Energy Fuels Inc. (TSX:EFR) ("Energy Fuels") and Strathmore
Minerals Corp. (TSX:STM)(OTCQX:STHJF) ("Strathmore") are pleased to
announce the signing of a Letter of Intent (the "LOI") pursuant to
which Energy Fuels and Strathmore have agreed to pursue a
transaction (the "Transaction") whereby Energy Fuels would acquire,
by way of a plan of arrangement, all of the issued and outstanding
common shares of Strathmore. Under the terms of the LOI, Strathmore
shareholders would receive 1.47 common shares of Energy Fuels for
each common share of Strathmore held, resulting in the shareholders
of Strathmore owning approximately 21% of the issued and
outstanding shares of Energy Fuels upon completion of the
Transaction. The consideration represents a premium of 31% based on
the 20-day volume weighted average prices on the TSX as of May 22,
2013.
Energy Fuels and Strathmore believe the Transaction will
position the newly combined Energy Fuels as the premier pure-play
U.S. uranium company, supported by significant current uranium
production of 1.175 million lbs. for its current fiscal year, as
well as a robust pipeline of development projects. The U.S. remains
the largest consumer of uranium globally, yet it is heavily reliant
on imported uranium for over 90% of its supply requirements. Energy
Fuels is well-positioned as a large, reliable source of uranium
supply within the U.S., currently accounting for over 25% of
estimated U.S. production.
Stephen Antony, President and CEO of Energy Fuels commented, "It
is rare to find an acquisition that offers the magnitude of
synergies that we believe exist between Energy Fuels and
Strathmore. I am very excited about the merits of this transaction
and the opportunity it represents for the shareholders of both
companies. It is consistent with our corporate strategy and
significantly strengthens the company's long- term production
profile throughout the Four Corners region of the southwest U.S.
and in Wyoming. Strathmore is recognized for building a quality
portfolio of U.S. uranium projects, and I look forward to working
with them and their partners to realize the many synergies and to
capitalize on the strengths that are created by this
transaction."
David Miller, Strathmore's CEO continued, "We are excited to
enter this transaction with Energy Fuels, which represents a strong
fit with Strathmore's asset base and a significant step forward in
both the near- term and long-term development of our U.S. uranium
portfolio. We evaluated this transaction extensively and believe
the synergies between Energy Fuels and Strathmore are substantial.
We look forward to the completion of this transaction which we
expect will contribute to our shared goal of becoming the dominant
uranium producer in the United States, and ultimately create
significant value for our shareholders."
Synergies
Energy Fuels and Strathmore believe the Transaction will result
in significant value creation for the shareholders of both
companies through numerous synergies.
Energy Fuels' White Mesa Mill and Strathmore's Roca Honda
Project
Energy Fuels' White Mesa Uranium Mill (the "White Mesa Mill") is
the only operating uranium mill in the U.S., centrally-located to
service the Four Corners region, which includes numerous uranium
projects in Arizona, New Mexico, Colorado and Utah owned by Energy
Fuels, Strathmore, and others. Strathmore's advanced stage Roca
Honda uranium project ("Roca Honda") in New Mexico is one of the
largest and highest-grade uranium projects in the U.S. with an NI
43-101 compliant resource estimate. The Roca Honda project is held
in the Roca Honda Resources LLC Joint Venture, which is owned 60%
by Strathmore and 40% by Sumitomo Corporation of Japan. The total
resources for Roca Honda are summarized in the table shown
below:
Summary of Roca Honda Mineral Resources
Measured & Indicated:
Classification Tons Grade % eU3O8 Lbs. eU3O8
----------------------------------------------------------------------------
Measured 284,000 0.395 2,247,000
Indicated 1,793,000 0.405 14,536,000
----------------------------------------------------------------------------
Total M&I 2,077,000 0.404 16,783,000
Inferred:
Classification Tons Grade % eU3O8 Lbs. eU3O8
----------------------------------------------------------------------------
Inferred 1,448,000 0.411 11,894,000
According to the August 6, 2012 technical report prepared in
accordance with NI 43-101 entitled, "Technical Report on the Roca
Honda Project, McKinley County, New Mexico, U.S.A.", which also
includes a Preliminary Economic Analysis (the "RHR PEA" ), the base
case evaluation shows attractive project economics, including a Net
Present Value of US$220 million (using an 8% discount rate and
$75/lb. uranium price), a nine year mine life, $24/lb. operating
cost, and production of 2.6 million lbs. of U3O8 per year. In March
2013, the U.S. Forest Service published a draft Environmental
Impact Statement on Roca Honda.
