Denison and UEX hash out $40.5M joint ownership deal for JCU

Denison Mines (TSX: DML) and UEX Corp. (TSX: UEX) have hashed out a deal that will see each company with a 50% […]
Wheeler River project. Credit: Denison Mines
Wheeler River camp
Denison Mines' Wheeler River uranium project in Saskatchewan. Credit: Denison Mines

Denison Mines (TSX: DML) and UEX Corp. (TSX: UEX) have hashed out a deal that will see each company with a 50% interest in JCU Exploration, a subsidiary of Overseas Uranium Resources Development Co. (OURD).

Last month, Denison offered $40.5 million for the prized asset – after UEX had already come to an agreement with OURD to pay $12.5 million for JCU.

Now, UEX has agreed to up its offer to acquire JCU to $41 million, with Denison agreeing to pay UEX $20.5 million for a 50% interest. Under the new arrangement, Denison will provide UEX with an interest-free, three-month loan of up to $41 million (half of which will be immediately retired when Denison receives its portion of JCU shares). UEX will be the manager of JCU as long as Denison holds no more than a 50% stake in the company.

JCU owns a 10% stake in Denison's 90%-owned flagship Wheeler River project in Saskatchewan's Athabasca Basin, as well as interests in other uranium projects in Canada.

"Denison welcomes this new partnership with UEX,” said Denison's president and CEO, David Cates, in a release. “We are pleased with the acquisition terms for this unique and valuable portfolio of strategic Canadian uranium interests, which have been meticulously accumulated by JCU over prior decades. Following this acquisition, Denison will not only increase its indirect ownership of the company's flagship Wheeler River project, but will also expand its asset base to include additional important Canadian uranium development projects such as Millennium and Kiggavik."

“UEX is excited to enter into a partnership with Denison to become the co-owners of JCU," said UEX president and CEO Roger Lemaitre. "Over the past twenty years, JCU has advanced an impressive and strategically important portfolio of uranium projects that include some of Canada’s key future uranium development projects. . .  This deal showcases UEX’s ability to partner and work with the key players in the Canadian uranium industry.”

The closing date for UEX's acquisition of JCU has been extended to Aug. 3. The arrangement is subject to approval of shareholders in OURD – a private, Japan-based company. A shareholders meeting is scheduled for June 18.

Denison has started the permitting process at its advanced stage Wheeler River project, but hasn't yet made the decision to move forward with a feasibility study. A 2018 prefeasibility study looked at simultaneous development of the Phoenix and Gryphon deposits at Wheeler River, the first as an in-situ recovery (ISR mine), and the latter as a conventional underground with ore processed at Denison's 22.5%-owned McClean Lake mill.

With a preproduction capex of $332.5 million, Wheeler River would have a 14-year mine life, producing an average of 7.8 million lb. U3O8 annually. The study pegged the project’s base case pre-tax net present value at $1.3 billion (at a 8% discount rate) and its internal rate of return at 38.7%.

UEX holds interests in 12 uranium projects in Canada. In addition to a 10% stake in Wheeler River, it has 30.1% interest in Cameco's (TSX: CCO) Millennium project, a 33.8% interest in Orano Canada's Kiggavik project, and a 34.5% interest in UEX's Christie Lake project.

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