NexGen Energy Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2024

There are 9 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to the NextGen Energy's Q2 2024 Financial Results Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, August 8, 2024. I would now like to turn the conference over to Mr.

Operator

Lee Courier, CEO and Director of NextGen Energy. Please go ahead.

Speaker 1

Thank you, Calvin. Welcome and thank you all for joining NextGen's Q2 2024 update and financial results call. I'm Lee Currier, Chief Executive Officer of NextGen Energy. Joining me is Travis MacPherson, Chief Commercial Officer and Benjamin Solter, Chief Financial Officer. We will be making forward looking statements throughout the call, so please visit our website for any relevant disclaimers.

Speaker 1

Since we last spoke in May, there have been exciting developments in advancing the Rook I project closer to production and actions within our industry that further underscore the need for a diversified and sustainable uranium supply chain, one that has more production capability and longevity in Western jurisdictions where there has been a tremendous underinvestment with the exception of a few in all aspects of the uranium industry for decades. The uranium market continues to be dynamic with demand for stable electricity in every country worldwide increasing whilst on the nuclear fuel supply side, current production continues to labor with significant production challenges regarding limited supply input availability, skilled labor and simply mine lives nearing the end of their resource life. During the quarter, additional factors arose exacerbating these already significant supply side challenges. Movements largely influenced by legislative impacts, including taxation in the current largest producer in Kazakhstan, which simply results in their in country production costs becoming higher and additional geopolitical impacts such as in Niger canceling mining leases. The focus which is currently estimated to be approximately £60,000,000 annually and growing to over £240,000,000 by 2,040.

Speaker 1

Long term prices for uranium over the quarter continued to rise as demand continues to outpace supply and investment in the sector is nowhere near the run rate to ensure long term supply stability, particularly as governments continue to reinforce their clean energy commitments as energy security concerns grow materially with the advent of energy hungry data centers. The sector continues to receive a steady stream of positive news, reinforcing that the global resurgence in nuclear energy demand, It has never been stronger and is simply growing. In the United States, milestones include the Vogtle 4 reactor entering commercial operation, steps to boost advanced reactors, the Department of Energy's US3.4 billion dollars request for proposals to stockpile low enriched uranium to provide a backup supply to replace Russian imports and the bipartisan support to enhance the U. S. And its allied partners' capacity to enrich, convert, mine uranium in order to sustain the required nuclear power generation in the U.

Speaker 1

S. Other notable developments include the U. S. Senate passing the Advance Act and multiple initiatives to restart and extend the life of existing nuclear plants, including welcome turnarounds at 3 Mile Island, the Palisades, and Indian Point. Additionally, Canada announced the construction of its first small modular reactor in Saskatchewan, home of the Rook I project, and continues to make further investments in small modular reactor research while developing new nuclear engineering hubs.

Speaker 1

Furthermore, we've seen signs of both Australia and Italy contemplating lifting their bands of nuclear power and several European countries including France, Poland and the UK are currently expanding their nuclear capabilities. South Korea, Japan and India are also ramping up their nuclear energy programs, while other nations Turkey, Saudi Arabia and the Philippines are exploring new nuclear project objectives. It's a remarkable global effort in the expansion and procurement of clean, baseload power while simultaneously decarbonizing energy generation. We're seeing significant activity in the market, particularly from the U. S.

Speaker 1

And European utilities, aiming to reduce reliance on Russian supplies and the revocation of uranium mining licenses in Niger and also ERA's Jebeluka mine, increasing the uncertainty of future supplies. These actions further highlight the critical demand for uranium sourced from politically stable and sustainable regions such as Saskatchewan, the U. S. And Australia. Also supporting the growing need for uranium and a stable supply of nuclear energy, representatives of Google, Microsoft, OpenAI and Meta continue to advocate for nuclear power sources to help meet the growing demand for low carbon energy to power AI and the data centers.

Speaker 1

Both U. S. Democratic and Republican leaders have recently advocated the U. S. Would rely heavily on nuclear power to meet the electrical demand growth from these data centers.

