Hathor Exploration
Accretive Consolidation of Roughrider Uranium Deposit |
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Conclusion: We view this acquisition to consolidate Hathor's key Roughrider deposit positively, and increase our target price to C$5.10 from C$4.75/sh, reiterating our BUY recommendation. We truly appreciate the importance of this project in the context of the eastern Athabasca Basin and perceive ownership consolidation as constructive towards its development. This deal appears as if it could also benefit Terra Ventures (TAS-V: C · Terra valued at ~$24.18 MM…16% premium to its most recent close - Terra shareholders would receive 0.20 Hathor common shares for each Terra share. Hathor would issue ~12.4MM shares to Terra shareholders, representing ~10% of Hathor's ownership post-acquisition. · Conditions for successful acquisition - the deal is subject to at least 66.7% approval by Terra shareholders in a special meeting schedule for June 2011, and could close thereafter. The proposed transaction has been deemed fair to Terra shareholders by its financial advisor Cormark Securities. Approvals by the Supreme Court, by the TSX and TSX Venture exchange, and due diligence by May 2nd are all required. Along with the customary board approvals and non-solicitation clauses, there is also a break-fee of $625K to Hathor should Terra accept an unsolicited superior offer. Positive impact to our valuation. We are increasing our target price by Deposit growing quickly. We currently assume the Roughrider deposit hosts between 54-58 MM lbs U3O8 - with plenty of upside potential, particularly as we await drill hole grades from its recent Roughrider Far East Zone. Roughrider West hosts 28 MM lbs of compliant resources grading 2.88% (high grade portion totals 24 MM lbs grading ~11% U3O8. Our non-compliant studies suggest that the 160m long Roughrider East zone has potential to host perhaps 22-24 MM lbs grading 6.75% in just a 40m x 40m x 40m core. At the new Roughrider Far East, the first drill hole in this area intersected 1.57% U3O8 over 37.5m in basement rocks. With subsequent drilling we now envision a 45m long zone where 15 of 17 holes hit elevated radioactivity and 13 of those hit off-scale scintillometer readings including 8.9m in one hole. We await assays. Hathor has made plenty of positive news recently. Its management team has been bolstered through the appointment of Dr. Mike Gunning to CEO, well known former Exelon nuclear fuel executive Jim Malone to Chairman, and Dr. Alistair McCready to VP Exploration. HAT has graduated to the TSX. It has converted its Roughrider mineral claim into a mining lease in the Province of Saskatchewan. The company has discovered a third potentially high grade Roughrider Zone at its flagship Midwest Northeast project. And now it consolidates not only its flagship property, but through the addition of the C4-, C-5 and C-6 claim blocks, also consolidates ground around Hathor's highly prospective Russell Lake property. This property is located adjacent to the high grade (18% U3O8) Phoenix discovery at Wheeler River owned 60% by Denison (DML-T: C$2.29, Not Rated), 30% by Cameco and 10% by JCU Canada Exploration Co. (Japanese). These properties all lie midway between Cameco's McArthur River Mine and the Key Lake mine and mill. Expect significant news this summer. Pending are potentially high grade assays from the Roughrider Far East zone as suggested by recently announced scintillometer results. By late April/early May we might see an initial resource estimate for the East Zone. Expect further aggressive drilling this summer, aided this time around by the Far East zone lying below dry land. Another resource estimate by September could potentially touch up the existing West and East resources and provide an initial account for Far East, assuming that there is enough detail to model this area properly. |