Fission Uranium Corp T.FCU

Dundee Recommendation

[Peak675]

Sell on news or the market doesn't like the resource estimates?

Dundee securities has a speculative buy on Fission from a research report for today.

 

https://research.dundeesecurities.com/Research/FIS011712.pdf

 

Fission Energy Corp.

(FIS-V: C
.94)

BUY, Speculative Risk* (was Venture Risk)

12-month target price: NA

January 17, 2012

David A. Talbot / [phone]

[e-mail]

Mansur Khan / [phone]

[e-mail]

 

Initial J-Zone Resource Estimate Totals 8.9 MM lbs U3O8,

Including 7.4 MM lbs grading 1.99% U3O8 Indicated

 

Conclusion: We recommend Fission Energy as a BUY based on this initial J-Zone resource estimate and are upgrading our risk rating to Speculative from Venture. We do not currently have a target price for Fission Energy.

 

Based on Hathor's $10/lb acquisition cost, we surmise that Fission's existing 60% share of the resource might be crudely valued at between $55 to $60 million, compared to an Enterprise Value of C$58 MM for FIS. However we don't believe that Fission is anywhere near finished testing its highly prospective Discovery Bay Corridor. And with the company accelerating a second project at Patterson Lake South (targeting the source of a 5km x 900m wide boulder field with samples of up to 40% U3O8), we expect heavy news flow this year with a fairly high chance for success and further resource growth.

 

This initial J-Zone Resource pass on Fission's 60% owned Waterbury Project is largely what we had expected and, in our opinion, is a very good start for an Athabasca Basin style unconformity deposit. The fact that 83% of the J-Zone resource is already classified as Indicated provides a relatively high level of confidence. A total of 7,377 assays from 142 drill holes and 43,900m of drilling were used by GeoVector Management Inc. to estimate the resource. The resource does include the entire 580m long J-Zone, including the former PKB Zone that was annexed by summer drilling. It does not include the prospective Summit Zone located 1,532m to the west. Every subsequent drill campaign by Fission has been highly successful at expanding the footprint of the deposit. We believe that further drilling this winter will continue with that trend.

• Initial Indicated Resource - 168,000 t grading 1.99% U3O8 for 7,367,000 lbs U3O8

• Initial Inferred Resources - 150,000 t grading 0.46% U3O8 for 1,511,000 lbs U3O8

 

J-Zone deposit taking shape. The J-Zone stretches for about 580m along an east-west strike, starting about 30m west of J-Zone East, which itself is an extension of the Hathor Roughrider West Deposit. The J-Zone remains open along strike, laterally and vertically within the sandstone rocks at the unconformity. Towards the western end of the known deposit, geology appears to become more complex and mineralization is found in the basement rocks as well as at the unconformity itself. In that direction, drilling is also becoming more sporadic, with the closer spaced drilling in the east giving way to holes that are about 50m apart in some cases, providing much of the inferred resource. Further, some sections might only have one or two drill holes. The lower grades of the inferred category are indicative of the lower grades found in those wide spaced holes. Further drilling is required to confirm that current holes are located directly on strike of the J-Zone and not off to one side or another.

 

Initial resource comes in close to our estimates. We had estimated that Fission's initial resource might be in the 11 to 18 MM lb range at a grade of 3% U3O8. A cursory glance at the Fission Energy resource suggests that its lower grades are likely due to the lower cut-off grade use (0.05% U3O8) compared to our attempt at a mineral inventory using a 0.1% cut-off. Part of our variation also likely originated from the fact that we didn't have access to Fission's specific gravity measurements and had to rely on charts and formulas based on other nearby high grade unconformity deposits including McArthur River, Cigar Lake, Shea Creek, Roughrider and Phoenix.

 

This looks familiar….This first pass J-Zone resource reminds us quite a bit of the initial 12 MM lbs U3O8 Roughrider resource reported by Hathor in 2009 on the property adjacent to Fission's J-Zone (Table 1). The deposit is at an early stage of exploration and the company is still search for that potential "sweet spot". Some of the high grades found at J-Zone including 46% U3O8 over 2m within 7.84% over 14.5m is an indication that higher grade pods may be found. Further drilling should help provide those little details. What we notice is that J-Zone is already larger on a tonnage basis than the original Roughrider resource with lower grades.

 

Winter drill program underway. Fission plans to spend $7.3 MM on a three rig, 25,000m drill program designed to expand resources, evaluate other uranium showings and test new targets. This program will include 69 drill holes, 47 of which will have the primary focus of expanding J-Zone resources through both infill and step-out drilling. The gap between the J-Zone and the Summit Zone to the west will also be tested. Six holes are planned for the Summit Zone and two more for Talisker along this 3km trend. Another 14 holes will test other targets on the property.

 

Table 1 - Summary of the Initial Fission J-Zone resource in comparison with the original Hathor Roughrider resource.

 

FIS' Initial Resource* (Jan-12)					HAT's Initial Resource* (Nov-'09)
Category	Tonnage	U308	U308		Category	Tonnage	U308	U308
	('000s t)	(%)	(Mlbs)			('000s t)	(%)	(Mlbs)
Indicated	168	1.99	7.367		Indicated	116	2.57	6.58
Inferred	150	0.46	1.511		Inferred	83	3.00	5.47
Total	318	1.27	8.878		Total	199	2.75	12.05

*0.05% U3O8 lower cut-off.                                                        * 0.06%  U3O8 lower cut-off.

Source: Company Reports, Dundee Capital Markets