Denison eyes a bigger piece of cake

In a move to lock up uranium-rich ground in the Athabasca Basin in northern Saskatchewan, Denison Mines (DML-T) plans to buy joint-venture partner JNR Resources (JNN-V) for nearly $10 million.

JNR is one of the largest landholders in the Athabasca Basin and surrounding areas with 2,550 attributable sq. km, writes Raymond James analyst David Sadowski in a note.

In the basin, JNR holds six joint-venture properties with Denison, and another six wholly owned exploration properties, including Way Lake, where it recently released an inferred resource of 10.35 million tonnes grading 0.03% uranium oxide for 7 million lbs.

But JNR’s best asset and perhaps the main reason for the acquisition, Sadowski says, is its jointly held Moore Lake project that sits 10 km from Denison’s 60%-owned flagship Wheeler River project, which is “one of the best uranium discoveries of the past decade.” (JNR currently holds 25% of Moore Lake.)

The smaller explorer also holds three other uranium properties in Newfoundland and Saskatchewan.

The acquisition is a “logical consolidation step for Denison and advances our goal to become the preeminent exploration company in the Athabasca Basin,” states Denison’s chairman Lukas Lundin in a statement.

Under the agreement, JNR shareholders will receive 0.073 of a Denison share for each share held or roughly 8.4 million Denison shares.

The tabled offer represents a premium of 53% to JNR’s 20-day volume weighted average price, or a 55% premium to its Nov. 13 close.

Pleased with the premium, the smaller firm’s board has supported the takeover, which requires at least two-thirds of JNR’s shares being tendered and regulatory approvals. 

Once completed, JNR will own roughly 2% of Denison. If it changes its mind about the offer or accepts a superior bid, JNR will have to pay a termination fee of $325,000.

“We like the deal as it significantly builds on Denison’s suite of assets in the Athabasca Basin, the world’s premier uranium district, without significant equity dilution or reduction in the company’s cash position,” comments Sadowski, adding M&A in the basin may pick up.

Cantor Fitzgerald analyst Rob Chang suggests Denison may even be interested in other regional plays in the basin such as Fission Energy (FIS-T) or Alpha Minerals (AMW-V) to increase its land position, and ultimately grab the attention of global miner Rio Tinto (RIO-N, RIO-L) and possibly Cameco Corp. (CCO-T, CCJ-N). Both firms have recently shown a growing interest in the Athabasca Basin.

Last November, Rio bought Hathor Exploration, putting its foot in the highly-prospective basin. But the acquisition was too small to “move the needle on its own for Rio,” says Chang.

More recently, Cameco acquired a 27.9% of Millennium from Areva. Cameco also owns 30% of Denison’s Wheeler project, with JCU Exploration Co. holding the remainder 10%.

Denison closed Nov.15 at $1.06, losing more than 9% since the bid was announced before market open yesterday.