Speaker 1

As the critical need for new uranium supplies grows, we are advancing our Rook I project optimally and are in the final stages of federal approvals having received both the acceptance of our federal license application as well as full provincial environmental assessment approval in September November 2023 respectively. On June 21, 2024, the Canadian Nuclear Safety Commission concluded their 30 day completeness check of our May 2021 submission, which included responses to the remaining 49 aspects. Technical review of this submission is now nearing completion. We look forward to the CNSC confirming that all aspects are accepted, the EIS being deemed final and the CNSC promptly setting the date for the Federal Commission hearing. The commission hearing date and subsequent commission decision representing the final stages of full approvals.

Speaker 1

The project is strongly supported by our indigenous nation partners who have advocated many times publicly and directly for this project to be approved immediately. The project squarely fits with all of the government of Canada's targets with respect to critical minerals, indigenous engagement, and decarbonization and will be instrumental to building Canada's place as the leading supplier of the cleanest baseload fuel source known to mankind. We are ready to commence full sale construction activities immediately upon receipt of those federal a final federal approvals. And will be in production approximately 40 months, 4 0 months thereafter bring online what is capable of being the world's largest uranium mine and one capable of generating in excess of CAD2 1,000,000,000 annually in free cash flow at current uranium prices. We've made significant progress with the Rookon project this year.

Speaker 1

Procurement of critical path items are tracking well, including the temporary freeze pump, which are now complete, in storage and ready for shipment to site. Both the shaft infrastructure partner and hoist partner have been identified and with final contractual terms being concluded, the team is ready to mobilize as soon as final permits are received. The remaining procurement plan for 2024 is consistent with previous communications and is predicated on optimizing the timing of financial commitments based on a combination of risk reduction, optimization of the project's critical path and capital spend efficiency to maintain a ready state to commence construction upon receipt of requisite final federal approvals. We've completed enhanced site infrastructure on and around the site in preparation for full construction to commence upon final federal approval. Last week, we provided updated feasibility study economic estimates for the Rook I project.

Speaker 1

The updated estimates place Rook I as one of the world's elite resource projects economically whilst delivering elite environmental performance throughout its lifecycle and on closure alongside industry leading local community aspects and outcomes, incorporating US95 dollars a pound. The NPV of the project increased to CAD6.3 billion and the payback period remained consistent at approximately 12 months, whilst incorporating CapEx adjustments to CAD2.2 billion or CAD1.58 billion and an OpEx increase to CAD9.98 per pound related to inflation and enhanced environmental performance. This is supported by advancing from 18% as per the feasibility study to 45% through the completion of front end and engineering design. As guided, this increase includes approximately CAD320 1,000,000 due to inflation and approximately CAD590 1,000,000 for design enhancements improving the efficiency, operating flexibility and operability of the mine. The mine life and production profile are entirely consistent with the 2021 feasibility study.

Speaker 1

Importantly and uniquely included in the cost for the project are reclamation liabilities being incurred throughout the mine life. This totals approximately CAD900 1,000,000 and will leave the project with a full estimate on closure of CAD70 1,000,000 which is a fraction of that of other projects in Canada where liabilities are significant and at the time multiple decades taken to reclamation such as the case at Clough Lake. This aspect is one of the many elite design and industry innovative approaches the company is committed to investigate and subsequently materialize. This approach will be applied throughout its operational phase with further advancements in technology and innovation with the objective of having as few persons underground as achievable through the use of remote sensing and operation technology, which delivers optimal operation and safety performance. NextGen is going further in mine safety and production efficiency than has ever been seen before.

Speaker 1

Further, this updated cost reflects the advanced stage of the project with the site enhancements over the first half of twenty twenty four incorporating a doubling of the accommodation, support for exploration and development activities, and road maintenance in readiness for heavy haulage transportation on the successful receipt of federal approvals. This has been achieved side by side with our local community partners who are currently contributing either directly to our own partnership to 82% of Brook 1 site services and commerce. Brook 1 is ready to begin major construction upon receipt of final approvals. With identification engagement of the industry experts in shafts thinking, infrastructure, underground development in place. Early stage construction aspects are fully engineered and designed.

