Fission, Denison terminate their merger agreement
Retail investors firmly resisted deal despite eager institutional side
Retail investors from
TORONTO Canada and around the world have blocked the proposed merger of Denison Mines Corp. and Fission Uranium Corp., a rare case in which the retail crowd got their way over large institutional investors.
“What I learned is that our shareholders are very passionate people,” Fission chief executive Dev Randhawa said in an interview.
The two junior uranium miners announced Tuesday that more than half of Fission’s shares were voted in favour of the friendly transaction, but the number fell short of the two-thirds majority needed to close the deal. Toronto-based Denison wanted to buy Kelowna, B.C.-based Fission for $321 million in stock.
Fission’s institutional shareholders were strongly supportive of the deal. But retail investors own roughly 80 per cent of the stock, and many of them were fiercely opposed. They got together and voiced their displeasure online. They thought the bid did not offer nearly enough value for Fission’s Patterson Lake South (PLS) project, which is one of the best uranium discoveries in Saskatchewan in decades.
Denison is one of mining kingpin Lukas Lundin’s companies. Last week, he travelled to Toronto to address Fission’s retail investors in person and try to convince them that the merger was in their best interests. It was a very unusual move on his part, and it ultimately wasn’t successful.
“We are, of course, pleased with the result,” said Jim Gifford, a retail shareholder who created the “FCU Oversight” group to mobilize support against the merger.
“It’s really a credit to the retail shareholders of Fission who made it their business to dig in and understand the nature of the deal.”
If successful, the deal would have combined two of the best undeveloped uranium assets in Saskatchewan’s Athabasca Basin (Fission’s PLS project and Denison’s Wheeler River project). Lundin said it would create the“go-to name” in the industryonce uranium prices recover. His son, Adam, proposed the deal and worked hard to put it together.
Both companies stressed they will be fine without this merger. They each have cash and plenty of work to do on their separate projects.
Denison CEO David Cates said he was disappointed, but that the company’s long-term strategy hasn’t changed. “This won’t be the first deal that doesn’t happen that might make sense,” he said in an interview.
Fission shares rallied seven per cent on Tuesday to close at 74 cents. “In the next while, we’ll see where the stock should be because the deal is gone,” Randhawa said.
His focus now will be on promoting the PLS project around the world, and hopefully drawing a strategic investor that can commit capital to support future drilling.
Last month, Fission released a preliminary economic assessment (PEA) on PLS. It envisioned a US$1.1-billion mine that would produce an average of 7.2 million ounces of uranium a year over a 14-year mine life. The operating cost was estimated at US$14.02 a pound, meaning it would be profitable at current low uranium prices (US$38.50 a pound). Prices have been stuck in a rut since the Fukushima nuclear disaster in March 2011.
Randhawa thinks the PEA was largely ignored because it came out during the Denison merger drama. Now that the deal is officially dead, he hopes investors will start to give it a closer look.