The recently completed RHR PEA assumed that a new uranium mill
would be built in New Mexico to process uranium from Roca Honda.
Given that Roca Honda is located within transport distance of the
White Mesa Mill, Energy Fuels and Strathmore believe the
Transaction will provide the option to process Roca Honda uranium
at the White Mesa Mill rather than at a newly constructed mill.
This could result in significant savings on development capital
expenditures and reduce Roca Honda's permitting timeline and cost.
Based upon certain forecasts contained within the RHR PEA, as well
as previous experience in conventional ore processing at the White
Mesa Mill, Energy Fuels believes there is the potential for Roca
Honda to be the largest, and one of the lowest cost, producing
mines in the Energy Fuels asset portfolio.
Energy Fuels and Strathmore caution that the RHR PEA is
preliminary in nature and includes inferred resources that are
considered to be too speculative geologically for economic
consideration that would enable them to be classified as mineral
reserves. Mineral resources are not mineral reserves and do not
have demonstrated economic viability. There is no certainty that
the RHR PEA will be realized.
To view the figure "Major Projects of the Combined Company in
the Four Corners Region," please visit the following link:
http://media3.marketwire.com/docs/efr_stm_figure01.pdf
Energy Fuels' Sheep Mountain Project and Strathmore's Contiguous
Claims and Gas Hills Project
Energy Fuels' Sheep Mountain uranium project ("Sheep Mountain")
is a large conventional uranium project in Wyoming which Energy
Fuels is developing as a stand-alone production center. An April
13, 2012 technical report prepared in accordance with NI 43-101
entitled "Sheep Mountain Uranium Project, Fremont County, Wyoming,
U.S.A., Updated Preliminary Feasibility Study" (the "Sheep Mountain
PFS") outlined improved economics for the project. Energy Fuels
continues its permitting efforts on Sheep Mountain. Strathmore
currently owns various mining claims that are contiguous (the
"Contiguous Claims") with Sheep Mountain. By combining the claims,
it is expected that the design of Sheep Mountain can be modified to
take advantage of the additional area provided by the Contiguous
Claims, thereby simplifying permitting and design and lowering
Sheep Mountain's development capital expenditures and ongoing
operating expenses. The Sheep Mountain PFS estimates that the
project has 12.9 million tons of Indicated Resource containing 30.2
million lbs. eU3O8 with an average grade of 0.12% eU3O8. Included
in the above Sheep Mountain Indicated Resources are 7.4 million
tons of Probable Mineral Reserves containing 18.4 million lbs.
eU3O8 with an average grade of 0.123% eU3O8. The Sheep Mountain PFS
also describes attractive project economics under three separate
production scenarios, with Energy Fuels' preferred scenario having
a Net Present Value of $201 million (using a 7% discount rate and
$65/lb. uranium price), $32.31/lb. operating cost, initial capital
expenditures of $109 million, and a production rate of up to 1.5
million lbs. per year for 15 years.
