Nexgen Energy Ltd
TSX:NXE
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Nexgen Energy Ltd
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Good morning. My name is Julie, and I will be your conference operator today. At this time, I would like to welcome everyone to the NexGen Energy Q1 2024 Financial Results Conference Call. [Operator Instructions]
Before we begin, please note that the following caution respecting forward-looking statements is made on behalf of NexGen Energy and all of its representatives on this call. The statements made on this call will contain forward-looking information that involves risks and uncertainties. Actual results could differ materially from the conclusion, forecast or projection in the forward-looking information. Certain material factors or assumptions applied in producing forecasts and projections are detailed in the forward-looking information. Additional information about those material factors and assumptions are contained in NexGen Energy's filings, and they are available on SEDAR+ website at www.sedarplus.ca.
Mr. Leigh Curyer, CEO and Director of NexGen Energy, you may begin your conference.
Thank you, Julie. Welcome, and thank you to all our shareholders and stakeholders around the world for joining NexGen's Q1 2024 Update and Financial Results Call.
I'm Leigh Curyer, Founder and Chief Executive Officer of NexGen Energy. Joining me on the call today is Travis McPherson, Chief Commercial Officer; and Ben Salter, Chief Financial Officer.
From a company and industry perspective, it's been a great first quarter to 2024, and I'll commence by providing an update on the industry landscape and uranium market, which is entering into an unprecedented phase with last night, President of the United States, Joe Biden, signing into law a legislation that bans the import of Russian uranium and unlocking $2.7 billion in spending to support the buildup of U.S. domestic uranium suppliers. This purely reflects that particularly high risk surrounding a large percentage of current mine sources and available suppliers.
We'll provide a progress in advancing the Rook I Project, specifically federal permitting, which is in the final stages with the CNSC; project development with respect to front-end engineering design and detailed engineering progress; exploration, which includes the early-stage discovery of new mineralization in the first drill hole at the target on an entirely new conductor corridor 3.5 kilometers from the one that host the mighty Arrow Deposit; and financing, including discussion related to 2 transactions in the last fortnight, the AUD 250 million CDIs raised exclusively on the ASX, which closed this morning pre-market, and the strategic purchase of 2.7 million of [ U-238 ] which, given last night's ban being passed into law, is ultimately very, very timely.
NexGen, on closing, now has cash and liquid assets of approximately CAD 930 million in preparation for construction of the Rook I Project. After this discussion, I'll then move into a Q&A portion on the call, where I invite you all to ask questions.
In the last 6 months, we're highly encouraged to see governments worldwide adopt energy policies and strategies that are aligning strongly with NexGen's recognition back in 2011 of the role sustainable and cost-effective nuclear energy will play in the 2020 decade and beyond. Increasingly, nuclear is being recognized as the critical component of the global energy mix addressing the need for clean, efficient and secure energy sources.
The world is on an aggressive path to bring more nuclear power online, tripling by 2050, both in the form of new builds in places like China, India, the U.A.E., U.K. and France as well as restarts and extensions in large and key nuclear markets such as Western Europe, Japan, South Korea and the United States.
This expansion is increasingly critical as the electrification of our world accelerates, notably, through the expanding adoption of artificial intelligence and electric vehicles. Both need a reliable and baseload power source, leading to a paradigm shift in the energy market. We have seen this urgent need for a nuclear renaissance to continue expressed by many thought leaders, including tech giants such as Microsoft and Amazon, as well as the likes of Sam Altman, OpenAI and Brad Gerstner legendary venture investor. Demand is robust, sustainable and growing significantly faster than anyone forecast, causing the focused shift to the ability of the industry to supply this key energy fuel.
Supply, however, tells a different story, a narrative of fragility and decline. The confluence of over a decade of extreme underinvestment, supply disruptions, twiddling inventories, with the overlay of significant geopolitical risk, is precipitating a new market reality, one in need of more dependable uranium sources and has led to uranium spot during this past quarter reaching new 15-year highs at USD 107 a pound.
In the face of supply challenges, new sources must be found through the purposeful exploration efforts and then developed, which take time, even for those companies doing their good work like ourselves and our Canadian development company colleagues, Denison, Fission, UEC and IsoEnergy in Canada.
It's not simple, convenient or quick to find and develop any mineral project. It's at least a minimum 15 years before new undiscovered sources come online. It's more important than ever to advance the Rook I Project into production this decade, and the NexGen team is delivering on that objective.
In Canada, the federal government has recognized its importance and strongly emphasized its commitment to expanding the nuclear sector both domestically and globally. This includes efforts to expedite the approval process for nuclear projects in Canada and increased funding availability, as highlighted in the most recent federal budget. NexGen, its Rook I Project and all its shareholders and stakeholders are extremely well positioned for this Canadian government commitment.
The importance and reality for the need of supply chains was bluntly reflected last night with the signing prohibiting Russian Uranium Imports Act. This is set to take effect 90 days banning U.S. imports of Russian uranium in a phased manner through 2028. This legislation begins a new unprecedented era in the uranium market and is expected to tighten the market considerably, leading to significant and long-term upward pressure on uranium prices. Consequently, for all these reasons, utilities are seeking to diversify their highly concentrated nuclear fuel supply chains in large jurisdictions.
