of 433

Hi Mark,

I think its very likely the BEE process will involve Epangelo buying a stake in Swakop Uranium. In many ways, I think a good outcome would be Extract selling 20% of Swakop to Epangelo for a reasonable sum (~US$500 - optimistic I know) and the rest of the mine financed by debt.

I agree that using a discount rate of 12% is high, but as you say that's what the analysts are using. The instos are crucial here (like in Dana) and if they and their analysts are going to use a discount rate of 12%, then so will I (at least for the bear case).

For the bull case, I know you have read it, but for others can I suggest Cameco's Annual Information Form. At page 54 (confusingly, its page 55 on the PDF), it says Camecos share of total reserves are 478m lbs U3O8. I can see that potentially Zones 1 - 4 of Husab might equal this. Plus the elephant in the room is Zone 5. Personally I think that, unless its taken over, Extract will rival or surpass Cameco within the decade. In 2007 Cameco was about $50 per share (about US$20b). If Extract equals that performance, that gives a potentially 20fold increase on where we are now (assuming minimal dilution). And all that for a boring, old fashioned mine, that doesn't have to use any fancy new tech...

Well worth holding for IMO



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marben100 2nd Oct '10 404 of 433

Hi Chris,

Epangelo's problem is that it doesn't have any money. ;0) ...yet it wants to acquire a stake in the Husab project, without acting in a manner that would be seen by international observers as appropriating assets.

The solution? ...My thinking is that it could become a member of a consortium that finances the development of the Husab project. In exchange for gaining government favour, the other consortium members would give Epangelo a free carry. I believe that would work for all concerned.

There are various ways that the financing could be arranged, right from an outright T/O of Swakop or Extract to the provision of a substantial debt-style facility, in exchange for offtake agreements and a modest % of the project. On reflection, it is not surprising that reaching a deal is slow process, there are so many possible permutations. Results of the DFS, however, will form the basis for negotiation, though I'd expect negotiations to be well advanced before the DFS is in the public domain.

By-the-by the appropriate discount rate (or WACC) will be one of the key negotiating issues, but I'd expect the sort of WACC figure being discussed to be more like 8%, in the current climate. In terms of short-term share price movements, yes, analyst NPVs & price targets should be around the levels you indicate. However, that should all change once a deal is done - and it becomes clearer what value industry partners put on the project. Your calculations show just how cheap Extract and Kalahari are at the current level, using even very conservative estimates.

No criticism whatsoever of your methodology intended.

To support your view that Extract could rival Cameco (current net production ~20Mlb p.a.), it is worth noting this from Kalahari's interims:

All these results, and a further 6km of the entire 15km Rössing South Anticline yet to be drill tested, provide further credence for the commissioning of multiple mining operations across Husab.

The 15Mlb p.a. currently scoped is based purely on zones 1 and 2. Zones 3, 4, 5 etc could lift production well beyond that, ultimately, though that won't be evident from the DFS.



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xigris 2nd Oct '10 405 of 433

Thanks for your kind words Mark - much appreciated.

I agree, what happens with Epangelo is v important, and key to the government expediting the Mining Licence.

Nice problem to have though. Keeping everything else equal, with a discount rate of 8%, then I make the current NPV A$16.7

Depending on who's out there and interested, IMO a takeover at A$20 is not unreasonable for such a strategic deposit.

Conversely, I'll look for A$40+ in 5 / 6 years and a dividend of A$2



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marben100 14th Oct '10 406 of 433

Lots of new info out today:

Quarterly Cashflow Report

Quarterly Activities Report

Swakop Uranium September newsletter (Swakop U is Extract's Namibian operating subsidiary)


  • Looks like we've got enough cash for another 6-9 months. Funding for mine development should be finalised in that timeframe.
  • On track for DFS and mining licence application this quarter (those will be major events, IMO)
  • New head of marketing and business development manager appointed. Seems like an appropriate management team is being put in place, and actions are being taken, for a serious second tier miner, as opposed to a junior.

This is getting exciting now, as we get close to a crticial point in Extract's evolution!




