RE:RE:Ramblings Hey Greeday, in case you missed this from eight capital. JMO
***TOP PICK*** NXE CN - No surprise to my usual readers, I am tremendously bullish on NexGen, in both the short and long term. At risk of sounding hyperbolic, this is the most exciting
development asset in the world. Period. Arrow boasts economics that catapult's NXE into a top-10 mining company from an earnings perspective, from a single asset. Think about that. It's large,
low cost and low capex. The project is the largest development-stage uranium deposit in the world, with a 1-year payback on the $1.3bn capex at $50/lb uranium. For context, when in production,
they can produce 30mm lbs of u308 a year, or ~20-25% of global annual supply. Saudi Arabia produces ~10% of annual oil supply. It's no secret America needs to quit Russian enriched uranium, 50
getting assets like this online, in a friendly place like Saskatchewan, is HUGELY important from a national security perspective and for building that domestic supply chain. At $50/lb U308, Arrow will
generate annual after-tax net cash flow of $1.1 Bn. At $60/lb, it's $1.25 Bn. And at the incentive price of new production closer to >$100/lb, Arrow would be spitting out $3.39 Bn of annual ebitda.
The economics at NXE are freaky. But I want to provide some context. They will produce twice as many lbs as Cameco, at 1/5th of the cost. They don't need CCO to buy them, because it makes
sense for so many people too. Maybe it's Shell or CNQ or Glencore. And that should be scary for CCO... because they need Arrow... why? Well Arrow is capable of producing more pounds than
Cameco's whole portfolio! And CO's economic breakeven is multiples of NXE's.
CCO's cash costs are US$36/lb or C$48 CAD cash costs. Add sustaining costs of $10/lb and $8/lb of care and maintenance and you're looking at $65/lb... on the Cameco's earnings call, management
said the incentive price for new production is "US$90/lb... "People talked about $45 or $50, or maybe where it made sense. But it's not easy to restart things, it's not easy to put greenfield into
production. If the last marginal pound from a cost curve basis, prior to a bifurcated market was somewhere in the mid 70's. We wouldn't quarrel with those who have said that the price probably
needs to $20 a pound higher than that". NXE's costs are ~$15/lb (I'm rounding up for inflationary pressures from ~$12/lb).
If Uranium goes to $100/lb and production simply can't respond, what happens to the equity? Plug $100/lb spot into our NAV and NXE is C$13.37/sh, almost a triple from here. At $125/lb, it's
almost $17/sh. If you go with a more conservative $75/lb you get a $6bn NPV and $2bn in after tax cash flow….. annually. The draft EIS approval is the big catalyst everyone is waiting. Given the work
Leigh and Co. have done on community engagement, environmental efforts and the like, we think the market is discounting the likelihood of this happening incorrectly (far too low). Bottom Line:
Arrow alone could be doing $3-5bn in EBITDA a year if prices go where we think. I am max conviction this is a 4-5x over the next few years.