Thursday, October 20, 2011

And Hathor Exploration continues to appreciate in value

Originally I wrote about Hathor Exploration (TSX:HAT) in late May of this year. In the two articles I posted, I explored the possibilities of Hathor becoming a takeover target as compared to becoming a stand-alone mine. Then in August we saw Hathor Exploration face a hostile unsolicited take-over bid from Cameco(TSX:CCO). Cameco's bid was for C$3.75 per share, and was declared as something that all shareholders should reject, according to a unanimous decision by the management of Hathor. I believe that management was indeed correct in their view of this offer.

Now, Hathor is faced with yet another bid, albeit fully expected although no one was certain who might be the next bidder, and this time it comes from none other than one of the world's largest miners, Rio Tinto. This offer is somewhat higher than Cameco's, coming in at C$4.15 per share.
Considering that the price of Hathor shares closed at C$4.40, I believe the market is re-enforcing the belief that hathor shares are still significantly under-valued. This will quite likely lead to yet another bid, or as an alternative, we could see Rio Tinto and Cameco make a joint bid. I would hate to discount either scenario at this point, but I do fully expect that we will most likely see another bid.

There are many figures flying around regarding the correct valuation of Hathor shares at this point. Some people are stating that C$5.20 is completely within an acceptable range while others are view the closing today as an acceptable price. One thing that seems to remain constant is the fact that Rio Tinto's offer is still lacking the depth that the market is expecting. For this reason I believe that another bid is not only possible, but highly likely.

There are other aspects that also lead one to believe that this latest offer may be put to the test. For example if one looks at the drilling that has been carried out to-date on the Hathor Exploration properties, in particular the Far East zone of the Roughrider deposit, we will notice that this zone is surpassing all expectations. With the total amount of resources reported by Hathor Exploration, and with this figure constantly growing, it is not difficult to see that the share price could appreciate greatly from its current standing.

Another aspect that provides speculation that Hathor Exploration shares could realize a higher valuation, than this latest offer from Rio Tinto, is the fact of some of the statements that come from Rio Tinto's news release announcing their bid. Rio Tinto Energy 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. 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 going forward. Canada is a country crucial to our business and growth plans and a location where Rio Tinto has a track record of delivering on major development projects to the benefit of the local community."

Although Rio Tinto is definitely a world class miner of uranium, they are starting to experience declining production of the raw material in nuclear fuel because of lower grades and bad weather at its Ranger mine in the Northern Territory. Although bad weather and a recent labor dispute have hampered production, it has been reported that the grade of uranium is not near to reaching the grades from the Hathor Exploration properties located in the Athabasca Basin region of northern Saskatchewan.

I have put forth my opinion regarding the possibility of another bid, but one must also take into account that the management has given their unanimous support to this bid from Rio Tinto. As such, it is difficult to say with certainty, what the true outcome will be. Hathor Exploration is reportedly giving an update to the Far East zone resource calculation on approximately Nov. 11, and this truly could be the catalyst that precipitates another bid. In my opinion, I tend to favor those who have given Hathor Exploration the value of slightly more than C$5.00 per share. I base this on the speculation that the Far East zone will contain much more uranium than it is currently being credited for.

I am very pleased that I was able to see this chance and to be able to share it back in May of this year. I do not expect that this story is over yet though, and I do hope that Hathor Exploration will get what many seem to feel is the true value of this company. For those who may have bought when I first presented Hathor
For those who feel that this may fit their investment choice criteria, I would suggest that you definitely do your own due diligence. An excellent place to start would be at the company website, which is located at

For disclosure purposes I have not received any compensation of any kind for this post or my opinions. I do not own shares of Hathor Exploration. 

No comments:

Post a Comment