Paladin Energy (ASX/TSX: PDN) will purchase 100% of Aurora Energy Resources' uranium assets, a subsidiary of Fronteer Gold (TSX/NYSE: FRG), in an all scrip deal.
Under the terms of the agreement, Fronteer will receive 52.1 million Paladin shares, valued at around A$255 million (C$260.87 million).
The deal will make Fronteer Paladin's largest shareholder with an approximate 6.7% stake.
Paladin said the acquisition of Aurora's uranium assets, which includes the Michelin project in Labrador, will give the company access to uranium in Canada.
Aurora's properties in Labrador consist of 91,500 hectares in 32 licences, with six identified uranium deposits in the region containing a measured and indicated resource of; 84.4 million pounds of U3O8 and an inferred resource of 52.5 million pounds of U3O8.
A preliminary economic assessment of the project in September 2009 projected, at an 8% discount rate, that Michelin has a pre-tax net present value of US$914 million, with an IRR of 19.4%, and a pay back period of 4.7 years.
Fronteer said that the sale of its subsidiary's uranium assets will allow the company to focus its resources on advancing its recently consolidated flagship Long Canyon project and Northumberland property in Nevada.
The deal, which remains subject to regulatory approvals, is expected to close in the first quarter of next year.