NexGen Energy Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 10, 2023

There are 9 speakers on the call.

Operator

Good morning, and welcome to the NextGen Q2 Quarterly Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you. I will now hand the call over to Lee Currier.

Operator

You may begin your conference.

Speaker 1

Thank you and good morning everyone. Ladies and gentlemen, my name is Lee Currier, Chief Executive Officer of NextGen Energy. Thank you for joining our Q2 2023 company update and financial results call. I'll speak for about 10 minutes and then we will move on to the Q and A. Joining me on the call today are Travis MacPherson, Chief Commercial Officer and Benjamin Solter, Vice President of Finance, Acting Chief Financial Officer.

Speaker 1

Throughout the call, we will be making forward looking statements. So please visit our website for our full disclaimers on such statements. This summer, we're seeing record temperatures globally. In July, Phoenix recorded 30 consecutive days over 43.3 Degrees Celsius. There were forest fires across continents And warmer ocean temperatures.

Speaker 1

We cannot stay on the same path. Global governments have set goals to reach net 0 by 2,050 With some ambitiously targeting 2,030 for the first milestones, many countries are acting now to bring more 0 emissions nuclear power online and as the cleanest and most cost effective form of power generation, Nuclear Energy is the linchpin to the global energy transition. Nuclear provides reliable, Carbon free around the clock power and it is a reliable complement to the Expansion of renewables like wind and solar as part of a clean energy mix. Currently, there are 4 Last month, we saw the U. S.

Speaker 1

Commission in its first the U. S. Commission its 1st commercial reactor in many years. Off the back of several license extensions issued over the last 12 months and Japan brought its 1st nuclear reactor online in nearly a decade. Additionally, the Nuclear Energy Institute is anticipating That 300 SMRs will come online before 2,050.

Speaker 1

And as reported by TradeTech, these 300 SMRs alone Would increase uranium demand by £100,000,000 which is approximately 50% of current annual demand. We continue to see notable global support for nuclear energy. The Chief Executive at Rolls Royce Recently said Europe will not reach its net zero targets by 2,050 unless it embraces nuclear. An American entrepreneur, Sam Altman stated that nuclear is a way better deal than anything else out there In the provision of clean, reliable energy, reinforcing the cost effectiveness of nuclear and the need for a stable power grid. Additionally, Parnassus Investments, an investment firm known for its strong and focused ESG leadership With rigorous fundamental environmental, social and governance criteria, they shifted and approved investments in nuclear.

Speaker 1

The company believes nuclear energy will be an essential fuel source in the transition to a low carbon economy. Over the past quarter, we continue to see additional policy momentum that supports a clean energy Future with nuclear at the center. European lawmakers agreed to endorse all nuclear power as a green technology For Europe's industrial revival under the proposed Net Zero Industry Act, granting This to preferential funding. Despite a decision 40 years ago to phase out nuclear power, Sweden's government recently embraced nuclear energy as an essential way to increase electrical production and provide a stable energy system. Just this week, the government announced its plan to build 10 new conventional reactors.

Speaker 1

This is in addition to 2 SMRs previously announced And the commitment to extend the lifetime of existing reactors whilst establishing generous loan guarantees for the additional reactors. The reality is being realized renewables, wind and solar alone cannot support a modern economy and population. This is the reality and the consequence of that reality is that nuclear is the direction countries are adopting to meet the energy demands. And you're undoubtedly aware of the significant U. S.

Speaker 1

Investments in nuclear energy in the U. S. Through The Inflation Reduction Act, Bipartisan Infrastructure Law and the Chips and Science Act on top of the Advance Act Focus on boosting the development of nuclear technologies. Adding to this momentum is the growth of the SMR market that I mentioned earlier. Ontario recently announced it was building 3 SMRs to power the province.

