Hathor Exploration Ltd.

(HAT-T: C$2.67)

This Just In!

buy, High Risk*

12-month target price: C$5.60

August 26, 2011

David A. Talbot / (416) 350-3082

dtalbot@dundeesecurities.com

Mansur Khan / (416) 350-3314

makhan@dundeesecurities.com

Cameco Posts Opportunistic $520MM Bid

Conclusion: We continue to recommend Hathor as a BUY with a $5.60 target price. We would not expect investors to tender their shares to an offer at this level.

Cameco has potentially kick-started what could become a bidding war for Hathor and its world-class high-grade Roughrider uranium project. In our view, Cameco's theme on its conference call was largely fear mongering. While being complimentary towards Hathor's professional and cordial management team, Cameco's underlying premise for the bid is that not only is Hathor ill-equipped financially and technically, but also ill-equipped in terms of handling the permitting and the relationships required to develop the project. Yes, Cameco is likely the world leader at developing difficult uranium mining projects, but the bottom line is that this initial offer appears to be too low in our opinion. This offer does not even compare to the latest large acquisition in the sector - Uranium One's takeover of Mantra - in certainly a more risky jurisdiction. We surmise that Hathor's management is of like mind, otherwise, they might have likely reacted to Cameco's offer when it was placed before them a week ago. Stay tuned for further developments - particularly Hathor's scoping study that should help establish the Roughrider project as one of the penultimate uranium projects on the planet. In our view, Cameco might have to come back to the table with a better offer or other companies looking to get into the Athabasca now have 60 days to come to the table.

Cameco Announces All-Cash Offer:

· Cameco announced this morning an all-cash offer of $3.75 per share of Hathor. This values the company at almost $9.00/lb or ~$8.57/lb by our estimate excluding Hathor's cash on hand (as of March 31st, 2011). The offer represents a 40% premium to Hathor's closing price of $2.67 and 33% premium to its 20-day volume-weighted average price.

· Cameco is highlighting to Hathor shareholders the immediate liquidity and certainty of value, removal of risk of further shareholder dilution, and unconditional financing for this offer. No less than 66.7% of Hathor shares have to be tendered to this offer along with other customary conditions for it to go through. CIBC is acting as the financial advisor.

Offer Appears to be Hostile & Opportunistic

· We see this offer as opportunistic, as did Hathor's board who did not reach an agreement with Cameco after getting this offer last Friday. While Hathor has not yet formally rejected the offer, it appears as if the $3.75/sh offer is too low.

· We believe Hathor's scoping study is due in perhaps the next 2-3 weeks. At the very least, investors should wait until the scoping study is released to properly value this project – in our opinion probably the world's best value uranium project. Although it doesn't yet have the size as Extract in Namibia, we see Hathor trading at least at the offer price or probably higher.

Reasons A Premium Valuation Is Justified

There are several reasons why we believe Cameco (or anyone for that matter) should pay a premium.

·

4th Highest Grade Deposit In The World - Hathor has high-grade resources of 58MM lbs U308; 54MM of which grades ~12%. Very high grade means little earth moving and the deposit is relatively shallow for the Athabasca region.

·

Synergies With Nearby Deposits - Rock characteristics at Roughrider make it suitable for the down-blending of high arsenic material located nearby (Areva-Denison own Midwest and Midwest A that are 40MM and 10MM lbs in size respectively).

·

Excellent Infrastructure - There is access to power, a provincial highway, and an airport. Areva/Denison's McClean Lake mill is located about 17km away. Cameco's Rabbit Lake Mill is ~30km away.

·

Valuation Appears Low For World-Class Project - $8.57/lb is roughly in line or lower than where the producers were trading at springtime. Mantra was acquired by Uranium One (BUY rated; target price - $5.40) for A$1B or $10/lb (~$9.50/lb excluding Mantra's cash on hand) - despite the low grades (0.04%), remote location and minimal infrastructure in a jurisdiction with no uranium mining policy. Mantra owned the Mkuju River project that hosted a resource of 101MM lbs.

· Resource Upside Potential Ignored - We also believe that Hathor has at least 20-30MM lbs discovered already that has not been included in their resource. The newly discovered Far East zone appears to be getting larger, and to what Cameco said on its conference call, is wide open to the east. Given the cluster of deposits found along this trend already, there remains high potential for further discoveries to the east.