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F3 Uranium (TSXV: FUU) has received a C$15 million ($11m) strategic investment from Denison Mines (TSX: DML; NYSE: DNN) to support the advancement of its Patterson Lake North (PLN) property in Saskatchewan.
The investment comes in the form of a convertible debenture financing that carries a 9% interest with a five-year term. The conversion price is C$0.56 per share, representing a 30% premium to F3’s current five-day volume weighted average price.
F3 shares were up 6.9% to C$0.42 at mid-day Friday in Toronto following the announcement, taking the company’s market capitalization to C$164.4 million.
Assuming conversion of the debentures and no other changes to F3’s outstanding share capital, the common shares issued would represent about 6% of the company.
“We are pleased to welcome Denison as a strategic investor in the company. Denison is a uranium industry leader, possessing a diverse array of both early and advanced-stage assets in the Athabasca Basin,” said F3 CEO Dev Randhawa.
Gross proceeds of the debentures will be used main for exploration and development at PLN, and for general working capital purposes. The debentures are expected to close on or around Oct. 18, subject to conditions including the receipt of all necessary regulatory approvals, including the acceptance of the TSXV.
F3’s PLN property is located on the southwestern edge of the Athabasca Basin, comprising two mineral claims covering 40.8 sq. km. Its focus is on the newly discovered high-grade JR zone, where drilling last year returned uranium oxide grades of up to 59.2%. The company plans to continue drilling into 2024.
Denison’s flagship, 95%-owned Wheeler River project is located on the southeastern edge of the basin. In June, the company released a feasibility study for the project, which outlined a base case after-tax net present value (at an 8% discount) of C$1.6 billion and an internal rate of return of 90%. Preproduction capital costs are estimated at just under C$420 million, yielding an after-tax NPV to initial capital cost ratio in excess of 3.7 to 1. The payback period is 10 months.
The PLN project is close to Fission Uranium‘s (TSX: FCU) Triple R and NexGen Energy‘s (TSX: NXE; NYSE: NXE; ASX: NXG) Arrow high-grade uranium deposits, which the company says are poised to become the next major area of development for new uranium operations in northern Saskatchewan.
