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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.
ANALYSIS– ProspectingJournal.com – Months after drawing the mining giant into the province’s potash sector through a JV with North Atlantic Potash, Saskatchewan is rolling out the carpet again for Rio Tinto, and this time it’s for uranium.
Ending what many were speculating to become a bidding war with Canadian uranium miner Cameco [CCO – TSX, NYSE], Rio Tinto successfully won out in its takeover bid for Hathor Exploration [HAT – TSX] and its Roughrider uranium project for $654 million ($4.70/share). As the faceoff between Cameco and Rio Tinto gathered steam, investors bid Hathor shares up to a high of $5.05 last week, at a value of $700 million, in anticipation that Cameco would match and raise the stakes.
Yet Cameco balked at going higher, opting to let its $4.50/share offer lapse and focus its efforts on doubling annual uranium production to a rate of 40 million pounds by 2018.
But as the world’s demand for uranium, and in this case Canadian uranium, increases on account of bullish indicators (like China’s plans to increase its capacity four-fold over the next decade), the acquisition of Hathor may not be the end of takeover activity in the Athabasca basin.
Though today they appear as competitors, tomorrow could look quite different for Rio Tinto and Cameco. According to a Montreal Gazette interview with Canadian uranium player Strateco Resources’ [RSC – TSX] CEO, Guy Hébert, the industry believes Rio Tinto and Cameco will make a joint-venture to process Hathor’s future ore within Cameco’s underutilized facilities. Cameco’s Cigar Lake project, which will take considerable time to come on line, adds to the Company’s immediate need for millfeed to avoid being decommissioned and reclaimed.
This kind of synchronicity could bode well for the Athabasca basin’s other players, many of which are now neighbours of both Cameco and Rio Tinto. Among those with interesting positioning, especially in the fabled Waterbury Lake region, are Fission Energy [FIS – TSX.V, FSSIF.PK] and Unity Energy [UTY – TSX.V, URGYF.PK, UJN.F].
In the post-Fukushima effected market, these uranium juniors are indeed poised to make some ground, especially with the vote of confidence coming from Rio Tinto for the region.
For Fission, positive results have allowed the company to hang on, after suffering the drop in share price from Fukushima’s fallout. Fission stock almost returned to the $1 mark in mid November through a private placement before clawing back to the $0.80 mark where it is now, and where it was in January. But with its announcement to commence its $7.3 million, 25,000m exploration program at Waterbury Lake, more information is coming soon on Fission’s flagship property.
Meanwhile, Unity is seemingly under the radar, compared to Fission, but location-wise has a significant land position in the same ballpark. Unity’s Waterbury Lake Project covers an area of 1856 hectares, and is extremely accessible with road access to the property and is only 9 kms away from Areva Resources and Denison Mines’ Midwest Mine. A former Cameco property, Unity’s project is only 11km south and 16km southeast of the Hathor Roughrider discovery that enticed Rio Tinto.
At a considerably earlier stage than Fission, Unity has the benefit of historic drill holes done in 1992 on its Close Lake property, which turned up 1000ppm U3O8 at 622m and in 1970 on its McKenzie Lake property showing 2.5m of 0.31% U3O8 at 47m.
Ground surveys are set to precede drilling for Unity, but management believes that it has the ability to prove Cameco’s loss of this property as significant. In September, Unity announced it had identified five distinct exploration target zones at its Lampin Lake project, also in the Athabasca Basin, which adjoins UEX Corp.’s [UEX – TSX] Hidden Bay Project and is only 16km southeast of the Roughrider. This identification came from detailed analysis of VTEM data, historical Bouguer Gravity and diamond drilling to the south by Cameco (Dawn Lake Project).
Both Fission and Unity offer opportunity in a region that is drawing renewed attention with the Rio Tinto buyout of Hathor. Fission provides the slightly more advanced stage of exploration, especially with its winter program, whereas Unity is in good company with its locations. And at 21.6 million shares is one of the most tightly held in the region at this time, and could prove to be another takeout target should more big players arrive looking for a piece of the Athabasca Basin.
Disclaimer: The author does not currently hold any shares of any of the companies mentioned in the article. However, some members of Cordova Media Inc., which owns the ProspectingJournal.com, may or may not have interests in one or more of the companies mentioned at the time of publication. Staff members from theProspecting Journal reserve the right to acquire interests in any of the companies mentioned after 36 hours have elapsed upon initial publication of this article. Unity Energy is a sponsor of ProspectingJournal.com.
