A Uranium One processing plant. The miner reported on Monday, May 7, 2012 that its first-quarter earnings fell to $4.5 million as it reported increased production, but lower uranium prices and a hedging-related charge.Supplied
Dissident investors have dropped plans to oppose asset sales by First Uranium Corp. after the company said it would increase payments to shareholders as it winds down operations just five years after going public.
The investors' about-face came just before a June 13 special vote on the asset sales, which would give the struggling Toronto miner $405-million to pay down looming debt that includes $150-million in convertible debentures due at the end of the month.
First Uranium lists on its website only two assets, both in South Africa, and has struck deals to sell both of them. In March, it agreed to sell its Mine Waste Solutions tailings-recovery project to South Africa's AngloGold Ashanti for $335-million. In April, it reached a deal to sell its Ezulwini mine to Australia's Gold One International for $70-million.
Both sales were opposed from the outset by a group of investors holding as much as 17 per cent of First Uranium's stock; the group was led by Russia's giant Olma Investment Firm, which demanded that First Uranium find better value for shareholders. Analysts had estimated shareholders would receive between 16 cents and 27 cents a share as a result of the sales.
"In light of First Uranium's announcement of the increased distribution to shareholders to $0.33 per share, we plan to support the proposed transactions on June 13, 2012," Nicholas Betsky, head of equities at Olma, said just hours before a deadline for proxy voting on the asset sales set for 5 p.m. (ET) on Monday.
First Uranium's stock reacted favourably, rising 21 per cent in Toronto on Monday, to close at 23 cents. But that was dramatically below the levels of $13 a share five years ago, when the company was the talk of the mining sector amid record-high uranium prices and its market capitalization was $1.4-billion.
Today, battered by shifting industry dynamics, operational mishaps and a cooler uranium market, the company is valued at just $49-million.
The Olma investment firm, joined by Stratton Enterprises and Patto Corporate Services, said in late April that First Uranium assets were worth about double what was on offer, and pledged to seek higher bids themselves.
Although the group led by Mr. Betsky agreed to vote in favour of the bids on the table, it said First Uranium's management and its bankers "have not acted in the best interest of shareholders but due to the time constraints, at this point we see no other choice but to vote Yes."
First Uranium was not available for comment on Monday, but the company said in written statements over the past two weeks that it was committed to the existing offers to purchase Mine Waste Solutions and Ezulwini.
There were at least two other signs of interest in the South African assets in recent weeks, but no solid bids.
Last Friday, South Africa's Kumvest Ltd. proposed to buy a 26-per-cent stake in First Uranium for 37 cents a share, prompting a market rally that saw the value of the company double. But the offer was highly conditional: It required a vote against the sale of Ezulwini, the appointment of a new management and board, a 90-day period for them to turn the company around, and the right to do due diligence on company records before Kumvest's offer would become unconditional.
On June 5, First Uranium said Waterpan Mining Consortium was reportedly trying to raise financing for a substantial bid for 100 per cent of the company, but there was no further evidence of an offer. The company has no poison-pill defence in place, making it open to receiving offers for all or a portion of its shares.
First Uranium went public on the Toronto Stock Exchange in January, 2007, in the largest initial public offering of a Canadian miner in years. The stock made its debut at about $7 a share, climbing 20 per cent on its first day before eventually hitting over $13 a share in April.
That was when it took advantage of sky-high uranium prices to brand itself as a producer of the radioactive metal, even though it was to be predominantly a gold company.