During the last quarter of 2008, I spoke about an expectation of mergers and consolidations in the junior resource market. Crosshair Exploration and Target Exploration announced on January 6, 2009, that they have entered into a Letter Agreement to merge. This comes as good news to both companies considering it gives Crosshair an additional uranium asset that is both outside the Central Mineral Belt of Labrador and inside an existing uranium producing region, while providing Target with the necessary capital to continue to advance its flagship Bootheel project in Wyoming towards production.
Growing Demand
Although recent months have seen most sectors (and especially the junior exploration and mining sector) take a serious beating, it shouldn’t end up being a permanent situation. The spot price of uranium has increased by about 20% since the end of October and although it levelled off during the holiday season while activity dropped, it is expected to continue its upward trend in 2009. With a continually growing demand for uranium, and the supply side seeing several companies putting their projects on hold, Crosshair and Target appear well positioned with a project that is near-term and appears to have low capital and operating costs.
A Great Project
In June 2008, Target began drilling on their Bootheel Property in the Shirley Basin, Wyoming. Not only is Wyoming a uranium-mining-friendly state, but it has already produced close to 200 million pounds of uranium and currently has two producing ISR (In-Situ Recovery) mines with several more in the permitting stage. Because Bootheel is located in an area where the uranium is hosted by sandstones in roll-front settings, the company should be able to use ISR mining techniques which are a more environmentally-friendly and less expensive way to mine uranium.
Bootheel is also slated to be producing uranium in as little as four years. This relative short timeline is due in part to the fact that an ISR mine can be constructed far more rapidly than a conventional mine and also because you only need approximately 5 million pounds in the ground to go into production. With a historic uranium resource of nearly 11 million pounds, Target possesses a project that has strong potential. With the cash that Crosshair can supply, this merged company promises to be one of the survivors that makes it through these tough times. For more details on the project, please visit the project page on Target’s website: http://www.target-mining.com/s/ShirleyBasin.asp.
Keeping Busy
Crosshair currently controls just over 17 million pounds of uranium in the Central Mineral Belt of Labrador. In March of this year, the Nunatsiavut Government passed legislation placing a three-year moratorium on uranium mining within the Nunatsiavut’s self-governed Labrador Inuit Land (LIL). Although all of the company’s principal assets fall outside of LIL, “it has affected market sentiment and this cannot be ignored,” says Mark Morabito, President and CEO of Crosshair. With this new acquisition, the company will not only increase its overall uranium resource base, but will also control a project located in a region already producing uranium. And make no mistake about it, one day the Central Mineral Belt should be back. Crosshair has a firm hold on its assets there with much of the licenses good through 2017.
Deal Details
The merger will occur on the basis of 1.2 common shares of Crosshair being issued for each outstanding share of Target. Crosshair will issue approximately 14.6 million shares for 100% of the outstanding Target shares representing 15.4% of Crosshair’s shares outstanding. The transaction remains subject to regulatory approval for both companies as well as shareholder approval for Target and is expected to be completed by the end of March 2009.
Bottom Line
The merger works for both companies. It will create a uranium exploration and development company with a timeline to production. Crosshair will acquire an excellent project in a highly sought after area for much less than it would be spending to explore for uranium. Target will have the money to fully complete its earn-in and the much needed 43-101 resource to put the Bootheel project on the path to production. Although several uranium deposits have been put on hold or are being shut down, it is actually a good time for these types of deposits (ie. ISR), since they are much cheaper to get up and running and also much cheaper to operate. This new company has the money and the project to be one of the few to make it through these rough times.
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