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Message: Cameco prospectus could signal acquisition
Peter Koven May 23, 2012 – 9:05 AM ET | Last Updated: May 23, 2012 9:08 AM ET
Courtesy of Cameco
Uranium giant Cameco Corp. has filed a preliminary prospectus to raise as much as $1-billion through a combination of securities over the next 25 months.
It should be noted that the company is not short on cash today. BMO Capital Markets analyst Edward Sterck wrote that Cameco had cash and short-term investments of $1.4-billion at the end of the first quarter, and can access an additional $1.25-billion through various credit facilities.
The company does have an ambitious (and capital-intensive) strategy to double uranium production by 2018, but Mr. Sterck estimated that this plan can be “almost completely” funded from cash flows from operations.
So what is Cameco thinking here? Mr. Sterck wrote that it is possible that the miner wants flexibility in case it chases an acquisition. Uranium equity valuations have fallen sharply in recent weeks, and there are certainly opportunities available for a well-funded company like Cameco.
“Potential targets could include Paladin Energy, Denison Mines or UEX Corp.,” Mr. Sterck wrote in a note, adding that Paladin is the only significant producer that could be acquired.
Cameco tried to buy junior miner Hathor Exploration Ltd. last year, but was outbid by Rio Tinto Ltd.
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