The Rook I Project stands out as the world's largest and lowest-cost future producer for an exceptionally sound technical and environmental setting, evident by its vertically stacked ore body that is large, high-grade and located in ideal hard rock conditions with clean ore, making it truly unparalleled in the global uranium landscape. We're encouraged to know that our valued government partners and local communities acknowledge the importance of Rook I's generational profile and recognize that Rook I will cement Canada as a global leader in the delivery of uranium as part of the Green Energy solution.
Looking ahead, NexGen is energized to progress the Rook I Project into construction and production through our innovative culture, deep expertise, operational excellence and our collective commitment to being a key contributor to this central global clean energy transition.
Over the first quarter, we continued to execute our strategy to permit Rook I for construction. After receiving Saskatchewan provincial environmental approval of the Rook I Project on November 8, 2023, which was the first greenfield uranium mine and mill project in Canada to receive provincial EA approval in over 20 years, we immediately submitted responses to the CNSC technical comments. On February 12, 2024, at conclusion of the prescribed 90 days following that submission, NexGen received only 49 comments remaining to address and, once done so successfully, we'll have concluded the federal environmental impact study. We're extremely pleased with this CNSC review and have been finalizing our subsequent responses to these remaining 49 comments, which we'll be submitting imminently this week or early next and will be reflected in a news release at that time. This is all in the backdrop of full support from our local indigenous community partners who have all signed impact benefit agreements with NexGen on the full life cycle of the Rook I Project.
On project development, the 2023 site confirmation program is informing and validating the final detailed design of the production exhaust shafts, water treatment, underground tailings management facility, mill and surface infrastructure. This work is estimated to be completed at or around the end of Q2, where we'll then provide an updated cost summary on CapEx, OpEx and project economics.
Regarding procurement, we are finalizing details of the shaft sinking contract award and advancing the procurement of the mine hoist system, which will be awarded in the near future. Additionally, we are awarding various ancillary site contracts, including the LNG power plant, during the second half of this year.
As we shared earlier this year, our 2024 winter exploration program has returned successful results at a brand-new discovery on the Patterson Corridor East, which lies 3.5 kilometers east of Arrow on a separate conductor package. The intense mineralization discovered in RK-14-183 (sic) [ RK-24-183 ], meant that we focus the balance of winter exploration solely in this area to first understand the extent of the system. The geological similarities between Patterson Corridor East and Arrow's stock have dictated the summer program will focus on this area for a considerable period of time.
The early exploration holes at Arrow in early 2014 were hitting the top of the strong and large mineralization below. This discovery and the holes drilled to date suggest a similar setting of an extensive mineralizing event in the vicinity. Results of the remaining 2023 program are imminently pending and the 2024 summer drilling program will be commencing late May and will be an expanded program from winter and ore on this new discovery. Ore discoveries have their own unique nature, and this will be no different. But note, the execution of this drilling program is incorporating the same industry-leading technical approach and discipline as deployed at Arrow on discovery and in a manner which was the most time and cost-efficient per meter drilled in the discovery of a plus-100 million pounds deposit in the world.
Regarding contracting, our discussions continue to advance well with respective nuclear power utilities. We have been recognized as a significant producer in the future with a strong understanding of NexGen's key positioning in any utilities future supply portfolio. As evidenced in the industry market commentary, contract negotiations for 2028 and beyond are recurring now. Last week, NexGen announced a purchase of 2.7 million pounds of physical uranium at USD 92.50 per pound via the issuance of a USD 250 million convertible debenture at a 30% premium to our 5-day VWAP share price. This debenture is on the same terms of which we have successfully executed in the past with CEF, Li Ka-shing in 2016 and '17. Queen's Road Capital and, more recently, Soul Pattinson in Australia, which all incorporate an investor rights agreement that contains shareholder voting alignment, standstill, sale and transfer restriction covenants and anti-hedging through short selling options, swaps or derivatives.
The rationale to procure uranium now is logical given our stage of development in approaching final permitting and construction and more so, the contracting cycle for delivery from 2028 and beyond is occurring now. That's right now. Last night's signing of the Russian uranium ban, fully enforced by 2028, means the importance of procurement for this time and beyond has even more significantly elevated in the last 24 hours.
Nuclear fuel is unique in the sense it's a highly specialized input of production for power utilities that takes many years to procure and not commonly available, if we fall short. The producers and spot market is no longer flush with inventory levels to accommodate any unexpected shortfalls. Given the supply side dynamics of fragility, utilities are rightfully focused on security of supply now. This purchase shows utilities NexGen has their back and is a responsible, reliable supplier, reflecting respect and understanding of their risks and requirements for successful operation.
With respect to the price of USD 92.50 per pound based on recent spot market purchases over the last 6 months, 100,000 pounds has been resulting in greater than $1.50 upward price movement. We are confident we have purchased extremely diligently and, at the same time, is enhancing our contracting and debt financing approach.
With respect to the debt package, which we will continue to advance through due diligence and schedule concluding shortly after federal approval, this includes many different potential avenues and significant capacity is being evaluated with maintaining leverage to future uranium prices evidenced by expressions of interest from lenders, which now totals approximately USD 1.4 billion, which provides substantial excessive capacity to fund and execute the project.
We continue to experience strong institutional and retail shareholder support from Australia and the broader Asia Pacific region who exhibit strong demand for unhedged uranium development opportunities. Our listing and subsequent inclusion in the ASX 300 Index on March 18 marked a significant milestone, reflecting our company's continued commitment to finding new shareholder markets, exposure and, in the process, leveraging optimal outcomes for our shareholders and stakeholders.
