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Vimy calls in lawyers and advisors after blowing off suitor

Vimy Resources has called in lawyers and financial advisers after blowing off a budding suitor just weeks ahead of a game-changing deadline that will determine the future of its Mulga Rock uranium project east of Kalgoorlie-Boulder.

Fellow ASX-listed uranium hopeful Deep Yellow on Friday revealed Vimy had brushed off its proposition of a $687 million merger after letting the offer lapse.

That came after Vimy on Thursday said it had launched a strategic review process after receiving “unsolicited approaches from a number of parties”.

The company said with “strong inbound interest” it had appointed Macquarie Capital as its financial adviser and MinterEllison as its legal adviser to help with the review.

Deep Yellow had proposed a one-for-3.74 scrip offer that valued Vimy shares at 30.25¢, representing a 14.15 per cent premium to the company’s closing price on Thursday.

Deep Yellow said the proposed merger with Vimy would have been the first step in its ambitions to create a multi-jurisdictional uranium player of scale.

The company has uranium exploration assets in Namibia with a focus on its Tumas project.

Deep Yellow boss John Borschoff said the uranium market needed consolidation to produce companies of scale able to provide comfort to utilities with a pipeline of sustainable uranium production.

“The merger would have delivered to Vimy’s projects an experienced technical team of proven uranium mine builders able to expedite the development of Mulga Rock,” he said.

“This merger just makes sense, and it is disappointing that the Vimy board has chosen not to engage in our proposal, without even giving shareholders the opportunity to consider it.”

But Vimy interim chief executive Steven Michael on Thursday told the Kalgoorlie Miner there was the potential for imminent upside and the company needed to be prudent about the approaches.

Vimy cleared one hurdle in its bid to develop its $393 million project after receiving overarching approvals in late September that will allow it to forge ahead with an early-works program.

That sent the company scrambling to ensure it clears the next and more major hurdle of proving “substantial commencement” of the project by December 16.

Vimy hopes the 11th-hour blitz at Mulga Rock will see it fulfil a State Government directive that will allow it to forge ahead with the project.

That comes after former State Environment Minister Albert Jacob approved the project on December 16, 2016, with a condition that Vimy started work in earnest within five years.

Mr Michael said the onus was on the company to determine if and when it had achieved substantial commencement.

“I believe quite firmly that if we haven’t achieved it already then we will achieve it by that date,” he said.

“I think we now just need to go over the processes of documenting everything we’ve done over the five-year period leading up to this point … and submit that to DWER and EPA services within the next few weeks.

“We are getting very close I believe to being able to submit that letter saying we’ve achieved (substantial commencement) and here’s the evidence.”

Mr Michael said until that risk was overcome, the company was potentially undervalued.

“For us in the short-term our greatest value-adding catalyst is to achieve substantial commencement and take away that risk,” he said.

“Then we become like any other near-term uranium producer in terms of the risk profile.

“So you sort take away that one large risk and I think there’s a lot of upside.

“That’s where as a company as a board we’ve got to be very conscious of the fact that there is an opportunity for someone now to come in and get this thing on the cheap.”

The spot price of uranium had been in the doldrums since the 2011 Fukushima nuclear disaster, but has recently enjoyed a rebound.

Uranium prices have risen 50 per cent in recent months on the back of renewed interest in the metal as a nuclear fuel source for zero-emissions baseload power as well as sustained physical buying of the commodity by a new Canadian investment fund.

Mr Michael said the recent COP 26 UN Climate Change Conference had put uranium “very much on the front page for a lot of countries”.

“It looks like it’s back on the agenda to become one of the main sources of baseload power generation in a decarbonised energy mix,” he said.

“So with all that in mind, having a shovel-ready project in Australia is very, very attractive.”

Vimy’s move follows a raft of senior executive departures in recent months including managing director Mike Young, chief financial officer Marcel Hilmer and chief nuclear officer Julian Tapp.

Mulga Rock is slated to produce as much as 3.5 million pounds of uranium oxide over 15 years.

In May, Deep Yellow named former Rio Tinto iron ore boss Chris Salisbury as its new non-executive chairman.

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