Release Date: May 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NexGen Energy Ltd (ASX:NXG, Financial) has secured approximately CAD930 million in cash and liquid assets, positioning the company well for the construction of the Rook I project.
- The company has received Saskatchewan Provincial Environmental Approval for the Rook I project, the first greenfield uranium mine and mill project in Canada to receive provincial EA approval in over 20 years.
- NexGen Energy Ltd (ASX:NXG) has successfully raised CAD250 million through CDIs on the ASX and purchased 2.7 million pounds of U3O8, which is timely given the recent ban on Russian uranium imports.
- The company is progressing well with federal permitting, with only 49 comments remaining to address from the CNSC, which will conclude the federal environmental impact study.
- NexGen Energy Ltd (ASX:NXG) has strong support from local indigenous community partners, who have all signed impact benefit agreements for the full lifecycle of the Rook I project.
Negative Points
- The company faces significant inflationary pressures, with labor wages being the largest cost component, potentially impacting the overall project budget.
- There are concerns about the technical and operational risks associated with starting up a new mine, which could affect production timelines and costs.
- The purchase of 2.7 million pounds of uranium at USD92.50 per pound has raised questions about the timing and necessity of this acquisition, given the current market conditions.
- NexGen Energy Ltd (ASX:NXG) is entering a highly competitive and regulated market, which could pose challenges in securing long-term contracts with utilities at favorable terms.
- The company is heavily reliant on the timely approval of federal permits, and any delays in this process could impact the start of construction and subsequent production timelines.
Q & A Highlights
Q: So it's great to hear you're about to resubmit the EIS soon. Just kind of -- just wanted some clarity around the timeline. So after you submit, what are the specific steps and timeline that needs to happen before a public hearing can be scheduled and what actually happens during the public hearing? Could there be some public commentary that comes out that needs to be addressed during that process and then after that like, what's the timeline before the -- from the public hearing until you get a final decision from the Minister?
A: Yeah. Thanks, Andrew. Yeah, look, so we're very pleased with the response that we received from the CNSC. Like, to have 277 questions in the first place according to our consultants was unprecedented for this stage of a project. We're down to 49 and they really -- whilst every aspect is very, very important and we're respectful of that, we are submitting imminently, either late this week or early next. Now, as prescribed by the rules and regulations, the CNSC is entitled to another 90 days to review and close out those remaining 49 aspects. On closing those 49 aspects out, the EIS will be deemed final. At that point, it will then establish a commission hearing date. Now every project that has gone to a commission hearing has been approved within 60 days. I think whilst all aspects are very, very important and material, it's very, very significant with respect to concluding the EIS and we are very much looking forward at the conclusion of this next 90-day period, which I think is at the end of July off the top of my head, and very much look forward to those 90 days. That's for sure. Now, with respect to other public comments that can arise, well, the federal government has already ran its 120-day public comment period back in 2022. And those questions that we've already addressed were directed at those public and technical comments. So from our perspective, it's very, very well -- has been very rigorous, has incorporated all stakeholders, and this is on the overlay of having 100% community support from the communities in the local project area who have all reviewed and signed off on the EIS as we have presented to the CNSC.
Q: And then just talking about the Rook I project itself, you've been pretty clear on, I think, your intentions to bring it into production. It sounds like there could potentially be a construction start within the next 6 months to 12 months. So can you just talk about the technical team that you have in place already? What's the size of that team right now, and how much more do you need to build it out? How quickly can you hire the labor force that needs to build the project?
A: Yeah, sure. So we are -- on receiving federal approval, we'll be in a position to start immediately the following week. We have done 100% engineering of a lot of the site infrastructure aspects, the preliminary works in order to commence construction in earnest and all the early-stage items are 100% engineered. The remaining engineered items around the specifics in the mill, to put that into perspective, around the wiring and so we're ready, subject to federal approval to immediately start. And with respect to the team, we have currently about 76 people in our Saskatoon head technical office and at NexGen, our culture is absolute responsibility. And so we have a dedicated NexGen person for every aspect of our operations. That's not just the construction of the project that exhibits in geology, the financial side, commercial side, everything. So we have been very, very strategic and well planned in acquiring the personnel and the technical expertise that we want ever since 2017. We knew at that stage we had a project, and we're taking it forward into production. That's elevating as we speak. And to give you one example, like on the safety side of things, we're now breaking that out into very specific areas of safety at surface, underground radiation experts. And given the profile of the project and the culture that NexGen is exhibiting, we're very, very pleased with the caliber of the applicants that we're receiving, not just within Saskatoon and Saskatchewan, but also from outside of Saskatchewan. And so Saskatchewan is going to be experiencing an inflow of skilled labor as a consequence. With respect to the labor force on the ground, well, our community team led by Adam Engdahl and Dylan Smart in Saskatoon have already been running training programs with the various government technical colleges in Saskatchewan. And the take up of those training programs has been absolutely phenomenal and so we are well prepared on both fronts, and it exhibits our commitment to making as many of the jobs as local as achievable. And so you're going to also be seeing an inflow of population into the local community area on the commencement of construction of the project.
Q: Just a couple questions on the convertible. Just regarding strategy, the way the uranium price has traded, why not do this a couple of years ago? And what specifically were you seeing in the market that made you pull the trigger now?
A: Yeah, look, you're quite right. We've always been confident that the price of uranium is going higher, even five years ago, and it's going to go higher. But the decision to purchase pounds of uranium now is completely in line with our stage of development. We're about to -- we are in the final stages of federal approval. We'll immediately, on receiving approval, start construction. And the contracting cycle for 2028 and beyond is now. And so that predicated, given the fragility around current production and available supplies, like the producers have had a significant drawdown of inventory on hand over the last two years and then also the spot market is incredibly tight. And dealing with the nuclear fuel, the utilities want a surety of delivery. So us acquiring 2.7 million pounds is very significant in our contract negotiations with utility and recognizes the utilities risks around security of supply. And so the timing of that is evident today, and I would say, the Russian ban introduced last night has elevated that significantly into a new era that is unprecedented, frankly.
Travis Mcpherson: Yeah. Hey, Puneet, it's Travis here. I would also just add that, yeah, with respect to the timing like, three, four, two years ago even, we weren't at the point of these negotiations with the utilities. We're there now and to Leigh's point, the world that the utilities live in is -- it's 2028 tomorrow. And so that's where the decision in terms of the exact timing, it's not a -- while we're extremely bullish on the uranium price obviously for all the reasons and more that Leigh has outlined in the opening remarks, it wasn't purchased on the basis that we're speculating on the uranium price. It's really tied to the development of the Arrow project as it relates to contracting, which obviously feeds into the debt financing discussions that we're having as well.
Q: Okay, got it. And then just building on that then. If it's tied to the utilities, would we -- should we expect more
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
