Take over in Uranium, bottom reached?News of major M&A activity signifies that some of the biggest players in the industry think the bottom is nigh
One of the world’s largest uranium producers – Canada’s Cameco (TSX: T.CCO) – has launched a C$520-million hostile takeover bid for Hathor Exploration (TSX: T.HAT) in order to get its hands on Hathor’s high-grade Roughrider deposit in Saskatchewan’s prolific Athabasca Basin.
The offer of C$3.75 a share represents a 40% premium to Hathor’s closing price of C$2.67 on Thursday August 25, and it sent the company’s share price more than 46% higher on Friday. Cameco made the offer after talks with Hathor’s board failed. Hathor has not responded publicly to the news. The bid implies an enterprise value of US$8.70 per pound of contained uranium.
The Roughrider deposit is an exciting, high-grade discovery that sits just 25 km northwest of Cameco’s Rabbit Lake mill. Since first hitting strong mineralization there in 2008, Hathor has delineated almost 58 million pounds of uranium at the site.
In announcing the offer, Cameco CEO Tim Gitzel noted the “exceptional job Hathor has done with the Roughrider deposit.” He also pointed out that Cameco’s financial strength, development expertise, and existing infrastructure and experience in the Athabasca region put his company in a unique position to turn the exploration project into a mine.
This is a move the Casey energy team has been awaiting for some time now. We first recommended Hathor to our subscribers in 2006, before the Roughrider discovery, when it was trading at C
.69. In 2008 and early 2009 we gradually told our subscribers to recoup their initial investments and hold on to the remaining shares, to maintain risk-free exposure to the remaining upside. Later in 2009, Hathor’s share price fell back down to our bid; we bought in again and then took profits for a second time in 2010. And we have repeatedly described the company as a prime takeover target – in our last Casey Energy Report (released one day before Cameco announced its offer) we told investors who didn’t own Hathor to pick up some shares of this “acquisition candidate.”
Cameco’s offer for Hathor might have another important ramification, aside from validating our prediction: It might convince investors that we’ve reached the uranium bottom and thereby help to kick-start a recovery. The uranium market has been in the dumps since the Fukushima disaster in March, which reignited global anxiety over the safety of nuclear energy and prompted some countries, notably Germany, to back away from nuclear power. Since the earthquake-tsunami combo slammed the Fukushima nuclear plant, the price of a pound of U3O8 has essentially slid from US$70 to its current hover just below US$50.