Cormark’s latest report on NexGen-NAV is C$13.78NexGen Energy (NXE:V) Buy, C$5.00 Target Cash - $73 MM - Funded to PFS and beyond
Event: Reports final assay results for 2016 drilling campaign at Arrow (Saskatchewan)
Impact: Positive. Final drill holes from the successful 2016 summer drill program continue to demonstrate continuity and expansion of the best zones at Arrow. Resource Forecast -
73,091 m of 2016 summer drilling have been received and will be incorporated into the resource update (H1/17) vs the 60,000 m used to estimate the existing resource (200 MMlb at 2.63%).
- We note that the
new drilling also included a lot of infill and the A2 high grade core is now defined at 25m x 25m spacing (vs 50 m x 50 m in the current inferred resource estimate).
- We therefore
expect the H1/17 resource update will accomplish two goals: 1) convert the A2 high grade core (120 MMlb @ 13.26% U3O8) to M&I ahead of the PFS study, 2) expand the total contained U3O8 to 350 MMlb. - However,
our long-term (1 year) resource forecast continues to be >400 MMlb given the success at the large (>180 m) step-outs to the south-west....and we view it as just a matter of time until the data gap can be plugged and convert to resources later in 2017.
- NexGen has assays pending from 22 holes.
Drilling Commentary A2 Shear - The summer drilling campaign at Arrow finished with high grade intersections both inside and outside of the A2 high grade domain:
- Scissor hole AR-16-111c2
returned 30.0 m at 15.07% U3O8,
including 6.0 m at 51.97% U3O8, (which also included 2.0 m at 68.20% U3O8 both inside and outside of the high grade shell). - Scissor hole AR-16-112c2 returned 40.5 m at 6.18% U3O8,
including 24.0 m at 10.35% U3O8 (which also
included 4.0 m at 44.80% U3O8 below the high grade shell).
- Link to A2 long-section:
LINK A3 Shear - Infill drilling further defined this shear which is still open in all directions:
- Scissor hole AR-16-113c1 returned
17.0 m at 1.83% U3O8 and was drilled 47 m down-dip and NE of Hole AR-15-57c2 drilled in 2015 (29.5m at 5.89% U3O8)
Valuation: - We recently switched to valuing NexGen on a DCF basis and determined a C$5.00 price target based on a fully funded and diluted NAV at current term U pricing (US$34/lb)........
LINK - The stock
offers a lot of leverage to a rising U price and our NAV is C$13.78 assuming a commodity price of US$65/lb which we estimate is the long-term price required to incentivize new production.