Shareholders of Canadian-listed uranium explorer Fission Uranium [TSX:FSU], including option holders this time, are being asked to vote in favour of the company’s acquisition by Australia’s Paladin Energy [ASX:PDN]. Paladin is aiming to acquire 100% of the issued and outstanding FSU shares in a court-approved plan of arrangement.
As part of the deal, Paladin is to list on the TSX. Fission’s board has been recommending that shareholders vote in favour of the deal. It has admitted to receiving “some pushback” on the valuation from shareholders. Shares in the company were up 5.4% in Toronto yesterday.
A British Columbia court has taken the unusual move of ruling that owners of options can also vote on the agreement. A new vote on the deal with Paladin Energy is now scheduled for this coming Thursday.
The deal has the potential to create a substantial uranium explorer and producer at a time of increasing demand on global uranium supplies. Fission Uranium has the Patterson Lake South project in development in Canada’s Athabasca Basin and Paladin the Michelin project in Labrador. Paladin also controls the Langer Heinrich mine, which is a producing uranium mine in Namibia which recommenced production in March.
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Largest uranium deposit in Queensland
Also currently under exploration in Australia is Paladin’s Mount Isa project. This is regarded as the largest uranium deposit in Queensland. Paladin’s Langer Heinrich has production forecast out to 2041 with Fission Uranium’s Patterson Lake South projected to come online in 2029.
The deal holds out the prospect for the creation of a major Canadian uranium development hub, potentially a globally significant uranium resource. Pro-forma, Paladin would have the third largest uranium endowment of a listed uranium company globally after Cameco and Kazatomprom.
The proposed deal comes at a time when uranium demand is being driven up by the global trend towards decarbonisation. Nuclear energy is the second largest source of clean energy globally. With China poised to become the largest consumer of uranium by 2029, the US government is known to be keen to secure supplies of uranium from nearby and friendly countries like Canada.
Awaiting environmental impact study
Fission Uranium is currently in the process of awaiting its final EIS (Environmental Impact Study) on Patterson Lake South. Meeting with investors in London last week, Bob Hemmerling, part of the Fission management team, said that elections in the province of Saskatchewan had the potential to slow the application process down.
The company has also been the subject of opportunistic legal action from First Nations in the area. Hemmerling said this surprised the management team, but is a tactic used by some groups as an opening negotiating ploy. He added that Patterson Lake South “already has contracts.”
Fission Uranium CEO to run Canadian operations
Hemmerling confirmed that current Fission Uranium CEO Ross McElroy would run Paladin’s Canadian operations and that Paladin would be seeking a listing on the TSX. Fission Uranium already has the most experienced uranium mine development team of its peer group.
The combined entity has the potential to position itself as one of the top five uranium producers in the world in terms of its market cap. Close peer NextGen Energy TSX:NXE has a market cap in the area of CAD 4bn.
Disrupted project development plans over the last decade coupled with a drop in secondary supplies of uranium and geopolitical issues are all combining to further impact uranium supplies.
