Canada-based NexGen Energy Ltd (ASX:NXG) has seen its share price plunge more than 13% as it announced a blow-out in costs to bring its Rook I uranium project online, compared to what had been predicted in the feasibility study published three years ago.
The company said pre-production capital costs for Rook I – Canada’s largest development-stage uranium play – were now set at $2.2 billion Canadian (US$1.58 billion).
This represented an increase of C$310 million as a result of inflation, plus another C$590 million caused by project enhancements identified through advanced engineering and procurement activity since the feasibility study was published in March 2021.
In addition to this, inflation had also pushed up cash operating costs C$2.65 per pound of triuranium octoxide (U3O8), in addition to a C$3.63/lb U3O8 increase from advanced design developments, advancement of procurement, and operational and ongoing elite environmental enhancements.
The latter cost rises reflect the development status of the Athabasca Basin project, where engineering is 45% complete, compared to the 18% completion which it had reached at the time of feasibility study publication.
However, the fact that inflation was noted as a factor in the increase might give pause for thought about the economic viability of pursuing uranium projects in Western countries, given that these pressures remain live.
The next stage will involve construction activities, beginning after the final Federal Environmental Assessment approval has been reached, with critical path detailed engineering and procurement happening parallel to the latter.
CEO Leigh Curyer said the increases were indicative of the work being done to bring Rook I up to the highest standards.
“NexGen’s updated CapEx, OpEx and sustaining capital reflect the Company’s focus on thorough planning and responsible financial management, ensuring that every aspect of
the project aligns for the development of a truly world-class resources project,” he said.
“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, with a payback period of 12 months.
“Our commitment to developing this Project to the highest environmental standards ensures sustainable and responsible operations from the outset whilst delivering industry leading profitability and local community consultation and engagement.”
At 12:24 AEDT, NexGen shares were trading at $9.00, a fall of 13.63% since the market opened.