Mr. Leigh Curyer reports
NEXGEN ANNOUNCES 64% INCREASE IN AVERAGE ANNUAL AFTER-TAX CASH FLOW IN PRE-FEASIBILITY STUDY, AFTER TAX NPV OF $3.7BN, 43% INCREASE IN INDICATED RESOURCES, AND INITIATES THE LARGEST DRILL CAMPAIGN IN COMPANY'S HISTORY TO EXPEDITE ARROW TO FEASIBILITY
NexGen Energy Ltd. has released the results of an independent prefeasibility study and mineral resource update of the basement-hosted Arrow deposit, located on the company's 100-per-cent-owned Rook I project in the Athabasca basin in Saskatchewan, Canada. The PFS was completed jointly by Wood Group, and Roscoe Postle Associates Inc., with other technical inputs completed by subconsultants.
Prefeasibility study highlights
SUMMARY OF ARROW DEPOSIT PREFEASIBILITY STUDY (BASED ON US $50/LB U3O8)
PEA (July 31, 2017) PFS
After-tax net present value (8% discount) $3.49-billion $3.7-billion
After-tax internal rate of return (IRR) 56.7% 56.8%
After-tax payback 1.1 years 1.2 years
Initial capital costs (capex) $1.19-billion $1.25-billion
Average annual production (life of mine) 18.5 M lb U3O8 25.4 M lb U3O8
Average annual production (years 1-5) 27.6 M lb U3O8 29.0 M lb U3O8
Average daily throughput 1,448 tonnes per day 1,039 tonnes per day
Average annual grade 1.73% U3O8 3.09% U3O8
Mine life 15 years 9 years
Average annual after-tax net cash flow (life of mine) $553-million $909-million
Average annual operating cost (opex, life of mine) $8.37 ($6.70 (U.S.))/lb U3O8 $5.81 ($4.36 U.S.))/lb U3O8
Operating margins (life of mine) 85.5% 90.6%
Note: Preliminary economic assessment based on $1 (Canadian) equals 80 U.S. cents, PFS based on $1 (Canadian)
equals 75 U.S. cents.
Capex
-- increased due to the introduction of provincial sales tax (PST) applicable to capital projects. Excluding PST, initial capital costs reduced by approximately $64-million to $1.18-billion (0.5 per cent lower than PEA). Additionally, due to the reallocation of tailings management to operating costs, the sustaining capital component of capital expenditures has been significantly reduced.
Mine life
-- PFS is based on indicated resources only and does not include the current additional inferred resources 91.70 million pounds of U3O8 contained in 4.84 million tonnes grading 0.86 per cent U3O8 or further potential increases in the resource base at Arrow that remains open in many directions.
Leigh Curyer, chief executive officer, commented: "An assessment across all of the PFS metrics, results in a substantial improvement to the PEA with a 64-per-cent increase in average annual after tax net cash flow. Incorporating only the indicated mineral resource, the life of mine drops from 15 to nine years, yet the increase in average annual grade -- whilst maintaining a consistent capex and lower opex -- results in an after tax NPV of $3.7-billion. In addition, the 43-per-cent increase in indicated mineral resource growth during 2017 demonstrates with closer-spaced drilling, Arrow improves and optimizes mine production plans.
"With these strong PFS results, the company is expediting Arrow to feasibility by initiating a two-stage 125,000-metre (10-rig) high-density drilling program. This will be the largest drilling, geotechnical and hydrogeological focused program in the history of NexGen. Preparations are well under way with the program brought forward and scheduled to commence in early December, 2018.
"I would like to take the opportunity to congratulate the entire NexGen team, key consultants, local communities and government departments for their outstanding commitment and execution of Arrow's development."
Conference call
NexGen will host a conference call today,
Monday, Nov. 5, 2018, at 11 a.m. ET.
To join the call please dial 1-416-764-8688 (local/international) or 1-888-390-0546 (North America toll-free) with passcode 49399985 and an operator will assist.
A recorded version of the proceedings will be available on NexGen's website shortly after the conference. The playback numbers are 1-416-764-8677 (local/international) and 1-888-390-0541 (North America toll-free) and the playback passcode is 399985 followed by the pound key. The playback will be available until Tuesday, Feb. 5, 2019.
