Is nuclear fusion close at Mulga?

Talk of a merger between uranium minnows EMA and Manhattan Corporation is heating up.

PORTFOLIO POINT: A small, but perfectly formed, uranium merger could be taking shape in the semi-desert east of Kalgoorlie.

Five years after bruising investors with its 70% price crash from $US135 a pound to $40/lb, and less than 18-months after the Fukushima nuclear meltdown in Japan, the uranium industry is regathering strength, complete with a potential small, but neat merger.

Not for the fainthearted, and certainly not for anyone with a dislike for nuclear power, the deal-in-waiting is being geologically driven because the two companies involved own half each of what is technically one of the world’s biggest undeveloped uranium deposits.

Energy and Minerals Australia (EMA) and Manhattan Corporation (MHC) own the top and tail respectively of the Mulga Rocks uranium deposit in WA, discovered in 1979 about 250 kilometres east of Kalgoorlie by a Japanese government-controlled exploration company.

Australia’s ban on uranium mining, complemented by a WA government ban, and reinforced by a low uranium price through much of the 1980s and 1990s, saw Mulga Rocks abandoned until picked up about five years ago by EMA, with Manhattan snatching the southern extension.

In theory, either EMA’s top half with its estimated 60 million pounds of uranium, and Manhattan’s bottom half (called Ponton) with its 67 million pounds, could be developed as stand-alone projects.

In reality, EMA never acquired clear title to its piece of Mulga Rocks – until a legal dispute was resolved last week, and Manhattan can’t move ahead with confidence at Ponton until it gets clear title by winning approval to do more work inside a nature reserve covering a small part of a vast expanse of semi-desert.

Lifting the government bans on uranium mining has been a first step in revitalising the industry, with Toro Energy an early mover in developing WA’s first uranium mine by winning environmental approval in May to develop its Wiluna project about 520km north of Kalgoorlie.

Last week, the logjam cracked open a little wider with a series of significant developments, and equally significant “non-events”.

First came settlement by EMA of its dispute with Yarri Mining, the other company claiming title to Mulga Rocks. That agreement is costing EMA $3 million, a price which will burn about half of the company’s cash balance.

Next came a uranium conference in the WA port city of Fremantle where Toro chief executive, Greg Hall, delivered a buoyant talk that contained two key comments not widely reported: that global demand for uranium was rising, not falling, and that the long-term price of uranium had just enjoyed its first increase since the Fukushima meltdown.

At $US61.50/lb, the long-term uranium price is higher than the short-term price of $US50.15/lb, with the gap between long and short prices one of the more curious aspects of the uranium market compared with other metals that generally trade the other way around.

Also at the Fremantle conference were the two “non-events”, which compound a growing view that EMA and Manhattan are hatching a deal to unite Mulga Rocks in a single company with a ready-to-mine uranium plan.

While the chief executives of EMA and Manhattan were both in the audience at Fremantle, neither opted to deliver an address.

EMA boss and major shareholder, Mike Fewster, was listed as a speaker, but chose to send to the podium a project geologist. Manhattan chief executive, Alan Eggers, was not listed as a speaker, but has been at every other uranium conference for the past few years. He also sent up a project geologist.

What made the situation even more curious was that the two staff members speaking on behalf of EMA and Manhattan did not have English as their first language. Both had French roots, one from France and the other a Canadian.

On the market, a whiff of a deal has been wafting across EMA and Manhattan, with EMA shares almost doubling over the past week with a rise from 5c to 9c. Manhattan went the other way in a very light market that saw the stock fall from 20c to 18c.

On their own, both companies are minnows, valued at $34 million (EMA) and $15 million respectively (MHC). Neither has the funds to develop a mine, and investor interest in companies exposed to the metal remains depressed.

But for speculators with an eye for a deal in the making, the end of EMA’s legal problems, the rising long-term uranium price, the environmental approval for Toro’s proposed mine, and the silence of the chief executives at last week’s uranium conference are clues that something is cooking.

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