AngloGold’s move lifts First Uranium

AngloGold Ashanti (AU-N) clearly likes the discounted price of 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. 

First Uranium shares began the year trading in the $1.30 range, but have fallen consistently since then, dropping all the way down to 38¢ before the AngloGold investment was announced. 

On July 22, 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 in Toronto. 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, 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 $55 million in convertible notes it holds. The lock-up period will last for 120 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 (MWS) tailings recovery facility.

To expand its production profile, the company has boosted the capacity of MWS and is ramping up production at the Ezulwini mine. 

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