Fresh from a successful 2016, mining royalties company Anglo Pacific Group PLC (LON:APF) has inked a £26.4mln streaming agreement that will give it exposure to the highest grade uranium operation in the world.
The deal with Denison Mines Inc. (TSE:DML) means Anglo will now receive Denison’s 22.5% share of the proceeds from the McClean Lake mill in Canada, which is operated by AREVA Resources Canada.
The mill earns toll revenue for each pound of triuranium octoxide – a stable, yellow powder and a common form of uranium – that it processes.
Under the terms of the deal, Anglo is entitled to toll milling revenues dating back to 1 July 2016.
“This transaction ticks all the boxes for Anglo Pacific and moves forward our growth and diversification in a material way,” said Anglo chief executive Julian Treger.
“The transaction should be accretive to our 2017 income, building on the more than doubling of income in 2016.”
All of the ore processed at the McClean Mill comes from the Cameco Corp-operated Tier 1 Cigar Lake uranium mine in Canada.
It currently processes 18 million pounds (Mlbs) of ore each year from Cigar Lake but has the scope to increase this to 24Mlbs, which could result in increased income for Anglo.
Funding
To fund the acquisition, in addition to an upfront payment of £1.64mln, Anglo has secured an initial £24.8mln, 13-year loan which bears interest of 10% per annum.
The loan is payable each quarter in cash and is fairly flexible in that it allows Anglo to repay more when toll revenues come in ahead of expectations or roll over to the next payment should revenues not equal the accrued interest.
Anglo confirmed it had conditionally raised £13.7mln through the issue of new shares which is being conducted through an accelerated bookbuilding process.
At 3.15pm, the shares, up 130% in the last year, were changing hands for 129p each.
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