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Nov. 28, 2011 05:27PM PST
Gold futures rallied Monday, tracking the global equity markets, as record Black Friday sales and evidence that European leaders would come up with a plan to curb the Eurozone’s debt crisis boosted investor sentiment.
By Dave Brown – Exclusive to Uranium Investing News
Cameco (TSX:CCO,NYSE:CCJ) has officially conceded the bidding war for Hathor Exploration Ltd. (TSX:HAT), after Rio Tinto PLC (LSE:RIO,NYSE:RIO,ASX:RIO) increased its offer for the Canadian uranium explorer to $654 million.
Cameco’s Chief Executive Officer Tim Gitzel commented on the news within the company’s press release “After careful consideration we cannot justify increasing the price beyond our current offer and accordingly, we will let our offer lapse.” Cameco has maintained uranium production guidance expecting double annual uranium production to 40 million pounds by 2018. The uranium producer committed to existing resources and will be evaluating potential growth opportunities where it can find positively accretive benefit for existing shareholders.
The market has rewarded Cameco’s more conservative capital allocation by strengthening share prices 4.5 percent of the previous trading session. Some analysts implied that Cameco could have accepted making an increased offer based on the strategic framework preventing Rio Tinto access in the area; however, increasing its offer might have diluted Cameco results on most metrics.
As expected Hathor share prices are demonstrating downside volatility to move 7.1 percent below Friday’s closing prices. The share prices of Rio Tinto have also appreciated 5.0 percent relative to last week’s closing value. The previous trading week had been particularly challenging for Cameco as share prices for the top Canadian uranium mining producer declined 10.4 percent, widely anticipating an additional bid for Hathor to follow.
Rio Tinto indicated it obtained permission to acquire Hathor from Canada’s competition bureau maintaining that Investment Canada approval is not required. The offer was set to expire at the end of the month and Rio Tinto is urging Hathor shareholders to tender their stock by the end of the day on Wednesday.
Mine production costs and potential issues
The extensive exploration phase Roughrider asset in the relatively high enriched uranium Athabasca region was considered by many observers and industry stakeholders to make the most sense for Cameco, with synergies and large scale operational capacity currently existing in close proximity. The uranium resource is located just 25 km to the southeast of the Rabbit Lake mill and could provide an estimated annual 5 million pounds of uranium production per year. In a preliminary economic assessment issued in September, Hathor estimated it might cost $567 million to develop a mine at the site.
Investors would also note that note that Rio Tinto might still need to find a Canadian company in order to share at least 51 percent of a joint venture production from the deposit, due to existence of the Non-Resident Ownership Policy, inhibiting an exclusive foreign mining interest from producing uranium from the region.
Raymond Goldie, Senior Mining Analyst for Salman Partners also speculated on a joint venture, and provided a very bullish outlook for the supply and demand fundamentals for uranium, “the outlook for uranium is that right now the demand for uranium is greater than the supply, and that is liable to continue for several more years.” On prices, “So [spot market] uranium prices in the low $50′s [per pound of uranium] could double within the next couple of years”
Ambitious production targets
BMO Capital Markets Mining Analyst, Ed Sterck has suggested “While acquiring Hathor was not essential for Cameco to meet guidance on BMO Research’s forecasts, the acquisition would likely have provided the company with production flexibility.” Cameco has previously experienced some delivery and operational delays over select time periods within the last 5 years, notably from a rockfall in the underground production area of the Cigar Lake mine leading to successive periods of flooding.
Securities Disclosure: I, Dave Brown, hold no direct investment interest in any company mentioned in this article.
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Investor Insight
Generation Uranium offers investors high-leverage exposure to a potential major discovery in Canada’s underexplored and resource-rich Thelon Basin, led by a management team with a proven track record of securing high-value exits.
Overview
Generation Uranium (CSE:GEN, OTCQB:GENR, FRA:W85) is a Canadian exploration company focused on wealth creation through discovery within the uranium sector. The company’s primary strategy is to build a high-caliber exploration team that can rapidly test and drill high-potential targets, de-risking projects for potential takeover by larger producers. Currently centered in the prolific Thelon and Angikuni Basins of Nunavut, the company is also actively evaluating additional project acquisitions in the Athabasca Basin to expand its portfolio.
