Cameco bows out of Hathor bidding, Rio triumphs

Cameco‘s (CCO-T, CCJ-N) hunt for Hathor Exploration (HAT-T) is over, leaving Rio Tinto (RIO-N, RIO-L, RIO-A) in the driver’s seat to acquire the junior and its Roughrider uranium deposit in Saskatchewan’s Athabasca basin.

“After careful consideration we cannot justify increasing the price beyond our current offer and accordingly, we will let our offer lapse,” Tim Gitzel, Cameco’s president and chief executive, said in a statement.

Hathor drew the attention of the two senior miners with Roughrider, which is considered one of the world’s best undeveloped uranium deposits.

Rio’s latest offer rang in at $654 million, or $4.70 a share – topping Cameco’s second and final bid of $4.50.

Rio Tinto has already received clearance from the Canadian Competition Bureau for its bid.

As for Cameco, the company emphasized that losing out on Hathor won’t affect its plan to double its annual uranium production to 40 million lbs. of uranium oxide by 2018.

With no third bid coming from Cameco,  the company’s conservative approach to takeovers appears to have won out over its desire to keep Rio Tinto out of the Athabasca basin.

With operations already in the area, Cameco likely would not have needed to build a mill for Roughrider, but Rio Tinto almost surely will. Those mill cost savings and other synergies available only to Cameco led many to believe that the company would up its bid, but its final valuation of Hathor may suggest that Rio is overpaying.

If Rio can complete the merger, and that now looks likely, the company will  seriously challenge Cameco’s stated “unique position in the Athabasca.”

In a note to investors released before Cameco’s withdrawal, Dundee Securities analyst David Talbot warned what the stakes were for Cameco if it lost its bid.

“Rio Tinto would also likely prey upon Cameco [and others in the basin] for its highly qualified personnel – not only geologists, engineers and miners, but also accountants, lawyers and other management positions,” Talbot wrote. “We believe Cameco has more to lose than just Hathor, should it walk away.”

On Nov. 28 – the day the news of Cameco’s withdrawal was announced – Cameco shares were up 5%, or 85¢, to $18.22. Hathor shares were off 7%, or 36¢, to $4.69, and in New York Rio’s shares were up 6%, or $2.62, to $48.96 on 3.5 million shares traded.