UPDATE: Kalahari Making Move To Producer From Explorer

Kalahari Minerals PLC (KAH.LN) is preparing itself to become a minerals producer rather than an exploration firm, holding talks with potential funding partners, the company's chief executive said Monday.

"We'd look to begin production first with copper," Mark Hohnen, executive chairman, told Dow Jones Newswires on the sidelines of the African Mining Indaba in Cape Town.

"We're talking with possible joint venture partners," he said without providing names. "We'd like to bring in partners on the funding side."

Hohnen said the London-based company, which is listed on the Alternative Investment Market, is also talking with unspecified Indian investors regarding developing a mine for Kalahari's lead and zinc assets.

Kalahari currently is an exploration company with a portfolio of copper, base metals and uranium interests in Namibia. Its main investment is an almost 41% interest in Extract Resources Ltd. (EXT.AU), which owns the Husab uranium project northeast of Namibia's Walvis Bay.

Hohnen said Kalahari finds itself in a fortunate position against the backdrop of the turmoil in world economies and credit markets in that it has done a lot of drilling work on its assets and can now look to reduce capital expenditure while it makes its resource calculations.

"We don't see ourselves as an exploration company any more," he said, adding the exploration work had been done on its assets other than gold.

The company at the end of January said it had GBP5.5 million in cash to accelerate its base metals projects.

Hohnen said the company would have no funding shortfall to build a copper mine if Extract Resources is taken over, which is a possibility.

He said Rio Tinto PLC (RTP), which operates the Rossing uranium mine in Namibia, is a potential suitor for Extract, particularly if media and industry talk regarding a deal for it to sell stakes in assets for funding is accurate. According to recent reports, Aluminum Corp. of China Ltd., or Chinalco, is interested in a deal with Rio Tinto.

Chinese, Indian, Korean and other investors are looking to secure multi-year supplies of uranium as they develop nuclear power plants, Hohnen said.

Rio Tinto owns an almost 14% stake in Kalahari and a 15% (please double check) in Extract, whose Rossing South target is five kilometers south of the Rossing mine.

Hohnen said Extract is proceeding with a bankable feasibility study and could begin production by 2011, although output would begin sooner if the assets became part of Rio Tinto.

Extract's resource stands at 133.1 million pounds of U3O8, he said.

Company Web site: www.kalahari-minerals.com

-By Robb M. Stewart, Dow Jones Newswires; +27 11 783 7848; robb.stewart@dowjones.com

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