Canada’s future uranium producer NexGen Energy Ltd. (TSX: NXE) (NYSE: NXE) released a new cost estimate for its flagship Rook I project this week. The massive operation’s pre-production work will unfortunately cost about 70 per cent more than previously expected.
NexGen says rising inflationary pressures and engineering expenses are the primary cause of the budget’s reassessment. It was formerly expected to pull about C$1.3 billion out of the company’s pockets, but NexGen will need to dig deeper now for approximately C$2.2 billion.
“The updated capital cost presents an all-encompassing spend to bring the Rook I project into production based on robust, proven mining and construction methodologies,” chief executive Leigh Curyer said in a statement.
Rook I, which hosts the rich Arrow deposit, is still on track to produce 30 million pounds of yellowcake uranium per annum beginning in 2027. It is the world’s largest uranium asset under development.
Other companies and Indigenous groups, such as ATHA Energy Corp. (TSX-V: SASK) (OTCQB: SASKF) (FRA: X5U) and the Métis Nation, have solidified beneficial partnerships with NexGen in the Athabasca Basin.
However, NexGen is still trying to secure adequate funding for its major mining endeavour.
“The company is progressing discussions with various prospective financing entities,” NexGen said Thursday in a press release, “including commercial lenders, export credit agencies, and alternative sources to secure financing for the project.”
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Thriving hedge fund remains content being top shareholder
NexGen’s number one stakeholder is Australia’s L1 Capital, a hedge fund with a strong performance track record. It has received a 20 per cent return on its investments annually for the last 10 years.
“It’s just such a strategic asset,” L1’s lead researcher Amar Naik said recently. The project is expected to make NexGen a future takeover target for major uranium producers like Orano or Cameco Corporation (TSX: CCO), Naik has estimated.
Rook I will produce about 13 per cent of the world’s uranium in the coming years, the Bank of Nova Scotia (TSX: BNS) says.
On another note, NexGen is currently hosting its largest Summer Student Program to date. Seventeen young people will be on site learning about mining and potential future careers in the industry for the next two months.
Photo credit: NexGen Energy
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