SXR Uranium to buy Energy Metals

0 Comments | Deseret News (Salt Lake City), Jun 5, 2007 | by Stewart Bailey

SXR Uranium One Inc., the second largest producer of the radioactive metal, agreed to buy Energy Metals Corp. for C$1.59 billion ($1.5 billion) to meet growing demand from nuclear plants in the United States.

SXR will offer 1.15 of its shares for every one of Vancouver- based Energy Metals, the two companies said Monday in a statement. SXR, based in Toronto, values its offer at C$19.12 per Energy Metals share, 4.5 percent more than the June 1 closing price.

The price of uranium has increased more than fourfold in the past year as supply growth strains to keep up with demand that's been bolstered by global efforts to limit emissions of carbon dioxide from burning fossil fuels.

"This fits with SXR's move to build a strategic position in the western U.S.," said Jim Taylor, an analyst at Canaccord Adams in London who rates SXR a buy. "A strong point for U.S. consumers will be to have U.S. production" of uranium.

The acquisition will help SXR meet its goal of producing 28 million pounds of uranium by 2013, up from 2.7 million pounds, SXR Chief Executive Officer Neal Froneman said in a conference call Monday.

The combined company would trail only Cameco Corp. in global uranium reserves, the companies said in the statement. SXR is already the only producer with operations in each of the top five countries ranked by uranium deposits: Kazakhstan, South Africa, Australia, the U.S. and Canada.

SXR bought UrAsia Energy Ltd. in April for $3.1 billion, giving it control of three mining and exploration projects in Kazakhstan and an exploration venture in Kyrgyzstan. SXR agreed in February to buy U.S. Energy Corp.'s uranium assets in Utah for $142 million.

"We see the need for the creation of a major U.S. uranium producer to provide fuel for U.S. power facilities," Froneman said. "Growth in production appears to be earmarked for Asian countries."

SXR shareholders will own 79 percent of the combined company, which will have a market value of about $7.8 billion and cash of $678 million, the company said.

The acquisition was approved by the boards of both companies and has yet to be voted on by shareholders, according to the statement. The agreement includes a C$55 million break fee payable to SXR if Energy Metals accepts any competing bids.