NexGen Energy Ltd.

Good morning, ladies and gentlemen, and welcome to the NextGen Q3 quarterly conference call. At this time, note that all lines are in a listen-only mode. But following the presentation, we will conduct a question-and-answer session. And if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded. And I would like to turn the conference over to Lee Currier. Please go ahead, sir.

Thank you.

Thank you for joining NextGen Energy's third quarter company update and financial results call. My name is Lee Currier, CEO of NextGen Energy. Joining me on the call today are Travis McPherson, Chief Commercial Officer, and Benjamin Salter, Chief Financial Officer. I'll commence with an update covering milestones and activities during the quarter and moving forward prior to handing over and opening up the call for Q&A. Throughout the call, we will be making forward-looking statements. So please visit our website for relevant disclaimers. Since the company was started in 2011, industry leaders have been saying no to greenfield projects. Irrespective of that, NextGen has backed our objective judgment and built an incredible team that knew the pursuit was not only possible, but absolutely necessary. The decision-making, dedication and commitment to setting new industry standards in every respect of our operations has resulted in NextGen, together with our valued shareholders and stakeholders, laying the foundation of now being on the cusp of making an even bigger impact on global clean energy. Only three years after incorporation in 2014, we discovered the Arrow project, deposit, sorry, the largest, highest-grade uranium deposit in Canada that's currently under development. And we opened up the southwest section of the Athabasca Basin as the future of world uranium production. Every day, NextGen has and confidently applies innovation to all aspects, both technical, environmental, social and commercial, all whilst delivering in an industry-leading cost and time efficiency relative to activity and market capitalisation. Today, on behalf of everyone at NextGen, I'm incredibly proud to reflect on November the 8th, NextGen secured provincial environmental assessment approval for the Rook One project, home of the Arrow deposit. Remarkably, Rook One stands as the first greenfield uranium project in Saskatchewan to reach this stage in more than 20 years and the first ever inside of Canada. This is a historic and well-earned milestone. With securing this primary approval, the project is now elevated to seek finalization of the requisite federal approvals to commence construction and subsequently delivering the RUC1 project to operation. As part of this focus during Q3 2023, we submitted responses to the technical review comments we received in the Q4 2022 federal review process of the draft environmental impact statement. Our submissions are currently under review by the CNSC and we look forward to the conclusion of this process. Furthermore, in September of this year, the CNSC accepted NextGen's initial licence application to prepare the site and construct the project. This acceptance by the CNSC confirmed completeness and compliance with all applicable CNSC licensing requirements. Once the provincial and federal approvals are both in place, the project development schedule is fully in our hands. The design of the RUK1 project is rooted in maximising benefits and minimising effects. Our development prioritises environmental protection, ensuring minimal disruption to local ecosystems and wildlife. Currently, our work on the 2023 site program is approximately 60% complete, including the installation of the 200-person construction camp road enhancements, and preliminary shaft preparation drilling. With regards to project engineering, front end engineering design, or FEED, this is scheduled to be completed during this quarter. And further, advancement of detailed engineering for critical path aspects of the project. We have also been advancing process design work through the continued mill flow sheet testing, through which we have validated the uranium concentrate product G308 that will be generated by the project. In addition, we're in the process of continually seeking the application of technology and innovation to mining methods to ensure the highest achievable cost and environmental efficiency, along with the priority of safety and well-being of all employees and contractors at site. This is a never-ending process. Furthermore, the extensive process of awarding the shaft sinking contractors will be finalised within the coming months, signalling an increase in activity on the ground at Rook One. As we have noted in past quarters, next-gen energy, sorry, nuclear energy is emerging as the critical source for reliable, efficient, clean energy. With increasingly favourable public appreciation of global and global policy momentum around nuclear energy, Demand for uranium continues to grow substantially, while supply significantly lags due to decades of underinvestment. Prices are up almost 50% this year alone, surpassing 2010 highs and reaching $81.50 as per yesterday's UXE close. During the upcoming COP28 conference held in Dubai, which NextGen will be attending alongside Premier Mo of Saskatchewan, it is expected that the US will join the UK in France, Sweden, Finland and South Korea in committing to tripling nuclear capacity by 2050. The US tripling their nuclear capacity over the next 25 years would be an increase in uranium consumption by over 100 million pounds per year. And this is just in the US alone. These latest commitments are in addition to the prior ones committed by the likes of China and other countries that are all already well in progress. Demand for uranium today and through the next three decades has never been more positive, as the world now