Denison is making itself look pretty for Rio Tinto; Athabasca Basin back in play

April 18, 2012

Uranium Industry

Denison Mines (DML-TSX / $1.41; Market Cap. $550.1M) – Not Rated

Rio Tinto (RIO-NYSE / US$54.95; Market Cap US$107.8B) – Not Rated

Areva (AREVA-PA / €13.28; Market Cap €5.1B) – Not Rated

Cameco Corp (CCO-TSX / $20.48; Market Cap $8.1B) – Not Rated

Fission Energy (FIS-TSXV / $0.57; Market Cap $64.3M) – Buy (Speculative) Target: $1.05

  • Denison’s sale of its U.S. assets appears to be cleaning itself up to be a for a major to take it over. A major whom just recently won a toehold in the prolific Athabasca Basin and whom many see as needing to get a larger piece of the area for the move to make sense.
  • As we have mentioned several times in the past, Rio Tinto’s acquisition of Hathor Exploration’s 58M lbs U3O8 Roughrider deposit in the Athabasca Basin on a standalone basis was not significant enough to move the global mining giant’s needle. It was expected that Rio Tinto would have to follow this acquisition with a few others:
    • The 53M lbs U3O8 Midwest and Midwest A projects and the state-of-the-art McLean Lake Mill jointly owned by Areva and Denison
    • The Waterbury Lake property owned by Fission Energy, which is host to the 8.9M lbs U3O8 J Zone deposit and the western extension of Rio Tinto’s Roughrider deposit.
  • What Rio Tinto was likely not interested in was Denison’s U.S. assets, which are too small to be meaningful for the multinational but an excellent fit for Energy Fuels. With the recently announced sale, Denison effectively “cleans up” to be a better fit for Rio Tinto.
  • With Areva essentially putting up all of its assets on the block to raise some much needed cash, it would not be a stretch to envision Rio Tinto consolidating the entire region surrounding Roughrider with the acquisitions of Denison Mines, Areva’s Athabasca assets and Fission Energy.
  • It will be interesting to see if Cameco allows this to happen. It already gave up Hathor to Rio Tinto due to financial “discipline” but will it allow the mining giant to establish a significant position in an area that Cameco has held a long-standing dominant position? We may see a pretty interesting bidding war if Cameco decides to “defend its house”.

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