JV buys Kintyre from Rio Tinto

Cameco (CCO-T, CCJ-N) is teaming up with a subsidiary of Mitsubishi Corp. (MSBHY-O) to buy Rio Tinto’s (RTP-N, RIO-L) Kintyre uranium project in Australia for US$495 million.

Of that amount, the Canadian uranium giant is contributing US$346.5 million for a 70% stake in the joint venture, while Mitsubishi Development of Sydney is spending US$148.5 million for the remaining 30% stake.

Kintyre is an advanced exploration project about 1,250 km northeast of Perth, that Cameco believes could host potential mineral deposits ranging from 62-80 million lbs. U308, with an average grade of 0.3-0.4% U308.

Those estimates are based on 70,280 metres of historical drilling in 355 diamond-drill holes. The project was put on care and maintenance in 1988 when uranium prices dropped below US$12 per lb. and the project became uneconomic.

Cameco believes the site has the potential to become a low-cost open-pit operation and adds to Cameco’s diverse asset base.

But the project does not come without some political risk. In a prepared statement announcing the deal, Cameco conceded that the Labor government in Western Australia permits uranium exploration but opposes the development of new uranium mines.

At the same time, however, “Australian governments and political parties generally are becoming more supportive of uranium development.”

The Saskatoon, Sask.-based company also notes that the federal Labor party “abandoned a long-standing policy opposing development of new uranium mines” last year and since forming the national government, “the party has become supportive of uranium mining generally in Australia.”

Mitsubishi Development owns coal and iron ore properties in Australia. These include a 50% ownership stake in BHP Billiton Mitsubishi Alliance, reportedly the largest metallurgical coal producer in the world.

Cameco has been active in Australia since 1997 with exploration licences in western, southern and northern Australia.

In February, it picked up rights to the Angela-Pamela deposits, 25 km south of Alice Springs in the Northern Territory through a joint venture with Paladin Energy (PDN-T, PDN-A).

Cameco is trading at about $42.08 per share, and over the last year has traded in a range of $31.39-55.26 per share.