Strathmore's Gas Hills, Wyoming uranium project ("Gas Hills") is
located only 28 miles from Sheep Mountain. Gas Hills is currently
being developed by Strathmore pursuant to a phased joint venture
agreement with Korea Electric Power Company ("KEPCO"). According to
a March 22, 2013 technical report prepared in accordance with NI
43-101entitled "Update of Gas Hills Uranium Project, Fremont and
Natrona Counties, Wyoming, USA", Strathmore showed a substantial
increase in uranium resource estimates from the previous July 2012
report, including 2,300,000 tons of Indicated Resources containing
5,400,000 lbs. of eU3O8 with an average grade of 0.13% eU3O8. In
addition, the technical report estimates that Gas Hills contains
3,900,000 tons of Inferred Resources containing 5,500,000 lbs. of
eU3O8 with an average grade of 0.07% eU3O8. Under its joint venture
agreement with Strathmore, KEPCO has the option to earn-in up to a
40% interest in Gas Hills by spending US$32 million over three
years beginning in 2013. Energy Fuels and Strathmore believe that
significant synergies exist between Sheep Mountain and Gas Hills
which can be realized through combining the two projects
including:
-- Evaluating opportunities that could result in significant savings on co-
development capital expenditures by utilizing a common precipitation,
filtering, drying and packaging plant circuit for uranium recovery from
each project's heap leach process solutions;
-- Targeting a larger combined annual production profile in excess of the
1.5 million pounds U3O8 currently outlined in the Sheep Mountain PFS;
-- Applying the Sheep Mountain permitting and design work to accelerate the
Gas Hills development timeline;
-- Evaluating general and administrative expense savings in areas including
payroll, purchasing, environmental compliance, engineering, surveying
and geologists, land management and safety; and
-- Considering capital cost savings by utilizing common equipment fleets.
Finally, Strathmore's Juniper Ridge uranium project ("Juniper
Ridge") in Wyoming is located approximately 92 miles from Sheep
Mountain. Energy Fuels and Strathmore are currently evaluating the
opportunity to potentially develop Juniper Ridge as part of a
larger regional project with Sheep Mountain and/or Gas Hills.
To view the figure "Major Projects of the Combined Company in
Wyoming," please visit the following link:
http://media3.marketwire.com/docs/efr_stm_figure02.pdf
Expanded Relationship with KEPCO
KEPCO (NYSE:KEP)(KRX:015760) is the largest electric utility in
South Korea, responsible for the generation, transmission and
distribution of electricity and the development of electric power
projects. KEPCO is responsible for 93% of South Korea's electricity
generation. The South Korean government owns a 51% equity interest
in KEPCO. KEPCO is understood to be the largest shareholder of both
Energy Fuels and Strathmore, owning 9.1% and 11.7% respectively. An
affiliate of KEPCO will be Energy Fuels' largest uranium customer
during Energy Fuels' Fiscal Year 2013. In addition, KEPCO is
Strathmore's partner at Gas Hills. KEPCO has expressed its
willingness to enter into a support agreement with both Energy
Fuels and Strathmore to, amongst other things, vote their common
shares of each company in favour of the Transaction. Based on each
company's common shares currently outstanding, following the
closing of the Transaction, KEPCO will own 9.6% of Energy Fuels'
common shares. In addition, following the closing of the
Transaction, Energy Fuels will appoint a director, nominated by
KEPCO, to join Energy Fuels' Board of Directors.
Additional Assets Held by Strathmore
In addition to the aforementioned Strathmore assets, which
Energy Fuels believes are synergistic with its existing portfolio,
Strathmore owns a number of other property assets and royalties,
which, in the opinion of Energy Fuels and Strathmore, enhance the
overall value of the Transaction. These assets include a number of
additional uranium properties, as well as the Copper King
gold/copper project located in southeastern Wyoming. After closing
of the Transaction, Energy Fuels intends to complete a thorough
evaluation of these assets to determine how best to enhance
shareholder value.
Transaction Details
Pursuant to the LOI, the completion of the Transaction is
conditional upon a number of items, including, without limitation,
the entering into of a definitive agreement, required shareholder
approvals, receipt of all necessary regulatory approvals, and other
customary conditions. Upon closing of the Transaction, Strathmore
will nominate one director to join the Energy Fuels Board of
Directors. In addition, other key Strathmore executive team
member(s) will be retained on a consulting basis to advise Energy
Fuels post- closing. The Management Teams and Boards of Directors
of both Energy Fuels and Strathmore have expressed their
willingness to enter into support agreements to, amongst other
things, vote their common shares owned in favour of the
Transaction.