understands that nuclear energy is the linchpin to energy security and the energy transition. Many multiples of Rook One's annual production will be needed, and they aren't known globally today. It's our ongoing exploration efforts to find more arrows on our dominant land position in the Southwest. The security of supply from stable and ethically sourced is of utmost importance. And NextGen is ideally positioned with a project exhibiting strong technical and environmental setting with high certainty on production volumes to meet the world's utility requirements. Our strategic long-term contracting strategy reflects these attributes. And we'll continue our term book approach to volume-based and unhedged, thereby focus on optimising returns for our stakeholders while delivering to a growing nuclear industry. Our priority is clear in developing the ROOC 1 project into production. In parallel, we are exploring our highly prospective properties located in the southwestern section of the Athabasca Basin, adjacent to Look one. The industry is on track to see a 200-plus pound deficit by 2040. In 2023, we drilled 22,100 metres and made numerous intersections of prospective structure and alteration, providing a new understanding of previously unexplored corridors. The 2023 results provide a framework for a large-scale follow-up exploration program in 2024, of which details will be presented soon. NextGen is leading a change in the sector. We recognize uranium is far too essential for our future to be anchored in the past practices. We recognize the conventional methods of building shareholder value, managing risk, and addressing stakeholders' needs to adapt to meet present-day dynamics. That's why we're approaching Rook One in a way that upholds all environmental, social, labour and economic standards. Our approach has delivered enhanced returns for our shareholders and our stakeholders. Throughout our conversation with utilities, investors and others in the industry, a recurring sentiment is emerging loudly. There is pronounced interest in next gen and an essential demand for new production from Western suppliers. Amid geopolitical uncertainty and security concerns of supply, many companies anticipate constraints affecting their contracted capabilities in the medium to long term. NextGen stands poised and eager to be the solution that enables companies to deliver clean energy to their customers, with the confidence that their supply comes from a secure jurisdiction with the highest environmental, community and labour standards. For example, earlier this month, members of our team participated in Team Canada's trade mission to Japan, led by the Honourable Mary Ng, Minister of International Trade, Export Promotion, Small Business and Economic Development. Japan is actively promoting greater use of nuclear energy, maximising the use of existing reactors and developing the next generation of reactors. The trade mission discussed the unparalleled opportunity for uranium source stable democracies like Canada, quite literally the fuel to Japan's nuclear expansion. Before we move into the financial section of the call, I want to recognize Ben Salter for his appointment as Chief Financial Officer during the quarter. Ben has been a key figure in our growth story for the past few years, and his experience prior to NextGen is absolutely critical in positioning the company for future expansion. Additionally, NextGen also appointed Tracey Primeute to our advisory committee, and she's focused on our community approach, advancing education on climate and growing Indigenous knowledge to benefit all involved with the project. As I've detailed today, we've set and met ambitious goals and done so while maintaining and establishing new industry-leading standards. For an overview of our financial position ending on the 3rd of September 2023, NextGen has a working capital balance of $357.8 million as of September 30. To the end of Q3 2023, NextGen has deployed approximately $91.4 million in the successful exploration and development of the RookOne project, against the current market capitalisation of approximately $4.5 billion. We're developing this mine with the community at the forefront, embracing the opportunity for full and active engagement and partnership with the local priority area communities as a vital part of the process. Additionally, as of September 29, NextGen has outperformed the S&P TSX Global Mining Index by approximately 41% this current year. As we near the completion of the approvals process for the project, we've received expressions of interest from over six traditional lenders. We executed financing through convertible debentures from two supportive long-term shareholders for $110 million US, together with strategically executing the ATM for another $150 million Canadian, to less than a handful of existing and new shareholders, all at a maximum of a 1.5% discount to the spot share price at the time. Comparatively, other financings have been executed at up to 10% discounts. This dilution avoidance equates to hundreds of millions in preserved value and whilst saving approximately $10 million in financing execution fees that would have otherwise applied. In parallel to securing financing, we are working towards index inclusion in the ASX 300. We expect this update in March 2024. This continued interest from lenders and shareholders reinforces that we have a sound strategy and there is strong support within the investment community to bring clean energy solutions to the market. To conclude, we continue to see strong shareholder support for the global appetite for uranium and nuclear power. We're incredibly proud and excited to drive the future of nuclear to solve what is currently one of the world's greatest challenges. Moderator, please open the call to Q&A.

Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touch-tone phone. You will then hear a three-tone prompt acknowledging your request. And if you would like to withdraw from the question queue, please press star followed by two. And if you are using a speakerphone, we do ask that you please lift the handset before pressing any keys. Please go ahead and press star one now if you have any questions. And your first question will be from Andrew Wong at RBC Capital Market. Please go ahead.

Hey, good morning. Thanks for taking my questions. So just with regards to the provincial permitting approval, can you maybe just detail what does that allow you to do today with respect to construction? And then with respect to the federal environmental permit, When do you expect you'll see approval from that side of things?

Yeah, thanks, Andrew. Yeah, look, the provincial permit or approval basically facilitates or is the main gating item to receiving the federal approval. And we are permitted to do all site preparation work for the commencement of construction so at the moment we're putting in a well with nearing completion of the 200 man construction camp we've cleared the pads for both the exhaust shaft and the production shaft we have also been commenced the preparation drilling for the both those shafts the production and exhaust shafts A new bridge has gone in as well and a number of other ancillary surface preparation works in readiness for construction. Major construction is dependent on the federal approval. Now, the federal approval, as we speak, we have submitted absolutely everything to the federal government now that the provincial approval has been received and we are eagerly awaiting their response to all of that information. We can't issue anything else. We're absolutely complete. We are expecting on conclusion of that imminently and in doing so we'll receive a commission hearing date sometime in 2024. Now importantly, even if that was to take the full 2024 to have the commission hearing date and no project has ever gone to a commission hearing date without being approved. It doesn't inhibit the timeline in terms of construction. We are still doing the site preparation work and final engineering prior to major construction. In addition, we're about to appoint the shaft sinker after a very extensive tendering process which will be a major elevation in activities in terms of site preparation.

Okay, that's great. So maybe just going back a bit, last quarter I think there was a commentary that after you received a provincial approval, you'll be able to do some of the site work like you've mentioned, and then the timeline to getting RIC1 online is about four years. So you've received that provincial permitting approval,

now um so are we starting that four-year clock now yeah i think that's reasonable um obviously subject to receiving the final federal approval sometime in 2024 that's that's very reasonable okay thanks thanks andrew next question will be from alexander pierce at the bmo please go ahead hi lee uh hi all um so

You're expecting completion of the feed and detailed engineering soon. Are you able to share when we may be able to see any of the outcomes from these, particularly with respect to maybe any opportunities you found or any kind of capex changes, et cetera?

Yeah, look, we're continually looking at that. And as we speak, we haven't seen any major changes in our design process from what we've had in the feasibility study. Yes, costs have gone up in line with inflation. And also, we're making a number of process optimizations in the interest of the long-term interest of the project. If it's material, we'll provide an update, but we're seeing nothing at the moment which is material to what has previously been disclosed. I would anticipate sometime in the first quarter of 2024, we'll be in a position to be more conclusive around the process optimizations and their results economically.

Yeah, and Alex, as Lee mentioned earlier, you will see the shop sinker appointment probably before Q1 or in early Q1, which is obviously a huge part of the scope of the project. So you will get an update there as well.

Yeah, that's going to be an exciting development and The incorporation of the partners in the local community and the local project area is going to be a very exciting announcement for all stakeholders involved.

Great. Thanks, Dave. Thanks, Alex.

Next question will be from Chris Thompson at PI Financial. Please go ahead.

Hey, guys. Thanks for hosting the call, by the way. Just a quick question. Lee, I think you mentioned that you're about 60% through the 2023 work program, if I read you correctly. Does that mean you're a little behind based on budgets?

