brenda bouw — MINING REPORTER

VANCOUVER— Globe and Mail Update

Published Monday, Nov. 14, 2011 9:01AM EST

Uranium giant Cameco Corp. (CCO-T20.03----%) has upped the stakes in the battle for Hathor Exploration Ltd. (HAT-T4.47----%) by increasing its hostile bid to $4.50 per share in cash, valuing the company at $625-million and topping the friendly deal struck by mining major Rio Tinto PLC (RIO-N55.48----%).

Cameco's higher offer is an 8.4-per-cent increase from Rio's $4.15-per-share bid made last month, which had the blessing of Hathor's board.

More related to this story

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• Is Fission Energy the next uranium takeover target?
• Rio Tinto tops hostile Cameco bid for Hathor

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It's also a 20-per-cent increase from Cameco's initial all-cash offer of $3.75 per share made in August, which Hathor had rejected as too low and opportunistic given the drop in uranium prices in the aftermath of Japan's nuclear disaster.

Until Rio's offer surfaced, Saskatoon-based Cameco had maintained its original bid for Hathor was “full and fair” and offered shareholders certainty in volatile markets.

“Cameco's increased offer to Hathor shareholders provides an attractive premium over Rio Tinto's offer and makes sense for Cameco given our unique position in the Athabasca Basin,” Cameco chief executive officer Tim Gitzel said in a statement on Monday before markets opened.

Cameco's latest offer, which expires Nov. 29, is above Hathor last closing price of $4.47 on the Toronto Stock Exchange Friday. Hathor's stock has been trading consistently above Cameco's offer price since the bid was made Aug. 26th at a 40-per-cent premium.

Hathor's stock has also traded above Rio's offer price since the deal was announced Oct. 19.

Shareholders were anticipating a bid war for Hathor's assets in the uranium-rich Athabasca Basin of northern Saskatchewan, where about 20 per cent of the world’s uranium is produced.

Both bids come as the price of uranium, used to fuel nuclear power plants, struggles to recover from a slump since the nuclear crisis in Japan last March caused many countries to re-examine their nuclear power programs. Both companies are vying for the uranium player with the long-range belief that nuclear energy will expand in key growth countries such as China and India.

Cameco wants Hathor's assets, including its flagship Roughrider project, to help meet its goal of doubling production by 2018. Rio wants to expand its existing uranium operations in Australia and Africa. Rio's offer for Hathor is the first Rio has made for a Canadian company since its ill-timed purchase of Montreal-based aluminum producer Alcan in 2007, on the eve of the global recession.