Western Prospector to be bought by Chinese company with ties to state

A Hong Kong-listed company with links to China National Nuclear Corporation, China’s former Ministry of Nuclear Industry that built the country’s first atom bomb, wants to buy Western Prospector Group (WNP-V, WEPGF-0), a Canadian junior with uranium assets in Mongolia.

Under the takeover offer, CNNC International is offering to buy Western Prospector for C$0.56 per share in cash, valuing Western’s equity at about C$31 million.

CNNC International’s offer represents a 51% premium to Western’s closing price of C$0.37 on March 24, and a 75% premium to Western’s 20-day volume weighted average price for the period ending March 24.

CNNC Overseas Uranium Holding, a wholly owned unit of China National Nuclear Corp. (CNNC), holds 74% of CNNC International.

China National Nuclear Corp. is a large state-owned enterprise that is the country’s largest nuclear power plant builder and has more than 100 subsidiaries and institute overseeing all aspects of civilian and military nuclear programs.

CNNC was set up in 1988 by a government decree and its president and vice president are appointed by the head of China’s State Council.

Western Prospector’s board and special committee of advisors unanimously recommends the offer to shareholders.

“Their depth of expertise in the nuclear fuel cycle, their strong financial position and their strong political ties with Mongolia make CNNC an ideal strategic partner for Western going forward,” Eric Bohren, Western Prospector’s president and chief executive, said in a statement.

News of the takeover bid drove up Western Prospector’s shares by 43%, or 16¢, to 53¢ per share with 10.3 million shares changing hands.

The Vancouver-based junior has traded in a 52-week range of 10¢-$1.34 per share and has 54.3 million shares outstanding.

The company’s flagship project is Gurvanbulag, a uranium deposit in eastern Mongolia. According to a definitive feasibility study, and based on proven and probable reserves of 5.04 million tonnes grading 0.161% U₃O₈ (for 17.9 million lbs. contained uranium) at a cutoff grade of 0.08% U₃O₈, the project would have an estimated pretax internal rate of return of 9.2% based on a constant selling price of US$65 per lb. On an after-tax basis, the IRR would amount to 1.3%.

The reserves were generated in the study from the revised resource estimate released in November. According to the new resource estimate, Gurvanbulag has measured and indicated resources of 4.28 million tonnes grading 0.189% U₃O ₈ plus 795,000 tonnes grading 0.126% U₃O₈ in the inferred category.

The feasibility study indicated that the deposit can produce an average of 1.85 million lbs. of uranium oxide annually as calcined yellowcake for a nine-year production life. (A radiometric sorting plant is projected to remove 620,000 tonnes of low-grade rock and feed a nominal 500,000 tonnes a year to the process plant with a head grade of 0.179% U₃O₈.)