After the group of 10 assays released on May 29, a few new analyst updates came out for Fission Uranium ($FCU:CA) ($FCUUF).
The assays were for 10 holes, all of which hit uranium mineralization. Six of them had intervals at or higher than 1.49%, a few had intervals higher than 10%. These are great holes.
Here are the comments from Clarus Securities:
We maintain our SPECULATIVE BUY recommendation and $2.30 per share target price.
High Value Rock – holes 160, 171 & 156 all generated high grade, near-surface intervals from roughly 69m to 122m. Despite depressed uranium prices (US$28/lb. spot and US$45/lb. contract) FCU continues to produce high grade, near-surface intervals that would likely be economic in any environment. Using spot prices, 14.74% U3O8 ore has a rock value of roughly US$9,000/t while contract pricing would be closer to US$14,600/t. This value is comparable to mining 11.7oz./t (364g/t) open pit gold.
Clarus is assuming 75 million pounds of uranium. It's my opinion there's twice as much.
Here's what Dundee Capital had to say:
We continue to recommend Fission Uranium as a BUY and C$2.10 target.
Today's results provide a relatively large bump to our mineral inventory. Most investors view grade and (true) thicknesses as an indicator of a good exploration press release. Today's was good in that respect. But what makes it even better is the location of these drill holes in relation to those already provided. Most of these holes were designed to expand width and fill gaps in the deposit. A couple were the first holes drilled on those sections, and hole PLS-160 was far enough away from its neighbours that we provide for a full 15m x 15m block surrounding that hole in our polygonal mineral inventory. That means no infringement by nearby holes and our block provides maximum volume. Thus we see potential for adding between 3 and 6 MM lbs (between 5-10% of the deposit) today alone, depending on true thickness of the intercepts.
Still our favored exploration stock. FCU has been under pressure like the rest of the sector. However, it is outperforming its peers and all but one of the producers – down only 8% this month, 15% over the past three. We believe this is a testament to several factors: 1) PLS is a high grade world class project; 2) its in the Athabasca Basin; 3) its shallow and could potentially be mined with relatively low Capex relative to other Athabasca projects; and 4) it is still early stage and should continue to grow. That said, we believe its share price does not reflect neither the precedent $10/lb Athabasca take-out valuation nor its upside potential. FCU trades at an implied EV/lb of $5.35, using our 62 MM lb mineral inventory estimate. We maintain our C$2.10 target on the stock based on our estimated mineral inventory, potential upside, and NPV of a hypothetical PLS operation.
You can see hole 160, along with the two other best holes from this assay release (156 and 171) in the radon-in-water map below:
June 2014 Fission PLS Radon Map
And this is Cantor Fitzgerald's take (highlights mine):
Bottom line: Positive – This particular set of assays infilled several of the previously identified zones that have since been amalgamated into the R780E zone by Fission. As we still model PLS based on the smaller, discrete zones, today’s assay results went a long way in proving continuity of the new R780E zone and added significant size to our estimated resource. We currently estimate PLS to contain 74M lbs. of U3O8 and using $10/lb. (which is below historical takeout metrics of $10.98/lb.), the company would be valued at $1.92/share, or 61% above yesterday’s closing price.
As a result of today’s news, our unconstrained resource estimate increases to 119.0M lbs. U3O8 at an average grade of 0.63% (was 96.7M lbs. U3O8 at an average grade of 0.75%) while our more conservative constrained estimate improves to 73.8M lbs. U3O8 at an average grade of 0.74% (was 63.6M lbs. At 0.68%).
We continue to estimate that Patterson Lake South will contain at least 100M lbs. U3O8 when all is said and done. Using a $10/lb. valuation (note Rio Tinto’s acquisition of Hathor was $10.98/lb.) we believe FCU should trade closer to $1.92/share (+61%) based on our constrained resource estimate of 74M lbs. and will ultimately trade north of $2.60/share (+119%) once it provides a 43-101 compliant estimate of at least 100M lbs. (notwithstanding dilution from possible additional equity financings).
The stock went up as much as 15% in the week after this news came out, even as the rest of the sector continued to struggle in the face of suppressed uranium prices. They were the 40th assays from the winter program to be released, with 52 still pending. And the drill should start turning soon for the summer program.
Fission's uptrend is still intact:
Fission Uptrend Chart
Three more assays from winter holes were released on Monday, June 16th…
These were from holes PLS14-161, 164, and 166.
All hit wide intervals of uranium starting at shallow depths. The best hole – PLS14-164 – returned several meters of 21.2% uranium starting just 85 meters below the surface. Hole 161 hit intervals as high as 18.1%.
The world-classness continues.
This deposit is still growing, and half the assays from the winter program are still-to-be released.
President, COO, and Chief Geologist Ross McElroy commented:
"Some very solid results from this latest batch of assays and more high-grade growth at the prolific and shallow R780E zone. Hole PLS14-164 is particularly impressive in both the size and strength of its high-grade intervals. We continue to be highly encouraged by the results of the winter program at PLS as we enter the final stages of planning and preparation for our summer drill program."
The company also released a new corporate presentation that shows how much recent progress has been made at Patterson Lake South, the plan for the summer drill program, and future milestones to expect, including all winter assays being released by July and 43-101 maiden resource estimate in December.
You can see that presentation here.
Then, on July 2, Fission released assays for nine more holes.
All holes came from zone R780E. All intersected wide intervals of uranium mineralization. Six of them returned substantial high-grade assays, the best of which was hole PLS14-186 with 23.4% uranium over seven meters and 12.35% uranium over 13.5 meters.
The assays continue to be world class.
President, COO, and Chief Geologist Ross McElroy noted that he “continues to see the hallmarks of both width and strength at shallow depth.”
You can see all nine of those holes on the map here:
Fission Zone Map
There are now assays out for 53 holes with 39 pending.
As a result of the news, Cantor Fitzgerald increased its estimated resource size yet again.
Their conservative estimate is 80 million pounds. Their unconstrained resource estimate is 159 million pounds.
Here's what Cantor analyst Rob Chang had to say after the news came out (emphasis mine):
We continue to estimate that Patterson Lake South will contain at least 100M lbs. U3O8 when all is said and done. Using a $10/lb. valuation (note Rio Tinto’s acquisition of Hathor was $10.98/lb.) we believe FCU should trade closer to $2.08/share (+81%) based on our constrained resource estimate of 80M lbs. and will ultimately trade north of $2.60/share (+126%) once it provides a 43-101 compliant estimate of at least 100M lbs. (notwithstanding dilution from possible additional equity financings).
That 43-101 resource estimate is due out by the end of the year.
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