Denison Mines (DML-T, DNN-X) is taking another stab at diversifying into Africa by trying to take over Perth, Australia-based OmegaCorp (OMC-X).
Toronto-based Denison upped the high bid from its previous takeover attempt of $1.04 (A$1.15) per share by 13% to $1.18 (A$1.30) per share. With Denison already holding 33% of OmegaCorp, the new deal values the rest of the company at $121 million. The offer is all cash.
The move into Africa has to do with country risk, Denisons chief executive Peter Farmer says. Its a big continent with lots of resources and certain countries there are miner friendly. Zambia is not like Australia on the political side of things.
OmegaCorps uranium projects include: Kariba in Zambia, Mkuju in Tanzania and the Zambezi Valley project in Zimbabwe and Mozambique.
Kariba, however, is the companys key asset and Denisons improved bid is tied to its substantiation of the resource there — which is estimated to be 13.7 million lbs U3O8 .
Its an attractive resource that we think we can get going into production by 2010 or 2011, Farmer says Its close to the surface, and while its a very low grade its easily leachable and theres infrastructure close by.
Additionally, Farmer says the size of the property roughly 2,521 sq. km — and the relatively small amount of it that has been drilled, means theres significant exploration potential.
He says the company has roughly $200 million in the kitty, so despite the $121 million price-tag on OmegaCorp, there would be plenty of money left to explore while moving the project towards feasibility.
Another key factor driving the timing of the renewed bid is Central African Mining and Exploration Company‘s (Camec) failure to acquire OmegaCorp. Camec had made an all-share offer for the company back in April of this year but withdrew the offer on June 13.
Camec had been offering what amounted to roughly A$1.44 per share at the time of the offer, but the combination of Camec shares losing roughly 25% of their value and OmegaCorp selling off assets and spinning-off a copper and gold project in Mozambique, conspired to kill the deal.
Denisons offer represents a premium of 6.6% to the volume weighted average price of OmegaCorp’s shares over the last 20 trading days. It will need the approval of 90% of OmegaCorp shareholders to go through.
The takeover attempt comes on the heels of Paris-based Areva‘s move to grow uranium resources in Africa by tabling a $2.5 billion in cash for UraMin (UMN-T, UMN-L).
And while Farmer says the Areva move had nothing to do with its renewed interest in OmegaCorp, he did say Denisons merger with International Uranium Corporation (IUC) back in December a move that brought it under the Lundin Group of Companies umbrella increased its awareness of the continent.
Theres no question that the merger and the added information we get from being part of the Lundin Group of Companies makes us more comfortable with Zambia in particular, Farmer says.
Denison currently has assets in the Athabasca basin and the southwest United States and anticipates producing 5 million lbs of U3O8 per year by 2011.
The company also has a stake in 2 of the 4 conventional uranium mills operating in North America.
In Toronto on June 25, Denison shares were off 44 or 3% to $13.60 on 1.4 million shares traded. In Australia OmegaCorp shares moved towards the offering price, and were trading for A$1.31 on a volume of 320,000 shares.
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