Bloomberg News

Rio Tinto Makes $567 Million Offer for Hathor to Trump Cameco

October 19, 2011

Oct. 20 (Bloomberg) -- Rio Tinto Group, the world’s fourth- largest uranium producer, agreed to pay C$578 million ($567 million) to acquire Canadian uranium explorer Hathor Exploration Ltd., trumping a hostile bid by Cameco Corp.

Shareholders of Vancouver-based Hathor would receive C$4.15 a share, Rio said yesterday in a statement. The bid represents a 55 percent premium to Hathor’s closing share price on Aug. 25, the day before Cameco made its C$3.75-a-share offer.

Hathor’s board unanimously recommended investors accept the latest bid, London-based Rio said. Hathor, which controls the undeveloped Roughrider uranium deposit in northern Saskatchewan, previously said investors should reject Cameco’s “predatory” offer.

Acquiring Hathor would boost Rio’s global uranium strategy and complement existing exploration assets in the Canadian province of Saskatchewan, Rio said in the statement. The company’s Australian uranium unit, Energy Resources of Australia Ltd., has been battling declining production of the raw material in nuclear fuel because of lower grades and bad weather at its Ranger mine in the Northern Territory.

If completed, the Hathor deal would be the most expensive uranium acquisition since the end of 2008 as measured by the dollar value divided by indicated and inferred pounds of uranium in the ground, according to data published in August by Raymond James Ltd. Rio is paying about $9.88 a pound for Hathor’s 57.9 million-pound lode, more than the $9.82 that Rosatom Corp.’s ARMZ Uranium Holding Co. paid for Mantra Resources Ltd. in June, according to Raymond James.

Roughrider Deposit

The size of the Roughrider deposit is expected to expand to about 78 million pounds based on pending exploration results, Bart Jaworski, a Vancouver-based analyst at Raymond James, said yesterday in a note to clients.

Hathor climbed 9.4 percent to C$4.41 at the close yesterday in Toronto, suggesting investors expect Cameco to increase its bid for the exploration company or are betting on the likelihood of another offer.

“People are speculating that Hathor will be in play for a while,” Ben-Ari Elias, a New York-based analyst at Sterne Agee & Leach Inc., said in a telephone interview yesterday. “You might see Cameco come in with another bid and Rio would be forced to counteract it.”

Hathor agreed to pay Rio a so-called breakup fee of C$20 million if Hathor accepts a superior offer from another company, Rio said in the statement.

Cameco Bid

Cameco is reviewing the takeover announcement and intends to update investors on its offer for Hathor, the company said yesterday in a statement.

Gord Struthers, a Saskatoon, Saskatchewan-based spokesman for Cameco, declined in a telephone interview to comment on the likelihood that the company would raise its offer.

“That’s one of the options we have to consider,” he said.

Cameco, the world’s largest uranium producer, announced its cash bid on Aug. 26 after talks with Hathor’s board failed to lead to an agreement. Cameco is also seeking control of Roughrider, estimated to have at least 17.2 million pounds of indicated uranium resources, it said in a statement. The company wants to almost double its annual uranium output to 40 million pounds by 2018, it said Oct. 6.

Regulatory Process

Under Canadian government policy, foreign companies can’t own a controlling stake in Canadian uranium mines in commercial production. The policy doesn’t apply to the proposed acquisition by Rio Tinto because Hathor doesn’t have any mines in production, Julie Di Mambro, press secretary to Natural Resources Minister Joe Oliver, said in an e-mail.

“Should the company bring one of their respective mine sites into production, at that time it would be reviewed,” Di Mambro said.

The takeover will be reviewed under Canada’s foreign- takeover legislation, known as the Investment Canada Act, she said. The law requires that foreign acquisitions of companies with assets worth more than C$312 million be reviewed to determine whether the transaction is a “net benefit” to the country.

Cameco declined 2.7 percent to C$20.52 at the close in Toronto. The shares have fallen 49 percent this year.

Rio fell 0.7 percent to 3,138 pence in London trading.

Areva SA and KazAtomProm are the second- and third-largest uranium producers, respectively, according to the World Nuclear Association.

--With assistance from Jesse Riseborough in London and Andrew Mayeda in Ottawa. Editors: Charles Siler, Tina Davis

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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