Deal Overview

Paladin Energy Limited (ASX:PDN, OTCQX:PALAF) announced on 24 June 2024 that it has entered into a definitive arrangement agreement to acquire 100% of the issued and outstanding shares of Fission Uranium Corp (TSX:FCU, OTCQX:FCUUF, FSE:2FU) via a court-approved plan of arrangement under the Canada Business Corporations Act. The transaction is structured as an all-scrip acquisition, with no cash component.

Under the terms of the agreement, Fission shareholders will receive 0.1076 fully paid Paladin shares for each Fission share held at closing. Based on the closing price of Paladin shares on the ASX of A$13.24 on 21 June 2024, this exchange ratio implies a value of C$1.30 per Fission share and an aggregate equity value for Fission of C$1,140 million (approximately A$1,253 million).

Concurrent with the closing of the transaction, Paladin has applied to list its shares on the Toronto Stock Exchange (TSX). Fission shareholders will therefore receive TSX-listed Paladin shares, providing them with continued access to liquidity in a Canadian capital markets context. Upon completion, existing Paladin shareholders will own approximately 76% of the enlarged company, with Fission shareholders holding the remaining 24%.

“The acquisition of Fission, along with the successful restart of our Langer Heinrich Mine, is another step in our strategy to diversify and grow into a global uranium leader across the top uranium mining jurisdictions of Canada, Namibia and Australia. Fission is a natural fit for our portfolio with the shallow high-grade PLS project located in Canada’s Athabasca Basin. The addition of PLS creates a leading Canadian development hub alongside Paladin’s Michelin project, with exploration upside across all Canadian properties.

Both sets of shareholders are expected to benefit from the increased scale of the enlarged company, with a combined Mineral Resource representing one of the largest amongst pure-play uranium companies globally and a substantially increased international capital markets exposure. The Transaction also de-risks the development of PLS for Fission shareholders, underpinned by LHM production and Paladin’s leading offtake contract book. Paladin will bring the required investment to PLS in order to advance it towards production.”

— Ian Purdy, CEO, Paladin Energy Ltd

Transaction Terms

The all-scrip consideration structure means the transaction carries no immediate cash outlay for Paladin. The exchange ratio of 0.1076 Paladin shares per Fission share was fixed at announcement, providing Fission shareholders with certainty on the number of shares to be received while retaining exposure to Paladin’s future performance.

The arrangement agreement includes customary reciprocal deal protections, including fiduciary-out provisions and non-solicitation covenants, with a right for Paladin to match any superior proposal. Fission’s Board of Directors — following the unanimous recommendation of its Special Committee of independent directors — recommends that Fission shareholders vote in favour of the transaction. Directors and senior management of Fission holding 0.7% of outstanding Fission shares have entered into voting support arrangements with Paladin.

Strategic Rationale

For Paladin, the acquisition accelerates its stated strategy of building a diversified, multi-asset uranium portfolio across tier-one jurisdictions. The Langer Heinrich Mine (LHM) in Namibia recommenced production in March 2024, providing Paladin with near-term cash flow. The addition of the Patterson Lake South (PLS) project in Saskatchewan’s Athabasca Basin provides a high-quality development asset with a clear path to production, targeted for first output in 2029.

The combined company will hold a pro-forma total mineral resource of 544 million pounds of U3O8 across its portfolio, positioning it as the third-largest listed pure-play uranium company by resource endowment globally. The combination also creates a leading Canadian development hub, pairing PLS with Paladin’s Michelin uranium project in Labrador, which is advancing toward a Pre-Feasibility Study expected to complete by FY2026.

“The combination of Fission and Paladin will create a world class diverse uranium producer, adding a class leading development project in a Tier 1 jurisdiction with the ability to expand production and cash flow profiles in the near term. With commercial production at Langer Heinrich and further development milestones at PLS, this opportunity will create a diverse pureplay uranium company with current production and a deep pipeline of near and mid-term assets available to investors.”

— Ross McElroy, President and CEO, Fission Uranium Corp

From Fission’s perspective, the transaction de-risks the funding of PLS development. The Langer Heinrich Mine’s cash flow generation, combined with Paladin’s strong balance sheet and offtake contract book, creates a financing pathway for PLS that reduces the need for further equity dilution at the project level. The transaction also provides Fission shareholders with a 30.0% premium to the 20-day VWAP and ongoing exposure to both PLS and the producing Langer Heinrich Mine through their ~24% holding in the enlarged Paladin.

“This arrangement significantly de-risks the mine-building financing at PLS, with the cash flow generation at Langer Heinrich and a strong balance sheet creating an opportunity to significantly fund the development of PLS through debt and internally generated cash flows with limited further equity dilution.”

— Ross McElroy, President and CEO, Fission Uranium Corp

Combined Asset Portfolio

The enlarged Paladin will operate across three uranium mining jurisdictions: Namibia, Canada, and Australia. The production and development pipeline spans multiple decades, from the currently producing Langer Heinrich Mine through to longer-dated exploration assets in the Athabasca Basin.

The Langer Heinrich Mine, in which Paladin holds a 75% interest, resumed commercial production in March 2024 after a care-and-maintenance period. The mine has a 17-year mine life with a nameplate production capacity of 6 million pounds of U3O8 per annum, with first customer shipment expected in July 2024. The restart project was delivered on time and within the forecast capex of US$125 million.

The Patterson Lake South project, Fission’s flagship asset, hosts the shallow, high-grade Triple R deposit in Saskatchewan’s Athabasca Basin. The 2023 Feasibility Study outlined a 10-year mine life with annual production of 9.1 million pounds of U3O8, with total Mineral Reserves of 93.7 million pounds at 1.41% U3O8. Front-End Engineering Design (FEED) for PLS is nearing completion, with first production targeted for 2029.

Paladin’s Michelin uranium project in Labrador, Canada, holds mineral resources of 127.7 million pounds U3O8 at 860 ppm and is at the Preliminary Economic Assessment stage, with a Pre-Feasibility Study expected by FY2026. The combined portfolio will also include Paladin’s Australian exploration assets at Manyingee, Carley Bore, and Mount Isa.

Closing Conditions & Timeline

The transaction requires approval from at least 66⅔% of votes cast by Fission shareholders voting as a single class at a special Fission shareholder meeting, with the same supermajority threshold applying to Fission shareholders and optionholders voting together. Additionally, a simple majority of votes cast by Fission’s minority shareholders is required. No Paladin shareholder approval is necessary.

The deal is also subject to customary closing conditions, including clearance under the Investment Canada Act and Competition Act (Canada), British Columbia court approval, and applicable stock exchange approvals. Paladin has received in-principle confirmation from ASX that it is likely to grant a waiver from Listing Rule 7.1, meaning Paladin’s shareholders will not be required to vote on the issuance of Paladin shares as consideration.

A management information circular is expected to be mailed to Fission shareholders on or around 23 July 2024 in connection with the Fission shareholder meeting. Paladin intends to retain Fission’s management team following completion of the transaction, to continue development of PLS. The transaction is targeted to close in the September 2024 quarter, subject to all conditions being satisfied.

Upon completion, Fission shares will be de-listed from the TSX, the OTCQX, and the Frankfurt Stock Exchange. Paladin’s financial advisor for the transaction is Macquarie Capital, with Fasken Martineau DuMoulin LLP serving as Canadian legal advisor and Corrs Chambers Westgarth as Australian legal advisor. Fission has engaged SCP Resource Finance as financial advisor, Blake, Cassells & Graydon LLP as legal advisor, and Cantor Fitzgerald as financial advisor to the Special Committee.