Resource Star Executes Low Cost Acquisition Of Remaining 80% Stake In Livingstonia

May 15, 2012 1:20 AM ET
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Resource Star (ASX: RSL) is set to increase its control over the Livingstonia Uranium Project in Malawi with the company to acquire the remaining 80% of the project.

Under a restructured agreement with joint venture partner Globe Metals & Mining (ASX: GBE), the two companies will effectively swap Resource Star's remaining 80% interest in the Machinga niobium-rare earth elements project for the 80% joint venture interest in Livingstonia that Resource Star has not yet earned.

The follows Resource Star's initial 20% earn-in on Livingstonia, which was achieved in mid-March.

Resource Star will still retain a 0.7% gross production royalty interest in Machinga, while Globe will retain a 1% gross production royalty in Livingstonia.

Importantly, there is no cash component for the transaction which provides for a very low cost acquisition relative to the earn-in cost.

Simon Heggen, Resource Star managing director, commented on the positive move:

"We believe that this restructure is in the best interest of our shareholders as it strengthens our focus on our key project in Livingstonia, where there is great potential for future growth.

"We are currently planning the next round of drilling at Livingstonia and our exploration manager has recently returned from Malawi, following meetings with contractors, suppliers and Malawian Government officials, in order to map out the program.

"Once this is finalised the company will outline these plans to shareholders."

Livingstonia - strategically located

Livingstonia is part of the prospective Karoo-equivalent sedimentary sequence that hosts a number of sandstone-hosted mineralised bodies through southern Africa, including Paladin Energy's (ASX: PDN) nearby Kayelekera Uranium Mine in Malawi and ARMZ's Mkuju River Project in neighbouring Tanzania.

The project hosts an Inferred Resource of 8.3 million tonnes at 325 parts per million for 6 million pounds of uranium oxide at the Chombe Prospect.

Late last year Resource Star was granted an extension to the northern boundary of the Livingstonia tenement, which increases the exploration potential of the project.

The northern boundary was found to be 300 metres further north than previously realised.

In addition, a further 100 metres of ground to the north of that boundary was able to be applied for and that has now been granted as an extension to the existing exploration licence.

The additional 400 metres to the north of the Inferred Resource is unexplored. The mineralisation identified to date at the Chombe Prospect extends up to the previously understood boundary, and trends in a north westerly direction into this area.

Drill holes along that boundary include Resource Star's 2010 intersection of 11.8 metres at 517 parts per million equivalent uranium oxide. This mineralisation remains completely open to the north.

Uranium demand

Uranium demand is set to increase driven by major nuclear expansion in China.

China has proposed or planned to build 197 new reactors, which will in turn see demand rise from 4.5 million pounds to 40 million pounds by 2020.

The nation has almost no domestic production and spent more than $2 billion to acquire uranium products in 2011.

Globally, nuclear expansion continues with 62 reactors under construction, 156 planned and 343 proposed.

Even post-Fukishima, China, India, South Korea and Russia still remain committed to nuclear power, with uranium demand poised for long term growth.

More than 80 million pounds per year of new production is required to meet 2020 demand and even more new production is required by 2030.

Proactive Investors is a market leader in the investment news space, providing ASX "Small and Mid-cap" company news, research reports, StockTube videos and One2One Investor Forums.

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