Energy Fuels Inc. (NYSE American: UUUU; TSX: EFR) is pleased to announce that it has entered into an agreement (the “Agreement”) to acquire all of the issued and outstanding shares of Excalibur Industries (“Excalibur”).
Energy Fuels Inc. (NYSE American: UUUU; TSX:EFR) (“Energy Fuels” or the “Company”), a leading producer of uranium in the United States, is pleased to announce that it has entered into an agreement (the “Agreement”) to acquire all of the issued and outstanding shares of Excalibur Industries (“Excalibur”). Excalibur holds royalties on the Company’s Nichols Ranch ISR project in Wyoming, as well as royalties on several operating, standby and advanced-stage ISR projects in Wyoming owned and operated by Power Resources, Inc., a wholly-owned subsidiary of Cameco Corporation (collectively, the “Royalties”). The transaction will occur by way of a merger of Excalibur and Energy Fuels’ wholly-owned subsidiary, EFR Utah, Inc.
Through the transaction, the Company is acquiring a 6% – 8% sliding-scale gross proceeds production royalty (based on the then prevailing month-end spot price) on Energy Fuels’ Nichols Ranch, Hank and Doughstick properties (Doughstick is included in the Company’s Jane Dough Project expansion area). This royalty also applies to the nearby Niles Ranch, Willow Creek, and Verna Annuranium properties also owned by the Company. After closing of the transaction, the Company plans to extinguish the royalty and will no longer be required to pay the royalty on future production from these projects. The Company expects to produce approximately 140,000 to 160,000 pounds of uranium in 2018 from the Nichols Ranch Project. Further, there are four (4) additional fully-permitted wellfields at Nichols Ranch and fourteen (14) fully permitted wellfields at the Company’s Jane Dough Project, of which Doughstick represents a portion, that are expected to be developed as an extension of Nichols Ranch in the future. The Company’s Hank Project is fully-permitted for eight (8) wellfields that are expected to be developed as satellite operations to Nichols Ranch in the future. According to a February 2015 technical report, the Nichols Ranch, Jane Dough, and Hank Projects contain 3.4 million tons of Measured and Indicated Mineral Resources with an average grade of 0.115% U3O8 containing 7.9 million pounds of uranium, along with 0.6 million tons of Inferred Mineral Resources with an average grade of 0.10% U3O8 containing 1.1 million pounds of uranium.
Through the transaction, Energy Fuels is also acquiring the 4% gross proceeds production royalty on Cameco’s North Butte/Brown Ranch Project (“North Butte”), the Ruby Ranch Project, and the Greasewood property. North Butte is a fully permitted and operational project that has been operated by Cameco as a satellite to their Smith Ranch-Highland ISR Project since 2013. Cameco ceased wellfield development at North Butte in 2016. However, as uranium prices rise, North Butte should be expected to resume production in the future. The royalty is based on Cameco’s average weighted sales price on production from these properties. According to Cameco’s 2016 Annual Report, the North Butte/Brown Ranch Project contains 6,499 million tons of Measured and Indicated Mineral Resources with an average grade of 0.07% U3O8 containing approximately 10.1 million pounds of uranium. Of these resources, 365 million tons are Proven Mineral Reserves with an average grade of 0.08% U3O8 containing 0.7 million pounds of uranium. The project also contains significant quantities of Inferred Mineral Resources. Energy Fuels expects to hold the royalty on the Cameco properties and receive royalty payments from future production from those properties.
Stephen P. Antony, CEO of Energy Fuels stated: “This is a key transaction for Energy Fuels which has a compelling business case and obvious synergies in both high and low uranium price environments. First and foremost, we expect to generate an attractive return on investment through the acquisition and extinguishment of the royalty on our projects, as it substantially enhances the operating margin and cash flow profile of our flagship Wyoming ISR asset base on a life-of-mine basis. As an added benefit, we will also acquire and hold what is, in our view, a trophy royalty asset in the US uranium sector. The 4% gross proceeds royalty on the Cameco-owned North Butte property is an appealing investment in a quality, well-known ISR project with extensive production history and significant in-ground uranium resources. We look forward to closing this transaction with Excalibur and welcoming Excalibur shareholders as Energy Fuels shareholders.”
As consideration, the Company will deliver to the current shareholders of Excalibur common shares of Energy Fuels having a total value of $3.5 Million, as follows:
$3.15 million of common shares at closing, which will be priced based on the volume-weighted average price (“VWAP”) of Energy Fuels’ shares on the NYSE American for the five most recent trading days ending on the last trading day prior to closing.
$0.35 million of common shares nine months following closing, which will be priced based on the VWAP of Energy Fuels’ shares on the NYSE American for the five most recent trading days ending on the last trading day prior to the date that is nine months after closing.
The Company will also deliver cash to the shareholders of Excalibur based on the aggregate amount payable to Excalibur and its subsidiaries pursuant to the Royalties as of the closing date of the transaction and based on certain closing adjustments.
The closing of the transaction is subject to Excalibur shareholder approval, stock exchange approval, satisfactory completion by Energy Fuels of its due diligence investigations, the approval of the Utah Department of Commerce and Division of Securities, as well as other closing conditions set out in the Merger Agreement. In addition, holders of at least 45% of the issued and outstanding shares of Excalibur are required to deliver lock-up agreements to Energy Fuels, whereby such Excalibur shareholders may not sell their Energy Fuels shares for six-months following the closing date. The closing will occur after the satisfaction or waiver of all conditions, which is expected to occur within 120 days from today.
