Q&A: With Ross McElroy

October 17, 2018

Ross, before we start asking you company specific questions, could you please educate readers who may be unfamiliar with the different resource and reserve categories as it pertains to National Instrument 43-101?

I sure can. National Instrument 43-101 “NI 43-101” is a national instrument for the Standards of Disclosure for Mineral Projects within Canada. The Instrument is a codified set of rules and guidelines for reporting and displaying information related to mineral properties owned by, or explored by, companies which report these results on stock exchanges within Canada. The purpose of NI 43-101 is to ensure misleading, erroneous or fraudulent information relating to mineral properties is not published to investors on the stock exchanges overseen by the Canadian regulators. This was created after the Bre-X Minerals Ltd. scandal of 1997 to protect investors from unsubstantiated mineral project disclosures. This was a positive development for the integrity of capital markets especially when it comes to mineral exploration and development plays.

(source: Wikipedia)

As the above flow chart illustrates mineral resources are less certain than that of mineral reserves. Within the mineral resource category, the level of confidence starts with inferred, increases to indicated and finally to measured. Mineral reserves, or ore reserves, are resources known to be economically feasible for extraction. Reserves are categorized as probable or proven with proven being the ultimate level of certainty before mining. Prefeasibility and Feasibility studies requires (as a minimum) that resources are classified as indicated. Mineral resources classified as Inferred can not be used in these studies.

What did the Fission technical team achieve over the past 12 months?

On February 20th, 2018 we announced an updated resource estimate based on drilling during the 2016 and 2017 programs. This resource estimated resulted in an increase of 95% of inferred classified resource and an increase of 8% to the indicated resource estimate. The increase in the resource estimate was due primarily with the addition of 3 new high-grade zones discovered and delineated since the 2015 PEA study.

During the winter and summer 2018 programs, we focused primarily on the resource estimate that will be used in the upcoming PFS study. The resource drill program focused on converting key areas of the R780E zone “high-grade” domain from inferred to indicated classification so that these can be used in the resource model for the PFS. We recently announced the results of the 6 holes drilled on the R780E zone during our summer drill program.

Has your team been focused exclusively on the PFS or have you been exploring for new zones?

Both really. During 2018, approximately 70% of the winter program and 100% of the summer program focused on advancing the PFS. While we are advancing the Triple R deposit to PFS level, the exploration potential on the areas outside of the deposit remain excellent. PLS is an amazing project hosting not only a robust large, shallow high-grade deposit but also an exceptional exploration potential to make further discoveries.

What are the main catalysts for Fission over the next six months?

A lot of this depends on the uranium market. As we continue to advance the core Triple R deposit towards PFS, if we have a stronger uranium market that encourages exploration, we may propose a more aggressive program advancing drill testing within the Patterson Lake Corridor along strike of Triple R deposit and testing our regional targets on parallel trends. This would mean new zones and targets on the property not yet explored, specifically on the west side. If the uranium market remains weak, then we will stay focused on advancing Triple R and conserving cash where we can. Unfortunately, the market has been weak for a long time now, so we need to be cautious. Regardless, over the next six months we plan to complete and release our prefeasibility study.

What is your opinion about the current conditions of the uranium market?

I think that the fundamentals are getting better. The spot price of uranium has increased almost 25% in 2018. We know that uranium is a growth sector. One of our greatest insights comes from having a strategic partnership with CGN, one of the two state owned Chinese utilities. CGN is a uranium developer and miner and builds nuclear reactors to provide clean energy to China. CGN own a 19.9% interest in Fission. The Chinese understand the benefits of clean nuclear energy and leading the global build-out of reactors. While the Chinese growth story is the elephant in the room, there are other substantial growth stories out there. India and several middle east countries such as UAE and Saudi Arabia also understand the benefit of nuclear power and are working towards building up nuclear energy in their power generation mix. Conversely, the price of uranium commodity has been so low that even the low-cost producers have been cutting supply because they can’t mine it at a profit let alone achieve their cost of capital. The two lowest cost producing geographic regions in the world are Kazakhstan and the Athabasca Basin (where we are) and both of those areas have seen a significant reduction in production due to the low-price environment. Curtailing supply is forcing the price of uranium to move up, as producers are forcing the utilities to pay more for their product. Thus, we are currently seeing growth in the number of reactors being constructed, and now finally an increase in the price of the commodity. These increases will help make the mining sector healthier as companies will have more capital and stronger balance sheets. As we are still very much in a low commodity price environment, supply will continue to be curtailed, thus continuing the pressure for the price of uranium to increase.

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