Uranium investment company restructures to pursue US listing

29 April 2021

Uranium investment company Uranium Participation Corporation (UPC) has entered into a definitive agreement with Sprott Asset Management LP to convert UPC into the Sprott Physical Uranium Trust and pursue listing on US stock exchanges. Denison Mines Inc's Management Services Agreement with UPC will be terminated, with Denison set to receive a termination payment estimated at CAD5.3 million (USD4.3 million).

(Image: Cameco)

Toronto, Canada-based UPC, listed on the Toronto stock exchange since 2005, has since its inception been managed by Denison. It invests in physical uranium through holdings of physical uranium in the form of uranium oxide in concentrates and uranium hexafluoride. At the end of March, UPC had holdings of 16,269,658 pounds U3O8 and 300,000 kgU as UF6, with a market value (at that time) of around CAD665 million.

In its current corporate form, UPC is not eligible to complete a listing in the USA but as a trust, the prospect of obtaining a listing on US exchanges is "significantly improved," UPC said. A listing in the USA "is expected to increase the profile of the Trust with US and international investors, potentially resulting in an increase both in trading liquidity and in access to capital, which could be used to support future uranium purchases," it added.

The trust structure will also lower annual operating costs for the company and align its business with the world's leading physical commodity investment vehicles, it said.

"Partnering with Sprott Asset Management brings immediate value to UPC shareholders through an upfront cash contribution and the potential for significant long-term value from the modernisation of our business structure, integration into Sprott's industry-renowned portfolio of physical commodity trust products, and a potential future listing in the United States - which, taken together, are expected to reduce corporate costs, increase trading liquidity, and improve access to capital for our existing shareholders," UPC Chairman Jeff Kennedy said.

On closing of the transaction, UPC is to receive a cash contribution of around CAD$6.7 million from Sprott, the proceeds of which may be used by the trust to purchase additional uranium holdings. Sprott Asset Management will reimburse UPC for up to CAD$1.0 million in direct transaction costs and to fund approximately CAD$5.3 million in related management termination fees.

Denison President and CEO David Cates said the pursuit of a US listing is an important element of the transaction. " As we have witnessed with Denison's recent increase in trading liquidity, the United States represents a powerful marketplace with a uniquely global reach - offering the potential to significantly increase trading liquidity and access to investors. We believe this is an exciting development for UPC shareholders and the broader uranium market," he said.

The transaction, which is subject to conditions including regulatory, securities commission and stock exchange approvals, as well as approval by the Ontario court and by the common shareholders of UPC, is expected to close in the late second or early third quarter of 2021.

Researched and written by World Nuclear News