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Fission Uranium (TSX: FCU) President Ross McElroy on Successful Summer Drill Program that Sets Up a Perfect Storm of Forthcoming PFS in an Improving Uranium Market

August 16, 2018

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Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is President, COO, and Chief Geologist for Fission Uranium (TSX: FCU)(OTC: FCUUF), Mr. Ross McElroy. Ross, it's been a bit. How have you been?

Ross McElroy: I'm doing well. Thank you, Gerardo. Things are going well. We're busy and lots of reason for optimism, things are good.

Gerardo Del Real: Well, there's got to be a lot of reasons to be optimistic for Fission shareholders. You just announced the completion of your summer field program. You hit, as anticipated, high grade in all nine of the holes, frankly, wide high-grade mineralization, and that's got to bode well. We'll talk about why that's important for the pre-feasibility study coming up and the work that you've done, but I want to start by talking about the uranium sector, just a quick overview because you and I haven't chatted in a month or two, and there's been several material developments that I think all bode well for the fact that I think we're at a bottom, especially for the uranium juniors.

Despite the fact that we're at a 2018-high for the uranium spot price, the juniors haven't moved all that much. Can we talk about how you're feeling about the sector and what you see out there?

Ross McElroy: Sure can. I think we started to get a real sense that the investment community was starting to take a look, I'd say that started back in April when we did a road show over in London, attended a conference over there, and it was pretty apparent how the general funds are starting to look at uranium again. It's one of the metals that hasn't moved from the rest of the other metal sectors had moved. And uranium was still at fairly low prices, but there have been some significant developments even since that time that I think has really caught people's attention.

Maybe the most important would have been Cameco's announcement. What was that, maybe a month ago when they suspended indefinitely production out of the McArthur River mine in the Athabasca Basin in Saskatchewan. I mean, this is one of the best uranium deposits in the world. It's high grade, it's large, it's a low-cost producer.

It was Cameco's response to the low uranium prices, then they just refused to sell any more of their high-quality assets at rock bottom prices. So really that was an interesting development, and it is forcing Cameco to go into the market and buy uranium because what this does, with the shutdown of McArthur, is it really takes away the excess and available inventory on an annual basis.

McArthur provides almost 18 million pounds a year, I think what's going to happen is the utilities will start to scramble sooner rather than later and start paying higher prices. That's in play. We say earlier in the year what the Kazakhs announcing further production cuts up to 20%. What I see, to keep it very simple, is that the lowest cost producers are making their significant production cuts. They're forcing the price of uranium to go up.

We know the utilities need uranium. The reactors are being built at a record pace worldwide, so the need is out there. They just have been able to, in the last four or five years in particular, been able to buy very cheap uranium, but I think that that situation's no longer the case, and so that's why I think that there's a certain amount of buzz in the sector.

Gerardo Del Real: I'm on record as saying that when the lowest cost, highest margin, highest grade producers in the world tell you that they're going to work to get the price higher and are willing to commit to further cuts in order to advance that, you should believe them.

Ross McElroy: Yeah, absolutely. Cameco's committed to that. It's unfortunate for the people that work in the sector that they're operating mines because they have to lay a number of people off.

Gerardo Del Real: Absolutely.

Ross McElroy: There's people in the office at the corporate level laid off. I mean, these are painful events, but they're also a catalyst for a turnaround in this sector, and I think it will bode well for all of us in the long run to have the significant production cuts. It will force the price of uranium up, and as we know, our share price in Fission and every other publicly traded company out there, it's really tied into the price of the commodity.

Gerardo Del Real: Well put, well put. Well, exciting times for Fission. You just completed the summer program and a large focus, of course, was to get all the fieldwork complete for the highly anticipated PFS, which is now, if I understand it correctly, the work is done. All nine of the resource holes intersected the high-grade domain.

I mentioned off top that you, as expected, intersected high-grade wide mineralization. But in some cases you had greater than expected results. I think you made a really good point of that in the release. Can we talk about those results and what we can look forward to in regards to the PFS that I know everybody's anticipating?

