Fission Uranium has lagged while Cameco has soared

Fission stock is deeply undervalued

Cameco (CCO) has enjoyed a good run doubling in trading price as U3O8 prices have surged with many countries turning to nuclear as a serious option for future power needs and recognizing the reality that so-called “renewables” are costly and unreliable. In Europe, shortages of natural gas and dependence on Russia for both oil & gas has seen the U.K. consider nuclear, Germany expand its reliance on nuclear and in Asia Japan sees more nuclear energy as vital as an alternative to its dependence on imported LNG. The outlook for uranium is stronger today than it has been since the Fukushima disaster.

Most larger institutional investors have holdings in Cameco as the world’s largest player in the space and the bright prospects for uranium are well baked into the CCO share price which commands a premium to net asset value and a multiple that Cameco shareholders enthusiastically welcome, with many sell-side analysts calling for CCO shares to keep rising with the industry tailwinds.

Cameco shares may well continue to rise but patient money can speculate on developments in Canada’s uranium rich Athabasca basin in Saskatchewan and consider two smaller and undervalued uranium miners - Denison Mines (DML) and Fission Uranium (FCU). I will write about Denison separately so this article simply presents a Black-Scholes analysis of the value of the Fission Uranium Triple R deposit which is well along in its route to production (subject to permitting of course). Black Scholes analysis treates the Fission deposit as a “real option” on future uranium prices and assumes production will happen, both risky assumptions. Nonetheless, the analysis demonstrates with some substance that Fission shares are undervalued even if speculative.

Based on an assumption of a US$80 per pounds of U3O8 and the capital and operating economics set out in the Fission NI 43-101 study of its Triple R project, I get a value of over CDN$8.00 a share for Fission shares, eight times their current trading price.

Fission is likely a few years away from production since it has yet to wade through the onerous Impact Assessment Act put in place by the Trudeau Liberals and once permitted, await an estimated US$1.5 billion of mine construction and start up expenses (which are at risk to inflation and cost overruns), but with the prospect of an eight-fold gain on today’s price I see Fission stock as undervalued and a good bet for patient investors with at least a ten year investment horizon.

I see Denison as undervalued as well, but that is another article.