uranium one: rio in acquisition pact

Uranium One, Rio in acquisition pact

Tue, 11 Jul 2006
Toronto-listed uranium and gold company sxr Uranium One on Monday announced that it had been selected by global resources group Rio Tinto as the preferred bidder for Rio Tinto's Sweetwater Uranium mill and associated Green Mountain uranium properties located in south-central Wyoming.

A Rio Tinto spokesperson in London confirmed that Uranium One was a preferred bidder for the mill and properties.

Uranium One and Rio Tinto also entered into an exclusivity agreement.

In terms of the agreement, Uranium One will pay an exclusivity fee of $1 million.

The company will also be granted the right to carry out detailed due diligence on the Sweetwater Mill and Green Mountain properties for a period of six months, with the option to extend the due diligence to nine months.

In terms of the offer, Uranium One will pay Rio Tinto $110-million on closing, of which $65-million will be payable in cash and $45-million will be paid by way of the issuance of about 6.1 million Uranium One common shares.

In addition, Uranium One will issue to Rio Tinto on closing 2.5 million common share purchase warrants, exercisable between September 1, 2007 and September 30, 2010 at an exercise price of about C$9.50 (representing a 15 percent premium to the volume weighted average trailing price of Uranium One's common shares in the ten day period ending prior to the signing of the exclusivity agreement).

The offer includes a one percent gross royalty payable to Rio Tinto on revenue generated from the sale of uranium produced from the acquired assets.

In addition, Uranium One will make one-time payments to Rio Tinto depending on the level of uranium prices over the first five years of commercial production from the acquired uranium assets.

The maximum value of these payments is equal to $40-million.

The purchase transaction is subject to the completion to Uranium One's satisfaction of its due diligence investigations, to the execution of definitive documentation and to the approval of the boards of directors of Uranium One and Rio Tinto, and to the receipt of all required governmental and regulatory approvals, including acceptance by the Toronto Stock Exchange.

"Today's announcement is a significant step towards one of the key strategic goals we set for ourselves as a company in 2005 — acquiring the capacity to mine and process uranium in the United States," Uranium One chief executive officer Neal Froneman said.