More exciting M&A news hit the uranium space on Wednesday when Alpha Exploration and Lakeland Resources announced plans to merge.
More exciting M&A news hit the uranium space on Wednesday when Alpha Exploration (TSXV:AEX) and Lakeland Resources (TSXV:LK) announced plans to merge. The transaction has been unanimously approved by all directors of both boards, and will be voted on by shareholders in early September.
The proposed transaction will see the common shares of Lakeland be consolidated on the basis of three old shares for one new share. In addition, Lakeland will acquire all of the issued and outstanding shares of Alpha Exploration based on an anticipated exchange ratio of one share of Lakeland for every two shares of Alpha. That will result in Lakeland’s shareholders owning approximately 60 percent of the newly formed company, with the other 40 percent being owned by former Alpha shareholders.
Alpha Exploration CEO Michael Gunning said in a press release that “this proposal is good for both shareholder groups, as we believe the combined company can leverage the strategic treasury to facilitate rigorous but aggressive exploration on a merged property portfolio which spans the PLS camp along the southwest margin of the Athabasca Basin to the Black Lake area along the northeastern margin of the Basin.”
Lakeland Resources CEO Jonathan Armes added, “the solid share structure and anticipated market capitalization for CombineCo will provide a niche in the junior uranium space for potential new investors, underscored by the combined marketing strength and technical expertise of both companies and their track record of success in exploration over the past 30 years.”
Merger combines experience, land and capital
If it goes through, the merger will give the new company a large portfolio in the Athabasca Basin, including a combined version of Lakeland’s Carter Lake project and Alpha’s Hook Lake project. Together Carter-Hook will cover a length of about 15 kilometers in the Patterson Lake South (PLS) conductive corridor, an area that has seen four recent discoveries, including Fission Uranium’s (TSX:FCU) PLS and 600W, NexGen Energy’s (TSXV:NXE) Arrow and Purepoint Uranium’s (TSXV:PTU) Spitfire.
The impressive roster of properties isn’t the only positive outcome the consolidation will have — a strengthened management team with a long history of experience in the basin will also benefit both the new company and its shareholders, Alpha’s manager of capital markets, Robert Meister, said.
“We are going to have a fabulous board. Our board here at Alpha has been part of some of the largest discoveries in the Athabasca Basin for the last 20 years. Michael Gunning and Ben Ainseworth were with Hathor Exploration, [and] that went extremely well. Charles Roy with his years at Cameco (TSX:CCO,NYSE:CCJ) was part of the Millennium discovery. That experience, combined with the board of directors that are on Lakeland, shows an extremely strong management board with a very impressive track record,” Meister explained.
Another benefit of the merger will be access to capital, which isn’t always easy to come by in this market. The combined company will have approximately 41 million common shares issued and about C$3 million in the bank, enough money to carry out planned drilling, according to Meister.
“Following shareholder approval, we will be drilling almost immediately,” he said. “I am not sure the extent of the program, but we do have a number of priority targets, especially in the southwest corner and southern part of the basin, an area that investors can relate to. So it is a great area to be drilling, not only for the opportunity for success, but also for the opportunity in the market. Investors know the area and the successes there.”
Making past successes a new reality
As mentioned, both companies have significant experience in both uranium exploration and the Athabasca Basin. In fact, Alpha Exploration was spun out from a deal in December 2013 that saw Fission acquire what was known as Alpha Minerals, its joint venture partner in the discovery of PLS. The agreement gave Alpha Exploration all of Alpha Minerals’ assets save PLS, a fully intact board and management team, as well as C$3 million.
“We were part of the team that discovered PLS. We know the area extensively. We have been at Hook Lake since 2006, when we acquired the property, so we have extensive expertise in the area, the southwest as well as the rest of the basin,” Meister said. “What we are really trying to emulate is the success that Alpha Minerals had, going from $0.20 to nearly $8 — in combining properties, combining capital and combining expertise, we are trying to get that opportunity again. That opportunity is really rare in this market and this sector. The share structure can lead to that type of opportunity, to go from pennies to multiple dollars.”
Alpha and Lakeland shareholders will have a chance to vote on the deal at their respective special meetings, which are expected to take place in early September. At end of day Thursday, Alpha’s share price was up 60 percent, trading at $0.04, while Lakeland’s was unmoved at $0.03.
Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article.