PFS SENSITIVITY TO URANIUM PRICE
Uranium price ($U.S./lb U3O8) After-tax NPV After-tax IRR After-tax cash pay back
$80/lb U3O8 $6.62-billion 80.4% 0.8 years
$60/lb U3O8 $4.65-billion 65.5% 1.0 years
$50/lb U3O8 $3.66-billion 56.8% 1.2 years
$40/lb U3O8 $2.67-billion 46.9% 1.5 years
$30/lb U3O8 $1.69-billion 35.6% 1.9 years
$25/lb U3O8 $1.19-billion 28.9% 2.3 years
Key updates of the 2018 PFS from the 2017 PEA:
-
Reduction in capex due to a reduced mine footprint as a result of higher head grades and also the reallocation of the underground tailings to operating costs. If the recently introduced PST is ignored for an apples-to-apples comparison on capital cost estimates from the PEA to the PFS, the PFS capital cost would be even lower;
-
31-per-cent reduction in average annual opex to $5.81/pound U3O8 (from $8.37/lb U3O8) despite the PFS recategorizing the underground tailings to opex instead of sustaining capital as per the PEA. These costs account for 21 per cent of opex;
-
43-per-cent increase in indicated mineral resources from 179.5 million lb of U3O8 contained in 1.18 million tonnes grading 6.88 per cent U3O8 from the March, 2017, mineral resource estimate to 256.6 million lb of U3O8 contained in 2.89 million tonnes grading 4.03 per cent U3O8;
-
Average annual production increase from 18.5 million lb U308 in the PEA to 25.4 million lb U308 due to higher head grades increasing from 1.73 per cent U308 in the PEA to 3.09 per cent U3O8 in the PFS;
-
Average mining rate decrease from 1,448 tonnes per day to 1,039 tonnes per day;
-
Metallurgical pilot plant and bench-scale testing optimized recovery resulting in increased total processing recovery rate to 97.6 per cent versus 96.0 per cent in the PEA;
- Metallurgical process was updated resulting in ammonia being eliminated entirely from the process which strengthens the environmental performance of the envisioned Rook I project;
- Metallurgical paste-fill testwork confirmed proof of concept for uranium tailings to be used for cemented paste backfill underground;
-
Lateral development reduced from 78,805 metres to 39,908 metres due to a reduced mine footprint;
-
Vertical development was reduced from 3,832 in the PEA to 3,059 due to the elimination of a fresh air raise, which has been redesigned and combined with the primary production shaft.
Mineral resources
The Arrow deposit mineral resource estimate was updated, and the indicated mineral resources form the basis for the PFS. The indicated portion of the resource has increased by 43 per cent from the previous resource estimate (see news release dated March 6, 2017). The updated estimate comprises an indicated mineral resource of
256.6 million lb of U3O8 contained in
2.89 million tonnes grading 4.03 per cent U3O8, including the A2 high-grade core of
181.0 million lb of U3O8 contained in 460,000 tonnes grading 17.85 per cent U3O8 and an inferred mineral resource of
91.7 million lb of U3O8 contained in
4.84 million tonnes grading 0.86 per cent U3O8.
The tonnes, grades and classification of the mineral reserves defined in the PFS mine design are summarized in the attached table.
