Fission Uranium Corp T.FCU

H.C. Wainwright: Buy rating and $1.70 target price for FCU

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According to H.C. Wainwright & Co.:
 
https://personal.crocodoc.com/KG77pdq
 
Fission Uranium Corp. (FCUUF)
 
Rating: Buy
 
Price Target: $1.70
 
Maiden Resource at PLS Positive; Growth In Resource Expected
 
On January 9, 2015, Fission Uranium announced a maiden resource estimate for its wholly-owned Patterson Lake South (PLS) uranium deposit. The estimate was completed on the R00E and R780E zones, now known as the Triple R Deposit. The initial estimate at Triple R includes 79.6 million pounds of U308 grading 1.58% in the indicated category, in addition to 25.8 million pounds of U308 grading 1.3% in the inferred category. We highlight that the average grade of 1.58% U308 in the indicated category came in slightly above our average grade estimate of 1.50% U308. Notably, PLS now ranks as the largest undeveloped uranium resource in the renowned Athabasca Basin region.
 
The Triple R Deposit contains a “high-grade” zone which we have previously not modeled out. The high-grade area of the deposit is estimated to contain 110,000 tonnes grading 18.21% for a total of 44.3 million pounds U308 in indicated resources in addition to inferred resources of 24,000 tonnes grading an average of 26.35% for a total of 13.9 million pounds U308. Further, the majority of mineralization present in the resource estimate is occurring at shallow depth, approximately 60m to 250m, which further substantiates our view that the deposit could be open-pittable. Fission expects to conduct sizeable winter and summer drilling programs during 2015. Current plans call for a total of 63 holes for a total of $10 million. The winter program already announced should be underway later this week.
 
The estimate includes a gold resource. In the indicated category, the estimate outlined a gold resource consisting of 2.3 million tonnes grading 0.51 g/t in addition to 901,000 tonnes grading 0.56 g/t in the inferred category for a total 38,000 ounces indicated and 16,000 ounces inferred. Although we currently do not factor the gold resource into our valuation, we believe the presence of gold offers Fission a future option to realize gold value at the site.
 
The maiden resource estimate at PLS is in line with our estimate. We highlight that utilizing a 0.5x multiple on inferred resources, the Triple R deposit contains a total of 79.6 + 25.9*0.5 = 92.5 million pounds of U3O8 in total resources. Given the small differential, we are maintaining our estimate of 90 million pounds of U308, while noting the potential for resources at the site to increase.
 
We are reiterating our Buy recommendation and $1.70 per share price target on Fission Uranium. Our valuation is based on our unchanged estimate of 90 million pounds of uranium in the ground at PLS. While Fission's figure of 79.6 million pounds of indicated and 25.6 million pounds of inferred resources is somewhat higher than this figure, we note the uncertainty related to inferred resources during a potential capital markets transaction. We value each pound of uranium in the ground at $7.00 and therefore value Fission at $664 million, or $1.65 per share. We round this figure to the nearest $0.10 to arrive at our final price target of $1.70 per share.
 
Risks. 1) Commodity price risk; 2) perceived safety risks; 3) operational and technical risks; 4) overall uranium market risks; and 5) risks of finding a buyer for the large-scale PLS property.