MINING giant Rio Tinto has agreed to buy Canadian uranium junior Hathor Exploration for C$578 (A$554.8 million) cash, trumping a hostile bid from Canada-based competitor Cameco.
The all-cash offer of C$4.15 per share represents an 11 per cent premium on Cameco’s unsolicited bid of C$3.75 and a premium of 55.4 per cent on Hathor’s closing share price before Cameco made its bid in late August.
Hathor’s directors have signed lock-up agreements with Rio and have agreed to tender all of their common shares, representing 4.6 per cent of shares.
In addition, the companies have entered into a support agreement under which Hathor would have to pay a break fee of $20 million to Rio if an unsolicited superior proposal emerged.
Hathor has projects in the uranium-rich Athabasca Basin in Saskatchewan, including the wholly-owned Roughrider deposit – which is thought to be one of the richest undeveloped uranium deposits in the world.
The basin currently provides 20 per cent of global uranium production. Hathor chief executive officer Michael Gunning said Rio’s superior offer providedfair value to Hathor shareholders. “The strategic context of the Rio offer underscores the ‘best of breed’ global stature of the Roughrider uranium deposit relative to its peers of undeveloped uranium deposits around the world,” Mr Gunning said.
On August 26, Cameco announced its intentions to proceed with a hostile all-cash takeover bid for Hathor but, after careful consideration, Hathor’s board recommended that shareholders reject the unsolicited offer. In a statement to shareholders, Hathor said the offer from Cameco was opportunistic as it leveraged the market capitalisation setback in the industry post-Fukushima, and was announced prior to the company’s planned release of the preliminary economic assessment [PEA] of the Roughrider uranium deposit.
The PEA, which was released on September 13, said the high-grade project had resources of around 57 million pounds of uranium oxide. It estimated the project would have a pre-tax net product value of C$1 billion based on a US$70/lb uranium price and 7 per cent discount rate.
According to a statement by Rio on October 19, the acquisition fit in with the company’s strategy to invest in the primary uranium-producing regions of the world to develop long-life, low-cost operations. Despite the current period of depressed
uranium prices, Rio chief executive Doug Ritchie said the medium and long-term outlook for the uranium market was positive, with uranium assuming a significant role in the world’s primary energy needs. “The acquisition will allow us to build
on the platform successfully laid out by Hathor, and we will continue to draw on their expertise and commitment going forward,”
Mr Ritchie said.
“Canada is a country crucial to our business and growth plans, and a location where Rio Tinto has a track record of delivering on major development projects to the benefit of the local community.”
At the time of the announcement, shares in Hathor, which was listed on the Toronto Stock Exchange in April, jumped 9 per cent to $4.40. Meanwhile, First Eagle Management announced that it had acquired a 5.7 per cent stake in Hathor since the Cameco bid was first announced.
Cameco is reviewing the announcement and will update shareholders when appropriate with respect to its offer.
By Kate Christou