In line with this objective, 2 weeks ago, NexGen issued a CAD 224 million placement to ASX investors which, together with the issuance of the USD 250 million convertible, takes our cash and liquid assets to approximately CAD 930 million, and that is excluding our investment in IsoEnergy. We have significantly addressed the equity component of funding construction of Rook I, providing the market with clear visibility of our objective of taking Rook I immediately into construction upon receiving federal approval, with the value of that milestone unincumbered.
In September of 2023, NexGen has raised approximately CAD 540 million, with a discount to market being an industry-leading 1.5% to 4% discount while still remaining sector-leading share price performance. Further, this has been during a period CEF have liquidated their shareholding. This represented approximately 18% at the beginning of last September to only yesterday, being advised, is now holding less than 0.1%. We are very proud of this investment return to CEF since 2017 of over 500% and equally excited it has been replaced with new, predominantly large Australian-based shareholders, with an affinity for a new world mining company delivering exceptional returns.
By the end of Q1 2024, we will have invested approximately CAD 459 million in the successful exploration and development of the Rook I Project, and this has resulted in a current market capitalization of CAD 5.4 billion.
The day prior to the announcement of the uranium purchase last week, NexGen hit a new all-time high market capitalization at CAD 12.14 per share and led all year-to-date 1-year rolling tables relative to its peers. The 2.7 million pound purchase of uranium represented approximately 4% dilution to that market cap and has placed NexGen in a far stronger position than what it was prior to our announcement.
Before we turn to the Q&A, I'd like to mention Susannah Pierce's nomination for election to our Board of Directors at our upcoming AGM in June. And this is referenced in the NexGen management information circular issued last week. Susannah currently presides as President and Country Chair of Shell Canada. Her expertise and experience in the global energy industry and genuine engagement with local indigenous communities and government stakeholders makes her a natural fit for our organization. I encourage everyone to read the NexGen management information circular, which details all aspects of our approach, governance and diligence in delivering the world's largest, environmentally, socially and elite economic uranium development project.
Our team's strength lies in its diverse composition enriched by top-tier talent from a variety of backgrounds, reflecting a wide-reaching perspective that enhances our approach.
In 2023, total employees by gender statistics were 66% male and 34% female compared to a Canadian average of females in mining measuring 16%, more than double. Proudly, 80% of Rook I site employees were from the local priority area. Over CAD 44 million has been spent on the local priority area supplies in 2023, which stimulates economic development within local communities and builds long-lasting and self-sustaining community resilience. As we move forward with the project, we continue to add to our high-performance team. Building and investing in skilled talent pool is central to our continued success and local economy's success.
In summary, we are moving forward with the support of our valued indigenous partners, our shareholders, the regulatory and governmental authorities of our dedicated team. As we look toward the rest of 2024, our focus is on advancing the Rook I Project.
We are at a pivotable and exciting time for our company. And as always, it's a privilege to share our continued growth with you as we work together to secure the energy transition.
Now let's transition to the Q&A, and we encourage questions from all of you. I'll hand it over to the moderator.
[Operator Instructions] Your first question comes from Andrew Wong from RBC.
So it's great to hear you're about to resubmit the EIS. I just wanted some clarity around the time line. So after you submit, what are the specific steps and time line that needs to happen before a public hearing can be scheduled? And what actually happens during the public hearing? Would there be some public commentary that comes out that needs to be addressed during that process? And then after that, like what's the time line from the public hearing until you get to sort of final decision from the Minister?
Yes. Thanks, Andrew. Yes, let's say, we're very pleased with the response that we received from the CNSC. Like, to have 277 questions in the first place, according to our consultants, was unprecedented for this stage of the project. We're down to 49. And whilst every aspect is very, very important, and we're respectful of that, we are submitting imminently either late this week or early next.
Now as prescribed by the rules and regulations, the CNSC is entitled to another 90 days to review and close out those remaining 49 aspects. On closing those 49 aspects out, the EIS will be deemed final. At that point, it will then establish a commission hearing date.
Now every project that has gone to a commission hearing has been approved within 60 days. I think whilst all aspects are very, very important and material, it's very, very significant with respect to concluding EIS, and we are very much looking forward at the conclusion of this next 90-day period, which I think is at the end of July, off the top of my head, and very much look forward to those 90 days. That's for sure.
Now with respect to other public comments that can arise, well, the federal government has already ran its 120-day public comment period back in 2022. And those questions that we've already addressed were directed at those public and technical comments. So from our perspective, it has been very rigorous, has incorporated all stakeholders. And this is on the overlay of having 100% community support from the communities in the local project area who have all reviewed and signed off on the EIS as we have presented to the CNSC.
Okay. That's great. And then just talking about the Rook I Project itself, you've been pretty clear on, I think, your intention to bring it into production. It sounds like there could potentially be a construction start within the next 6 to 12 months. So can you just talk about the technical team that you have in place already? What's the size of that team right now? And how much more do you need to build it out? How quickly can you hire the labor force needed to build the project?
Yes, sure. So on receiving federal approval, we'll be in a position to start immediately the following week. We have done 100% engineering of a lot of the site infrastructure aspects, the preliminary work's in order to commence construction in earnest, and all the early stage items are 100% engineered. The remaining engineered items are around the specifics in the mill, to put that into perspective, around the wiring. And so we're ready, subject to federal approval, to immediately start.
