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Uranium oxide. (Shamil Zhumatov/Reuters/Shamil Zhumatov/Reuters)
Uranium oxide. (Shamil Zhumatov/Reuters/Shamil Zhumatov/Reuters)

Eye on Equities

Is Fission Energy the next uranium takeover target? Add to ...

Now that Rio Tinto PLC has thrown its hat into the ring for Hathor Exploration Ltd. , the outlook is even better for Fission Energy Corp. , says Versant Partners’ Rob Chang.

Fission is a uranium exploration company that owns a majority stake in potential ore bodies adjoining Hathor’s much sought-after Roughrider deposit in Saskatchewan. That positions Fission as a possible future takeover target itself, the thinking goes, and Rio Tinto coming in with a higher offer than what Cameco Corp. has on the table only increases Fission’s potential price tag.

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Rio Tinto’s white-knight offer was unanimously recommended by Hathor’s board of directors and senior managers have agreed to tender all their shares.

But Mr. Chang believes Cameco isn’t going to concede defeat quietly. “With the significant synergies available to Cameco as the Athabasca’s dominant uranium producer and its ownership of two mills, the company likely has the ammunition to increase its bid for Hathor,” he said in a research note today.

Investors appear to agree. At midday, Hathor was trading at $4.47 a share, well above the $4.15 Rio Tinto offer price.

All the better for owners of Fission Energy stock, argues Mr. Chang.

“Due to the bidding war between Cameco and Rio Tinto for Hathor Exploration, we believe Fission Energy could be the next in line to be acquired due to the proximity of J-Zone and J-Zone East to Hathor’s Roughrider zone as well as because of the quality of the deposits themselves,” Mr. Chang said.

Upside: Mr. Chang raised his price target on Fission by 10 cents to $1.60 and maintained a “buy” recommendation.

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CIBC World Markets Inc. analyst Jacob Bout is scaling back his expectations for potash demand and prices for the next 12 to 18 months. As a result, he trimmed his 2012 earnings per share estimate for Potash Corp. of Saskatchewan Inc. to $4.07 from $4.71.

Downside: Mr. Bout cut his price target by $3 (U.S.) to $65 and maintained a “sector performer” rating.

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Methanol contract prices held in well during the third quarter despite falling oil prices, but production issues for Methanex Corp. remain, notes CIBC’s Mr. Bout. Its Atlas plant has been running at reduced rates and will continue to do so until maintenance is done in the first quarter of next year, and its Chilean facility is running only half of one plant due to natural gas issues.

Downside: Mr. Bout cut his price target by $4 (U.S.) to $30 and maintained a “sector performer” rating.

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Ag Growth International Inc. reported lower than expected third-quarter sales, as demand for grain-handling equipment and storage in North America weakened due to uncertainty over crop yields in the U.S. and a quick harvest in Western Canada. CIBC’s Mr. Bout expects these headwinds to carry into the fourth quarter of this year and has lowered his growth assumptions for the company.

Downside: Mr. Bout cut his price target by $15 to $35 and maintained a “sector performer” rating.

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Aastra Technologies Ltd. reported disappointing revenues and earnings in the third quarter, but National Bank Financial analyst Kris Thompson believes that sales should rebound in the seasonally strong fourth quarter. With valuation at historical lows at around eight times earnings, “we’d be buying this stock on a selloff in a big way,” he said.

Upside: Mr. Thompson upgraded Aastra to “outperform” from “sector perform” but trimmed his price target to $18 from $20.

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