Earnings Call Transcript - NXE Q1 2025

Operator, Operator

Thank you for your patience. This is the conference operator. Welcome to the NexGen Energy First Quarter 2025 Results Conference Call. As a reminder, all participants are in listen-only mode and this call is being recorded. After the presentations, there will be a question-and-answer session. I would now like to turn the conference over to Mr. Leigh Curyer, Chief Executive Officer and Director of NexGen Energy Limited. Please proceed, sir.

Leigh Curyer, CEO

Thank you, Kaitlyn. I appreciate everyone joining us today for NexGen's Q1 2025 financial results conference call. I'm Leigh Curyer, the Chief Executive Officer of NexGen Energy, and I'm here with my colleagues Travis McPherson, Chief Commercial Officer, and Benjamin Salter, Chief Financial Officer. During today's call, I will share an update on the global uranium market, which continues to experience historically high demand amid ongoing supply challenges. Additionally, we're seeing liquidity return to the spot market towards the end of the quarter, which has driven spot prices up by 11%. I will also highlight our key achievements in the first quarter of 2025, including our ongoing progress on the regulatory front for our Rook I project as we prepare for Canadian Safety Commission hearings later this year. Furthermore, I will provide an update on our exciting 2025 drilling program at Patterson Corridor East. Early results from our drilling efforts are excellent, featuring what is now recognized as the best discovery phase intercept ever recorded in RK-25-232 on our land as reported on March 24, 2025. All of this indicates that NexGen's Rook I project is nearing final federal permits, after which we will proceed to construction and subsequent production. The market for uranium will be competitive for low-risk, stable production sources in reliable jurisdictions. NexGen's Rook I project aims to restore Canada as a leader in uranium production while adhering to the highest environmental, social, and governance standards. Concurrently, further drilling at PCE is defining mineralization with attributes similar to our neighboring Arrow deposit, located just 3.5 kilometers to the west. At the end of this presentation, we will open the floor for questions, allowing you to inquire with Travis, Ben, and myself. Throughout today's call, we will make forward-looking statements, and I encourage you to check our website for relevant disclaimers. It's essential to recognize that we are at a critical turning point. The narrative around uranium investment has shifted from being aspirational to concrete, emphasizing execution and scarcity. Since the year's start, there has been a noticeable disconnect in uranium equity from fundamental market metrics. Concerns about tariffs have drawn attention to essential factors shaping the uranium market. With over 30 countries committed to tripling their nuclear power capabilities by 2050 and more than 60 reactors currently being built globally, the demand for nuclear power is more robust than ever. Canada has a crucial role in this landscape, especially as the United States seeks to reinforce its supply security through substantial investments in critical projects that must come online immediately. The International Atomic Energy Agency estimates that cumulative uranium needs could reach approximately 7 billion by 2025, the majority of which remains undiscovered. A project like NexGen's Rook I is exceptional in terms of its volume capacity and performance across technical, environmental, social, and economic dimensions. Yet, the industry will need at least ten projects of this caliber over the next 25 years to satisfy demand. The substantial structural deficit highlights the urgency of the supply issues the world faces and underscores the vital role NexGen will play. A market signal has emerged this quarter, with several producers indicating that current price levels are untenable, leading them to postpone contracting decisions and further delaying investments in development projects. It's encouraging to see a new generation of uranium developers and producers collaborating with NexGen to ensure our industry's sustainability through discipline and patience, ultimately driving uranium prices higher in the long term to reflect the true costs of responsibly sourced uranium and ensure a reliable supply. Pricing needs to increase significantly to stimulate production growth globally necessary to meet both current and future demand. Demand remains strong, and the entry of new technology players into the market leaves our industry well positioned for improved outcomes, which benefits all stakeholders involved in delivering energy. Spot prices currently hover around $71 per pound, having quickly risen from the low $60s due to modest activity in a developing carry trade, highlighting how sensitive the market is to shifts in liquidity. Meanwhile, the term price has remained stable, close to $80 per pound. This stability in long-term pricing is a strong indicator, reflecting that fundamentals focused on demand are exceptionally solid despite short-term fluctuations. For NexGen, these developments reinforce our strategy. Our initial sales contracts highlight the supply-demand imbalance in the uranium market and strategically benefit our shareholders by securing economics in a rising price environment while providing unparalleled security and diversification of supply for our utility partners. NexGen remains actively engaged in negotiating term deals across the industry, and these efforts have not been affected by elections, global trade challenges, or the current lack of liquidity in the spot market. Our role in the market is