Speaker 1

The team continues to work towards further optimization such as enhanced recoveries, energy initiatives through kinetic heat recovery, and increased automation of material handling and processes. To exploration, in March, we announced a new greenfield discovery on Patterson Corridor East, PCE, 3.5 kilometers east of Barrow on our 100% owned SW2 Rook I property. We continue to build on these positive results with this morning announcing very exciting preliminary summer drilling results. To date, 8 of 12 summer drill holes intersected mineralization, which is indicating a large mineralized footprint with remarkable continuity. Referencing figures 12 in this morning's news release, the footprint of PCE is currently larger than arrows at the same stage of meters drilled, with the geological setting indicating a tremendously prospective basement hosted system with many geological similarities to ARO.

Speaker 1

In the first 15 holes at ARO, mineralization was defined over 550 meters vertical extent, 500 meters strike length and 150 meters width. PCOE already exhibits broader vertical and strike length of 600 meters and 540 meters respectively with a width currently of 75 meters. Further, there is the presence of intense mineralization greater than 61,000 counts per second, which is the Holter high grade mineralization in 4 holes at PCE, whereas at ARO at the same stage we had not intersected that until AR-fourteen fifteen, the 15th hole drilled, which then led to the vectoring in and discovery of the A2 high grade heart, which represents approximately £180,000,000 just under 20% average grade. When you consider the combination of these broad space tolls at PTE and the similarities to ARO, the growth potential here is obvious. The drilling program at PCE is now specifically targeting 2 aspects, continued broad based drilling to define the extent of mineralization and 2, vectoring into the ultra high grade zones within the area of mineralization.

Speaker 1

Discoveries of the caliber of ARO all take their own path in terms of time and extent of drilling to fully define a world class ore body. PCE is now commencing its path showing all the characteristics of ARO at the same stage. PACE validates the continued prospectivity of the next gen land package is incredibly immense and underpins the southwest section of the Athabasca Basin as the future of Canada's uranium industries growth. From the latter part of this decade and for over the balance of this century. Our summer drilling program is likely to be extended into the winter incorporating a short break during the change of seasons and more information regarding this will be disseminated once approved.

Speaker 1

We look forward to answering any questions the audience may have at the conclusion of this report on these exciting results. We are also progressing negotiations with utilities and will advance this post the WNA in London this September. On the back of the uranium purchase NextGen undertook, multiple new utilities have approached NextGen, seeking uranium supply from 2028 beyond, as well as there has been a material increase in the project from a variety of financiers. The current and future scarcity of uranium in the market cannot be understated and hence why we remain steadfast in our contracting approach on maximizing leverage to future prices. We will only contract on terms that reflect the sustainable price to encourage and promote a more diversified Western world mine supply platform.

Speaker 1

This assessed price being substantially higher than the current uranium prices when considering the economics and permitting hurdles of Western World Advanced Development Projects.

Speaker 2

I'd like

Speaker 1

to take the opportunity to highlight and remind the audience, profitable uranium projects in the Western World are straight up scarce. Those currently in production are either making razor thin returns and in some cases losses, and those proposed face the toughest development and permitting challenges in the entire resources sector. NextGen being at the conclusion of the permitting process has the most recent and firsthand experience of what is involved. It cannot simply be assumed and history will support us on this that all stated uranium development projects will move into production as forecasted or possibly at all. A significant component of permitting success is dependent on multiple factors, economic, technical, environmental, skilled and experienced labor, stakeholder engagement, all facets which have to be met prior to a single town being produced.

Speaker 1

There are currently less than a handful of projects located in Canada, the U. S. And Australia capable of reaching production within 5 years from now and at the current prices. To the financial section, as per the financial statements and disclosures released just prior, at the end of the Q2 ending 30 to June 2024, NexGen has approximately CAD 570 million in cash, having raised CAD346,500,000 during the first half of twenty twenty four and CAD340 1,000,000 in uranium on our balance sheet. CAD 161 1,000,000 is budgeted spend for the full year 2024 covering site program, engineering, procurement of long lead time items, project development costs, exploration, permitting, community programs and training.

