Australia’s Paladin Energy Ltd. PALAF has reached an agreement to buy Canadian mining development company Fission Uranium Corp. FCU-T in a friendly transaction worth $1.14-billion, as Fission lays down a big bet on a uranium project in Saskatchewan.
Kelowna, B.C.-based Fission is developing the Patterson Lake South (PLS) project in the Athabasca Basin region of Saskatchewan, and hopes to be in production by the end of the decade.
Paladin is offering 0.1076 of its shares for each Fission unit, or $1.30 a share, a premium of just under 26 per cent compared to Friday’s closing price on the Toronto Stock Exchange.
Investor interest in the uranium sector has perked up over the past few years, thanks to a run-up in the price of the commodity. Nuclear power is increasingly pitched as a clean energy source because it generates no CO2 emissions.
The potential of Fission’s Saskatchewan uranium project is “right up there” with those owned by peers such as Denison Mines Corp. and NexGen Energy Ltd, said Ian Purdy, chief executive of Paladin, in an interview.
“It’s one of the great undeveloped deposits in the Athabasca and in the world.”
Mr. Purdy said the combined company will benefit from increased investor interest because of better trading liquidity, wider analyst coverage and more funding options. Paladin trades on the Australian Securities Exchange, and it plans to list on the TSX after the deal closes. The projected market value of Paladin after the acquisition of Fission is expected to be US$3.5-billon.
“Scale is important in mining,” said Mr. Purdy in a conference call with analysts on Monday. “And particularly when you’re looking at bringing forward development, having that scale is incredibly useful.”
Australia in recent years has strengthened its position considerably in Canada’s critical minerals industry, amassing a powerful position in lithium production, in particular. Australia’s Wyloo Metals Pty Ltd. was also given the green light to buy junior Canadian nickel development company Noront Resources Ltd. in 2022. Meantime, Melbourne-based BHP Group Ltd., the world’s biggest mining company, is building a giant new potash mine in Saskatchewan.
Paladin’s acquisition of Fission is subject to a federal review under the Investment Canada Act, and will be scrutinized on net benefit and national security grounds. While Ottawa has taken a hard line against investment by China in Canada’s critical minerals sector in recent years, Australia, an ally, has not faced nearly the same kind of resistance.
Paladin, which is based in Western Australia, recently restarted production at its Langer Heinrich Mine in Namibia. The operation had been in care and maintenance for several years during a prolonged slump in the uranium market.
Fission’s PLS project has been in development for about a decade, and its mine plan has undergone several iterations. Because the deposit lies only about 55 metres below the surface, Fission originally considered building an open pit mine along with an underground operation.
But Fission eventually decided to move forward on an underground operation only, in part because the environmental footprint is less and permitting is anticipated to be easier to obtain. If the necessary permits are obtained, the mine and mill are projected to be in production in 2029.
Puneet Singh, an analyst with Eight Capital in an interview said the premium that Paladin proposes to pay for Fission is light.
“It just doesn’t seem like enough for something that’s going to be 5 per cent of global supply,” he said.
He thinks a fairer takeover price would be 0.85 times Fission’s net asset value, compared to the roughly 0.6 times Paladin is paying.
Shares in Fission rose to $1.19 a share on the TSX on Monday to close 11 cents below the offer price.
Uranium’s recent revival came after a protracted slump in the price triggered by the 2011 meltdown of the Fukushima power plant in Japan following a tsunami. Many nuclear power projects were cancelled after the disaster.
Earlier this year, uranium hit a multiyear high of US$106 a pound, in part owing to speculative demand from traders. In recent months, the commodity has fallen by more than 20 per cent to around US$83 a pound.
While the nuclear fuel is marketed as a green power source, worries persist over the challenges of the long-term storage of radioactive waste and the possibility of another accident at a power plant.