NexGen Energy Ltd.
Development progressing at Rook I, a critical asset to meet coming uranium deficit
Our view: We continue to see Rook I as a world-class uranium project with a large and high-quality resource, exploration upside, and geopolitically stable location in Canada. We are encouraged by ongoing permitting progress and see potential Federal approval in 2025 as a possible catalyst for strategic options (i.e. takeout, strategic partnership). We raise our PT to C$15/sh (from $10) due to higher forecasted prices and increased multiple to account for exploration upside and permitting progress.
Key points:
Uranium set to remain tight into next decade; next several years vulnerable to supply-shock: We see uranium in short-supply through the late-2020s and vulnerable to supply shocks, especially in Western markets as demonstrated with recent news Russia will be temporarily suspending exports to the US (note). Into 2025, supply-side risks will likely remain while contracting activity may pick up given only moderate volumes secured in 2024 despite an increasingly uncertain supply outlook. In our report "RBC ImagineTM: Nuclear revival is going to need a lot more uranium", we explore our updated uranium S&D outlook through to 2040 and raise our long-term uranium price to $100/lb (up from $75/lb previously).
Permitting could be on-track for 2025 approval, followed by construction:
NexGen has completed the EIS Federal Technical review, a major milestone in the permitting process. The next step will require NexGen to submit the Final EIS package which will undergo a 30-day review by the CNSC. After the Final EIS has been accepted by the CNSC, a public hearing date will be set, followed by a final permit decision within 60-days. A mid-2025 approval is possible, which would support a timeline for first production by 2029 if construction goes according to plan. We conservatively assume an H2/25 approval followed by construction start in 2026 and first production by 2031 to account for typical delays with new projects.
PCE exploration success adds long-term optionality: Following completion of the 34,000m 2024 drilling campaign at Patterson Corridor East (PCE), NexGen released another impressive intersection of a 17m wide vein with multiple >61k cps occurrences while 10 holes in the 30 hole campaign exhibited >10k cps occurrences. We view PCE as a source of potential upside at Rook I as further definition of the deposit could manifest in long- term optionality (expanded production or mine life extension) that may be strategically important given a significant long-term uranium deficit.
Potential offtake contract signings by year-end: Management indicated on the Q3 call they could sign several offtake agreements by year-end and noted permitting is not necessarily a pre-requisite to contracting volumes. With the WMC marketing partnership recently announced (details here), progress in permitting, and cited strong interest from utilities, we think an offtake announcement before year-end is a realistic possibility.