Speaker 1

Cash G and A for the quarter was 11,030,000 dollars inclusive of some of the one off costs associated with the capital raising proceeds of $346,500,000 Full year 2024 G and A is forecast to represent less than 1 5th of those total expenditures for the year in supporting a workforce approaching 100 persons and up to another 50 consultants and service providers engaged across all activities totaling $161,000,000 all focused in readiness for final approval and subsequent commencement of construction and once in operation generating over CAD2 1,000,000,000 free cash flow. As we work to advance the Rook One project, we maintain high standards for our sustainability practices and corporate governance. In May, we released an annual sustainability report. The report marks the 4th year NextGen has reported the company's robust environmental, social and governance profile and is in accordance with Global Reporting Initiative GRI. Highlights include expanded training and education programs, launching groundbreaking and unprecedented partnerships with local industry, education institutions and communities to offer trade training and certification for the creation of a strong and thriving workforce in the local community adjacent to the Rook One project.

Speaker 1

These programs resulted in more than 300 students and community members participating throughout 2023, of which 39% were female and 99% indigenous. We anticipate approximately 400 participants for our 2024 programs expect 100% of the participants to be indigenous. Diverse top tier talent. We foster a diverse safe work environment where everyone is treated with respect. Our commitment to community development training is exemplified by 80% of site employees in 2023 being local community members residing in the local priority area.

Speaker 1

Furthermore, in comparison to industry standards that say 16% female employees, 34% of next gen personnel were female in 2023. And with Susanna Pierce joining our Board, women now represent 30% of our directors. Local careers and procurement through the full benefit agreements with our nation partners, mechanisms are in place to ensure procurement opportunities are communicated transparently and well in advance to allow for maximum local supply chain participation, with the result being 82% of procurement for one site going through our nation partners. The key to this positive outcome is the continuation and growth of training initiatives for local priority area community members and that is something the company is incredibly proud of. Our dedicated team along with our valued indigenous partners, shareholders, government and regulatory partners should all be credited with how we are working collectively through the approvals, all in the service of bringing the largest single source uranium deposit to production this decade.

Speaker 1

As we look forward as we look to the second half of twenty twenty four, our focus is on finalizing the federal permitting process to advance the Rook I project that is poised to have a positive impact on both the economy, the environment, local communities and generating the generational benefits. With current mine supply having never been more fragile and the growing deficit requiring more than 5 roof, one side projects to be found, permitted, financed and constructed over the next 20 years, we'll continue to lead the industry with our innovative approach and steadfast dedication to excellence in all aspects of mine development. Now let's transition to the Q and A and I look forward to all the questions that the audience may have. Over to you, moderator.

Operator

Ladies and gentlemen, we will now begin the question and answer Your first question comes from the line of Andrew Wong of RBC Dominion Securities. Please go ahead.

Speaker 2

Hey, good morning. Thanks for taking my questions. So Lee, I was curious like what are your thoughts on how the Patterson Lake area should be developed into the future? I mean, it's pretty clear that there's a lot of uranium in the area. It's very highly prospective.

Speaker 2

You have the PLF project just come up across the lake from Rook I. So, like, does it make sense to develop these areas separately or could they be developed together to share infrastructure and profitable to maybe be more efficient?

Speaker 1

Yes, that's a good question. And look, with respect, I can only really answer for ourselves. We are very focused as you know having discovered this project in February 2014 and it clearly looks like we're on to another magnificent discovery. This area is going to be the future growth of Canada's uranium industry. Look, we are obviously clearly advanced in our project.

Speaker 1

We are looking forward to the federal approvals and we've built this or designed this project to service ore from nearby deposits as well, obviously, clearly subject to subsequent approval, federal permitting and provincial permitting aspects. How it's optimally done or accessing or from other projects coming into our mine site remains to be seen. There's clearly some synergies for those other deposits to access the Rook I Mill. And at the appropriate time, those discussions will be had and if concluded, we'll go through that. But we're focused on our the Arrow deposit first, obviously mineralization that is in and around Arrow and everyone's aware that ARO is open at depth as well.