well recognized, evident through ongoing contract negotiations. The regulatory landscape is also evolving favorably for nuclear energy and secure supply chains. Notably, there is an anticipated executive order from the United States aimed at expediting nuclear project developments through the Department of Defense and the Department of Energy, acknowledging the intersection of national security and energy needs in today's world. Baseload power is essential for attracting business investments, supporting industrial growth, and fostering advancements in critical sectors like artificial intelligence. Europe has also announced plans to phase out Russian nuclear suppliers from its energy landscape starting in 2027, which presents significant opportunities for Western suppliers and strengthens the emphasis on ethical, environmentally responsible production from politically stable regions. Recently, Germany has signaled a substantial shift back toward nuclear energy, which positively impacts EU energy policy. Alongside Belgium's repeal of nuclear phase-out laws, this opens the door for new nuclear investments, among other positive developments impacting the nuclear landscape. This shift emphasizes the value of reliable, responsibly sourced power to support communities and economies. Rook I, with its leading environmental profile, technical simplicity, long mine life, and strategic location in Saskatchewan, Canada, is well positioned to greatly benefit from this recalibration of the global supply chain. In Q1 2025, we reached significant company milestones, including scheduling our two public hearings for the Rook I project with the Canadian Nuclear Safety Commission on November 19, 2025, and February 9 to 13, 2026. We are fully prepared to present Canada's largest uranium development project to the world to secure final project approval for the benefit of our shareholders, indigenous partners, the province of Saskatchewan, Canada, and the planet. These hearing dates provide a clear timeline and enable us to strategically optimize our construction schedule, advance procurement initiatives, and implement our construction hiring plan precisely, allowing us to maximize efficiency when transitioning from permitting into construction execution. We are actively monitoring Canada's changing regulatory environment, which has put a focus on streamlining approvals for projects of national significance with provincial support. Newly elected Canadian Prime Minister Mark Carney's commitment to a one-and-done approach is very positive, demonstrating not only his recognition of the opportunities within Canada but also his willingness to sensibly expedite the rigorous approval process needed to enhance Canada's economic trade and energy security. Turning to Patterson Corridor East, this region consistently exceeds and redefines our expectations. In 2025, we initiated our most extensive drill campaign at PCE, a 43,000-meter exploration project, among the largest in the Athabasca Basin this year. Our aim is clear: to follow up on the exceptional mineralization identified so far and better ascertain the scale and continuity of what appears to be a significant discovery with all the unique features reminiscent of the Arrow deposit. On March 24, 2025, we reported an outstanding discovery phase intercept at drill hole RK-25-232, which showed 3.9 meters of uranium mineralization with counts exceeding 61,000, within a broader 13.8-meter zone. Additional drill holes, spaced at least 50 meters from this intercept, have also returned ultra-high-grade mineralization. High-grade zones have now doubled in size from our last update, measuring 210 meters along strike and 335 meters vertically, and they remain open in all directions. These results are extraordinary, especially since PCE is still in the discovery stage. For context, intercepts of this magnitude at Arrow were only noted later during the targeted resource definition phase. I'd like to remind everyone that NexGen holds the most significant land position in Saskatchewan's Southwest Athabasca Basin, which is regarded as the future of uranium production in the West. PCE is situated just 3.5 kilometers east of the prominent Arrow deposit, positioning us to expand our resource base significantly in the years ahead and positively impact the surrounding communities for generations. NexGen is in a strong financial position, holding approximately CAD 435 million in cash, sufficient to fund the beginning of construction activities for the next 12 to 18 months. Additionally, we have more than CAD 1.6 billion in expressions of interest from leading banks and export credit agencies, forming the foundation for our project funding. Like any Tier 1 project, we are exploring various financial options to determine the best strategy for this project’s funding. In terms of timing, we are concentrating on the end of 2025 to decide on the best financing approach that provides capital certainty, allows us to uphold our marketing strategy, and maximizes our exposure to future price trends while maintaining production output flexibility. Simultaneously, the demand for our future production has never been more vigorous. Ongoing offtake negotiations are taking place with diverse partners worldwide, and we anticipate announcing more agreements this year, further strengthening our market position as we advance toward construction and production. With federal approval on the horizon, our integrated project team is in place, and all procurement and detailed engineering work is ready to begin construction with a solid balance sheet. We are well prepared and positioned to proceed to the next phase of development. Now, I would like to open the floor to questions.

