The Fission-Denison deal that excluded PLS
In reference to nosleep's question about the Fission deal with Denison, FCU Dev Randhawa related the sequence of events in great detail in this interview with The Northern Miner. I also recall him talking about it in earlier interviews. It's a key part of the lore that now surrounds the whole PLS discovery.
Northern Miner 1 Jan 14
Excerpt:
TNM: Can you speak a little about leaving the PLS asset out of the Denison deal? Was that inspired, or lucky, or what was going on there?
DR: My relationship with Lukas Lundin goes far back. In 2003 I sold him a small gold company, with Ron Netolitsky and Mike Halvorson on my board. We were going to do some drilling in the area close to what he was drilling, so he said, “Let me just buy you.” So we sold it to him, and it worked out very well for me and him.
Then there was a time when they needed a lot of money. If you remember, Denison almost went broke in 2008. I went to Kepco and said you should invest in this, at 80 cents or something. And they did. So Lukas always remembered that we’d done good business together, on handshakes.
At Strathmore, we’d been talking about selling out to them, so after a bunch of meetings on Nov. 2, 2012, which was a Friday, I went to Lukas’ office to talk about it again. This was our sixth meeting. We had to get rid of our U.S. assets first, close our flow-though deal and then we met.
We actually agreed on a handshake to sell the entire company to him, including PLS on Nov. 2. Now, we hadn’t made the discovery yet. I sent it to my board, and told them you have my support to sell it as is, but I want cash out and our Peruvian assets left out.
And Lukas said, “Fine, we’ll do the deal.” Because Lukas’ goal is to sell the whole company to a Rio or something, and we had a really good project with Kepco, and Rio was next door. So it made sense for him and for us.
We shook hands, and I got on a plane to Hong Kong, got off, and bang, I got an email: Stop the press — we’ve got a discovery!
And so I said, “Oh, brother.” You know, Lukas is a pretty powerful guy. He’s a nice guy but he’s not the kind of guy you want to phone up and say, “Oh, by the way, the deal’s dead.”
I had to phone Ron up, and say, “We have a problem, and you won’t like it.” And I told him that we can’t sell the whole company because we made a discovery. And the phone goes quiet.
We had a board meeting and the decision was to not go forward with the sale of the company. I phoned Denison up, and said, “Sorry, we can’t do this.” We made the announcement on Monday morning and the stock started going up.
There were two problems. One, the board wouldn’t approve it and two, the market wouldn’t allow it, because already the stock had moved up, and it was going to move up past what they were going to offer us for the whole company. Why would we sell? It doesn’t make sense.
The deal was dead, but we kept talking and Lukas still had an interest in the other assets on the east side of the basin. They put out results, and their Phoenix results had gone up significantly, so their stock went up to $1.35, and he said, “Look if I can use my currency, let’s chat.”
On Jan. 14 we all met and they brought their banker from Haywood, and on the phone, I had Dundee from Toronto.
We kept it simple and said, “Imagine that day, we sell the company still, but if you leave out the cash and Peru, and PLS. What does it look like then?”
PLS was easy to measure because the other half was in Alpha, and the market cap of Alpha was $2.5 million. So all we did was take $2.5 million out of the original deal, and went forward. It wasn’t that complicated. There was a financing in between there, so we took 9% off the market cap of the company, and that’s what it came down to, the $75 million, then multiplied by the premium, and you get the deal.
We sent it to the board and advisors, and there was a bit of a battle on the board to sell out. Finally we made a decision 4-to-1 to sell. And we did the right thing, because when the votes came in, they came in at 99% to sell to Denison.