Boss Resources Limited (ASX:BOE) today formally announced the acquisition of the Honeymoon Uranium project via an acquisition of Uranium One Australia (subsidiary of Uranium One), in what we think is one of the deals of 2015. In this article, we’ll discuss just why we feel this way.
About Honeymoon Uranium Project
The Honeymoon Uranium project is located in South Australia and is one of only four fully permitted Uranium mines in Australia. On an indicated and inferred basis, with a cut off grade of 0.05% U3O8, the project has resources of over 16.6m lb’s at an average grade of 0.14% U3O8.
The project also consists of a number of exploration licenses over more than 2500km2, which Boss management believe holds excellent potential for resource upgrades.
The mine itself has produced 335t of Uranium between 2011 and 2012, before being put on care and maintenance as Uranium prices showed significant weakness. Assets included are an 880,000lb pa procession plant (care and maintenance), a 200 person accommodation camp, administrative buildings, 75km of power line infrastructure, air strip, vehicle fleet and a near $9m environmental bond held in cash.
Boss has acquired Uranium One Australia from Uranium One, having entered into a JV with a Wattle Mining Pty Ltd, who own 20% of the project, and Boss 80%. Boss have a call option to acquire the remaining 20% from Wattle Mining upon the completion of a positive pre-feasibility study on the project. Terms for the 100% acquisition are set out below:
- $200 000 site visit fee (also granted exclusivity to Boss for the deal proceedings)
- $2 442 000
- $3 000 000 promissory note payable in 24 months
- $4 000 000 promissory note payable in 48 months
- $2 000 000 cash/shares upon restart of operations or 5 years from acquisition
- 10% of operating cash flow from project annually to a maximum of $3 000 000.
- Boss purchased approximately $158m debt from Uranium One for just $1 (owed by Uranium One Australia to Uranium One).
Why This Might Be Deal Of The Year
Let’s look at the terms of this deal. Total payments not including the ongoing cash flow related payments, equal just under $12m. Honeymoon Project assets include an 880 000lb pa processing plant, vehicles, an accommodation camp and much more, including the very significant $9m (rounded) environmental bond held by cash. It’s not easy to put a value on the assets remaining at Honeymoon, but it doesn’t take a rocket scientist to realise the purchase is well below whatever that asset value ends up being.
Having purchased the debt of $158m, and the addition of approximately $40m existing accumulated losses, Boss won’t be paying any tax on profits for quite some time (to the tune of $200m profit tax free).
We will follow this article up with some peer analysis to show how truly cheap this acquisition is based on the resource and possible production comparisons. In the meantime we are going to marvel at how this minnow exploration company has acquired one of very few fully permitted Uranium mines for almost nothing.
Disclaimer: The author of this article and management of YourWealthWatch are shareholders of Boss Resources. None of the above is intended as personal advise and should be considered general in nature.