Fission Uranium Corp (FCU)

[Tommy]

$FCU.V - Uranium juniors merger between Fission, Alpha Minerals creates bigger target

http://business.financialpost.com/2013/09/03/uranium-juniors-merger-between-fission-alpha-minerals-creates-bigger-target/?source=email_rt_mc_body&app=n

The co-owners of a landmark Saskatchewan uranium discovery are coming together in a deal that they hope will be a precursor to a much bigger sale in the future.

Ever since junior miners Fission Uranium Corp. and Alpha Minerals Inc. started to release spectacular drilling results from their Patterson Lake South (PLS) project last year, investors viewed a merger of the two companies as a logical move. It would give them greater scale, make them more appealing to large investors and create a potential takeover target for a senior producer.

A friendly deal finally arrived on Tuesday, as Fission said it will buy Alpha for $185-million in stock. The move comes after a few large Alpha shareholders approached Fission about putting the two companies together. Each company owns 50% of the PLS project.
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“It all started with their shareholders coming to us, and not us coming to them,” Fission chairman and chief executive Dev Randhawa said in an interview.

PLS is a very early-stage discovery, but the grades are high and the potential is enormous. It is the most exciting find in Saskatchewan’s Athabasca Basin since Hathor Exploration Ltd. discovered the Roughrider deposit in 2008. Hathor was later sold for $654-million.
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Several other junior companies have flocked to the region around the PLS discovery in hopes of repeating Fission and Alpha’s success, creating Saskatchewan’s biggest uranium staking rush in years.

The PLS deposit lies near the western edge of the Athabasca, an area that was largely abandoned by explorers prior to this discovery. Mr. Randhawa said it has an advantage over other Saskatchewan projects because it is at a very shallow depth. That reduces mining costs and risks.

“That’s why this discovery is so important,” he said. “When uranium prices are so beat up, mining companies are going to go to the projects that are easiest to mine first.”

He made it clear that the ultimate plan is to sell the combined company to a major producer like Cameco Corp. or Areva SA, which have the financial and technical resources required to bring the PLS deposit into production.

Of course, this is not an easy time to sell a uranium company. The spot price is floundering at a multi-year low of about US$34 a pound as the industry struggles to recover from the Fukushima disaster in 2011.

However, there is hope within the industry that the market is set for a turnaround, as a long-running Russian supply deal is coming to an end and Japan is slowly working to re-start idled nuclear reactors. That could convince senior companies to take a closer look at M&A opportunities, experts said.

“I do think there will be some consolidation,” said Robert Gill, portfolio manager at Aston Hill Institutional Partners. He noted that Fission paid a very healthy premium for Alpha compared to other recent uranium transactions.

The merged company will only hold the PLS deposit, as Fission and Alpha plan to spin out all their other projects into new companies. Fission completed a similar deal earlier this year when it sold a chunk of assets to Denison Mines Corp.