PERTH (miningweekly.com) – Uranium developers Vimy Resources and Deep Yellow on Thursday announced a A$658-million merger agreement.

Under the terms of a scheme of arrangement, Deep Yellow will acquire all of the shares in ASX-listed Vimy, with Vimy shareholders to receive 0.294 Deep Yellow shares for every Vimy share held.

The companies said in a joint statement that the merger transaction implied 28.5c per Vimy share, representing a premium of 35.3% to the 30-day volume weighted average price and a 18.8% premium to the closing Vimy share price on March 25.

The board of Vimy is unanimously recommending that shareholders accept the offer in the absence of a superior proposal, and has stated their intention of voting in favour of the transaction.

The merger is expected to create a new global uranium player with significant scale, cash resources of A$106-million, one of the largest uranium mineral resource inventories globally of 389-million pounds, and two advanced, world class assets in Tier-1 uranium mining jurisdictions.

Deep Yellow’s project pipeline includes the Tumas project, in Namibia. A prefeasibility study last year estimated that the project could produce 2.5-million pounds of uranium oxide over a mine life of 11.5-years, at an initial capital cost of $98-million.

Vimy’s uranium assets include the Mulga Rock and Alligator River projects, in Western Australia and the Northern Territory respectively. A definitive feasibility study (DFS) into the Mulga Rock project found that it could produce 3.5-million pounds a year of uranium oxide over a mine life of 15 years, for a capital investment of $255-million.

“This merger has the potential to be a significant value-creating opportunity for both Deep Yellow and Vimy shareholders. The merger combines two world-class assets, both in Tier-1 mining jurisdictions, into a single group with scale and know-how,” said Deep Yellow MD and CEO John Borshoff.

“The expanded strong technical team of Deep Yellow, together with Vimy personnel, positions us well to bring both projects online when uranium prices support the generation of long-term, sustainable positive cash flows. Our vision has been to deliver growth organically and inorganically to Deep Yellow shareholders and I am very pleased we have started to achieve that in this process. This transaction also builds on the pipeline of exploration assets able to add growth organically, and critically, creates a platform for additional value accretive acquisitions.”

Vimy MD and CEO Steven Michael said that the merger would derisk and underpin a path to development for the Mulga Rock operation.

“The combined financial, processing and operating strengths of both companies will enable greater optimisation and the delivery of Mulga Rock, as well as an established exploration team that can unlock considerable value at Alligator River. The merger provides Vimy shareholders the opportunity to share in the expected significant benefits of being part of a larger, geographically diverse merged group, with the expertise to develop the full portfolio of assets in the near term.”

The merged group will look to produce a revised DFS for Mulga Rock that optimises the value of the project by undertaking additional works. The DFS into the Tumas project is on track for completion at the end of 2022, and Deep Yellow will work with the Vimy technical team on elements of process that can be incorporated at Mulga Rock.

Following the merger, the enlarged Deep Yellow will be led by Borshoff as CEO and MD, and Deep Yellow’s nonexecutive chairperson Chris Salisbury.

Deep Yellow’s existing executive directors and nonexecutive directors will be joined by Michael, as an executive director, and Wayne Bramwell as a nonexecutive director.

Vimy shareholders are expected to vote on the merger in late June or early July this year.