MELBOURNE Nov 15 Rio Tinto is
unlikely to walk away from a bidding war for uranium developer
Hathor Exploration, investors said on Tuesday, after
rival bidder Cameco Corp trumped the global miner with a C$625
million ($615 million) offer.
Cameco, Canada's largest uranium miner, raised its
offer for Hathor by 20 percent to C$4.50 a share, topping a
friendly bid from Rio Tinto at C$4.15.
Given that Rio Tinto had been in talks with Hathor
since early 2010, investors expect Rio Tinto is eager to take
over the company and would have a bit more up its sleeve to top
Cameco, especially since the target is not large.
"It wouldn't be out of character for them to come up with a
higher bid. In the scheme of Rio, we're not talking about a lot
of money," said Peter Chilton, an analyst at Constellation
Capital Management, which owns Rio Tinto shares.
Rio Tinto declined to comment on the latest bid by Cameco.
Rio Tinto mines uranium in Australia, through its ERA
unit, and owns the Rossing uranium mine in Namibia, but
its Australian assets face environmental obstacles and the
Namibia mine is considered fairly low grade.
The main attraction in Hathor is its large exploration-stage
Roughrider project in the uranium-rich Athabasca region of
Saskatchewan in Western Canada, which has the potential to
produce at least 5 million pounds of uranium a year.
"Rio want to stay in the uranium game, and clearly (Hathor)
ticked all the boxes -- high grade, exploration potential,"
The key issue is whether it will be able to justify paying
as much as Cameco is willing to fork out, as the Canadian
company already has operations in the Athabasca region.
"Given the synergies with Cameco, I would think they are
capable of paying a higher price than Rio," said James Bruce,
portfolio manager at Perpetual Investments, which owns Rio Tinto
Rio's shares fell 1.2 percent on Tuesday, underperforming a
0.4 percent dip in the broader market.
Uranium prices have fallen below $55 a pound since the March
11 tsunami that knocked out Japan's Fukushima nuclear plant.
That compares with January's price of nearly $75, itself nearly
half a high of $136 in 2007 .