NexGen Energy (TSX, NYSE: NXE; ASX: NXG), advancing the largest development-stage uranium deposit in Canada, said Wednesday it has secured a major new offtake contract with a large U.S.-based utility.
This agreement with an unnamed company for the annual delivery of 1 million lb. of uranium over a five-year period, would double its existing contracted volumes to a total of 10 million pounds. It includes market-related pricing mechanisms that provide “significant leverage” to future prices at time of delivery, the company said in a release.
With the new offtake deal, analysts at Raymond James have maintained their “Outperform” rating for the stock with a target price of $12. NexGen is well-financed in the near-term to continue to develop the Rook I project in Saskatchewan and the firm’s positive view on uranium, mining analyst Brian MacArthur said.
“This announcement is positive as it is another step forward in NexGen’s goal to become a uranium producer,” MacArthur said in a note. “Other milestones that are important could be the approval by the Canadian Nuclear Safety Commission (CNSC) and financing details for the project.”
Shares of NexGen rose 1.7% to C$9.72 on Wednesday afternoon in Toronto for a market capitalization of C$5.57 billion. Its highest in the past 52 weeks was $12.51.
Major uranium asset
The deal reflects the “significant materiality” of Rook I in the future supply of uranium at a time when sovereign and technical risk surrounding current production sources is at unprecedented levels worldwide, NexGen said. It follows the first sales contracts announced in December. Those were for the supply of 5 million lb. of uranium to multiple U.S. nuclear utility companies.
The proposed underground mine and mill, anchored by the high-grade Arrow deposit in the uranium-rich Athabasca Basin, is at the final stage of approval. Hearings with the Canadian Nuclear Safety Commission for the final green light are set for Nov. 19 and Feb. 9 to 13.
Once in production, Rook I is expected to produce nearly 29 million lb. of uranium oxide (U3O8) per year over the first half of its approximate 10.7-year life, according to a feasibility study published in 2021. The Arrow deposit alone has nearly 4.6 million measured and indicated tonnes grading 2.37% U3O8 containing 240 million lb. of U3O8.
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