No, no. That's physically, that we're at about 60%. It's really the... We've got some more work to do in this quarter, But annually, we'll be well within budget for 2023. Great.

Thanks, Lee. And then I guess the final question, and I guess, you know, just referring to the previous caller talking about any sort of enhancements and what have you, have you given any thought or can you maybe talk a little bit about the opportunity to flex up and flex down production when you enter production?

Yeah, that's an excellent question, Chris, and that's our focus. Look, given the market dynamics, we're looking at flexibility up and primarily around the hoisting and the shaft capacities at site and then also the subsequent flow-on effect through the mill. It's Yeah, we're about midway through that at the moment. And we need to really understand what does flexing up within the parameters of the approval are achievable. But I think that reflects our confidence in the market with what we're hearing from utilities around, you know, the production from Rook One. And, yeah, we've always... you looked at the flexibility of the project, but it's fair to say over the last quarter, there's been an added focus on that flexing capability of the Arrow mine prior to us settling on the final design. So yeah, watch this space. We expect to be a bit more conclusive about it in the first quarter of 2024.

Chris, I might just jump in as well. It doesn't change anything that you would have heard from us in the past. We're exploring this flexibility up. I think it's obvious why we're confident that that opportunity to flex up exists, given the scarcity of this project at this time. But as always, we're not going to produce a pound that isn't needed, that won't be maximal value for ourselves. We're exploring it. We believe that the world's going to need a lot more from Arrow. But having said all of that, you know, we're still going to be very disciplined with respect and make sure that we optimize the value of every pound generated from Arrow.

Great, gents. Thank you very much. Thank you, Chris.

Once again, as a reminder, ladies and gentlemen, if you would like to ask a question, you will need to press star 1 on your touch-tone phone. And your next question will be from David Talbot at Red Cloud Securities.

Good morning, Lee. Thanks for the call here. Morning. Uranium price is certainly on the rise here. The commodities are cyclical, and Fukushima has shown us that things can happen that are unexpected. NextGen hasn't yet signed any forward contracts. You want to leverage those future prices, but Do you foresee the need to backstop any potential debt with offtakes, perhaps guarantee enough sales to at least cover your annual production costs and debt coverage requirements?

It's a good question, David, and a very important one for all investors to appreciate. We are seeking volume-based contracts at future events. market-related prices at the time of delivery. We are very fortunate in the fact that we have an operation that we can ramp production up and ramp production down dependent on market conditions. And so we won't be locked into large amounts of sustaining capex year after year in committing to production five years or longer out. So with that nimbleness, It doesn't reflect the need to secure long-term contracts seeking a floor or the requisite ceiling that comes with seeking a floor. The other aspect too is even at 30 million pounds, we have a very low annual operating costs across those pounds. So from a financial risk assessment perspective, given the capital that we are going to deploy, Our contracting strategy merely reflects that technical certainty around production volumes that's flexible up and flexible down from one quarter to the next, and also that very low operating cost.

Yeah, and just specific to the debt, David, because of the margins that Lee's referring to, we don't have a requirement to commit a lot of production to backstop operations. the debt payments with cash flows from those uptake contracts because, as you well know, you know, at current pricing, it pays the feasibility, say, capex back in less than six months.

The other aspect, too, Dave, we're seeing, you know, the marginal cost of production from Western world producers are approaching the mid-50s and going higher, and that's natural given the... costs that everyone's experiencing. Even with Fukushima, nuclear energy was still, whilst demand went down in Japan and Germany, it was still very buoyant everywhere else in the world. So as the lowest cost producer went in production, we don't see a scenario where our pounds would be scaled back even in that event.

Okay, no, thank you for that. You know, a lot of costs obviously rise and fall with production once on operation, so I can see you, you know, ramping up, scaling back as needed. When it comes to, you know, requiring to sell 20 to 30 million pounds, you know, from a new producer, you know, do you find the next gen getting the attention, sufficient attention from nuclear utilities right now? Are they U.S.? Are they European? And what sort of strategy are you... taken to approach potential clients?

