BMO Research Fission Uranium: Reiterating Our Outperform (Speculative) Rating

BMO Research Fission Uranium: Reiterating Our Outperform (Speculative) Rating

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Bottom Line: We have updated our Fission Uranium estimates alongside our revised uranium outlook and after incorporating the company's decision to move to a December year end. We continue to rate Fission Outperform (Speculative) and it remains one of our preferred uranium exploration plays due to its near surface mineralisation, healthy cash balance and proven M&A interest.

Whilst on a P/NPV basis the company is slightly more expensive than a number of its peers, the premium is warranted, in our view. Key Points This note forms part of a broader sector report, which is available here.

The company reported a December 30 cash balance of C$50.2M, with a further C$10.1M in investments. On our forecasts, the company retains sufficient liquidity to continue to fund the next 12-24 months of exploration and technical studies on its already impressive high grade, 108Mlb U3O8 resource in the Athabasca Basin.

Further, the company continues to undertake extensive drilling and we expect to see a revised resource statement by the end of calendar 2017, with good potential for expansion. The move to a December year end was effective December 31, 2016; however, the impact to our estimates is limited given the company is an exploration and development company; thus its earnings estimates are largely immaterial.

Valuation and Recommendation: We ascribe an NPV of C$0.83/share (+7%), including a mine level DCF valuation of C$520M for Patterson Lake South, EV/lb resource upside, and after assumed future equity dilution. We retain our Outperform (Speculative) rating with no target price. The company trades on an attractive EV/lb of resource of US $2.21/lb, well below the peer average of US$2.72/lb. Further, the healthy cash balance, proven M&A interest and near surface mineralisation provides a lower risk option, in our view. Whilst it looks marginally more expensive on a P/NPV basis at 1.05x, versus NexGen and the peer average at 1.0x, we believe the premium is warranted.



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