2.7MMLBS U3O8 PURCHASE FINANCED WITH US$250MM CONVERTIBLE ISSUANCE
THE TD COWEN INSIGHT
This morning, NexGen released its Q1/24 results and announced the purchase of 2.7mmlbs U3O8 for an aggregate purchase price of US$250mm (US$92.51/lb). The timing and cost
of the purchase agreement comes as a surprise given the strong run-up in uranium prices over the last three years. There were no material updates in regard to the company's Q1/24 financial results and the Arrow permitting.
Impact: MIXED
Uranium purchase agreement — The company has entered into a binding term sheet with MMCap International Inc. SPC ("MMCap") for the purchase of 2.7mmlbs U3O8 at US$92.51/ lb, for an aggregate purchase price of US$250mm. To finance the purchase, NexGen has agreed to issue US$250mm in five-year 9.0% coupon unsecured convertible debentures, convertible to ~23mm common shares (~4.3% of shares outstanding) at a share price of US $10.73 (~30% premium to 5-day VWAP).
NXE has also issued 909,090 shares (~3% of principal) to MMCap as an establishment fee in connection with the issuance. Closing of the purchase is conditional upon customary conditions prior to June 28.
Recall that NexGen announced a $180mm equity raise last week (note) as the company builds its balance sheet in preparation for the Arrow build. We model total capex of $1.65bln from Q4/24 through 2027, and had assumed $1.5bln in project debt issuance as part of the overall financing package.
Upon closing of both transactions, the company will have cash balances of ~$600mm in addition to the US$250mm of physical uranium (~C$930mm), with management adding the U3O8 purchase “bolsters its marketing discussions and optimizes the optionality of project financing structures under evaluation”.
NXE remains engaged in the federal permitting process — On February 12, the Federal and Indigenous Review Team completed their technical review of the responses to information requests (IRs) submitted by NexGen. As of the company's most recent update in mid- March, CEO Leigh Curyer, noted that they have 48 remaining IRs to address to the federal regulator, CNSC, and the company expects to answer these IRs in the coming weeks. There were no updates provided with the Q1/24 results. The end goal is to obtain a Uranium Mine and Mill License from the CNSC following the establishment of a Commission Hearing date anticipated for later this year. The company plans to update the market on the updated cost for Arrow by year end.