Li Ka-Shing-Backed NexGen Plans NYSE Listing as Stock Soars

2016-12-22 09:54:23

Li Ka-Shing-Backed NexGen Plans NYSE Listing as Stock Soars

By Natalie Obiko Pearson, Bloomberg News

NexGen Energy Ltd., the uranium explorer backed by Hong Kong billionaire Li Ka-shing, plans to list on the New York Stock Exchange in 2017 after its shares more than tripled in Canada this year.

U.S. funds are showing increased interest in the metal, which is poised for a resurgence amid declining supplies, according to Chief Executive Officer Leigh Curyer. U.S. president-elect Donald Trump’s plans to keep aging reactors online and climate commitments that prod nations toward emissions-free nuclear energy will also boost uranium, he said.

“The fundamentals look incredibly compelling when you consider all those things,” Curyer said in an interview from his Vancouver office. “More generalist funds are looking to invest in clean energy and they see nuclear as forming a significant part of that energy mix.”

NexGen, the second best-performer on the S&P/TSX Global Mining index in the past month, holds one of the world’s most promising uranium deposits, according to analysts. Its Arrow asset in Saskatchewan is expected to start production early in the next decade, when a global oversupply is set to tighten as older mines close and new reactors in Asia and the Middle East fuel demand.

“Seriously valuable rock” is how Cormark Securities Inc.’s Tyron Breytenbach described Arrow in a Dec. 13 note to clients.

Drilling has exposed some of the thickest and highest-grade uranium ever reported, David Talbot, a Toronto-based mining analyst at Dundee Capital Markets Inc. said in a Dec. 5 note. According to the company’s latest estimate, the resource base is 202 million pounds. That could soon be updated following winter exploration work to more than 300 million pounds, according to Colin Healey, a Vancouver-based analyst at Haywood Securities Inc.

Uranium is trading at about $20.25 a pound on the spot market after falling to a 12-year low of $17.75 a pound in November, according to Denver-based TradeTech. Prices have slumped from more than $70 in January 2011 following the Fukushima disaster in Japan.

Curyer’s not fazed.

“To us, it’s almost artificial, irrelevant,” he said of the spot uranium market, where he said barely any trading occurs, just a few swaps “mostly on paper.”

Curyer said more than 90 percent of annual uranium trades are done via long-term contracts. The most recent is believed to have been signed at about $43 a pound for supplies from Berkeley Energia Ltd.’s mine in Spain, said Curyer, 45, who co-founded NexGen in 2011.At that level, Arrow could be profitable today, he said.

U.S. Approaches

NexGen has already been approached by U.S.-based nuclear power plants about potential post-2020 supply contracts, he said. The company expects to complete a pre-feasibility study by the end of 2017 that will provide better quantification of the Arrow deposit and its expected production profile.

Forecasters predict uranium spot prices may recover to $55 a pound by 2019, according to estimates compiled by Bloomberg.

“In five years time the landscape changes dramatically,” Curyer said. “We’re beautifully levered to meet that demand at that time.”

That outlook helped NexGen sell $60 million in convertible bonds in June to CEF Holdings Ltd., which is 50 percent-owned by Li’s CK Hutchinson Holdings Ltd. That’s enough funding to see the company through to production, Curyer said.

Li is “acutely aware of the need for uranium in that part of the world,” said Curyer. “It was a good endorsement on the fundamentals of nuclear energy. It’s validation that we can become one of the preeminent suppliers globally.”

Takeover Target

China is expected to have an additional 200 nuclear reactors operating by 2030, according to the World Nuclear Association. Large-scale buildouts are also planned in India, Russia and South Korea, while designs for smaller, safer reactors that could be deployed more widely have received the backing of the International Atomic Energy Agency, as well as billionaires Bill Gates and Peter Thiel.

The potential for Arrow to emerge as one of the lowest-cost and most stable sources of uranium just as established producers like Cameco Corp. shutter older mines has sparked speculation that NexGen could be a takeover target. Though NexGen has no revenue, it already has a market value of C$681 million ($505 million) after its 211 percent gain this year on the Toronto Stock Exchange.

“Our view is to take this to production,” said Curyer, who ranks as the eighth-largest shareholder, according to data compiled by Bloomberg. “Large mining companies have started on assets like this.”

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