NexGen Announces Closing of Strategic Purchase of 2.7 Million Pounds of Uranium

Rhea-AI Summary

NexGen Energy (NXE) has completed the purchase of 2.7 million pounds of natural uranium concentrate (U3O8) for US$250 million. The acquisition was financed through the issuance of US$250 million in five-year, 9.0% unsecured convertible debentures, payable in cash and common shares. The company aims to leverage this uranium inventory for future production and sales, especially in light of the new U.S. law banning Russian uranium imports. NexGen is also progressing in its offtake negotiations and project financing, with final technical reviews submitted to the Canadian Nuclear Safety Commission. The project is advancing as per schedule, with detailed designs and procurement activities underway.

Positive

• Completed purchase of 2.7 million pounds of uranium for US$250 million.
• Transaction financed through five-year, 9.0% unsecured convertible debentures.
• Strategic acquisition aligns with the new U.S. law banning Russian uranium imports.
• Advancement in offtake negotiations expected to maximize uranium inventory value.
• Final technical review submitted to the Canadian Nuclear Safety Commission.
• Project financing process progressing, anticipating full project approvals.

Negative

• Issuing US$250 million in convertible debentures may lead to shareholder dilution.
• High-interest rate of 9.0% on debentures increases financial obligations.
• Dependence on the successful outcome of offtake negotiations and project financing.

Insights

Financial Analyst

NexGen Energy's strategic purchase of 2.7 million pounds of uranium for $250 million through unsecured convertible debentures is noteworthy. Firstly, the cost structure involves issuing five-year debentures at a 9% interest rate. The payment is a mix of cash and shares, a maneuver that can conserve liquidity while potentially diluting existing shareholders.

The company's timing aligns with geopolitical shifts such as the Prohibiting Russian Uranium Imports Act, which could increase uranium prices by reducing global supply. Therefore, acquiring this inventory now appears strategically sound, positioning NexGen to capitalize on potential price hikes.

From a financial perspective, investors might focus on the debentures' terms. These include voting alignment and sale restrictions, hinting at a structured long-term strategy involving key stakeholders. However, the 9% interest rate raises concerns about the cost of capital. It's higher than average for similar companies, reflecting either a risk premium or a lack of cheaper financing options.

In the short term, investors should watch NexGen's liquidity and how it manages interest payments. Long-term implications hinge on uranium market dynamics and the company's ability to convert this inventory into profitable sales.

Market Research Analyst

The acquisition of a significant uranium inventory by NexGen could have far-reaching market implications. The purchase price of $250 million underscores a robust commitment to securing raw material against the backdrop of the Prohibiting Russian Uranium Imports Act. This legislative change could disrupt the uranium supply chain, making NexGen's move timely and potentially profitable if uranium prices rise due to supply constraints.

Furthermore, the statement about progressing offtake negotiations suggests NexGen is securing future sales agreements for its uranium, which could lock in revenue streams and stabilize future cash flows. This is particularly pertinent in a sector where long-term contracts often underpin financial stability.

For retail investors, it's essential to recognize that while the strategic inventory acquisition could yield benefits, it also ties up substantial capital. The success of this move will depend on the effective execution of offtake agreements and the broader uranium market trends. If NexGen succeeds, it can enhance its market position significantly. However, any delays in project approvals or technical reviews could impact their strategic timeline and financial health.

VANCOUVER, BC, May 28, 2024 /PRNewswire/ - NexGen Energy Ltd. ("NexGen" or the "Company") (TSX: NXE) (NYSE: NXE) (ASX: NXG) is pleased to announce that it has closed its previously announced purchase (the "Purchase") of 2,702,410 pounds natural uranium concentrate ("U₃O₈") for an aggregate purchase price of US$250 million, which was satisfied through the issuance of US$250 million aggregate principal amount of five year, 9.0% per annum (payable 2/3 cash and 1/3 common shares) unsecured convertible debentures (the "Debentures"), in accordance with the previously disclosed terms including entering into investor rights agreements with the holders of Debentures containing voting alignment, standstill, anti-hedging and sale and transfer restriction covenants. 

Leigh Curyer, Chief Executive Officer, commented: "This transaction further optimizes the advancement of the offtake negotiations which are underway and progressing well.  This transaction is designed to ultimately maximize the value of the significant uranium inventory that we will have as we look ahead to production and sales.  Further, having access to 2.7 million pounds of uranium at surface in inventory will no doubt prove to be increasingly strategic given the recent passing of the Prohibiting Russian Uranium Imports Act into US law. The current offtake discussions tie into the project financing process which is progressing in anticipation of full project approvals.  With the responses to the final 49 aspects of the technical review process submitted to the Canadian Nuclear Safety Commission on May 21, 2024, we are advancing the project through final detailed designs and procurement activities in line with our objectives and schedule."

The securities referenced herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements thereof.