ARROW MINERAL RESOURCE ESTIMATE
March, 2017, Arrow mineral 2018 Arrow mineral
resource estimate resource estimate
Structure Tonnage (t) Grade (U3O8%) Metal U3O8 (U3O8 lb) Tonnage (t) Grade (U3O8%) Metal U3O8 (U3O8 lb)
Indicated mineral resources
A2 790,000 0.84 14,500,000 1,240,000 0.79 21,700,000
A2 HG 400,000 18.87 164,900,000 460,000 17.85 181,000,000
A3 No indicated in 2017 1,010,000 0.70 15,500,000
A3 HG No indicated in 2017 180,000 9.68 38,400,000
Total 1,180,000 6.88 179,500,000 2,890,000 4.03 256,600,000
Inferred mineral resources
A1 860,000 0.75 14,300,000 1,510,000 0.72 23,900,000
A2 1,100,000 0.76 18,500,000 1,290,000 0.70 19,900,000
A2 HG 30,000 13.00 8,600,000 5,000 12.70 1,400,000
A3 1,460,000 1.16 37,300,000 1,230,000 1.11 30,000,000
A3 HG 150,000 8.53 28,200,000 1,000 9.07 200,000
A4 550,000 1.06 12,900,000 800,000 0.92 16,300,000
180 110,000 0.95 2,300,000 Combined into A3 and A4
Total 4,260,000 1.30 122,100,000 4,840,000 0.86 91,700,000
Difference between Arrow 2018 and
2017 mineral resource estimate
Structure Tonnage (t) Grade (U3O8%) Metal U3O8 (U3O8 lb)
Indicated
A2 450,000 (0.05) 7,200,000
A2 HG 60,000 (1.02) 16,100,000
A3 1,010,000 0.70 15,500,000
A3 HG 180,000 9.68 38,400,000
Total 1,700,000 (2.85) 77,200,000
Inferred
A1 650,000 (0.04) 9,600,000
A2 190,000 (0.06) 1,400,000
A2 HG (25,000) (0.30) (7,200,000)
A3 (230,000) (0.05) (7,300,000)
A3 HG (149,000) 0.54 (28,000,000)
A4 250,000 (0.14) 3,400,000
180 (110,000) (0.95) (2,300,000)
Total 580,000 (0.44) (30,400,000)
Notes:
1. Canadian Institute of Mining definition standards were followed for mineral resources, mineral resources are
reported inclusive of mineral reserves.
2. Mineral resources are reported at a cut-off grade of 0.25 per cent U3O8 based on a long-term price of $50
(U.S.) per lb U3O8 and estimated costs.
3. A minimum mining width of 1.0 m was used, with a mineral resource effective date of May 25, 2018.
4. Numbers may not add due to rounding.
5. Mineral resources that are not mineral reserves do not have demonstrated economics.
Mineral reserves
The PFS defines probable mineral reserves of
234.1 million lb of U3O8 contained in
3.43 million tonnes grading 3.09 per cent U3O8 from the indicated mineral resources. The probable mineral reserves include diluting materials and allowances for losses which may occur when material is mined.
ARROW PROBABLE MINERAL RESERVES
Structure Tonnage (t) Grade (U3O8%) Metal U3O8 (U3O8 lb)
A2 2,057,600 4.13% 187,400,000
A3 1,375,500 1.54% 46,700,000
Total 3,433,100 3.09% 234,100,000
Notes:
1. CIM definitions were followed for mineral reserves.
2. Mineral reserves are reported with an effective date of
May 25, 2018.
3. Mineral reserves include transverse and longitudinal
stopes, ore development, and incremental ore.
4. Stopes and ore development were estimated at a cut-off
grade of 0.25 per cent U3O8.
5. Incremental ore is material between 0.03 per cent U3O8
and 0.25 per cent U3O8 that must be extracted to access
mining areas. 0.03 per cent U3O8 is the limit for what is
considered benign waste and material that must be treated
and stockpiled in an engineered facility.
6. No byproduct credits have been included in the mineral
reserve statement.
7. Mineral reserves are estimated using a long-term metal
price of $45 (U.S.) per pound U3O8, and a 75-U.S.-cent/$1
(Canadian) exchange rate.
8. A minimum mining width of 3.0 m was applied for all
long-hole stopes.
9. The density varies according to the U3O8 grade in the
block model.
Waste density is 2.464 tonnes per cubic metre.
10. Numbers may not add due to rounding.
RPA is not aware of any environmental, permitting, legal, title, taxation, socio-economic, marketing, political or other relevant factors that could materially affect the mineral resource or mineral reserve estimates.
Mine plan and production profile
A detailed mine plan based on conventional long-hole stope mining was engineered using indicated mineral resources only. Geotechnical studies during prefeasibility supported the conventional long-hole stoping mining method including the use of longitudinal and transverse stopes, 30 m level spacing, and the nominal stope strike length of 15 metres to 30 metres. This represents an excellent stope stability range for underground mining in highly competent conditions. The geometry of the Arrow deposit enables decoupled production areas in both the A2 and A3, allowing flexibility of mine sequencing. The PFS production profile is underpinned by long-hole stopes in the transverse orientation through A2 high-grade mineralization. Arcadis was engaged in the modelling and assessment of radiological effects of underground uranium mining, and they fully endorsed the proposed mining methods and overall plans. The ability to mine transverse long-hole stopes through the A2 high grade will support significant scheduling flexibility enabling NexGen to correlate supply quickly and inexpensively to market conditions.
