Thank you for standing by, and welcome to the Paladin Energy and Fission Uranium Investor Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Ian Purdy, Chief Executive Officer of Paladin Energy. Please go ahead, sir.
Thanks very much, and thanks everyone for joining us on this call. It's my absolute pleasure to talk tonight about the combination of Paladin and Fission, and I'd like to welcome Ross McElroy, President and CEO of Fission Uranium. Ross, thanks very much for joining me this evening.
It's a pleasure to be here with you, Ian, and very excited to tell our investors about this story.
Thanks, Ross. And with Ross and I today, I've also got Anna Sudlow, the Paladin CFO, and also Alex Rybak, the Paladin Chief Commercial Officer. So thanks, everyone. It's a pleasure. This is our second call. We did one earlier today to capture the southern hemisphere, and it's a pleasure to be here evening Australia time, morning Canadian North American time to talk to you about the deal. So we'll dive straight in. I'll turn to slide 6, please. We'll touch on the deal highlights. It's an all-scrip acquisition of Fission Uranium by Paladin Energy via a Canadian plan of arrangement. The transaction consideration represents a 30% premium to Fission shareholders based on the 20-day VWAP. No Paladin shareholder approval is required.
Post-closing, when we look at the combined company, the Paladin shareholders will own approximately 76% of the company, and the Fission shareholders will own approximately 24%. We're targeting transaction completion in the September 2024 quarter, and I'm really pleased to say the transaction has been supported by both the boards of Paladin and Fission, and I think you'll see from the presentation why the boards are supporting this deal and why we're excited to be bringing you this deal on this call. Also, very pleased to let you know that concurrently with the deal, Paladin will be listing on the TSX. That's really important for us.
We want to show our commitment to the Fission and shareholders, and being an all-scrip deal, we're really excited to offer all shareholders the opportunity to continue on in this journey and not only to see the incredible upside of the PLS project, but also to join in the upside of the whole Paladin portfolio. Turning to slide seven, please. This is an amazingly strong, simple deal, and when you look at the combination of Paladin and Fission, one thing that stands out is we will be a clean energy leader. We will be right up there with the top independent Western-listed uranium companies of the world. Firstly, we are a proven uranium producer. The Langer Heinrich Mine has successfully returned to full commercial production with a 17-year life of mine. Really pleased to update that the ramp-up continues to go exceptionally well.
We're looking at our first customer shipment in a few weeks' time, and we'll be taking full advantage of the strong uranium market fundamentals. We're expecting to hit our nameplate capacity of 6 million pounds per annum during financial year 2026. This combination gives us an attractive growth pipeline on par with any other uranium company in the world. We've got life-of-mine extension work commencing at Langer Heinrich. The Patterson Lake South region in the project is approaching the start of detailed engineering design and is on schedule to produce in 2029, and Paladin is standing right behind that plan. We've had a good look at what Ross and his team have been up to.
We're incredibly impressed with the work that has been done, and we're going to work right alongside Ross and his team to deliver this project as per the plan and as per the work that has already been done by Ross and his team, and we'll bring the resources to deliver this project. We've also got the Michelin Project, which is on the eastern side of Canada in the Labrador region, another good project, but on a different timeline. We're just starting the pre-feasibility study on Michelin, and we'll look to bring that forward during the phase at which we're developing PLS with a view to Michelin potentially coming into development and production in the 2030s.
And very importantly, when you look at our global exploration portfolio in the three top Western uranium jurisdictions of Canada, Australia, and Namibia, I think it's arguable that we've got the best uranium exploration holding of any company in the world, and I'm really pleased to have the expertise and track record of Ross and his team helping us unlock that potential going forward. When we're combined, we'll have a pro forma market capitalization of $3.5 billion. We'll have a strong balance sheet, and we'll have an expanded global capital markets footprint. We'll have increased development funding options, which are underpinned by Langer Heinrich Mine production and our contract book, and this will really consolidate Paladin's position in the ASX 100 and also give us a platform to have a significant presence in North America through our TSX listing.
What's really pleasing about this deal, and Ross and I have talked about this on numerous occasions, is the combination of our operational and development expertise. Ross has an exceptionally strong team in Canada, and we back Ross and his team to deliver this project, and we're standing right alongside the team. We've got an exceptionally strong team in our corporate office and in Namibia, and when you bring that together, we're extremely confident to drive value across our whole portfolio of global assets. We've also got a very clear purpose. We see a fantastic opportunity to provide zero-carbon fuel source to our global customers. We're committed to leading environmental practices, and we're really pleased to see our alignment in terms of our social profile and our commitment to the regions in which we operate.
