NexGen set for major uranium drill program

NexGen Energy Ltd. [NXE-TSX, NYSE] on Thursday November 22 released geotechnical and radioactivity results for 29 drill holes that targeted the company’s 100%-owned Rook 1 uranium property in northern Saskatchewan’s Athabasca Basin.

The announcement follows a prediction by Uranium Energy Corp. [UEC-NYSE] Executive Vice-President Scott Melbye, who told Barron’s during an interview that uranium is in the early innings of a rally. “In terms of an investment thesis today, there is no better commodity than uranium with this bull market finally under way on tightening fundamentals,” he said.

NexGen is developing one of the world’s largest uranium deposits on its Rook 1 property, which is estimated to contain an indicated resource of 256.6 million pounds of uranium oxide (U₃O₈) contained in 2.89 million tonnes of 4.03% uranium oxide, according to a resource update and prefeasibility study announced on November 5, 2018.

The latest estimate includes a high-grade core of 181 million pounds contained in 0.46 million tonnes grading 17.85% uranium oxide.

On top of that is an inferred resource of 91.7 million pounds of uranium oxide contained in 4.84 million tonnes grading 0.86% uranium oxide, the company has said.

The indicated resource outlined so far could support annual production of 24.5 million pounds of uranium over a projected mine life of nine years. The prefeasibility study foresees an initial capital cost of $1.25 billion.

When the results of the prefeasibility study were announced, NexGen said it was planning to initiate a two-stage 125,000-metre (10-rig) high density drilling program. It will commence in mid-December, 2018 and continue through to the third quarter of 2019.

“This will be the largest drilling, geotechnical and hydrogeological focused program in the history of NexGen,” the company said.

The results of this program will then be incorporated into a feasibility study scheduled to be released in the first half of 2020.

On Thursday, the company said the primary objective of the 29-hole program, which was comprised of 20,482 metres of drilling, was to obtain a geotechnical characterization of areas within the Arrow deposit’s footwall, lateral development and underground infrastructure locations. These results were incorporated into the pre-feasibility study that was announced on November 5, 2015.

Two holes were drilled to geotechnically characterize the rock mass within the Arrow deposit’s A2 subzone. Three shaft pilot holes were also successfully completed to a depth of between 650 metres and 702 metres.

However, the company said the exploration results in Thursday’s release, which encountered strong mineralized intervals in key areas, were not incorporated into the updated mineral resource estimate and prefeasibility study results announce on November 5, 2018.

NexGen is backed by one of Asia’s wealthiest investors Li-Ka-shing. The company has roughly $125 million in cash, enough to fund all of the its programs through 2019.

“The successful completion of the geotechnical and hydrogeological drilling was highly positive and reflected in the Arrow PFS,” said NexGen CEO Leigh Curyer. “In addition, the exploration results at Arrow last summer continue to provide strong upside with respect to areas of potential future resource growth,” he said.

On Thursday, NexGen shares were down 3.68% or $0.11 to $2.88 on volume of 417,261. The 52-week range is $2.11 and $3.58.