quakes99 wrote: Exciting news out of NexGen this morning, eh? Pretty much every analyst but David Talbot of Dundee/Eight Capital had raised their estimates on Arrow to between 400-500M lbs as NXE headed towards a revised Resource Update. However, the total came in at just
301.6M lbs with
only 60% in the Indicated category (compared to
75% for PLS ever since the Maiden RE). That's a miss of between 30 and 66% in those overestimations. Only David Talbot came in nearly on target with his latest estimate:
We estimate Arrow hosts 305 to 310 MM lbs U3O8, and should grow further once assays from these holes are reported. We don't increase our mineral inventory estimate on scintillometer results, but only on quantitative assays. Our mineral inventory is ~50% larger than Arrow's initial 202 MM lb resource, and we are likely conservative.
Turns out you weren't conservative at all, David, and your earlier price Target of $3.40 seems to be where the market sees the true valuation being today. I think the RE2 News Release caught a lot of investors off guard by the introduction of the terms
Indicated and Inferred. Those were terms that were absent in any previous news release, so a lot of investors may not have realized that there were different levels of quality in the reporting of Uranium resources.
Have to give credit to the high grades announced, for sure. The spin doctors, however, were working overtime focusing on the conversion rate as being so high... while in reality the release shows that a helluva lot more drilling is going to be required to get that Indicated number to go higher. 60% Indicated is a long way to the 100% needed at the Feasibility Study stage.
The upshot to me is that NexGen most certainly has a fabulous deep resource with some outstanding grades, still needs an Economic Analysis done to see exactly how much it will cost to develop a mine (and mill) and what kind of Operating Cost will be determined. Investors still don't have an independent economic assessment... just the hype from the promoters... and we just saw how wrong they got it for the RE2... so how wrong are they in their CAPEX and OPEX claims? TBD... Will still do extremely well when U prices move substantially higher, imho.
The message, however, to Fission shareholders is that an ultra-shallow high-grade resource with 75% Indicated from the get go is still vastly superior to what Arrow has to offer... and that analyst David Talbot is the only one to really trust as he has clearly demonstrated his ability to properly analyze the data. That being said, his latest report on Fission is, in my view, the most likely to be accurate in the assessment of both the Resource size (
150-160M lbs) and upside Target pricing. His accurate call for NexGen adds much more credibility to his latest report on Fission, imho, and clearly shows how extremely undervalued Fission is at present.
The 12-month Target set by Eight Capital (formerly Dundee) is now
$2.25 implying upside of
200%. Here is David Talbot's latest report on Fission. Expect another one soon as further Winter drill results out of PLS are released in the coming days. I'm glad Fission didn't release any drill results today to compete with the NexGen news. :-0
Eight Capital - Target Revision Fission Uranium Corp. (FCU-T: C$0.78)
February 27, 2017
BUY
Target: C$2.25, (up from C$2.20)
NAV: C$2.72, (up from C$2.62)
Projected Return: +188% David A. Talbot / (416) 350 -3082
dtalbot@viiicapital.com
Joseph Fars, P.Geo / (416) 350-5090
jfars@viiicapital.com
New Area Identified Early During Winter Drill Program We recommend Fission Uranium as a BUY and increase our target to C$2.25/sh from C$2.20, based on an increase in our in-situ value assumption to US$4/lb from US$3/lb U3O8. An initial ten holes of scintillometer results from an expanded 63 hole winter program were provided today. This is relatively positive news, but not earth shattering…yet. Identification of a new potential area of uranium mineralization at the far western end of the known mineralized trend appears exciting. This might extend the PLS trend by another 25% or 660m to measure 2.63km strike. Further uranium was also intersected at the far eastern R1620E zone; and the best results were likely from infill drilling within R840W.
This is a positive start for winter drilling. We do like the potential of the new western trend, and the 840W infill drilling in the heart of that zone is positive if not expected. The eastern drilling helps provide additional critical mass we believe is necessary below the lake in that area. Uranium stocks were off 8% last week and uranium fell another US$2.50/lb to US$22.50/lb on Friday according to TradeTech. Thus today's news might not necessarily move the stock in the short term unless this new western area starts to immediately show further upside potential. We point out that Fission Uranium has become less of an exploration story and more of a developer anyways; the real driver is a resource update and Pre-Feasibility Study due post-summer drilling. Meanwhile, FCU trades at an EV/lb of US$2.34 based on its 106 MM lbs U3O8 resource; or less given
our mineral inventory estimate of 150 to 160 MM lbs. New area identified in the far west. This is the most intriguing news from today's press release. It appears to be a potential new priority target located 660m west of R840W zone, making this the most westerly uranium found on the property. Drilling hit a fairly shallow (117.5m depth) 1m thick interval with a peak of 3200cps of radioactivity and boron. It is likely too early to call this a zone. The area definitely needs more work and management has made that a priority. We are optimistic however; typically smoke turns into fire along the PLS trend based on past exploration work by various parties. This western target is shallow, occurs on land, is hosted within the right rocks, and demonstrated potential for high uranium grades. This checks the right boxes. Discovery of pounds that matter has been a goal for management since the initial 106 MM lbs U3O8 resource was announced two years ago.
Strong R840W infill results. This is likely most important of today's news from the point of being potentially accretive to resources. Three broad and consistent infill drill results demonstrating a high-grade mineralized core were again from near the center of this 450m long zone. The zone has yet to be included in resources. Results included in the 52.5m of radioactivity host 6.82m of >10,000 cps (-517, L765W); and then two slightly narrower and lower grade intercepts of 36m radioacvitity within a 49.5m interval including 4.03m of >10,000cps (-521, L795W); and 41m radioacvitity over a 49.5m interval including 3.86m of >10,000cps (-515, L765W).
Far eastern 1620E zone extended. Five holes hit, dominantly towards the zone's western end where it remains open back towards the heart of PLS's main R780E zone. Numerous holes appear to thicken R1620E vertically and horizontally between lines 1455E and 1515E. Best results appear to be 21m of continuous radioactivity with up to 25,300 cps (thickness of >10,000cps). Previous assays on L1515E include 3.6% over 26.5m containing 8.56% over 9m.
You can download the full report at the link below:
Analyst Report - Eight Capital - Buy - Target raised to $2.25 - 27 February 2017 Do your own due diligence and invest according to your own unique investment goals, risk tolerance, trading skills, and overall strategy and thesis. It's your money and your decision how best to invest it to meet your own financial goals and greatest after-tax returns.
Cheers and good luck to the patient longs!