Two days ago, uranium folks were agonizing about how dumping by China had driven down the commodity market, just as uranium prices had started on an upward swing.

Then, yesterday, Fission Uranium (FCU.T) announced that it had welcomed a $1.1 billion bid from Australian mining giant Paladin Energy to walk away from its Athabasca Basin properties and accept a 26% premium to its Friday share price, the biggest uranium acquisition attempt in some time.

Today, I called a bunch of explorers I know in the space to see how many were popping champagne corks at this industry-shaking turn of events, and the answer was, none, at least among those I spoke to.

Standard Uranium’s (STND.V) Jon Bey said, “We’re right up alongside Fission, right nextdoor, not far from NexGen, and Fission’s now worth a billion dollars and we’re sitting at $5 million. I don’t for a second think we’re comparable, but $5 million?”

Bey, who believes uranium will be back in favour by the fall, sees plenty of blue sky ahead but, right now, the market is stilted.

“We’ve put together three great JV’s on some great properties, and we’ve had good drill results at the Atlantic project, and I’m not sure what more you can do at that point other than not take offense and accept the big uranium future we know is coming is actually coming, with new nuclear projects and modular reactors in the works – it just isn’t here yet, so we have to keep working until that moment of recognition hits.”

Atco Mining (ATCM.C), which is involved in a JV with Standard, concurred.

“We just finished the first phase of our drill program and hit nice mineralization in this first phase,” said Etienne Moshevich, Atco CEO. “Three really great hits but it’s crickets at the moment. I think we’re going to have a new re-rating on uranium soon, and projects like the Atlantic should catch the attention of some much larger players when that happens. But, in the meantime, our team is working to plan our next phase of exploration imminently.”

Atco’s patch, which it’s working to earn 75% of from Standard through continued work over the next few years, confirmed highly anomalous uranium in three drill holes, coinciding with prospective structural zones and favourable alteration.

In layman’s terms: There be radioactivity down there, with “multiple zones of elevated uranium linked to the sub-Athabasca unconformity and basement structural zones [..] indicating a uranium-fertile system.” Atco loves what they’re seeing, but is frustrated the market doesn’t want to get on the dancefloor.

Another Standard JV partner, Aero Energy (AERO.V), just hit strong radioactivity in a shallow new discovery at the Murmac Project.

An average of 1,309 counts per second was intersected over 8.7 metres in graphitic pelite, with up to 33,600 counts per second (using handheld RS-125 Spectrometer) associated with visible uranium mineralization.

In simpler times, that would have launched the stock, and it did, from $0.12 to $0.19.. for a moment anyway, before shrinking back to $0.145.

Alex Klenman of Azincourt Energy (AAZ.V) and Tisdale Clean Energy (TCEC.C) shares the frustration, but says things are coming together behind the scenes… slowly.

“I’ve had an open financing for a while and the brokers are just not enthused at the moment,” he said. ‘It’s summer, it’s the markets, it’s ‘I only finance my own deals’.. You hear every excuse, but you don’t hear too many flat no’s, just a lot of ‘not right nows’.”

Klenman is a longtime optimist, but tempers his optimism with hard facts.

“You’ve got to look at the macro environment for uranium right now and see, the Russians are facing sanctions that kick in in August, the traditional sales season for winter delivery of uranium is September/October/November, and institutional groups are buying up physical uranium in massive quantities, at high prices, just to ensure they have supply locked down ahead of time. That’s a confluence of events that I have little doubt will see a rising tide lifting us all in the fall. The Fission buyout is the first shot across the bow, and I wouldn’t be shocked if shareholders have to be dragged over the line on that.”

In the meantime, market caps on junior explorers are increasingly attractive to buyers. Klenman suspects this might be a good time for groups of smaller players to join forces, rather than wait to be picked off, but says one potential problem always gets in the way of such talk.

“I see a lot of greenfield deals and the prices being asked for them are stupid,” he says. “Like, you could find three or four small explorers with good projects and join them up, share cash and marketing dollars, be a bigger target, expand the shareholder base, get more heads around the table, but the thing that always stops that from happening is people.”

“Everyone wants to be the boss. Everyone wants the bigger deal. Greed forces us to go every man for himself.”

Speaking of, the question of whether Fission shareholders will approve of the offer to merge is still an open one. A 26% premium to the share price is nice, but those shareholders have been holding under the impression Fission would be in production by decade’s end, so a short term premium if you’re okay with holding Paladin shares might not move the needle as much as some think.

“Paladin is a $3.5 billion company, so a $1.1 billion bid is big for them, but is it enough for an asset like Fission?” asked a mining executive who asked me to keep his name quiet during a boozy lunch today.

“The government will have to approve the sale, if the shareholders even do, then Paladin will have to list on the TSX. None of this happens quickly.”

Why does speed matter?

“The slower it goes, the more likely someone makes a better offer.. or the market picks up and that premium goes away,’ he said. “And Fission shareholders are already complaining on  the messageboards that they should get more. The little guys aren’t benefiting right now, but if Fission and Paladin, and whoever else tries to jawbone their way into the deal, becomes an ongoing news story, that’s when you’re going to see those mid-range explorers and solid properties finding suitors. The market needs a bidding war.”

— Chris Parry

— FULL DISCLOSURE: Mostof the companies above are former clients of Equity Guru and could be again should the market pickup. We own stock in several of the companies.

 

 

 

 

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