NexGen Energy was formed to address a major structural risk that was forming in global energy markets during the 2000s. This was the fact that the world was seeing uranium production mostly concentrated from within non-OECD nations. NexGen was formed to discover the world’s next tier one uranium asset. What the company ended up finding was better than anything that has been seen in the sector and one that goes a long way to addressing these structural issues in the global energy mix. The company was founded in the 12 months following the Fukushima accident in Japan. The impact of the 2011 disaster was heavy-hitting to the uranium industry, however NexGen viewed the downturn as a rare and opportune moment to acquire 260,000 hectares of land in Canada’s Athabasca Basin – within what the company believes is the world’s best uranium jurisdiction: Saskatchewan.
“We were able to acquire the land position for a very good price and if you wanted to do that today, you wouldn’t be able to,” claims Travis McPherson, vice-president, corporate development at NexGen.
“We took advantage of the negative sentiment towards uranium at that time, knowing that nuclear is a critical, diversifying portion of any countries’ energy mix.
“We were very confident in the fundamentals of that commodity and remain so. We have never been as constructive about the supply-demand fundamentals as we are today. Nuclear energy has a very bright future especially as the world focuses on clean reliable energy sources.”
NexGen is the largest landholder in the Southwest part of the Athabasca Basin, which represents the future of Canada’s uranium industry according to McPherson and several leading pundits. Within the company’s vast landholding in the Athabasca Basin is its flagship Rook I project, which includes the 100%-owned Arrow Deposit – the jewel in NexGen’s Canadian crown.
Follow the trend
“The district is extremely well endowed; our deposit remains open in every direction and that is just one part of a 9 km known mineralised trend that we have on our property.”
As part of its ongoing exploration activity at Arrow, NexGen has poked holes in several areas around the strike and everywhere it has looked it has hit more uranium mineralisation. This explains why the company is so convinced that it is located in one of the most endowed mineral belts in the world, across any commodity.
“For us to have the most dominant foothold in this area, straddling the edge of the Athabasca Basin, is very strategic. Stradling the Basin boundary is where you want to be because, theoretically, that’s where a deposit would be at its most economic, where the Basin comes up from the depth and is shown at or near surface.”
NexGen also considers itself to be located in the best uranium district in the world due to the professional and transparent stance of the Saskatchewan and Canadian governments, who have a long history and deep understanding of uranium mining. “We wouldn’t want to be working anywhere else,” McPherson enthuses.
The most notable examples of the provincial government’s experience in handling major uranium developments comes in the shape of Cameco’s McArthur River and Cigar Lake mega-mines, which are currently the world’s largest and highest-grade uranium mines, located in Northern Saskatchewan. According to McPherson, Arrow will potentially leapfrog NexGen into the number one position globally.
However, McPherson stresses that when compared to other uranium deposits in the province and across Canada, the unique thing about the Arrow Deposit is the fact that the resource is completely contained within basement rock with no surface water.
“That really is a massive differentiator from everything else out there because it means the resource can be mined using traditional underground methods.”
The deposit shares similarities with Canada’s high profile uranium mines in terms of scale and grade profile.
Furthermore, it is the unique technical setting of the deposit that is driving the economics seen in the company’s preliminary economic assessment (PEA), published in July of last year.
“Within the basement rock you are talking about extremely competent, essentially impermeable ground conditions that are very stable, explains McPherson. “This means extraction comes at industry leading low costs due to the combination of scale, grade and technical setting.
“Also, because the deposit is completely vertical we are able to extract almost all of the resources with very high recovery rates as confirmed by our recent metallurgical results, along with low deleterious elements such as arsenic, selenium or antimony.”
NexGen’s PEA for the Arrow Deposit revealed a mouth-watering selection of project economics including a post-tax net present value of C$3.5 billion, an after-tax internal rate of return of 57% and a 1.1 year payback period on C$1.2 billion in capital costs.
For a project with an average annual production of 27.6 million pounds of uranium (in the first five years) over a 14.4 year mine life, the outlined economics are absolutely unique not just in the uranium space but across the entire mining industry, according to McPherson.
He goes on to run through a checklist of important features that are crucial for any mining project to be successful:
“1) Highest quality mining jurisdiction – check. 2) No surface of ground water issues – check. 3) Working closely in a partnership approach with the local communities – check. 4) uranium specific advantages (high grades and large tonnages, basement hosted, low delirious elements) – check.
“All of these elements combine to produce one of the most economically powerful mining projects out there irrespective of the commodity one is speaking about.”
During the recent winter months, NexGen was engaged in a two-pronged drilling programme at the Arrow Deposit, the first half of which involved development activity in the form of geotechnical drilling, metallurgical and hydro-geological work, as well as some environmental baseline and community relations activity.
The other half of the winter drill programme has been called exploration drilling by the company, although McPherson explains that the actual purpose of the undertaking was to understand and test the global context of Arrow.
Nonetheless, the assay results confirmed uranium mineralisation in aggressive step outs to the Northeast of the deposit and also along strike. “This summer we are following up on these new zones.
“Again, the idea is not to delineate another 10 million pounds of resources per say, but to understand if there is another Arrow sitting there.”
During the winter drill programme and throughout its time in the Athabasca Basin, NexGen has been able to call upon a plethora of local goods and services companies, from drilling partners to transportation, while also dipping into the highly-skilled employment market.
“We are continuing to look at and develop our supply chain into the local areas. We want to use suppliers that may be in Saskatoon or other parts of Saskatchewan and help them develop into locally-focused businesses in order to supply our projects.
“We’re also working with the communities in the areas of health, education and workforce development in order for everyone to be involved in the tremendous opportunity in front of us all.”
A packed pipeline
Following the completion of the summer drill programme at Arrow, NexGen will gear up for the release of its maiden pre-feasibility study for the project, which will include an updated mineral resource estimate.
The PFS is due in early Q4 of this year and will be followed up by initiating the permitting process shortly thereafter. In 2019, the company will continue expansion and definition drilling to support the feasibility study as well as continue permitting the project.
With demand for uranium steadily increasing against a backdrop of concentrated and strained supply as several major global deposits reach depletion, the importance of NexGen’s high-grade Arrow Deposit comes sharply into focus.
The company is confident that nuclear energy is on the rise once again and is aiming to supply the industry with the world’s highest quality uranium from the world’s best uranium project in the world’s best mining jurisdiction – the Athabasca Basin, Saskatchewan.