Rio Bid by BHP Could Lead to Tightening of World Uranium Market

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A link-up would create the world's largest uranium company, ahead of Canada's Cameco, but a lengthy merger process might slow expansion at BHP's Olympic Dam mine in Australia.

A formal bid by BHP Billiton for smaller mining rival Rio Tinto could tighten the uranium market due to uncertainty over supply, industry sources and analysts say.

A link-up would create the world's largest uranium company, ahead of Canada's Cameco, but a lengthy merger process might slow expansion at BHP's Olympic Dam mine in Australia.

Rio is the second largest producer of uranium in the world with two large operating mines -- Ranger in Australia and Rossing in Namibia. In 2006, Rio's total production was 7,094 tonnes, second only to Cameco, which produced 8,249 tonnes. "The biggest implication for the market, and for Cameco, is whether the significant expansion at Olympic Dam proceeds as scheduled," Cameco Chief Executive Jerry Grandey said.

BHP Billiton produced 2,868 tonnes of uranium in 2006, making it the sixth largest uranium producer in the world.

"BHP is expected to triple the size of their Olympic Dam uranium mine in Australia," said Tim Williams, director of metals and mining at UK-based Ernst & Young.

BHP, the world's biggest mining group, made public its plan on Nov. 8 to take over Rio and forge a mega-mining group with a market capitalisation of around $350 billion.

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