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In a sign that consolidation in the uranium sector is gathering pace, world number one uranium producer Cameco announced on Friday it is extending a $527 million cash offer to shareholders of Hathor Exploration, after talks with the board of the junior explorer failed to result in a deal.
Cameco said it first offer to buy Hathor, which owns the Roughrider deposit in Saskatchewan close to Cameco’s Rabbit Lake mill, a week ago. The Roughrider deposit is estimated to contain indicated and inferred resources of about 17.2 million and 40.7 million pounds of uranium. Cameco was down over 2.5% in early morning trade on Friday and has lost more than $8 billion in market value this year as the uranium market begins to resemble a ‘ghost town’ as one trader put it, in the aftermath of the Japan nuclear disaster.
Uranium-oxide concentrate for immediate delivery sells for $50.50 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.
Bloomberg quotes one uranium trading company as saying “A number of market participants have indicated that recent market activity has been very limited. This lack of activity has been described as the market looking like a ghost town.”
Press Release August 26, 2011:
SASKATOON, SASKATCHEWAN, Aug 26, 2011 (MARKETWIRE via COMTEX) — Cameco CA:CCO -2.22% CCJ -2.24% announced that it intends to make an offer (the “Offer”) to acquire all of the outstanding shares of Hathor Exploration Ltd. CA:HAT +46.44% for cash consideration of $3.75 per share in a transaction which values the fully diluted share capital of Hathor at approximately $520 million(1).
Cameco delivered a written proposal to Hathor following the close of market on Friday, August 19, 2011 outlining its interest in acquiring the company for cash in a transaction valued at $3.75 per share. Cameco made today’s announcement after discussions with Hathor regarding a potential board-supported transaction failed to result in an agreement.
Hathor is a junior uranium company focused on exploration projects in the Athabasca Basin of northern Saskatchewan, Canada. The company’s most significant asset is the Roughrider uranium deposit. The Roughrider deposit is estimated to contain indicated and inferred resources of approximately 17.2 and 40.7 million pounds of uranium (U(3)O(8)) respectively(2). The deposit is located approximately 25 kilometres northwest of Cameco’s Rabbit Lake mill.
(1) Estimated fully diluted share capital of approximately 139 million
shares, based on Hathor’s public disclosure.
(2) Indicated and inferred resources of the Roughrider deposit as reported
by Hathor in a press release dated June 17, 2011. The deposit’s west
zone has an indicated resource estimate of 394,200 tonnes of ore
containing 17.2 million pounds at an average grade of 1.98% U(3)O(8) and
an inferred resource estimate of 43,600 tonnes of ore containing 10.6
million pounds at an average grade of 11.03% U(3)O(8). The deposit’s
east zone has an inferred resource estimate of 118,000 tonnes of ore
containing 30.1 million pounds at an average grade of 11.58% U(3)O(8).
Compelling Offer for Hathor Shareholders
The Offer is compelling for Hathor shareholders as it provides:
— Attractive Premium: The Offer price of $3.75 per Hathor share represents
an attractive premium of 40% over Hathor’s closing price and 33% over
Hathor’s 20-day volume-weighted average price as at August 25, 2011.
— Liquidity and Certainty of Value: The consideration offered is cash,
which provides Hathor shareholders with certainty of value and immediate
liquidity, while removing the inherent execution risk to shareholders
that is associated with companies in the early stages of development
such as Hathor.
— Fully Financed Offer: The Offer is not subject to a financing condition
and will be funded using existing cash on hand, providing Hathor
shareholders with little execution risk.
— Avoidance of Dilution: Continued development of the Roughrider deposit
and Hathor’s other projects will require substantial additional funds;
any additional equity financing, joint venture agreement(s) or other
transaction(s) that are undertaken could result in material dilution to
existing Hathor shareholders.“Our offer provides Hathor shareholders an opportunity to receive an immediate and substantial premium for their shares and eliminate the inherent risks of a company at Hathor’s early stage of development,” said Tim Gitzel, president and CEO of Cameco.
“The market has recognized the exceptional job Hathor has done with the Roughrider deposit and the company’s other properties. Given our financial strength, development expertise, existing infrastructure and experience in the Athabasca region, we feel we are in a unique position to build on that success and further advance the Roughrider deposit.”
The Offer will commence as soon as possible by publication of an advertisement and filing of a take-over bid circular which includes the full details of the Offer, including applicable terms and conditions.
Further Details of the Offer
The Offer will be made by way of a formal offer and take-over bid circular to be mailed to shareholders of Hathor and will be subject to usual and customary conditions, including receipt of all required regulatory approvals, termination or waiver of Hathor’s shareholder rights plan and not less than 66 2/3% of the Hathor shares being deposited under the Offer and not withdrawn. Further details concerning the Offer will be included in the formal offer and take-over bid circular. The Offer will be open for acceptance for at least 60 days following the commencement of the Offer.
