Rio Tinto outbids Cameco for Hathor

Rio Tinto (RIO-N, RIO-L, RIO-A) has swooped in with an all-cash, $578-million bid for uranium explorer Hathor Exploration (HAT-T) and its world-class Roughrider uranium project in Saskatchewan’s Athabasca Basin.

The friendly offer values Hathor at $4.15 a share, an 11% improvement over rival bidder Cameco‘s (CCO-T, CCJ-N) unsolicited offer of $3.75 per share in cash. 

Shares of Hathor jumped 9.2% on the news, rising 37¢ to $4.40 on Oct. 19 as 27.05 million shares traded hands, with shareholders anticipating a sweetened bid from Cameco.

Saskatoon-based Cameco, the world’s largest primary uranium producer, has argued its acquisition of the high-grade Roughrider orebody would result in attractive synergies because the deposit is  less than 30 km from the company’s underused Rabbit Lake mill.

Rio Tinto and Hathor nevertheless see the project’s potential as a stand-alone mine, something Cameco has vehemently argued against in recent months. 

Rio Tinto has a large enough enough uranium production profile to know what it is doing, however. It controls the second and third largest uranium mines in the world through its majority interests in the Ranger mine in Australia’s Northern Territory and the Rossing mine in Namibia’s Namib desert. Together, the two mines represent 16% of global supply. 

Rio Tinto also owns an interest in Australia’s large Jabiluka uranium deposit, though the project is in conflict with local aboriginal groups and does not look to be developed any time soon.

In its statement about the offer, Rio Tinto argued that the acquisition of Hathor would bolster the company’s strategy to invest in the primary uranium-producing regions of the world.

It also said it would complement its exploration program elsewhere in Saskatchewan. This would presumably include an agreement signed in September with Russian fertilizer giant JSC Acron, in which Rio Tinto agreed to jointly explore the vast mineral claims prospective for potash in the province held by Acron’s subsidiary, North Atlantic Potash. Financial terms of the deal were not revealed. (Rio Tinto previously held other potash claims in the area but sold them in 2008 to Brazilian miner Vale [VALE-N] to help pay down debt.)

Hathor’s board has unanimously recommended its shareholders accept the Rio Tinto offer, which represents a 55% premium to Hathor’s closing price prior to the initial offer from Cameco on Aug. 26. 

Hathor’s directors and officers have agreed to tender all 6.35 million of their common shares under the new bid, or 4.6% of Hathor’s outstanding shares on a fully diluted basis.

Cameco said it is reviewing the Rio Tinto bid will update shareholders on its own offer when appropriate.

Under the terms of the support agreement with Rio Tinto, any improved bids from Cameco or other parties will be subject to a $20-million break fee and a right by Rio Tinto to match the superior proposal.

Shares of Cameco closed down 98¢, or 4.6%, to $20.52 following the surprise offer. 

Shares of Rio Tinto on the New York Stock Exchange fell a similar 5.9%, or US$3.05, to close at US$47.89.