Australia's Paladin Energy (ASX:PDN,OTCQX:PALAF) has announced plans to acquire Saskatchewan-focused Fission Uranium (TSX:FCU,OTCQX:FCUUF) in a transaction valued at C$1.14 billion.
“The acquisition of Fission, along with the successful restart of our Langer Heinrich Mine, is another step in our strategy to diversify and grow into a global uranium leader across the top uranium mining jurisdictions of Canada, Namibia and Australia,” said Paladin CEO Ian Purdy in a press release on Monday (June 24).
Under the terms of the agreement, Paladin will acquire 100 percent of the issued and outstanding shares of Fission, while Fission shareholders will receive 0.1076 fully paid shares of Paladin for each Fission share that they hold.
This exchange represents an implied value of C$1.30 per Fission share, a 25.8 percent premium to Fission's closing price on June 21, and a 30 percent premium to the company's 20 day volume-weighted average price.
Once the transaction is complete, Fission shareholders will own approximately 24 percent of the combined entity, while Paladin shareholders will account for the remaining 76 percent.
Fission President and CEO Ross McElroy also commented on the deal, saying it will create a diverse world-class uranium producer that has "the ability to expand production and cash flow profiles in the near term."
Paladin has applied to list its shares on the TSX, ensuring that Fission shareholders will receive TSX-listed Paladin shares.
The companies are targeting to complete the transaction by this year's September quarter.
Uranium market gaining steam as supply tightens
The uranium market faced a prolonged downturn after the Fukushima nuclear disaster in 2011, but prices for the energy fuel have risen substantially since mid-2023, driven by tightening supply and growing demand.
An upward trend that began in 2021 gained significant momentum in 2023. By January of this year, the uranium spot price had surged past the US$100 per pound mark for the first time in 17 years, influenced by global events such as the Russia-Ukraine war and the growing realization that it will take miners time to bring supply online.
At the same time, the World Nuclear Association's latest nuclear fuel report indicates that uranium demand could grow by 28 percent from 2023 to 2030, which corresponds to an 18 percent rise in reactor capacity.
Although prices have pulled back since the highs seen earlier this year, there are strong indicators that the uranium market could see further growth in the coming years. Various experts have pointed out that utilities are a good bellwether for uranium demand and prices, and many US buyers still have contracting to do.
"The real pricing structure is being determined in the term market, and increasingly it's going to be reflected in the term market in the five year product, the 10 year product, the 15 year product and the 20 year product. This is going to have really profound and positive implications for those few uranium juniors that have developable projects," Rick Rule, proprietor at Rule Investment Media, recently told the Investing News Network.
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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.