UPDATE: Rio Tinto Accepts Chinese Bid For Kalahari Shares

Rio Tinto PLC (RIO) has agreed to sell its roughly 11.1% stake in Kalahari Minerals PLC (KAH.LN) to China Guangdong Nuclear Power Corp., pushing the Chinese nuclear fuels supplier closer to grabbing control of one of the world's largest uranium deposits.

Rio's Rossing uranium unit in a statement said Tuesday it had accepted the offer for the almost 28.3 million shares it holds in London-listed Kalahari, whose main asset is a 42.5% stake in Australia's Extract Resources Ltd. (EXT.AU).

China Guangdong and partner China-Africa Development Fund on Jan. 20 said they had secured a 30.8% stake interest in Kalahari. With Rio's shares, that would put the Chinese companies' combined stakes at roughly 42%--still shy of the 50% threshold that would trigger a A$2.2 billion (US$2.3 billion) offer for Extract.

Central to the linked bids is Extract's Husab project in Namibia, which promises to become one the world's largest uranium mines and neighbors Rio's Rossing uranium mine. Mining and power companies are keen to secure uranium supplies to meet an expected rise in demand from China, India and other countries intending to build fleets of nuclear power stations.

Rio Tinto Rossing said it would make a decision on whether to sell its about 14.2% stake in Extract in due course and in light of any recommendation provided by the smaller company's board.

Rio a year ago confirmed it had discussed with Extract a possible combination of the Husab project with its Rossing mine.

Extract's board has said it would consider available alternatives to the likely offer from China Guangdong, and was continuing to negotiate with potential investors in Husab.

China Guangdong's and CAD Fund's offer for Kalahari of 243.55 pence in cash, valuing it at about GBP632 million (US$996 million), is due to close Thursday. It is conditional on the companies securing acceptances for more than 50% of Kalahari--a level at which a bid must be extended for Extract within four weeks, under Australian securities rules.

Rio first bought 24.8 million shares in Kalahari and 23.2 million in Extract in September 2008, according to a statement from Kalahari that month.

Rio last year trumped rival suitor Cameco Corp. (CCJ) with a C$654 million (US$652 million) bid for Canadian uranium prospector Hathor Exploration Ltd. (HAT.T), securing high-grade uranium projects in the Athabasca Basin of northern Saskatchewan, a region that provides about 20% of global uranium production.

The Anglo-Australian mining giant's majority-owned Energy Resource of Australia Ltd. (ERA.AU) Wednesday said it expects to raise production to between 3,000 and 3,700 metric tons of uranium oxide this year after it swung to a loss in 2011 after output was hampered by heavy rains.

-By Robb M. Stewart, Dow Jones Newswires; [phone]; [e-mail]