Okapi steps into uranium space with Tallahassee acquisition
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Okapi Resources will jump into the budding uranium sector with an agreement to acquire a portfolio of large, high-grade assets in the US.
Okapi (ASX:OKR) has reached a binding agreement to acquire Tallahassee Resources, which owns the Tallahassee Uranium Project in Colorado and also holds an option to acquire the Rattler Uranium Project in Utah.
The Tallahassee Uranium Project was previously part of former ASX listed company Black Range Minerals and has a JORC 2004 Mineral Resource estimate of 26 million pounds of U3O8 at a grade of 540ppm U3O8, with significant exploration upside.
Black Range had a market capitalisation in excess of $180 million in 2007, before the existing resource was defined. Okapi’s market capitalisation prior to announcing the transaction was just $11.7 million.
An assessment of the market capitalisation of Okapi’s ASX-listed uranium developer industry peers measured against their defined mineral resources delivered a mean valuation $2.17 per pound.
Against that metric and using the 2004 JORC resource, Okapi would have an implied valuation of $52 million – almost five times its pre-transaction market cap, without factoring in its growth potential or other assets on its books.
More broadly, uranium has been on a tear this year on a thinning spot market and improved demand outlook that has seen prices hit about US$32/lb, with Far East Capital analyst Warwick Grigor speaking on a groundswell of growing interest in the uranium sector.
Spurring the uranium story the Biden Administration’s willingness to embrace nuclear energy as part of its goal to achieve a net-zero carbon economy by 2050 – an almost 50-year first for the Democrat party.
The US is currently establishing a national strategic uranium reserve – one of a number of countries, including China, which is driving positive rhetoric around the commodity.
Okapi executive director David Nour said given the global circumstances, the acquisition was a transformational opportunity for the company to become a prominent global uranium developer.
“Through this acquisition, Okapi is perfectly placed to capitalise on the strengthening uranium market,” he added.
The Tallahassee uranium project covers about 7,500 acres around 140km southwest of Denver.
It is located within the Tallahassee Creek Uranium District that was first discovered in 1954 and produced about 80,000t of ore grading 2,500ppm uranium oxide from 16 small open pit and underground mines through to 1972.
Western Nuclear conducted the first systematic exploration in the district between 1962 and 1966 that identified thick sequences of sandstone that were not evident at the surface or in past producing mines, while Cyprus Mines discovered the Hansen uranium deposit in 1977.
While Cyprus carried out broad spaced drilling that discovering extensions of the uranium mineralisation in a paleochannel system that hosts what are now known to be the Northwest Taylor, Noah and Boyer Deposits, it focused primarily on the development of the Hansen and adjacent Picnic Tree deposits.
Hansen and Picnic Tree were fully permitted for mining in 1982, however, mining never began because of a downturn in the global uranium industry.
Black Range then consolidated ownership of mineral rights through the Tallahassee District between 2007 and 2014 with its drilling defining JORC 2012 resources totalling 90.4Mlbs of uranium oxide at a grade of 600ppm.
The Rattler project comprises 51 Bureau of Land Management mining claims covering about 1,000 acres that are located about 85km north of Energy Fuels’ White Mesa uranium-vanadium mill in Utah, the only operating conventional uranium mill in the US.
It includes the historical Rattlesnake open pit mine that was discovered in 1948 and produced a total of 1.6Mlbs uranium oxide and 4.5Mlbs of vanadium oxide until about 1954.
While the Rattlesnake deposit is the only outcropping deposit in the immediate area, exploration drilling has been successful in discovering other deposits.
Okapi noted that while exploration drilling immediately down-dip from Rattlesnake has reportedly discovered mineralisation, no drilling information is available.
Tallahassee holds an option to acquire 100% of this project.
Subject to the satisfaction of all conditions, Okapi will issue the vendors 33.5 million shares and 16.75 million options exercisable at 30c and expiring two years from the date of issue.
A further four tranches of 3 million shares each may be issued upon achievement of certain milestones.
Okapi has also received firm commitments from sophisticated and professional investments for a $2.84 million share placement through the issue of 14.2 million shares priced at 20c each.
This includes one free attaching option exercisable at 30c each and expiring two years from the date of issue for every share subscribed.
On the board level, former Black Range Head of Exploration Manager (USA) Ben Vallerine will join Okapi as a non-executive technical director.
A previously announced proposed acquisition of the Holly and White Knight kaolin projects in Western Australia and South Australia respectively will no longer go ahead by mutual agreement between Okapi and the project vendor.
This article was developed in collaboration with Okapi Resources, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.