Well, look, we've had Charles Skora, as you know well, on our team for probably seven years now, ever since we put out the first PEA. We've had an ongoing dialogue with utilities since that time. It's fair to say that those discussions and presentations have been more prevalent over the course of 2023. The interest is coming very strongly from the US, Europe, and Japan. Frankly, Travis and I have never been busier on this particular aspect of the project. Utilities are looking for a diversified Western world supply. And the response that we're receiving directly That's why we're looking at possible flexing up of production beyond that 30 million pounds come 2028. The demand and supply gap is widening and the fragility over current Western world supply is very, very high. And this isn't just good news for NextGen, it's good news for all the developers out there, the Denisons, the Boss Energies, the Encores, energy fuels, all those companies who have been working hard over the last 10 decades, the market's far bigger than just NextGen alone. We're not looking to be the only supplier in the Western world. We're looking to be part of a diversified Western world fuel supply mix when we're dealing with such a critical world energy need, both the provision of energy, but also from a clean, reliable source. So... Look, I think we've demonstrated since 2011, we have a very conservative approach. And it's based on facts and experience, and we test that regularly. From a market perspective, we've never been more confident with respect to the long-term prospect or prosperity of the uranium market. And what we all do know very, very clearly is that Western world mine supply can't react quickly. And so we're seeing the uranium price go up to $80, up 50% over the course of this year. I think we're in the very early stages of the market recognizing that available supplies are very, very tight. And we need, I'm just glad that ourselves and those other developers that I've mentioned have been doing the work over the last 10 years in order to meet this critical world demand. And so we see the opportunity for all of these developers as incredibly exciting in going forward. And it's going to be more than over a decade long.

Okay. Thank you, Lee. Travis, well done. It's been great watching NextGen go from pre-discovery to now.

Thank you, David. Appreciate the support all along.

Next question will be from Graham Tanaka at Tanaka Capital Management. Please go ahead.

Hi, guys. Can you hear me? Yep, can hear you loud and clear, Graham. Yeah, congratulations on your progress so far. I'm really interested in this flexing up versus the marginal cost of supply of other mining companies and other mines that have maybe been shut in. So you've cited a $200 million gap. pound shortfall um what would be the total supply uh globally that that you're that you're referring to when you talk about a 200 million pound shortfall when would that be and what would be the marginal cost of providing the first 100 million of those 200 million pounds and then maybe the second 100 million because it seems to me that the incremental cost would be rising considerably over time in those last incremental pounds. Thank you.

Hi, Grant. Graham, good to talk. Yeah, I think it's a good point. The reality is it's not clear on how the 200 million pound deficit is going to get filled. So we can't point to what that cost structure is because it's actually not really a cost or incentive price issue. It's It's the fact that, you know, since 2011, effectively, there was a handful of companies doing exploration work, only ourselves and really ISO that were successful in making new discoveries and fission next door to us. And other than that, there hasn't been new discoveries. And yet, obviously, there's been, you know, 180 to 200 million pounds a year consumed. So it's Yeah, the incentive price, I think the trend is clearly going higher, but it really isn't. You can't point to a price and say at that price, a lot of supply comes online. We're not in that world. You need to have the incentive price clearly go a lot higher because still today there's not a tremendous amount of grassroots exploration happening even yet. So you need the price to go higher to incentivize that. And then obviously you need time and luck and everything else that goes into making a discovery and bringing it forward. I mean, for us, We've acquired the properties in 2012 and made a discovery in 2014. And then, you know, we're talking about production in 2028. That's 14 years from first discovery through to production. And, you know, I think undeniably we have a true tier one asset that was discovered on the very first hole and for a number of reasons was delineated very efficiently. developed extremely efficiently. We didn't waste a day. We had access to capital. And that whole process still took 14 years or will take 14 years. So you make new discoveries today. They're not being made today. But even if you did, you're still talking about 14 to 20 years before those things come into production. So it is unclear how that deficit gets filled, Graham.

Right. Okay. So the other question I had is for Nick Schentz. that to flex up, you have how many pounds proven and probable or indicated, and what is your optimism or what is your sense based on your drill results at depth and to the three sides of Arrow that you could add to annual production flexing up and extend your reserves and mine life at just Arrow alone? because that seems to be probably the fastest way for you to bring on incremental pounds. Thanks.

