Uranium mergers and acquisitions (M&A) activity is expected to heat up in the months ahead as the uranium price powered to its highest level in more than 12 years recently.
We previously wrote about our top takeover target in the uranium space as well as another that would be a good fit for a larger producer.
And although it’s one of the smaller companies operating in the Athabasca Basin, F3 Uranium Corp could have big upside due to its promising discovery.
F3 currently holds 18 projects across Saskatchewan’s Athabasca Basin, several of which are near large uranium discoveries including Triple R, Arrow and Hurricane.
It’s the company’s Patterson Lake North (PLN) property, however, that has people talking, especially after drilling an 18-metre intercept of 8.8% uranium oxide from the JR Zone in August, which followed equally impressive off-scale mineralization discovered last November.
F3 management has called it the best discovery since IsoEnergy’s Hurricane deposit, which ranks as the most significant uranium discovery made in the Athabasca Basin in recent years, according to PI Financial analysts.
"We recognized early on that the geology and the alteration in that structure was quite similar to the Triple R deposit itself," F3 Uranium president Raymond Ashley told Canadian Mining Journal recently, referred to the discovery his former company, Fission Uranium, made at the Patterson Lake South (PLS) project in 2014.
F3 Uranium was spun out from Fission Uranium and is the third Athabasca Basin play created by Ashley and F3 CEO Dev Randhawa, whose first company Fission Energy was sold to Denison Mines in an all-stock transaction in 2013.
Denison has also recently provided Randhawa and Ashley’s current company with unsecure convertible debentures financing in the amount of $15 million, which could see the company take an approximate 6% equity stake in F3 Uranium presuming it doesn’t issue more shares.
That would make the $1.7 billion market cap Denison Mines a logical suitor for F3, which sports a market valuation of about $150 million.
Denison Mines has a 95% effective interest in Wheeler River project, which the company calls the largest undeveloped uranium project in the infrastructure rich eastern Athabasca Basin.
Denison also has a 67.41% interest in the Waterbury Lake project, which has estimated life of mine production of 9.7 million pounds of uranium oxide at average cash operating costs of just US$12.23 per pound, plus a 22.5% interest in the Strategic McClean Lake Uranium Mill, as well as smaller stakes in other projects operated by majors.
And the company holds 2.5 million pounds of physical uranium in storage facilities, valued at more than $170 million based on the current market prices.
Thus, a combination of F3 and Denison Mines would be appealing to a larger uranium miner looking to grow its asset base in the Athabasca Basin.
Early drill results from F3 Uranium’s PLN property, meanwhile, has widths and grades comparable to that of Triple R and even NexGen Energy’s Arrow deposit, with the only question being how big will the resource be?
To find out, the company will need to spend a lot more money on drilling and will likely require the resources only a much larger company can provide.
Contact Sean at sean@proactiveinvestors.com