Operator, Operator

Our first question is from Ralph Profiti with Stifel. Please go ahead.

Ralph Profiti, Analyst

Good day. Thanks, operator. Leigh, I'd like to ask a question on more detailed progress towards procurement of equipment and long lead items. Are you happy with where you are in the queue? And are your suppliers talking about general inflationary pressures or delivery schedules that may be at risk? Or are these conversations in line with expectations?

Leigh Curyer, CEO

Thank you, Ralph. We have a thorough construction execution plan that is scheduled down to the day once we receive approval. One of the advantages of having the commission hearing dates set for November 2025 and February 2026 is that it allows us to effectively plan the procurement process for the essential inputs, especially for the first 12 to 18 months of construction. This is currently well underway and is a major focus for our executive team. I feel confident about where we are heading. Regarding pricing, the industry as a whole is facing pricing pressure, and we are not immune to that. However, we are maintaining our expected cost forecasts, which has been backed by the due diligence of several debt and equity providers involved with our project. The Rook I Arrow project has very strong economics, so any consumer price index pressure will not significantly affect us like it would for a marginal project. Additionally, with a payback period of about 13 months at current prices, any CPI increase will have minimal impact on the financial viability of the project. You are right, Ralph, it is an area we diligently monitor and plan for. As it stands, we're in a good position and I don’t anticipate any significant changes moving forward, given the extensive planning that has gone into our construction execution schedule.

Ralph Profiti, Analyst

Great. Thanks for that answer, Leigh. And a separate question, as greater attention turns to exploration, just wondering how you're balancing the desire to turn around the mineral resource estimate inaugural one for PCE and basically what the drills are telling you, which is the longer you take, the more potential is, just wondering how you're balancing those two aspects of potential versus delivering an MRE?

Leigh Curyer, CEO

Sure. Firstly, regarding the exploration group, this does not distract from the final federal permitting or the execution schedule. I want to emphasize that PCE is still in the early definition phase, and we are not transitioning to delineation, resource definition, or drilling activities any time soon, at the earliest that would be in 2026. The area is still open in all directions and is looking more promising than Arrow did at the same drilling stage. Arrow expanded significantly once we considered the high-grade sub-domain. It is very early in the process, and we do not feel any pressure. Our exploration strategy is well thought-out; we first aim to define the mineralization area, then we focus more drilling on the high-grade sub-domain because intersecting that high-grade mineralization greatly impacts the resource definition. Once we have a clear understanding of both aspects, we'll shift our focus to measuring volume and grade, but that stage is not upon us yet. It is still too early to determine what we are really dealing with at PCE, as it shows incredible similarities to Arrow.

Ralph Profiti, Analyst

Thanks very much, Leigh. I appreciate those answers.

Leigh Curyer, CEO

Thanks, Ralph.

