VANCOUVER — After a bit of back and forth over the past week, 50-50 joint venture partners Fission Uranium (TSXV: FCU) and Alpha Minerals (TSXV: AMW) have nailed down an agreement that will see Fission acquire full ownership of the Patterson Lake South (PLS) uranium discovery in the southern reaches of Saskatchewan's Athabasca Basin.
Alpha originally rebuffed a consolidation proposal on Aug. 26 that would have seen its investors receive 5.3 shares of Fission for every Alpha share held, which equated to roughly $7.26 per Alpha share based on Fission's closing price on Aug. 23. The offer valued Alpha at around US$170 million, but a brief, 48-hour closing period and potentially insufficient premium prompted the company to take a step back and request additional time to mull over its options.
In a written response Alpha outlined how the closing of the proposal offered limited opportunity for review, and also cited concerns surrounding the timing of the offer given that the partners are in the midst of a US$7-million, 11,000-metre winter drill program at PLS that has been producing some promising results.
Alpha did, however, concede the inevitability of the consolidation, while both companies explained that the dialogue had been ongoing regarding a potential takeover for the last "several months." And given that Fission acts as exploration operator, while Alpha contributes an equitable stake in exploration expenditures, it does not come as a surprise that the partners were able to resolve the consolidation amiably over the short term.
On Sept. 3 the companies announced the signing of a non-binding letter of intent. Fission sweetened its premium; agreeing to acquire Alpha at a price of $7.67 per share, which brings Alpha's value to around $185 million. Alpha shareholders will receive 5.725 shares of Fission for each share held, which represents a 14.5% premium to the share prices of Alpha and Fission on Aug. 23 — compared to an 11% premium under Fission's initial offer.
"This is an important milestone. Combining this incredible shallow and high grade uranium asset under one roof will benefit the shareholders of both companies. On behalf of Fission, I particularly want to thank Ben Ainsworth, Mike Gunning and the rest of the Alpha team for their efforts in reaching this point, and I look forward to working with them further as we continue to develop PLS," commented Fission chairman Dev Randhawa.
In a bid to make Fission's sole focus PLS, the majority of non-cash assets and obligations held by Alpha and Fission will be spun out into a pair of new companies, which will also receive US$3 million in working capital each. Alpha shareholders will likely retain interests in the company's Donna gold project in British Columbia, Mikwam gold project in Ontario, and a portfolio of non-related uranium assets in the Athabasca Basin.
Fission's spin out will operate in much the same way, though the company notes it will retain "certain assets related to PLS." Fission recently completed a joint venture on its contiguous Patterson Lake North (PLN) project with Azincourt Uranium (TSXV: AAZ), and also holds its Clearwater uranium project directly south of PLS.
"[There are] continuing indications that [PLS] is one of the most significant uranium discoveries in the Athabasca Basin," added Alpha president and CEO Benjamin Ainsworth. "We believe that with the consolidation, the project will provide further benefits to our shareholders. Also, the creation of a new company will offer our shareholders upside potential from the technologies used at PLS in the exploration of other properties in Alpha's portfolio."
Thought it may be overlooked, Ainsworth's final point is likely an important part of the agreement for Alpha. Back in mid-July Fission filed a patent application on an invention it calls "System And Method For Aerial Surveying Or Mapping Of Radioactive Deposits." Having access to the technology, which has proven very effective for Fission's technical team, could give Alpha a leg up in future exploration endeavours.
Alpha shares were up around 2%, or 14¢, following news of the consolidation agreement before closing at $7.05 at the time of writing on 644,300 share trade volumes. The company maintains 24.2 million shares outstanding for a $170.5 million press time market capitalization.
Shares of Fission dropped roughly 6.7%, or 9¢, following the news, as 7.7 million shares traded hands en route to a $1.25 close at press time. The company had 150.6 million shares outstanding at the time of writing for a $188 million market capitalization. Under terms of the agreement Fission will issue an additional 138 million shares, which will dilute it by roughly 93% and bring total shares outstanding to around 289 million.
The partners last released an exploration update from PLS on Aug. 22. The results were highlighted by drill hole 13-086, which was collared at the R390E zone and intersected a 47-metre-wide mineralized zone, including a total of 5.27 metres of composite "off-scale radioactivity."
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