enCore Energy Corp. (TSXV: EU) has entered a definitive agreement to acquire Azarga Uranium Corp. (TSX: AZZ), in a transaction that would create a leading uranium in-situ recovery (ISR) mining company in the US.
The combined company would hold multiple uranium projects at various stages of development. These include the licensed Rosita & Kingsville Dome past-producing uranium production facilities in South Texas, the advanced stage Dewey Burdock development project in South Dakota, which has been issued its key federal permits, and the PEA-staged Gas Hills project in Wyoming.
The portfolio also consists of a large uranium resource endowment in New Mexico including the Marquez-Juan Tafoya project, for which a recent preliminary economic assessment was published, and the Crownpoint and Hosta Butte project.
Together, the total uranium resource base for these assets amounts to 90 million pounds in the measured and indicated category, 9.9 million pounds in the inferred category, as well as 68.4 million pounds in the historic category.
“This strategic acquisition fills the gap in enCore’s pipeline of projects with key intermediate development opportunities in Wyoming and South Dakota, in between initial production in Texas and longer-term opportunities in New Mexico,” enCore’s executive chairman William Sheriff said in a press release.
“Scale is important in the natural resource sector and this transaction will position the new company among the top uranium miners based in the US,” Azarga president and CEO Blake Steele added.
Pursuant to a court-approved plan of arrangement, Azarga shareholders would receive three-eighth (0.375) of an enCore common share for each Azarga share held, implying a consideration of C$0.71 per Azarga common share based on the closing price on the TSX Venture Exchange on September 3, 2021.
The 0.375:1 exchange ratio is subject to an adjustment mechanism, which could see the exchange terms amended to a ratio calculated as C$0.54 divided by enCore’s 15-day volume-weighted average price prior to the closing of the transaction, subject to a maximum closing exchange ratio of 0.49:1.
A special meeting of Azarga shareholders is set to be held in October or November to vote on the all-stock merger, which requires two-thirds of the votes cast in favor of this deal to pass.
The Azarga merger represents the second major acquisition for enCore within the last 12 months. In September 2020, enCore announced its acquisition of then Nasdaq-listed Westwater Resources Inc. and the company’s Texas uranium production assets (Rosita & Kingsville).
According to Haywood Research’s latest commentary, the “combination of enCore and Azarga create a stronger, more diversified platform for growth in the US.” As such, the firm has assigned a “Tender” rating in favor of the transaction.
Shares of enCore fell 3.3% by midday Wednesday following the merger news, giving the US uranium developer a market value of C$343.0 million.
Azarga’s stock was also in the red, down 4.8% with a market capitalization of C$139.2 million.