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(Reuters) - Cameco Corp (CCO.TO) agreed to buy Areva Resources Canada's entire 27.94 percent stake in the northern Saskatchewan-based Millennium project for C$150 million, to boost its assets in Athabasca basin, the world's highest-grade uranium district.
Buoyant demand and steady spot prices of the radioactive heavy metal have spurred deals in the sector in recent times.
On Thursday, Uranium Resources (URRE.O) said it would acquire private uranium explorer Neutron Energy, while Extract Resources EXT.AX, which owns one of the world's largest uranium mines, backed a takeover offer from China Guangdong Nuclear Power.
"We expect that M&A activity will continue, as junior companies with large prospective deposits fall into the hands of better-capitalized entities," Dahlman Rose's Anthony Young said in a note to clients.
Young said more M&As are likely in this space over the course of the year.
"We could see value in investors purchasing a basket of high quality junior uranium mining companies, with the likely outcome being that a few of these companies may be acquired," said Young, for who Cameco remains the top pick in the sector.
Cameco, Canada's largest uranium miner, has struggled with delays at its Cigar Lake project in Saskatchewan and with permitting issues at its U.S. assets.
Last year, the company had backed out of a bidding war with Rio Tinto (RIO.AX) for Hathor, which controls the advanced exploration-stage Roughrider project in the Athabasca region.
The Millennium project, a proposed uranium mine in the Athabasca basin, has indicated resources of 50.9 million pounds of uranium and inferred resources of 16.7 million pounds.
Cameco expects to produce 21.7 million pounds of uranium this year.
The outlook for nuclear power has improved and stock prices have moved higher, analyst Edward Sterck of BMO Capital Markets said in a note to clients.
Spot uranium has held steady around the current level of $52 a pound for the past six months.
Uranium prices had hit a low of $49 in August in the wake of the March earthquake and tsunami in Japan that devastated the Fukushima nuclear reactor complex.
Even if Japan's reactors stay offline following the Fukushima disaster, there seems to be some optimism about uranium prices.
According to World Nuclear Association data, 14 new units are scheduled to come online this year, including three in China and five in other Asian countries.
"Despite the impact of Fukushima, Cameco achieved solid earnings in 2011," said Sterck, who raised his price target on the Cameco stock to C$29 from C$26.
The agreement with Areva could give Cameco majority ownership of the Millennium project.
On Thursday, Areva's parent (AREVA.PA), the world's biggest nuclear reactor maker, reported a 2011 net loss of 2.4 billion euros due in part to cancelled orders in the wake of the Fukushima nuclear disaster.
Cameco, which already holds 41.96 percent, is the operator of the project -- one of the 12 mineral claims held by Cree Lake Extension Joint Venture.
Its partner JCU (Canada) Exploration Co owns 30.1 percent and has rights of refusal on transfers. If JCU does not exercise its rights, Cameco will acquire Areva's entire stake, which would take its ownership to 69.9 percent.
However, if JCU exercises its rights, Cameco will get only 16.27 percent, giving it 58.23 percent ownership. JCU will acquire 11.67 percent.
BMO's Sterck said the deal values the Millennium project at C$537 million.
The transaction is expected to close no later than June 6.
Shares of Saskatoon, Saskatchewan-based Cameco were down 69 Canadian cents at C$23.72 on Friday on the Toronto Stock Exchange.
Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Sriraj Kalluvila