NexGen Energy Ltd.(NXE-T: C$10.84) May 30, 2024BUYTarget: C$21.00
Encouraging Follow-up Drilling at PCE Discovery
NXE announced drilling results following up on its recent greenfield discovery.Greenfield Discovery Background: Recall that in Mar/24 NXE announced a new greenfield discovery 3.5km east of Arrow on its 100%-owned SW2 Property. The initial mineralized occurrence seen in hole RK-24-183 is located on a parallel (to the Patterson corridor which hosts Arrow) and previously-untested corridor named Patterson Corridor East (PCE).
The mineralization ran 19.8m at a starting depth of 347.7m and peaks up to >61,000 cps (over 3m; close to off-scale which is usually a strong indicator of high grades). For context, this discovery hole was significantly better on all metrics than Arrow’s discovery hole (RK-14-21) which hit less than 0.5m of >9,999 cps.Initial PCE Strike Length at 275m; NXE Testing 1.5km x 1.2km Area:
Follow-up drilling in hole RK-24-193 encountered elevated radioactivity (up to 7,500cps) over 67.5m (starting depth 383.5m). RK-24-193 is located 275m southwest along strike of the discovery hole and mineralization was found around the same depth below surface. In addition, assays from the discovery hole, RK-24-183, confirmed mineralization across a 20m interval.
Notable intersections included 13.5m of 0.78% U3O8 including 0.5m (348m to 348.5 m) at 10% U3O8 and another 0.5m (356.5m to 357m) at 6.23% U3O8. In aggregate, these results represent a current strike length of 275m at PCE, and potentially suggest an upper edge of mineralization highly analogous to the early holes at Arrow.Geological Similar to Arrow;
Drill Program Expanded to Four Rigs/22,000m: At the time of the discovery we noted that it included dravitic clay fractures, strong silicification, etc., all features seen in the early days of the Arrow discovery. NXE is using their understanding of Arrow (structural controls, etc.) to help vector in for further drilling. The target area is within a large gravity low and features a strike-slip displacement akin to Arrow.
Management noted that many brittle reactivated structures and associated intense alteration within three drill holes potentially highlight a supplementary uranium-bearing trend within the same system. This system has an approximate extent of 1.5 km long by 1.2 km wide.
Given favorable early results, the summer drill program has been expanded to four rigs and is now targeting 22,000m of drilling at PCE.
NXE will focus on targets between 400 and 700m deep.H2/24 Timeline for Federal Permits:
Last week, NXE submitted responses to the 49 technical review comments made by the CNSC. Within the next month, the CNSC will conduct a completeness check on the 49 submissions. Upon conclusion of the completeness check, a technical review will be conducted within 60 days.
If everything is deemed “ok” then the CNSC will establish a Federal Commission Hearing date for the project.
Based on the guidance in the Q1/24 conference call, typically projects that are given the “green-light” to go to the hearing date are approved within 60 days. Thus, NXE could wrap this whole process up by Q3/24 (October) at the earliest.
Top Uranium Pick: In our view, initial results at PCE are showing all the right signs for the discovery of a potential uranium deposit.
Proving out scale will be the key to making the market pay attention.
We maintain our Buy rating and $21.00/share target price based on 1.5x NAV (trades at ~0.8x). Key risks to our target price and valuation include commodity price risks (uranium), mining operations and technical build-up risks, cost inflation, financing, regulatory, and social risks associated with bringing a mining project into production.
NXG Price at posting:
$11.77 Sentiment: Buy Disclosure: Held
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