We've got an outstanding track record at our Langer Heinrich Mine in working with our local communities, and Ross and his team have done a fantastic job engaging and working with the First Nations in his local region as well. So we're culturally aligned, and we're set for success. Turning to slide eight, this deal has a compelling strategic rationale. I always held the view, if you can't describe the rationale for a deal simply and succinctly, you have to question why you're doing it. I'm pleased to say the rationale of this deal is self-evident and I think incredibly strong. Firstly, we are creating a world-class production and growth pipeline. If you look at slide nine, please, the incredible aspect of this deal is the way the respective portfolios fit together, and I think slide nine shows that well.
We've got the Langer Heinrich Mine, which is in production and has a 17-year life of mine. Patterson Lake South, it's a world-class ore body in a fantastic jurisdiction and a location that Paladin is very keen to expand our footprint. It's got a 10-year life of mine and a low-risk mine plan with development advancing on schedule to produce in 2029. We then will move to Michelin, which is at an earlier phase, and we're currently completing a PFS. When you look at our advanced exploration and early-stage exploration, we've got the best uranium mining jurisdictions in the world covered. The production timeline on the bottom just shows you the opportunity we have here to be a multiple mine, globally significant uranium-independent company with two assets up and running by 2030. The second rationale for the deal is we'll be creating a leading Canadian development hub.
Ross, I'll ask you, please, to overview your Patterson Lake South project, please.
Sure. Thank you very much, Ian. So the PLS project is located in the Athabasca Basin in northern Saskatchewan. The Athabasca Basin is no stranger to anybody in the uranium business. It's been such an important global supplier of uranium. It's famous for hosting the world's highest-grade uranium deposits, and our project is located on the southwest side of the Athabasca Basin. It's been about 12 years now since the discovery, and we've been able to successfully move and grow this project, move it down the path towards production. We recently, well, just over a year ago, completed a feasibility study at PLS, and as Ian's already highlighted, we've shown a 10-year mine life with a little over 9 million pounds a year annual production. And extremely important there, it promises to be one of the lowest operating cost uranium mines in the world. We continue to move the project forward.
Earlier this year, we submitted our environmental impact study, so it's now in the process of getting through the approval process of the environmental assessment phase. We anticipate being able to have a favorable ruling for advancement on the EA side by September this year. The project does continue to move along towards the timeline of production by 2029, so we're well on target for this and very pleased to be part of this story.
Thanks, Ross. On the other side, on the eastern side of Canada, you can see there the Michelin Project. Look, we're really excited to get Ross and his team to add value and help us out with Michelin. I know the guys on the ground in St. John’s, Steve and Jess out of our corporate office, they know Ross and Kanan well, and we're really excited to get Ross's expertise to move Michelin along as well. Thirdly, on slide 11, please, we've got a globally significant uranium resource, the second largest in the Western world and the third largest overall. What's a standout of this resource is the quality.
If you look at the pie chart on the right-hand side, you can see the quality and size of the assets around the world, and this excites us as much as the opportunity to bring a second production platform by 2030. The exploration potential across this portfolio is unlimited, and having Ross's expertise and his team's expertise combined with our exploration expertise gives us great confidence for the future. Slide 12, we've got enhanced exposure to a highly attractive uranium market. I think it's well socialized and well documented, the turnaround in the uranium market over the last couple of years. We're seeing strong uranium demand driven by global decarbonization, and we continue to see supply tightness due to underinvestment for the last decade. We're seeing a shortage of existing production in the market today with a growing deficit over the next few years, continuing out well into the 2030s.
We see PLS as part of that solution. We believe in delivering PLS, we'll be able to deliver it into a very strong, sustainable market, and we'll bring the customers to underpin that development. Next, on slide 13, we're also very excited by the increased international capital markets presence. Scale is important in mining, and particularly when you're looking at bringing forward development, having that scale is incredibly useful and also de-risks the project delivery significantly. So the pro forma market cap, as I mentioned, about $3.5 billion, and we will be in the top echelon of the leading uranium companies globally. We'll have a broader investment base, an increased research coverage, and enhanced liquidity.
