This Merger Is Leaving Money On The Table For Us To Grab

Written by Gerardo Del Real
Posted May 27, 2018 at 8:00PM

Last week, I explained why the catalyst to watch in the uranium space was the utilities coming back to the market to lock down future supply.

I also explained that the quality uranium companies would benefit immediately and dramatically, and that 15 and 20% moves would happen on a daily basis.

What I didn’t anticipate was that the market would be handing out free money just a week later.

On May 7, 2018 URZ Energy (TSX-V: URZ) (OTCQB: URZZF) announced that it was merging with Azarga Uranium (TSX-V: AZZ) to form a new, U.S.-focused in-situ recovery (“ISR”) uranium development company.

Azarga will acquire all of the issued and outstanding shares of URZ for consideration of two Azarga shares for each URZ share held.

(click to enlarge)

The combined company will have measured, indicated, and inferred resources of 39.4 Mlbs U3O8, all located in the United States, including high-grade measured & indicated resources of 8.6 Mlbs U3O8 at an average grade of 0.25% U3O8 at the advanced permitting-stage Dewey Burdock project.

The Dewey Burdock project has already received several key permits and is in the process of obtaining final regulatory approvals required for project construction.

A NI 43-101 preliminary economic assessment on ISR production at Dewey Burdock completed in 2015 estimated annual production of approximately 1 million lbs. U3O8/year.

The management team at URZ has a history of success and successfully sold Uranerz Energy during the last bull market.

At its peak, Uranerz Energy had a market capitalization approaching US$420 million.

When Uranerz went public, it had a share price of C$0.25. It eventually reached a high at its peak during the uranium boom of approximately $8 per share.

The size and grade of the uranium pounds with this merged company will be comparable to those of Uranerz when it was sold.

Over the next year to 18 months, several market catalysts are expected for the merged company, including anticipated final permitting clearances with the Nuclear Regulatory Commission and the results of the Section 232 petition filed with the U.S. Department of Commerce.

The Section 232 petition seeks to restore the long-term viability of the U.S. uranium mining industry by setting a quota to limit imports of uranium into the U.S., effectively reserving 25% of the U.S. nuclear market for U.S. uranium production in accordance with the president’s "Buy American" policy.

This remedy is expected to create a healthy U.S. uranium mining industry and, if approved, has the potential to create a two-tiered uranium price: one for the global market, and another price for the domestic U.S. market, which could be considerably higher than the global price.

Once the transaction closes, the merged company will have 155.8 million shares outstanding with 26 million warrants, 10.4 million options, and a market cap of approximately $42.1 million.

The merged company will have approximately 40 million lbs. of uranium across all categories anchoring that valuation.

Back to the free money.

The merger is anticipated to close in July of 2018.

URZ shareholders will receive two shares of Azarga for each URZ share.

Azarga shares currently trade at C$0.26 and recently traded as high as C$0.34. Shares of URZ currently trade at C$0.44/US$0.34.

Shares of URZ should be trading at least 20% higher and that’s after the recent pullback in Azarga.

Some have caught on — which is likely responsible for the recent pullback in Azarga — but most are leaving free money on the table.

I could make a very compelling argument explaining why Azarga shares should be trading much higher as well, but I’ll leave that for another day.

The merged company will be very well positioned for the next leg higher and should be considered as a staple in everyone’s portfolio. Whether you own URZ for the mid- to long-term or just for the free money, make sure you buy URZ shares now and then just wait for the transaction to close in July.

I hope all of you have a safe Memorial Day.

A very sincere thank you to all who serve and your families. We are truly indebted to those who have paid the ultimate price.

To your wealth,


Gerardo Del Real
Editor, Junior Mining Monthly and Junior Mining Trader.

For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.

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