With respect to the team, we have currently about 76 people in our Saskatoon head technical office. And at NexGen, our culture is absolute responsibility, and so we have a dedicated NexGen person for every aspect of our operations. And that's not just the construction of the project that exhibits in geology, the financial side, commercial side, everything. So we have been very, very strategic and well planned in acquiring the personnel and the technical expertise that we want ever since 2017. We knew at that stage, we had a project, and we're taking it forward into production. That's elevating as we speak.
And to give you one example, like on the safety side of things, we're now breaking that out into very specific areas of safety at surface, underground radiation experts. And given the profile of the project and the culture that NexGen is exhibiting, we're very, very pleased with the caliber of the applicants that we're receiving not just within Saskatoon and Saskatchewan but also from outside of Saskatchewan. And so Saskatchewan is going to be experiencing an inflow of skilled labor as a consequence.
With respect to the labor force on the ground, well, our community team led by Adam Engdahl and Dylan Smart in Saskatoon have already been running training programs with the various government technical colleges in Saskatchewan. And the take-up of those training programs has been absolutely phenomenal. And so we are well prepared on both fronts, and it exhibits our commitment to making as many of the jobs as local as achievable. And so you're going to also be seeing an inflow of population into the local community area on the commencement of construction of the project.
Your next question comes from Puneet Singh from Eight Capital.
Just a couple of questions on the convertible. Just regarding strategy, the way that uranium price has traded, why not do this a couple of years ago? And what specifically were you seeing in the market that made you pull the trigger now?
Yes. Look, you're quite right. We've always been confident that the price of uranium is going high even 5 years ago and it's going to go higher. But the decision to purchase pounds of uranium now is completely in line with our stage of development. We're in the final stages of federal approval. We're immediately on receiving approval to start construction. And the contracting cycle for 2028 and beyond is now. And so that predicated, given the fragility around current production and available supplies, like the producers have had a significant drawdown of inventory on hand over the last 2 years and then also the spot market is incredibly tight.
And dealing with the nuclear fuel, the utilities want a surety of delivery. So us acquiring 2.7 million pounds is very significant in our contract negotiations with utility and recognizes the utilities' risks around security of supply. And so the timing of that is evident today and, I would say, the Russian ban introduced last night has elevated that significantly into a new era that is unprecedented, frankly.
Puneet, it's Travis here. I would also just add that, yes, with respect to the timing, like 3, 4, 2 years ago even, we weren't at the point of these negotiations with the utilities. We're there now. And to Leigh's point, the world that the utilities live in is it's 2028 tomorrow. And so that's where the decision in terms of the exact timing. While we're extremely bullish on the uranium price, obviously, for all the reasons and more that Leigh has outlined in the opening remarks, it wasn't purchased on the basis that we're speculating on the uranium price. It's really tied to the development of the Arrow project as it relates to contracting, which obviously feeds into the debt financing discussions that we're having as well.
Okay. Got it. And then just building on that then, if it's tied to the utilities, should we expect more purchases from you guys? Or how should we look at that in terms of a strategy, contracts versus physical inventory?
Yes. Look, you're not going to see us like materially fill, obviously, the production volumes that are coming out of Arrow. And those contracts that we do sign will be filled predominantly by Arrow's production like vast, vast majority of it. Again, to Leigh's point, these 2.7 million pounds, and whether it grows from here or not, to be determined. I think we're very happy with 2.7 million pounds that we got because it does just provide a bit of an insurance policy to the utilities. And again, really, I think, demonstrates that the understanding of the supply challenges, meaning the available insurance that exists out in the market, is very limited.
And whilst it's very, very unique to the nuclear fuel market in respect to mining, it is a necessity of the start-up operation, but it's not unique when you would have seen other developers do a similar thing as they approach production. Boss Energy have done it. Denison have done it as well. So it's not unique in that sense. And it does reflect, though, the aspect of commencing a uranium mine. It really does reflect we are taking this project into production.
Your next question comes from Katie Lachapelle from Canaccord Genuity.
I have two, but I just want to quickly follow up on Puneet's question. With respect to the contract negotiations that you're having right now, what sort of volumes or tenor would you be looking to lock down when you are looking to sign contracts?
Well, I'll start with the question and then hand over to Travis. Our current negotiations are with 4 main utilities at the moment, all varying degrees. We've been very, very clear that we are looking for 3-year offtake arrangements that are tied specifically to market prices at the time of delivery. Volume levels at the moment are commercially sensitive. But given the supply and demand gap that all market commentators are saying 2028 and beyond, and I said this morning that an Australian bank came out with $150 uranium price forecast for year-end 2025, I've got no doubt that we're going to be filling contracts to the tune of what Arrow is capable of producing annually.
Yes. I might just add, yes, there's no urgency. We need to sign some contracts or it's optimal to sign some contracts in this kind of time frame that we're in now. In terms of the specific volume, say, day 1 when we look out for the foreseeable, say, 3 to 5 years of Arrow's production, I mean to the extent we take on and finance it with the debt, which we're again going down that path right now, there will be a minimum level. I think in order of magnitude, it's minimal in the context of Arrow's overall production to shore up the cash flows necessary to make those debt service payments and make it comfortable for utilities or the lenders.
