Cameco stirs up interest in bombed out uranium sector
1:51 pm by Ian Lyall
The faint stirrings of interest in the uranium sector are starting to be detected in the wake of the Japanese earthquake and tsunami, which set the scene for the worst atomic disaster since Chernobyl.
The tragic event prompted a rethink of nuclear policy worldwide, with Germany at the vanguard. And sent the price of the fuel plummeting, bringing the valuations of the companies mining uranium down with it.
Against this backdrop the world's largest producer, Cameco Corp (TSE:CCO, NYSE:CCJ), is looking to conclude what seems to be a smart piece of business.
It has gone hostile with its US$530 million bid for Hathor Exploration (CVE:HAT), which owns the Roughrider deposit in Canada's Athabasca Basin.
Of course Hathor believes the approach is opportunistic as it significantly undervalues the business.
However, this may be a difficult point to argue given the severe mark-down of stocks in the sector as the uranium price has traded at depressed levels of around US$50 a pound. This is well off its high for the year of around US$68.
Analysts estimate that anything up to 60 per cent has been wiped from the value of shares in uranium miners since the disaster at Fukushima.
Cameco itself has lost 41 per cent of its value the past six months, Denison Mines (AMEX:DNN) is down 57 per cent and closer to home Uranium Resources (LON:URA) is off 33 per cent.
The Cameco offer does suggest that the gloom and doom may have been over-cooked.
Research by Royal Bank of Canada suggests the outlook for the uranium is far from dire and predicts the spot price will tick up to around US$80 a pound in 2015 from an average price of just over US$46 last year.
So perhaps we may see further consolidation if share prices in the sector remain rooted around their current levels.
One stock to have escaped relatively unscathed from the sector's meltdown has been Kalahari Minerals (LON:KAH), although it has fallen around 16 per cent in the last six months.
Kalahari has a major interest in the Husab Uranium Project in Namibia via its 42.8 per cent stake in Extract Resources (ASX:EXT, TSE:EXT). Rio Tinto's (LON:RIO) nearby Rossing uranium mine has produced more than 260 million pounds of uranium since 1976.
One thing probably keeping the Kalahari share price bubbling � it is up around 57 per cent in the past month � is the prospect of renewed bid interest.
In the spring, China Guangdong Nuclear Power lodged a 290 pence, or �756 million offer for the company, before revising it down to 270 pence in the wake of the horrendous events in Japan.
And while both sides were willing to deal, the Takeover Panel here in the UK wouldn't allow the price reduction.
The restrictions on CGNPC-URC re-bidding were lifted just under a month ago, though it has been all quiet on this front.
An announcement earlier this week revealed that around �10 million-worth of loan notes were converted into stock, suggesting professional investors have confidence in Kalahari and its long-term prospects.
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