OmegaCorp on the block Crossy!!!=DJ Denison Seen Having Competition For OmegaCorp >DEN.T --
By Brian Truscott
Of Dow Jones Newswires
VANCOUVER (Dow Jones)--Denison Mines Corp.'s (DEN.T) plan to buy Australia's
OmegaCorp Ltd. (OMC.AU) - a deal primarily meant to secure ownership of an
advanced uranium project in Zambia - is buy no means a certainty, given the
cheap price being offered and the current appetite for uranium assets, analysts
said.
"The offer is fairly cheap at just 0.9 times net asset value, when you
consider this is an asset with potential for so much upside," said one uranium
analyst.
Denison said Monday that it would offer A$1.10 a share, which is a 25% premium
to the average share price over the past 20 days. Omega trades around 99
Australian cents a share.
The deal is worth about A$170 million. OmegaCorp directors have recommended
that shareholders accept the offer in the absence of a superior offer.
When President and Chief Executive Peter Farmer was asked during an analysts'
conference call if Denison expects to see a competing offer, he said: "I don't
know, but our offer is a fair offer."
Analysts weren't so sure, in part because of the huge potential of one of
OmegaCorp's core assets, the Kariba uranium project in Zambia, a relatively
stable and democratic African country.
There are expectations that SXR Uranium One Inc. (SXR.T), Paladin Resources
Ltd. (PDN.AU), an Australian rival of OmegaCorp, and Lundin Mining Mining Corp.
(LUN.T) will take a close look at Denison's bid.
"Paladin and Lundin have lots of experience operating and working in Africa,
but it might also make sense for an SXR to step in," one analyst said.
"Realistically, I can't see who else would bother, because the uranium volumes
and the size of the deal is (relatively) small."
At the moment, Kariba only has an inferred resource estimate, but a scoping
study and accompanying estimates suggest a mine with a life of six to 10 years,
churning out 1.5 million pounds of uranium a year.
Denison's Farmer described the Kariba project as an advanced uranium project
in Zambia with the potential for low-cost production, using shallow open pits
and benefiting from sound infrastructure.
Production is expected to start as early as late 2009. A pre-feasibility study
is in the works.
Analysts dismissed any talk of the likes of a Cameco Corp. (CCJ) descending on
OmegaCorp, because the scope of the project is too small. Cameco is in a
struggle to restart the development of its Cigar Lake mine in Canada, which was
hit by severe flooding earlier this fall. Cigar Lake had been slated to start
production in 2007 but that's now in question.
"Cameco has to do something; they need to buy production now - and that could
be an SXR," one analyst said.
However, the favored bet is that Cameco will go fater Denison, which has a
market cap of C$1.8 billion and would offer Cameco considerable potential for
additional production and exploration, another analyst said.
In Toronto Tuesday, Denison is up C$1.25, or 4.3%, to C$30.60 on 205,000 |
