January 5, 2015 / 4:53 PM / 3 years ago

U.S. uranium producer Energy Fuels to buy Uranerz in $150 mln deal

Jan 5 (Reuters) - Energy Fuels Inc said on Monday that it agreed to buy Uranerz Energy Corp in a roughly $150 million all-stock combination of the U.S. uranium producers.

The deal comes amid improving spot prices following a slump triggered by the 2011 Fukushima disaster, which shut down all nuclear reactors in Japan. Spot prices rebounded somewhat in late 2014 as Japan took steps toward re-starting some of its idled reactors.

Uranerz shares jumped 12.8 percent in morning trading in Toronto to C$1.50, while Energy Fuels dropped 6.4 percent on the Canadian exchange to C$6.85.

Energy Fuels, based in Lakewood, Colorado, will pay 0.255 common shares of Energy Fuels for each Uranerz common share, or a 40 percent premium over Uranerz’ closing price in Toronto on Friday.

The combined company will have the ability to scale up production in coming years as uranium prices increase, and may further consolidate the U.S. uranium sector, the companies said in a statement. The deal also offers potential cost savings, they said.

Dundee Capital Markets said in a note that the deal may allow Energy Fuels to lower its average operating costs and give the combined company the means to develop new projects. But the deal, joining companies that use different mining methods, may result in little operational synergies, Dundee said.

The combined company will have six long-term sales agreements with utilities including Exelon Corp. Long-term agreements generally pay more than the spot price, which was recently $35.50 per pound.

The takeover combines conventional uranium production from Energy Fuels’ mill at White Mesa, Utah with Uranerz’ mine and plant at Nichols Ranch, Wyoming, which uses in situ mining techniques. In situ mining removes ore by injecting a solution into wells while leaving the rock in place, resulting in lower costs.

Energy Fuels, the second biggest uranium supplier in the United States after Canada’s Cameco Corp, accounts for 20 percent of U.S. uranium production.

The deal requires majority shareholder approval from both companies and is set to close in the second quarter.

Cantor Fitzgerald Canada is acting as financial adviser to Energy Fuels, while Borden Ladner Gervais LLP and Dorsey & Whitney LLP are its legal counsel. Haywood Securities Inc is financial adviser to Uranerz, and McMillan LLP is its legal adviser.

$1 = 1.1790 Canadian dollars Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Tom Brown

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