Nexgen Energy Ltd T.NXE

Dundee Capital Markets comments on NexGen Energy Limited

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According to Dundee Capital Markets:

https://www.ge.tt/5MDaxM92/v/0?c

NexGen Energy Ltd.

(NXE-V: C$0.34)

January 27, 2015

BUY, Venture Risk

Dundee target: N/A

Initial Winter Results Should Impress - High Grade Zone Extended

We continue to recommend NexGen Energy with a BUY and No Target Price. NexGen announced the first set of winter drill results from its 100%-owned Rook 1 project this morning. Four thick intercepts of potentially high grade uranium were intersected at Arrow, confirming our view that this zone is shaping up to be one of the more important discoveries in the Athabasca Basin. All four holes intersected thick zones of mineralization, including a potentially ultra-high grade hole in -34b which might be one of the best yet from this project. Hole -34b intersected 129m of mineralization, including 10.3m off-scale (>10,000 cps) within a 328m section. We see two high grade zones, one at 418m depth and another at 533m. True thickness isn’t known but it’s likely to be fraction of core width. Notably, this hole extends known mineralization in AR-30 by 30m southwest along strike. It's likely that further drilling would add other higher grade zones vertically above and below those found today.

NexGen is still at a very early stage of drilling and almost every drill hole should help increase our knowledge as what to expect and how to find more mineralization. As such, we expect the stock to perform well on such positive exploration news. Being located adjacent to the Triple R deposit, now the third largest deposit in the Athabasca (105.5 MM lbs at 1.5% U3O8), speaks volumes as to the upside potential of the entire area - of which has rime real estate. Located in favorable basement rocks, drilling is starting to delineate a series of near vertical, parallel and en echelon stacked zones of high grade mineralization. This is very similar to that currently being mined by Cameco (CCO-T, But, C$24.00 Target) at the Eagle Point Mine. This is important as about 76% of all uranium mining in the Athabasca has come from basement hosted deposits.

Four holes, four hits. Holes -33 and -35 were scissor holes drilled to follow up on uranium mineralization found last summer. With good composite thicknesses, uranium grades were modest with minor off-scale uranium counts (Table 1 for details). There is still unconformity potential with hole -36 drilled vertically hitting uranium mineralization just 6.5m below the unconformity. While more difficult to develop, these are the highest grade uranium deposits in the world.

High grade area around AR-14-30. We continue to look at the AR-14-30, -31, -32 and now -32b trend as being ground zero for uranium mineralization at Arrow. Mineralization is expected to occur as numerous parallel and stacked zones, and almost by definition difficult to discover and tie together without considerable exploration drilling. Fortunately basement hosted deposits such as these are easier to advance towards mining (although we are quite early here). This zone is still taking shape, about 480m long, with this high grade lens perhaps tracking over 45m along strike. It's likely that this lens is longer in a vertical sense, and probably irregular in shape, but roughly S shaped with a tube shaped core that plunges at depth to the NE. It would be very difficult to try to define any size at this stage. Certainly more drilling is required.

Different than Triple R. The Arrow Zone isn't the same style of mineralization at the massive Triple R deposit found next door. It is likely composed of narrower, stacked, discontinuous, and smaller lenses than found at the near continuous Triple R. But, this style of basement hosted uranium mineralization is often very high grade and quite well understood due to years of study. While the apparently smaller hit ratio into the zone is noticeable relative to its neighbor, investors cannot completely discount missed holes which help define the lenses, as all information helps move the understanding of the project forward. This type of deposit ensures that there will be holes that miss - investors should not be anticipating a 100% hit rate. Of course, "miss" is also relative. All winter drill holes thus far have increased our knowledge of the deposit and extended known trends, however, from a potentially economic point of view, we would be inclined to focus on hole -34b.

Winter 2015 program: NexGen commenced drilling at Arrow on 5-Jan-15. Winter drilling will utilize three rigs for 18,000m or an $8 MM program (~$15 MM cash currently). Two rigs will be dedicated to land based targets and a third targeting NE and SW of Arrow along the Patterson conductor corridor (7km in length). Drill fence sections, scissors and vertical drill holes will be completed at Arrow in order to further understand geometries and controls on the high-grade uranium mineralization. It is likely that ongoing positive drill results will be met with an increase in exploration budgets, assuming share price co-operates.