Rio Algom cancels Uranium offer

Toronto-based Rio Algom (TSE) has withdrawn its US$6.40 a share offer for the 92% interest in Uranium Resources (TSE) it doesn’t already own because of low uranium prices and the company’s high production costs.

“In view of the extraordinary changes which have occurred since the merger was announced in May 1991, we could not justify continuing with the transaction,” said Robert Luke, president of Rio Algom’s U.S. affiliate. “Primarily, the market and outlook for uranium have been dramatically altered, as reflected by the 20% drop in uranium prices since May and the present pessimism in the market resulting substantially from Soviet dumping,” he said.

Production at Uranium Resources’ Rosita property in South Texas was hampered this year by bacteria in the host rock. However, even though the problem has been resolved, Luke said production costs are now higher than Rio Algom anticipated when tabling its offer in May.