Rio Tinto ups the ante in bid for Canada's Hathor

Thu Nov 17, 2011 5:05pm EST
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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: Quote) (RIO.L: Quote) 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: Quote). 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.   Continued...