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Rockgate directors “reluctantly” recommend Denison offer to shareholders

by Greg Klein | October 21, 2013

With no white knight in sight, Rockgate Capital TSX:RGT directors reluctantly recommended shareholders accept Denison Mines’ TSX:DML “unsolicited opportunistic hostile takeover bid.” The October 21 announcement came after negotiations between financial adviser Dundee Securities and potential third party bidders failed to produce a superior offer.

Denison’s bid came through suddenly on September 17, just eight days before Rockgate shareholders were to vote on a proposed merger with Mega Uranium TSX:MGA. Rockgate directors called off the vote, noted several criticisms with Denison’s offer and recommended shareholders take no action pending further study and negotiations. Denison valued its offer, 0.192 of a Denison share for each Rockgate share, at about $26.7 million, a 38% premium over the Mega offer, based on September 16 prices.

For Rockgate to be subject to an unsolicited opportunistic hostile takeover bid at this crucial stage is disappointing to say the least.—Karl Kottmeier, president/CEO
of Rockgate Capital

In a statement accompanying Rockgate’s October 21 announcement, an obviously discouraged president/CEO Karl Kottmeier recounted how the company overcame seven years of tribulation only to succumb to Denison:

Over the past seven years Rockgate has developed the Falea uranium-silver-copper deposit into a potentially world class asset. We have raised over $90 million to fund that effort, weathered poor market conditions, the Fukushima disaster, a coup d’état in Mali, and an Al Qaeda invasion and occupation of almost half of the country, yet despite these significant challenges remained focused on building the Falea asset and responsibly managing the company. For Rockgate to be subject to an unsolicited opportunistic hostile takeover bid at this crucial stage is disappointing to say the least. We had hoped that shareholders of Rockgate would receive greater value from the strong fundamentals of the Falea project and not just based on the size of Rockgate’s cash reserves.

Updated last December, Falea’s resource estimate shows:

  • a measured category of 1.39 million tonnes averaging 0.14% for 4.29 million pounds uranium oxide (U3O8)

  • an indicated category of 14.28 million tonnes averaging 0.08% for 25.29 million pounds

  • an inferred category of 15.35 million tonnes averaging 0.05% for 15.69 million pounds

Rockgate had a pre-feasibility study scheduled for January release.

Should its Rockgate proposal succeed, Denison has stated it will spin out its African assets to focus on Saskatchewan’s Athabasca Basin. In September, following a review by the Ontario Securities Commission, the company filed a new NI 43-101 to replace two previous reports for its Mutanga project in Zambia.

Rockgate also stated it would not oppose Denison’s request that the British Columbia Securities Commission impose a cease trade order on options granted to directors and senior staff. Denison had termed the options “improper defensive tactics.”

Denison’s offer remains open until October 25.

Rockgate shares opened October 21 at $0.19, half a cent above their previous close, dropped back to $0.185, rose to $0.205, then closed on $0.20. With 116.9 million shares outstanding, the market cap came to $23.38 million.

Denison opened the day at $1.03, a penny below the previous close and reached a high of $1.08 before closing on $1.07. The company had 449.93 million shares outstanding for a $481.42-million market cap.

Read more about Denison’s and Mega’s competing proposals for Rockgate.

Read more about uranium merger-and-acquisition activity.

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