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« A Big Uranium Deposit, and a Big Debate on Mining It | Main | Fukushima Daiichi Manager Steps Down Due to Illness »
Monday
Nov282011

Cameco quits Hathor bidding war



TORONTO (miningweekly.com) – Cameco, the biggest uranium miner globally, said on Monday its backing out of a takeover battle for junior Hathor Exploration, declining to offer more than Rio Tinto’s November 17 C$654-million friendly bid.

Cameco CEO Tim Gitzel said the company could not validate a higher bid for the Vancouver-based junior, after Rio Tinto’s latest offer valued the company at around C$11.50/lb of uranium resource, making it one of the more expensive deals in the sector.

Hathor owns the Roughrider deposit in northern Saskatchewan, which would have offered Cameco operational synergies, but gives Rio Tinto a foothold in the region that produces around one-fifth of global uranium supplies.

“After careful consideration we cannot justify increasing the price beyond our current offer and accordingly, we will let our offer lapse,” Gitzel said in a statement.

He said the decision would not impact the company’s plan to double output to 40-million pounds by 2018.

“We will continue to explore other growth opportunities, but only where there is a clear benefit to our shareholders,’ Gitzel said.

Cameco first made a hostile move on TSX-listed Hathor on August 26, after it failed to reach an agreement over valuation with the target's board.

Since then, the junior's share price has consistently traded above the offer price of the latest bid, as the market anticipated a prolonged takeover struggle. The stock gave back 7% on the news Cameco was allowing its inferior bid to expire, closing at C$4.69 in Toronto – just below Rio Tinto's C$4.70 a share offer.

Cameco's offer expires on Tuesday, while Rio Tinto on Monday urged Hathor shareholders to tender into its bid, which last until close of business on Wednesday. The world's third-biggest mining company announced last week it received competition approval from Canada for the takeover.

Analysts had largley expected Cameco to return with a higher bid, as it could achieve significant cost savings at Hathor that Rio Tinto could not, given that it already owns the nearby Rabbit Lake mill that will run out of ore to process by the end of 2017 as matters stand. Roughrider, set to produce five-million pounds of yellowcake yearly, would have been a good candidate to fill this space.

There had been speculation that Cameco and Rio Tinto might team up to make a joint bid for Hathor – thereby avoiding a costly takeover battle, while addressing the Canadian policy that prevents a foreign company from majority owning uranium production in the country.

This has now morphed into talk that work together in other ways in the Athabasca Basin.

"It is still possible that some sort of joint venture may ultimately be agreed upon between Cameco and Rio Tinto," Dahlman Rose analysts Anthony Young and Anthony Rizzuto said in a note to clients.

Versant Partners analyst Rob Chang went further, to say the two company – each a giant in its own right – could even team up and offer to buy some of French nuclear utility Areva's assets in the area.

"Cameco could come in with Rio Tinto for joint bids for Areva and/or Denison’s assets and consolidate the entire camp together under a 51%/49% split," he said.

There had been speculation before Cameco announced it was dropping out of the Hathor race that the two bidders were trying to buy Areva assets to secure their respective positions, though this theory was shot down last week when an Areva spokesperson denied the company was a seller of its key McClean Lake operation, which was backed up by another person close to the situation.

With the dust from the battle now settling, one aspect perhaps stands stands out.

The bidding “war” was what a Harvey’s fast food chain commercial might call “very Canadian”. There were no public unpleasantries exchanged between the competing bidders, as is often the case, and Gitzel even at the start congratulated Hathor’s team for doing an “exceptional job” at Roughrider.

Perhaps the only missing "Canadian" element, and thankfully so, was a nationalist factor that reared its head last year when Saskatchewan premier Brad Wall effectively shot down BHP Billiton’s hostile play for Potash Corp.

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