Speaker 1

On the basis that PCE shapes into something similar to ARO, well, we're going to be very busy for many, many decades just focus on our own ore. So, yes, it's a good question, Andrew. We as I said, I can only really answer it from our perspective based on what we have in the company's portfolio as we speak.

Speaker 2

Okay. That's all fair. Maybe just switching

Speaker 1

a little bit on to

Speaker 2

the strategy around selling and marketing uranium. I think you've been pretty clear that you have plans to sell through contracts that maybe are short of duration and give you 100% market related pricing. And I'm just curious as you have more conversations with potential utility customers and others in the industry? Has that evolved over time? And if there's anything that's changed?

Speaker 2

Thanks. Yes.

Speaker 1

Just to clarify that sorry, Travis?

Speaker 3

Go ahead, Anthony.

Speaker 1

Yes, I might start and then hand over to Travis. But what would be just to clarify what we have said and it's on public record, we will sell under contract with pricing mechanisms to be heavily weighted to market prices at the time of delivery. And that is what we are pursuing and that will be a transition over a period of time and I can say the number of inbound calls that we have as a company from utilities looking to undertake off take agreements with us from 2028 beyond. Well, we've had our busiest year yet and there what is very pleasing to us is that it's new to utilities over and above that we've had conversations with in the past. So our strategy is on track and we're getting a very good sound board from the utilities with respect to that strategy.

Speaker 1

Travis?

Speaker 3

Yes, I might just add that, yes, the discussions with the utilities are progressing well. Lots and lots of interest, I would say growing interest globally. As we mentioned earlier, it will be focused of the second half of the year post the WNA kind of after the summer break. Although we are busy in the summer actually on this front, which is a bit unique in our experience, the summer tends to be a slower time, but continues to progress on next gen front with these utilities. So, and as we mentioned, we're not seeing any material concerns or anything.

Speaker 3

It's part of a transition, part of negotiations that I think are and then all the macro tailwinds that Lee talked about, they're all playing in favor of this, of us being able to optimize every pound that we produce dependent on how many pounds we produce. And I think that is being

Operator

Your next question comes from the line of Katie Lechappel of Canaccord Genuity Group. Please go ahead.

Speaker 4

Hey, guys. Thanks for taking my question and congrats again on today's exploration update. I was just wondering if you could comment further on M and A. Clearly, you're in a position now where you could push forward and build ARO yourself, but you are nearing the end of the federal approval process and that does seem like a key trigger for a potential acquisition if someone did have interest in aero. So I know you're probably restricted what you can say, but any further color in terms of any interest that you are seeing in aero specifically?

Speaker 1

Yes. Thanks, Katy. Yes, I mentioned on the during the transcript that we've had increased interest from various sources of financiers. Given the nature of the project, it's clearly on the radar of anyone who's in the production of energy fuel and clearly on the radar of anyone who's in mining. The big majors out there have all been very open about transitioning their portfolios towards a heavier weighting to clean energy metals with strong ESG profiles in politically stable jurisdictions.

Speaker 1

NextGen ticks all of those boxes very, very strongly. The permit though, we got the 1st provincial permit in over 20 years. Subsequently, there hadn't been one in over 20 years, so it's a very big gate for NexGen to walk through and it's approaching quickly. So I think it's fair to say that the interest for their preparedness to act may elevate post federal approval. But as I've always said, we always approach this project on the basis that and you've seen that in the feasibility study, we'll be the ones closing the mine down.

Speaker 1

Well, that is if we're still alive. But and so we continue on that process on a daily approach of optimizing this project in every aspect and we'll continue to do so. But to answer your question, yes, there is an increase in interest. But how that eventuates, we will see.

Speaker 4

Awesome. That's all for me guys. Thank you.

Operator

Your next question comes from the line of Craig Hutchison of TD Securities. Please go ahead.

