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Uranium Takeovers Offer Investors Big Payoffs

Brian Hicks

Written By Brian Hicks

Posted October 26, 2011

Uranium takeovers are offering investors big payoffs, less than a year after Japan’s Fukushima nuclear plant disaster.

Bloomberg reports, “Hathor Exploration Ltd. (HAT), the owner of a uranium deposit in northern Saskatchewan, yesterday traded 8.4 percent above a bid from Rio Tinto Group that topped an offer from Cameco Corp.”  

Investors are now suspecting that “Hathor will extract the biggest price hike of any pending North American deal greater than $500 million, according to data compiled by Bloomberg. Kalahari Minerals Plc, which resumed talks with China Guangdong Nuclear Power Group after a takeover was derailed by Japan’s disaster, would now hand shareholders a higher return than the pre-Fukushima agreement, even with a 5 percent lower offer.”

Hathor now finds itself the target of a bidding war. Discussion of purchasing Kalahari, a company that owns 43% stake in the developer of what will one day be the world’s third largest uranium mine, have been struck up again in response to the increase in energy demand from developing nations.

Despite the devastation, and radiation leaks in Japan that occurred after the March 11 earthquake and tsunami, China, India and Russia are planning or already constructing a combined 125 nuclear reactors.

“The Chinese and other emerging economies are going to need uranium to power their nuclear reactors,” Rob Chang, an analyst for Versant Partners Inc. in Toronto, said in a telephone interview with the Financial Post. “When you start seeing consolidation, it’s usually a sign of the bottom. Buyers, they’re trying to snap these assets up on the cheap. Investors would be well served.”

As reported by Bloomberg, “Cameco, the world’s biggest uranium producer, took its takeover offer for Hathor directly to shareholders after the companies couldn’t agree on a price. The proposal would give Hathor’s shareholders C$3.75 a share in cash, valuing the uranium explorer at C$520 million ($530 million), according to the Aug. 26 statement.”

Rio Tinto, the world’s second largest mining company, defeated the proposal last week. Rio Tinto’s bid valued Hathor at C$4.15 a share in cash, or C$578 million, according to a statement released on October 19.

Following the nuclear crisis in Japan, uranium prices plummeted 27 percent in three days to $49.99 per pound of U3O8, and then fell even further to a low of $48.75 on August 30. However, Japan has since changed its harsh view on nuclear power, prices are recovering, and this change of heart should help to steady uranium prices very soon.

That’s all for now,


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