Fission Uranium Corp T.FCU

Raymond James: Strong Buy rating and $2.30 target for FCU

[shakerman640]

According to Raymond James:

https://personal.crocodoc.com/Iq61YJM

Fission Uranium Corp.

Strong Buy 1

C$2.30 target price ↓ old: C$2.50

Summer Drill Program at PLS Set to Kick Off in Early July

Recommendation

Fission announced an aggressive C$10 mln, 60-hole (20,000 m) summer drill program will commence at its flagship, 100%-owned Patterson Lake South (PLS) uranium project in the first week of July. Drilling will be evenly distributed between the on-land R600W Zone, main Triple R Deposit, and regional targets. We encourage investors to bolster positions in Fission ahead of likely further drilling success this summer, maiden PEA due this fall, as well as our expectation of: (i) upward pressure on uranium equity valuations with Japanese reactor restarts due to start this August; and, (ii) higher uranium prices with increased contracting heading towards 2H15E. We view ramping evidence of interest in Canadian uranium projects from Chinese utilities as bolstering M&A potential.

Analysis

After a successful 87-hole winter program, which yielded the discovery of high-grade mineralization at R600W and expanded Triple R, Fission will focus this summer on:

- R600W. Follow-up drilling at R600W (20 holes), the new, shallow, high-grade zone located ½ km west of the 105.5 Mlbs Triple R deposit. R600W is to us of high strategic importance for the project as a potential starter pit and tailings facility. Growth potential is strong, with mineralization open in all directions and what appears to be a new, parallel uraniferous structure 25 m to the north. Seven holes were drilled at R600W in the 2015 winter program.

Triple R. Expansion drilling at Triple R (20 holes)

- 15 holes to grow the high-grade domain and extend strike further east

- five holes designed to (i) expand the sparsely-tested, easternmost R1620E zone and (ii) close the 330 m gap between the R780E and R1620E zones

- Regional exploration. Twenty holes are to test multiple high priority targets around the property, particularly the main Patterson and Forest Lake corridors, with drilling to be aided by ground gravity geophysics and radon, which were key in the successful discovery of R600W and Triple R (see map on page 2).

- Radon. A radon survey is planned along the PL3-B conductor (containing Triple R and the R600W zone) from the R00E zone to the high-grade boulder field to prioritize drill targets.

Model Updates. We are incorporating closing of the C$20 mln financing, latest financial results, and revised RJL C$ FX assumption of US$0.80 (from US$0.82), which in aggregate, has a slightly dilutive impact to valuation. We estimate a cash position of ~C$23 mln as of Jun-30-15, sufficient to fund the upcoming exploration campaign.

Valuation

Our target price is based on a 50/50 blend of a (i) 0.7x multiple and C$2.39 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.