Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Junior explorer Hathor Exploration on Tuesday said a preliminary economic assessment of its Roughrider uranium deposit showed it would potentially be one of the lowest cost uranium producers in the world at only $14.44/lb U3O8.
The junior uranium company is the target of a hostile bid from world number one uranium miner Cameco and has gained about 56% since the offer and 121% since the start of the year. Hathor believes its worth more than the offer price and said it will formally respond tomorrow (September 14) and urged shareholders to sit tight.
Hathor closed up 1.7% at C$4.17 on Tuesday in Toronto where it is worth $522 million. $8 billion industry bellwether Cameco’s stock has almost halved in 2011 as uranium oxide prices languish around $50/pound.
Hathor said 2011 Cameco’s unsolicited all-cash takeover offer of $3.75 per share effectively values Hathor and its Roughrider Uranium Deposit, as well as the Russell Lake and Henday projects, at approximately $468 million or $3.37 per Hathor share after adjusting for approximately $52 million, or $0.38 per fully diluted Hathor share, of existing Hathor cash as of the date of the offer (calculated on a fully diluted basis, including proceeds from outstanding options and warrants).
A low daily milling rate of about 200 tonnes per day thanks to high metallurgical recovery and shallow depth will keep production costs low. Hathor (TSE:HAT) said in a statement average operating costs for Roughrider is estimated at $14.44/lb U3O8. This compares to Cameco Corp’s (TSE:CCO) Cigar Lake and McArthur River (pictured) of $23.14/lb U3O8 and $19.69/lb U3O8 respectively.
The capital expenditure for the mine and mill at Roughrider is estimated at C$567 million and the undiscounted pre-tax net present values is pegged at $2.0 billion over an estimated 11 year mine life. Roughrider is located near Cameco’s Rabbit Lake mill in Northern Saskatchewan.
Uranium-oxide concentrate for immediate delivery sells for around $50 a pound and the spot price for the nuclear fuel has declined 24% since the March 11 earthquake and tsunami in Japan damaged the Fukushima nuclear power station. Uranium oxide prices peaked above $70/pound at the start of 2011.
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Jvt999
6.25/share…