Speaker 1

The U. K. Is launching an SMR competition projects and France and India are launching a cooperation program around SMRs and advanced modular reactors. The demand for uranium is evident at its current price per pound, which stands just about above US56 dollars As the price remains steady in the mid-50s during this traditionally quiet summer period in the Northern Hemisphere, We are seeing increased interest from utilities to enter into offtake contracts. And as we head into the second half of the year, With the WNA in London in early September, where we historically see higher volumes transacted, We are well positioned for a sustainable and promising long term future for the commodity.

Speaker 1

Global nuclear capacity is currently 390 gigawatts, with the International Energy Agency estimating it will more than double by 2,050. To meet this increase, uranium supply will need to nearly triple because by 2,040, It would equate to a £200,000,000 deficit and growing. On the supply side, We have not seen the increase needed to meet the rising demand due to mine depletion, rising costs And geopolitical instability. And while we may be turning a corner in exploration and mining, Especially when it comes to the Athabasca Basin, it still won't be enough to meet the rising demand. In addition to next gen, there are a number of additional mining and exploration companies advancing respective projects, targeting to be in production during the next decade.

Speaker 1

That means action now. Our Rook-one project will be the cornerstone to closing the gap Within 4 years of permitting approval, delivering up to £29,000,000 of uranium annually, With NextGen's Rook I project located in a premier, stable democracy of Saskatchewan, Canada, NextGen is committed to being a partner of choice for fuel buyers and nations actively seeking to mitigate Or exclude volatile nations from their supply chains. Rook I coming online within 4 years of permit approval Is it critical as it will help accomplish 3 imperatives. 1, provide the world with reliable Western supply, Curtailing outside influence on our energy markets 2, secure the energy transition for nations allied To energy security and targeting net 0 and 3, avoid supply chain issues As we're currently seeing in the electrical vehicle market, business leaders must be able to drive the quarter And have the experience, vision and courage to see the bigger picture. And that picture is ever expanding.

Speaker 1

Having a strategy in place that anticipates and mitigates risk for customers, investors, employees And Allied Nations as well as their citizens is how we approach it at NextGen, whilst being highly leveraged 2 terrific economic outcomes. We recently shared some of this thinking because we fundamentally believe businesses have no reason to wait On policy mandates to do the right thing. Those four commitments, we will only sell To nations who are allied for energy security and targeting net 0. We will maintain a checklist of standards for all partners In the chain of custody of our uranium, we will keep our supply chain and operations onshore in these nations To guarantee the highest levels of security, safety, labor standards and local community partnership, And we will advocate for policies that support sensibly produced uranium to set a new standard for the industry. While these commitments have been embedded in the next gen strategy from the beginning, our supply chain diversity Has become central to the discussion around decarbonization.

Speaker 1

We want to bring them forward and our recent news affirms Our approach. The coup in Niger has put the country's uranium exports in serious question. Indonesia exports 6% or produces 6% of the world's total supply Approximately 20% of the Europe's uranium. Additionally, The East increasingly complicated geopolitical situation is a major risk for those operating there and for their investors. These events underscore the need to reduce the influence of governments that may not share our core values and interests.

Speaker 1

Conventional approaches to stakeholder engagement and risk management must evolve to meet present day dynamics. This applies across many industries and mining is no different. A lot has changed since 1970s And we need leaders who can embrace the opportunities those changes create. This is why after decades in the sector, I founded NextGen in 2011. Uranium is far too essential to our future To rest on the industry practices of the past, customers require suppliers who can meet environmental, social, Labor and security standards and act as reliable partners to advance their businesses.

Speaker 1

Communities deserve meaningful partnerships That creates sustainable, generational impact through positive social, economic and environmental outcomes That extend beyond mine dependent opportunities. Doing things the Next Gen Way has led to amazing outcomes And it extends to our relationships with indigenous communities in Saskatchewan. I am proud to say that during this past quarter, We signed an industry leading impact benefit agreement with the Metis Nation of Saskatchewan Northern Region 2 and the Metis Nation, Saskatchewan, Covering all phases of the Rook One project. The IBA defines the environmental, cultural, Economic employment and other benefits to be provided to the Metis Nation Of Saskatchewan NR2 by NextGen in respect to the project and to confirm Community consent and support for the project throughout its complete lifecycle. This agreement follows the signing of benefit agreements with each of the Clearwater River Dene Nation, the Birch Narrows Dene Nation and the Buffalo River Dene Nation.