Speaker 5

Hi, good morning guys. Just on the CapEx increase for Arrow, dollars 2,200,000,000 does that include any early works or is that separate? And I think you mentioned in your opening remarks about $161,000,000 budget for this year. Just any kind of context in terms of whether that includes early works? And then maybe just as a follow-up, the $590,000,000 of increased CapEx from enhancements, can you just provide some more color in terms of what those enhancements are?

Speaker 5

Thanks.

Speaker 1

Yes, I'll start the first part of that, Craig. The $161,000,000 only includes items that we're permitted to do currently. So it's and then on top of that there's things such as long lead time items that we've ordered and paid deposits on that we have yet to take delivery of and won't take delivery until the final federal approvals.

Speaker 3

Yes. And then with respect to what makes up that $590,000,000 increase, I would say it's certainly spread across a number of things. It's not like we saw big chunky things go up by a lot. Actually the shaft sinking as an example, which is clearly critical path and very vital for the project success, didn't actually see a material increase in cost at all. So it was really spread out over things like increasing as Lee said, I would kind of categorize them as flexibility options and then constructabilityoperability improvements.

Speaker 3

So with respect to flexibility, increasing the size of the skip from 15 to 20 tons helps with reliability, but also flexibility, similarly with the power plant size up to give us that increased flexibility. Things that relate to the reliability and operability would be increasing the processing equipment size, which improves the plant availability and other things like that. But it's really spread out across a number of things, which really I would say is a result of taking the project from 18% up to over 45% and going through that whole process, as well as I think being sincere the whole time of actually being the ones that are going to construct and operate it. When you have that mine set, I think you pay attention to all of these little details to make sure that you get it right.

Speaker 5

Okay. So if and when you guys get the permit, I guess there will be some additional early work still to be done, I guess, that's outside that $161,000,000 budget?

Speaker 1

We will get the permit, Craig. So in terms of when, that is the question, but we will get the permit.

Speaker 3

Yes. And just in terms of the early works, like basically we're ready to start the shop sinking process the minute we get our permits. That is where we're at. We've got yes, the site is ready to start that once at the requisite final federal approvals to do so.

Speaker 5

Got you. Thanks. And then just on the contracting, you guys ramp up discussions here around W and A. Is there a certain percentage of contracts you'd like to have in place before you guys get your permits or are you kind of flexible on that front?

Speaker 3

Sorry, go ahead, Lee.

Speaker 1

Yes. Obviously, that's a function of the project financing and the debt component, etcetera. We won't be looking to contract all of the production, clearly not, And that will evolve as we get closer to that 1st year's production. You will see an increase in the percentage of volume contracted as we get closer and closer to the start date and that 1st year of production.

Speaker 3

Yes. And Craig, from a financing perspective, there's no kind of timeline related to the receipt of permits or anything. There will be some tied to 1st drawdown and then project completion. But those are obviously far, far in the future from now. So we do have time as Lee mentioned to optimize let the market develop for one thing, which has definitely played in our favor over the last few years in terms of waiting to sign contracts and then being able to get that balance right in the structuring of them.

Speaker 5

Okay, great. Maybe one last question for me guys, just on the financing, just any updates in terms of the expresses of interest kind of dollar amount you guys are hearing now, obviously given the increase in the CapEx for aero? Thanks.

Speaker 3

Yes, Craig, no issues on capacity. That's certainly the case. There's obviously been some challenges in the mining industry, but in fact those have actually played into our favor because it's really highlighted to these lenders and this has been communicated directly to us just how rare an opportunity to lend and put money to work on a project of this quality in this jurisdiction, etcetera. So yes, the interest is very, very robust, very strong and growing, growing both in terms of new parties, levels of interest, but also existing parties increasing their level of interest. So yes, we're not concerned on the capacity and availability of capital for this project at all.

Operator

Your next question comes from the line of Gordon Lawson of Paradigm Capital. Please go ahead.

Speaker 2

Hey, good morning, everyone. On the drill results, so my understanding of the scintillometer is that a reading of 10,000 roughly equates to a 1% grade uranium and this tapers off such that reading of around 60,000 gets you a range of between 30% 40%. Is that in line with your estimates?

