In the rapidly shifting uranium sector, where the price of the metal used to make nuclear fuel has soared more than 500 per cent since 2003, the aggressive deal maker has prospered.
Few have been more willing to pull the trigger on a takeover than Toronto's sxr Uranium One Inc. , which yesterday unfurled its latest purchase, a $1.75-billion, all-stock offer for Vancouver's Energy Metals Corp. , which owns a slew of uranium projects in the United States and a processing facility.
If successful, the deal will create an $8.2-billion entity, amalgamating two of the most active players in the industry, which through a series of rapid-fire acquisitions, have each capitalized on the surge of interest in all things radioactive.
"We believe in our product more so than some people who have been in this business for a long time," Neal Froneman, Uranium One's president and chief executive officer, said in an interview.
A nearly bankrupt South African gold company with no production to speak of three years ago, deal making has vaulted Uranium One to its position as the second largest publicly traded uranium producer, behind industry stalwart Cameco Corp. of Saskatoon.
A $3.8-billion merger with UrAsia Energy Ltd. last year gave Uranium One much-needed production assets in Kazakhstan to complement its Dominion mine in South Africa and Honeymoon project in Australia.
Investment bankers at BMO Nesbitt Burns Inc. have guided the company's transformation, facilitating transactions, a Toronto Stock Exchange listing and a move of its headquarters from Johannesburg to Toronto.
Energy Metals or EMC has also been a keen consolidator.
Amid the rocketing price of uranium concentrate, or yellowcake, EMC snapped up several U.S. uranium properties in 2005 and in 2006 pulled off three acquisitions; Standard Uranium, Quincy Energy and High Plains Uranium.
The spot price of uranium has more than doubled over the past year to an all-time high of $138 (U.S.) a pound.
"It's really a race to production," Paul Matysek, EMC's president and CEO, said in an interview.
For Uranium One, EMC offers the potential for a major presence in the United States, where demand for yellowcake from U.S. utilities is about 50 million pounds a year, outstripping the annual domestic production of approximately four million pounds by roughly 11 times. Nuclear-generated electricity has returned to favour amid concerns about emissions from coal-fired plants and worries about dependence on energy from foreign sources.
EMC is developing uranium projects in Texas, Wyoming, New Mexico and Utah, among other states, and is expected to begin a modest level of production in Texas next year, followed by a mine startup in Wyoming in 2009 or 2010. The company, which was advised on the deal by GMP Securities LP, has roughly 61 million pounds of measured and indicated resources.
"This transaction results in the creation of a powerhouse in the U.S. uranium sector and goes a long way towards reaching our goal of releasing uranium to U.S. utilities," Mr. Matysek, who will stay with the combined company to lead operations in the Americas, said on a conference call.
Mr. Froneman expects U.S. uranium demand to increase and predicts between six and 10 new reactors will be approved for construction in the next few years.
"I do believe we are seeing a U.S. nuclear renaissance," he said.
The bulk of EMC's assets will use "in-situ recovery" or ISR -- a process that uses ground water to leach uranium from deposits. Uranium One's operations in Kazakhstan also use ISR.
Despite Uranium One's rapid growth, Cameco remains the industry giant, with a market value more than double Uranium One's and 10 times its 2007 production.
Cameco has ignored the flurry of sector takeovers, concentrating instead on its own development projects, including the troubled Cigar Lake mine.
"This transaction results in a larger, higher-growth alternative to Cameco," Mr. Froneman said.
SXR URANIUM ONE:
Close: $16.10, down 53 cents
ENERGY METALS:
Close: $18.44, up 15 cents.
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The Deal
sxr Uranium One is offering 1.15 of its shares for each Energy Metals Corp. share or $18.51 based on yesterday's closing price. EMC shareholders will own 21 per cent of the new company.
The Deal Makers: sxr Uranium One
December, 2005: Neal Froneman's Aflese Gold and Uranium Resources completes a reverse takeover of Southern Cross Resources.
July, 2006: Uranium One starts negotiating purchase of U.S. Energy Corp.'s uranium assets.
February, 2007: Announces $3.8-billion stock-swap takeover of uranium producer UrAsia Energy Ltd.
Energy Metals Corp.
December, 2004: TSX Venture-listed Clan Resources Ltd. changes name to Energy Metals Corp.
January-November, 2005: EMC stakes or acquires dozens of U.S. uranium properties in Utah, Wyoming, South Dakota and Oregon.
Nov. 10, 2005: Announces stock deal to buy Standard Uranium Inc., giving it Hobson Plant uranium facility in Texas.
Nov. 16, 2005: Announces all-stock deal for Quincy Energy Corp.
August, 2006: All-stock deal for High Plains Uranium.
The Result
Valued at roughly $8.2-billion, the new company will be the second-largest publicly traded pure-play uranium producer, but still a distant second to Cameco's $19.9-billion market capitalization.