26 November 2008
Extract Resources' merger with Australian Stock Exchange-listed Kalahari Minerals has collapsed over concerns it would hand control to mining giant Rio Tinto.
The junior uranium explorer's key asset is the Roessing South project in Namibia, which borders Rio Tinto's long-life Rossing Mine.
In September this year, Rio snapped up a small interest in each company from distressed RAB Capital during a couple of hours of trading.
Rio now owns at least 14,9 per cent of Kalahari and 15,2 per cent of Perth-based Extract, and would have become the major shareholder if the merger had been completed as planned by mid-January 2008.
Kalahari announced on its website on Friday that its shareholders had refused to approve the deal after failing to secure a standstill agreement from Rio Tinto.
Following Rio's emergence on the register of Kalahari and Extract, concerns were raised by a number of Kalahari's larger shareholders about the potential for Rio to acquire effective control of the merged company without paying a premium for doing so," Kalahari said.
In addition, a number of those shareholders were concerned that Rio's material holding in the combined group would give it an unhealthy level of control and/or influence in relation to any future negotiations involving a possible transaction between Rio (or its related company Roessing Uranium) and the merged company," Kalahari said further.
Kalahari sought assurances from Rio regarding its intentions for the future control of the enlarged company, and tried to secure a commitment that Rio would not increase its shareholding in the merged company for a set time after the merger.
"Unfortunately, it is now apparent that a standstill commitment will not be able to be agreed with Rio on terms which would satisfy the concerns raised by Kalahari's shareholders," Kalahari said.
The collapse of the merger, initiated to reduce complexity and eliminate Kalahari's 39 per cent blocking stake in Extract, disappointed the Australian partner.
Managing director Peter McIntyre said Extract was proceeding with business as usual, but considering all options.
"The merger was the best option.
We're back to square one now but we've been making progress at a business level in Namibia.
From a business point of view, nothing is going to change," he said.
McIntyre said he had been aware that some Kalahari shareholders were concerned by Rio's stake in the merged company, but that Extract shareholders had not communicated similar concerns to him.
"I said from the outset that having Rio as a substantial shareholder is a pretty good endorsement of the company and the projects," he noted.
Nampa
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