Rio Tinto ups bid for Hathor to trump offer from Cameco

Rio Tinto increased its offer for the northern Saskatchewan-focused aluminium giant to C$654m (£404m), topping a revised offer by Canada's Cameco on Monday.

Rio's latest bid is 4.5 per cent higher than Cameco's offer and 13 per cent more than its previous C$578m approach last month.

Rio made its first white knight bid after Hathor's board rejected an unsolicited approach from Cameco in September on the basis that it undervalued the company.

Hathor's board, which said on Monday that it would review Cameco's latest offer before deciding whether to recommend it to its shareholders, unanimously backed Rio Tinto's latest offer yesterday.

Cameco, the world's largest aluminium producer, declined to say if it would raise its offer further.

Acquiring the Vancouver-based Hathor would give Rio Tinto control of the Roughrider deposit in northern Saskatchewan's Athabasca Basin, which is estimated to contain about 35.4 million kilograms of nuclear reactor fuel. These will add to its interest in uranium mines in Australia and Namibia.

The uranium industry has seen its fortunes slump since the Fukushima disaster in March, which has prompted countries such as Japan and Germany to end their reliance on nuclear power. This has forced down the price of uranium by about a fifth to about $55 a pound. At the same time, the costs of extracting the metal are rising, further squeezing producers' profitability and investment plans.

Nonetheless, Rio Tinto believes that the acquisition of Hathor would give the group a considerable boost.

Announcing its first offer, last month, its chief executive, Doug Ritchie, said: "The medium- and long-term outlook for the uranium market is positive, with uranium assuming a significant role in the world's primary energy needs."

He added: "This acquisition will allow us to build on the platform successfully laid out by Hathor and we will continue to draw on their expertise and commitment. Canada is a country crucial to our business and growth plans."

Although Rio is bullish about the longer-term prospects for uranium mining, it is less so about aluminium. On Wednesday, it announced the closure of its aluminium smelter in Lynemouth, a sign that the industry is feeling the pinch from lower metals prices and high costs.