Consolidated Uranium agrees to buy undeveloped Virginia uranium project

Consolidated Uranium, which owns a portfolio of pre-production and mothballed uranium projects, has agreed to acquire Virginia Energy Resources, owner of an undeveloped uranium deposit in that state, for C$29 million (US$21.6 million) in stock.

Under the deal announced Nov. 15, Virginia Energy shareholders would receive 0.26 shares of Consolidated Uranium for each share in Virginia Energy they hold. Both company stocks are listed on the Toronto Stock Exchange.

At the closing price Nov. 14, that implied a value for the transaction of C$32.2 million. However, the value dropped as shares of Consolidated Uranium declined in recent days. The price of Consolidated Uranium shares fell after the announcement, closing at C$1.73 Nov. 22, down more than 10% from C$1.93 on Nov. 14, the day before the announcement.

Prices of Virginia Energy shares climbed on the news of the deal, closing at C$0.41 Nov. 22, up 26% from the closing price Nov. 14.

The transaction requires approval by a two-thirds vote of Virginia Energy shareholders and may require approval of Consolidated Uranium shareholders, the companies said.

The Coles Hill project has been stalled because of a state-level moratorium on uranium mining dating to 1982. Efforts to remove the moratorium have failed repeatedly.

"In fact, Virginia over the last seven years has taken the state to court in an effort to overturn the moratorium without success," Phillip Williams, CEO of Consolidated Uranium, said in a video released in connection with the deal's announcement. In 2019 the US Supreme Court upheld the legality of Virginia's uranium mining ban in a case brought in 2015 by Virginia Energy subsidiary Virginia Uranium.

There is a chance the moratorium could be overturned, William said, citing growing interest in nuclear energy use. "Virginia is a nuclear state," he said.

The deal continues Consolidated Uranium's strategy of acquiring mothballed or uncompleted uranium projects. Consolidated has acquired 18 such projects in Argentina, Australia, Canada and the US — none of which is producing — since it was formed in 2020, he said. The company has no revenue from sales.

The Coles Hill project is being acquired at a low price based on the potential resources, Williams said.

Virginia Energy shareholders Energy Fuels, which holds almost 15% of Virginia Energy, and Mega Uranium, which holds a smaller stake, support the acquisition, Williams said.

Energy Fuels will own about 17% of Consolidated Uranium after the transaction closes, he added.

The value of Virginia Energy is "underpinned" by the value of the land it owns as well as that of a solar energy project that is being developed on the property, Williams said. The presence of the solar project is an "important value driver" behind the acquisition, he noted.

The land could be sold should the project not be able to move forward, Williams said, noting that the area in which the solar project is located is not directly above the uranium deposit, allowing it to be developed regardless of the solar project's status.

"We'll be a larger market-cap company" with the Virginia acquisition, making it more likely that exchange-traded funds, which hold a basket of stocks, will include Consolidated Uranium in their portfolios, he said.

Warren Coles, chairman and CEO of Virginia Energy, said in the statement that shareholders of his company will gain exposure to a more diverse set of uranium projects by agreeing to the acquisition. "Having run Virginia Energy since its formation in 2007, I am acutely aware of the inherent risks of being a single asset, single jurisdiction uranium developer," he said.

Virginia Uranium estimated in 2013 the deposit contained 132 million lb of indicated resources, Consolidated Uranium said.