Slide 14, as I mentioned, Ross and myself and our teams have a shared commitment to a sustainable future, and we're committed to reporting to best practice standards in all of our operations, and we've got combined ESG commitments, which are very closely aligned. Slide 15, please. So in conclusion, this deal is creating value for all shareholders. For both shareholders, we'll see an enhanced project development pipeline. Very importantly, we'll have multi-asset production by 2029, diversified presence across all of the leading Western mining jurisdictions, increased exposure to the highly attractive long-term uranium fundamentals, and that increased scale I mentioned, especially with our commitment to the TSX listing. In particular, for Fission shareholders, an attractive 30% premium to the 20-day VWAP, and most importantly, the ability to participate in the upside of Paladin and PLS going forward. Meaningful 24% ownership in a leading global multi-asset uranium company.
We will de-risk Fission and PLS development with funding underpinned by Langer Heinrich production and customer offtake contract book, and the opportunity to retain TSX-listed shares in a leading ASX 100 growth-focused uranium company. Thank you very much. We'll now hand over to questions.
Thank you. If you wish to ask a question, please press star then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up your handset to ask a question. Today's first question comes from Puneet Singh with Eight Capital. Please go ahead.
Hi. Thanks for taking my questions. First question I had for you, Ross. Just on the timing of the deal, Fission has always traded cheap, and I think it was investors' belief that you were on the cusp of a re-rating. So maybe just discuss more of the rationale behind doing this deal now.
Yeah. Well, certainly, Ian and I have been looking at this opportunity for several months now, and I think that seeing where we're at in the pipeline on development, we're, as I said, we've obviously made major strides forward on the regulatory permitting front, looking for EA approval this September. But when you also look at the path forward, we'll have still another 2 years, 2.5 years to complete all the regulatory side. We'll begin construction early 2026. Now, when we looked at, and you see with Paladin and the Langer Heinrich operation, of which I had the opportunity to go down and have a look at this wonderful project and meet the team, we felt that it was a really good fit. We are extremely impressed with the operations team, with the overall project down there. I just think that the timing's right.
We're firm believers in the uranium industry, the uranium sector. We just, and this gives us an opportunity to continue to develop this project going forward and yet have a world-class leading uranium company with production, with the world-class development, excellent exploration portfolio. It just felt like the right time. We're obviously very bullish on the sector. We're happy with where Fission is right now on its path forward to development of the PLS project, and just the timing is right.
Okay. Got it. Thanks, Ross. And then my second question is for Ian, just regarding deal value. At first glance, to me, it seems a little light. One of the best assets in the world, 5% of global supply. If you look at the street, basically the entire street values Fission much higher. So maybe just speak to the rationale behind the £1.30 that you're offering and how you came to that specific number. Thank you.
Yeah. As Ross said, we've both done a lot of work from both sides, and we really have considered it closely and discussed it over a fair period of time between Ross and I. Look, we're really pleased to make a very strong offer to the Fission shareholders and a very attractive premium at 30%. One of the principles that I agreed very early with Ross in the early days is we would not argue at all about the full equity value of the Fission project and the shareholders' valuation of his company, and we would base a strong premium off the VWAP of the shares. So we think we've offered a very strong premium. We're satisfied that it's fair to all shareholders. We're satisfied that it offers a great opportunity to the Fission shareholders.
And being a scrip deal and with our commitment to the TSX listing, we'd love all the Fission shareholders to come on the journey and share in the upside, not only with PLS, but also across the Paladin portfolio. And look, it's a great question, and I've had very similar questions from my large shareholders already saying, "Look, we can see the deal makes sense from a portfolio point of view, but why are you giving Fission shareholders full value plus a premium for an undeveloped asset?" So look, I think Ross and I are very satisfied from both sides of the equation. I think both our shareholders probably have different views, and I think that's great. That probably says that we've got it just about right.
But look, we really want all Fission shareholders to come along with us and share in the upside of the group, take advantage of the premium, and let's move forward together.
Okay. Got it. Thank you very much.
Thank you. Our next question today comes from Alexander Pearce with BMO. Please go ahead.
Hi, Ian. Hi, Ross. You've got what looks like a fairly ambitious timeline for closing the transaction. So I was hoping you could just comment on how confident you are in able to get the regulatory approval that quickly, particularly with a focus on the Investment Canada Act. I know Paladin has received exemption in the past, but what is the likelihood of being able to get that exemption again? Thanks.
Alex, thanks for the question. I'll hand over to Alex Rybak, who's run this transaction from our side. Alex?
Yeah. Thanks, Alex, for the question. Look, as you can imagine, we've done a lot of work on this and seek advice from our legal counsel, Fasken, a Canadian law firm. We are obviously doing the notification under the Investment Canada Act, under the Competition Act. We're not making the NRCan approval a condition to the deal. That will be done as part of the deal transaction, but not as a condition precedent. We are confident in getting all those approvals in those time frames, although the NRCan approval will take longer, but that's not a condition to the deal. And as you mentioned, we have previously received NRCan approval for 100% ownership and operation of our Michelin Project. So we're confident in receiving that as well.
