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NexGen Energy Ltd. (NYSE:NXE) Q4 2023 Earnings Call Transcript

NexGen Energy Ltd. (NYSE:NXE) Q4 2023 Earnings Call Transcript March 11, 2024

NexGen Energy Ltd. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, ladies and gentlemen, and welcome to the NexGen Energy Year-End and Q4 2023 Conference Call. Note that all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session at the end. [Operator Instructions] Also note that this call is being recorded. Mr. Leigh Curyer, CEO and Director for NexGen Energy, you may begin your conference.

Leigh Curyer: Thank you, Sylvie, and thank you everyone for joining NexGen's year-end and Q4 2023 financial results conference call. I'm Leigh Curyer, Chief Executive Officer of NexGen Energy, with Travis McPherson, Chief Commercial Officer, and Benjamin Salter, Chief Financial Officer, who are joining me on today's call. I'll provide an update on the exciting progress made this quarter and reiterate the key accomplishments from the past year regarding the rainy market, permitting, project development, financing and for those who have seen the news release this morning, a very exciting discovery of new intense mineralization in a greenfield discovery only 3.5 kilometers from Arrow. After that, we'll move into the Q&A portion of the call.

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We will make forward-looking statements throughout the call. So please visit our website for the relevant disclaimers. As we collectively navigate the global energy transition, nuclear power has emerged as a pivotal force. It presently accounts for approximately 10% of the global electricity mix with targets set to elevate to 20% to 25% in the coming decades to meet three generational goals, the provision of power for an increasingly energy intensive world, two, decarbonization and, three, providing access to power to those who currently do not have it. The commitment to expanding global nuclear capacity was prevalent at COP28, when NexGen presented on a panel with the Premier of Saskatchewan regarding the province's commitment to sustainably producing uranium to meet the global nuclear requirement.

This was further reflected at COP28 where countries pledging to triple nuclear capacity by 2050 acknowledging its essential role in achieving carbon neutrality, ensuring energy reliability and enhancing national security. India recently announced it will be constructing an additional 18 civil nuclear reactors by 2032, aiming to boost its nuclear generation to 2.42 gigawatts, a tripling of its current capacity. Canada supports these efforts, evidenced as recently as two weeks ago, with the issuance of its second green bond for nuclear development, raising $4 billion US, ensuring cost effective financing for nuclear projects in Canada and reflecting widespread federal government support for nuclear energy in Canada and globally. Further, Natural Resources Minister, Jonathan Wilkinson, announced the Governor of Canada would expedite the approval processes of new nuclear projects domestically.

Similarly, the EU has officially labelled nuclear power as strategic for its decarbonization agenda, acknowledging its cost competitiveness and potential to draw investment. In November 2023, EDF successfully raised EUR1 billion for nuclear energy through a green bond issuance, representing the first of its kind in Europe. Japan has also demonstrated the impact of its strategy with the restart of 12 nuclear reactors and as a consequence have reduced their dependence on fossil fuels by 15%, demonstrating nuclear energy's immediate positive impact. With the rise of technologies and the imperativeness for cleaner energy, the demand for uranium is projected to increase by 127% by 2030 and 200% by 2040. Yet the supply side presents a stark contrast with its fragility due to the confluence of factors, primarily under-investment in exploration development for over a decade, geopolitical tensions and supply chain challenges, challenging mine restarts and overall resource depletion have all affected the current supply levels and the long-term forecasted ability of supply to come online.

The potential ban on Russian uranium imports by the US Senate adds to this precarious situation, leaving many market participants reassessing future strategies and looking for sustainable new diversified primary uranium sources in sound jurisdictions. Given these inventory scarcities and the trend towards increased contracting, we anticipate continuous upward pressure on the spot and churn prices for uranium for a long period of time. This underscores a critical juncture for the nuclear sector. While nuclear power is embraced as a strategic component in the global decarbonization effort, ensuring a stable and sufficient uranium supply chain is paramount to fulfilling the growing energy needs. We are facing a probable long-term supply deficit with an anticipated cumulative shortfall of over 1.5 billion pounds expected through 2040, underscoring this [NexGen] (ph) role and the value that NexGen has in the global energy markets.

