8-K: enCore Energy to Sell New Mexico Uranium Assets to Verdera Energy in Share and Royalty Deal

enCore Energy Corp. will sell its New Mexico uranium projects to Verdera Energy Corp. for shares, royalties, and cash, with plans to distribute the shares to enCore shareholders.

Summary

• enCore Energy Corp. has entered into a share purchase agreement with Verdera Energy Corp. to sell its New Mexico uranium projects (Crownpoint, Hosta Butte, Nose Rock, West Largo, and Ambrosia Lake Treeline) to Verdera.
• The consideration includes $350,000 in cash, 50,000,000 non-voting preferred shares of Verdera, and a 2% net proceeds royalty on uranium and a 2% net smelter returns royalty on other minerals extracted from the properties.
• Verdera is expected to pursue a listing on a Canadian stock exchange by December 10, 2025, which may be extended to January 31, 2026.
• Upon listing, 15,000,000 of the preferred shares will convert into common shares, with the remaining 35,000,000 to be distributed to enCore shareholders.
• enCore retains the right to repurchase the subsidiary holding the properties if Verdera fails to complete the listing.
• enCore has a right to participate in any financing by Verdera to maintain its initial equity interest until the listing is complete.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. enCore is divesting non-core assets and potentially creating value for shareholders through the Verdera transaction. However, the success of the deal depends on Verdera's performance and market conditions.

Positives

• enCore receives cash, equity, and royalties for non-core assets.
• enCore shareholders may benefit from the distribution of Verdera shares.
• Verdera's dedicated focus may unlock additional value in the New Mexico projects.
• The transaction aligns with enCore's strategy to divest non-production pipeline assets.
• enCore retains the right to repurchase the assets if Verdera fails to list.

Negatives

• The transaction's value is dependent on Verdera's success in listing and developing the assets.
• enCore shareholders will receive shares in a new, unproven entity.
• The transaction is subject to customary closing conditions, which may not be satisfied.
• The listing may be delayed or not completed.
• The value of the Consideration Shares is subject to market fluctuations.

Risks

• The proposed transaction may not be completed in a timely manner or at all.
• Conditions to the completion of the share sale may not be satisfied or waived.
• A stock exchange listing by Verdera may not be completed in a timely manner or at all.
• A governmental entity may prohibit, delay or refuse to grant approval for such listing.
• A distribution of common shares of the Resulting Issuer may not be completed in a timely manner or at all.
• Verdera's ability to realize the synergies contemplated by the proposed transaction is uncertain.
• Exploration and development risks, changes in commodity prices, and regulatory risks could impact the projects.

Future Outlook

enCore plans to distribute Consideration Shares to shareholders, contingent on Verdera listing on a Canadian stock exchange. enCore hopes to surface additional value, and to eventually transfer a majority of that additional value directly to shareholders though the distribution of Verdera shares.

Management Comments

• William Sheriff, Executive Chairman, stated that the New Mexico projects deserve a dedicated focus, which they do not currently receive inside enCore's broader portfolio.
• William Sheriff, Executive Chairman, stated that enCore continues to execute on its stated non-core asset disposition strategy to create additional value for shareholders.
• William Sheriff, Executive Chairman, stated that enCore looks forward to working with Verdera and its Chief Executive Officer, Mr. Tim Gabruch, to see a greater focus on the essential steps to modernize resources and develop long term relationships with local communities to secure a social license for development of the assets.

Industry Context

The transaction involves uranium assets in the Grants Uranium District, a historically significant uranium-producing region in the United States. enCore is divesting non-core assets to focus on its production pipeline, reflecting a strategic shift in its portfolio.

Comparison to Industry Standards

• The royalty rates of 2% net proceeds on uranium and 2% net smelter returns on other minerals are within the typical range for royalty agreements in the mining industry.
• The structure of the deal, involving shares in the acquiring company and royalties, is a common approach in mining asset transactions.
• The Crownpoint project is permitted under Laramide Resources Ltd.'s Nuclear Regulatory Commission License to recover up to 3 million pounds of uranium per year, which is a significant capacity for a uranium project.
• The Grants Uranium District has produced ~350 million pounds U3O8, or nearly 40% of all uranium mined in the US and is one of the largest uranium districts in the world.

Related Party Transactions

• The spouse of the Company's Chairman serves as a member of the board of directors of Verdera and certain directors and officers of the Company own common shares of Verdera.
• The Audit Committee of the Company's board of directors (the Board) consisting solely of disinterested directors oversaw the negotiation of the terms of the Sale on behalf of the Company.
• Fort Capital Partners is acting as financial advisor to the Audit Committee and provided the Audit Committee an opinion as to the fairness, from a financial point of view, to the Company of the consideration received in the Sale pursuant to the Purchase Agreement.
• The Purchase Agreement was unanimously approved by the Audit Committee, and, upon recommendation by the Audit Committee, by the Board.

Stakeholder Impact

• Shareholders may benefit from the distribution of Verdera shares and potential value creation.
• Local communities in New Mexico may see increased focus on the uranium projects under Verdera's management.
• Employees are not impacted as neither NME Texas nor the Corporation have any employees.

Next Steps

• Closing of the sale of the subsidiary to Verdera by March 31, 2025.
• Verdera to pursue a listing on a Canadian stock exchange.
• enCore to distribute Consideration Shares to its shareholders after Verdera's listing.
• Negotiation, finalization, and execution of the Royalty Agreement as described in Sections 2.02(c) and 2.06 of this Agreement.

Key Dates