About NexGen

NexGen Energy is a Canadian company focused on delivering clean energy fuel for the future.  The Company's flagship Rook I Project is being optimally developed into the largest low cost producing uranium mine globally, incorporating the most elite standards in environmental and social governance.  The Rook I Project is supported by a NI 43-101 compliant Feasibility Study which outlines the elite environmental performance and industry leading economics. NexGen is led by a team of experienced uranium and mining industry professionals with expertise across the entire mining life cycle, including exploration, financing, project engineering and construction, operations and closure.  NexGen is leveraging its proven experience to deliver a Project that leads the entire mining industry socially, technically and environmentally.  The Project and prospective portfolio in northern Saskatchewan will provide generational long-term economic, environmental, and social benefits for Saskatchewan, Canada, and the world. 

NexGen is listed on the Toronto Stock Exchange, the New York Stock Exchange under the ticker symbol "NXE" and on the Australian Securities Exchange under the ticker symbol "NXG" providing access to global investors to participate in NexGen's mission of solving three major global challenges in decarbonization, energy security and access to power.  The Company is headquartered in Vancouver, British Columbia, with its primary operations office in Saskatoon, Saskatchewan. 

Forward-Looking Information

The information contained herein contains "forward-looking statements" within the meaning of applicable United States securities laws and regulations and "forward-looking information" within the meaning of applicable Canadian securities legislation. "Forward-looking information" includes, but is not limited to, statements with respect to maximizing the value of the Company's uranium endowment, expected project financing discussions progressing in anticipation of full approvals, delivery of clean energy fuel for the future, the development of the largest low cost producing uranium mine globally and incorporating elite standards in environmental and social governance, and delivering a project that leads the entire mining industry socially, technically and environmentally, providing generational long-term economic, environmental and social benefits for Saskatchewan, Canada and the world. Generally, forward-looking information and statements can be identified by the use of forward-looking terminology such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or the negative connotation thereof or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or the negative connotation thereof.

Forward-looking information and statements are based on NexGen's current expectations, beliefs, assumptions, estimates and forecasts about its business and the industry and markets in which it operates. Forward-looking information and statements are made based upon numerous assumptions, including, among others; the supply, demand and price of uranium; the cost of planned exploration and development activities; that, as plans continue to be refined for the development of the Rook I Project, there will be no changes in costs, engineering details or specifications that would materially adversely affect its viability; that financing will be available if and when needed and on reasonable terms; that third-party contractors, equipment, supplies and governmental and other approvals required to conduct NexGen's planned exploration and development activities will be available on reasonable terms and in a timely manner; that there will be no revocation of government approvals; that general business, economic, competitive, social and political conditions will not change in a material adverse manner; the assumptions underlying the Company's mineral reserve and resource estimates; assumptions made in the interpretation of drill results and other geological information; the ability to achieve production on the Rook I Project;  other estimates, assumptions and forecasts disclosed in the Feasibility Study for the Rook I Project; and supply and demand conditions will lead to a pricing surge. Although the assumptions made by the Company in providing forward-looking information or making forward-looking statements were considered reasonable by management at the time they were made, there can be no assurance that such assumptions will prove to be accurate.

Forward-looking information and statements also involve known and unknown risks and uncertainties and other factors, which may cause actual results, performances and achievements of NexGen to differ materially from any projections of results, performances and achievements of NexGen expressed or implied by such forward-looking information or statements, including, among others, negative operating cash flow and dependence on third-party financing, uncertainty of additional financing, the risk that pending assay results will not confirm previously announced preliminary results, the imprecision of mineral reserve and resource estimates, the price and appeal of alternate sources of energy, sustained low uranium prices, aboriginal title and consultation issues, exploration and development risks, climate change, uninsurable risks, reliance upon key management and other personnel, risks related to title to its properties, information security and cyber threats, failure to manage conflicts of interest, failure to obtain or maintain required permits and licenses, changes in laws, regulations and policy, competition for resources, political and regulatory risks, general inflationary pressures, industry and economic factors that may affect the business, and other factors discussed or referred to in the Company's most recent Annual Information Form under "Risk Factors" and management's discussion and analysis under "Other Risks Factors" filed on SEDAR+ at www.sedarplus.ca and 40-F filed on Edgar at www.sec.gov 

Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in the forward-looking information or statements or implied by forward-looking information or statements, there may be other factors that cause results not to be as anticipated, estimated or intended.  Readers are cautioned not to place undue reliance on forward-looking information or statements due to the inherent uncertainty thereof.

There can be no assurance that forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking statements or information. The Company undertakes no obligation to update or reissue forward-looking information as a result of new information or events except as required by applicable securities laws.

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SOURCE NexGen Energy Ltd.

FAQ

What did NexGen Energy announce on May 28, 2024?

NexGen Energy announced the closing of its purchase of 2.7 million pounds of natural uranium concentrate for US$250 million.

How did NexGen Energy finance the uranium purchase?

NexGen Energy financed the purchase through the issuance of US$250 million in five-year, 9.0% unsecured convertible debentures.

What is the significance of NexGen's uranium purchase?

The uranium purchase is strategic, especially given the new U.S. law banning Russian uranium imports, and is expected to enhance future production and sales.

What are NexGen Energy's next steps following the uranium purchase?

NexGen Energy is focusing on offtake negotiations, project financing, and advancing detailed designs and procurement activities.

What challenges could NexGen Energy face with the debenture issuance?

NexGen Energy may face challenges such as shareholder dilution and increased financial obligations due to the 9.0% interest rate on the debentures.