Nexgen Energy Ltd V.NXE

Dundee Capital Markets comments on NexGen Energy Limited

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According to Dundee Capital Markets:

https://is.gd/7jZ69E

NexGen Energy Ltd.

(NXE-V: C$0.65), intraday

August 26, 2015

BUY, Venture Risk

Dundee target: N/A

SW Extension Hits Positive Enough To Include Within Initial Resource

We continue to recommend NexGen Energy with a BUY and No Target Price. Nexgen, perhaps our top uranium exploration stock currently under coverage, released very good scintillometer results from its Arrow Zone, Rook I project in SK this morning. NXE is off 14% WoW, perhaps providing a good buying opportunity as summer drilling is in full swing. NXE is still outperforming its exploration peers MoM, essentially flat versus peers down 7%. Drill success has shifted the focus to the recently identified SW extension of Arrow. Today's results confirm and infill mineralization previously hit by large step-outs announced in early August. Further massive pitchblende was intersected in both the A2 and A3 Shears. While some holes look better in the A2 Shear, others highlight the A3. We expect plenty of more drilling to be required to properly confirm the continuity of these largely vertical zones, and view these large step-outs as very positive.

Summer program expanded, initial resource deferred. Due to recent success, summer directional drilling plans have increased by 5,000m to 30,000m. We believe that delaying an initial resource into H1/16 makes complete sense. First, NXE may not get credit for its accomplishments in this market. A delay allows further testing of zone continuity - these basement-hosted, vertically stacked, parallel and en echelon zones, much like those found at Cameco's (CCO-T, BUY, C$22.50 target) Eagle Point Mine at Rabbit Lake, aren't necessarily continuous or easy to define. Finally, it gives additional time to bulk up tonnage in the SW extension area for a potential initial resource. Overall - we'd expect a better quality resource estimate. The downside of having all 5 rigs focused on Arrow is that it eliminates the opportunity to identify new zones along strike and elsewhere. At this stage, and in this market, management made the right decision as adding resources as quickly as possible is likely the best use of proceeds.

All six holes hit significant mineralization and strongly anomalous uranium (>10,000 cps – aka off-scale). Four were drilled along strike to the SW, and two were drilled within Arrow's core. We’d call all of these 'infill drilling' now that significant mineralization has been identified up to 210m SW of hole -44b, although some of these holes are amongst the deepest ever drilled at Arrow. With hole -44b as the starting point, previous holes that discovered the SW extension were drilled down plunge at 50m, 55m, 100m and 210m along strike. Today's results come from holes drilled down plunge at 81m, 87m, 105m and 255m along strike. Two holes were drilled down-dip, below -44b within the core.

Intensity of alteration and mineralization remains strong. Arrow Zone is open in all directions and at depth. The focus for the rest of the summer is to define extensions of high grade mineralization in both shear zones. These zones are located within roughly a 300m strike in an area that measures 645m long by 215m, with vertical extent from 100m to 920m.

• AR-15-54c1 (87m SW step-out from AR-15-44b): hit three potentially higher grade zones and 68.5m total composite mineralization including 10.35m off-scale (>10k to >61k cps), over 302.5m. Significant massive pitchblende was found in A2 shear (9.4m off-scale within 42m total composite mineralization).

• AR-15-56c1 (81m SW step-out) hit 125m total composite mineralization over several zones, including 10.95m off-scale (>10k to >61k0 cps), over 385.5m. Extensive, locally strong pitchblende was found in the A3 shear.

• AR-15-54c2 (105m SW step-out) hit at least two zones and 114m of total composite mineralization including 5.85m of (>10k to 53k cps), over 307m. Extensive, locally strong pitchblende was identified in the A3 shear.

• AR-15-55 (~255m SW step-out). A2 mineralization is weaker, returning 8m of total composite mineralization with 0.2m of (>10k to 12.4k cps), over 121m.

• AR-15-53c2 (91m below -44b) hit one higher grade zone and 61.5m total composite mineralization including 6.55 m of off-scale (>10k to >61k cps), over 215.5m. Local massive pitchblende was found in the A2 shear.

• AR-15-53c3 (155m below -44b) hit at least four higher grade zones and 59m of total composite mineralization including 5.5 m off-scale (>10k to >61k cps), over 342.5m. Local massive pitchblende was found in the A2 shear.

Cashed up. NXE had $29 MM at 30-Jun-15. Given the original 25km summer program of $9 MM, we assume an expanded 30km program may require a budget of $10.5 MM through late Sep or early Oct. Even with this increased budget, NXE should still have enough cash to cover a winter drilling program.