The common shares will be issued pursuant to an exemption from registration under Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”). Section 3(a)(10) of the Securities Act exempts the issuance of securities issued in exchange for other securities from the registration requirements of the Securities Act where the terms and conditions of such issuance and exchange have been approved by a court of competent jurisdiction, after a hearing on the fairness of the terms and conditions of such issuance and exchange at which all persons to whom the securities will be issued have the right to appear. Energy Fuels anticipates that the fairness hearing will occur before the Utah Division of Securities during the first quarter of 2018 and will announce the specific date once it has been established.
About Energy Fuels: Energy Fuels is a leading integrated US-based uranium mining company, supplying U3O8 to major nuclear utilities. Energy Fuels holds three of America’s key uranium production centers, the White Mesa Mill in Utah, the Nichols Ranch Processing Facility in Wyoming, and the Alta Mesa Project in Texas. The White Mesa Mill is the only conventional uranium mill operating in the U.S. today and has a licensed capacity of over 8 million pounds of U3O8 per year. The Nichols Ranch Processing Facility is an ISR production center with a licensed capacity of 2 million pounds of U3O8 per year. Alta Mesa is an ISR production center currently on care and maintenance. Energy Fuels also has the largest NI 43-101 compliant uranium resource portfolio in the U.S. among producers, and uranium mining projects located in a number of Western U.S. states, including one producing ISR project, mines on standby, and mineral properties in various stages of permitting and development. The Company also produces vanadium as a co-product of its uranium production from certain of its mines on the Colorado Plateau, as market conditions warrant. The Company’s common shares are listed on the NYSE American under the trading symbol “UUUU”, and on the Toronto Stock Exchange under the trading symbol “EFR”.
Stephen P. Antony, P.E., President & CEO of Energy Fuels, is a Qualified Person as defined by Canadian National Instrument 43-101 and has reviewed and approved the technical disclosure contained in this news release.
Cautionary Note Regarding Forward-Looking Statements: Certain information contained in this news release, including any information relating to: the Company being a leading producer of uranium in the U.S.; the expected time to complete the transaction; resource estimates; any expectations that production or well field development on any of the properties may resume or occur in the future; any expected impacts on costs of production and cash flows from the acquisition of the royalties; and any other statements regarding Energy Fuels’ future expectations, beliefs, goals or prospects; constitute forward-looking information within the meaning of applicable securities legislation (collectively, “forward-looking statements”). All statements in this news release that are not statements of historical fact (including statements containing the words “expects”, “does not expect”, “plans”, “anticipates”, “does not anticipate”, “believes”, “intends”, “estimates”, “projects”, “potential”, “scheduled”, “forecast”, “budget” and similar expressions) should be considered forward-looking statements. All such forward-looking statements are subject to important risk factors and uncertainties, many of which are beyond Energy Fuels’ ability to control or predict. A number of important factors could cause actual results or events to differ materially from those indicated or implied by such forward-looking statements, including without limitation factors relating to: the Company being a leading producer of uranium in the U.S.; the expected time to complete the transaction; resource estimates; any expectations that production or well field development on any of the properties may resume or occur in the future; any expected impacts on costs of production and cash flows from the acquisition of the royalties; and any other statements regarding Energy Fuels’ future expectations, beliefs, goals or prospects;and other risk factors as described in Energy Fuels’ most recent annual report on Form 10-K and quarterly financial reports. Energy Fuels assumes no obligation to update the information in this communication, except as otherwise required by law. Additional information identifying risks and uncertainties is contained in Energy Fuels’ filings with the various securities commissions which are available online at www.sec.gov and www.sedar.com. Forward-looking statements are provided for the purpose of providing information about the current expectations, beliefs and plans of the management of Energy Fuels relating to the future. Readers are cautioned that such statements may not be appropriate for other purposes. Readers are also cautioned not to place undue reliance on these forward-looking statements, that speak only as of the date hereof.
Cautionary note to United States investors concerning estimates of measured, indicated and inferred resources. This news release contains certain disclosure that has been prepared in accordance with the requirements of Canadian securities laws, which differ from the requirements of U.S. securities laws. Unless otherwise indicated, all reserve and resource estimates included in this news release have been prepared in accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) classification system. Canadian standards, including NI 43-101, differ significantly from the requirements of U.S. securities laws, and reserve and resource information contained in this news release may not be comparable to similar information disclosed by companies reporting only under U.S. standards. In particular, the term “resource” does not equate to the term “reserve” under SEC Industry Guide 7. United States investors are cautioned not to assume that all or any of Measured or Indicated Mineral Resources will ever be converted into mineral reserves. Investors are cautioned not to assume that all or any part of an “Inferred Mineral Resource” exists or is economically or legally minable. Energy Fuels does not hold any Reserves as that term is defined by SEC Industry Guide 7. Please refer to the section entitled “Cautionary Note to United States Investors Concerning Disclosure of Mineral Resources” in the Company’s Annual Report on Form 10-K dated March 9, 2017 for further details.