First Uranium Corporation T.FIU

raymond james...2.40 target BUY

[greatemailslob]

On Friday morning, FIU announced a C$125 mln - C$150 mln private

placement in senior secured convertible notes due Mar-13-13. Close is

expected Mar-31-10.

Action

Impact is positive. We believe that financial risk will be substantially

decreased and critical management changes have been made.

Analysis

?? Size and Shareholders. The pending offering is for a minimum of C$125

mln and a maximum of C$150 mln. Key potential shareholder subscriptions

include Simmer and Jack (SIM-JO) for C$40 mln and Gold Wheaton (GLWTSX)

for up to C$20 mln. The remaining C$65 mln (minimum) to C$110

mln (maximum) is to be sold to accredited investors. Commitments by SIM

and GLW are conditional upon a number of items including a minimum

$125 mln raise and settlement of an agreement allowing SIM its pro-rata

holding.

?? Terms. Each note has a principal amount of C$1000, convertible into

769.2307 shares (conversion price of C$1.30/sh, a 13% discount to 5 day

VWAP). The notes are guaranteed by the subsidiaries of FIU, secured by

second ranking security over all assets currently encumbered by GLW and

first security over all other current and future assets. The notes carry a 7%

coupon paid semi-annually (paid Sept-30 and Mar-31 of each year).

?? GLW Penalty Deferred. Instead of charging a US$42 mln penalty to FIU on

Jun-01-10 (for non-completion of Gold Module 3), GLW has agreed to

accept 14 mln FIU shares and a commitment by FIU to construct the

module by Sept-01-11 (or pay US$1.5 mln per each month of noncompletion

and US$30 mln if not completed by Dec-01-11).

?? Management Changed. It is proposed (not conditional) that Deon van der

Mescht will assume the role of Interim CEO. The board is to be restructured

to include three SIM nominees and one GLW nominee.

Valuation

We are increasing our rating to OUTPERFORM (from MARKET PERFORM)

and increasing our target to $2.40 (from $2.30). Our target is based on a

blended average (50%, 30%, 20%) of: (a) a 0.8x P/NAV and $1.89 (from $3.10)

NAVPS; (b) an 8x P/CF and ’12E CFPS of C
.70 (from C
.25); and (c)

C$2.25/lb metric applied to 256Mlbs U3O8. Our decreased NAVPS reflects the

dilutive effect of the above convertible; increased CFPS reflects the addition of

assumed acceleration of gold module #3 at MWS