Impact: Positive
NexGen (NXE) has awarded the first uranium sales agreements for 5M lb U3O8 with multiple, major US nuclear utilities. Although this news is rather financially immaterial to NexGen, we believe that the market will appreciate it. NexGen’s marketing strategy is to maintain as much potential pricing upside as possible while maintaining production flexibility (read here and here). Even for a company destined to produce as much uranium as NXE, it’s nice to see that sales contracts are starting to be signed, and this news should come as a comfort to investors. It is a start to NexGen’s financial de-risking during the early days of production, while starting to forge those relationships with Western Utilities that will be required for the long haul. That said, there is a lot more to go – these contracts only total 5M lbs over the first five years, representing just 3.5% of the 144.2M lbs of anticipated uranium production during that period (Table 2), and 2.2% of total probable reserves. The original FS assumed US$50/lb, but the more recent revision from August 2024 uses a base case of US$95/lb to achieve an NPV8% of C$6.32B, and annual FCF of C$1.93B in years 1-5 (read note). Even at US$80/lb, close to current spot, a project NPV is C$4.89B with C$1.61B in annual FCF is anticipated. This is a world class asset. The project recently passed its technical review with the CNSC, with a Commission hearing date and final Federal approval pending (read note). While C$2.2B in Capex is required, we expect most to be covered by debt despite +C$800M in cash and liquid assets (incl. U inventories).
