logo-loader

Denison Mines intends to acquire Fission Uranium for C$483 million

Last updated: 16:51 07 Jul 2015 BST, First published: 14:51 07 Jul 2015 BST

alberta_and_saskatchewan_350_559bdf06ef5d4
Denison Energy’s most important assets will be two uranium exploration and development projects: the Patterson Lake South Project Fission and Denison Mines’ 60% owned Wheeler River project

Canada’s Denison Mines (TSE:DML) (NYSE MKT:DNN) and Fission Uranium Corp. (TSE:FCU) (OTCQX:FCUUF) intends to take over its competitor Fission Uranium for approximately C$483 million to create a diversified uranium company with a promising project portfolio in northern Saskatchewan.

"The continued exploration success at our Phoenix deposit and Gryphon discovery, in combination with the discovery and exploration success of the world class Triple R deposit puts the combined company in an incredibly strong strategic position, with the most significant development portfolio in the world. We are confident that our shareholders will benefit from the value creation opportunities that will be realized through an expanded and more diversified uranium company," said Denison’s executive chairman, Ron Hochstein, Executive Chairman of Denison.

If approved, Fission’s shareholders will receive 1.26 common shares of Denison for each common share of Fission held plus $0.0001 per share in cash. This implies a price of 1.25 CAD per Fission-share, a premium of 18% to the average price of the past 30 days.

The combined company will be named Denison Energy, boasting a market capitalization of approximately C$900 million. Denison Energy would then be equally owned by the Denison- and Fission shareholders. Fission’s chairman and CEO Dev Randhawa will take over the CEO position in the merged company.

"This merger will create the uranium industry's leading exploration and development company at a time when the sector is poised for growth. Denison has a strong, diversified portfolio and, with the Triple R deposit, Fission is bringing the Athabasca Basin's largest undeveloped high-grade resource as well as a successful and award-winning technical and management team," said Randhawa.

Denison Energy’s most important assets will be two uranium exploration and development projects: the Patterson Lake South Project Fission and Denison Mines’ 60% owned Wheeler River project.

Both are located in the Athabasca Basin, which has seen the start of an actual uranium exploration ‘boom’ because its deposits are among the most desirable in the world. Some analysts suggest that when uranium demand gets under way – and it will, given the number of uranium reactors that are being planned for construction until 2020 - the Athabasca properties will be among the ones to benefit first and most. Athabasca is home to such large and uranium rich properties as McArthur River and Cigar Lake.

While most uranium mines produce at grades of 0.15% or less, Athabasca can deliver grades of about 15%. Uranium has been mined in the Athabasca Basin for more than 60 years, which has allowed geologists and engineers to gather plenty of data about the geological formation of uranium enrichment and the area’s unique formations, allowing for the use of much more sophisticated exploration methods than in lesser known areas.

According to the industry giant Cameco (NYSE:CCJ), the outlook for the uranium sector is positive. The Japanese nuclear energy sector has been steadily resuming operations since the Fukushima disaster in 2011 as reactors are gradually brought back online and needing fuel. While not directly affecting prices yet, the recovery from Fukushima will have psychological effects, contributing to a uranium ‘rebound’.

In general most uranium sector analysts expect uranium prices to rise sharply and higher than US$70/lb. after 2020 because of a widely expected supply deficit.

Analyst Gary Lampard from Canaccord told the Globe and Mail last spring that he expects the global uranium market to be in surplus until 2022 while the prospect of shortages beyond that year will prompt utilities “to be more aggressive” in securing uranium by 2018 or 2019, when the price will be $70 per pound.”

Mergers and consolidations in the sector reflect the renewal of interest in the uranium sector. Last month, Energy Fuels (NYSE MKT:UUUU) (TSE:EFR) acquired Uranerz Energy Corporation last week, creating a large and diversified uranium producer with resources in Arizona, Utah, Colorado and Wyoming.

Caledonia Mining tackles 2023 challenges with optimism for 2024 as it...

Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL) chief executive Mark Learmonth tells Proactive's Stephen Gunnion the company faced a challenging 2023, primarily due to poor production in the first half of the year at its core asset, the Blanket Mine in Zimbabwe, and an underperformance...

1 hour, 22 minutes ago