Denison Mines, Energy Fuels to Merge into Leading Pure U.S. Uranium Producer

Energy Fuels and Denison Mines have entered into CA$106 million all-stock transaction which allows Energy Fuels to acquire all of Denison's U.S. mining assets and operations, forming what is hoped to be a U.S. pure uranium miner.

As Denison shareholders receive 1.106 common shares of Energy Fuels for each common share of Denison, the Denison shareholders would end up with a 66.5% stake in the combined company.

The result, Energy Fuels and Denison management believes, would be "creation of the largest 100% U.S. pure-play uranium producer and one of the largest holders of National Instruments 43-101 (NI 43-101) compliant U.S.-based uranium resources. The combined company would hold 49.8 million pounds of measured and indicated U3O8 resources.

Denison brings to the deal the only conventional operating uranium mill in the United States, White Mesa, located near Blanding, Utah. The facility can process up to 8 million pounds annually of U3O8.

The company also owns four developed and partially developed uranium mines in the Arizona Strip: Arizona 1, Canyon, Pinenut and Kanab North. The development of a number of potential new mining projects in the Arizona Strip has been halted by a declaration of the U.S. Secretary of the Interior banning new mining exploration near the Grand Canyon National Park. However, the Denison mining properties are not included in the 20-year ban.

The Arizona 1 underground mine resumed production in 2009 as ore from Arizona 1 is processed through the White Mesa mill. The Pinenut mine is expected to open this year.

Energy Fuels is currently battling the Sheep Mountain Alliance over the validity of the permits issued for the Piñion Ridge Uranium and Vanadium Mill planned for the Paradox Valley in western Montrose County, Colorado. If Piñion Ridge survives the legal challenges, it will become the first new U.S. uranium mill constructed in more than three decades.

The Colorado-based Energy Fuels holds projects in the Sheep Mountain District of Wyoming, as well as the Uravan Mineral Belt spanning Utah and Colorado. Its Sheep Mountain Project is a former Wyoming uranium mine operated by Phelps Dodge, Continental and Western Nuclear from the mid-1950s until 1982.

Sheep Mountain is currently in the advanced permitting stage. An updated Preliminary Feasibility Study made public on March 1, 2012, calls for the concurrent underground and open pit development for a 15-year mine life. It is believed to have an indicated resource of 30.285 million pounds of eU3O8. Production is expected to begin in 2015 with a peak production rate of up to 1.5 million pounds per year of U3O8.

In a statement, Steve Antony, CEO of Energy Fuels said the transaction with Denison "combines the highly strategic asset of the only operating uranium mill in the U.S., White Mesa, with a significant resource base that substantially increases White Mesa's available feedstock. The result is an unmatched production growth profit and the opportunity for both Energy Fuels and Denison shareholders to benefit from the clear operational synergies that result from this transaction."

Denison CEO Ron Hochstein noted that Denison has evolved "on to parallel but different tracks, being both an exploration and development entity with a global footprint and an established producer in the U.S. We are pleased to have the opportunity to combine our U.S. operations with such a complimentary set of assets and people."

The Henry Mountains Complex in Utah, represents Denison's largest resource in the U.S. with 12.8 million pounds of indicate resources. The complex was fully permitted in 2007 and is now on care and maintenance.

The three largest shareholders of Energy Fuels, Dundee Resources, Pinetree Capital and Mega Uranium, who collectively own 22.7% of Energy Fuels' shares have indicated their willingness to enter into support agreement for the transaction. Zebra Holdings and Investments and Lorito Holdings, which combined own 9.9% of Denison's shares, have also indicated their willingness to enter into support agreements.

A break-up fee of CA$3 million will be included as part of the letter agreement between Energy Fuels and Denison. A conference call is scheduled Tuesday morning to discuss the transaction. –Dorothy Kosich, Mineweb