NXE - TD Report - Speculative Buy $4.00 price targetNexGen Energy Ltd. (NXE-T) C$2.24 Expecting Material Resource Growth in 2017
Event
We have made some slight revisions to our estimates to reflect the company's most recent balance sheet, increased 2017 exploration expenses along with some positive commentary on the company's most recent drill hole results. Impact: SLIGHTLY POSITIVE
Best holes are not in the maiden resource estimate - Since announcing its maiden resource estimate in March of this year, the company has released assay results from 73,091m of drilling in 2016 on the Arrow deposit. This compares to the 59,796m included in the resource estimate (201.9mmlb at 2.63% U3O8). A number of these drill holes represent the best holes on the property to date.
We expect the resource estimate to increase in size and grade - After compiling the Arrow drill hole results from 2016, we calculate a weighted average grade of 3.03% U3O8. This compares to a calculated weighted average grade of 2.57% U3O8 for the maiden resource estimate. This suggests to us, that not only will the size of the resource increase with the 2016 drilling, but the overall grade of the deposit should also increase.
Therefore, we believe that our estimate for a resource estimate increase of 50-100mmlb U3O8 targeted for release in H1/2017 may prove to be conservative.
Multiple catalysts to look forward to in 2017 - The company is slated to released an updated resource estimate in H1/17, followed by a pre-feasibility study in H2/17. Furthermore, we expect the company to release the remaining assay results from the 2016 summer drill program. The company plans to commence its 35,000m winter drill program in late January 2017.
The company continues to maintain a strong balance sheet (cash of approximately $73mm) which we believe can fund its exploration and development program through 2018. TD Investment Conclusion We are maintaining our SPECULATIVE BUY rating and C$4.00 target price. We continue to view NexGen as one of the top long-term uranium investment plays due to the tier-1 potential of its Rook I property. In our view, 2017 is lining up to be another busy year filled with potential catalysts for the stock.