The LOI contains customary deal support provisions, including a
reciprocal expense reimbursement fee of $650,000 payable to the
other party if either party does not obtain shareholder approval of
the Transaction, as well as a reciprocal break fee of $1,300,000
payable if the Transaction is not completed in certain other
circumstances. In addition, the LOI includes customary
non-solicitation covenants by Strathmore, as well as the right for
Energy Fuels to match any superior proposal that may arise.
Strathmore's outstanding options and warrants will be adjusted
in accordance with their terms such that the number of Energy Fuels
shares received upon exercise and the exercise price will reflect
the exchange ratio described above.
The Transaction is expected to be completed in August 2013 or
such later date as the parties may agree. A special meeting of the
shareholders of Strathmore and, if required, Energy Fuels, to
approve the Transaction will each be held at a time yet to be
determined.
Advisers & Counsel
Haywood Securities Inc. and Dundee Securities Ltd. are acting as
financial advisers to Energy Fuels and its board of directors.
Borden Ladner Gervais LLP is acting as legal adviser to Energy
Fuels.
Raymond James Ltd. is acting as financial adviser to Strathmore
and its board of directors. Blake, Cassels & Graydon LLP is
acting as legal adviser to Strathmore.
Other Strathmore Assets To Be Acquired Separately by Energy
Fuels
Strathmore owns a 5% gross production royalty (the "Royalty") on
the Reno Creek in-situ recovery uranium project in Wyoming ("Reno
Creek"), which is currently owned by an affiliate of Bayswater
Uranium Corporation ("Bayswater"). Reno Creek is an advanced stage
project, which recently released a pre-feasibility study in March
2013 which, according to an April 2, 2013 press release issued by
Bayswater, is in the process of being amended to incorporate the
Royalty.
As a form of interim funding to Strathmore pending the approval
and closing of the Transaction, Energy Fuels has agreed to
separately acquire the Royalty from Strathmore in exchange for
consideration of CDN $3,000,000 by way of a non-interest bearing,
unsecured, convertible, promissory note (the "Note"). The Note
shall be repaid in three equal monthly cash installments of
$500,000, beginning with the first installment due on June 28,
2013. Following payment of the third installment, the outstanding
balance of CDN $1,500,000 is payable on October 31, 2013, either by
cash payment or, at the option of Energy Fuels, by the issuance and
delivery to Strathmore of the equivalent amount of common shares in
the capital of Energy Fuels, based on the previous five day volume
weighted average price.
The technical information in this news release has been prepared
in accordance with the Canadian regulatory requirements set out in
National Instrument 43-101 and reviewed by Stephen Antony,
President and Chief Executive Officer for Energy Fuels Inc. and
David Miller, Chief Executive Officer for Strathmore Minerals
Corp., both Qualified Persons under National Instrument 43-101.
About Energy Fuels Inc.
Energy Fuels Inc. is America's largest conventional uranium
producer, supplying approximately 25% of the uranium produced in
the U.S., and is also a significant producer of vanadium. The
company operates the White Mesa Mill, which is the only
conventional uranium mill currently operating in the U.S., capable
of processing 2,000 tons per day of uranium ore. Energy Fuels has
projects located throughout the Western U.S., including producing
mines and mineral properties in various stages of permitting and
development.
Additional information about Energy Fuels Inc. is available by
visiting Energy Fuels' website at www.energyfuels.com or under its
profile on SEDAR at www.sedar.com.
About Strathmore Minerals Corp.
Strathmore Minerals Corp. is a Canadian based resource company
specializing in the strategic acquisition, exploration and
development of mineral properties in the United States.
Headquartered in Vancouver, British Columbia with a branch
administrative office in Kelowna, the company also has U.S. based
Development Offices in Riverton, Wyoming and Santa Fe, New
Mexico.
