by Sam Kiri
Falling markets and weak economies hardly fuel optimism. But for companies that seek to grow through acquisitions, hard times bestow remarkable opportunities. Low valuations in the face of weak commodity prices have left many companies and projects at attractive prices. They are however not for faint-hearted but are for those who have the experience and ability to develop them. The glut of acquisitions markets witnessed over the last few months confirms that the mining industry is entering a new phase.
In what could be a similar scenario, Canadian Venture listed Santoy Resources (TSX.V: SAN) has signed a definitive agreement to enter into a series of transactions involving the acquisition of Virginia Uranium Ltd. (“Virginia”). Santoy will hold an initial 20.8% interest in VA Uranium Holdings Inc. (“VAU”) which holds the Coles Hill uranium property, as well as various financing and M&A rights. Santoy plans to increase its interest gradually to approximately 30% through further investments and financings of development work. Santoy has the right of first refusal on future financings.
Santoy management has a nose for good projects and this acquisition follows a series of similar acquisitions and joint venture agreements. With 30 years of mining exploration experience including three major gold discoveries in Eskay Creek, Snip and Brewery Creek that were subsequently put into production, Santoy’s President & CEO Ronald Netolitzky is not in the habit of acquiring companies nonchalantly. Netolitzky has strict acquisition criteria which include advanced stage projects in safe and workable jurisdictions, preferably with a resource estimate.
Virginia and the Coles Hill uranium property nicely slots into Santoy’s strategy and business model. Located in southern Virginia, the Coles Hill deposit and is considered to be one of the largest undeveloped uranium deposits in the US. It has a National Instrument 43-101 compliant estimated measured and indicated resource of 119 million pounds of U308, grading 0.06% average at a cut-off grade of 0.025% U308. The deposit, which was advanced to the Feasibility stage 25 years ago and then shelved with the price collapse of uranium, has a high grade core that is expected to support mining in most uranium price environments.
An ambitious development programme is in store for Coles Hill. Santoy intends to provide funding for prefeasibility and scoping studies as well as for selective infill and step-out drilling programme to increase the size of the defined resource. The launch of an Environmental Impact Study is expected soon together with a community outreach programme. Santoy is aware of the sensitive nature of uranium projects and plans are underway to expand public relations efforts. They include sponsoring uranium related research initiatives at local universities and supporting National Academy of Sciences study of uranium mining in Virginia. Santoy would like to see Coles Hill move into production by 2014/2015.
Prospects of Coles Hill are further enhanced by favourable local dynamics for uranium projects in Virginia. The state is no stranger to uranium and has four nuclear power plants operated by Dominion Resources, guzzling some 1.6 MM lbs of U308 annually. Another nuclear plant is expected to come on stream by 2011. Nuclear power currently accounts for 35% of Virginia’s electricity supply.
Prospects of Coles Hill are further enhanced by favourable local dynamics for uranium projects. The Coles family and numerous other surrounding land owners are substantial shareholders in the company. The large local ownership makes the Coles Hill project unique and will prove to be a critical component for its success. The state is no stranger to uranium and has four nuclear power plants operated by Dominion Resources, guzzling some 1.6 MM lbs of U308 annually. Another nuclear plant is expected to come on stream by 2011. Nuclear power currently accounts for 35% of Virginia’s electricity supply.
The state of Virginia also has a strong AREVA nuclear infrastructure including commercial nuclear fuel production facility, engineering & services and a heavy equipment manufacturing partnership with Northrop Grumman. This is further enhanced by its strong naval nuclear infrastructure such as Babcock & Wilcox naval nuclear fuel facility and Northrop Grumman naval shipbuilding and maintenance facilities. Virginia is also the home base to five nuclear powered aircraft carriers. Clearly, Virginia is a state ripe for uranium projects with a guaranteed large and a growing market.
Mining laws and mining environments differ widely in the US with some states showing considerable hostility towards mining projects. Virginia however is a notable exception and has a long mining history. For instance, the first commercial coal mining in the US occurred near Richmond, the state capital, in 1748.
Today, over 400 different minerals have been found and more than 30 different mineral resources are produced in Virginia at a combined annual value of nearly $2 billion. Virginia is the nation’s 10th largest producer of coal, ranks 5th in the production of crushed stone and is a large natural gas producer following the development of coal-bed methane (CBM) reserves. Not surprisingly, Virginia boasts of several prominent mining companies including Alpha Natural Resources (NYSE: ANR) and Massey Energy (NYSE: MEE).
While we rejoice the addition of Coles Hill, it is important to highlight Santoy’s other projects in its portfolio. Santoy has two joint-ventures and an option agreement in place in the Otish Basin Northern Quebec. Its 100% owned Marc-Andre Prospect has mineralisation with similar setting to Strateco’s Matoush deposit. The company also has an Option Agreement with Xemplar Energy Corp. (TSX.V: XE) to acquire up to 100% interest in 1,241 claims totalling approximately 61,194 hectares in four main blocks in the Otish Basin. (emphasis mine..SB)
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