Merger creates new Canadian uranium giant

Tuesday, 7 July 2015

Denison Mines and Fission Uranium are to merge, bringing together their prime Canadian uranium assets to create what the companies describe as a "leading Canadian focused diversified uranium company".

Summer 2014 exploration at Patterson Lake South (Image: Fission)

The combined company will be named Denison Energy Corp and will boast an asset portfolio containing two major Canadian uranium exploration and development projects: Patterson Lake South, currently 100% owned by Fission, and Wheeler River, 60% owned by Denison. Both projects are in Northern Saskatchewan, in the Athabasca Basin.

Denison Energy Corp will be approximately 50% owned by each of Denison's and Fission's existing shareholders. The combined companies will be worth about CAD 900 million ($705 million) based on their market capitalization. The transaction is expected to be completed in October, subject to the necessary shareholder and regulatory approvals. Both companies have agreed to pay a termination fee of CAD 14 million ($11 million), depending on the circumstances, should the deal fail.

As well as the uranium projects - Patterson Lake South and Wheeler River, plus Denison's interests in the Midwest, McClean Lake, Waterbury Lake, Man Lake and Wolly projects – the consolidation includes Denison's strategic 22% interest in the McClean Lake uranium mill, which is operated by Areva. It also includes Denison's African portfolio of uranium claims in Zambia and Mali and its 85% interest in the Gurvan Saihan joint venture in Mongolia.

Fission Uranium took full ownership of the Patterson Lake prospects in the western Athabasca Basin following its spin-out from Fission Energy in 2013, when Denison purchased Fission Energy. The shallow but high grade Triple R deposit at Patterson Lake South is described by Fission as the largest undeveloped uranium deposit in the Athabasca Basin district, for which the company announced 30,600 tU of indicated resources at 1.58%, and 10,000 tU inferred resources at 1.3% (NI 43-101 compliant) earlier this year. A preliminary economic assessment (PEA) for Triple R is expected to be completed in September, Fission COO Ross McElroy said, and the deposit has the potential to be developed as an open-pit mine.

Wheeler River, located in the eastern part of the basin, is Denison's prime exploration focus. Its Phoenix deposit has a total indicated mineral resource estimated at 27,000 tU at an average grade of 19.13% U3O8 - the highest grade deposit in the world. The Gryphon deposit, discovered in 2014, has the potential to add significantly to Wheeler River's already known mineral resources and Denison is following up a winter program at Wheeler River which resulted in the expansion of the Gryphon zone and also the discovery of a new zone of unconformity-hosted uranium nearby.

In a conference call following the announcement of the merger, Fission chairman and CEO Dev Randhawa described the transaction as a "merger of equals". Randhawa drew particular attention to the strategic importance of the McClean Lake mill to potential strategic partners. Uranium ore from Cigar Lake is toll-milled at McClean Lake, which also provides the combined company with cash flow to fund its future activities.

Wheeler River's proximity to McClean Lake - which is designed to process high-grade ore and is already undergoing capacity expansion - offers opportunities for future production. Development of Patterson Lake South would effectively establish a new uranium mining region in the western Athabasca basin, Ross and Randhawa said. The anticipated PEA will address the mining methods to be used at Patterson Lake South - likely underground - and the viability of constructing a mill there.

The senior executive team and board of directors of the combined company will draw from both companies' existing leadership, with Randhawa taking the CEO role and McElroy as president and COO. The board of ten directors will be drawn equally from Fission and Denison's current directors.

Researched and written
by World Nuclear News