Kalahari Minerals supported by Extract news read-through - Ambrian

Extract Resources’ (ASX, TSX, NSX: EXT) good news from the Rossing South uranium deposit in Namibia will have a long-term supportive effect on the shares of Kalahari Minerals LON:KAH), according to research boutique Ambrian.

London listed Kalahari has a 41 per cent stake in the Aussie uranium miner which earlier today unveiled a ten-fold increase in the size of the resource at Rossing South.

Repeating his 232p a share price target, analyst Brock Salier said: "This resource upgrade indicates to us that, led by the stunning Zone 1 orebody, Extract now holds all the cards as to its choice/ability to take Rossing South into production (we think in 2014), supported by debt, equity, off-take finance or JV.
"While there is potential to divest a section of the orebody to fund production, the sheer width and depth of Zone 1 makes it, in our view, almost too attractive to sell, although the size does give options to the company in terms of, for example, a JV with Rio to enable a quick move to production using the Rossing plant to the mutual benefit of both parties."

Salier said the immediate focus of Extract will now be carrying out a definitive feasibility study of the area.

That way it will be better placed to negotiate an a deal with a mining major, possibly Rio Tinto (LON:RIO, NYSE:RTP, ASX:RIO), which is already a major investor

in the group, he added.

"(The Kalahari shares) continue to trade at a discount to the investment in Extract (currently c. 12%), and we consider that this makes Kalahari the more attractive investment because, although the discount isn’t likely to disappear immediately, it will close on either take-out of Rossing South or the combination of the two companies, offering optionality. As with funding/JVs etc., we think the consolidation may well take place in 2011, but see the DFS as the immediate priority for Extract."