Cameco Hunts for Uranium Mines While BHP Sells: Corporate Canada

Cameco Corp., which has made $1.45 billion of uranium-industry bids since last year’s Fukushima nuclear accident in Japan, is on the lookout for more acquisitions while BHP Billiton Ltd. and Areva SA sell assets.

Cameco, the world’s third-largest uranium producer, is seeking to almost double output to 40 million pounds a year by 2018 from current mines and those under development. The company said Aug. 26 it agreed to buy BHP’s Yeelirrie project in Australia for $430 million.

Cameco is “keeping an eye out for other opportunities,” Chief Executive Officer Tim Gitzel said in an Aug. 27 interview. “We scour the world for projects.”

Gitzel is betting on a revival in uranium prices, which have fallen as much as 28 percent since the crisis in Japan, as China and India build nuclear reactors. BHP, the world’s largest mining company, last week put on hold an expansion that would make its Olympic Dam project in Australia the biggest uranium mine. France’s Areva, the largest supplier of nuclear fuel and services, is selling assets after writing down the value of uranium mines it bought in Africa.

Cameco “is likely the first call for anyone looking to sell any property, good or bad,” Rob Chang, a Toronto-based analyst at Versant Partners Inc., said in an interview. “Everyone calls Cameco.”

The Saskatoon, Saskatchewan-based company has been the buyer in two of the seven “significant” uranium-mining deals since the disaster at Tokyo Electric Power Co.’s Fukushima Dai-Ichi nuclear plant, according to data compiled by David Sadowski, a Vancouver-based analyst at Raymond James Ltd.

Potential Targets

Cameco fell 1.1 percent to C$21.48 in Toronto. The shares have increased 17 percent this year.

More deals may be coming, Chang said. North America-based uranium-mining companies Denison Mines Corp., Fission Energy Corp., Kivalliq Energy Corp., UEX Corp., U3O8 Corp. and Uranerz Energy Corp. are potential takeover targets, he said. Cameco has about C$3.5 billion ($3.6 billion) of capital available for acquisitions, according to Sadowski.

Cameco agreed in May to acquire uranium trader Nukem Energy GmbH for 105 million euros ($132 million). In June, Cameco bought a 30 percent stake in the Millennium uranium project held by Paris-based Areva for C$150 million, giving it majority ownership of the asset in Canada’s Athabasca Basin.

Opportunities for further purchases include projects that companies such as BHP and Areva may look to divest, Gitzel said.

“We’re a bit opportunistic in that regard,” said Gitzel, who worked at Areva before joining Cameco in 2007.

‘A Mistake’

Not every deal has gone Cameco’s way. Gitzel, 50, who was appointed CEO in July last year, terminated a C$625 million takeover offer for Hathor Exploration Ltd. in November after Rio Tinto Group made a higher bid for the owner of the Roughrider uranium deposit in Saskatchewan.

“They didn’t increase the bid enough,” Sadowski at Raymond James said in an Aug. 27 interview. “I thought it was a mistake they didn’t try harder.”

Triuranium octoxide, the tradeable form of uranium also known by its chemical formula U308, has dropped 27 percent to $49 a pound since a magnitude-9 earthquake and tsunami struck Japan on March 11, 2011.

The crisis at Fukushima led to the temporary shutdown of Japan’s nuclear power plants and sparked Germany’s declaration that it would close its reactors by 2022.

Cigar Lake

Gitzel joined Cameco as chief operating officer after an underground flood in 2006 delayed construction of the company’s Cigar Lake project in Saskatchewan. The mine, which sits atop the world’s largest untapped, high-grade uranium deposit, is now forecast to begin production in mid-2013, six years behind schedule.

At full output, Cameco’s share of Cigar Lake will be about 9 million pounds of uranium a year, or about half of the company’s planned increase to 40 million pounds by 2018. Cameco forecast production of 21.7 million pounds of uranium this year, mostly from deposits in Saskatchewan.

Kazatomprom, Kazakhstan’s state-owned producer, and Areva were the two largest uranium producers last year, according to the World Nuclear Association.

Yeelirrie will eventually produce about 7 million pounds a year, Raymond James’s Sadowski said. The project, located about 650 kilometers (404 miles) northeast of Perth and about 750 kilometers south of Cameco’s Kintyre project, will probably come into production after 2018, according to Gitzel.

Yeelirrie is “further corroboration of Cameco’s faith in higher uranium prices,” Sadowski said. “The significance of the deal is that Cameco is a buyer, not that BHP is a seller.”

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