NexGen rises on US$250M uranium purchase

Shares of NexGen Energy (TSX: NXE; NYSE: NXE; ASX: NXG) rose on Thursday as the uranium developer inked an agreement with MMCap International to buy 2.7 million lb. of uranium concentrate.

The deal is valued at US$250 million based on the metal’s five-day average spot price.

MMCap International is a Grand Cayman-based fund with US$546 million in assets under management as of Dec. 31. Its investments include a US$160.6 million stake in Uranium Energy (NYSE-AM: UEC), which has projects in Wyoming and Texas as the largest diversified uranium company in the United States. 

NexGen gained 4% to $10.93 in afternoon trading in Toronto. The company has a market capitalization of $5.9 billion.

“At a time when available physical uranium is extremely tight and expected to continue to be scarce given the long-term supply deficit, this purchase represents a strong opportunity for the company to bolster its marketing discussions and optimizes the optionality of project financing structures under evaluation,” said NexGen CEO Leigh Curyer.

Rook I

NexGen’s main development focus is the Rook I project, hosting the Arrow discovery from 2014, considered to be the largest development-stage uranium deposit in Canada.

In a binding term sheet, NexGen commits to issuing US$250 million in secured convertible debentures to MMCap in exchange for the uranium concentrate. These debentures will be convertible into about 23 million common shares of NexGen, equating to about 4.3% of the company’s issued and outstanding common shares.

In November 2023, the company obtained environmental approval for the proposed mine, making it the first approved greenfield uranium development in 20 years. Permitting to construct the underground mine and mill is underway.

Rook I would produce 21.7 million lb. of uranium oxide annually over 11 years from the Arrow deposit, according to a 2021 feasibility study. Last month, the company said it had found a new deposit 3.5 km east of Arrow. The Athabasca Basin is one of the world’s leading sources of uranium production.