Furthermore, given the competency and conditions of the underground environment, all waste streams from the process plant are planned to be stored underground.
The PFS mine plan, using a 0.25-per-cent U3O8 cut-off grade, includes probable mineral reserves consisting of
234.1 million lb of U3O8 contained in
3.43 million tonnes grading 3.09 per cent U3O8 that will be extracted by underground mining in an initial nine-year mine life. The mine production schedule envisions a life-of-mine rate of 1,039 tonnes per day. The underground workings will be accessed by two shafts, the first supporting personnel movements, materials, ore, waste and fresh air. The production shaft will have divided compartments, ensuring that fresh air and personnel entering the mine remain isolated from ore being skipped to surface. The second shaft will be used for exhaust air and secondary egress. Mining extraction is estimated to be 95 per cent of mineralized tonnes for both ore development and stopes. Planned dilution was included in the generation of the stope shapes, and additional backfill dilution (at zero grade) was included where appropriate. Overall rock dilution is estimated to be 31 per cent, with additional backfill dilution applied on secondary stopes only.
Processing and underground tailings management facility
The PFS confirmed processing and production of Yellowcake from the Arrow deposit with conventional processing technology. The main components of the processing plant are:
-
Grinding;
- Leaching;
- Liquid-solid separation via counter-current decantation;
- Solvent extraction;
- Yellowcake precipitation;
- Yellowcake packaging;
- Paste tailings plant.
A detailed metallurgical study resulted in process recovery increasing to 97.6 per cent (versus 96 per cent in the PEA). In addition, the ammonia strip process envisioned in the PEA was updated to an acid strip process in the PFS, resulting in the complete elimination of ammonia in the processing facility. Elimination of ammonia from the processing facility will ultimately lead to improved effluent discharge performance.
The study also confirmed that all processed waste streams can be stored in an underground tailings management facility. The study also confirmed the geotechnical design, size and sequencing of the UGTMF included in the PFS mine plan. The UGTMF will significantly reduce the surface footprint of the project, and represents continued reclamation during operations, allowing for industry-leading environmental sensitivity.
PFS testwork confirmed paste fill strength meets or exceeds all requirements set in the original design for a potential paste backfill to be used for underground stope stability. The study confirmed the suitability of the tailings from Arrow uranium deposit for use as cemented paste backfill.
NexGen is committed to advancing the project with innovative approaches to mine design, management and operation in order to deliver enhanced environmental, social and economic performance.
Capital costs
A capital cost estimate was produced for the PFS. The preproduction capex for the contemplated underground mine, process plant and supporting infrastructure at Arrow are estimated at $1,247-million with sustaining capital costs of $262-million (including $48-million for decommissioning). Wood and RPA estimated the capital costs based on a three-dimensional civil model, a mechanical equipment list, material takeoffs, vendor budget quotations on major and secondary equipment, and inputs from leading expert service providers which have experience in construction projects and cost estimation both in the Athabasca basin and globally. Preproduction construction is envisioned to be complete in three years, the construction phase will be supported by a labour force consisting of skilled labour, trades people, professionals and administration. The study determined the total personnel hours required for preproduction construction is 3,557,000 hours. The capex is summarized in the attached table.
SUMMARY OF CAPITAL COST ESTIMATES
PEA 2017 PFS 2018
Capital cost estimates ($ millions) Preproduction Sustaining Total Preproduction Sustaining Total
Mine 324 205 529 303 194 497
Process plant, infrastructure and indirects 627 199 826 736 20 756
Decommissioning 0 64 64 0 48 48
Contingency 237 0 237 208 0 208
Total capital costs 1,188 468 1,656 1,247 262 1,509
Notes on variances
Mine -- reduced mining extents due to increase in mining head grades as a result using indicated resources only.
Process plant, infrastructure and indirects -- tailings management costs reallocated to operating costs.
Decommissioning -- higher resolution on decommissioning costs.
Contingency -- increased confidence level of cost estimates.
Operating costs
The opex estimate outperformed the PEA and is based on a shaft-accessed underground mine with a conventional longitudinal and transverse long-hole stope mining method, conventional processing facility, and underground processed waste management facility. While in operation the PFS defines a required work force of 491 persons, the expertise required ranges from skilled labour, equipment operators, mining professionals, technical professional, management and administrative. NexGen's community-first approach ensures opportunities are prioritized within the local region.
