RCKS Talk

16-Apr-2019

Fission Uranium Corp

Fission Moves a Step Ahead with PFS

Impact: Mildly Positive

Fission Uranium Corp has issued a prefeasibility study (PFS) for its Paterson Lake South (PLS) project in Canada which features lowered operating costs and room for further improvement as the company assesses an underground-only option for their mine plan. This PFS suggests that the PLS project has the potential to be one of the larger and lowest operating cost uranium projects in the world and is well positioned for a potential turn in the uranium market.

Highlights:
  • PFS compares positively to 2015 PEA. Results from the PFS compare well to company’s 2015 PEA with a 45% decrease in operating costs to C$9.03/lb U3O8, slightly offsetting the 37% increase in capital costs. The hybrid open pit and underground operation has after-tax NPV of C$693M and we note this study assumes a lower long-term uranium price (US$50$/lb) than the 2015 PEA (US$65$/lb) incorporating the company’s maiden reserve estimate of 90.5Mlb at 1.42% U3O8 as opposed to the PEA whose estimates were based on the larger resource.
  • Initial PEA on underground only option appears to be the path forward. While the PFS considers an underground and open pit scenario, the company is considering an underground only scenario for a post-tax NPV of C$696M. Although it is still early days, this option would yield a 20% lower capital cost for a slight 6% increase in operating costs.
  • Mine plan expected to grow with more drilling. The updated resource estimate includes 103.8 MlbsU3O8 in the indicated category. This resulted in three zones (R1515W, R840W & R1620E) being excluded from the PFS and underground only PEA. This summers drill program is expected to be focused on infilling these areas, to incorporate them in the mine-plan. Additionally, zone R780E remains open at depth and along plunge to the east, including the high-grade core and likely represents the highest potential to extend the mine plan.
Valuation:
The PFS highlights the projects quality supporting its premium valuation. Fission trades at premium to peers at US$1.32/lb U3O8Eq (peers US$0.66/lb U3O8Eq) which in our view is justified and a further premium is likely warranted given the projects low-costs, premium jurisdiction and scale. Upcoming Catalysts include: 1) Summer 2019 Exploration program and 2) Underground only PFS (H2/19).

 

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