Nexgen Energy Ltd T.NXE

Raymond James comments on NexGen Energy Limited

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According to Raymond James:

https://is.gd/V0u9NV

NexGen Energy Ltd.

Strong Buy 1

C$1.80 target price

Highest-grade Assays Ever at Arrow Bolster Resource Potential

Recommendation

NexGen released assay results for six angled holes from its ongoing >30,000 m summer drill program at 100%-owned Arrow, with all holes returning thick and strong intervals, particularly from hole 58c1 which include the highest-grading assays ever returned at the project. We advise investors to bolster positions in NexGen on the expectation of more drilling success in the current and upcoming exploration drill programs and ahead of a large maiden resource estimate due in late-1H16E.

Analysis

- Robust Assays from 58c1. Among the assays released were world-class numbers from hole 58c1, which was drilled 53 m up-dip and SW from hole 44b (another prolific hole – 56.5 m of 11.55%) and which cut several strong intervals: 80.5 m grading 2.48% U3O8 and 35.5 m of 9.72% in the A2 Shear and 5.0 m of 7.23% and 19.0 m of 2.01% in the newly discovered A4 Shear. Included in these A2 results is the highest-grading individual 0.5 m chemical assay ever recorded at Arrow: 80.5%. The assays confirm previously released scintillometer readings (see our Sep-22-15 Comment, “Fourth Shear Zone Discovered with Another Zinger Hole”; price $0.63).

- Results Bolster A2 Sub-zone. Hole 58c1 joins other high-grade holes such as 49c2, 44b, 58c1, and 54c1 which together define a thick core of mineralization exceeding 10% average grade over ~162 m strike length and up to 200 m down-dip (subvertical) extent – the A2 sub-zone. Naturally, more drilling must be completed to connect these pierce-points to have absolute confidence in the continuity of the sub-zone, however drilling may already have provided sufficiently close spacing to include the sub-zone in an Inferred category resource estimate. It appears to us that a gently SW-plunging structure running parallel with the metasedimentary rock package at A2 provided a preferential pathway for fluids, concentrating emplacement of uranium all along the conduit. The numbers underline potential for contained metal in the maiden estimate to come in well above the 100 Mlbs mark for Arrow overall, with the majority in A2 and this sub-zone.

- More to Come. Plus-80% weight-percentage assays are very rare in the world of uranium exploration, occurring within a small number of known deposits, including ‘monsters’ like McArthur River; the conversion of such a high percentage of the country rock to pitchblende suggests an incredibly strong mineralizing system was active, with multiple phases of fluid flow over a long period of time. This bodes well for extension of A2 and its sub-zone (and other shears) along-strike and to depth.

Valuation

Our target price reflects US$4/lb in-situ value and our resource target of 100 Mlbs. Our multiple is based on trading peers and takeout values of high-grade Athabasca projects.