Fission Uranium Corp T.FCU

Raymond James: Strong Buy rating and $2.50 target for FCU

[shakerman640]

According to Raymond James:

https://personal.crocodoc.com/hSubmr2

Fission Uranium Corp.

FCU-TSX

Strong Buy 1

C$2.50 target price

Positive Results Keep on Rolling; Re-iterating Strong Buy

Recommendation

This week, Fission made three notable announcements: (i) positive scintillometer results from on-going drilling at the R780E Zone of its 100%-owned Triple R deposit in northern Saskatchewan; (ii) very strong confirmatory assay results from hole 343, the high-grade discovery hole from the entirely-on-land R600W Zone; and (iii) a C$3 mln expansion to its winter exploration budget (to ~C$13 mln). Given continued success with the drill bit and growing resource expansion potential at new and existing zones; our strong view of a near-term improvement in uranium prices and industry sentiment; and, as a result, rising takeout potential, we re-iterate our Strong Buy rating on Fission and encourage investors to bolster positions near current share price levels (trading at ~37% of takeout comps).

Analysis

- More Strong Hits Grow R780E. Fission cut moderate to high-grade radioactivity in 17 of 19 step-out holes at R780E (two cut weak intervals), the second batch of R780E holes released from the on-going winter exploration program. Drilling successfully expanded the zone’s footprint in several directions, including up to 90 m east, 60 m north, 10 m south, 60 m up-dip and 70 m down-dip on individual section lines. Hole 368 also extended the high-grade core slightly to the west with a 9.0 m interval of off-scale radioactivity. Though assays have not yet been announced, we estimate the 33 holes released this winter at R780E represent a >10% increase to contained metal vs. the existing 105 Mlbs resource, with plenty of room to grow via additional step-outs and in-fill at R780E, not to mention R600W, R00E, and R1620E.

- Assays Confirm Bonanza R600W Grades. Recall, the project took another leap forward earlier this month when hole 343, collared 555 m west of R00E Zone, cut high-grade uranium (see Mar-02-15 Comment, “New High-grade Zone Discovered On-Trend and Entirely On-Land”, price: $1.17) – a major milestone with very positive economic/logistical implications. Chemical assays have now confirmed what is truly a superb hole: 44.0 m grading 3.4% U3O8 (starting at 107 m core depth), incl. 9.0 m of 14.7%; given this thickness and grade and the fact R600W is open in all directions to us suggests serious growth potential at the western end of the PLS trend.

- Exploration Program Expanded. The aforementioned success has spurred Fission to expand the winter budget by C$3 mln to C$13 mln, boosting the program by 28 holes (6,270 m) to 91 (26,500 m). The new full-year exploration budget is thus C$18 mln, but we believe additional success could justify further increases and we are keeping our modeled C$30 mln unchanged (includes work for a PEA due late-2015E).

Valuation

Our target price is based on a 50/50 blend of a (i) 0.7x multiple and C$2.53 DCF-derived NPV/share (8%) on Triple R and (ii) US$7/lb in-situ value on our 6–12 month target of 150 Mlbs. Our multiples reflect comparable takeouts of high-grade Athabasca projects since Fukushima (averaging US$9/lb), PLS’ quality, development stage, scarcity, and location.