Speaker 1

That's 100% support from all our local indigenous communities. This is a historical minor for the Canadian mining for a Canadian mining company and a critical step to advancing the Roquan project. We are proud to share that the communities have joined us in advocating for regulatory approvals to realize the opportunity ahead for all of us. NextGen has reached a significant milestone in advancing the regulatory approvals for the 100% owned Rook I project By submitting the final provincial environmental assessment and federal license application during the quarter, We have also received provincial approval for the commencement of the 2023 site infrastructure and confirmation project program At Rook 1, this program includes comprehensive field work focused on infrastructure upgrades, Which will support the increased activity at site with the freeze holes on the critical path. The program is going smoothly and is expected to be executed on time and budget.

Speaker 1

Before we get into the financial update, I wanted to reflect on summer exploration drill programs on our Rook 1 property regionally and the SW1 property in the Southwest of the Athabasca Basin. Our drilling will continue to test high priority targets on both those properties and we'll provide a further update on this program once it's complete. Total meters to be drilled during 2023 has increased to 22,500 meters. Now for an overview of our financial position ending on the 30th June, 2023. NextGen had a working capital Of 89,000,000 as of June 30, 2023.

Speaker 1

To the end of the quarter, NextGen has deployed approximately 39,400,000 in the successful permitting, exploration and development of the Rookwan project. On the financing side, Last quarter, we shared that we've received strong expressions of interest totaling over US1 $1,000,000,000 in debt. We've recently heard from additional parties also expressing their interest on that news becoming public. This engagement is a testament to the economic and ESG profile of Rook I and the strong investor support eager to bring The Rook I project online. As we look forward to the rest of 2023 and into 2024, We are scheduled to meet critical milestones to advance the Rook One project.

Speaker 1

These include the acceptance and approval of the final provincial environmental assessment 2, the submission and acceptance of the final federal environmental assessment And 3, completion of the final licensing and securing a commission hearing date for the conclusion of the permitting process. While the Rook-1 site program progresses on time and within budget, I'm proud of the work of the NeXgen team. As a leader in the energy transition, we will continue to share our commitments with the world and bring to bear a generational project Labor and environmental standards. Now let's transition to the Q and A and we encourage questions

Operator

Your first question is from Andrew Wong from RBC. Please ask your question.

Speaker 2

Hi, good morning. Thanks for taking my questions and thanks for the update. So I'm just kind of curious, wanted to ask about your strategy to focus on Subtling to nations who are allied for energy security. And just wondering like how do you Make that distinction, which countries would that include or exclude today? And, yes, just wanted to hear more about that.

Speaker 2

Thanks.

Speaker 1

Well, I think that the recent events that we're seeing around the world in some countries where Nations that are focused on the sensible provision of power To their populations is the key definition of that. Obviously Canada, US And many countries in Europe fall into that category. When we're talking about such an important global objective, it requires leadership. And unfortunately not all players on the planet at time behave in the interest of all. So we are very openly stating what our values are And the direction in which we will head.

Speaker 1

So it's basically open for any country to behave sensibly And that as a good world neighbor and they will be the countries that we will sell our Offtake 2.

Speaker 2

Okay. Maybe just switching gears here a little bit. Obviously, a lot of geopolitical challenges in the uranium market. Definitely a lot of interest now in nuclear and We're seeing a renaissance in the nuclear industry. So clearly a need for more uranium and Canada can play a critical role in so Connexion.

Speaker 2

Does that help What's your approvals process and is there any update on the timeline for federal permitting?

