Uranium Discovery Highlights Expansion Potential at Patterson Corridor East

NexGen Energy Ltd. (NXE:TSX;  NXE:NYSE.MKT) has reported an expansion of the mineralized zone at its Patterson Corridor East (PCE) site, following the commencement of its summer drill program on May 21.

To date, eight out of twelve drill holes have intersected mineralization, with extensive mineralization identified along a 540-meter strike and 600-meter vertical extent. The results include four drill holes with high-grade uranium mineralization, including the best hole to date, RK-24-207, which has shown massive uraninite replacement—a key indicator of a strongly mineralized system.

The latest findings highlight the presence of off-scale uranium mineralization (greater than 61,000 counts per second), which further underscores the potential of PCE to become a significant uranium deposit. The drilling program has already completed 10,045.5 meters of the planned 22,000 meters, with assay results from the mineralized intersections expected in the fourth quarter of 2024.

The Push For Uranium 

NexGen Energy Ltd. operates within the uranium mining sector, a key industry experiencing significant growth and development due to rising global commitments to nuclear energy and the ongoing geopolitical landscape. The sector has seen substantial upward pressure on uranium prices, driven by a combination of factors, including increased investment, supply concerns, and government support for nuclear energy expansion.

According to Nuclear Engineering International in May 2024, "Global uranium prices, which almost doubled in 2023, have continued the trend with further price rises this year. The spot price of uranium oxide has already exceeded US$106 per pound, returning to a level last seen in 2007." This price surge has been attributed to the growing interest in nuclear energy, coupled with geopolitical fears over production and access, particularly in light of events such as the cessation of uranium production in Niger and the ongoing conflict in Ukraine, which has the potential to disrupt Europe's uranium supply.

David Talbot of Red Cloud maintained a Buy rating for NexGen with a target price of CA$12.00 per share, emphasizing that the ongoing exploration and development activities.

Investing News Network also highlighted the robust fundamentals supporting the uranium market on July 23, noting that "Rising global commitments to nuclear energy and other supporting factors are helping to make uranium a more compelling investment than ever."

Despite a slight cooldown in Q2 2024, with prices consolidating above US$82 per pound, the sector remains strong, with geopolitical tensions and resource nationalism providing additional support.

The firm also pointed out that "uranium prices were pushed higher in May by the news that the Biden administration will be banning Russian uranium imports," a move that reestablished America's leadership in the nuclear sector and is expected to secure the energy industry for generations to come.

The growth in uranium prices has been mirrored by the broader market, with the World Uranium Index up nearly 50% for the year, as reported by ETF Trends on July 12.

Edward Egilinsky, Managing Director at Direxion, emphasized the market's potential, stating, "Uranium prices have reached the highest levels in over 15 years, and the uranium market is seeing incredible growth. But there's a significant gap between supply and demand that begs further development and investment." This sentiment is echoed by the recent legislative support in the United States, where President Joe Biden signed the Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy (ADVANCE) Act, aimed at expediting the development of new nuclear reactor projects.

Company Catalysts

The recent drilling results at Patterson Corridor East mark a critical milestone for NexGen Energy Ltd. The discovery of extensive mineralization with high-grade uranium zones, particularly in RK-24-207, reinforces the potential of the PCE site to mirror the success of NexGen's nearby Arrow deposit.

Paradigm Capital noted that NexGen's Arrow uranium deposit represents "one of the largest and highest-grade discoveries in the Athabasca Basin in decades."

The mineralization at PCE shares many similarities with Arrow, including its containment within competent basement rock, which is an ideal setting for large-scale uranium deposits.

According to CEO Leigh Curyer, the summer drill program's focus has now intensified, with two main objectives: to continue testing the extent of the mineralized system through bold stepouts and to hone in on the high-grade zones within the broader mineralized area. Curyer emphasized that the PCE site is showing all the characteristics of Arrow at a similar stage, validating the continued prospectivity of NexGen's land package in the southwest Athabasca basin as a future cornerstone of Canada's uranium industry.

The company also noted in its investor presentation the permitting timeline for its Rook I project. Currently, the company is awaiting a hearing and a decision from the Federal Commission hearing. If granted this  Federal Environmental Assessment and license, the company said it is ready to begin construction. 

Expert Analysis of NexGen

NexGen Energy Ltd.'s recent drilling results at Patterson Corridor East (PCE) have garnered positive attention from analysts, reinforcing the company's potential within the uranium mining sector.

"The stock rose 3.1% in the two days after this news, gaining some of what it lost from the news of the updated feasibility study," wrote Jeff Clark of The Gold Advisor in an August 12 update, "though it’s still down 35% from its May high, making for a good entry point if you want shares."

According to David Talbot, MD, Head of Equity Research at Red Cloud Securities on August 9, NexGen's discovery at PCE is significant, with hole RK-24-207 being described as "the best hole to date" and marking a "material expansion of the Paterson Corridor East (PCE) discovery."

Talbot highlighted that the mineralization characteristics at PCE are reminiscent of NexGen's Arrow deposit, indicating the potential for a large, basement-hosted uranium deposit. He maintained a Buy rating for NexGen with a target price of CA$12.00 per share, emphasizing that the ongoing exploration and development activities, along with the anticipated Federal approval for the Rook I project, could serve as key catalysts for the stock's growth. 

Gordon Lawson at Paradigm Capital echoed this sentiment in his August 11 research note, noting that NexGen's Arrow uranium deposit represents "one of the largest and highest-grade discoveries in the Athabasca Basin in decades."

He reported that the updated cost expectations at Arrow, which included increases in development capex to CA$2.2 billion and operating costs to US$9.98 per pound, were in line with industry-wide inflationary trends and should not be surprising to the market.

Despite these increased costs, Paradigm Capital maintained a Buy rating for NexGen with a revised target price of CA$13.00 per share, down from CA$14.00, reflecting adjustments in its valuation model. The firm underscored the company's progress in obtaining permits and advancing toward production, now expected to commence in the first half of 2029.

Ownership and Share Structure

According to Refinitiv, institutions own 50.24% of Nexgen.

Among those, the top owners are Mirae Asset Global Investments with 4.52%, L1 Capital Pty Ltd at 4.26%, The Vanguard Group with 3.36%, Sprott Asset Management LP with 2.99%, and Alps Advisors Inc at 2.90%.

Strategic investors own 3.45% of Nexgen, with Mega Uranium Ltd at 3.24%.

Management & Insiders owns 4.54%, with investor Li Ka Shing holding the most at 2.65%.

Nexgen currently has 517.73 million free float shares.  They have a market cap of US$3.08 Billion and a 52 week range of US$4.62-US$8.88.

Important Disclosures:

1) James Guttman wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.

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