Yeah, so Arrow's got about 230 million pounds of probable reserves, and then we've got another 80-plus million pounds of inferred, which isn't incorporated in the feasibility study. And then, as you point out, I mean, as you know, you've been with us in the story for a very long time, but we stopped drilling, not because we ran out of ore or anything, just because we had a critical mass of resources to take the next steps and develop a feasibility, you know, all the economic plans in a mine and finance it and everything. So once we get underground, you know, that's when we're going to start exploring all around Arrow, along strike, laterally, and certainly at depth where we've already hit uranium down there, which we're extremely encouraged by. At Arrow alone, we're certain that it's going to grow. Obviously, we don't know to the extent yet, but we're very confident that there's going to be some material growth there. We're exploring all along that corridor and then parallel corridors. Once we've built you know, Arrow and we're underground, you know, the time to develop, you know, nearby deposits is actually quite quick because we're in that competent basement rock. So, yeah, we're very confident in our ability to expand Arrow, certainly, and flex up. But even without doing that, we can still flex up because we don't need more pounds necessarily to flex up the mine. We have ample resources today to flex up the mine.

Okay. And the other factor besides potential additional reserves, it's the time to market. You've cited 12 to 14 years for Arrow. And how much, how short or how long would that time period be to bring on incremental pounds should you discover more in the Patterson corridor or any of the other corridors you have since they're nearby similar rock, et cetera, would it take 10 or 12 years or shorter?

No, I mean, if you're talking about expanding Arrow itself, no, because you've already, like if it's within the environmental assessment footprint, which, you know, something, say, at depth would likely be, you know, you're not talking about material time at all. If you're talking about something regionally, then, I mean, to be determined, because we'd have to go through environmental assessment amendments, but I think it's safe to say it wouldn't take, you know, as long as it did take to develop Arrow because we're not starting from, you know, no drill holes on a project. The engagement efforts have been done, et cetera. So there would certainly be significant time savings there, but it would be to be determined the specific, you know, amount of months or years that it would take to make those amendments. But again, once we're in production, you know, we can be doing those things simultaneously.

Okay, great. Thank you.

Thanks, Graham.

Thanks, Graham.

Next question will be from Poonit Singh at 8 Capital. Please go ahead.

Thanks. Good morning. I just had a quick one. Positive announcement into space this week. The Green Bond Framework in Canada now includes nuclear power You know, language focuses on reactors there, but this site investments in the supply chain, you talked about traditional debt being available to you guys, but maybe talk about something like this being possibly included in your eventual financing package. Thanks.

Yeah, thanks. Yeah, definitely a possibility. I think, as you point out, you know, a lot of these policies that are coming out now are focused on, you know, supporting demand. not necessarily supporting supply. I think that's where other elements, like the critical mineral strategy, et cetera, more come into play and some of the tax incentives there. But, yeah, I think over time you'll likely see that because, you know, as those groups do more work and realize that, you know, demand needs to be supported for sure, and I think that's being recognized and valued accordingly, you know, Similarly, the supply side certainly needs and particularly primary supply certainly needs support. Otherwise, you know, that's all for not. So at the current moment, yeah, very focused on demand, which obviously has trickle down effects to to to the rest of. the fuel cycle, but I wouldn't be surprised to see that evolve over time, certainly. And it's something we're definitely keeping a very keen eye on as we build this capital stack to develop the project.

Great. Thanks, Simon. Thanks, Praneet.

And at this time, we have no further questions registered. Please proceed.

Well, thank you, everyone. with, uh, those, those questions and for listening in today, look, it's a, it's a very, it's always an exciting time at next gen with what we're working on. And, uh, the team's, uh, commitment and dedication is, uh, is absolutely outstanding. Um, it's also a very exciting time in the market. It's, it's in the early stages of, of developing. And, um, NextGen is very well positioned for that going forward. So I thank you for your attention, your interest, and your ongoing support in the objectives that we've set ourselves. Thank you.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.