Speaker 1

Yes, I think it is Really just blowing the wind stronger into our backs. We've heard many statements from The Environment Minister Wilkinson and also the Kristia Friedland regarding the acceleration of Projects involved in clean energy metals and the provision of energy in order to export To those good neighbor countries. And look, we were already Very advanced on the permitting front, there's no doubt about that And making significant progress, but yes, it's always nice to hear from a federal and provincial political level The support for your business initiatives, Saskatchewan earlier in the year launched their critical minerals Strategy and they used our office in Saskatoon to launch that strategy, where they openly stated a doubling of uranium production By 2,030, that's our project, Denison's project, no doubt. So yeah, Incredibly positive tailwinds by both provincial and federal governments in Canada and Again, I've said it in the past. Canada is an outstanding country for the development of Resources projects, particularly uranium projects and it's very rigorous.

Speaker 1

And that rigor is in the interest of The long term success of the project and as I mentioned when dealing with such a key component of Energy transition and sensible energy policy is the key ingredient To a higher standard of living for the entire world's population. It roughly has a very rigorous approach And we absolutely adopt that and appreciate that.

Speaker 2

Okay. Thank you.

Operator

Your next question is From Alex Pierce from BMO. Please ask your question.

Speaker 3

Good morning all. So Lee, you touched on this already. Given that Additional uncertainty you mentioned in Niger.

Speaker 4

Can you

Speaker 3

provide a little bit more commentary on how your conversations with Utilities have changed in the last few months. And do you think we're getting closer to the point where utilities may be willing more willing to sign mutually acceptable Contracting terms or prepayments etcetera that could help finance the project when the time comes.

Speaker 1

Yes. Hi, Alex. Yes, that's look, I think the Negere thing has been on the back or in addition to what was already occurring. It's we're seeing more RFPs being issued In the sector, which I think is highlighting that utilities are really starting to focus on their supply chains And the and actually the materialization of that sovereign risk that was already around over 70% Our mine production worldwide has always been there, but now it's materializing in the form of we see the actions of Russia At the moment and now the coup in Niger and it really is highlighting that sovereign risk that's always been there. So naturally a lot of the Western World and European and Middle Eastern and Asian Countries are looking at that supply chain and some countries are more vulnerable than others given their past reliance On some of those sovereign locations that are now in question.

Speaker 1

And so I think you will see Over time, a change in the way some of the elements around contracting. What utilities want to say though is strong sovereign jurisdiction that's reliable and also strong technical Delivery and certainty around production volumes. And being in Saskatchewan Meets the first box and the second box, well, everyone is well aware of the technical strength of our project with the high levels of Sandy around production volumes And moving into the latter part of this decade and into the following decades, Yeah, our profile certainly meets those 2 ingredients that utilities are seeking.

Operator

Your next question is from Winston Miles from 8 Capital. Please ask your question.

Speaker 5

Hey, Lee. How's it going? Just wanted to wish you congrats on all the success this year and progress at the Rookbone project So far in 2023, there's been a lot of talk by other companies, especially in the sector around your contracting strategy. I guess my question is, are they accurate with their assertions you could kind of quote unquote dump all your production into spot? And then part 2 of that question would be, How does your contact tracking strategy impact the debt process you've undertaken?

Speaker 5

Thanks a lot.

Speaker 1

Yes, sure. I'll answer the first part of that question, Winston, and then hand over to Travis on the debt side, who's running that process. Look, we've been very, very clear irrespective of how it's been commentated by others that we are Simply taking an approach which reflects the technical and sovereign nature of our project. And so We are going to contract on that basis and basically what we're going to do Is really be heavily levered to prices at the time of delivery. And we our position is that the uranium price needs to go considerably higher In order to encourage production from a number of these development projects That are nearing permitting approval and even nearing production such as the Denison's, BOSS Energies, Paladin are out there as well.

