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Uranium consolidation

January 16th, 2013

Fission likes Denison’s offer, wants to “do it all again” in Saskatchewan’s Athabasca Basin

by Greg Klein

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(Update: The spin-out company Fission Uranium Corp TSXV:FCU began trading on April 30, 2013.)

Uranium M&A activity continues with Denison Mines’ TSX:DML move to acquire Fission Energy TSXV:FIS. Both companies back the plan, which would help Denison consolidate its position in Saskatchewan’s Athabasca Basin. Meanwhile Fission management would move into an aggressively “lean and hungry”—but well-financed—spinoff.

A helicopter lands at Waterbury Lake. Under part of the proposal, Denison Mines would get Fission Energy’s 60% stake in the 40,256-hectare uranium project.

A helicopter lands at Waterbury Lake. Under part of the proposal,
Denison Mines would get Fission Energy’s 60% stake in the
40,256-hectare uranium project.

Under the binding letter of intent announced January 16, Denison would get Fission’s 60% interest in the Waterbury Lake uranium project. Fission’s other focal point, its 50% stake in the Patterson Lake South uranium project, would spin out to a new company headed by the Fission team. The deal, which values Fission at $70 million, would offer 0.355 Denison shares for each Fission share. As a result, Fission shareholders would own about 11% of Denison as well as a proportional interest in the newly formed company.

The parties expect consummation by April. The LOI includes a reciprocal break fee of $3.5 million.

Patterson Lake South, located in the western Athabasca Basin, is currently a 50/50 joint venture between Fission and Alpha Minerals TSXV:AMW. The high-grade, near-surface project has seen a steady stream of encouraging results since its discovery last fall.

In the eastern basin, Fission holds a 60% interest and 2% NSR in Waterbury Lake. A consortium led by the Korean power utility Kepco holds the remaining 40%. Waterbury’s J-Zone is an extension of the Roughrider deposit, which Rio Tinto bought from Hathor Exploration last year for $654 million. Cameco’s TSX:CCO McArthur River and Rabbit Lake mines, as well as its Millennium deposit, lie on the same trend.

Denison would also pick up the rest of Fission’s eastern basin assets, a few more in Quebec and Nunavut, and Fission’s share of two JVs in Namibia.

Denison already commands a strong position in the eastern basin, with 26 projects covering over 330,000 hectares. Included is Denison’s 60% interest in Wheeler River, a JV in which Cameco and JCU Exploration hold 30% and 10% respectively. Also in the eastern basin, Denison holds a 25.17% interest in the Midwest high-grade uranium deposits and a 22.5% stake in the McClean Lake near-surface deposits and mill, one of the world’s largest uranium processing plants.

Last November Denison acquired 13.9% of International Enexco TSXV:IEC, whose assets include Athabasca’s Mann Lake project, a JV in which Cameco holds 52.5% and AREVA 17.5%. Other Denison assets are located in Mongolia and Zambia.

Speaking to ResourceClips, Fission chairman/CEO Dev Randhawa says, “I think Denison’s corporate strategy is to be a dominant player like Cameco and Rio, so they acquired [JNR Resources TSXV:JNN] last fall and now they’re acquiring our asset next to Rio, which is just north of Denison’s Midwest project.”

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