First Uranium Rides Momentum Wave

Vancouver — The widely anticipated Canadian market debut of First Uranium (FIU-T) ended successfully, proving that momentum, for the time being, continues to ride in favour of the radioactive metal.

Having raised $203 million from an initial public offering of shares, First Uranium rose 12 to $8.12 on its first day of trading in Toronto, on volume of 7.6 million.

The company took advantage of record-high uranium prices to fund mining projects in South Africa by launching the largest IPO by any miner in the Canadian market since 2004.

An underwriting syndicate led by RBC Capital Markets priced an IPO of 29 million shares at $7 each.

Analysts say First Uranium’s performance will have been noted by executives at U308, which is set to go public in the next few weeks in a bid to finance exploration in western Guyana.

Rumours were circulating in December that the U3O8 IPO, led by Sprott Securities, has been priced at $2.50 a share.

As the names suggest, First Uranium and U308 are branding themselves in a bid to cash in on soaring uranium prices, which are being powered by demand from nuclear reactors and by a lack of exploration in recent years.

“Momentum is riding in their favour as investors gravitate towards names and management teams,” said a mining analyst, who asked not to be named.

However, he said the water inflow troubles at Cameco’s (CCO-T, CCJ-N) Cigar Lake mine in Saskatchewan are a sign that uranium mines are difficult to find, permit and develop.

Prior to going public, First Uranium was a unit of South African gold miner Simmer & Jack Mines. However, Simmer will continue to hold 70% of First Uranium and plans to use proceeds of the IPO to repay debt and fund development of the Ezulwini and Buffelsfontein uranium and gold projects in South Africa.

Technical reports in a prospectus filed in connection with the IPO suggest that, in spite of its name, First Uranium will be more focused on gold than uranium.

Ezulwini was initially developed in the early 1960s and is located in Gauteng province about 40 km from Johannesburg. Production stopped in 2001 due to capital restraints and low metal prices.

The company hopes to expand the mine using nearby shafts that it said are currently underused. Projections are based on the assumption that Ezulwini can produce 280,000 oz. gold and 879,000 lbs. U3O8 annually.

The Buffelsfontein project is located near Klerksdorp, about 160 km from Johannesburg, on the site of two underground mines which began production in 1954. The company plans to construct a facility to process material located in 11 tailings dumps.

According to a technical report, the mine plan is based on expectations that Buffelsfontein can produce 130,000 oz. gold and 950,000 lbs. of U3O8 annually.

Following its successful IPO, First Uranium will maintain a foothold in Canada with offices in Toronto and Vancouver. Three directors — Robert Franklin, Patrick Evans and John Hicks — previously worked as senior executives with Placer Dome.

The company’s chief executive officer, Gordon Miller, also worked for Placer Dome as vice-president of business development, heading up the firm’s platinum metals group.

RBC, a unit of Canada’s biggest bank, led a group of eight banks in the sale of First Uranium’s shares, including Canaccord Capital, National Bank Financial and GMP Securities.

The banks sold another $30.5 million First Uranium shares to meet demand through an overallotment option, raising the value of shares sold in the IPO to $233.5 million.