Denison Mines Corp. (“Denison” or the “Company”) (TSX: DML) (NYSE American: DNN) is pleased to announce that is has executed an agreement (the “Agreement”) with Cosa Resources Corp. (“Cosa”) (TSX-V: COSA) to form three uranium exploration joint ventures in the eastern portion of the Athabasca Basin region in northern Saskatchewan. Pursuant to the Agreement, Cosa will acquire a 70% interest in Denison’s 100%-owned Murphy Lake North, Darby, and Packrat properties (the “Properties”) in exchange for approximately 14.2 million Cosa common shares, $2.25M in deferred equity consideration, and a commitment to spend $6.5 million in exploration expenditures at Murphy Lake North and Darby (the “Transaction”).
David Cates, President & CEO of Denison, commented, “Denison is pleased to collaborate with Cosa in a way that is mutually beneficial and enhances our exposure to the potential discovery of a meaningful uranium deposit on the Properties and through Cosa’s existing uranium exploration portfolio. With Denison focused on executing on our core mining and development-stage projects, we believe Cosa is an excellent partner to advance exploration of the Properties. The entire Cosa senior management team has worked with Denison previously, and have strong technical capabilities, plus a unique familiarity with the Properties and nearby discoveries.”
Transaction Highlights:
- The transaction is structured to incentivize exploration activity, with Cosa required to invest a minimum of $6.5 million in exploration expenditures to retain its operatorship and ownership level of the Murphy Lake North and Darby properties.
- Denison to receive meaningful consideration in the form of an upfront payment of 14,195,506 Cosa common shares (representing ~19.95% ownership interest in Cosa post transaction), deferred equity consideration of $2.25 million of additional Cosa common shares, and a royalty on each of the Properties.
- Denison retains a minimum 30% direct interest in the Properties and will become Cosa’s largest shareholder, while also securing strategic pre-emptive rights and a buydown right to increase Denison’s interest in the Darby property.
- Denison will have the right to nominate one director to Cosa’s board of directors for so long as Denison holds at least 5% of the issued and outstanding common shares and an additional director to Cosa’s board of directors for so long as Denison holds at least 10% of the issued and outstanding common shares.
Terms of the Transaction
Under the terms of the Acquisition Agreement, Cosa will acquire a 70% interest in each of the Properties from Denison. Upon closing of the Transaction, the parties will form a joint venture for each of the Properties (each, a “Joint Venture”) and Cosa will become the project operator. Denison will retain a 30% interest in each of the Properties.
As consideration for the Transaction, Cosa will issue 14,195,506 common shares to Denison, equivalent to 19.95% of the outstanding common shares of Cosa following completion of the Transaction. Denison will retain a 2% Net Smelter Royalty (“NSR”) on Darby and Packrat, and a 0.5% NSR on Murphy Lake North.
Cosa has been granted the right to reduce the NSR royalty rate on each of Darby and Packrat to 1% for a cash payment of C$2,000,000 per project.
Additionally, Cosa will be required to:
- issue Denison a further C$2,250,000 in deferred consideration shares within a five-year period beginning at the closing date (the “Closing Date”) of the Transaction;
- fund 100% of the next C$1,500,000 in exploration expenditures on Murphy Lake North by December 31, 2027, otherwise Denison’s ownership interest in the property will increase to 51% and Denison will become the operator; and
- fund 100% of the next C$5,000,000 in exploration expenditures on Darby by June 30, 2029, otherwise Denison’s ownership interest in the property will increase to 51% and Denison will become the operator.
Darby is subject to a buydown right (the “Buydown”), which permits Denison to reclaim up to a 60% interest in Darby until such time as Denison’s interest in the project falls below 10%, or commercial production of 500,000 lbs. of U3O8 is achieved from the applicable Darby claim.
Cosa is to appoint a technical advisor nominated by Denison for a period of five years from the Closing Date or until all of Cosa’s obligations under the Acquisition Agreement have been fulfilled.
Completion of the Transaction is subject to a number of conditions precedent, including, but not limited to: (i) acceptance by the TSX.V and receipt of other applicable regulatory approvals to be obtained by Cosa, and (ii) certain other closing conditions customary for a transaction of this nature.
On closing, Denison and Cosa will enter into an Investor Rights Agreement, which will provide for, among other things, a pre-emptive right and top-up rights entitling Denison to maintain and/or acquire up to a 19.95% interest in Cosa, on the condition that Denison holds at least 5% of the issued and outstanding common shares. Additionally, Denison will have the right to nominate one director to Cosa’s board of directors for so long as Denison holds at least 5% of the issued and outstanding common shares and an additional director to Cosa’s board of directors for so long as Denison holds at least 10% of the issued and outstanding common shares.
