FREEHILLS advised Arafura Resources Ltd on the spin-off of its uranium assets to form uranium exploration company NuPower Resources Ltd, which closed at 80 cents on the first day of trade on the Australian Securities Exchange, a 300 per cent premium.
“The transaction involved several unique aspects,” said Peter Smith, Freehills lead partner on the deal.
“First the demerger was preceded by a rights issue by Arafura for the primary purpose of providing working capital to NuPower following the spin-off.
“Arafura’s existing capital structure included several different classes of quoted and unquoted options. This meant that we had to assist the client to come up with a novel approach to adjusting all of Arafura’s option exercise prices which would reflect the perceived market value of the assets being transferred to NuPower.”
Smith said the demerger was done via an “in specie” distribution to existing Arafura shareholders instead of an IPO.
“The client also believed that the market’s perception of the value of the uranium assets was considerably higher than their pure accounting value, so they wanted the structure of the transaction to accommodate this. As a result we needed to obtain unique waivers from the ASX.”
Arafura said the separate listing of NuPower released the value of the uranium assets to shareholders and gave current shareholders and new investors greater flexibility to invest in both Arafura’s assets and a specialist uranium stock.
Arafura retains ownership of Nolans rare earth-phosphate project as well as interests in gold, iron ore, nickel and vanadium projects.
NuPower’s uranium assets are all located in the Northern Territory.
In a joint venture with Laramide Resources Ltd, on 14 June the company started drilling the “North East Westmoreland target zone”, located close to the Gulf of Carpentaria.
On 18 June, an electromagnetic geophysical survey was also started over NuPower’s Yalyirimbi, Woodforde, Sandover, Yambah and Burt Plains exploration licences, about 100 kilometres north and north-west of Alice Springs.
Last week the company was trading at around 66.5 cents per share.