TORONTO (miningweekly.com) – Versant Partners on Friday cut its target price by 21% for Canadian uranium hopeful Fission Energy after a recent $10-million private placement diluted the share’s value, with analyst Rob Chang still predicting Rio Tinto will buy the company.

In a note to clients, he said Hathor Exploration, which the mining giant bought last year after a bidding fight with Cameco, is not “large enough to be meaningful to Rio’s bottom line”, and that Fission will likely fall prey too.

The TSX-V-listed company owns the Waterbury Lake deposit located immediately west of Hathor’s flagship Roughrider property in Northern Saskatchewan. The two deposits are so close that the companies have argued over property boundaries in the past.

“With Hathor Exploration being acquired by Rio Tinto, it makes sense for the mining giant to acquire Fission as well since its mineralization is shallower,” Chang wrote.

However, after the November capital raising, he cut his price target for Fission to $1.25 a share from the previous $1.60 level, using an expected market capitalisation per pound takeout valuation of $11/lb for Waterbury Lake, and a peer-average multiple for the company’s Dieter Lake property in Quebec.

The stock was trading 1.4% lower at C$0.72 by late Friday afternoon, implying upside of 73% to its current price, using Chang’s target.

Rio Tinto ended up paying C$4.70 a share for Hathor, valuing the company at $654-million.

As at December 22, the Anglo-Australian mining giant owned 87.26% of Hathor’s stock, and it extended its offer to January 6 to allow more shareholders to tender.

The uranium spot price reached $52/lb on January 2, according to US firm Ux Consulting. It has traded in a range between $49/lb and $58/lb since the Fukushima disaster derailed prices in March last year.
 

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.