NexGen continues drilling the Arrow discovery

Analysts believe NexGen Energy (TSXV: NXE) may be on to something at its Arrow zone on the Rook 1 property in the southwest part of Saskatchewan’s Athabasca basin.

The Vancouver-based junior discovered Arrow last February and has since been focusing its drill efforts on the zone, located near Fission Uranium’s (TSX: FCU; US-OTC: FCUUF) Patterson Lake South project. Fission recently unveiled a monstrous resource for the project’s Triple R deposit of 105.5 million lb. grading 1.5% uranium oxide (U3O8).

“Being located adjacent to Triple R, now the third-largest deposit in the Athabasca, speaks volumes as to the upside potential of the entire area — of which NXE has prime real estate,” Dundee Capital Markets analyst David Talbot writes in a note.

“While NexGen holds an excellent location relative to a world-class deposit, it is far from an arm-waving ‘me too’ story,” adds Rob Chang, an analyst with Cantor Fitzgerald.

NexGen has been reporting its own promising results from Arrow, with 34 of the 36 holes drilled to date returning various grades of uranium mineralization. The zone measures 515 metres long and 215 metres wide. Mineralization starts from 100 metres deep and continues down to 730 metres. The zone is open in all directions. 

Scintillometer results from hole 30, the most intriguing hole to date, pushed the stock up 29% to close Aug. 26 at 54¢. Assays released in October confirmed that the hole hit several high-grade intercepts, including 0.5% over 92 metres, 2.5% over 45 metres, 15.5% over 4.5 metres, 10.2% over 20 metres and 7.5% over 63.5 metres. The latter intercept contained 46 metres of 10.3% U3O8. 

Hole 30 is one of the best holes ever drilled in the Athabasca basin, with a total composite grade thickness (intercept x grade) of 909, Chang and Talbot write.

After the mid-2014 program, NexGen kicked off a $7.5-million, 18,000-metre drill program in January. It has two rigs on the land-based, basement-hosted Arrow discovery. A third rig is testing the area northeast and southwest of the zone along the Patterson conductor corridor and several other high-priority geophysical targets. The corridor has a 7 km strike length and runs through the western part of the property. 

On Jan. 27, the junior reported scintillometer results for the first four holes from the 2015 program. Talbot says that all four hit potentially high-grade uranium mineralization, supporting his belief that “this zone is shaping up to be one of the most important discoveries in the Athabasca basin.” 

Chang agrees that the program is “off to a good start,” with all the holes hitting broad mineralization, including the most intensive to date illustrated by massive pitchblende mineralization and off-scale radioactivity. 

Hole 34b intersected 129 metres of mineralization, including 10.3 metres of off-scale radioactivity (greater than 10,000 counts per second) within 328 metres. This hole extends the known mineralization in hole 30 by 30 metres southwest along strike. “As a rule of thumb, a 5,000 cps reading implies a 1% U3O8 grade, and the relationship is exponential,” Chang says. 

Hole 36 also encountered mineralization 6.5 metres beneath the Athabasca Group and basement unconformity, “which is highly encouraging with respect to potential for shallow unconformity-style mineralization to the northeast of Arrow,” Garrett Ainsworth, the junior’s vice-president of exploration and development, said in a release. 

Elsewhere on the Rook 1 property, NexGen discovered a multi-point, 480-metre long radon anomaly ranging from 20 to 150 metres wide, some 400 metres northeast of Arrow.

“The results of this radon lake water survey add another layer of data that enhances the prospectivity of this target area … which has now become a high priority to drill during this winter program,” Ainsworth says.

“While targets don’t necessarily mean a uranium discovery, there has been a high success rate between radon anomalies and uranium mineralization next door at Fisson’s Triple R deposit,” Talbot adds.

More recently, a ground gravity survey identified six high-priority drill targets at the Fury area, 13.5 km southeast of the Arrow zone. The company says the area has similar geophysical signatures to Arrow and sits in a section of the property that has up to 20 metres of overburden.

Given the potential for shallow high-grade mineralization, NexGen plans to drill up to 4,500 metres.

“I look forward to one of our three rigs mobilizing to Fury shortly,” Ainsworth says.

NexGen’s manager of corporate development Travis McPherson adds that the junior intends to drill 9,000 metres on the Arrow zone, and 4,500 metres on the radon anomaly.

While Arrow is next to the Triple R deposit, analysts say it has more in common with Cameco’s (TSX: CCO; NYSE: CCJ) Eagle Point mine. That asset is part of the major’s larger Rabbit Lake uranium district, on the eastern edge of the Athabasca basin.

Talbot writes that drilling at Arrow is delineating near, vertical, parallel and en echelon stacked zones of high-grade mineralization, explaining this is similar to what’s being mined at Eagle Point.

Chang points out that the Arrow zone and the Eagle Point mine have similar graphitic horizons, appear to plunge away from the Athabasca basin and have few impurities in the uranium mineralization. 

Despite only completing 36 holes at Arrow, McPherson says the company has a good grasp on the mineralization because it has drilled various holes, including angled, scissor and vertical. “We are really trying to focus on understanding as much mineralization as humanly possible with each and every hole,” he says, adding the company will have enough information to put out a resource statement later this year.

Both analysts recommend a “buy” on the stock, with no target price. 

NexGen recently closed at 33¢ per share, with a $57-million market capitalization. It has $14 million in cash.