Additional information about Strathmore Minerals Corp. is
available by visiting Strathmore's website at
www.strathmoreminerals.com or under its profile on SEDAR at
www.sedar.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information contained in this news release, including
any information relating to the proposed Transaction between Energy
Fuels and Strathmore, the benefits and synergies of the
Transaction, future opportunities for the combined company and any
other statements regarding Energy Fuels' and Strathmore's future
expectations, beliefs, goals or prospects constitute
forward-looking information within the meaning of applicable
securities legislation (collectively, "forward-looking
statements"). All statements in this news release that are not
statements of historical fact (including statements containing the
words "expects", "does not expect", "plans", "anticipates", "does
not anticipate", "believes", "intends", "estimates", "estimates",
"projects", "potential", "scheduled", "forecast", "budget" and
similar expressions) should be considered forward-looking
statements. All such forward-looking statements are subject to
important risk factors and uncertainties, many of which are beyond
Energy Fuels' and Strathmore's ability to control or predict. A
number of important factors could cause actual results or events to
differ materially from those indicated or implied by such
forward-looking statements, including without limitation: the
parties' ability to consummate the Transaction; the conditions to
the completion of the Transaction, including the receipt of
shareholder approval, court approval or the regulatory approvals
required for the Transaction may not be obtained on the terms
expected or on the anticipated schedule; the parties' ability to
meet expectations regarding the timing, completion and accounting
and tax treatments of the Transaction; the volatility of the
international marketplace; and other risk factors as described in
Energy Fuels' and Strathmore's most recent annual information forms
and annual and quarterly financial reports.
Energy Fuels and Strathmore assume no obligation to update the
information in this communication, except as otherwise required by
law. Additional information identifying risks and uncertainties is
contained in Energy Fuels' and Strathmore's respective filings with
the various provincial securities commissions which are available
online at www.sedar.com. Forward-looking statements are provided
for the purpose of providing information about the current
expectations, beliefs and plans of the management of each of Energy
Fuels and Strathmore relating to the future. Readers are cautioned
that such statements may not be appropriate for other purposes.
Readers are also cautioned not to place undue reliance on these
forward-looking statements, that speak only as of the date
hereof.
CAUTIONARY NOTE REGARDING TECHNICAL DISCLOSURE
This news release and the information contained herein does not
constitute an offer of securities for sale in the United Sates. The
securities have not been and will not be registered under the
United States Securities Act of 1933, as amended, and may not be
offered or sold in the United States absent registration or
exemption from registration. The terms "inferred mineral
resources", "indicated mineral resources", "measured mineral
resources", "mineral resources" and "probable mineral reserves"
used in this news release are Canadian mining terms as defined in
accordance with National Instrument 43- 101 - Standards of
Disclosure for Mineral Projects under the guidelines set out in the
Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM")
Standards on Mineral Resources and Mineral Reserves (the "CIM
Standards"). The CIM Standards differ significantly from standards
in the United States. While the terms "mineral resources",
"measured mineral resources", "indicated mineral resources",
"inferred mineral resources" and "probable mineral reserves" are
recognized and required by Canadian regulations, they are not
defined terms under standards in the United States. "Inferred
mineral resources" have a great amount of uncertainty as to their
existence, and great uncertainty as to their economic and legal
feasibility. It cannot be assumed that all or any part of an
inferred mineral resource will ever be upgraded to a higher
category. Under Canadian securities laws, estimates of inferred
mineral resources may not form the basis of feasibility or other
economic studies. Readers are cautioned not to assume that all or
any part of measured or indicated mineral resources or probable
mineral reserves will ever be converted into reserves. Readers are
also cautioned not to assume that all or any part of an inferred
mineral resource exists, or is economically or legally mineable.
Accordingly, information regarding resources and reserves contained
or referenced in this news release containing descriptions of our
mineral deposits may not be comparable to similar information made
public by United States companies.
Contacts: Energy Fuels Inc. Curtis Moore Investor Relations
(303) 974-2140 or Toll free:
1-888-864-2125investorinfo@energyfuels.com www.energyfuels.com
Contacts: Strathmore Minerals Corp. Craig Christy Investor
Relations Toll free: 1-800-647-3303info@strathmoreminerals.com
www.strathmoreminerals.com
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