Uranium Consolidation – More To Come?

With the commodity price bumping along the bottom, corporate players are beginning to make moves that will position them nicely for an expected recovery. It’s still early innings however. Be aware of this space!

| More on:
The Motley Fool

Currently, the primary theme impacting the world of mining and resources is that of financing – specifically, the lack thereof.  Consolidation in the uranium space is another emerging theme that is not attracting as much attention.

The price of uranium is low.  At $42/lb or so, the commodity trades well below its marginal cost which sits up in the $60 or $70 range.  Many believe that the depressed price is temporary and will rebound once the nuclear industry regains its footing after the Fukushima disaster in Japan.  Smart corporate players are beginning to position themselves for this rebound.

Back in mid-January, a seemingly opportunistic bid to takeout one of the industry’s more prospective junior players occurred.  ARMZ, a Russian state-owned uranium miner is in the process of acquiring Uranium One (TSX:UUU).  Around the same time, Fission Energy (TSXV:FIS) and Denison Mines (TSX:DML) struck a deal that is expected to close in April.  This Fission/Denison deal appears far more favourable to Fission shareholders than the Uranium One deal was to that company’s shareholders.


For each share owned, Fission shareholders will receive .355 shares of Denison as well as 1 share of a newly created company that will hold some of Fission’s more prospective exploration projects, as well as $15 million in cash and Fission’s current management team.

In exchange for its shares, the big asset that Denison is getting back is Fission’s stake in a project known as Waterbury Lake.  This will leave Denison as the 60% owner of the project, with Korean utility Kepco owning the other 40%.  The Waterbury Lake project sits directly adjacent to Rio Tinto’s Roughrider project, a deposit that they acquired by purchasing Hathor Exploration (after outbidding Cameco) back in 2011 for more than $600 million.


Fission is effectively selling itself – just like Uranium One did.  The reason this deal is more appealing for Fission’s shareholders than the UUU deal is that FIS owners are receiving shares, not cash.  UUU owners are being taken out of their position with cash at potentially the worst time, given the low commodity price.

It is widely believed that with this more consolidated Waterbury Lake project in its stable, Denison is now itself a viable takeout candidate.  Fission shareholders stand to benefit from this.

In addition, one of the early stage assets (Patterson Lake South (PLS)) that will be 50% owned by the new exploration company that Fission shareholders will hold, has had tremendous initial drill results.  This transaction will potentially unlock the value embedded within this asset as the other owner of PLS, Alpha Mineral Resources (TSXV:AMW), has seen its shares climb by over 900% during the past 6 months because of the successful drill results.  Rather than being taken out of the game like UUU’s shareholders, Fission shareholders are still very much alive and kicking.

The Foolish Bottom Line

A decent size list of companies that could be next in line for a corporate transaction in the uranium space exists.  To help your search, there are two themes that you can focus on.  One, seek out management teams that have pulled off shareholder friendly transactions in the past.  The other, look for companies with substantial resource bases in politically stable areas.  Majors tend to favour these rare assets.

With its shareholder friendly deal to sell itself in place, Fission’s management easily qualifies for theme number one.  In addition, the team with whom Fission shares the promising Patterson Lake project with is none other than the team that led Hathor and the Roughrider project into its bidding war between Cameco and Rio Tinto.  Seemingly, current Fission shareholders are in good hands!

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Iain Butler does not own shares in any of the companies mentioned in this report at this time.  The Motley Fool has no positions in the stocks mentioned above.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing


2 Great REITs That Won’t Stay Cheap Forever

First Capital REIT (TSX:FCR.UN) and Automotive Properties REIT (TSX:APR.UN) are cheap real estate plays for yield-seeking Canadian investors.

Read more »

shopping online, e-commerce
Tech Stocks

Young Investors: Shopify (TSX:SHOP) Stock May Finally Be Worth Buying

Shopify (TSX:SHOP)(NYSE:SHOP) stock is attempting to stage a bottom, but should investors be buyers amid the market chaos?

Read more »

stock analysis

3 Ideal Stocks for Your Short-Term TFSA Growth Goals

Depending on what your short-term growth goals are, you can choose from the diverse pool of growth stocks, including linear…

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House

1 of the Cheapest REITs in Canada Looks Poised to Soar

H&R REIT (TSX:HR.UN) has become way too cheap to ignore for passive-income seekers who want a great deal from the…

Read more »

Early retirement handwritten in a note

TFSA Investors: 3 Top TSX Stocks to Buy Now for Early Retirement

Plan an early retirement by maximizing your TFSA and investing in solid stocks like CN Rail (TSX:CNR)(NYSE:CNI) for growth.

Read more »

Tech Stocks

How to Easily Turn a $25,000 RRSP Into $250,000

You can hold quality growth stocks such as Shopify in your RRSP and benefit from market-beating gains in the long…

Read more »

Retirement plan
Dividend Stocks

3 Retirement Stocks to Buy in Your 20s

A retirement stock is not necessarily something you buy when you retire. It also includes a broad spectrum of stocks…

Read more »

Dividend Stocks

Dividend Earners: Stay Invested in 2 Low-Volatility Stocks

Dividend earners can stay invested, despite the extreme market volatility provided they shift to two low-volatility stocks.

Read more »