Rio Tinto bets on uranium price in Hathor battle

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.

By InvestSMART · 19 Nov 2011

By InvestSMART ·
19 Nov 2011

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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.

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Frequently Asked Questions about this Article…

What is Rio Tinto’s latest bid for Hathor Exploration and why does it matter for investors?

Rio Tinto recently improved its takeover offer for Hathor Exploration to C$4.70 per share (up from C$4.15 a week earlier). For investors, the higher bid highlights growing corporate confidence in uranium assets and signals possible upward pressure on uranium-related stocks as companies compete for scarce deposits.

How has Cameco been involved in the Hathor bidding war and could it make a counteroffer?

Cameco previously offered C$4.50 per Hathor share, which forced Rio to raise its bid. Analysts cited in the article expect Cameco may respond again to protect its strategic position in the Athabasca Basin, so a further counteroffer is possible before the bidding ends.

Why are analysts uncertain about whether Rio Tinto is overpaying for Hathor?

CLSA analyst Hayden Bairstow said it’s hard to judge if Rio is paying too much because Hathor’s flagship Roughrider deposit is still undeveloped. Whether the price is justified depends largely on investors’ and companies’ expectations for a long-term recovery in the uranium price.

What is the Roughrider deposit and why is it important in this deal?

Roughrider is Hathor Exploration’s flagship uranium deposit located in the Athabasca Basin. Its undeveloped but high-potential status is a key reason major miners like Rio and Cameco are competing for Hathor, since control of Athabasca deposits can influence future uranium supply.

How have uranium prices and stocks reacted amid the Hathor takeover battle?

The global uranium price rose by close to 7% on November 11, which lifted uranium share prices. The Hathor bidding drama contributed to renewed confidence in the uranium sector, with Hathor’s own shares trading above C$5 on Toronto markets amid expectations of continued bids.

What role could Australian policy changes on uranium sales to India play for mining companies?

Australian Prime Minister Julia Gillard called for overturning the Labor Party’s ban on uranium sales to India. The article notes that a policy change could particularly benefit big players like BHP Billiton, which plans to develop the Olympic Dam uranium project—potentially making it a major winner from any loosening of export rules.

What does Cameco’s production strategy mean for the uranium market and investors?

Cameco currently produces about 16% of the world’s uranium and has said it wants to double production by 2018. If achieved, that expansion could affect global uranium supply dynamics and industry competition—factors everyday investors should watch when assessing uranium-focused stocks.

As an everyday investor, what key takeaways from the Hathor bidding war should I keep in mind?

The Hathor battle illustrates how corporate bids can signal expectations of higher future uranium prices, how strategic control of deposits matters (especially in the Athabasca Basin), and how policy shifts—like possible changes to Australia’s India sale ban—can influence uranium stock outlooks. Keep in mind the risks: deposits like Roughrider are undeveloped, and outcomes depend on price recovery and regulatory factors mentioned in the article.