There is an urgent need for more uranium from technically, environmentally, and jurisdictionally sound sources of supply and that is the profile of NexGen's Rook I project. We just passed the 10-year anniversary of the discovering Arrow, and the significance of the deposit and project cannot be overstated. Once operational, it will dramatically reshape the Western supply landscape. As per NI 43-101 feasibility study of February 2021, it is forecasted to deliver up to 30 million pounds of uranium to the market annually. This represents over 20% of current uranium fuel production and over 50% of Western supply. This will not only reestablish Canada as a preeminent uranium producer in the globally recognized province of Saskatchewan, but will also emphasize NexGen's unique position to meet the world's increasing uranium requirements.

Over the past 12 months, NexGen has successfully and safely executed the strategy to advance the Rook I project. Our commitment to the company's values and dedication to excellence in everything we do has resulted in a world-class organization leading positive necessary change in the sector and setting new standards for sustainable responsible resource development. This is highlighted through our industry ESG standards approach, historic benefits agreements and optimal permitting progress. From the outside -- outset, we have been focused on innovation and peak performance to bring Rook I into production this decade. As our actions and track record demonstrate, we're committed to playing our role successfully in delivering the vast benefits of nuclear to improve the quality of living globally.

We're well on our way. In November, we secured the Provincial Environmental Assessment approval for the Rook I project, the first uranium project in Canada to obtain this approval in over 20 years, and the first ever in Canada from a non-government organization. With this approval, we have submitted the initial applications for approvals of site earthworks, shaft sinking infrastructure, site water, mine waste management facilities, and associated ancillary infrastructure and services. We are continually in communication with the applicable Saskatchewan ministries regarding these phases of development, so we can continue to progress Rook I site and be ready for full construction once all federal permits are in hand. Recently on February 12th, we received the Canadian Nuclear Safety Commission's results of their thorough review of NexGen's responses to the federal technical comments received on the environmental impact statement.

The team are developing responses to the few remaining technical review comments as a matter of priority and once complete, we'll be submitting these to the CNSC along with an updated federal EIS. In collaboration with our indigenous community partners, we look forward to securing a commission hearing date with the CNSC in the near term to ensure the benefits of this generational project are realized as a priority for the region and its community. As mentioned earlier, we applaud the federal government of Canada's commitment to nuclear energy, evidenced by the resource minister, Jonathan Wilkinson, announcing the focus to expedite the approval processes of new nuclear projects domestically. In 2023, NexGen made considerable progress on its site confirmation works, expecting completion by the end of this quarter.

A miner in a hard hat and apron holding a piece of uranium ore in the Athabasca Basin, Saskatchewan.
A miner in a hard hat and apron holding a piece of uranium ore in the Athabasca Basin, Saskatchewan.

The site confirmation program has been highly successful in providing the data to validate and inform future design of the production shaft and exhaust shaft for the Rook I project which is on the critical path. In the meantime we are finalizing detailed engineering and are well underway in procuring long lead items. And the awarding of the shaft sinking contract is imminent, signifying subject to federal approval to construction readiness of the project. While the company is focused on advancing the Rook I project, NexGen is also embarked on a bold exploration program on this highly prospective land package in the southwestern Athabasca Basin. Our 2024, 30,000-metre exploration program follows up on last year's successful program which identified highly anomalous areas to follow up as well as generate new target areas based on our previous drilling and geophysical surveys.

All of this is focused on making new material discoveries over and above the Tier 1 Arrow deposit, adding value through the drill bit. And we are pleased to announce this morning the discovery of new intense uranium mineralization on our 100% owned SW2 Property, Rook I, approximately 3.5 kilometers east of NexGen's world-class Arrow deposit, Figure 1 as per the news release. The new mineralized occurrence in RK-24-183 is located on a previously untested conductor segment of the Patterson Corridor East. Localized uranium mineralization was intersected for 19.8 meters between 347 meters and 367.5 meters below surface, with peaks up to and greater than 61,000 counts per second. To put this intercept into context, it intersected 3 meters of greater than 61,000 counts per second, which is significantly higher on all metrics than RK-14-21, the Arrow discovery hole, which only intersected less than 0.5 of a meter of greater than 9,999 cps.

Exploration is predominantly open in all directions, including over 1.5 kilometers of strike in a setting incorporating many of the geological features seen in and around Arrow, figures 2 and 3 of today's new release. I'd like to take the opportunity to congratulate and acknowledge the fine dedicated work of the NexGen geological team. Our understanding of the markers of mineralization in the region improved with every drill hole and geophysical survey. And the NexGen exploration programs of the past years have been extremely valuable in contributing to today's result. A highly prospective land position in the southwestern section of the Athabasca Basin is still in its infancy and a significant amount of exploration is in front of us to fully define the extent of mineralization at this location and on the balance of the Rook I SW2 property.

