NexGen signs uranium sales contracts with U.S. utilities
NexGen Energy Ltd. [NXE-TSX, NYSE, NXG-ASX] has announced its first 5 million pounds (one million pounds per year from 2029 to 2033) sales contract with major U.S. utilities at market pricing at the time of delivery.
The move comes after the company’s proposed Rook 1 project in Saskatchewan completed the final Federal technical review with the Canadian Nuclear Safety Commission (CNSC) last month and appears poised to receive final permits and approvals around the end of the first quarter of 2025, pending scheduling of a hearing. The company notes that the contract awards are in parallel to ongoing discussions and negotiations with US, European and Asian utilities.
“These offtake awards with premier US utilities represents a pivotal moment for NexGen,’’ said NexGen CEO Leigh Curyer. “They underscore the premier quality and scalability of the Rook 1 Project, whilst offering diversification of supply from existing centralized sources,” he said. “Further, the terms of these awards reflect pricing mechanisms at the time of delivery reflecting the NexGen’s long-stated strategy of optimizing the value of each pound produced.’’
NexGen shares advanced on the news, rising 4.46% or 51 cents to $11.95. The shares currently trade in a 52-week range of $12.51 and $7.04.
NexGen is developing one of the world’s largest uranium deposits on its Rook 1 property. The company is backed by one of Asia’s wealthiest investors Li-Ka-shing. In June, 2016, CEF Capital Markets Ltd., an affiliate of the Hong Kong based conglomerate CK Hutchison Group, subscribed for US$60 million worth of convertible debentures in NexGen.
A feasibility study published in March 2021, envisaged a capital expenditure of $1.3 billion and an average cash operating cost over the life of the mine of $7.58 (Canadian) per pound.
The company recently released updated economics for its Rook 1 project, including a revised capital cost estimate of $2.2 billion. However, the estimated mine life production capability of up to 30 million pounds of uranium annually is consistent with previous estimates, the company said.
The updated estimate includes an environmental plan that incorporates reclamation during operations, resulting in a “minimal” closure cost of $70 million.
NexGen is also envisaging average annual after-tax net cash flow (years one to five) of $1.93 billion (at US$95 a pound U308), and an average cash operating cost over the life of the mine of US$9.98 per pound ($13.86 Canadian).
The company attributed its latest estimates to $310 million in direct and attributable inflationary increases since 2020, and approximately $590 million in increased capital expenditures from enhancements identified through advanced engineering and procurement activity since March 2021.