VANCOUVER — Fission Uranium (TSXV: FCU) made headlines last year with the J-Zone discovery at its Waterberg uranium joint-venture in Saskatchewan’s Athabasca basin, and the company is showing no signs of slowing down.
The company has tacked on another potentially major uranium find to a list of accomplishments, and could be a prime takeover target for the second time in under a year. According to chairman and CEO Dev Randhawa, Fission’s success is due to its strong exploration model, and a willingness to take a few gambles along the way.
Fission’s fifty-fifty joint venture with Alpha Minerals (TSXV: AMW) at the Patterson Lake South (PLS) project is widely viewed as one of the most promising uranium assets in the hands of junior explorers, but for Fission, PLS came close to not happening at all.
Earlier this year the company was involved in acquisition talks with Lukas Lundin’s Denison Mines (TSX: DML; NYSE-Arca: DNN), and it was only a last-minute drill program at PLS that led Fission to pull its Patterson Lake assets from the deal after terms had been agreed to in principle. Denison would pay US$70 million for a 60% stake in Waterberg, leaving Fission with a soaring stock and a second major discovery at PLS.
“It’s a strange story, because on that Friday I flew in early to meet with Denison and we shook hands on a deal that would have seen us sell them the entire asset base outside of our Peru property, just so we could stay trading,” Randhawa comments over coffee in Vancouver. “I jump on another flight that night to Hong Kong, and when I land I have an email saying: ‘We can’t sell Patterson Lake, we just hit.’ Our stock just took off after that, and in order to look out for the best interests of our shareholders we needed to revise that deal.”
Randhawa attributes Fission’s success to the technical knowledge of chief operating officer and president Ross McElroy, who leads the company’s team of around 14 exploration professionals in the Athabasca basin. It is worth noting that Fission acts as operator in all its joint ventures, and McElroy has been involved in two of four major uranium discoveries — namely McArthur River and Waterbury Lake — in the region over the past 20 years. The company is running a 92% drilling success rate at PLS, and has filed for a patent on its “system and method for aerial surveying or mapping of radioactive deposits.”
Randhawa says that “there are a few main elements I’d like to mention — when you have a shallow discovery [like PLS] it gives us advantages. Firstly, there are boulders in the area, and that allows us to fly our targets. The biggest thing, however, are the radon gas surveys. We in fact use three different technologies to really lock down our drilling: we fly geophysics to identify the conductors; use resistivity to identify alteration; and use radon gas to let you know exactly where to go.”
Radon surveys can be especially useful in winter conditions involving snow-covered soils and frozen lakes. Since PLS is located on the far southwestern reaches of the Athabasca basin, uranium mineralization tends to run under less overburden, while radon gas dissemination is limited due to winter freezing, which helps Fission rule out false anomalies.
“All uranium comes from graphitic conductors, but not all graphitic conductors have uranium, so in order to identify it you have to find the alteration rock, and then the radon gas comes in,” Randhawa explains. “We tried this on the east side [of the Athabasca basin], but it was just too deep. Radon gas is mobile, and it will drift into just about any crack. So you can get radon gas signatures and it’s difficult to know exactly where they are originating. But since we did these surveys in the winter — and the water in the lake is shallow, so it freezes — the gas has few places to go.”
Fission’s discovery at PLS kick-started after initial boulder tests returned up to 40% uranium oxide (U3O8), and though the company has yet to pinpoint the source of such high-grade uranium mineralization, it has run a series of drill programs. Fission has identified three main zones of uranium mineralization to date — R00E, R390E and R780E — and the company is hitting strong radioactivity during its stepout drill program.
R00E, R390E and R780E are along strike of each other over an 850-metre trend. R00E is west of Fission’s uranium zones and located on land. R390E is 390 metres east of R00E and lies within Patterson Lake, at 4 metres depth. Zone R780E is 780 metres east of R00E, and within Patterson Lake at a 6-metre depth.
“When you make a discovery like this you have to go back and rethink a few things. Everyone was focused on the Cigar Lake area, but what we call the Athabasca basin today is not what it was in the past. We’re not revealing too much, but we are flying a lot of areas and keeping an open mind,” Randhawa says.
On July 18 Fission released results from a stepout target located 15 metres west of mineralization at R390E. Hole 13-072 returned “overall stronger, wider and more continuous” results than previous western drill holes, including an 85.5-metre “main zone” containing 19 metres of off-scale radioactivity.
Fission followed up with results from R390E on July 30, which extended the strike length of the zone by 105 metres. With 21.7 metres of off-scale mineralization, R390E’s hole 13-075 represents the largest accumulation of discrete, off-scale mineralized intervals in any drill hole at PLS to date.
Fission is running a US$6.9-million, mid-year exploration initiative at PLS that includes 44 reverse-circulation and diamond drill holes over 11,000 metres, but Randhawa says that he would be surprised if the company has time to complete its entire program before a suitor comes calling with a takeover bid. He knows at least two interested parties, and says it would be hard to turn down an offer with a comparable premium to the Denison bid in the current market.
Shares of Fission have jumped 71%, or 39¢, since it announced its mid-year exploration program on May 21. The company trades an average of 874,000 shares daily and closed at $1 at press time. Fission maintains 150 million shares outstanding for a $150-million market capitalization. The company reported US$13.1 million in working capital to start 2013.
“We’re looking at a couple of ideas in regards to acquisitions. We have companies approach us daily since cash is so tight these days, and the reality is that a lot of people are pretty much broke,” Randhawa says. “We haven’t found anything yet, but that’s one of the reasons we fly a lot of geophysics over a variety of areas. We’re looking at identifying companies we may approach about a takeover. We can fly those areas where a lot of other outfits can’t, and we’re looking to stay in the Athabasca.”
So he basically shook hands on a deal and then refused to follow through ?!
Is that legal over in Canada ?