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TORONTO (Reuters) - The battle for a major undeveloped uranium deposit in Canada intensified on Thursday when Anglo-Australian mining giant Rio Tinto (RIO.AX) (RIO.L) raised its friendly takeover offer for Hathor Exploration HAT.TO to about C$654 million ($634 million).
The C$4.70 a share offer leapfrogged a revised hostile bid for Hathor from Canada's largest uranium producer, Cameco Corp (CCO.TO). And it may well prolong an already protracted battle to buy the Canadian uranium explorer as Rio and Cameco bet global demand for uranium will grow despite the pressure the nuclear power sector is under after the Fukushima disaster in Japan.
The sweetened offer tops a revised bid of C$4.50 a share that Cameco put forward earlier this week and it is more than 25 percent higher than Cameco's first offer of C$3.75 a share, made in late August.
Investors are gambling that the bidding isn't over yet. Shares of Hathor, which owns the Roughrider uranium project in Canada's uranium-rich province of Saskatchewan, closed 2.9 percent higher at C$5.01 on the Toronto Stock Exchange following Rio's new bid.
The market had already factored in a sweetened offer from Rio, given that the two companies have been in talks for more than a year. And Hathor's shares have consistently traded at a premium to Cameco's revised offer this week.
Several analysts, however, were less than certain that Cameco will be lured deeper into a bidding war to get Roughrider, which is located just 25 km (15 miles) southeast of Cameco's Rabbit Lake mine and mill, has the potential to produce at least 5 million pounds a year.
Salman Securities analyst Raymond Goldie noted Cameco's latest bid was already 20 percent richer than its first bid for Hathor and said the company would be hard pressed to justify a much higher price.
In a note to clients, Dundee Capital Markets analyst David Talbot said he believes Cameco may consider sweetening its bid, but given its history of being disciplined, the chances of this are diminished.
"While we believe there are strategic reasons for Cameco to up the ante, the economic reasons, at least based on what we know of the deposit, are decreasing," Talbot said.
Rio said Hathor's board of directors supports the revised offer and it has advised its shareholders to tender shares to it. Rio's lock-up agreements with Hathor directors and senior officers remain in effect, the company said.
The revised Rio bid is subject to regulatory approval and it remains open until November 30, unless extended or withdrawn.
Rio produces aluminum, diamonds, iron ore and titanium dioxide in Canada, while its uranium assets are in Australia and Namibia. The company has said that buying Hathor fits its strategy of investing in primary uranium producing regions around the world.
Canada produces some 20 percent of global uranium supply from Saskatchewan's Athabasca region. Cameco, which has plans to boost its annual uranium output to 40 million pounds by 2018 from 21.7 million pounds this year, first floated a C$520 million hostile bid for Hathor in August, after initial talks on a friendly deal failed.
Canada considers uranium a strategic resource, and limits a foreign entity's ability to buy fully developed assets. Before a uranium project can go into production, a domestic company must hold a controlling stake.
Reporting by Euan Rocha and Pav Jordan in Toronto, Aftab Ahmed in Bangalore; Editing by Viraj Nair, Peter Galloway and Rob Wilson