Bannerman Resources (BAN-T, BMN-A) says it’s not going to “tie its hands down” in a long-term arrangement with Sichuan Hanlong Group just yet, keeping its doors open to a less-conditional offer by the Chinese conglomerate and other interested parties.
Hanlong Mining Investment, a subsidiary of Sichuan Hanlong, has been eyeing Bannerman’s sizeable Etango uranium deposit in Namibia for some time. In mid-July it made a conditional proposal to buy the junior for A$0.612 per share, in what Bannerman said was a “highly conditional” and opportunistic gesture, given that its share price fell considerably after the Fukushima incident in March and continued to slide.
“The Hanlong proposal was submitted at a time when the uranium price was weak and not yet reflecting the fundamentals of expected supply and demand imbalances [considering] the continued move to nuclear power by the world’s fastest growing nations,” Spyros Karellas, Bannerman’s investor relations representative, explained in an email.
Etango is a sizeable and relatively simple uranium project which is extremely leveraged to increases in the uranium price, he adds, saying that from last July to the Fukushima incident the price of uranium shot up 70%, and Bannerman’s share price tripled.
But that eight-month ascent was quickly reversed by the time Hanlong made its offer as the company fell back into the 30¢ range, where its shares were trading at last July. The spot price for uranium also toppled, sliding below US$52 per lb., close to last July’s price of US$45.60 per lb.
Since then, the company has routinely been updating its shareholders on the proposal.
It recently announced that Hanlong’s financer, the China Development Bank, required extra due diligence to gain more certainty surrounding the timing and conditions of a mining licence before it could provide Hanlong with funds. Bannerman explains Hanlong could not say how long the additional work would take or when it would get the green light from its financer and the Chinese government.
As a result, the Namibia-focused uranium explorer told investors that it was “unlikely” whether it would know if Hanlong could enter a binding agreement with Bannerman within a suitable timeframe that would meet the expectations of its shareholders and the Namibian government.
“That’s not to say that nothing will come of the Hanlong proposal,” Karellas says. “It’s just that the board is not willing to lock the company into a long-term arrangement with limited certainty.”
Bannerman has also told Hanlong it’s still open for a “less conditional” proposal but will resume discussions with other interested parties.
Some of Hanlong’s previous conditions included a three-month period of exclusivity, which Bannerman shook off as being inappropriate because there was no agreement on the price or conditions of the proposed bid.
Other terms included Hanlong completing due diligence before Sept. 30, a Bannerman board recommendation and receiving a handful of approvals and support from major shareholders, institutions and relevant stock exchanges.
Karellas does not say how many other companies Bannerman is talking to regarding possible joint ventures or acquisitions, but he mentions that as long as the price is right, the junior will take either avenue to move Etango forward.
Bannerman’s 80%-owned project is one of the world’s largest undeveloped uranium deposits. It is located near Rio Tinto‘s (rio-n, rio-l) Rossing uranium mine and Paladin Energy‘s (pdn-t, pdn-a) Langer-Heinrich mine.
The project hosts a measured and indicated resource of 336.2 million tonnes grading 201 parts per million U308 for 148.7 million lbs. contained U308. Results from an ongoing definitive feasibility study shows Etango could process 20 million tonnes per year and between 6 million lbs. and 8 million lbs. U308 for at least 15 years. The feasibility is anticipated to be done by next March.
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