Dundee's take on HAT/FISHathor Exploration Limited
(HAT-V: C$1.92)
Update
January 26, 2010
BUY, High Risk*
12-month target price: C$4.00 (was C$3.75)
Potential Fission Discovery Implies Roughrider Extension
Conclusion: We continue to recommend Hathor as a BUY and are increasing our target price to C$4.00 from C$3.75.
Based on elevated scintillometer readings taken over the weekend, it looks like Fission Energy (FIS-V: C
.37, Not Rated) may have a uranium discovery at its Waterbury project in the Athabasca Basin of Saskatchewan. The project is immediately adjacent to Hathor's Roughrider deposit, and upon the news HAT rose 6%. Fission stock more than doubled.
This is positive news for Hathor - and as a result we are increasing our mineral inventory estimate for Hathor to roughly 33 to 37 million pounds, and this added a quarter to our target price. Hathor suggests that if the zone remains continuous and assuming scintillometer readings equate to U3O8 mineralization, there is potential for a strike of about 60 to 80m on its property. Hole MWNE-129 was noted in Fission's press release as being 140m away from its scintillometer results (Figure 1). Hathor does have some drilling planned around the western end of its Roughrider zone that is open in that direction. It will follow up on the MWNE-116 (18.12% over 13m) to hole -129 (15.65% over 5m) areas this winter.
Drilling has already started on Hathor's Midwest NE property, but with this potential Fission discovery we don't expect Hathor to deviate from its game plan and drill towards the western edge of its property. We expect Hathor to continue searching for high grade core areas. What it does is further validate Hathor's geological model - the zone occurs along strike of Roughrider at the right depth in the preferred basement rocks and below the sandstone.
Fission Energy reports significant radioactivity at adjacent Waterbury project
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Alteration, mineralization and elevated scintillometer readings were found in hole WAT-10-06a. This hole is located ~140km from the Roughrider Zone. Fission reports that its second hole from its 2010 winter drill program is situated within an east-west trending geophysical corridor (very strong magnetic anomaly) that stretches for about another 2.5 to 3.0 km to the west.
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We expect modest to high uranium grades over ~9.5m (Table 1, Figure 1). A wide zone of elevated radioactivity is reported to extend for over 29m from 206.5 to 235.5m, with higher counts at 214m depth, and then ~ 9.5m of almost continuous mineralization beginning at 226m. The mineralization in this hole remains open in every direction - along strike and at depth.
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Elevated counts suggest uranium mineralization present. We caution investors not to link scintillometer readings directly to uranium grades, but only as an indicator that radioactive minerals are present. That said, a rule of thumb in the Roughrider area suggests that that 1,200 cps equates to roughly 0.3% U3O8 grades - assuming Fission's scintillometers are calibrated similarly to Hathor's. This equation is not linear however. While 5,000 cps may roughly suggest ~1% U3O8, there is a big increase from between 5,000 and >9,999 (off-scale) cps readings. For example, scintillometer readings of 7,000 cps could result in assays of anywhere between 3% and 80% U308.
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Over 60m of moderate to intense alteration below unconformity. Intense hematite and clay alteration is found associated with the mineralization that begins at the unconformity at 206m depth and extends well past the end of mineralization at 235.5m, to 266.2m core depth. Alteration varies in strength from intense to moderate as it descends into the basement rocks. Similar alteration found on Hathor's property.
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Assays are pending - core samples haven't even left site yet. Management suggested to us that they may be able to hurry the process along with perhaps a goal of 3-4 weeks, although time will tell. FIS had reported that drilling just began on 18-Jan-10. It has approved a $2.68 MM budget for its JV with KEPCO (Korean consortium). With 20 holes and 7,500m is planned, this potential uranium discovery is early in the project and there is plenty of time for the program to be adjusted to follow up on these results.
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Hathor and Fission reacted in unison to this news - despite a doubling of Fission's share price during the day. Each company rose a little over $10 million in value. Hole WAT-10-063A is located 140m away from Hathor's hole -129, and depending on where the property boundary is positioned, the companies have about 60 to 80 m of strike potential each.