AngloGold move lifts First Uranium

AngloGold Ashanti (AU-N) clearly likes the discounted price on uranium plays and its confidence in one producer is reverberating through the market.

The gold producing senior miner is taking a significant position in Toronto-based First Uranium (FIU-T, FUM-J), a gold and uranium producer whose stock had been on a steady decline since the Fukushima nuclear disaster struck.

First Uranium shares began the year trading the $1.30 range but slid consistently since then and were all the way down to 38¢ before the AngloGold investment was announced.

After word of AngloGold’s $28 million investment in the company’s shares, First Uranium shares shot up 48% to 57¢ on 2.75 million shares traded. And that movement did not come on the back of AngloGold buying in the open market.

Instead the company is acquiring the 47 million shares in First Uranium from Village Main Reef Limited (VIL-J), a South African-based platinum miner. AngloGold is paying roughly 60¢ per share, the price to which the market price is gravitating towards.

The purchase will get AngloGold a 19.79% interest in First Uranium.

And the buying may not be done there. AngloGold has lock-up rights and rights of first refusal on both of Village’s remaining 5.7% stake in First Uranium equity and the roughly $55 million in convertible notes it holds. The lock-up period will last for120 days after which the right of first refusal kicks in.

Prior to this acquisition AngloGold held no interest in First Uranium.

Village said it made the sale because it needed cash to “normalize” relations with its creditors. The company also said the money raised from the sale is sufficient to clear a gold hedge it has with Deutsche Bank.

“The responsible disposal of our shareholding in First Uranium has been at the forefront of our short term strategy this year, as it is non-core to our business,” Village’s chief executive Bernard Swanepoel said in a statement.

First Uranium has operating gold and uranium projects in South Africa, and is working on expanding production.

Its two main projects are the Ezulwini gold and uranium underground mine and the Mine Waste Solutions tailings recovery facility.

To expand it production profile the company has expanded the capacity of MWS and it is ramping up production at the Ezulwini Mine.

As of December 31, 2009 Ezulwini had measured and indicated resources of 13.8 million tonnes grading 6.16 grams gold for 2.7 million oz of gold and 6.9 million lbs of U3O8.