Fission Uranium (TSX: FCU; US-OTC: FCUUF) is currently in the midst of a $6.4 million summer work program at its near-surface Patterson Lake South (PLS) uranium project in northwestern Saskatchewan. It aims to complete the remaining resource and geotechnical drilling to field a pre-feasibility study (PFS) in 2018’s fourth quarter.
PLS contains the Triple R deposit: five mineralized bodies across a 3.2 km mineralized trend on the southwestern end of Saskatchewan’s Athabasca Basin — in a location that defies the once conventional wisdom on where to find uranium in the area.
Until Fission discovered PLS, most believed uranium deposits resided on the eastern end of the basin, that all the near-surface deposits had been found and explorers needed to look deeper. It makes sense: all of Canada’s current uranium production comes from the eastern side of the basin.
Fission proved them wrong.
It did so partially thanks to an airborne geophysical survey it ran in 2009 using now-proprietary technology developed by Fission that detected a radioactive anomaly just south of PLS.
“You need geophysics to paint the picture of the rocks below because there’s really no outcrop,” Fission president and chief operating officer Ross McElroy says during a site visit to PLS.
Follow up work on a uranium-bearing boulder field led Fission north to the shore of Patterson Lake. It drilled the discovery hole, announced on Nov. 5, 2012, in what is now called the R00E zone.
Since then, the project has grown considerably. Its now 17 mineral claims cover 310 sq. km. From west to east, the five separate mineralized zones that make up the Triple R deposit are: R1515W, R840W, R00E, R780E and R1620E.
R1515W covers 90 metres in strike length. Mineralization remains open in several directions.
R840W is located 515 metres to the east along strike of R1515W and has a strike length of 430 metres.
R00E is located 485 metres to the east along strike of R840W and is drill defined to 115 metres in strike length.
The R780E zone and R1620E zones make up the eastern region of the Triple R deposit. Both zones are located beneath Patterson Lake where water depth is generally less than six metres and overburden thickness is generally about 50 metres.
R780E is the biggest zone. It’s located 225 metres east of R00E and has a strike length of 945 metres. R1620E is located 210 metres along strike to the east of R780E, and is drill defined to 185 metres in strike length.
“The grades overall in each of the zones are remarkably similar,” McElroy says. “I think this area is beginning to look every bit as good as the east. I think it’s where the future of mining uranium in Saskatchewan is going to be.”
As of Feb. 20, 2018, PLS contains 2.18 million indicated tonnes grading 1.82% uranium for 87.76 million lb. uranium, including 119,000 tonnes grading 18.93% uranium for 48.24 million lb. uranium at the R780E deposit.
The project also contains 1.33 million inferred tonnes grading 1.8% uranium for 52.85 million lb. uranium, including 32,000 inferred tonnes at 20.85% uranium for 14.71 million lb. uranium at R780E.
“The deeper these things are the more technically challenging,” McElroy says. “That’s one of the things that sets us apart. There’s no other large high-grade uranium deposit near surface in the basin.”
Fission CEO Dev Randhawa adds, “Being shallow, there are lots of buyers for us. Whereas, if you’re underground, you have to ask yourself who has the skill set to take it out of the ground. That’s very limiting. But a trucking operation is pretty straightforward.”
As of a 2016 preliminary economic assessment (PEA) the project has a $1.02 billion after-tax net present value at a 10% discount rate and a 34.2% after-tax internal rate of return, assuming a US$65 per lb. U3O8 long-term price. It could produce 100.8 million lb. uranium: 13 million lb. uranium per year for the first six years followed by 3 million lb. uranium per year for eight years. It would require a $1.1 billion initial capital expenditure.
The company is currently assessing how to build the dyke in Patterson Lake that would allow open-pit mining. In 2015’s PEA, the dyke was the single most expensive part of the initial capital expenditure.
It will drill 14 holes this year for a total 3,425 metres. Of that, it will drill nine holes for 2,925 metres in the R780E zone to upgrade the remaining resources from the inferred to the indicated category for its forthcoming PFS. It will drill the last 500 metres over five holes to test overburden for a proposed tailings management area.
