Fission Uranium Corp T.FCU

HC Wainwright - BUY - Target $0.60 U.S.

[Uranium]

Fission Uranium Corp.

FCUUF: Price: $0.29; Market Cap (M): $144
Rating: Buy; Price Target: $0.60

Heiko F. Ihle, CFA

Tyler Bisset

Marcus Giannini

Appointment of New VP Project Development to Advance PLS Project; Closing of Bought Deal; Reiterate Buy; PT Higher

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Hiring of uranium industry expert to advance Patterson Lake South (PLS) project. Fission Uranium announced on January 6 the appointment of Mr. Gary Haywood as VP Project Development for the firm. Mr. Haywood has 35 years of experience as a professional mining engineer. We highlight that he was the General Manager of Cameco's (CCJ; not rated) McArthur River mine in Saskatchewan, Canada, from 2004 to 2007, which remains the world's largest high-grade uranium deposit. He has also managed his own mining engineering and mine operations management services consulting firm since 2017. Going forward, we anticipate Mr. Haywood’s vast experience in high-grade uranium deposits, spanning project development and production, will aid in the next phases of advancement for Fission's PLS project in Saskatchewan. This is especially important now as PLS enters the feasibility study and environmental assessment phases.
 
Closing of bought deal to provide liquidity for exploration. On December 21, 2020, Fission Uranium announced the closing of a bought deal financing, consisting of about 17.1M flow-through units at a price of C$0.41 per unit. In short, this issuance provided C$7.0M in funds following the full exercise of the over-allotment option by the underwriters. Notably, each flow-through unit consists of one common share of Fission plus one half of one common share purchase warrant. Each warrant has a strike price of C$0.50 and is exercisable within two years. As the shares are flow-through, we expect all proceeds to be used for Canadian-based exploration expenses at the company’s PLS project.
 
We reiterate our Buy rating on Fission Uranium as we raise our PT to $0.60 per share from $0.40 per share. Our higher price target is the result of increasing our long-term uranium price for non-U.S.-sourced uranium to $40/lb from $35/lb, which is more in line with our other uranium companies under coverage. Our valuation remains based on a DCF of operations at PLS, to which we now apply a 10.0% discount rate, and a long-term uranium price estimate of $40/pound (lb), or about C$51.24/lb beginning in FY26. We then add cash and the 32.3Mlbs of Fission's uranium resource at an average value of C$4.50/lb to account for the recent strength in spot pricing. Looking ahead, we believe Fission remains well positioned to continue advancing its Triple R deposit given the recent bought deal financing and appointment of Mr. Haywood. Additionally, we continue to expect management to look into some form of share consolidation followed by a listing on a major U.S. exchange. These steps could ultimately open the company up to a broader range of U.S.-based investors and increase market interest in the firm.
 
Risks. (1) Uranium price risk; (2) financing risk; (3) political risk; and (4) operating and technical risk.

Heiko F. Ihle, CFA
212-356-0510
[e-mail]