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Patterson Lake South’s still up for grabs as Fission/Denison merger fizzles

by Greg Klein | October 13, 2015

Two renowned dealmakers have failed in their plan to merge the Athabasca Basin’s two most prominent exploration companies. On October 13 Fission Uranium TSX:FCU and Denison Mines TSX:DML announced that proxies submitted four days earlier showed majority support from both companies but fell short of the two-thirds vote required from Fission shareholders. The companies called off shareholders’ meetings scheduled for October 14.

Patterson Lake South’s still up for grabs as Fission-Denison merger fizzles

Potentially one of the world’s lowest-cost uranium mines
according to its PEA, Patterson Lake South seeks a new owner.

Fission shareholders expressed skepticism soon after the proposal was announced in early July, putting CEO Dev Randhawa on the defensive in a conference call. To drum up support, he and Denison director Lukas Lundin then spoke to shareholders at an October 6 town hall meeting in Toronto.

The deal would offer Fission “superb access to capital via the Lundin Group,” as well as a large Denison portfolio featuring its 60%-held Wheeler River project and 22.5% interest in the McClean Lake mill, Randhawa maintained. He and Lundin noted “two of the leading independent proxy advisory firms,” Institutional Shareholder Services and Glass Lewis & Co, recommended a yes vote.

A week prior to the proxies, the National Post’s Peter Koven reported strong support from Fission’s institutional shareholders but stated “the vast majority of the stock is held by retail shareholders, some of whom are loudly resisting the deal.”

A website called FCU Oversight argued that from the outset the terms severely undervalued Fission’s sole asset, Patterson Lake South, and included “no value” for the preliminary economic assessment released in early September.

FCU Oversight added that Denison’s “Athabasca projects are located on the eastern side of the basin and are not considered as robust, or as readily minable. The balance of Dennison’s [sic] international assets are simply not synergistic to Fission.” The website also questioned the appointments of Fission brass to positions with the new company.

Randhawa told Koven he foresaw no deal with giants like Cameco Corp TSX:CCO or AREVA. Fission has shown no interest in taking PLS into production itself. In fact the company was set up specifically to be sold after spinning out its other assets to Fission 3.0 TSXV:FUU to make PLS a more attractive take-out target.

Foreign suitors might be emboldened by last June’s federal government decision to allow Australian Paladin Energy’s (PDN) ownership of its proposed Michelin mine in Labrador. Canada requires at least 51% domestic ownership of uranium operations but allows exceptions when no Canadian partners materialize.

The failed merger marks the second time PLS has slipped through Denison’s fingers. The company nearly got the project in November 2012 with Denison’s takeover of Fission Uranium’s predecessor, Fission Energy. Before the deal was signed, Fission Energy’s joint venture partner Alpha Minerals struck massive pitchblende and strong radioactivity in the project’s discovery hole. Randhawa renegotiated the deal with Lundin to exclude the project. Fission Uranium bought out Alpha the following year.

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