Bayswater matches competing offer for Strathmore’s Pine Tree-Reno Creek

Vancouver – Bayswater Uranium (BYU-V) inked a deal to acquire the Pine Tree-Reno Creek uranium properties in Wyoming from Strathmore Minerals (STM-V) in August and completed a pre-feasibility study and hired a project manager before the deal even closed. Then an unidentified foreign company tried to snag the project away from the junior with a slightly superior offer.

To no one’s great surprise, Bayswater just matched that offer, putting its Pine Tree-Reno Creek plans back on track.

Bayswater is now paying US$17.5 million in cash and US$2.5 million in shares, and granting Strathmore a 5% gross production royalty, for the properties. Bayswater can repurchase the royalty at any time for US$1 million in cash and US$1 million in shares for each 1% royalty reduction.

The new deal actually reduces the overall payment amount, but requires payment immediately instead of staged over two years. In the old deal, Bayswater was to pay US$26 million in cash and US$6 million in shares in payments spread over two years.

Pine Tree-Reno Cree is an advanced stage uranium project in Wyoming’s Powder River basin. The group of properties that make up the project sit 40 km southeast of the producing Christensen Ranch in-situ recovery (ISR) mine, recently bought by Uranium One (UUU-T) from AREVA, and 50 km north of Cameco‘s (CCO-T, CCJ-N) producing Smith Ranch ISR mine.

The project is home to a measured and indicated resource of 7.5 million tonnes grading 0.066% U₃O₈, for 10.96 contain lbs. uranium oxide. The deposits sit roughly 100 metres below surface and are considered highly amenable to ISR, due to their compact shapes, good continuity, and excellent permeability, porosity, and transmissivity. During the 1980s and 1990s metallurgical testwork and a pilot operation demonstrated ISR recoveries of up to 76%.

According at a pre-feasibility study commissioned by Bayswater that was completed in October, an ISR mine at Pine Tree-Reno Creek could recover 7.6 million lbs. U₃O₈ over a 6-year mine life. It should cost only US$48.2 million to build the operation and another US$13.72 in operating costs to produce each pound of uranium oxide.

The project carries a net present value of US$164 million, using an 8% discount rate, and should produce a 79% internal rate of return, allowing payback in two years. The study assumed a long-term uranium price of US$67.57 per lb.

A key feature of the Pine Tree-Reno Creek acquisition is that the project comes with a deep well injection permit for two disposal wells to take the wastes from the ISR operation. There is also an abandoned dry oil well on the property that will serves as one of the deep injection waste wells.

The pre-feasibility study did not consider the project’s inferred resources, which stand at 3.5 million tonnes averaging 0.063% U₃O₈ for 4.73 million lbs. uranium oxide, nor did it include the historic resource containing 8.4 million lbs. U₃O₈ at a grade of 0.083% U₃O₈ in a nearby deposit. The historic portion of the resource does not comply with National Instrument 43-101 regulations.

Strathmore staked the ground at Pine Tree-Reno Creek in 2003, when Cameco dropped it in the face of falling uranium prices. In 2007 the company signed a joint venture deal whereby American Uranium (ACUC-O) could earn a 60% interest in the project by spending US$33 million over six years. American Uranium has since spent roughly US$3 million on exploration, maintaining good standing with respect to the agreement.

The new deal incorporates the same arrangement with Strathmore’s joint venture partner at Pine Tree-Reno Creek, American Uranium, as was in the earlier deal. In exchange for American Uranium’s consent to the transaction and the termination of its option rights on the project, Bayswater will pay the company US$1 million in cash and US$1 million in shares.

At a November meeting Bayswater’s shareholders consented to a share consolidation of up to 15 to 1. As such, in early January, the company rolled back its share count on a 10 to 1 basis. Bayswater also changed its trading symbol to BYU, from BAY.

Bayswater’s share price gained 5¢ on news of the new deal to close at $1. Subsequent to the share rollback, the company has 15.4 million shares outstanding.

Since the competing offer for Pine Tree-Reno Creek was announced in late December Strathmore’s share price has gained 10¢ to reach 74¢. Strathmore has a 52-week trading range of 20.5¢ to 82¢ and has 72 million shares outstanding.