Reuters reported that Rio Tinto entered the battle for Hathor Exploration with CAD 578 million friendly takeover offers for the Canadian uranium explorer that tops Cameco Corporation's hostile bid.
The attraction of Hathor for both miners is its large exploration stage Roughrider project in the uranium rich Athabasca region of Saskatchewan in Western Canada. Both bidders see Hathor as a neat strategic fit. Roughrider is close to an existing mine and mill operated by Cameco in the Athabasca basin.
Anglo and Australian giant Rio Tinto said that the Hathor acquisition fits its strategy of investing in the primary uranium producing regions of the world. Canada produces some 20% of global uranium supply from the Athabasca region.
Hathor's board recommended that shareholders accept Rio Tinto's all cash offer of CAD 4.15 per share which is 11% higher than Cameco's cash bid of CAD 3.75. Hathor's shares jumped over 10% to CAD 4.47 on the Toronto Stock Exchange after Rio's bid was announced. By mid afternoon shares had steadied at CAD 4.39 still well above Rio's offer on speculation of a bidding war.
Mr Edward Sterck analyst of BMO Capital Markets said that "It just makes life a bit more difficult for Cameco. They've got to work out now if it is worth them raising their bid or not."
Mr Sterck said that to outbid Rio, Cameco would have to come back with an offer of around CAD 4.25 per share or about CAD 4.40 per share including the CAD 20 million break fee Hathor would owe Rio if a competing bid wins.
He said that while too high of a bid could dilute earnings, Cameco may view the deal as essential as it looks to boost its uranium output to 40 million pounds a year by 2018.
The Saskatoon, Saskatchewan based company expects to produce 21.9 million pounds of uranium this year. The Roughrider deposit which is located just 25 kilometers southeast of Cameco's Rabbit Lake mine and mill has the potential to produce at least 5 million pounds a year.
Cameco first floated its CAD 520 million hostile bid for Hathor in August, after initial talks on a friendly deal failed. The company said that it was reviewing Rio's offer and would update shareholders when appropriate.
(Sourced from Reuters)