Thanks, Alex. And then maybe I can just ask a follow-up question. Ian, Ross, maybe you can just talk about how this could change the priority list for development. Do you think the cash flows from Langer Heinrich can expedite development of PLS?
Well, I think, Alex, I'll start and then I'll hand over to Ross. Look, from our point of view, we're all in on the PLS project. This is a world-class project. Ross has done some great work with his team, and we'll be working with Ross and his team to resource the next phase and to move the project forward as per the Fission plan. We think it's a great plan. We think it's realistic. Ross and his team have been very realistic and have done quality work to this point in time. We think bringing Fission into the Paladin group and combining substantially de-risk that delivery gives us funding optionality, gives us the strength of the cash flows out of Langer Heinrich.
But Alex, I think in terms of acceleration, one thing that Ross and I are very similar on is we deal with the reality of time frames. So you may recall with the Paladin restart of Langer Heinrich, we stuck to our timetable, our budget. Some people thought it was a bit long. We delivered on time on budget. Ross has got a very structured timetable that's driven by his regulatory time frame. And from where we sit, we think he's accurately portrayed that, and we fully support that. Ross, anything you'd want to add on that? Thank you, Ian. Yeah, thanks, Alex, for the question. I guess really what I want to do is echo exactly what Ian said. We know our timelines. I think we're very structured. We're honest. We know exactly what it takes to move PLS forward.
I have every confidence that nothing slows down for us at all. We stay to the process that we're in. We will be confident we can bring PLS to production in 2029. And key for what Ian says is it does significantly de-risk the build-out of PLS, having a producing asset, a world-class asset in the Langer Heinrich mine in Namibia. I think goes an awful long way towards de-risking the project, bringing capital, the ability to raise capital, be able to raise capital internally, externally. I think that our path forward can continue to march on as we've mapped out. And yeah, we're very confident in this deal, Alex.
Great. Thanks, both.
All right. Thank you. And our next question today comes from Justin Chan with SCP Resource Finance. Please go ahead.
Hi, Ian, Ross. Congratulations. I can definitely see the logic for this one, although I must say, Ross, it's a bit of a bittersweet day. Just maybe my first one is just on the team. So I guess it's early days, but will the whole team be coming over, Gary, Ross, etc.? And then my second one is just on, I guess, Ian, as you look at the balance sheet, you've got Langer Heinrich ramping up, which should provide some cash flow, but also just given the size of the investment in Fission, I guess, how does that inform your thoughts on contracting, price protection, that sort of stuff? Do you have any thoughts on how you'd like to run the strategy regarding exposure to uranium?
Ross, you can answer the first one. I sure will. And Justin, thank you very much for the question. And I think the answer is the Fission team, everybody, we put a lot of effort into building out what we know is a world-class team. We obviously have a strong track record of exploration success. We've made some of the most significant uranium discoveries in the Athabasca Basin in decades. And we've built a world-class development team at PLS, and I'm very happy to be working with Ian on this. And 100%, our team is welcome in the new structure. So they will absolutely be part of it. I think what this does is it just gives us further strength to continue to develop PLS. But yeah, the team, the exploration team, the development team, yeah, where the intent here is for everybody to come over and work.
I will say that we've had the opportunity to meet with Ian's operational team down at the Langer Heinrich operation, and our whole group felt fantastic chemistry. We could recognize the fact that this was a serious company that really was a company builder, had a great asset, and a very strong team to move the Langer Heinrich back into production. And so we feel very good chemistry going forward, and yeah, we're happy to be part of this team, fully integrated. Thanks, Ross. The second part of the question, in terms of our approach to underpinning a project with a contract book, a great question. Ross and myself and Alex and Anna alongside me, we're what you call traditional uranium project developers. We are firmly of the belief that you need to underpin your project development, not only with sensible and appropriate funding, but also with a contract book.
In uranium, we stand right alongside Cameco, Kazatomprom, Orano, and we're firmly of the view you cannot have a sustainable scale uranium business without contracts and without contracts to top quality counterparties. Alex and his international marketing team have built a fantastic contract book for us in Paladin with the top five utilities in the U.S., the large ones in Europe, and one of the largest in China. And we've got further opportunities to extend that contract book as we move forward into full production. We will bring that approach to underpinning PLS. We will have a contract book in place at the right time when we commit to an FID, and that contract book will be populated with our existing customers and other global leading utilities, which will underpin the delivery of the project, as you would expect from a sensible mining company.
