Cameco's bid could spark further demand By Peter Koven, Postmedia News August 30, 2011 4:30 AM Cameco Corp. has launched a hostile $520-million bid for junior miner Hathor Exploration Ltd. in an attempt to take control of one of the best uranium discoveries in Saskatchewan in years.
Saskatoon-based Cameco offered $3.75 a share in cash, which represents a premium of 40 per cent over Hathor's closing price on Thursday.
Cameco said it reached out to Hathor last week in an attempt to strike a friendly deal, but launched the hostile bid after it failed to make progress.
Cameco covets Hathor's Roughrider project, a highg rade uranium deposit that was discovered in 2008. Roughrider has indicated and inferred resources of nearly 58 million pounds of uranium.
"The market has recognized the exceptional job Hathor has done with the Roughrider deposit and the company's other properties," Cameco chief executive Tim Gitzel said in a statement.
"Given our financial strength, development expertise, existing infrastructure and experience in the Athabasca region, we feel we are in a unique position to build on that success and further advance the Roughrider deposit."
The uranium market has been in a funk since the Fukushima nuclear disaster in March, and Gitzel has hinted that he may try and take advantage of the slump and pursue acquisitions. This is his first big move as chief executive since taking over in July.
Rob Chang, an analyst with Versant Partners, said the offer could also spark interest in the much smaller Fission Energy Corp., a uranium producer with a market capitalization of $50.4-million. Fission's Waterbury Lake "J-Zone" discovery is directly adjacent to Hathor's Roughrider deposit.
"We believe this bid from Cameco is the positive catalyst many have been waiting for to reignite interest in the uranium space," Chang said in a note Friday.
Hathor's stock shot up 46 per cent by 10 a.m. Friday, with shares trading at $3.90, above the price offered in Cameco's bid, suggesting investors expect the negotiations are not over yet.
The offer is open for 60 days and requires a minimum tender of two-thirds of Hathor shares.
The bid implies an enterprise value of $8.70 US per pound of contained uranium, Edward Sterck, an analyst with BMO Capital Markets, said in a note Friday.
This is a bargain compared to Russian company ARMZ's purchase of Australian Mantra Resources Ltd. earlier this year (priced at $10 US per pound) but is richer than China Guangdong Nuclear Power Group's proposed offer for South African Kalahari Minerals PLC (priced at $6.30 US per pound), he said.
"Given the nature of the Athabasca deposits, 58 million pounds may not constitute critical mass for the Roughrider deposit, suggesting that Cameco sees upside potential to the current resource base and sees synergies with its existing operations."
The company has said the all-cash bid will be fully funded from existing funds.
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