Canada's Cameco Corp, the world's largest uranium producer, has bowed out from the bidding war over uranium miner Hathor Exploration, after the Anglo Australian mining giant Rio Tinto last week raised its offer to $654 million.

Citing financial discipline for its decision, Saskatoon-based Cameco said in a brief statement that it will let its bid lapse.

"After careful consideration, we cannot justify increasing the price beyond our current offer," Cameco's chief executive Tim Gitzel said.

Although armed with about $1.2-billion in cash and having credit facilities of $1.25-billion, with the potential to expand to $1.75-billion, Cameco may have given up looking at Rio Tinto's strong balance sheet.

Cameco first made a hostile bid in August and Rio Tinto joined in the bidding war in October.

Since then, both companies have raised their bids with Rio Tinto raising its bid on 17 November to $654 million or $4.70 a share, (See: Bidding war for uranium miner Hathor intensifies after Rio Tinto raises offer) which finally was beyond he reach for Cameco.

Both mining giants have strong reasons to want to buy Vancouver-based Hathor's assets in the resource-rich Athabasca basin. Hathor's Roughrider uranium deposit holds around 58 million pounds of uranium, according to industry experts, and has the potential to produce at least 5 million pounds of the yellow metal a year.

Currently Cameco, which produces about 16 per cent of the world's uranium, and French nuclear giant Areva are the two dominant uranium miners in the Athabasca Basin.

Rio Tinto, the world's fourth largest uranium miner, mines uranium in Australia and Africa, but is seeking to gain a foothold in the Athabasca basin, where about 20 per cent of the world's uranium is produced.

Cameco said that giving up on Hathor will not have an impact on its plans to double uranium production to 40 million pounds by 2018, and that there are other acquisition opportunities around the world it can pursue.

''We are scouring the world for different plays that might make sense to Cameco,'' Gitzel said in an interview after announcing the retreat.

Cameco owns several producing uranium mines and development-stage projects in Canada's Athabasca basin, the US and Kazakhstan.