Denison Mines and Fission Uranium to Merge

After market close on Monday, Denison Mines (TSX:DML) and Fission Uranium (TSX:FCU) announced that they will merge to create a new uranium company called Denison Energy.
The transaction will consolidate Denison’s projects in the US Midwest and in Canada’s Athabasca Basin with Fission’s Patterson Lake South (PLS) project in the Athabasca Basin. The new company will be approximately 50-percent owned each by existing shareholders of Denison and Fission, and will have a market cap of approximately C$900 million.
Fission’s Triple R deposit at PLS has made plenty of headlines this year, with the company releasing a much larger-than-expected maiden resource estimate for the project this January and continuing to put out positive exploration results.
“The continued exploration success at our Phoenix deposit and Gryphon discovery, in combination with the discovery and exploration success of the world class Triple R deposit puts the combined company in an incredibly strong strategic position, with the most significant development portfolio in the world,” said Denison Executive Chairman Ron Hochstein in Monday’s release. “We are confident that our shareholders will benefit from the value creation opportunities that will be realized through an expanded and more diversified uranium company.”
As per the terms of the agreement, Fission shareholders will receive 1.26 common shares of Denison for each common share of Fission, plus $0.0001 per share in cash. Lukas Lundin will serve as non-executive chairman of the new company, while Fission Chairman and CEO Dev Randhawa will be appointed CEO. Fission Chief Geologist Ross McElroy will be president and COO, and Denison CEO David Cates will become CFO.
This isn’t the first time Fission and Denison have done a deal together. In April 2013, Randhawa and McElroy’s Fission Energy sold the majority of its assets to Denison, spinning Fission Uranium out of the deal. Fission Uranium has since spun out Fission 3.0, also headed by Randhawa and McElroy, which holds a number of projects, including the Patterson Lake North and Clearwater West properties in the Athabasca Basin.
“Denison has a strong, diversified portfolio and, with the Triple R deposit, Fission is bringing the Athabasca Basin’s largest undeveloped high-grade resource as well as a successful and award-winning technical and management team,” Randhawa said in a statement.
Taking an initial look at reactions, the deal appears well received:


However, a look at the Bullboards suggests some investors aren’t so pleased:


Commenting further via email, Chris Berry of House Mountain Partners and the Disruptive Discoveries Journal expressed positivity at the prospect of continued consolidation in the mining space. “As Greece’s economy and China’s stock market continue to implode, the recent uptick in M&A in the metals space is a very encouraging sign,” he said.
“The Denison/Fission deal, the Western Lithium (TSX:WLC)/Lithium Americas (TSX:LAC) deal and the Energy Fuels (TSX:EFR,NYSEMKT:UUUU)/Uranerz deal are all indicative of management teams that are serious about competing in a metals market where demand and pricing are ruled by uncertainty. I would think you’ll see more deals like these across all metals and minerals throughout the remainder of 2015 in an effort to compete in a lower price environment,” he added.
For Rob Chang, senior analyst and head of metals and mining at Cantor Fitzgerald, both companies are “betting that size matters.”
“On the surface, there don’t appear to be many obvious synergies as the assets of both are on two different sides of the basin. However, it can be argued that a potential large buyer looking for a one-stop acquisition with scale in the basin may be attracted to the combined DML-FCU company,” he explained.
The boards of Fission and Denison have both unanimously approved the deal, and have recommended that their shareholders vote in favor of the transaction. The merger is expected to close in October.
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.