Fission’s uranium price – by Kip Keen ( – September 4, 2015)

There is a big gap between the company’s assumptions and reality.

HALIFAX – First let me say Canadian-junior Fission Uranium has its hands on a delightful discovery with the Triple R deposit. It’s already pretty big, high grade, and set to grow.

It and predecessor companies made the find a few years back in the Athabasca Basin, where the cream of the world’s uranium resides – at least in terms of grade. They recently calculated a 79.6 million pound uranium resource, indicated, at 1.58% U3O8. That’s quite sizeable and high grade by the industry’s standards.

Fission has released an early stage economic analysis (preliminary economic assessment or PEA in Canadian parlance) that puts the price tag at $1.1 billion to get it into production, with a 14-year mine life. It also anticipates pretty low operating costs per tonne – in the mid-teens per pound uranium.

But here’s my beef on the PEA and I’m not alone in having it. Fission (and RPA as the consultant) use $65/lb uranium as the base case in the PEA, giving it a catchy 35% IRR, post-tax. Yet current uranium prices are a lot lower in spot and contract markets and have been so for years.

Indeed, the resource itself is built around a $50/lb price. And consider what miners are getting in the market. Cameco’s average realized price for uranium over the past four years (to year end 2014) has been $48/lb, trading within a tight $47-$49/lb range.

That pricing reflects long-term contracts (for so much of production) in a world where the spot market has traded far lower in recent months, around the mid-$30s/lb. Uranium prices were crushed by the Fukushima-Daichi debacle and haven’t recovered much since.

Put another way, imagine a junior came out with a PEA today on a big gold project and used a gold price of $1,500/oz. That’s the equivalent of what Fission did with $65/lb uranium scenario.

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