Is more uranium consolidation on the way?

Fukushima has taken the wind out of the nuclear power and uranium markets, but the furious pace of consolidation in the industry is leaving investors betting on the next takeover target.

In the last four months, no less than eight uranium players have vanished from the market.

In early January, Rio Tinto (RTP-N, RIO-L) completed the acquisition of Hathor Exploration and its Roughrider deposit in Canada’s Athabasca Basin. In early February Macusani Yellowcake (YEL-V) acquired Southern Andes Energy, the largest landowner in Peru’s emerging Macusani uranium district. That acquisition was followed in late February with Energy Fuels' (EFR-T) takeover of Titan Uranium and its Sheep Mountain project in the Crooks Gap district of Wyoming.

March saw three uranium deals. Uranium Resources (URRE-Q, URA-L) acquired Neutron Energy, a private uranium exploration and development company with assets in New Mexico, South Dakota and Wyoming. China’s Guangdong Nuclear Power Corp. (CGNPC) gobbled up Extract Resources and its massive Husab project in Namibia, and Uranium Energy Corp. (UEC-X) picked up CUE Resources and its Yuty project in southeastern Paraguay.

Energy Fuels was back at it again in April with a takeover of Denison Mines' (DML-T, DNN-X) U.S. uranium assets including the White Mesa mill in Utah—the only conventional uranium mill currently operating in the U.S. And most recently Fission Energy (FIS-V) said it will annex Pitchstone Exploration, whose property portfolio includes thirteen projects in the eastern Athabasca Basin, five of which are 100% owned, two joint-venture projects in Namibia, and several joint venture projects in the Hornby Bay Basin of Nunavut.

So what do some of the industry experts say about future takeover targets?

David Talbot, a mining analyst at Dundee Capital Markets in Toronto, commented in an April 26 research note that potential targets could include UEX Corp. (UEX-T), Fission Energy, and Forum Uranium (FDC-V).

His top developer pick is UEX Corp. “While its 88 million lb. U308 high-grade Shea Creek project is likely coveted by others, we believe the 40 million pounds at Hidden Bay located just 4 km from Cameco’s Rabbit Lake mill, and its potential for becoming a Tailings Management Facility is the near-term prize,” he reasons, noting that Cameco Corp. (CCO-T, CCJ-N) already owns 23% of the company and participated in its latest financing. He holds a buy rating on the stock with a target price of $1.85 per share. As for Fission Energy, Talbot argues it is “growing its 9 million pound high-grade J-Zone deposit and appears to be on the verge of another discovery at PLS.” And Forum Uranium is on Talbot’s Exploration Watch List as another potential Athabasca Basin takeover target.

David Sadowski, a mining analyst at Raymond James in Toronto, includes Fission Energy in his list of potential takeover targets. In a report last August, Sadowski noted that the Waterbury Lake project, which is 60% owned by Fission and 40% owned by giant Korean nuclear utility Kepco, could host 15-25 million pounds of U308. The Waterbury Lake project is immediately to the west of the Roughrider deposit, formerly owned by Hathor Exploration but now part of Rio Tinto’s property portfolio. “Given our longstanding view that the two projects (Roughrider and Waterbury Lake) would be unitized and developed as a single mine, we believe Fission is a compelling takeover candidate for the eventual owner of Hathor,” Sadowski wrote in a research report in August 2011.

Sadowski also noted in a research note last October that it would not surprise him if Rio “was eyeing Areva’s Athabasca assets (assuming Areva’s weak finances, recent restructuring and African-focus finally compel an exit).”