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.
Rio Tinto (LON:RIO) is expanding its presence in Canada with an all-cash offer to acquire Hathor Exploration (TSE:HAT), which owns the Roughrider uranium deposit in Saskatchewan.
The global mining giant announced today a $4.15 per share, all-cash bid for Hathor valued at $578 million. The bid is 11% higher than Cameco’s $3.75 per share hostile bid for Hathor announced last month.
It is the first bid for a Canadian company that Rio has made since acquiring Alcan in 2007.
“The superior Rio Tinto offer provided fair value to Hathor shareholders over Cameco’s current hostile, unsolicited takeover over,” said Hathor chief executive officer Dr. Michael H. Gunning.
“The strategic context of the Rio Tinto offer underscores the ‘best of breed’ global stature of the Roughrider uranium deposit relative to its peers of undeveloped uranium deposits around the world.”
Hathor had urged its shareholders to reject the Cameco offer, calling it “opportunistic” and “predatory” coming in the wake of the Fukishima disaster in Japan that sent uranium oxide prices to lows of around $50/pound.
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 explorer (TSE:HAT) has gained about 56% since the offer and 121% since the start of the year. In contrast $8 billion industry bellwether Cameco’s stock (TSE:CCO) has almost halved in 2011.
Hathor’s shares leaped around 9% to $4.40 in mid-day trading Wednesday at over 8 times average volumes.
The Globe and Mail reported Rio is one of the world’s largest uranium producers, mining 16 percent of the world’s nuclear fuel. “The mines include a 68-per-cent interest in Energy Resources of Australia Ltd. and 69-per-cent interest in Rössing Uranium Ltd in Namibia.”
