Dundee Capital says Pitchstone "a good deal" for Fission shareholders

Dundee Capital Markets has issued a note about Fission Energy's (CVE:FIS) $5.8 million all-stock acquisition of industry peer
Pitchstone Exploration (CVE:PXP).

Fission Energy is a Canada-based Uranium exploration and development company with properties in Saskatchewan's Athabasca Basin, Quebec, and the Macusani District in Peru.

Its Waterbury Lake property in the Athabasca Basin, immediately adjacent to Rio Tinto's (NYSE:RIO) (formerly Hathor Exploration's) Roughrider deposit.

Under the terms of the deal, Fission will issue 0.2145 common shares of the company for each common share of Pitchstone.

Based on 45.2 million Pitchstone shares outstanding, Fission will issue roughly 9.7 million common shares to complete the deal, representing around 8.5 percent of Fission.

"We view this take-over as a potential marriage between two companies with very good synergies in the Athabasca Basin," Dundee Capital Markets said in a note.

Pitchstone is a Uranium explorer focused in three districts in Canada and Namibia. The company's property portfolio features 13 projects in the eastern Athabasca Basin of Saskatchewan, five of which are 100 percent owned.

In addition, it has two joint venture projects in Namibia and several joint venture projects in the Hornby Bay Basin, Nunavut.
Pitchstone's partner in Namibia is Rio Tinto.

"We continue to recommend Fission Energy and suggest that this land grab while prices are cheap is a good deal for Fission shareholders. The added relationship with Rio Tinto is also viewed as quite positive," the Dundee Capital note said.

"We are changing our Pitchstone Uranium recommendation from 'buy' to 'tender' and believe that Fission's more aggressive style of exploration is better suited for the hard to find high grade Athabasca style Uranium deposits."

Dundee Capitals analysts also joined the dots between Fission, Rio and Pitchstone.

"Perhaps this relationship will manifest itself in the Athabasca in coming months - we submit that we still believe Fission is one of the top take-over targets in the basin."

The analysts cautioned that the deal might take Fission's focus away from its J-Zone discovery.

"...carrying out aggressive exploration on some of the Pitchstone projects, namely the modestly deep Gumboot targets, could take a chunk out of the Fission coffers, depending on how aggressive a drill program it will carry out this year."