Market Commentary
Show printable version of 'Rio says no to BHP Billiton' in a New Window

Search Market Commentary

 February 08, 2008
Rio says no to BHP Billiton
    Publisher: U3O8.biz
    Author: Luke Brocki

 Rio Tinto has rejected the improved takeover bid from BHP Billiton.
The world's largest miner announced a hostile takeover offer for rival
Rio Tinto worth some US$147.4 billion on Tuesday, with its CEO saying
BHP will even consider selling assets to fund the bid.

The sweetened offer was the biggest bid in the history of the mining
industry, but the Rio Tinto board needed just a short couple of days
to reject it. Rio officers felt the offered exchange ratio of 3.4 BHP
shares per Rio share still undervalued Rio.

This is the same reason Rio dumped BHP's first offer in November 2007.
But the last rejection saw Rio stock skyrocket as investors vehemently
backed the board's decision to hold out for more money. The latest
"no" didn't have quite the same effect. On the TSX, Rio gained $7.83,
or 1.9 per cent, to $417.20. BHP was up 25 cents, or 0.4 per cent, to

Without further ado, Kung Hei Fat Choi. But while China celebrates the
Lunar New Year, the most important of its traditional holidays, the
Western world has put enough distance between itself and 2007 to be
able to look at the year through a statistical lens. Analytical data
is fast getting processed and all sorts of reports are pouring in.

Canada's Cameco has finished crunching some numbers and reported
Wednesday that its profit jumped 52.5 per cent in the fourth quarter
(Q4), despite production shortfalls due to flooding at two of its
mines and a contamination-fueled shutdown of its Port Hope plant.

While the National Post newspaper reported Cameco's Q4 results were a
disappointment---with the company's adjusted net earnings worth 22 cents
per diluted share compared with an earlier estimate of 48 cents---the
company's 2008 outlook remains unchanged with earnings expected to
reach $2.21 per share.

The National Post also reported the company's confirmation that it
will maintain uranium production at 20.6 thousand pounds in 2008 and
22 thousand pounds in 2009. And Cameco's CEO suggested the company may
soon be prowling for acquisitions. Still, the news failed to excite
investors Thursday as Cameco stock gained 23 cents, or 0.7 per cent,
to $32.42.

And another report is in, this one from the Nuclear Energy Institute
in the U.S.: according to preliminary figures, American nuclear power
plants posted all-time record highs in electricity production and
efficiency in 2007.

The report states U.S. nuclear plants generated about 807 billion
kilowatt-hours (kwh) of electricity last year, beating by two per cent
the past record-high of 788.5 billion kwh set in 2004.

And, according to the data, the industry's average electricity
production cost is dropping. The average production cost (which looks
at expenses for uranium fuel and costs of operations and maintenance)
was a record-low 1.68 cents/kwh in 2007.

The previous low was set in 2005 at 1.72 cents/kwh. This marks the
ninth straight year the industry's average electricity production cost
was below two cents/kwh and the seventh straight year that nuclear
plants had the lowest production costs of any major source of
electricity, besting coal- and natural gas-fired power plants.

It looks like the industry is here to stay even though the short-term
market keeps getting hammered. It remains in the dumps after recent
drops in the metal's spot price: according to industry indicators
Tradetech and Ux Consulting, uranium for immediate delivery is now
worth $75 a pound U3O8.

My new favourite index, the WNA Nuclear Energy Index, was worth
US$3,386.44 Thursday evening around 11pm PST, down US$34.79 since
Thursday's NYSE close and down 45.68 points since I last checked it
Tuesday night.

You can view the Previous Market Commentary item: Sun Feb 10, 2008, U3O8.biz Weekend Wrapup

You can view the Next Market Commentary item: Wed Feb 6, 2008, BHP Billiton plays hardball with Rio Tinto

You can return to the main Market Commentary page, or press the Back button on your browser.