Operator, Operator

The next question is from Julio Mondragon with BMO Capital Markets. Please go ahead.

Julio Mondragon, Analyst

Hi, good morning, Leigh. Julio here. So just the first question is related to your plans for Rook I development for this year. So, the budget on potential activities, well, as you await the hearing date later this year and early 2026.

Leigh Curyer, CEO

If I understand your question correctly, we are currently ready for the hearing date. If we had approvals right now, we would already be in construction. Since 2017, we have had a clear definition of what we are building and how we plan to do it, continuously refining our approach. This project has received extensive time and attention to ensure we execute it effectively. Additionally, from a technical standpoint, it is simpler compared to other mines globally, with a very stable basement rock. The mine has a small physical footprint, and we will be extracting about 1.5 double-decker buses worth of ore daily, which is minimal for a mine. Our metallurgy is very clean, making the processing plant a more straightforward version than what we’ve seen elsewhere. All these factors contribute positively to our ability to execute once approvals are granted. From a company perspective, we are very diligent in our risk analysis and are eager to begin construction after nearly eight years of preparation. We have the right team in place, and our execution schedule is detailed down to the day. We look forward to being in that position, expecting to start in early 2026 following the completion of the federal permitting process with the CNSC.

Julio Mondragon, Analyst

Thank you. Could you provide more details about your development activities planned for 2025 and the potential budget for those activities?

Leigh Curyer, CEO

We are focused on exploration in 2025 and are maintaining the site for regional drilling activities while ensuring it is managed in an environmentally responsible way. Currently, we have CAD435 million in our treasury and an additional CAD300 million in liquid assets. Once we move into construction, we will see a budget increase. For now, we are well-funded through the end of 2026 to cover all general and administrative expenses, maintain the site in preparation for construction, and support exploration activities.

Julio Mondragon, Analyst

Perfect. Thank you very much. So, if I may ask one more question, how are your contracting discussions with utilities going at the moment? If we can have more detail on that? Thank you.

Leigh Curyer, CEO

Sure. I might just hand over to Travis on that one.

Travis McPherson, CCO

Thank you for the question. As Leigh mentioned earlier, our contracting discussions have been very active and ongoing, with many contracts expected to be signed and announced soon and throughout the year. There is a growing awareness of the significant supply deficit anticipated later this decade and into the 2030s when Arrow will start production, which has utilities particularly concerned. This situation uniquely positions NexGen favorably. Utilities also recognize that not all uranium is the same, and purchasing from us offers them a different value compared to buying from established producers, which do not provide them with new diversification and supply sources. Support for our mine and other emerging developers is acknowledging this difference, which is beneficial for our initiatives. Overall, we are seeing good progress, and more developments will follow.

Julio Mondragon, Analyst

Perfect. Thank you very much, Travis and Leigh. Thanks.

Operator, Operator

The next question is from Andrew Wong with RBC Capital Markets. Please go ahead.

Andrew Wong, Analyst

Hi, thanks for taking my questions. Maybe just on contracting again, can you just talk a little bit terms of the contracts that are being discussed? For NexGen, my understanding, you guys would prefer more spot-related market exposure? Is that where we can expect to see your upcoming contract settlements? Are the utilities agreeing to that? Just any sense on if there are any floors or ceilings that are being discussed, what's those levels are today?

Travis McPherson, CCO

Thank you, Andrew. It's Travis again. We can't discuss specific terms, but I can say that what we revealed in December regarding the initial 5 million pounds of contracts outlines the sensitivities we're considering moving forward. Our focus is on maximizing exposure to the future prevailing uranium price. The spot price of uranium at the time of delivery has remained steady, and utilities are generally receptive to our approach, which is beneficial for both parties. Our overall philosophy is designed to avoid a situation similar to the post-Fukushima period, where producers flooded the market for too long due to floor prices that encouraged them to continue production at breakeven levels. Our marketing strategy addresses this by shortening contract durations and linking them to the market price at the time. This allows the industry to adapt if circumstances change in the future, which we've shown to be acceptable, as evidenced by our December disclosure.