And then as we progress from today onwards, I think you'll just see contracts and offtake negotiations and deals get done progressively as we march from today through to ultimate start-up of production.
Got it. That's super helpful. Maybe just one other question. In the prepared remarks, you mentioned that you guys are going to provide updated capital as well as operating costs around the end of this quarter or early Q3. Can you provide any detail on where you guys are seeing some of the largest impacts on the cost side?
Yes. I'll start and again hand over to Travis. But on the cost side, and as I explained in the earlier call, the inflationary impact on the CAD 1.3 billion as estimated in the 2021 feasibility study to date is at around CAD 320 million. Labor wages has been probably the biggest one out of everything on a weighted basis. But we're also experiencing some decreases in raw materials as well. The biggest cost component of the construction is the 2 shafts. And we'll be entering into a contract which limits subsequent inflationary and pressure on the construction of both the production of these ore shafts. But to answer your question, Katie, it's predominantly around labor.
Yes. And I think just on the inflationary thing, I think it's important as well, that is not calculated based on some kind of market indices. Like, we went unit cost by unit cost comparison from the feasibility study to today to make sure that we understand exactly what that is. And then the remaining aspects over and above the inflationary impacts are being finalized now through some ongoing test work and finalization there.
With respect to we've got under just shy of CAD 1 billion in the treasury now and with the debt process over, expressions of interest over USD 1.4 billion, we have got more than enough capacity, even taking into account the impact of inflation, on to the feasibility study. We are very, very well financed in order to execute this project with our current cash and liquid assets, including the debt expression of interest.
Your next question comes from Craig Hutchison from TD Cowen.
Just a follow-up question regarding the timing of the purchases that you did like from my perspective, I thought your Tier 1 asset, Tier 1 jurisdiction that you guys will be in the driver's seat with regards to offtake discussions and that you would not have to enter into purchase agreements now. Can you just talk to those discussions? Are you seeing the utilities not that rushed right now to enter into contracts? Are they not short material? Just some sense on that because I think in previous discussions, you guys have talked about potential to do even like a forward sale of uranium.
So Craig, in terms of the description box sake, well, we're working with the utilities to get contracts in place and arrangements in place, which make a win-win, so it's not like we're going to flex our muscles and have a win-loss situation. We are developing relationships with these key utilities for the long term and that uranium purchase reflected us understanding their sensitivities around a start-up operation, which exists for any start-up operation. And as we're saying, Denison and Boss have done a similar thing, which is very, very astute and reflects their understanding of the contracting process.
There's no doubt that the focus on the security of supply is now significantly elevated and elevating week by week with these market developments. We are entering into an unprecedented stage. Yes, there is a possibility of the forward sale of the contract. But that may not necessarily be with a utility. We are receiving expressions of interest from not just utilities but also financial players with respect to that possibility. So our approach is one that is understanding the utilities' specific requirements and one which is about a win-win for both the producer and the utility, taking into account the risks around producing nuclear energy.
Yes. I might just add, Craig, that this is really about optimization and our view of how to do that best. Like, we can get contracts without necessarily having purchased uranium. I mean that's obviously been done before. Really, I think the best way of thinking about it is we're trying to maximize the value of the plus 350 million pounds we have in the ground. And buying some uranium now, like 2.7 million pounds, to help us potentially optimize what those contracts look for the sale price of that plus 350 million pounds is a really good and astute move. Look, you're right. We're all right. Like, this asset is what it is, and it represents what it represents in the uranium market, which is unique of scale and quality. But this is around optimizing that. We're not just sitting back and saying, "Well, we have the best, so take it or leave it." This is about working with the utilities and evolving the market over time.
Great. And maybe just a follow-up, just given the expressions of interest you've had on debt and the financing you guys have done in the last couple of weeks here, you had talked previously about potential to do a project equity with a non-mining partner. Is that still on the table? Or is that sort of off the table just given the recent financings?
It's still a possibility but, I would say, maybe less so given the recent financings. And I get the commentary about, well, why would you do it now when you've got such a significant milestone coming up with federal permitting. Similar to the uranium purchase of 2.7 million pounds, having the treasury in place prior to the approval is a necessity to give the CNSC and the federal government of Canada knowledge that we have the funds in place. It's a very important aspect. And so doing it prior to that federal approval news coming through, and obviously subject to concluding the process respectively, we now have that in place and, on receiving that approval, well financed in order to construct the Rook I Project.
So I think that's very, very clear, and we appreciate the opportunity to really provide the color behind that because on face value, as I said, well, it's less dilutionary post a milestone. But this way, we've gotten in front of it. And it reflects the practicality of building a mine with regulators but also gives that significant milestone that the company is going to deliver on federal approval, absolutely clear air for it to be reflected in the value of the organization at that time. So it's very, very exciting for all shareholders and stakeholders.
Yes. And Craig, just with respect to the joint venture you referenced, and it's true for the debt and everything else, I think all these things being in a negotiation, demonstrating that you have other options is really important. So by having a really robust balance sheet today helps optimize, again, the debt discussions that we're having because we're not in a weak position there, like we have other options. Similar with the joint venture discussion, like we can then work to actually optimize those. We show we have other paths and other opportunities to fund it, and we do. It's true. It shouldn't be surprising to anyone there's lots of ways to fund this project under our stewardship.
