The announcement sent Hathor’s shares more than 45 percent higher on Friday to close at C$3.88, though analysts said a bidding war for Hathor was unlikely.
That’s because Hathor’s main asset, the Roughrider uranium deposit in Saskatchewan, is located about 25 kilometers northwest of Cameco’s Rabbit Lake mill, which is currently operating at about half capacity.
That proximity makes Hathor an ideal target for Cameco, said Morningstar analyst Daniel Rohr, noting the addition of Roughrider would enhance operational efficiencies.
“It would make Roughrider more valuable in Cameco’s hand than in Hathor’s hand,” said Rohr.
Roughrider is still an exploration stage property, with production at least five to six years away.
Cameco, the world’s largest publicly traded uranium producer, operates mines in Canada, the United States and Kazakhstan. This year it expects to produce about 21.9 million pounds of uranium, used primarily to fuel nuclear reactors.
The Saskatoon, Saskatchewan-based company has targeted production of 40 million pounds a year by 2018, part of its “Double U” strategy that involves the development of Cigar Lake in Saskatchewan and Kintire in Australia.
“What we don’t want to do is just peak in 2018 and then start dropping off,” Cameco Chief Executive Tim Gitzel told Reuters. “So this would help to continue to feed and sustain our ‘Double U’ strategy over a much longer time.”
BMO Capital Markets analyst Edward Sterck said the pricing on the all-cash offer is fair, considering Roughrider’s current resource size and stage of development.
With a total indicated and inferred resource of 58 million pounds, the project is likely too small to be developed as a standalone operation, he said. By comparison, Cameco’s nearby Cigar Lake project has proven and probable reserves of 209.3 million pounds.
Sterck said a bidding war is unlikely to break out even though Hathor’s shares are trading above the offer price.
“The only people who’d be interested are people with assets in the area,” he said. “So you’re really only looking at Areva.”
French nuclear giant Areva has operations in Saskatchewan, including a mill at nearby McClean Lake.
With few potential suitors, and Cameco already offering a stiff premium, analysts said Hathor would have little room for negotiations on price.
“Cameco is very disciplined,” said Salman Partners analyst Raymond Goldie. “They will have tucked away somewhere what they think the true valuation of Hathor is, and Cameco is so disciplined they will not pay more.”
With plenty of cash still left in the coffers, buying Hathor would not preclude Cameco from further takeover deals.
