Fission, Alpha hammer out $185M deal

VANCOUVER — After a bit of back and forth, fifty-fifty joint-venture partners Fission Uranium (TSXV: FCU; US-OTC: FCUUF) and Alpha Minerals (TSXV: AMW; US-OTC: ESOFF) have nailed down an agreement that will see Fission acquire full ownership of the Patterson Lake South (PLS) uranium discovery in the southern reaches of Saskatchewan’s Athabasca basin.

Alpha originally rebuffed a consolidation proposal on Aug. 26 that would have seen its investors receive 5.3 shares of Fission for every Alpha share held, which equated to $7.26 per Alpha share, based on Fission’s closing price on Aug. 23. The offer valued Alpha at US$170 million, but a 48-hour closing period.  The insufficient premium prompted the company to take a step back and request more time to mull over its options.

Alpha said of the original proposal that it’s rapid closing offered little opportunity for review, and cited concerns about the timing, given that the partners are in the midst of a US$7-million, 11,000-metre winter drill program at PLS that has been producing strong results.

But Alpha also said that consolidation was inevitable, while both companies explained that the dialogue had been ongoing regarding a takeover for the last “several months.” Given that Fission acts as exploration operator, while Alpha contributes its half of exploration expenditures, it does not come as a surprise that the partners resolved the consolidation amicably.

On Sept. 3 the companies announced Fission had sweetened its offer to $7.67 per share, which brings Alpha’s value to $185 million. 

Alpha shareholders would receive 5.725 shares of Fission for each share held, which represents a 14.5% premium on Aug. 23, compared to an initial 11% premium.

“This is a milestone. Combining this incredible shallow and high-grade uranium asset under one roof will benefit the shareholders of both companies. On behalf of Fission, I particularly want to thank Ben Ainsworth, Mike Gunning and the rest of the Alpha team for their efforts in reaching this point, and I look forward to working with them further as we develop PLS,” Fission chairman Dev Randhawa said.

To narrow Fission’s focus on PLS, most of the non-cash assets and obligations held by Alpha and Fission are to be spun out into two companies, with each receiving US$3 million in working capital. 

Alpha shareholders would likely retain interests in the company’s Donna gold project in B.C., Mikwam gold project in Ontario and a portfolio of non-related uranium assets in the Athabasca basin.

Fission’s spinout would work in much the same way, though the company notes the spinout would retain “certain assets related to PLS.” 

Fission recently completed a joint venture on its contiguous Patterson Lake North (PLN) project with Azincourt Uranium (TSXV: AAZ), and also holds its Clearwater uranium project south of PLS.

“[There are] indications that [PLS] is one of the most significant uranium discoveries in the Athabasca basin,” Alpha president and CEO Benjamin Ainsworth says. “We believe that with the consolidation, the project will provide further benefits to our shareholders. Also, the creation of a new company will offer our shareholders upside potential from the technologies used at PLS in the exploration of other properties in Alpha’s portfolio.”

Ainsworth’s final point is likely an important part of the agreement for Alpha. Back in mid-July Fission filed a patent application on an invention it calls “System and Method for Aerial Surveying or Mapping of Radioactive Deposits.” Having access to the technology, which has proven effective for Fission’s technical team, could give Alpha a leg-up in future exploration.

Alpha shares had risen 2%, or 14¢, following news of the consolidation agreement before closing at $7.05 at press time on 644,300 shares traded. 

The company maintains 24.2 million shares outstanding for a $170.5-million market capitalization.

Shares of Fission dropped 6.7%  or 9¢ following the news, as 7.7 million shares traded hands, en route to a $1.25 close at press time. 

The company had 150.6 million shares outstanding for a $188-million market capitalization. 

Under the agreement Fission would issue another 138 million shares, which would dilute it by 93% and brings total shares outstanding to 289 million.

The partners last released an exploration update from PLS on Aug. 22. The results were highlighted by drill hole 13-086, which was collared at the R390E zone and intersected a 47-metre-wide mineralized zone, including 5.3 metres of composite off-scale radioactivity.