Speaker 1

And because of the supply gap being so great, we need a diversified uranium mines uranium supply, Particularly in countries that don't exhibit the sovereign risk of other countries as we speak That produced a large portion of the world's uranium. So we are purely going to leverage our sovereign Aspect in our highly confident technical nature which provides very high certainty around production volumes. And so we'll be entering most likely into shorter term contracts Over shorter periods, from that fact which basically keeps our company exposed To future uranium prices in a sensible manner. We will be contracting Portions of our production, there's no doubt about that. But they will be tied to market prices at the time of delivery.

Speaker 1

And it's very, very clear. I think the contracts are going to be moving More weighted to market prices at the time of delivery as we move forward. And We are incredibly levered to that development. On the second part.

Speaker 6

Yes. Winston, so on the debt side, I would say the lenders that we're speaking to and there are more coming to the table, as Lee mentioned earlier, Wholeheartedly agree with our strategy, frankly. They see the opportunity to maintaining they know the position of this asset in the uranium market And taking advantage of production flexibility is important to optimizing the economic outcomes, which obviously benefits These lenders, so from a debt side, one thing we flushed out very early with them is this isn't a typical mine, Whether it's uranium or another commodity, so price hedging and a requirement for that is not required. And as Lee points out, it's not required For one reason, which is the technical profile of the mine and the consequential cost profile, But also philosophically with respect to this opportunity at hand to flex up and down the mine according to Market demands to make sure that the uranium price stays stable and can bring online more stability of production particularly in the West. So From a dead side, we will be signing a minor portion of production under volume based contracts, no pricing Mechanisms required, meaning full spot exposure at the time of delivery is fully accepted and agreed to by the lenders.

Operator

Thank you. Your next question is from Chris Thompson from PI Financial. Please ask your question.

Speaker 4

Hi, good morning, gentlemen. Thanks for the intro there, Lee. Good discussion, good recap, I guess, On what's happening with the uranium market, wholeheartedly agree. Just a couple of quick questions, I hope you don't mind. Just want to unpack some of the details that relate, I guess, to on the permitting side.

Speaker 4

My understanding is we're ready for the conclusion of the Final, I guess, provincial EIS approval permitting sometime this month. Is that correct?

Speaker 1

Yeah, it's imminent. How exactly how far away that is, we'll see and but It's fully with the environment department of the province of Saskatchewan. We're referring to the provincial environmental approval here. On a daily basis, we have done everything that we are able to do. And so Latest feedback is that we can expect it imminently.

Speaker 1

That will then commence a 30 day public record period. And then at the conclusion of that, well the Minister, the Environment Minister will be in a position to grant approval. We recently for in mining with the project in Saskatchewan received approval within 14 days following the conclusion of that 30 day Public record period. So, Chris, it's imminent. I can tell you the whole team here at NextGen, there's not a day that On a daily basis, we ensure that we've done everything we possibly can.

Speaker 1

So it's imminent. And in parallel to that, we've got the engineering proceeding really, really well and site construction preparation Being undertaken outside as we speak.

Speaker 4

Great. Thanks, Lee. And then I guess the federal EIS Side of things, when do you anticipate I mean, I'm asking you questions you probably don't know answers to, but I wanted to just Provide just a little bit of color on the sort of lag, I guess, between provincial approval and federal.

Speaker 1

Yeah. Well, look, Chris, it's a good question because it's Very detailed and rigorous process. The provincial one is incredibly material And the federal one will always come after the provincial one. We've ran the process in tandem and we've already completed 120 day public comment period In 2022 on the federal basis, we know all the questions that came in. The large majority of those questions were clarifications And referencing certain paragraphs in the EIS, which as you are aware is a Very large document.