In terms of funding and that optionality, I might ask Anna Sudlow to give us her thoughts. Anna?
Yeah, sure. Look, so as you mentioned, the capital we need for PLS is quite significant, but I think it's worth noting that we've got a lot of optionality as to how we do fund that. The other thing you should realize is that there's really not a lot of material spent until 2027. So we've got plenty of time to develop that funding strategy. We have got really robust cash flows coming out of Langer Heinrich. We're delivering product into a rising uranium market, and we've established really strong banking relationships. We put in place a sizable debt facility at the beginning of this year. So we're very well positioned to continue to consider our options on the funding, and we've got plenty of time to execute on that. So we don't anticipate any issues with the funding.
Gotcha. Thanks. And I guess, does it at all affect your thoughts on how to structure your price exposure, or is it maybe too soon to say?
Yeah. Look, I think at the moment, if you take our position at Langer Heinrich, where we're 80% exposed to basically market pricing, and you take the 100% exposure at PLS, it's pretty good. One of the things we've done at Langer Heinrich is we were fortunate to choose our timing as to when we re-entered the market. We did wait. We waited for several years for the market to strengthen. When we stepped back in, we took a conscious decision to go overweight market pricing this early in the cycle. We are very early in this uranium cycle. We're in a really strong position with significant market exposure at Langer Heinrich. We're really pleased to have production visibility from PLS as soon as 2029, which obviously has 100% market exposure. Once you move to implementation, you need contracts, and you need different pricing mechanisms.
You need to underpin the economic viability of the operation before you commit to spending the capital. So we'll have a very sensible, balanced approach to marketing, not only at Langer Heinrich, but also PLS.
Gotcha. Thanks very much. Appreciate the time. I'll free up the line, but congrats to both parties on a great deal.
Thanks very much.
Thank you. Today's final question comes from Nicholas Clark with TD Cowen. Please go ahead.
Thank you, Ian. Thank you, Ross, for taking my question. I just wanted to loop back, if I could, on a comment you made earlier about how the transaction originated. You mentioned you spoke a few months ago and had just been looking at some timing with respect to the Langer Heinrich ramp-up for more formal activity on the deal. But could you comment a little bit on if a formal process was run for the transaction and any color there? That would be great. Thank you.
Yeah. Look, I'll kick off. I was very pleased to commence a conversation with Ross McElroy. Ross, it must be six months ago now. And Ross and I were just talking with no particular intent. And what we speculated on was how well our combined portfolio would work. So I think that was a genesis. And I think, Ross, there could have been some red wine at that stage. But that was the genesis of a conversation. But what Ross and I agreed was we had some work to do. So certainly, Ross was very understanding when I said, "Look, we need to deliver Langer Heinrich first. We need to get our project completed.
We need to get it up and running, and we need to get the production going to our customers." Ross also was very upfront with me and said, "Look, I've got some really good milestones coming on the project. We want to get a couple of those under our belt." And we agreed that we'd stay in touch with a view to seeing if the timing was right for us to take it to the next step. So over those six months, we kept in touch. We started some light work of checking each other out and seeing, did the logic of us coming together make as much sense as we thought it did? And as we hit our milestones, we agreed to ramp up the due diligence. We both did extensive due diligence.
Alex ran a very heavy technical, commercial, legal due diligence for us, and Ross and his team did extensive due diligence on us as well, as well as site visits all around. I'm very pleased to say that all of our due diligence work and all of our legal review work just continued to reinforce the rationale and the compelling rationale of this deal for both of us. I think, Ross, from my point of view, it was quite recently that we actually decided to really get into that, and we worked very hard over the last month and a half to be where we are today. From where I sit, this deal is the perfect timing for both companies and the perfect timing for both our shareholder groups. Ross, your thoughts? Yeah, sure. Yeah. I remember the genesis of this.
It was some early February when Ian and I first had met and sort of started talking about this in a big arm-waving concept. But I think we both instantly felt good chemistry with each other and felt we run companies the same way. But when I could see what they were doing at Langer Heinrich and what the timing was to be able to get Langer Heinrich into production, that was an important step forward. And we also wanted to, around the same time that Langer Heinrich went into production, we had submitted our environmental impact statement to the provincial government. And so those were important milestones, I think, for both companies.
And then that was after that we could really get into the meat of it and look at not only the quality of the projects and the assets, but how well they were run and what the company's philosophies were. And really, it was over the last, yeah, probably two to three months, I guess, that we really started.