VANCOUVER — NexGen Energy (TSX: NXE; NYSE-MKT: NXE) has unveiled its first tentative mine plan for the Rook I uranium project along the southwestern edges of Saskatchewan’s Athabasca basin.
The company’s newly released preliminary economic assessment (PEA) outlines a 1,450-tonne-per-day underground mine with a 17-year life. The study estimates initial capital expenses of $1.2 billion.
The mine plan is underpinned by the Arrow deposit, which hosts 1.18 million indicated tonnes grading 6.88% uranium oxide (U3O8) for nearly 180 million contained lb., and 4.25 million inferred tonnes at 1.3% U3O8 for 122 million contained pounds.
The company notes the PEA doesn’t include 66,000 metres of drilling from the past six months.
Workers at a drill site at NexGen Energy’s Arrow uranium project in northern Saskatchewan. Credit: NexGen Energy.
“Recent drill results have materially expanded Arrow beyond the PEA footprint,” NexGen CEO Leigh Curyer said during a conference call. “We announced the discovery of Arrow South on a separate conductor. This study indicates that [the project] is a phenomenal, economically powerful mineral asset in its current state.”
Arrow is reportedly a good candidate for long-hole stope mining “due to its stacked high-grade veins and continuity on strike, dip and vertical extent.” NexGen says the deposit’s geometry would allow for 93% of the resource to be converted into “mineable resources.”
Mined material would be fed into a conventional uranium processing plant, where recovery could reach 96% over the mine life.
The operation would generate 18.5 million lb. U3O8 annually over the life-of-mine at total unit operating costs of $8.37 per pound. The PEA assumes that uranium output would be front-end loaded, with annual production in the first five years averaging 27.6 million lb. U3O8.
NexGen’s base case assumes US$50 per lb. U3O8, which would generate a 56.7% after-tax internal rate of return (IRR) and 1.1-year payback period, as well as a $3.5-billion net present value (NPV) at an 8% discount rate.
The Rook I camp in Saskatchewan’s southwest Athabasca basin. Credit: NexGen Energy.
Assuming a US$25 per lb. U3O8 price, Rook I’s economics include a 27% IRR, 2.4-year payback period and $1-billion NPV.
“We’ve put significant effort into looking at the uranium market during the time Arrow could realistically begin production. [Research] indicates a supply deficit emerging,” Curyer said.
“Projects with these economic outcomes are rare. The minimal payback period will provide the company with outstanding financing options, which will help us keep the share structure optimally tight. It is our mission to make Arrow the leading — and most profitable — source of mined uranium.”
NexGen hopes to lower the surface footprint of the project by using cemented paste-fill tailings. The waste material would be mixed with cement and delivered underground to backfill stopes, with excess tailings placed in an underground storage facility. Curyer said the design could set a “new environmental standard globally.”
Seven drill rigs are mobilized across Rook I for NexGen’s 43,000-metre summer program, in 2016. Credit: NexGen Energy.
The company plans to complete a prefeasibility study on Arrow by mid-2018, which could lead to more substantive permitting.
NexGen closed a US$110-million financing with Hong Kong’s CEF Holdings in July comprised of US$50 million in equity and US$60 million in unsecured convertible debentures.
The company issued 24 million shares priced at $2.70, while the debentures carry a 7.5% coupon rate over a five-year term and can be converted into equity at US$2.69 per share.
“The allocation of dollars and drill rigs is something we deal with on a daily basis. There are more resources to define at Arrow, both in terms of the existing footprint and on the extensions,” Curyer said. “We’re still early in the game in terms of understanding the size, and Arrow South mirrors what we already see. It could also be a similar size.”
The company has discovered uranium 400 metres south of its Arrow resource, where two exploration drill holes cut “a large and robust uraniferous alteration system” defined by narrow massive pitchblende veining and off-scale radioactivity.
NexGen Energy CEO Leigh Curyer (far right) with workers at the Rook I uranium project in Saskatchewan. NexGen Energy.
NexGen is planning a 25,000-metre development and exploration program in mid-year with seven drill rigs.
The company’s shares gained 11¢ on 1.5 million shares traded after the PEA was released and closed at $3.15 per share at press time.
NexGen has 338 million shares outstanding for a $1.1-billion market capitalization.
“The study shows that Arrow is in a class of its own,” Curyer said. “Not just in terms of uranium, but across other mineral commodities and from a global economic perspective.”
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