Nexgen Energy Ltd T.NXE

Dundee Capital Markets comments on NexGen Energy Limited

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According to Dundee Capital Markets:

https://is.gd/S7nkMp

NexGen Energy Ltd.

(NXE-V: C$0.64), intraday

September 22, 2015

BUY, Venture Risk

Dundee target: N/A

Massive to Sub-massive Core Being Recognized; A4 Shear Discovered

We continue to recommend NexGen Energy with a BUY and No Target Price. NexGen is starting to take this project to the next level. Additional scintillometer results from Arrow Zone at Rook 1, SK, were reported this morning, including hole AR-15-58c1, which may be considered one of the top three holes ever drilled at Arrow (assays pending). A high grade subzone core within the A2 Shear that hosts massive to semi-massive pitchblende mineralization is now being recognized; and a fourth mineralized shear (A4) was discovered. Both line items are positive and should better help 1) define the Arrow deposit, and 2) target additional high grade mineralization. We suspect that the high grade core at Arrow could carry much, if not most, of the high grade U3O8 mineralization which is to be defined in an upcoming initial resource estimate in 2016.High grade results at Arrow continue to be impressive, and should help drive NXE higher - it remains our top uranium exploration pick. We suspect the pressure placed on all Athabasca exploration stocks over the past week (collectively down over 8%) is temporary, perhaps in response to another China-driven, global mining stock sell-off. Saskatchewan ranks second in global U3O8 production, and is host to high grade deposits that are two orders of magnitude richer than anywhere else.

High grade subzone. We see massive to semi-massive pitchblende mineralization regularly over a 113m strike within the core area on the A2 Shear, within Arrow's Eagle-Point style basement mineralization. Arrow occurs as a series of vertically stacked and parallel or en echelon zones, but the core of this zone holds together very well, similar to the high grade cores found within other basement deposits such as Roughrider or PLS. Now called a "high grade subzone", it has been identified in at least five holes, including newly drilled -58c1. This will be an important area to focus on with closer drill spacing, to determine its full extent and to obtain higher confidence and more representative results.

Fourth shear identified - holds high potential. The addition of the A4 Shear is very positive, but not surprising. We are likely seeing a series of regional shears that have developed extensional shear gashes along parts of their strike extent...higher grades and thicker mineralization is likely taking advantage of room that was made during structural movements in the surrounding rocks. The A4 shear now represents an entire structure ready to be drill tested, although it remains to be seen how extensive this structure might be and whether excessive mineralizing fluids have made use of it, and in turn deposited here. The next step will be to find more untested shear structures along strike.

A2 Subzone infill required for added confidence. We love the step-outs as a cost-effective way to paint the "blue sky" picture. Successful step-outs give a maximum footprint, make planning for subsequent infill drill programs easier, and can uncover additional high grade zones or strike extensions, much like NexGen geologists have done. However, as the initial resource estimate draws closer, tighter spaced drilling, while more costly and time consuming is needed to increase our confidence in Arrow's continuity. We'd suggest that targeting more than the low-end inferred resource should be considered for the high grade core. More pierce points along trend means more data and likely a more representative sample of what Arrow might host. This is particularly important for Athabasca basement or unconformity deposits whose mineralization is typically variable and abrupt over short distances, despite the apparent homogeneity of the entire deposit as a whole. While gathering data is the first step, one might also consider using an increased lower cut-off grade (rather than 0.01% U3O8) to better define the trends of mineralization, and weed out significant low grade tonnage. The goal is to identify a deposit that is economically feasible, particularly in an underground environment. Gryphon Zone, for example, is a basement hosted deposit that occurs in excess of 500m depth. It employs an 80x higher cut-off of 0.8% compared to the Arrow Zone to identify mineralization within the recently discovered basement deposit. Better definition should also improve drill targeting of the high grade down the road.

Search for additional shears and tension gashes. Focusing on parallel zones that are preferentially mineralized such as the A1, A2, A3, and now A4 Shears provide an opportunity to add pounds quickly, and help focus eventual underground development in one area. NexGen's corporate presentation suggests that an untested shear lies to the north of the A1 Shear, and parts of the A1, A2 and A3 shears remain untested. Known shears have been identified from geophysical surveys at the contact between the semi-pelitic (graphite-bearing) gneiss and a mixed zone of gabbro, grano-diorite and semi-peletic gneisses. Their occurrence is likely due to competency contrast between rock types, creating tension gashes during a period of faulting. These tension gashes seem to create a preferred, low pressure, steeply dipping and plunging depositional environment for mineralization (with high grade zones mimicking the trend of these gashes). Should additional gabbro and grano-diorite bodies occur at depth within drill holes, along this regional structure, there is a good chance that further basement hosted high grade will also be discovered. It's our belief that higher grades occur within these gashes and that lower grade, yet still significant and even broad zones of mineralization occur along the regional shears. We believe that drilling should focus on 1) finding new zones of competency contrast, often where different rock types are found (who says that there isn't an A5 Shear at depth that geophysics cannot see), and chasing known tension gashes up and down plunge to maximize pounds of U3O8 in preparation for the initial resource estimate due in early 2016.

Cashed up. With $23 MM in cash, NXE should be fully funded through 2016. The 30,000m summer drill program is focused on the higher grade sub-zone within the A2 shear and on infilling A2 through A4 SW extensions at Arrow, in preparation for an initial resource early next year.

• AR-15-58c1 (53m step-out from -44b) hit 86.0m composite mineralization, incl. 20.25m off-scale (10k-61k cps), within a 102.5m section (422.5-525m) in A2 Shear. It also hit 47.5m composite mineralization in the new A4 Shear, including 7.35m off-scale (10k-61k cps), within a 150m section (834.5-984.5m).

• AR-15-54c3 (150m SW step-out from -44b) hit 36m composite mineralization incl. 4.25m off-scale (10k-57k cps) within an 89.5m section (628-717.5m) in A2. Management expects this represents significant growth within the high grade core.

• AR-15-57c2 (93m NE step-out from AR-14-41) hit 48m composite mineralization incl. 9.9m off-scale (10k-54k cps) within a 93m section (527.5-620.5m) in A3.

• AR-15-56c2 (33m SW step-out from AR-14-39) hit 37.5m composite mineralization incl. 5.65m off-scale (10k-56k cps) within a 79m section (746-825m) in A3.