Okay. Maybe just a very quick question. Just on the early works, I think your budget, you spent about CAD 46 million to the end of last year. Can you just give us an update kind of where that's at? And then I think on the last conference call, you said your budget for this year was around CAD 170 million, excluding exploration. Is that still the case?
Yes. It's subject to the timing of the federal permit. The deployment of capital will increase significantly upon immediately receiving that federal approval. So we're well under budget, frankly, for 2024 and incredibly well financed through into 2027, frankly, based on the cash we have on hand at just under CAD 1 billion as we speak.
Your next question comes from Orest Wowkodaw from Scotiabank.
Two questions, if I could. The first one, Leigh, your comments about having financing in place in order to show the government or give the government confidence in your ability to build the project, does that suggest that you plan to confirm all of the debt financing as well prior to permitting?
Prior or just after federal permitting the debt, the way it works is that the equity has to be spent first. So given that we will arrange that prior to federal permitting or just after, we're working on it now. But the debt is obviously subject to federal permitting approval and getting into construction and after you've spent the equity. So I wouldn't say it's contingent on it, but it's a functional.
Okay. And then alternatively, just on the inventory and the purchase of physical, I think that surprised pretty much all of us in terms of that transaction. Your comments about you could add more, when I look at what Cameco carries from an inventory perspective of 10 million pounds to 12 million pounds, that's about 1/3 of their annual sales, is that ultimately where you think you might have to get to in terms of volume on hand in terms of being able to sign offtake agreements down the road?
Look, they're completely different operations with completely different technical risks. So as you're aware, Cameco's mines are in the sandstone. It requires freezing in order to keep the cavities open. We're in the hard rock. We drill a cavity into the hard rock, and it will be open for 1,000 years. So we have the flexibility to ramp production up and ramp production relative to market conditions at that time. We can afford having a far lower level of inventory on hand at any particular time. But during commissioning, having 2.7 million pounds on hand is very, very astute. So it is a quantity which we have targeted and have acquired with a very sound technical and economic basis behind it to help launch the company into production at that time.
So Cameco's inventory, up until a couple of years ago, was always over 30 million pounds, representing an entire year's production. I think that just goes to show the availability of supplies and fragility of mine supply is very, very high at the moment. And so I think whilst it may have surprised people, it is a function of a company going into production. I think, in light of the market circumstances, which we have read very, very accurately since 2011, the astute nature and timing of that purchase will materialize in the near future.
Yes. And Orest, so two things. I definitely wouldn't read any parallels or correlations between the percent of anyone else's production profile and how much inventory they hold and draw a correlation and therefore, how much we need to hold or anything. As I said, we don't need to have any pounds to get a contract. It's not like it's a requirement to get a contract. It's about optimizing what those contracts look like. And we feel very comfortable with again, this insurance policy, the amount that we have now, to provide that to, therefore, optimize and maximize the value that those contracts that we do sign now represent, again, all the pounds that we have in the ground.
But I guess this 2.7 million pounds really make a difference at the end of the day given its, call it, 10% of your annual sales. Like, is that sufficient to actually move the needle with respect to giving utilities confidence?
Yes.
Yes, because the concern is not around once you ramp up. Look, we're very confident in our ability to ramp up our mine. This isn't about our view on production start-up risk or anything, this is just a perception that utilities could have or have around any new mine starting up, that there are risks associated with that. And so having 2.7 million pounds, just again, it's an insurance policy. Like, in an insurance policy, you don't buy that and cover all the value of whatever you're insuring. This is about just that small window of time, say, 3 to 6 months when the mine is ramping up for the first bit and just providing a bit of insurance around that to therefore, again, optimize the value of these contracts.
Your next question comes from Graham Tanaka from Tanaka Capital Management.
So I just wanted to understand, so trying to tie this all together, the establishing of inventory, I understand is to help you stage, create an inventory in hand and allow you to negotiate on stronger terms with utilities, with greater confidence with the inventory and even as you're starting up the mine. So I'm trying to understand what your timing was on purchasing at current prices and the financing it with quasi-equity or the convertible? What were your alternatives you could still wait and do this a year from now or you could have done it a year ago? I'm just curious about your timing and what the current price and your outlook for prices in the future has to do with your timing.
Sure. Thanks, Graham. As I said in the call, it specifically relates to the fact that the contracting cycle for 2028 and beyond is now. That is what the utilities are focused on. And so when you're having those discussions for offtake in 2028 and beyond, it's relevant to buy the pounds now. So yes, we could have bought it earlier, if we were just making a trade because we're always very confident the uranium price was going a lot higher, and we think it's going significantly higher in the future at $92.50. It was, at the time we bought it, $93.85 on the spot market. 100,000 pounds purchases over the last 6 months has resulted in at times greater than $1.50 increase in the spot price. So if we bought those 2.7 million pounds on the spot market, the price probably would have driven up to over USD 120 a pound based on those past transactions over the last 6 months. So we bought them extremely astutely.
With respect to the financing of it and issuing a convertible debenture, it was at a 30% premium to our 5-day VWAP, CAD 14.80. So incredibly good use of an instrument, which is on the identical terms to the one we've done with CEF very successfully, QRC very successfully and, more recently, with Soul Pattinson out of Australia. It's not like your typical convertible. It's a bit of a hybrid that we developed with Warren Gilman. And it works very, very well for us and has worked very, very well in the past. And when it comes with voting alignment and it's with one party, we know exactly what we're dealing with. And it wasn't a drain on the current cash balance.
