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Rio's faith in uranium drives bid

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 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 $C4.70 ($A4.55) 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 analyst Hayden Bairstow said it was difficult to judge whether Rio was now 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 its continued support for the 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-based analysts who believe Cameco must strategically protect its dominant position in the Athabasca basin, where the Roughrider deposit is based.

Cameco produces about 16 per cent of the world's uranium and wants to double 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 Prime Minister Julia Gillard called for the ban on uranium sales to India to be overturned.

Ms Gillard promised to lobby her Labor Party colleagues to change policy, which opposes sales to India because India is not a signatory to the nuclear non-proliferation treaty.

Ms Gillard's stance is expected to ensure the policy change is delivered, despite persisting opposition from some Labor factions, including from some of her senior frontbenchers such as Infrastructure Minister Anthony Albanese.

BHP Billiton looms as the biggest potential winner from a law change to allow sales to India.


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