rival bids

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[QUOTE]Uranium miner Denison launches offer for Australia's OmegaCorp
Vulnerable to competing bids, analysts say
ANDY HOFFMAN

MINING REPORTER

Denison Mines Corp. launched a $154-million friendly offer for Australia's OmegaCorp Ltd. and said it will look for further acquisitions in the booming uranium sector just a day after finalizing a merger to create a mid-sized industry player focused on aggressive growth.

Spot uranium prices have nearly doubled over the past year to $63 (U.S.) a pound, prompting soaring valuations for uranium companies and sparking a series of mergers and acquisitions.

"There's no question that the sector is getting a lot of puff in it," Denison's chief executive officer Peter Farmer said. "The puff is not value."

Mr. Farmer said his company identified Omega as "one that has value in it and is not over inflated as far as prices are concerned." Analysts however, said the bid could prove vulnerable to a competing offer from a rival uranium company such as Paladin Resources Ltd. or sxr Uranium One Inc.

On Monday, Denison put the finishing touches on its merger with International Uranium Corp., a marriage that created a uranium producer with a market value of approximately $1.8-billion (Canadian).

Omega would represent a relatively small purchase for the bulked up Denison, which is offering $1.10 Australian dollars (99 cents) a share, a 25-per-cent premium to the company's average share price in the last 20 days. The Australian-based company's shares were last quoted at 99 cents Australian.

Mr. Farmer said Denison may be interested in buying other so-called "near-term" producers, uranium companies that are within two or three years of production.

"If there is near-term stuff available that we can get a fair deal on, we're going to take a run at it," he said.

Omega owns a uranium project in Zambia that could begin producing the metal used as fuel by the nuclear power industry by 2010. A scoping study suggests the property may contain up to 16.4 million tonnes of uranium and could produce 1.5 million tonnes per year over a mine life of six to 10 years.

Omega's management and directors, who own about 10 per cent of the company's shares, are recommending shareholders accept the deal. Omega has agreed not to solicit other offers and to pay a 1-per-cent break fee should it accept another bid. However, analysts said Denison's offer could face competition from rivals such as Paladin and sxr Uranium, both of which have operations in Africa and recently completed debt financings that could be used to fund a bid.

"I'd say there is a pretty good chance of someone else stepping up. They've certainly got the currency to do so," said one analyst who spoke on the condition of anonymity.

Another analyst said Denison's bid is vulnerable because Omega shares haven't won the same valuations as other uranium companies.

"Omega shareholders are getting a good deal, but maybe they can get a better deal," he said.

Mr. Farmer adopted a cautious tone on the conference call when asked about possible competition for Omega. "Our offer is a fair offer and we have got management and the directors signed on. They want to do business with us and we'll see how the rest of the shareholder group reacts," he said.

Paladin and sxr officials did not respond to requests for comment.

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