Denison to sell GoviEx shares and warrants

Denison Mines (TSX: DML; NYSE-AM: DNN) is selling 32.5 million common shares it holds in GoviEx Uranium (TSXV: GXU; US-OTC: GVXXF) at 48¢ per share to one of the junior explorer’s larger institutional shareholders for proceeds of $15.6 million.

Denison currently owns 65.14 million GoviEx shares or about 12.07% of the company’s shares outstanding.

Under the private sales agreement with the unnamed institutional shareholder, Denison will also grant 32.5 million common share purchase warrants entitling the buyer to acquire one additional common share of GoviEx at an exercise price of 80¢ over an 18-month period. If the GoviEx warrants are exercised, Denison will receive a further $26 million and transfer the remaining 32.5 million common shares to the warrant holder.

Denison’s CEO, David Cates, will remain on GoviEx’s board of directors.

The transaction between the company’s two existing shareholders, GoviEx’s executive chairman, Govind Friedland, said, “demonstrates strong institutional demand and continued interest in the uranium sector and in GoviEx’s equity.”

Friedland also said the second part of the transaction involving the warrants, was “a positive sign of confidence in our management team and in the strength of our pipeline of uranium assets.”

Denison held the shares for investment purposes, and became a shareholder in 2016 as part of a strategic transaction in which GoviEx acquired Denison’s wholly owned subsidiary, Rockgate Capital Corp., which held all of Denison’s Africa-based uranium interests in exchange for 56.05 million shares of GoviEx and 2.42 million common share purchase warrants.

GoviEx’s assets are its Madaouela uranium project in Niger, its Mutanga project in Zambia, and its Falea project in Mali.

Following the news, Colin Healey, a mining analyst at Haywood Securities, raised his target price on Denison from $2.40 to $2.90 per share share.

“Overall we like the timing of the sale, as GoviEx’s shares have appreciated 250% in the last 12 months, and while we remain extremely constructive on the uranium sector and uranium price, Denison’s key focus is advancing its projects in the most efficient way possible for shareholders,” he wrote in a research note to clients.

“Given the rapid move in uranium prices and follow on response in market valuations for equities, the gap between Denison’s share price and our formal target has quickly narrowed, prompting us to revisit our valuation on this ‘top pick.’”

Denison’s uranium assets are focused in Canada’s Athabasca Basin region in northern Saskatchewan. It has a 95% stake in the Wheeler River project; and a 22.5% stake in the McClean Lake joint venture, which includes uranium deposits and the McClean Lake uranium mill that is contracted to process mineralized material from the Cigar Lake mine under a toll milling agreement. In addition it has a 25.17% interest in the MidWest Main and Midwest A deposits, and a 66.90% interest in the The Heldeth Tue (formerly J Zone) and Huskie deposits on the Waterbury Lake property.

The company also owns 50% of JCU (Canada) Exploration, which has joint venture interests in the Millennium, Kiggavik and Christie Lake projects.

“Denison shares have been demonstrating excellent sector leverage as of late,” Haywood’s Healey wrote, “while it continues to de-risk its world class Wheeler River project. We see great upside in this ‘top pick’ in a forecast rising uranium price environment.”

At presstime in Toronto, Denison’s shares were trading at $2.30 per share within a 52-week trading range of 40.5¢ and $2.43 per share.

GoviEx’s shares were trading at 48¢ within a 52-week trading range of 12¢ and 59¢.