Cameco to Acquire BHP Uranium Project for $430 Million

Cameco Corp. (CCO), the world’s third- largest uranium miner, agreed to buy BHP Billiton Ltd. (BHP)’s Yeelirrie uranium project for $430 million to expand in Australia.

“Yeelirrie represents an attractive deposit that fits well with Cameco’s vision and corporate strategy,” Tim Gitzel, chief executive officer of Saskatoon, Saskatchewan-based Cameco, said in a statement yesterday.

Cameco is buying resources at Yeelirrie for the equivalent of about $3.20 per pound of uranium, or 6.5 percent of the current uranium spot price, Rob Chang, a Toronto-based analyst at Versant Partners, said today in a note. That compares with a 9 percent average for uranium industry transactions since 2007, he said.

This is “understandable” given the deposit’s lower grade relative to recent higher-grade transactions, Chang said.

Cameco is aiming to increase its annual uranium output to 40 million pounds by 2018 by developing new mines and extending the life of existing ones. The company forecast production of 21.7 million for this year.

Cameco had 23 projects in Australia, including 22 operated by the company, according to its website. Among Cameco’s holdings is the Kintyre project in Western Australia acquired through a joint venture with Mitsubishi Development Pty in 2008.

Olympic Dam

BHP, the world’s biggest mining company, this month announced it will delay an expansion at its Olympic Dam in South Australia in favor of a less capital-intensive development plan. The expansion would have made Olympic Dam into the world’s largest uranium mine.

The acquisition is Cameco’s third since Gitzel, who is a former executive of France’s Areva SA (AREVA), became the Canadian company’s CEO in July 2011.

Cameco agreed in May to buy uranium trader Nukem Energy GmbH for 105 million euros ($131.2 million) after acquiring Areva’s minority stake in a uranium project in Saskatchewan for C$150 million ($151.4 million). Cameco terminated an offer last year to buy Hathor Exploration Ltd. after being outbid by Rio Tinto Group.

Cameco fell 1 percent to C$22.23 at the close in Toronto. The shares have increased 21 percent this year.

Cameco expects the acquisition of Yeelirrie in Western Australia to close by the end of the year. Yeelirrie has measured and indicated mineral resources of about 139 million pounds of uranium, with an average grade of about 0.13 percent, Cameco said in the statement.

Cameco was the third-largest uranium miner last year after Kazatomprom, Kazakhstan’s state-owned producer, and Paris-based Areva, according to the World Nuclear Association. Uranium is the raw material in nuclear-reactor fuel.

To contact the reporters on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net; Christopher Donville in Vancouver at cjdonville@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

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