The company currently has a barge set up on Patterson Lake above R780E and has already drilled three of the planned nine holes. It drilled six infill holes in the R780E zone as part of last winter’s work program that will also go into the updated resource estimate. It says all six infill holes hit wide, high-grade mineralization, including 119 metres of composite mineralization over a 177-metre interval from 59.5 metres downhole with 11.65 composite metres grading higher than 10,000 counts per second.
To finish its PFS, Fission will also continue to monitor hydrogeological holes for long-term ground-water analysis, complete additional metallurgy and keep collecting and analyzing data for the baseline environmental study.
“In order to hand in your environmental report, they say, ‘Have you done control studies?’, and we started ours right away,” Randhawa says. “So because we made our discovery two years ahead of NexGen, for example. We’re two years ahead of them in permitting. That’s just math. There might be a year where it looks like its one year, but it’s always two. As long as you start your permitting right away, you keep that advantage.”
NexGen Energy’s (TSX: NXE; NYSE: NXE) Rook I uranium project is also located on the southwestern part of the Athabasca Basin. It includes the company’s Arrow deposit. At a US$50 per lb. uranium price, it has a $3.49 billion after-tax net present value at an 8% discount rate and a 56.7% after-tax internal rate of return, as of a 2017 PEA.
According to the World Nuclear Association (WNA), there are 452 current uranium reactors operable globally, with at least 56 more under construction and 153 planned. Of the current reactors, the United States has 35. China has 179.
China General Nuclear Power Group owns 19.9% of Fission. It has four operating nuclear plants in China, five under construction and two more planned. It has an offtake agreement with Fission that includes 20% of annual uranium production from PLS.
“The Chinese always bought us with the goals of being in production four to five years from now, seven years from now,” Randhawa says. “They’ve never put pressure on us to have production ready — they just want their hands on what they think is the best uranium asset in the world.”
The WNA says global uranium production peaked in 2016 at 162 million lb. uranium. Nuclear energy consulting company UxC’s 2018 uranium outlook projects 2018 uranium production will be less than 135 million lb. uranium, while reactor demand will hit 192 million lb. uranium.
But more uranium came off the market in early 2018, when Cameco (TSX: CCO; NYSE: CCJ) temporarily shut down its McArthur River and Key Lake uranium mines, located on the eastern side of the Athabasca Basin. The two sites have collectively produced 535 million lb. uranium since 1999 and 1983.
The company said it expected to resume production within a year. However, in July 2018, Cameco indefinitely suspended production at the mines, laying off more than 550 workers.
“Them closing is a sign of how ridiculously low uranium prices are,” Randhawa says.
The price of uranium has fallen steadily since the Fukushima tragedy. Before, it sold for more than US$70 per pound; now it sells for around US$25 per pound — and US$23 per lb. for most of 2018.
That said, Randhawa assures that PLS doesn’t count on low uranium prices.
“We think that our life is really determined by the permitting process; what people think of us until then is really the uranium price, and hopefully they think we’re a great value for them,” he says.
“A lot of people jump in to what’s hot, versus what’s going to be hot, but the first jump is always the biggest, and that’s where the easy money is made. So some people will say, ‘What’s out of favour?’ Uranium. And we know we need it because the demand is higher than the supply.”
Fission aims to follow up its pre-feasibility study with a feasibility study. According to McElroy, that could be done by early 2020. From there it will submit its environmental work.
“That’s when the clock starts ticking, and it’s a minimum 24 month of review for community input and other stakeholder input,” McElroy says.
Shares of Fission are trading at 66¢ with a 52-week range of 55¢ to 89¢. The company has a $330 million market capitalization. At the end of May it had more than $30 million in cash and zero debt.
“We have an opportunity to take in more money and not give up anything,” Randhawa says. “There’s only so much debt an exploration company can take in.”
Source: The Northern Miner