Paladin Energy offers $1.25bn in friendly all-scrip deal with Canada’s Fission Uranium

Uranium is back in fashion, and ASX-listed Paladin Energy says it has snapped up one of the world’s best development options through a friendly all-scrip deal.

Paladin Energy has launched a $1.25bn takeover of Canada’s Fission Uranium, in a friendly all-scrip deal which opens up a Canadian development as its second production hub and could propel it into the second largest uranium producer listed on a Western market.

Paladin shares have doubled over the last year on the back of a surging uranium price as the company readies its Langer Heinrich mine in Namibia for a return to production.

The ASX-listed uranium producer has now offered a 30 per cent premium for Fission, in a move to capture what the company says is one of the sector’s best development options.

Uranium stocks have run hard over the last year as more countries put new nuclear reactors on the development agenda, and potential shortages emerge as a result of long-running lack of investment in new mines, exacerbated by Russia’s invasion of Ukraine.

In June the US banned the import of Russian-sourced fuel for its own nuclear reactor fleet, with President Joe Biden announcing a $US2.7bn support package to reinvigorate the country’s uranium mining sector.

Spot prices for uranium oxide nudged over $US90 per pound earlier this year, and now sit at around $US85 per pound — more than triple its level five years ago.

Paladin will offer 0.1076 of its shares for each Fission share on issue, valuing the Canadian explorers at $C1.14bn ($1.25bn), or $C1.30 per share.

It is a 30 per cent premium to Fission’s volume-weighted average trading price over the last 20 days, the company says, with Fission shareholders to walk out with 24 per cent of the merged company’s register.

At stake is Fission’s Patterson Lake South project in the Canadian province of Saskatchewan, which Paladin says is one of the best undeveloped uranium projects on the market.

Paladin boss Ian Purdy told The Australian the acquisition would make Paladin the second largest uranium producer listed on a Western market, after Canada’s Cameco, and give the company the third largest uranium resource endowment in the world, behind Cameco and Kazakhstan’s Kazatomprom.

“This is the fourth highest grade deposit in the world. The Athabasca is the number one uranium mining jurisdiction in the world,” he said.

The Namibia site is close to returning to production.

“This orebody has a 14,000 parts per million grade of uranium. The global average outside of Athabasca is probably about 600 or 700 parts per million grade,” he said.

Mr Purdy said he was not concerned Paladin’s deal with Fission came amid the market resurgence, however, pointing to the timing of the company’s re-entry into uranium sales.

“We’re a proven uranium producer. We’ve just successfully returned our Langer Heinrich mine in Namibia back to production. The ramp is going exceptionally well — we’re in commercial production, with our first customer shipment expected in July this year,” he said.

“The Patterson Lake South project is approaching detailed engineering and is scheduled to produce by 2029. We also have the Michelin project in Canada. which we believe will come into production the following decade. So, we’ll have a world class production and growth pipeline.”

When fully ramped-up Langer Heinrich will produce about 6 million pounds of uranium oxide each year, and Mr Purdy said the mine’s production was fully contracted to major utilities.

“We’ve got the five largest nuclear entities in the US. We’ve got three of the largest in Europe, and we’ve got the largest in China. So our business is underpinned by the biggest utilities in the world,” he said.

Paladin Energy shares last traded at $13.24 per share.