Ross McElroy: Yeah. Just a little bit of background and context to that, in a pre-feasibility study, the resource that you can use has to be the classification that's indicated and higher. If you have an inferred resource, the part of your deposit that's inferred cannot be used in the pre-feasibility study. It's of interest, but it can't be used to develop the economics.

We have our high-grade domain, this is the section of the deposit that averages around 20% U308. It's a significant portion of the deposit. There were certain parts of that high-grade domain in the 780 zone that were still classified as inferred, and what that means is we just need more drill hole density in particular areas.

We expected to hit mineralization. We expected the high-grade zone, but we just needed some tighter drilling in a few key areas, and that's what these nine holes were meant to do. I think we'll have the entire high grade domain now in the indicated category. A surprising welcome event for us was to see that not only were the results what we expected, that basically tells us that our modeling of the deposit is bang on, that we understand how we've modeled the grades and the mineralization, but to see it actually exceed in a few cases where we're getting wider than expected zones, I think bodes very well.

Obviously, the more uranium you can put into the resource, the better the overall pre-feasibility study will look from an economic perspective. That was the final part of the pre-feasibility fieldwork was to finish upgrading that key portion of the deposit to indicated. I think we've achieved it. I mean, we obviously have to wait for the assays to see what the results are and do the block modeling that's needed to get the resource estimate out. But I think that we're confident in saying that I think we've achieved our objectives on that program.

We've already wrapped up the other parts of the work, which is the geotechnical work for building around the pit wall, the dike perimeter wall for an open pit. That's all been done. We completed that last winter. We did a bit more geotechnical work in the areas where we'll plan for a tailing management facility and other infrastructure on the project. All those objectives were completed and the results look pretty good. I think we can go forward now and complete the pre-feasibility study. We expect, Gerardo, that we'll have that done before the end of this year. We're targeting Q4 in 2018 to be able to give an update on what the PFS results are.

Gerardo Del Real: Well, if the trend continues, you may be releasing that PFS in the middle or at the beginning of a raging bull uranium market. I think we're set up beautifully for it, and I can't wait to take a peek at those economics once that's published, Ross. Is there anything else that you'd like to add?

Ross McElroy: Well, I think that's exactly right. We've often thought for a while that this project, the timelines on it, what we're achieving at the project level is sort of a perfect storm. We think that we will also hit the uranium market at a much better time. We'll be able to provide these positive stories as the price continues to move up.

I will note too that the price of the spot price uranium is now over $26 a pound. If you follow the daily prices, you see a tick upwards almost most days. It's maybe not a lot, but it's going up by $0.05, $0.10, $0.15, sometimes you get a jump at $0.20. But it is in an upward path due to the reasons that we cited earlier in this interview. The production cuts I think are what's causing the price to go up and will continue to do so.

We're expecting much higher than $26 price spot uranium. I think really where people are looking at is in the $40s and $50s before you're able to get any real meaningful new production online. How quickly that comes to pass, we'll have to wait and see, but it's certainly setting itself up for a bull uranium market, as you've mentioned.

Gerardo Del Real: Well, with the summer doldrums, it's an excellent time to position, initiate positions, add to positions in the better names. And frankly, in the uranium space, the one thing bear markets do very well is they eliminate the bulk of the garbage that's in the sector, and I think it's not a coincidence that the companies standing are going to perform incredible and have done so in the past. I think we're in for a fun ride.

Ross McElroy: I couldn't agree with you more.

Gerardo Del Real: It's great catching up, Ross. Look forward to having you back on soon.

Ross McElroy: And I look forward to being able to provide further updates. Stay tuned. We'll have the results, the assay results, from the drilling probably we'll say in September, maybe as late as October depending on the speed that the samples can get through the lab. That'll be news flow as we move into the fall, and then, of course, we'll be putting out more plans on what our future programs are all about. And as we mentioned earlier, the key will be results from the pre-feasibility study expected later this year.

Gerardo Del Real: Fantastic. Look forward to it, Ross. Thank you.

Ross McElroy: Thank you very much.

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