So the other aspect, too, look, we're very, very cost conscious. We avoided the broker fee of USD 10 million in implementing that convertible as well. So it's a very successful transaction, and it's actually whilst it was a 30% premium to our 5-day VWAP at the time, it was also a 33% premium to the raise we did in Australia only 7 days beforehand. So that speaks for itself in terms of the strength of that financing.
I understand it. Just curious what the potential is for future equity raises, should you deem the market attractive relative to what your needs might be on future expansion, whether it be for exploration, say, 1 or 2 of your other Patterson Corridor or other opportunities become very ripe for development? I hope I'm not getting too far ahead of myself here, but what could be your additional capital requirements going forward? Or is this enough now to take you through a full production as well as continuing exploration?
This cash and inventory of just under CAD 1 billion, plus with the debt expressions of interest, I think, speaks for itself. It's far in excess of the CapEx that we need to take Rook I into production, receiving the federal permit. This new discovery would be completely exclusive aspect, which we're still in the very early days of understanding. It would be amazing, frankly, to have another Arrow on our hands. And if doing so, and if that's what eventuates, we'll navigate that financing accordingly.
I think whilst that may have shocked some investors, the close proximity of both of them, I hope today has explained the rationale behind it, which reflects a company which is taking a mine into reduction. I'd just ask everyone to look at our history of financing along the way. We've done it in the most least dilutive manner every time at a very cost-efficient manner every time in the context of the market, very small discounts to the spot share price at the time or at 30% premiums through the use of convertible. And whenever we do raise money, and if we do have another Arrow in our hands, it will be the same discipline and approach that we've always exhibited. In the short term, yes, we are very, very well covered between what we have on hand plus the debt that we're working on to more than adequately get Arrow into production.
Yes. And Graham, if we look into a world, which is a very exciting world, where this new discovery turns into the other Arrow, what we have in terms of plan, the CapEx and all of that to build Arrow will stay what it is. If something new comes along that we discover and looks like it can go into our mine and everything, that will likely come in later in the mine life. So it's not like, say, that turns out to be another Arrow, I wouldn't think of it or there's no way I'm thinking of it where, all of a sudden, the CapEx has doubled because we made a new discovery or something like that. It really would come in later in the mine life. Obviously, all the infrastructure would be built to develop Arrow.
So the timing of any future exploration in advance of even developing a second or a third mine, should you be successful, would come when you are generating surplus cash flows anyway from the Rook I Project, correct?
Exactly, Graham. Look, I think the geological evidence suggests we didn't hit the big mother lode in the very first drill hole back in 2014. This new discovery would suggest we've got a lot more mineralization. We've actually got significantly more mineralization at the bottom of Arrow and in and around Arrow that we haven't fully defined on our balance sheet. But yes, 3.5 kilometers away will probably most likely come in during the end of the Arrow mine life, will be fully funded from the cash that's generated out of Arrow. So I think your perspective on no future equity requirements is very, very real.
That's great. Changing the subject a little bit, I just get some industry feedback that there were some more traditional suppliers in the industry that are not that confident, shall we say, that pricing of long-term contracts "at market prices" would be unacceptable to many utilities. So I'm just curious, in your discussions with utilities, how many utilities have you had discussions with that are leading to you being confident that you can actually sign multiyear contracts from a new mine that are going to be priced at market? And what is the at market going to be a function of 1 or 2 or 3 spot market entities? Or how are you going to set that marketplace?
Yes. Well, Graham, just frankly, you've heard that from other companies in the sector that other companies or anonymous people on social media are only dealing with based on our discussions with utilities. So everyone's got an opinion. It reminds me of Fortescue Metals Group back in the mid-2000s developing a mine in between 2 majors, a lot of comments about, well, you can't do this, you can't do that. Analysts saying that they'll lie down on the railway tracks because there will never be ore coming up from their mine. That happens. And I would just encourage everyone to focus on the actual facts as we present them. And we present the facts with full compliance with the rules and regulations under the securities legislation.
So that is evident. We're aware of it, but we're only going to continue to do, in fact, and I'm telling you what our discussions are indicating, and that is what we're doing. But every situation is different. Our mine is completely different to whatever has existed before. It's got a far lower technical risk. And hence, it provides greater flexibility in terms of contracting and the contracting will be different. Every mine's contracts reflect its technical risk. Ours happens to have a lower one. And so we're just leveraging that. So if it's not common or it hasn't been done in the past, so be it. We are about moving forward into the future. And everyone is aware that the cost of pounds for a utility is such a small percentage of their overall operating costs. So the need in that sense is less weighted with ore coming from a project such as Rook I.
Yes. And Graham, I think there's lots of other future suppliers, which the world needs a lot more future suppliers come into production, that are also undertaking this type of a strategy, which I think is helpful in moving the market and evolving the uranium market into something that has more transparency and liquidity. I think that's a good thing. And again, for us, I think we've also been clear that we're about maximizing the value of every pound that's produced. And so that's what we're about. And to us, that means, yes, understanding our technical risk, understanding our resulting cost profile, which is industry-leading and low.
And so we're able to confidently and prudently expose ourselves, our stakeholders, our shareholders, to those optimal outcomes in a rising price environment and subsequently, be completely protected in a world where the uranium prices go down for whatever reason, both because of our cost structure but also because we will hold supply back then. And we have the ability to ramp production up and down very quickly because of the technical setting. So that is what we're targeting, what we're about. And I think undeniably, it's in the best interest of all of our shareholders and stakeholders.