Leigh Curyer, CEO

Yes, utilities do not have uniform contracts for all producers or advanced developers. The contracts are tailored to the specific nature of our projects. Our strategy takes into account the technical, economic, and environmental aspects of our project. We are in a strong position to adjust production based on market conditions, which benefits both producers and the utilities acquiring the offtake. While there are some misconceptions about how this operates, our mine stands out due to its technical certainty, economic viability, and environmental performance. Our contracting approach reflects these qualities, which have been recognized by the utilities we have already partnered with and those we plan to partner with soon.

Andrew Wong, Analyst

That’s a lot of great color. Thank you. With the federal election, I'm curious how has that impacted your discussions with the governmental on approvals? Have you had any discussions with the new government since the election? And is there any flex around those public hearing dates?

Leigh Curyer, CEO

Look, the good thing about those dates that are now bookends, and we know and they're in place. Look, I've been incredibly encouraged by Mark Carney's comments with respect to one and done for major energy projects in Canada. And if that transpires into a more efficient regulatory process where a project that has provincial approval won't require a subsequent federal approval, I think that's in the interest of all current but also future uranium projects that are going into production. Look, there are aspects of having two regulatory processes, both the provincial and federal. There is overlap and between the two, that's not in anyone's interest. And so look, I've been very impressed with Mark Carney's commitment to streamlining the process. And Canada playing to its strengths and getting these energy projects up and running now. So if it does transpire into that, I'll be very, very pleased to present that. Certainly, the Premier of Saskatchewan, Scott Moe has been very public with the receptor, what he would like to see with respect to the federal government's approach to projects such as ours. Yeah, let's wait and see. Look, November will be just around the corner. No doubt about that. And we are in the final stages as we speak.

Andrew Wong, Analyst

Great. Thank you very much.

Operator, Operator

Our next question is from Craig Hutchison with TD Cowen. Please go ahead.

Craig Hutchison, Analyst

Hi, good morning, guys. Thanks for taking my question. Just a question. You mentioned at the onset that you're looking to find out the best financing package by year-end. Are you guys still entertaining a strategic investor at the asset level at this point?

Leigh Curyer, CEO

Yeah. I’ll let Travis answer that.

Travis McPherson, CCO

Yeah, thanks, Leigh. Yeah, Craig, short answer, yes, we are. As we have talked about in the past, it's very targeted select group that we have been engaging with some over the last two years, some in detail over the last year. And yeah, it still remains one of the many options that we have at hand. In terms of timing, everyone involved on that process, on the prepayment process, on the debt process are all lining up for the timing around year-end of this year as we noticed.

Craig Hutchison, Analyst

Okay. So that would come before the permits probably?

Leigh Curyer, CEO

Yeah, potentially. But obviously, the permits are very dependent on including that financing aspect.

Craig Hutchison, Analyst

And just on the contracting, I mean, do you guys have a sort of set volume or rough volume that you want to have contracted before you make the final investment decision?

Travis McPherson, CCO

Yeah, Craig. We don't have that. Some options will require some level of offtake to be established, but it won't need to be in place to start construction. For instance, if part of the debt requires some volumes to be proven, as we've mentioned before, the lenders are not concerned with the pricing mechanism used. However, there will need to be some volumes, but those won't be necessary until we actually start drawing down the debt, which won't occur until at least early 2027. There is no volume requirement for us to begin construction. As we've said, we're ready to go. If we receive approval tomorrow, we can start construction immediately. We're in a good position there. Furthermore, in the long term, we don't have a specific target percentage for term contracts. We've always kept our ability to adjust to the production output flexibility of the mine, with the main factor being our alignment with the counterparties regarding the future of uranium supply and demand. If there is alignment, we can secure a contract. If not, we are patient. We've maintained this patience, which has significantly benefited us, and we will continue to do so.