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marben100 14th Oct '10 407 of 433

Oh... and another thing:

Production loss means ERA will buy uranium to cover contracts

Barcelona (Platts)--13Oct2010/1144 am EDT/1544 GMT


Uranium miner Energy Resources of Australia said Wednesday it would have to buy uranium to cover contractual commitments after disappointing production from its Ranger mine in Australia.

Lower ore grades at the mine have resulted in lower than expected production, leading ERA to revise its 2010 production estimates downward to 3,900 mt of uranium, from earlier estimates of between 4,300 and 4,700 mt.

 "Additional supply requirements necessary to meet 2010 sales commitments, anticipated to be around 5,000 mt, will be mostly covered by purchases," the company said.

Profits will be hit, ERA warned, since "the small price margin associated with the sale of the purchased material is more than offset by the on-going costs of operation."

ERA is 68% owned by Rio Tinto.Uranium oxide production by ERA for the 2010 third-quarter was 911 mt, 10% higher than the previous quarter and 35% lower than the corresponding period in 2009.


Combined with the timeline of events I've outlined in my last post, surely this must ramp up the pressure on Rio to act, to secure its future in the U industry? Once in full production in 2015, Extract should produce 6,820 mt p.a.with a mine life of 20 years++ (see Vission newsletter linked above).


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stevend 29th Oct '10 408 of 433

Introductory write-up on Kalahari Minerals and Extract Resources, at:

Book: Guide to Dividend Investing
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xigris 30th Oct '10 409 of 433

Extract Resources (EXT) blips loudly on Criterion's radar. Extract hopes to develop Rossing South in Namibia, the world's fifth biggest uranium deposit. "We have estimated the project will reach first production by 2015 at the rate of 14.5 million pounds a year, with capital requirements of $1bn," broker Patersons says.

Also, not strictly about Extract, but worth a read (just for the rant) is: 

El Oro Chairman's statement and prelims


Best, Xig

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StrollingMolby 7th Mar '11 410 of 433

The beginning of the end game for Extract Resources?

Kalahari Minerals PLC

Statement re Possible Offer

The Board of the Company notes the recent rise in the Company's share price.

On 21 February 2011 the Company announced it was holding discussions with Extract Resources Ltd (`Extract'), in which Kalahari holds an approximate 43% interest, to explore various different options that might simplify the Extract/Kalahari shareholding structure to facilitate a combination of Extract's Husab Uranium Project with the neighbouring Rössing Uranium Mine owned by Rio Tinto plc. These discussions remain ongoing and there is no certainty that the parties will reach any agreement.

The Company further confirms that it is in talks with a third party, which may or may not lead to an offer being made for the entire issued share capital of the Company. Discussions are continuing and a further announcement will be made when appropriate.


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StrollingMolby 7th Mar '11 411 of 433

Offeror announced as China Guangdong Nuclear Power Corp ("CGNPC") with a recommended offer of 290p per Kalahari Minerals (LON:KAH) share, which strikes me as a rather measly premium.  Irrevocable undertakings of Directors to sell to CGNPC can be revoked with an offer 5% higher i.e. 304.5p+.

So the Chinese are looking to gain control of Extract and the Husab mine - let's see if a counteroffer from Rio Tinto (LON:RIO) or another third party is flushed out in the days ahead... 

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marben100 7th Mar '11 412 of 433

In reply to StrollingMolby, post #411

I can't see Rio, Areva or ARMZ idly standing by whilst China walks off with the prize...

If Rio don't get their deal, they are effectively out of the U business. A business which Tom Albanese has said is attractive to them. Both of Rio's current main U mines, Rossing and Ranger, are approaching end-of-economic-life.

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marben100 8th Mar '11 413 of 433

H/T to harlee7 on another site for finding this juicy tidbit in that esteemed financial organ, The Sun:

KALAHARI MINERALS jumped 24.75p to 285p on news of an approach. Word is rival RIO TINTO, down 100p at 4209.75p, has given Kalahari the once-over and may be ready to offer 400p a share. That would value the company at almost £1billion.




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