Vancouver’s Hathor Exploration (TSX:HAT) has resoundingly rejected a hostile takeover bid targeting its Roughrider uranium deposit, but critics are beginning to question if the company has over-valued the flagship project.
Last week, during a conference call with investors, Hathor president and CEO Mike Gunning blasted Cameco’s (TSX:CCO) $520 million bid for his company, calling it “predatory and opportunistic.”
Cameco, Canada’s largest uranium producer, launched an unsolicited all-cash bid for Hathor in August, valuing the company at $3.75 per share.
The Vancouver company’s flagship Roughrider project made waves in uranium circles after an updated estimate doubled its resource potential.
The company believes there could be as much as 60 million pounds of uranium sitting in the ground beneath Roughrider, which is in Saskatchewan’s Athabasca Basin, one of the world’s premier uranium mining districts and Cameco’s backyard.
But the value of Hathor’s shares was hit hard earlier this year following the earthquake and tsunami in Japan, which resulted in a meltdown at the Fukishima Daiichi nuclear plant.
Since then investors have fled the uranium sector fearing a pullback in worldwide government programs to build new reactors (see “Junior firms face meltdown as investors run for cover after quake rattles Japan” – issue 1117; March 22-29).
Gunning said during the conference call that Cameco’s bid has taken advantage of volatile market conditions to seize control of a premier asset.
“The timing of the offer takes advantage of depressed uranium prices … since the Fukishima event, not to mention the general downturn in equity markets in recent months,” said Gunning.
Although Cameco tendered its bid for Hathor last month, the junior explorer waited to release a preliminary economic assessment (PA) for Roughrider before it formally rejected the offer. The PA estimated the project had a pre-tax net present value of $1 billion, far in excess of what Cameco offered in its bid.
Hathor also said the project would cost approximately $567 million to build, a number that Cameco has since disputed.
In a response to Hathor’s formal rejection of the takeover bid, Cameco said last week the junior company had missed the mark on the project’s value and costs.
“We believe Hathor’s PA 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,” said Tim Gitzel, Cameco’s president and CEO.
Raymond James analyst Bart Jaworski wrote in a research note to investors that Hathor’s estimated capital costs for the project were “quite low.”
Still, Raymond James has set a target price of $5 per share for the company, implying that Hathor is worth more than what Cameco has offered.
Another analyst, who asked to remain anonymous, said there’s a “greater than 50% chance” Cameco could increase its bid for Hathor or a white knight would swoop in with a competing offer.
During the conference call, shareholders repeatedly pressed Gunning to divulge what he believes would be a fair offer for his company, but the chief executive refused to quote a number.
At press time, Hathor’s shares were valued at $4. •