Craig Hutchison, Analyst

Okay, great. Maybe one last question for me. Just back to PCE. I think the expectation was assays were released in April. Would it take a bit longer than expected? Or are you guys just waiting to batch those results with some new ones?

Leigh Curyer, CEO

No. The lab has been extremely busy with the volume of samples processed. We are expecting results soon, and when we release them, we will always provide context regarding their significance. There’s no doubt that the findings from the 232 project will have their own announcement due to its importance, likely separate from the assay results of the drilling conducted in 2024. I want to emphasize that we are still in the very early stages of understanding the scope of PCE, but it appears to be very promising when compared to Arrow at a similar level of drilling.

Craig Hutchison, Analyst

Great. Good luck, guys. Thanks.

Operator, Operator

The next question is from Brian MacArthur with Raymond James. Please go ahead.

Brian MacArthur, Analyst

Good morning, and thank you for taking my question. A little bit back to what Ralph was talking about. When you get approval, let's just say we get it February next year, I mean, are you going to be able to do anything to move the whole construction timeframe up? If you can maybe just go through how you see it developing going forward on the timeline and where the critical path is to production once you do get your permits.

Leigh Curyer, CEO

Thank you, Brian. The shaft is essentially the item with the longest lead time and requires the most preparation. Regarding the feasibility study we updated in August 2024, the construction process will take four years. We would ideally like to begin as we exit winter, which aligns with when we expect to wrap up the CNSC hearing process. Therefore, everyone should note that from the start of construction—pending the CNSC's finalization—the timeline is 48 months. There isn’t any significant way to accelerate from that 48-month estimate; it will remain at 48 months.

Brian MacArthur, Analyst

Great. Thanks. I think that’s how I understood it too. On the converse, just to be sure, there's nothing because it's delayed back to Ralph's question that you've lost stuff in the queues, is there anything that would make it longer than 48 months that you can see right now just because of the timing of the way things have worked out.

Leigh Curyer, CEO

No, it's actually the opposite. The delay in the hearings allows us to refine the execution schedule for key imports even further out than we otherwise would have. So, that's a reduction in execution risk once we start construction due to this delay in the hearings to November of '25 and February of 2026. From an execution perspective, when we do commence, it's actually a little positive.

Brian MacArthur, Analyst

Great. Thanks. And maybe just one more thing to make sure I fully understand this. My understanding was a lot of the sourcing was in Canada for what you need as well. Is that right? So really, there's not a whole lot of risk in the supply chain going forward? Is that a fair comment?

Leigh Curyer, CEO

That's fair. And we will prioritize and optimize the opportunities for Canada first and foremost. There is some specialization of certain items of equipment with respect to the shaft and the mill, but nothing really material in that sense that Canada will be prioritized. And I will say that, that prioritization does, as everyone knows, with respect to our focus on local communities, it will start in the local communities and expand out from there.

Brian MacArthur, Analyst

Great. Thanks very much, Leigh. That’s very clear.

Leigh Curyer, CEO

Thanks, Brian.

Operator, Operator

This concludes the question-and-answer session. I'd like to turn the conference back over to Mr. Curyer for any closing remarks.

Leigh Curyer, CEO

Thank you, Kaitlyn. Yes, as always, we really appreciate everyone's ongoing interest and support for NexGen. As I alluded to in the earlier part of the call, we are on the cusp of final federal permitting approval. The market and the fundamentals for nuclear energy are improving almost on a daily basis with all of the news that is coming out. And NexGen is ready to deliver its role in returning Canada to being the number one producer of this incredibly important fuel that powers the economies and the population's homes right around the world. With that, I thank everyone for their time and attention. And as always, if any additional questions arise, please don't hesitate to reach out to Monica, Stacey, Travis or myself. Thank you.

Operator, Operator

This brings to close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.