Nexgen Energy Ltd T.NXE

Raymond James Jacked on NXE

[HighROI]

NexGen released preliminary scintillometer results from another eight holes as part of

its on-going winter exploration program at 100%-owned Arrow in northern

Saskatchewan. The most important hole, 77c2, cut strong radioactivity 180 m SW of the

Arrow deposit, indicating potential for a massive extension of strike length and a very

large resource update in 2H16E. We continue to ‘pound the table’ on NexGen as our top

pick in the uranium space – we believe Arrow is the best undeveloped uranium asset in

the world, is the best uranium discovery since McArthur River in 1988, and indeed, the

best discovery across all metals in the past 4-5 years. Despite recent share price strength

in the wake of its mammoth maiden resource earlier this month, the stock is trading at a

fraction of the value of its potential cash flows, which we discussed in detail recently in

our Mar-17-16 Comment “Switching to DCF Valuation on Back of Mammoth Arrow”,

price $1.32.

Hole 77c2 was drilled as a 180 m step-out to the SW of the Arrow

deposit, following-up on hole 75, and returned very strong numbers, including 109.5 m

of total composite mineralization (TCM), of which 2.3 m is off-scale radioactivity, along

strike from the A4 Shear. The hole looks similar to some of the intercepts that define the

main high-grade zone of the Arrow deposit, with semi-massive pitchblende and strong

dravite alteration. It appears NexGen could be clipping the edge of even stronger

material. For reference, the high-grade zone hosts 120.5 Mlbs grading 13.3% U3O8 and

runs over a strike length of less than 250 m, implying this incremental 180 m (if proven

to be an extension rather than a new zone) may have expanded the lateral scope of the

zone by another 80% along strike. Arrow’s footprint is now 865 m along strike by 275 m

laterally. Drilling will immediately follow-up on this hole.

Cameco Tech Report at Cigar Underlines Arrow’s Relative Attractiveness. Today’s

results are particularly interesting following Cameco’s updated Cigar Lake technical

report released last night, in which the major producer states another C$1.2 bln in

capital will be required over the life of mine, up from C$300 mln in the previous report.

This capital inflation is modestly shy of the entirety of our conservatively estimated upfront

capex (C$1.2 bln) on Arrow. We believe Cameco is following developments at

NexGen extremely closely. Cigar is Cameco’s ‘second flagship’, but Arrow is already

looking far superior, not only from a mineability perspective as it is hosted in stable and

water impermeable basement rocks, but increasingly from a size perspective as it closes

in on Cigar’s global 43-101 resource of 328 Mlbs (incl. 222 Mlbs 2P reserves and 103

Mlbs Inferred), of which Cameco only owns 50.0%. NexGen, meanwhile, owns 100% of

Arrow without any encumbrance over the deposit area.