UEX Corp (UEX) - Will $21.2M Bought Deal Get Denison Deal Closed?

UEX Corporation is a Canadian uranium exploration and development company formed in 2002 under an agreement between Cameco Corporation and Pioneer Metals Corporation. The company is listed on the Toronto Stock Exchange (TSX-V: UEX), and the OTC Markets (OTCQX: UEXCF). The company is an active explorer in the Athabasca Basin in northern Saskatchewan, the most important uranium-producing district in the world, accounting for 16% of the global uranium production in 2014. 

We met with Roger Lemaitre, President, CEO, and Director, UEX Corp. Roger is a Professional Engineer and Geologist with over 2 decades of experience with senior and junior mining companies. He previously served as the CEO and Executive Director at URU Metals Limited. 

Over the course of his career, Roger has held numerous senior management positions including the Director of World Exploration Projects for Cameco Corporation. His educational credentials include a Masters of Applied Science in Geology from McGill University and a Bachelor of Applied Science in Geological Engineering from Queen's University, and an MBA from Athabasca University. 

Company Overview

UEX Corp. has made significant advancements in the discovery and development of new and existing uranium and cobalt deposits in the Athabasca Basin. The company has 4 flagship projects in its portfolio, the Christie Lake Project, the West Bear cobalt-nickel project, the Horseshoe-Raven Deposit, and the Shea Creek property. 

UEX Corp. is one of the oldest juniors in the uranium space. They have a large portfolio of projects focused on the development-ready end of the spectrum. The company's vision is to be the next developers of uranium in Canada and the Athabasca Basin. Their strong portfolio enables the company to ensure sustainability in the long term beyond a single project. 

The JCU deal

UEX Corp. recently raised $21.2M through a bought deal with a half warrant at $0.29 for a 3-year term. This will allow the company to pay back the Denison loan. Since this is a bought deal, there's no risk at the company's end. 

This deal was made with Denison Mines Corp, who acquired 50% ownership of JCU from UEX Corporation for a cash consideration of $20.5M. As per UEX's press release, the company also has an OURD Agreement with Denison Mines Corp. to acquire 100% ownership of JCU, a wholly-owned subsidiary of OURD for a price of $41M. 

In case of a loan default, the company's JCU resources will go under 100% acquisition by Denison, a scenario UEX Corp. is looking to avoid to maintain shareholder value. 

UEX Corp. sold 50% of JCU to Denison mines as a way to raise money for their new assets. Through this deal, UEX Corp. acquired an interest-free loan for a duration of 6 months. The company is working towards generation 43-101 compliance reports on all new prospective financing deals, scheduled for October 2021. 

During the purchase of JCU, UEX Corp. inherited $5.8M with JCU use acquisition. This brings the purchase price from $41M to $35.5M as the company netted out $5.8M. The company is anticipating that by 2022, the Wheeler River project will be commencing operations. In an ideal scenario, the company won't need to raise any additional funds. 

As JCU is the operator of the project, the budgeting for the project is decided through the JV (Joint Venture). There are 3 partners who function as operators, namely Cameco, Orano, and Denison. Denison controls the Wheeler River site and the advancement of this project will have a major impact on the overall JCU budget. Meanwhile, the progression at Millennium and Kiggavik projects, under the ownership of Cameco and Orano will also have a lasting impact on the budget. UEX Corp. will have a better picture of the budget by October 2021. UEX Corp. currently has $5M in cash flow and already has funds needed to close the Denison deal in the long term.

The Wheeler River Project

Denison currently owns 95% of the Wheeler River Project, while UEX retains a 5% stake. UEX Corp. is expecting a budget similar to last year based on the progression of the development cycle. Since the project already resides under JCU, the company won't need to raise additional capital. The company's JCU budget currently stands at $2.6M. 

The company plans to utilize its cash flow towards its Christie Lake project in the summer. Since a significant number of gold exploration projects are being carried out in Canada, the company has seen delays at the site due to the lack of drill availability. 

The company has also been working on its Hidden Bay project since last winter, leading to encouraging results. They plan to further develop this project starting 2021 end or early 2022. 

The Shea Creek project with Orano is also ongoing. The company is mainly focused on its 3-year vision prioritizing the exposure to JCU projects, especially the Wheeler River project along with production visibility. The company is focused on the growth of its uranium projects along with other mid-stage and resource-level projects. 

Tough Financial Decisions

UEX Corp. decided to offload company shares before raising money as they had options that were nearing expiry. The company faced a blackout for 5-6 months just before Christmas 2020. To remove this blackout and exercise the expiring options, the company had to offload the shares. 

The company plans to buy back stocks through its directors and officers in the coming months as a way to maintain the company's structure. 

The Uranium Market

There has been an emerging trend where the 2nd quarter is challenging for uranium equities. This is because, during the summer, the deliverables in uranium are at their lowest levels. The 4th quarter often exceeds market expectations as the majority of production and output is carried out during this time. 

The capital raise from Sprotts to raise money for supply purchases has the potential to cause further fluctuations in the uranium utility market. UEX Corp. believes that as long as there's an existing uranium supply in the market, the value of fresh uranium will continue to be undervalued.

To find out more, go to the UEX Corporation Website