Consequently, drilling will continue to focus on this area and later this year in parallel at SW1. As development progresses, community initiatives are at the forefront of our approach and planning for the long-term success of the project. I'm proud to share that last year in 2023, over 300 community members from the local priority area participated in our education, training and certification programs, of which 39% were indigenous women, and we expect that number to grow to approximately 400 in 2024. We are contributing to building a strong and thriving local workforce, which has always been an important aspect of our development and success. We'll continue to expand these initiatives to contribute to the local economy while creating a highly qualified talent pool located within the local project area, and that will build onto our existing world-class team.

Over last year, we've been and continue to be highly engaged with investors, industry members and those who play a key role in the nuclear fuel cycle. Throughout those conversations, several themes have emerged. First and foremost, there's a lot of interest in NexGen and the company has been elevated to a key supplier for global utilities as they seek to find future material sources of sustainable uranium. It is well understood and accepted that the project is vital to support the growing demand. Our spot contracting strategy is being well recognized as it provides transparency, [price] (ph) discovery and promotes the resiliency of uranium miners and the nuclear industry. To be clear, we will only produce uranium that is needed and that will optimize the market dynamics.

We are taking a leadership role in the sector given the unparalleled flexibility, scale and cost structure of the project, due to the technical nature of the project and the natural hedge through the low all-in sustaining cost approximately $10 US per pound as per the 43-101 feasibility study. Our contracts will be predominantly volume based over the life of the project and linked directly to the spot prices at the time of delivery, fully leveraging to the future uranium prices and capturing the economics. We acknowledge this approach will signify a transition from traditional practices, but one that has been seen in other valued commodities worldwide and one that is in the beneficial interest of all stakeholders in the industry, ensuring a sustainable and successful energy transition.

Further, growing interest from global lenders reinforces that we have a sound strategy with expressions of interest now totaling over $1.25 billion US. We are starting the final confirmatory technical due diligence and are aiming to be in a decision point with respect to the total funding mix for the project in the second half of this year. Finally it is clear that our focused and disciplined approach is setting new standards in every aspect of responsible mine development. The team in place is focused on optimally bringing the Rook I project into production, continuously delivering industry-leading economic, social and environmental performance. Now for an overview of our financial position ending on December 31, 2023. NexGen had a working capital balance of $279 million at the end of the year.

Post-December 31, an additional $100 million US was raised through the ATM with a single Australian domiciled investor who has increased their shareholding. Consequently, as I speak, NexGen has approximately CAD410 million in its treasury to fund all programs permitting and running expenses. To the end of 2023, NexGen since incorporation has deployed approximately $451 million in the successful development of the Rook I project and other exploration properties against the current market capitalization of CAD5.4 billion Canadian, all whilst maintaining an industry-leading low ratio of general administrative expenses relative to development and market capitalization in any given year. Further, we are pleased to announce that NexGen has been included in the FTSE Global Index as well as the ASX 300 Index effective in mid-March 2024.

This reflects the continued growth and strength of outcome in the global market and especially in the Australian context. Our ASX listing continues to grow in terms of CDI market capitalization as well as daily liquidity and this index inclusion will continue to build on that. Given the large capital market dynamics combined with strong resource market focus in Australia, the growth of ASX ownership of NexGen is expected to increase. For 2024, our focus is advancing the Rook I project through the final phase of permitting process, detailed engineering and procurement, all while aggressively pursuing new material discoveries. With that, our priorities for the year include safely completing the site confirmation program, establishing a Federal Commission hearing date and approval, continuing critical path detailed engineering and procurement, formalizing a finance package and marketing our product.

It's shaping up to be a historic year for the company as we continue to see strong and vocal support from local and indigenous communities to see NexGen steward this opportunity through to fruition. We have continued collaboration from government partners, growing shareholder and investor interest, especially large generalists globally, and a surge in requirement for uranium-neutron energy. I'm incredibly proud of the focus and discipline the entire NexGen team exhibits. We are ready. Now let's transition into Q&A and we encourage questions from all of you. I'll turn it over to the moderator to commence.

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