Fission Uranium is a great speculative bet

High grade deposit in favourable jurisdiction with low costs, a terrific project

Fission Uranium (FCU.TO) is a small-capitalization Canadian uranium mining company with a development stage portfolio of deposits in Canada’s Athabasca basin, home to Canada’s richest uranium finds. The company’s Triple R deposit is the main asset of value. The deposit is high grade, near the surface and reaching a point where there is a path to production in my opinion.

With 729 million shares outstanding trading at about CAD$0.84 per share, Fission has a market capitalization of just of CAD$600 million. I valued the Triple R deposit using data from the recent NI 43-101 feasibility study done by independent consulting firm Tetra Tech, and come up with a value of about US$3.6 billion based on a uranium price of US$75, slightly higher than the spot price of US$72 a pound. Uranium is a small cost for a nuclear reactor and has little price friction so prices can rise very rapidly if markets are tight. As the inane and specious “climate change” narrative that blames CO2 for global warming gathers momentum, more focus is turning to nuclear with new nuclear plants under construction in Canada, United States and abroad. This suggests a longer term price of US$75 a pound is likely conservative.

Expressed as $CAD per Fusion share, the value I estimate comes to over CAD$8.00 per Fusion shares. Here is that analysis.

There is no shortage of risk in small-cap mining firms and Fusion has its share of risk, so I have used a 15% after tax hurdle rate for ongoing returns once in production, and nonetheless conclude that an investment in Fusion is highly speculative but a good choice for a place in a diversified mining portfolio.