Denison Mines to pick up Northern Continental Resources

Intermediate uranium producer Denison Mines (DML-T. DNN-X is expanding its empire and acquiring junior Northern Continental Resources (NCR-V) for its 60% interest in the Russell Lake project, adjacent to Denison’s new Wheeler River uranium discovery in Saskatchewan.

Northern Continental’s Russell Lake project, in which Hathor Exploration (HAT-V) owns a 40% stake, is on strike with and between two world-class uranium deposits. It is 30 km north of the past-producing Key Lake mine, which serves as Cameco Corp.’s (CCO-T, CCJ-N) regional uranium processing facility, and 15 km south of Cameco’s producing McArthur River mine.

The McArthur River mine is the world’s largest high-grade uranium deposit, with proven and probable reserves of 332.6 million lbs. of U₃0₈ at an average grade of 20.69% and accounts for about 60% of Canada’s total uranium production.

The all-share takeover deal involves one share of Denison for every 10.87 shares of Northern Continental, or one share of Northern Continental for each 0.092 of a Denison share.

The transaction represents a 28.7% premium based on the 20-day volume weighted average trading price of Northern Continental’s and Denison’s shares, and about a 64.8% premium over the closing price of Northern Continental’s shares on Apr. 30.

After the transaction is completed, Denison will issue about 5.04 million shares to Northern Continental’s shareholders.

A break fee of 4% of the transaction value will be owed to Denison if Northern Continental accepts a superior unsolicited offer.

As part of the deal, Denison will provide a bridge loan to Northern Continental of $495,000, at an interest rate of 5% per annum, which can be converted into shares of Northern Continental at a price of 12.5¢ per share. The bridge loan is for working capital until the takeover is completed.

News of the takeover broke on Thursday April 30 but both companies were still making big gains in mid-day trading on Monday May 4.

At midday in Toronto, Denison Mines was trading up 32¢ or 13.45% at $2.70 per share with 4.55 million shares trading hands.

Northern Continental was trading up 3.5¢ or 17.95% at 23¢ a share with 1.26 million shares changing hands.

Denison has ownership interests in two of the four conventional uranium mills currently operating in North America. The company also has a portfolio of exploration projects in the U.S., Canada, Mongolia and Zambia.