Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Denison Mines (TSX: DML) has made an improved offer to acquire UEX Corp. (TSX: UEX) after seeing its US-based rival Uranium Energy Corp. (UEC) trump its original bid earlier this week. The new proposal would see UEX shareholders receive 0.32 of a Denison share for UEX share held, representing an implied purchase price of C$0.51 per UEX share on a spot basis.
Denison said this offer represents a 7% premium to the price implied by the amended agreement between UEX and UEC, based on the one-day volume weighted average price on August 8, 2022, and a 9% premium to the 20-day volume weighted average price. The offer by UEC, which it revised to beat out Denison, had an implied price of C$0.49 per UEX share at the time, based on a share exchange ratio of 0.089 to 1.
“Following the expiration of our previous acquisition proposal, which equated to a premium over the amended UEC agreement on a 10- and 20-day volume weighted average price basis, and after internal discussions, including with our legal and financial advisors, Denison decided to make a further premium acquisition proposal to UEX,” Denison CEO David Cates said in a media statement.
“The success of this offer is subject to the board of UEX determining that it is superior to the amended UEC agreement and is also subject to UEC’s five-day right to match,” Cates said. “We note that on August 5, UEC increased its offer in response to Denison’s superior acquisition proposal of July 22, and that the UEX board of directors concluded that the amended terms offered by UEC constituted a matching offer – despite the fact it implied a lower UEX price from the perspective of premiums over normalized trading periods.”
Cates also said the company recognizes that UEC remains in the “driver’s seat” through its right to match, and that its offer may not ultimately prevail.
“That said, we believe that the UEX assets are so complementary to our own portfolio and Athabasca Basin specialization that it would be short-sighted not to afford another opportunity for both Denison and UEX shareholders to prosper from this combination.”
A successful acquisition of UEX would see Denison consolidate a 100% ownership of the Wheeler River project, which is host to the high-grade Phoenix and Gryphon uranium deposits and represents the largest undeveloped uranium project in the Athabasca Basin region of northern Saskatchewan.
Denison is actively advancing the Phoenix deposit, which is proposed as a low-cost in situ recovery mining operation through the environmental assessment and feasibility study processes. The results from the pre-feasibility study completed for Wheeler River suggest that Phoenix has the potential to be one of the lowest cost uranium mining operations in the world. Denison currently has an effective 95% interest in Wheeler River.
Through acquiring UEX, Denison would also be able to obtain 100% ownership of JCU (Canada) Exploration Company, which holds a portfolio of 12 uranium project joint venture interests in Canada, including a 30.099% interest in the Millennium project (Cameco – 69.901%), a 33.8118% interest in the Kiggavik project (Orano Canada – 66.1882%), and a 34.4508% interest in the Christie Lake project (UEX – 65.5492%). Denison currently has a 50% ownership interest in JCU.
