TORONTO (miningweekly.com) – Rio Tinto has until the close of business on Friday to decide whether to match or exceed Cameco's improved C$625-million, or C$4.50 a share, offer for uranium junior Hathor, and analysts said on Monday the world's third-largest mining company will most likely return with a higher bid.

A near-9% rise in the target's share price on the TSX to C$4.87 on Monday suggests the market holds the same view.

Investors had been expecting that Cameco, which drew first blood with a hostile C$3.75 a share bid for Hathor in August, would raise it offer after Rio Tinto struck a friendly deal to buy the company for C$4.15 a share last month.

Cameco's new offer, unveiled on Monday, is 8.4% higher than Rio's, which itself was a 10.6% increase on the previous bid.

Pope & Company investment stategist Mark Lackey said he expected Rio Tinto, Australia's which has built up deep pockets thanks the the iron-ore boom over the past two years, would not back down.

"If they came back with a higher bid, I wouldn’t be surprised," he said in an interview.

"If you look at their history they tend to come back [in bidding wars]."

Another analyst that covers the uranium sector, but asked not to be named, said that Rio Tinto would have anticipated Cameco's latest offer, and agreed the Anglo-Australian mining giant would raise the stakes once again.

"I think there's a good likelihood of them coming back in. They’ve got deep pockets so they can afford to," he said.

Rio Tinto has five business days to decide whether it will match or beat Cameco's bid, which will expire on November 29 – the day before Rio Tinto's expires, according to the bid circular, but this can be extended.

There is a C$20-million break fee Hathor would have to pay Rio if it decided to go with an unsolicited offer.

The world's biggest uranium producer wants to own TSX-listed Hathor because of its high-grade Roughrider deposit that lies about 25 km from Cameco's Rabbit Lake mill. The asset has a 57-million pound uranium resource so far.

Rio Tinto wants ownership to get a foot in the door of Saskatchewan's Athabasca Basin, which produces around one-fifth of the world's uranium supplies.

The market had anticipated Cameco would raise its original C$3.75 a share bid after Rio Tinto struck a friendly deal with Hathor. There was also speculation that the two bidders could team up and make a joint offer for the uranium junior.

The unnamed analyst said it was possible the two warring bidders could team up to buy Hathor, but that Cameco would likely have to call Rio Tinto.

However, he said the larger company might not be receptive as it likely had grand designs for the Athabasca Basin, and might not want only half of an asset.

Saskatoon-based Cameco produces the nuclear fuel mainly in Saskatchewan, and also has operations in Kazakhstan and the US. Rio Tinto has majority ownership of the Rossing mine in Namibia and Energy Resources Australia, which has a mine in the Northern Territory.

Announcing its first bid, Cameco said it decided to go hostile with the C$520-million offer after Hathor's board rejected it. The uranium producer questioned Hathor's preliminary economic assessment of a C$567-million capital expenditure estimate for a 5m lb/y mine at Roughrider, which the junior announced September 13.

Production is about six years away.

Versant Partners analyst Rob Chang said in a note on Monday that Cameco's latest offer valued Hathor at C$10.81/lb of uranium resources, and "not be the decisive bid the market was hoping for".

"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," CEO Tim Gitzel said in a statement.

Rio Tinto spokesperson Bryan Tucker said "we acknowledge the revised offer and will review it".

He told Mining Weekly Online that Rio Tinto had not increased its ownership of Hathor beyond the 5.7% it owned when the two companies announced the friendly deal.