Denison Mines is to sell its interest in the Gurvan Saihan joint venture (GSJV) in Mongolia to Uranium Industry a.s. of the Czech Republic for $20 million.
Denison announced that it has signed a definitive share purchase agreement whereby it will receive an initial payment of $250,000 on closing and a deferred payment of $19,750,000 by 30 November. Closing is set to take place on or before 8 September.
The transaction involves the transfer of all of the shares of Denison’s wholly owned subsidiary, Denison Mines (Mongolia) Ltd, to Uranium Industry. Denison Mines (Mongolia) holds an 85% interest in the GSJV, as well as a 100% interest in GSJV’s operator, Denison Mines Mongolia LLC.
The GSJV was created in 1994 by Denison, the Mongolian government and Geologorazvedka of Russia to explore and develop uranium deposits, particularly those amenable to in-situ leach extraction, in the south Gobi region of Mongolia. Denison acquired Geologorazvedka’s share in 2011, giving it a total share of 85%. The remaining 15% is held by Mongolian state-owned uranium company MonAtom.
The venture now holds 167,260 hectares in four exploration licences which the GSJV wishes to convert into mining licences. The deferred payment is guaranteed in the event that mining licences are granted to the GSJV for the Hairhan, Haraat, Gurvan Saihan, and Ulziit projects by 30 November. In the event that the mining licences are not issued and Uranium Industry does not otherwise elect to make the deferred payment by that date, the shares of Denison Mines (Mongolia) will be transferred back to Denison.
Denison says it has carried out considerable work towards the submission of the mining licence applications and understands that all the necessary materials for the licence applications have been prepared and that the GSJV is eligible to receive the licences.
Denison is in the process of merging with Fission Uranium to form Denison Energy Corp, consolidating the two companies’ strategic uranium assets in Canada’s Athabasca Basin, including Fission’s Patterson Lake South project and Denison’s interests in Wheeler River and the McClean Lake uranium mill. Company president and CEO David Cates said the company’s focus remains on its Canadian activities and that it was pleased to have reached an agreement for the sale of the Mongolian interests. “We are proud of the progress that Denison has made throughout the years in Mongolia, and we believe that Uranium Industry is very well positioned to take these assets into development and production,” he said.
Mining is a mainstay of the Mongolian economy. Russian interests produced uranium from the Dornod mine from 1988 to 1995, although no uranium mines are currently active in the country. A new nuclear energy law passed in 2009 regulated the exploration, development and mining of uranium, including legal provisions giving the state a greater degree of ownership and control of uranium resources including restrictions on the ability of licensees to transfer its licences or interests in its uranium properties, and a government right to acquire a 34% to 51% interest in each property.
Uranium Industry’s activities are currently focused on uranium exploration and mining in countries that have traditionally had ongoing relations with the Czech Republic. It is already active in Mongolia and established the Mon Czech Uranium joint venture with MonAtom in June.