Speaker 1

And we've also at the same time have Very letters of support from each of the 4 communities in the project area, Expressing their support for immediate regulatory approval. So on receiving the provincial environmental assessment, we already have with the signing of that 4th agreement during the quarter, 100% community support, and that's been expressed both provincially and federally. And so I suspect the federal process will be within a reasonable timeframe following The provincial approval and that's the indications we have received federally right throughout. And I think you'll see things start to accelerate on the federal level once that provincial approval is in place. And But I want to be clear, once that provincial approval is in place, that federal process It's going to be running in parallel to a lot of activity at site.

Speaker 1

And so the federal government And seeing the CC what's happening and see the support from the local communities and Looking forward to delivering Canada's next uranium mine.

Speaker 4

Beautiful. And then just Finally, just one quick, quick question. And it's something that I guess, Travis did lead to a couple of minutes ago, and that is the ability of the operation to flex up, flex down production. Could you maybe expand a little bit on that? And how are you going to be communicating that to the market?

Speaker 4

Obviously, this is not a discussion now, but something that I think the market is going to want A little bit more detail on as you start development.

Speaker 1

Yes. So with the deposit being in such highly competent Basement Rock, we can flex production up and flex production down from 1 quarter to the next. We also have such an incredibly low cost base That also the economics obviously play into That flexibility. And so we are purely and very simply leveraging the technical Nature of the setting and being able to deliver that to the market. And so, yes, it is I think a highly advantageous element of The Rookwan project that is meeting a demand by the utility sector.

Speaker 1

So to answer your question, Chris, it is purely around the technical setting and the low economic cost All producing a pound, which facilitates that flexibility.

Speaker 6

Yes. And To be clear, Chris, we are very confident on what we've outlined in terms of production volumes. Like we don't see a world where we need less uranium from a mine like Arrow. But this is just to say that we have that optionality to make sure the uranium price stays at a strong sustainable price for the long term.

Speaker 1

And the feasibility study based on 1300 tonnes a day, well, we are also Putting in flexibility into that as well, because we actually very strong advocates That the world needs more than 3 arrows online by 2,030 and yet they don't exist With respect to that size and scale, so yes, that's our position.

Operator

Your next question is from Ryan MacArthur from Raymond James. Please ask your question.

Speaker 7

Hi, good morning and thank you for taking my questions. I just want to follow-up on the potential debt. Obviously, getting a lot more interest than you had a little while ago. Do you still think you'll have Stuff in place at Q4, does it make more sense to wait longer or is it irrelevant because the way you're going to sign the contract, it's just you're going to get delivered spot In the future, so there's no real value in waiting to get a higher price, you're better to just get money in the door upfront?

Speaker 6

Yes. I'd say, with these other parties coming to the table, we're definitely flushing those out and seeing Their level of interest and so that may push it back a little bit from Q4 into early in the New Year, but Generally still tracking well and definitely not on the critical path in terms of a holdup or anything to actually Start construction activities and shafts sinking, the moment we get that approval to do so.

Speaker 7

Thank you. And maybe just Lee, you've talked about 4 years after permitting. Not to get technical on this, are we talking 4 years after you received the permits or after CNSC licensing? I mean, obviously, what I'm really When do you think first production is potentially at the mine now?

Speaker 1

Yes. So Basically on the provincial permitting of the feasibility study, if we were to start from scratch, said 42 months. And so we're going off the engineering schedule with respect to that timeline, but it is subject primarily To the provincial permitting approval. And in some elements, we've already got A head start because we've already got an accommodation camp there, we're expanding it. We've already cleared The pads for the thinking of the production shaft and the Exhaust shaft and we're doing the freeze hole preparations as we speak.

Speaker 1

So we are already eating into that 42 month timeline from point or time 0. So It's those two components, which is influencing that and it's subject to the timing Of the actual provincial approval as the primary gating item. If we receive the provincial permit this quarter or next well next quarter In Q4, 2023, you can reasonably assume based on all those factors, it's going to be Around 4 years or within 4 years following that approval based on the engineering schedule as currently defined.

