Denison Expanding With Northern Continental Acquisition

Intermediate uranium producer Denison Mines (DML-T, DNN-X) is expanding its empire and acquiring Northern Continental Resources (NCR-V, NCLRF-O) for its 60% interest in the Russell Lake project, adjacent to Denison’s new Wheeler River uranium discovery in Saskatchewan.

Northern Continental’s Russell Lake project, in which Hathor Exploration (HAT-V, HTHXF-O) owns a 40% stake, is on strike with and between two world-class uranium deposits. It is 30 km north of the past-producing Key Lake mine, which serves as Cameco’s (CCO-T, CCJ-N) regional uranium processing facility, and 15 km south of Cameco’s producing McArthur River mine.

McArthur River is the world’s largest high-grade uranium deposit, with proven and probable reserves of 332.6 million lbs. of U₃O₈ at an average grade of 20.69% and accounts for about 60% of Canada’s total uranium production.

“We have showings on the property so there is potential to find an economic deposit that exceeds most other places in the Athabasca,” says Northern Continental’s president and chief executive, Warren Stanyer. “The road between the McArthur River mine and Cameco’s Key Lake mill runs right through our property. . . When you’re that close to a mega deposit, you know the potential is there for another deposit.”

The all-share takeover deal involves one share of Denison for every 10.87 shares of Northern Continental, or one share of Northern Continental for each 0.092 of a Denison share.

The transaction represents a 28.7% premium based on the 20-day volume-weighted average trading price of Northern Continental’s and Denison’s shares, and about a 64.8% premium over the closing price of Northern Continental’s shares on April 30.

After the transaction is completed, Denison will issue about 5.04 million shares to Northern Continental’s shareholders.

Northern Continental has agreed to pay Denison a break fee of 4% of the transaction value if it accepts a superior unsolicited offer.

As part of the deal, Denison will provide a bridge loan to Northern Continental of $495,000, at an interest rate of 5% per year, which can be converted into shares of Northern Continental at a price of 12.5¢ per share. The bridge loan is for working capital until the takeover is completed.

Northern Continental’s Stanyer says Denison’s offer is a very good one and notes that financing an exploration company, particularly in the Athabasca region where exploration is very arduous, hasn’t been easy.

“It has been very difficult to fund our company and it’s still hard,” he explains. “You can do it, but the dilution of the existing capitalization would just get more and more extreme if it did take two or three years more to make a discovery.”

Denison has ownership interests in two of the four conventional uranium mills currently operating in North America. The company also has a portfolio of exploration projects in the U. S., Canada, Mongolia and Zambia.