Raymond James on Fission Uranium
Raymond James Ltd.
Canadian Equity Research - Jul-2-13
Patterson Lake South - Nothing Else Like it
David Sadowski
___________________________________
In just eight short months, Patterson Lake South (PLS) has evolved from an 'interesting prospect' to one of the most exciting uranium projects in the world. Although it is still early days, we believe PLS could become the centerpiece of a world class, long-lived production center in the western Athabasca Basin on its rare combination of open-pittable depths, high grades, and size potential. PLS is jointly-owned by Alpha Minerals Inc. and Fission Uranium Corp. and with this report, we are launching research coverage on both companies.
* Serious Grades and Size Potential. An impressive feat with only one field season completed since discovery. Given the intensity and extent of alteration, structure, and mineralization; a drilling 'hit rate' over 80%; numerous compelling geophysical targets; and world class analogies on the east side of the Basin, we view exploration upside as excellent.
* Rare Open-Pittable Depths. The majority of pounds are within 100 m of surface - likely well above the depth threshold for economic open pits. The scarcity of such a shallow project cannot be overstated; with the lowest-hanging fruit already plucked, PLS is arguably the only high-grade (>1%), open-pittable uranium asset left unmined in the world. Further, uranium is hosted in clean, competent, water-resisting basement rocks, implying easier mining, processing, and waste management.
* Top Jurisdiction. We view the Athabasca Basin as the world's premier jurisdiction for uranium mining, with supportive policies, geopolitical stability, an experienced workforce and infrastructure - three mills are operating and 2012 production was 23.4 Mlbs (15% of world). While PLS is likely to need a new mill given its west Basin location, we believe requisite capex could be justified as regional resource pounds quickly approach critical mass (i.e., augmented by Shea Creek, Centennial).
* Potential Suitors and Valuation. The consolidation flurry continues, with six large deals in the last 12 months further reducing the availability of 'good' pounds, and in light of PLS' quality and scarcity, it is very likely that the majors - e.g., Areva, Cameco, nuclear utilities in Asia - are watching the project closely.
* Potential Catalysts. We expect continued steady news flow from PLS over the remainder of the year. Key milestones include start-up of the ~C$7 mln summer drill program in early-July, initial scintillometer results by mid-July (and continuing throughout the program), with initial assays by mid/late-August. We expect a maiden resource estimate in mid-2014.
We are initiating coverage on the two companies that share ownership of the PLS project:
Alpha Minerals Inc. (AMW-TSXV
Fission Uranium Corp. (FCU-TSXV)
|