Speaker 7

Great. Thank you. And maybe if I ask one other philosophical question. You've talked about you've got obviously a very unique asset, Large, good jurisdiction, low cost, and you're going to be somewhat selective in who you sell to. Do you think that allow you to get a premium price from those customers versus what's historically maybe being Been quoted in the market, will you be able to build in anything for that, do you think?

Speaker 1

Yes, Brian, you're exactly right. It is a very unique asset that hasn't been in the market before and all we are doing is leveraging it given Its characteristics both sovereign wise and technically and cost wise. And I think as you see other dynamics in the market playing out Around sovereign risk around certain sources of production And technical risk and then the advent of highly focused investment funds expecting companies to have Elite ESG Profiles, that environment with a very tightening market with limited supply from Good actors. I think it could eventuate into that situation. And I think all we're well, I don't think all we are doing is keeping leverage to that outcome, which I think is paramount And in the interest of investors and stakeholders, community, governments, everyone associated with the project.

Speaker 1

Got to also take into account that the cost of the uranium going into a nuclear Utility makes up such a small component of the overall cost. So utilities The ability for them to pay substantially higher prices whilst they don't want to pay an extra dollar than they have to, but The market is the market and given the low cost that uranium makes up of an overall nuclear utility, Terrific scope to for higher prices going forward.

Speaker 7

Great. Thanks, Lee and Travis for answering my questions. I'll get back in line. Thank you.

Speaker 1

Thank you, Brian.

Speaker 8

Thank you, Lee and Travis. I've got a couple of questions. One relates to sort of the macro. You talked about the need for over 3 arrows to come online by 2,030. What is your best guess as to what The price would have to be a clearing market price to incentivize additional mines To be able to meet that demand, what kind of price level would you need to see in U.

Speaker 8

S. Dollars? And where would that come from? Are there any prospects that are close? Thanks.

Speaker 1

Yes. So you need to look at it what's The region, I think regionally because obviously the Athabasca Basin has significantly higher grades And lower cost profiles than other countries in the U. S. There's projects under development, but lower grade and hence have A higher economic cost and then in Australia as well, you've got some smaller projects, ISL going into production, which have a slightly lower cost base. So It really depends on the nature of the projects that we're talking about.

Speaker 1

Obviously, the Athabasca Basin projects Require a lower U. S. Price to get in production. I would say that the U. S.

Speaker 1

And Australia need higher prices. In the past when we saw Uranium prices go to $140 a pound in the late 2000s. A lot of the U. S. Projects development projects did not go into production.

Speaker 1

Projects in Namibia As well, did not go into production with uranium prices over $100 As you're aware, I'm a formerly a chartered accountant. I'm very cost driven and data focused and look at cost structures in terms of defining our strategy ourselves and understanding where we were placed in it. I think overall to answer your question simply, uranium prices are going Significantly higher, we see production at the moment barely breaking even, Even at current prices. So I believe the uranium price is going significantly higher and it has to go significantly higher to get Additional production on board on a diversified front. It's more than just the Athabasca Basin developers, it's also we need development In the U.

Speaker 1

S, we need development projects in Australia, all coming online to meet this very important world goal Of sensible energy provision.

Speaker 8

Okay. So would you hazard a guess at What kind of clearing price would be needed or price to be seen back over $100 or $90 or $80 What kind of level do you think Needs to incentivize additional mine additions.

Speaker 1

Sure. So in the U. S, you want to see over $100 a pound to see any material increase in uranium production. And when you consider they produce £50,000,000 they consume £50,000,000 per annum, yet produce less than 1. That's probably going to be one of the driving metrics in this market moving forward.

Speaker 6

But one of the Interesting things, Graham, is like it is less of a question about price because even if we had $100 uranium today and had that for the next 5 years, it's not clear at all where you get to those three arrows. Like they're just they're not in the pipeline. We went through post Fukushima a very long period of time like over a decade where there was no investor appetite, no exploration being done anywhere Outside of ourselves, Denison, Fission and a couple of others globally. So you need to have elevated prices. What Lee was mentioning in terms of those incentive prices, but it's not like you just get those incentive price and a bunch of production comes on It's going to take a long time to get discoveries made, developed, etcetera.

