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Earlier today, IsoEnergy Ltd. (ISO) and Consolidated Uranium Inc. (CUR) announced a definitive agreement for a share-for-share merger by way of IsoEnergy acquiring all of the issued and outstanding common shares of Consolidated Uranium not already held by IsoEnergy of its affiliates, by way of court-approved plan of arrangement. Given the terms of the merger, CUR shareholders will receive 0.50 of a common share of IsoEnergy for each CUR share held. Upon completion of the merger (close date expected in December 2023), existing ISO and CUR shareholders will own approximately 70.5% and 29.5% of the company respectively, on a fully diluted basis. Though we previously had an in-situ derived C$3.95 per share 12-month price objective for IsoEnergy, we are suspending all current forecasts owing to the pending merger with CUR. We will re-visit the post-merger story once the deal closes sometime later in December 2023. Until then, we will add that we like the rationale for the merger and acknowledge that size coupled with global diversification will help with attracting a broader shareholder base and with general financings. Combined company highlights include the highest grade deposit located in the Athabasca Basin (Hurricane), the largest undeveloped uranium deposit in the US (Coles Hill) and a trifecta of near term, production-ready conventional uranium assets (Daneros, Tony M and Rim).
Given a pro-forma market cap of $903.5M, the new-look IsoEnergy will rank among the top 10 publicly traded uranium companies located anywhere in the world. This newfound size will allow for greater liquidity and greater access to capital. Moreover, the company will continue to be backed by the likes of NexGen Energy (NXE), Energy Fuels (UUUU) and Mega Uranium (MGA), all of which have committed to provide additional capital to the deal.
As previously highlighted in our March 2023 initiation report (link here), IsoEnergy's flagship property is the Hurricane deposit, located in the eastern portion of the Athabasca Basin. What places Hurricane above the rest of the Basin's significant deposits is the high grade nature of the currently defined Measured & Indicated resource. With a relatively shallow 48.6M M&I lbs at a grade of 34.50% U3O8, Hurricane ranks well above Denison's Phoenix at 19.13% and Cameco's Cigar Lake at 14.05%:
Much work was done this summer at Hurricane, nearly 6,000m of drilling was accomplished along with significant geotechnical work. Evaluating the technical properties of the deposit (including ISR amenability) is the current focus at Hurricane. Once testing is complete, work on a Preliminary Economic Assessment may commence sometime in 2024.
Post-merger, IsoEnergy will complement it’s Athabasca Basin acreage with CUR’s asset portfolio made up largely of conventional uranium assets located in the US, Australia and Argentina. Near term production optionality is seen from Utah where the Tony M, Daneros and Rim mines have already each been in production up until late 2012 (Daneros). Of note is that all three mines remain on standby and can be relatively quickly placed back into production following an estimated 12 month re-start process. Note that the Tony M and Daneros mines remain fully permitted and have been each maintained in an operational state of readiness.
Specifically, Daneros produced 628,000 lbs between 2010-2013 (Energy Fuels) while Tony M produced 422,000 lbs between2007-2008 (Denison Mines). All of the above mentioned mines are now wholly-owned by CUR. Additionally, recall that CUR has a five year toll processing agreement with Energy Fuels for use at the nearby White Mesa mill (licensed conventional capacity for 8.0M lbs annually). Not only is Energy Fuels a current shareholder of CUR but the current 5 year agreement maintains an extension option for another 5 year term. It is estimated that Energy Fuels will require prices in the range of $75-$80/lb for White Mesa to restart production. In terms of LT optionality, recall that CUR’s Coles Hill property (located in Virginia) constitutes the US’ largest uranium deposit given an Indicated resource of 132.9M lbs along with an Inferred resource totaling 30.4M lbs. Coles Hill represents low-cost future optionality on a very large scale resource.
As per peripheral projects, the Quebec based Matoush project (Measured resource 12.3M lbs, Inferred resource 16.4M lbs) at 0.95% U3O8 boasts the highest grades outside of the Athabasca Basin. Additional portfolio assets can be found in both Argentina and Australia.
A concurrent private placement was announced involving 4.667M subscription receipts of IsoEnergy at an issue price of $4.50 per subscription receipt (gross proceeds of just over $21.0M). Cornerstone investors such as NexGen Energy, Energy Fuels and Mega Uranium have already indicated their intention to subscribe. Partial institutional allocation will also granted.
It is expected that the transaction will close by December 2023. At that point, current IsoEnergy President & CEO Tim Gabruch will assume the title of President while current CUR Chairman & CEO Philip Williams will assume the title of CEO & Director. Of note is that Richard Patricio (Mega Uranium) will be appointed Chairman of the company while Leigh Curyer (NexGen Energy) will be named as Vice Chairman. Pro-forma ownership will consist of NexGen Energy (34%), Energy Fuels (5%) and Mega Uranium (2%). CUR will own 24% (ex-Energy Fuels and Mega) while IsoEnergy will own 35% (ex-NexGen Energy). Given a pro-forma mcap of just over $900M, the resulting IsoEnergy will rank among the top-10 publicly traded uranium focused companies globally. The private placement transaction is expected to close in mid-October while the business combination is expected to close in December 2023. Note that a $10.8M termination fee would be payable by CUR should the deal fail to close. Following the merger, shares of CUR will be de-listed from the TSXV.