The company is led by a veteran management team with nearly 30 years of experience in mineral development. CEO Michael Collins has a significant track record of building and exiting public companies, including the co-founding of Bluerock Resources, a conventional uranium producer during the 2000-2008 cycle. This expertise is paired with a focused business model that leverages modern geophysical targeting to accelerate exploration timelines and reduce costs, ensuring the company can deliver results quickly in a bullish uranium market.
Company Highlights
- Strategic Location in a Premier Uranium District: The flagship Yath Project is located in Nunavut’s Thelon Basin, contiguous to ATHA Energy’s Angilak Project, which hosts the high-grade Lac 50 deposit.
- High-Grade Discovery Potential: Historical surface sampling at the Yath Project has yielded exceptional uranium grades, including boulders testing at 9.81 percent, 3.95 percent, and 2.14 percent U3O8.
- Expert Management with Exit Experience: Led by CEO Michael Collins, the team has decades of experience in mineral exploration and a history of co-founding companies that were later acquired, such as Prime Mining and Nuclear Fuels.
- Low-Cost, Rapid Exploration Strategy: By leveraging modern geophysics and extensive historical data, the company aims for a "short road to discovery," de-risking projects quickly to maximize shareholder value.
- Bullish Market Fundamentals: Generation Uranium is well-positioned to meet the growing global demand for carbon-free nuclear power, supported by a projected supply deficit and increased interest from major tech companies seeking clean energy.
Key Project
Yath Project - Nunavut, Canada
The Yath Project is Generation Uranium’s flagship project. This 100 percent owned property covers about 120 square kilometers within the underexplored Thelon Basin in Nunavut, Canada. The project is located where the Yathkyed and Angikuni sub-basins meet, which is a region known globally for high-grade uranium potential. It sits directly along the same trend as the Angilak Project owned by ATHA Energy (TSXV:SASK, OTCQB:SASFK, FWB:XSU.F), which contains the Lac 50 deposit, one of the highest-grade uranium resources found outside of the Athabasca Basin with a historical mineral resource estimate of 43.3M lbs at an average grade of 0.69 percent U3O8.
The Yath Project is contiguous to the Lac 50 trend and is crossed by several regional faults and basin boundaries. Past exploration work has already identified high priority targets, while surface sampling in the area has produced uranium grades from boulders, with some testing at 9.81 percent, 3.95 percent, and 2.14 percent U3O8.
The company has commenced its initial field program at the site, set to define and rank drill targets. Historic showings will be combined with new anomalies from the MMT geophysics survey, preparing the project for an anticipated drill permit.
Management Team
Michael Collins - CEO & Director
Michael Collins is a professional geoscientist with nearly 30 years of experience in mineral exploration. He has co-founded several public companies, including Exploits Discovery, Prime Mining (acquired in 2025), and Nuclear Fuels (merged with Premier American Uranium in 2025). He is also currently a director of First Atlantic Nickel.
Christoph Bruening - Director
Christoph Bruening is the founder and managing partner of Value Relations GmbH, a full-service investor relations and public relations agency in Frankfurt with over 25 years of excellence, focusing on mining, exploration, biotech and health care. In addition, he has listed over 600 companies on the Frankfurt Stock Exchange and is a speaker and author of several publications, including on rare earths and uranium.
Dallas Miller - Director
Dallas Miller has been working within the international mining industry for over 15 years, working with BHP and Santos Ltd. He has experience on the ground from an operational standpoint, as well as being an integral part of raising millions of dollars in capital funding for both private and public companies in recent years.
Roger Leschuk - VP Corporate Development
Roger Leschuk has been in corporate management for over two decades, with the past 15 years dedicated to corporate development and investor relations. He has experience participating in and assisting with mergers and acquisitions, and was an investment advisor for various services such as stocks, mutual funds and tax-sheltered investments. He is a Chartered Investment Manager and a Fellow of the Canadian Securities Institute.
Monty Sutton - CFO
Monty Sutton brings over 35 years of experience in public markets and corporate governance. He previously served as CFO for Nuclear Fuels from its IPO through its acquisition.