Great. And just another completely different subject. The debt financing, what do you envision roughly to be the total debt capital raise? And what kind of interest rates are you assuming in your projections? We've seen a rise in the yield curve. I'm just curious, you're having discussions with the debt providers already, I'm sure. So I'm just wondering what kind of range that would be and to what extent that might have an influence on profitability going forward.
Yes. We currently have USD 1.4 billion in debt expressions of interest. The rates that we're experiencing are standard commercial rates that you're seeing, Graham. But we don't spend an extra dollar than we have to, but the interest coupon on the debt, considering it will be over such a short period of time, will not be material to the company. So the debt decision is more driven by the structure, who it is with and not having excessive penalties for early repayment. So that's our approach and our thinking around it.
And so now you're talking about debt terms not being long because the cash flows from the mine production will be able to pay off the debt pretty quickly.
That is correct.
Your next question comes from [ Fred Berliner ], private investor.
I am concerned that the whole complexion of the company has changed. You had a vast landholding of uranium. And now you're going into the mining business, which is fraught with cost, fraught with unpleasant surprises, and you are now debt laden. I don't understand why, at this point, you would be gambling on the price of uranium when you can just sit there with a product in the ground and watch it rise. I mean, going into the mining business, it's just so difficult. And for you to cross that divide, you have to have real expertise and experience. And I don't know if you got it, so please enlighten me.
Yes. Look, all valid risks of mining. Mining is not a simple endeavor, but everyone at the company has been in the business from very large mining companies to the smallest. And I would say we've faced far greater challenges earlier on in our incorporation back in 2011. We're actually just trying to find a discovery in the first place than what we have in front of us. When we went out to the other side of the basin, we were laughed at by some of the industry leaders saying, "You'll never find economic mineralization out there." Well, we have discovered the largest and most economic and environmentally elite mineralization that exists on the planet.
We then got told, "You'll never get a permit." Well, we've got the provincial permit in the quickest time ever and the first one in the last 20 years. And the federal permit will be no different. We have assembled the best of the best into the company, and we'll continue to do so. We had partnerships with extraordinary organizations where we're going to be introducing additional innovation and optimizing efficiency and safety. So yes, you're quite right. Mining is a challenging game. No doubt about it. But our track record has demonstrated clearly that we understand exactly what we're doing, the risks and the opportunities. And we approach it in a manner which employs fact-based objectivity from all the relevant disciplines required to be successful.
And so the permitting aspect, even when we're in production in the future, when we look back, what was the biggest risk, it was always going to be around the permit because it's got the most variables and the largest number of stakeholders involved. But we've already got the provincial permit and the federal permit is in the final stages. And we look forward to that permit and getting just into construction, where they're narrowed down to just one aspect. And we love nothing more than having everything in our control. And construction will predominantly be 100% in our control.
So it's a very exciting time for investors. We're at a real inflection point. And the moment we receive that federal permit, we'll be constructing the mine and accelerating towards cash flows, which will take us into a top 10 mining company worldwide. So whilst you may not have seen NexGen as a brand constructing mine, the people within our organization has in their previous roles, and so we're very excited and energized more than ever for these next phase.
Yes. And Fred, I might just add, too, like I think it's important to put in context that while this all sounds big, like a big mine going to produce lots of uranium, if this is a gold mine, you wouldn't have even heard about it in terms of the tonnes that we're moving to date. Like, it's a very small physical mine, all conventional. And so yes, look, if we're developing a very complex mine, it's very large or complex, as I said, I mean, on a risk-adjusted basis, you got to consider those things. But for us, we're building a very tiny little conventional underground gold mine in an effectively granite hard rock setting using long-haul stoping and conventional processing in surface, except the difference obviously being the product that we're producing is extremely valuable and extremely strategic because it's actually an energy metal in the green energy transition. So yes, mining is not easy, but the size of the prize here is enormous.
Your next question comes from [ Reed Rubin ], a private investor.
On the mill, what is the budget for the completion of the mill? And what will the annual capacity be? And let me point out, as far as I know, there's only 1 mill in the Lower 48.
Reed, it's been a while since we've spoken pre-COVID, so I appreciate the support throughout here. Yes, so as per the feasibility study in 2021, the mill represented approximately 1/3 of the overall CapEx. That will need to be inflation adjusted, and we'll provide those numbers at or around the end of Q2. And we will be building a mill, which has a capacity of 30 million pounds per annum output.
30 million per annum?
Yes.
That's a fabulous mill.
Thank you, Reed.
And there are no further questions at this time. I will turn the call back over to CEO Leigh for closing remarks.
Thank you, Julie. So I thank everyone for their time and interest and questions on today's call. We are incredibly excited about the balance of 2024 and, as mentioned, this inflection point as we look to conclude the federal permitting process with the CNSC. Story is stronger than ever. Rook I went in production. We're going to be at the bottom of the cost curve and fully exposed to future uranium prices. The provincial permit is in place, and the federal permitting is in the final stages. And this uranium market is entering into a new unprecedented era. And NexGen is incredibly well positioned, ready and leveraged to it all.
So I thank you for your interest and look forward to our next call, the Q2 call for 2024. Thank you.
Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.