Speaker 8

Okay. So this links up with my Question which is what is the upside flexibility for NextGen to be able to increase its production Both at the future mill and the mine itself at Arrow, as I believe if you can confirm it, It's still open at depth and to 2 or 3 directions. And as well, what Can you what do you need to do from an exploration development point of view to bring on another arrow in one of the other Patterson corridors which you are exploring today. Thank you.

Speaker 1

Yes. Well, we currently have a resource base of 3 £50,000,000 it's very, very significant. And so our proposed Mine plan at 1300 tons a day is very, very small physically, yet will produce around £30,000,000 Per annum, it's clearly evident that that could be expanded in the future. But As we speak, we are going in at that £30,000,000 per annum capability. There's undoubtedly huge exploration upside at Rook 1 alone and we've got 2 other land packages as well that Along the boundary of the Athabasca Basin in the Pravellia Peak Southwestern region.

Speaker 1

Just on the Patterson corridor alone, where we found ARO on Very first or Rookwan, the arrow deposit on the Rookwan project on the very first drill hole within a 4.5 kilometer radius, There's Fission 7 kilometers along the same corridor with £130,000,000 F3 Have recently made a discovery up the road adjacent to our S1 project where we're exploring at the moment. Yeah, I think you're going to see that area producing uranium for many, many, many decades. And even the Patterson corridor on the Requiem project, we've really only explored probably less than 10% of it as we speak. We've got another 8 corridors in parallel on that project that we need to explore. So with that, But also having hit mineralization below ARO, I think it's undoubtedly That there's resource expansion, very high resource expansion potential as we continue to explore.

Speaker 8

I just was wondering to what extent if there really is a great shortage and the price goes away, say considerably above 100, Would NexGen be incentivized to crank up production and also expand The mill operation. And how much would that cost?

Speaker 1

It was Certainly possible. We haven't done that costing yet, but based on what we've already learned about our current proposed mine, I'm absolutely confident It would be both economically and technically achievable.

Speaker 8

Okay, great. Thank you very much. Good luck.

Speaker 1

Thank you.

Operator

Thank you. Your next question is from Andrew Wong from RBC.

Speaker 2

I just wanted to ask what kind of construction works and Just what kind of site works can you get done with the provincial permitting? And also given that your provincial permitting Could be imminent, what kind of construction do you plan to have done within the next 6 to 12 months? Thanks.

Speaker 1

Yes. So we've got a lot of the early stage items, 100% engineered at the start of The construction period, the detailed final engineering that we're doing is focused mainly on The surface infrastructure and surrounding the mill. So we're on receiving permit approval, we can get into it

Speaker 3

Immediately.

Speaker 1

The work will primarily revolve around the shafts to begin with. And Noting that we are not actually touching any uranium during the 1st 3 years of Construction, so it's all very benign activities and we're currently detailing those with the province as we speak.

Speaker 2

Okay, great. Thanks.

Speaker 1

Thanks, Andrew.

Operator

Thank you. There are no further questions at this time. I will now hand the call over back to Lee Perrier. Thank you.

Speaker 1

Thank you, host. Yes, so thank you for everyone's attention. It's a very exciting time For the company, a very significant inflection point going from pre provincial approval to post Provincial approval imminently. The company is ready And the team is ready. And that with the overlying market developments, both on the demand side And the supply side make an incredibly exciting time for all of our shareholders and stakeholders.

Speaker 1

And Again, it's an absolute privilege to be involved and the commitment of the team It's absolute. So thank you for everyone. Thank you everyone for your attention. If there's any additional questions that you may have, please don't hesitate

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Earnings Conference Call
NexGen Energy Q2 2023
00:00 / 00:00