Fission Uranium Corp T.FCU

Macquarie: Outperform rating and $2.25 target price for FCU

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According to Macquarie Research:

https://personal.crocodoc.com/sm4dCeB

Fission Uranium

Rating: Outperform

12-month target: C$ 2.25

From Discovery to Deposit to District

Event

- Preliminary results from the company’s 20,000m winter drill program have begun to arrive. It’s no surprise to us, the in-fill results on the >100m lb Triple R deposit are constructive and should lead to an increase in the resource. Moreover, the discovery of a new zone 555m west of the Triple R zone, on land supports our view that there’s more, possibly much more, to be found in the area. Ultimately we see the potential for Fission’s PLS project to be the anchor tenant in an entirely new high quality U3O8 district on the SW margin of the Athabasca Basin.

Impact

- The discovery of a new, land-based zone at R600W, some 555m west of the Triple R deposit has returned some strong results. Hole PLS15-343 reported 44m @ 3.36% U3O8 starting at 107m down-hole including a 9.0m interval grading 14.74% U3O8. This morning, the company announced that hole PLS15- 372 drilled on line 585W cut a new high-grade interval 30m to the north of the R600W zone.

- We believe that the success of the winter campaign could translate into a 20 to 25% increase in the >100m lb total mineral inventory on the project. Using the current EV/oz we believe this campaign could add some C$75m to C$100m in value to the company.

- FCU’s new discovery, coupled with NexGen Energy’s (NXE CN, Not Rated) new Arrow discovery located around 12 km to the NE of the Triple R deposit, confirms our view that this is a district in the making. Despite the fact that both discoveries are relatively new, they already account for three of the four, best ever drill holes reported from the Basin (2nd and 4th best by FCU and 3rd by NexGen).

Earnings and target price revision

- No Change.

Price catalyst

- 12-month price target: C$2.25 based on a NAV methodology.

- Catalyst: Ongoing winter drill program results, possible new resource followed by a PEA (3Q15)

Action and recommendation

- Our target is based on a 0.8x multiple to our discounted Net Asset Value of C$2.73 derived from our mine model for PLS. We recommend buying FCU to investors looking for exposure to a best-in-class uranium discovery. We are confident established producers and certain consumers are already paying close attention to the story.