rio bets on uranium price in hathor battle

Rio Tinto bets on uranium price in Hathor battle

Peter Ker
November 19, 2011

RIO TINTO is banking on a significant increase in uranium prices, after the mining giant escalated the bidding war for small Canadian company Hathor Exploration.

Rio improved its offer for the uranium explorer to $C4.70 per share yesterday and analysts predict rival Cameco may counter again before the end of the month.

Just one week ago, Rio was offering $C4.15 for each Hathor share but was forced to improve its offer when Cameco offered $C4.50 on Monday.

Rio's latest offer values Hathor 76 per cent higher than the stock was fetching in August and the share price was soaring above $C5 on Toronto markets yesterday in expectation of continued bidding.

CLSA Asia-Pacific Markets analyst Hayden Bairstow said it was difficult to judge whether Rio was paying too much for Hathor, given the undeveloped nature of its flagship ''Roughrider'' uranium deposit.

''Maybe they are but it depends on your view of the uranium price. They are implying the uranium price recovers pretty substantially in the longer term from where it is today to be buying anything in uranium,'' he said.

Rio's faith in uranium recovering from this year's nuclear disaster in Japan has previously been demonstrated by their continued support for struggling Northern Territory miner ERA. Mr Bairstow said he would not be surprised to see Cameco respond with an improved offer - a view shared by Toronto analysts who believe Cameco must strategically protect its dominant position in the Athabasca Basin, where the Roughrider deposit is.

Cameco produces about 16 per cent of the world's uranium and wants to double the size of its production by 2018.

The bidding war for Hathor was one of several events to boost confidence in the embattled uranium sector over the past eight days.

The global uranium price rose by close to 7 per cent on November 11, lifting uranium share prices with it. Australian uranium stocks rose further on Tuesday, when the Prime Minister, Julia Gillard, called for the Labor Party's ban on uranium sales to India to be overturned.

BHP Billiton looms as the biggest potential winner from a law change to allow sales to India, given the company's plans to develop the world's biggest uranium mine at Olympic Dam in South Australia.

http://www.smh.com.au/business/rio-tinto-bets-on-uranium-price-in-hathor-battle-20111118-1nn6e.html