SASKATOON and VANCOUVER - Two weeks after Cameco made a hostile bit of Hathor Exploration, the uranium miner and the uranium explorer look to be bracing for a fight.
On Aug. 26, 2011, Cameco made an all-cash offer of $3.75 each for all of Hathor's shares. Cameco noted that is was a 40% premium over Hathor's closing share price and 33% over Hathor's 20-day volume-weighted average price.
Hathor responded first by advising its shareholders to take no action on the matter. Then it released a preliminary economic assessment for its flagship Roughrider project in the Athabasca Basin of Saskatchewan. The document outlined a billion-dollar net present value and a 33% internal rate of return. The mine an mill could produce 5 million lb of U3O8 per year over an estimated 11-year mine life. The assumptions were based on resources in two deposits, and Roughrider has a third orebody that could enhance the project were it included.
In response, Cameco issued a news release calling the assumptions in the Roughrider PEA "unrealistic". The company said it had no plans to change its offer for Hathor.
Hathor management must have been stung by the "unrealistic" label. The board reacted as expected. They unanimously rejected Cameco's offer.
Cameco went again to the press yesterday, Sept. 14. President and CEO Tim Gitzel said, "Based on our extensive experience developing and operating projects in the Athabasca Basin, we believe Hathor's PEA significantly underestimates the costs, timelines, and risks associated with development of the Roughrider deposit and so, by inference, significantly overstates the value of the Roughrider deposit and Hathor as a company."
The press release went on to point out that developing a stand-alone Roughrider mine and mill for the costs presumed in the PEA, will not work. However, Cameco could make such numbers work for the project because it has existing infrastructure, milling capacity, and decades of experience becoming one of the world's leading uranium producers.
The fur looks close to flying. If both Hathor and Cameco stick to their opinion about the Roughrider assessment, the conflict should make for interesting reading over the next few weeks. Cameco could up its offer for Hathor or withdraw it. Hathor shareholders could just say "No" if they are convinced the small exploration company can grow into a producer based on the promise of the Roughrider project. Stay tuned.
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