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TABLE OF CONTENTS Dec 3 - 9, 2012 Volume 98 Number 42 - 0 comments

Denison eyes JNR in the Athabasca

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In a move to lock up uranium-rich ground in the Athabasca basin of northern Saskatchewan, Denison Mines (DML-T, DNN-X) plans to buy joint-venture partner JNR Resources (JNN-V) for nearly $10 million. 

JNR is one of the largest landholders in the Athabasca basin and surrounding areas, with 2,550 attributable sq. km, Raymond James analyst David Sadowski writes in a note.

In the basin, JNR holds six joint-venture properties with Denison, and another six wholly owned exploration properties, including Way Lake, where it has released an inferred resource of 10.35 million tonnes grading 0.03% uranium oxide for 7 million lb.

But JNR’s top asset is its jointly held Moore Lake project located 10 km from Denison’s 60%-owned flagship Wheeler River project, which Sadowski calls “one of the best uranium discoveries of the past decade.” 

JNR holds 25% of Moore Lake, with Denison holding the rest. The smaller firm also owns three other uranium properties in Newfoundland and Saskatchewan.

The acquisition is a “logical consolidation step for Denison and advances our goal to become the pre-eminent exploration company in the Athabasca basin,” Denison chairman Lukas Lundin says.

Under the agreement, JNR shareholders will receive 0.073 of a Denison share for each share held, or roughly 8.4 million shares.

The tabled offer represents a 53% premium to JNR’s 20-day, volume-weighted average price, or a 55% premium to its Nov. 13 close.

Pleased with the premium, the firm’s board supports the takeover, which requires at least two-thirds of JNR’s shares being tendered and regulatory approvals.

Once completed, JNR would own 2% of Denison. If it changes its mind about the offer or accepts a superior bid, it would have to pay a termination fee of $325,000.

“We like the deal, as it builds on Denison’s suite of assets in the Athabasca basin, the world’s premier uranium district, without significant equity dilution or reduction in the company’s cash position,” Sadowski comments, adding that merger and acquisition activity in the basin could pick up.

Cantor Fitzgerald analyst Rob Chang suggests Denison could be interested in other regional plays — such as Fission Energy (FIS-V) or Alpha Minerals (AMW-V) — to increase its land position and grab the attention of global miner Rio Tinto (RIO-N, RIO-L), and possibly Saskatoon-based Cameco (CCO-T, CCJ-N), as both senior producers have shown continued interest in the basin.

Last November, Rio outbid Cameco for Hathor Exploration, putting its foot in the highly prospective basin. But the acquisition was too small to “move the needle on its own for Rio,” Chang says.

More recently, Cameco increased its ownership in the Millennium uranium project to 69.9% by buying Areva’s 27.9% interest for $150 million. JCU Exploration holds the rest.

Cameco also owns 30% of Denison’s Wheeler project, with JCU holding the remaining 10%. 

Denison closed Nov. 15 at $1.06, losing more than 9% in the past two trading sessions since making the offer.

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