Analyst Actions: Denison Mines Corp 2014 Estimate, Target Raised at Credit Suisse; But Still Underperform


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Credit Suisse says: "Goin' Fission; Raising 2014 Estimate and Target Price to C$1.50 (from C$1.40)"

Event: "DML announced that it has signed a binding letter of intent (LOI) with Fission Energy Corp. (FIS.TO, not rated) whereby DML will acquire certain FIS assets for 0.355 DML shares (total transaction value $70Mln). FIS's key asset is a 60% interest in the Waterbury Lake project. The transaction includes a NewCo to be spun out, which includes FIS's 50% interest in Paterson Lake South, $18Mln in cash, plus other exploration assets."

Impact: "Consolidation continues in the eastern Athabasca Basin. Terms of the LOI values the DML assets to be acquired at $0.52 per FIS share. FIS's key asset (Waterbury Lake) is located in the eastern Athabasca Basin (60% FIS; 40% KEPCO) which has a current resource of ~13Mln lbs U3O8 (incl. Inferred) and is located in close proximity to Rio Tinto's Roughrider deposit and DML's Midwest project (25.17%-owned) and McLean Lake mill (22.5%-owned). On a resource/lb (in-situ) basis, we estimate the transaction values the FIS assets being acquired by DML at $1.90/lb (incl. Inferred) which we view as largely in-line with precedent transactions for early-stage exploration assets. Following closing of the transaction, FIS shareholders will own approximately 11% of DML."

Catalysts: "Transaction expected to close April 2013. FIS's BoD has approved and recommended shareholders vote in favor of the transaction. Completion is conditional on approval of the shareholders of FIS at a special shareholders meeting, receipt of all necessary regulatory approvals and satisfaction of other customary deal conditions."

Valuation: "Deal accretive to NAV. Our TP of $1.50 (from C$1.40) is based on 1x our revised cash-adjusted NAVPS of C$1.48 (from C$1.40, or +5.7%). Our NAVPS now includes in-situ valuation for Waterbury Lake (in-line with our Wheeler River methodology) of $4/lb plus other exploration assets at $2-3/lb. EPS revisions reflect updated assumptions for shares outstanding."

"We are raising our 2014 EPS estimate to C$0.04 (from C$0.05)."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright (C) 2014 All rights reserved. Unauthorized reproduction is strictly prohibited.

This article appears in: Investing Commodities
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