UNIT OPERATING COST ESTIMATES
Opex per pound PEA $/lb U308 PFS $/lb U308
Mining 3.61 2.35
Mineral processing 3.03 2.46
General and administration 1.73 1.00
Total operating costs 8.37 5.81
PFS ALL-IN SUSTAINING
COST ESTIMATES
AISC PFS $/lb U308
Operating costs 5.81
Revenue royalties 4.81
Transportation 0.34
Reclamation cost 0.21
Sustaining capital 0.94
AISC 12.11
PER TONNE OPERATING COST ESTIMATES
Opex per tonne PEA $/t PFS $/t
Mining 131.87 157.31
Mineral processing 110.91 164.65
General and administration 63.20 67.11
Total operating costs 305.98 389.07
Future programs:
-
As of Sept. 30, 2018, the company had $133-million in the treasury which fully funds NexGen for the upcoming and planned programs.
- Immediate initiation of a 10-rig diamond drilling, two-stage program of 125,000 m focusing on conversion of Arrow indicated mineral resources to measured of 70,000 m aimed at conversion of inferred to indicated mineral resources; and 55,000 m to enable additional optimization of mine production plans.
- Continued UGTMF study to optimize tailings density and further reduce tailings volume.
- The capital costs associated with the process plant and associated infrastructure will now undergo an evaluation to review opportunities for capital cost optimization.
- Project schedule and timeline are also being reviewed to identify opportunities to advance the development.
- Automation and electric mining equipment continue to evolve rapidly, and opportunities for inclusion are currently being pursued.
- Detailed evaluation of alternative energy solutions, which will further offset electricity costs and support NexGen's environmental initiatives.
About NexGen Energy Ltd.
NexGen owns a portfolio of prospective uranium exploration assets in the Athabasca basin, Saskatchewan, Canada, including a 100-per-cent interest in Rook I, location of the Arrow deposit in February, 2014, the Bow discovery in March, 2015, the Harpoon discovery in August, 2016, and the Arrow South discovery in July, 2017. The Arrow deposit's updated mineral resource estimate with an effective date of Dec. 20, 2016, was released in March, 2017, and comprised 179.5 million pounds triuranium octoxide contained in 1.18 million tonnes grading 6.88 per cent U3O8 in the indicated mineral resource category and an additional 122.1 million pounds U3O8 contained in 4.25 million tonnes grading 1.30 per cent U3O8 in the inferred mineral resource category.
Technical disclosure
The technical information in this news release with respect to the PFS has been reviewed and approved by Paul O'Hara, PEng, of Wood, David Robson, PEng, MBA, and Jason Cox, PEng, of RPA, each of whom is a qualified person under National Instrument 43-101 -- Standards of Disclosure for Mineral Projects.
The mineral resource estimate was completed by Mark Mathisen, CPG, senior geologist at RPA and David Ross, PGeo, director of resource estimation and principal geologist at RPA. Both are independent qualified persons in accordance with the requirements of National Instrument 43-101 and they have approved the disclosure herein. All other technical information in this news release has been approved by Troy Boisjoli, geoscientist licensee, vice president -- operations and project development for NexGen. Mr. Boisjoli is a qualified person for the purposes of NI 43-101 and has verified the sampling, analytical and test data underlying the information or opinions contained herein by reviewing original data certificates and monitoring all of the data collection protocols.
A technical report in respect of the PFS will be filed on SEDAR and EDGAR within 45 days of this news release.
Technical information
For details of the Rook I project, including the quality assurance program and quality control measures applied and key assumptions, parameters and methods used to estimate the mineral resource, please refer to the technical report entitled "Technical Report on the Preliminary Economic Assessment of the Arrow Deposit, Rook 1 Property, Province of Saskatchewan, Canada," dated effective Sept. 1, 2017, prepared by Mr. Cox, Mr. Robson, Mr. Mathisen, Mr. Ross, Val Coetzee, MEng, PrEng, and Mark Wittrup, MSc, PEng, PGeo, each of whom is a qualified person under NI 43-101. The Rook I technical report is available for review under the company's profile on SEDAR. A technical report in respect of the PFS will be filed on SEDAR and EDGAR within 45 days of this news release providing details of the Rook I project, including the quality assurance program and quality control measures applied and key assumptions, parameters and methods used to estimate the mineral resource.
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