Speaker 1

It varies depending on the deposit. But yes, it's reasonable assertion or assumption or correlation if you'd like to make it. We always release the assays subsequently and so that correlation factor gets more accurate over time and every deposit is different.

Speaker 5

Fair enough.

Speaker 2

Next question is on the remaining permitting and construction process. I mean, it can be a volatile timeline. I understand that, but what's your best estimate for timing of the first production and duration of ramp up at this point?

Speaker 1

It will be 40 months, four-zero post the federal approval and we are expecting end of this month, early next a reply from the CNSC with respect to those forty nine aspects that will then determine the timing of those final approvals. And from there, it will be 4 0 months construction. So I'm respecting the CMSC's timeline. We have fulfilled all the answers for those remaining 49 aspects. We look forward to their reply at the end of this month, early next and its conclusion.

Speaker 1

So I'll allow you to determine how quickly they may reciprocate and add 40 nuts to that.

Operator

Your next question comes from the line of Alex Sarintu of Fenton Financial. Please go ahead.

Speaker 6

Hello guys and exciting times ahead definitely for NextGen here. So I just wanted to touch base again just on the permits there. I mean and the timings, Lee, you made it very clear, obviously, that you do expect that permit. So can you just clarify for me? I mean, mean, based on your best understanding of the process, can you kind of lay out for me here the timings of approvals and effectively when you expect that the first shovel to kind of break ground?

Speaker 6

As you said here, the technical review

Speaker 1

should finish this month and

Speaker 6

then there's other processes that have to happen afterwards. But I just want to get a better understanding of what those are and how long they could take so that when that shovel breaks ground? And second point to that is, how do your financing plans factor into this? I mean, obviously, once that permit is in hand, then I expect some sort of financing to be announced or anyway, so just wanted to see how your financing expectations factor into the approval process?

Speaker 1

Yes. So we are waiting on the federal government, the CNSC to come back to us with their views on our responses to the 49 aspects that were remaining and we submitted that back on May 21. We are expecting a response at the end of this month early next. With respect to those 49 aspects, we're very, very confident with what we have submitted. And on the basis that they are all accepted, the EIS will be then deemed final and complete by the federal government.

Speaker 1

Got to remember we've already received our provincial permit and it's the same EIS and we have all 4 communities formally have endorsed and support the project. The federal government will then set a commission hearing date. Now that is at their discretion. And but there is given the circumstances and the strong support from all key stakeholders and the importance of this project as they have stated to their critical minerals strategy, I would expect that commission hearing date to be issued very shortly after the EIS being deemed final. The earliest EIS can be deemed final, I estimate end of September.

Speaker 1

But it will be subject on satisfactory resolution for those remaining 49 aspects. On the commission hearing date, it's legislated that a project be approved within 60 business days following that commission hearing date. Now a couple of aspects historically every project that's been deemed final, their EA is final has gone to a commission hearing date and has been approved. From that final approval, it will be for 0 months. But I'm not going to with respect to the same as they are going to respect them coming back to us once they are satisfied and that will be determined by the CMS.

Speaker 1

So I wish I could be more quantitative for you in that respect, but I think I've given you broad parameters enough to know that we expect the project to be in production prior to the end of this decade with all things being equal and assessed objectively. With respect to the financing, like with the debt one that we're or the debt process that we're running, it's still subject to receipt of federal approval. And you'll spend the equity first in any event. So you will see the complete financing package most likely post federal approval with respect to the timing of that being secured.

Speaker 6

Okay. That sounds good. And just if I just kind of do some simple math here, end of September approvals, commission hearing date, then max 60 business days after that to get to have that set. So I mean realistically, I guess, Q1 2025, at some point in that quarter, we could see construction officially start. Does that roughly make sense?

Speaker 1

I'll refer to you as you interpret what I said.

Speaker 6

Okay, good stuff. Thank

Speaker 1

you. Thank you.

Operator

Your next question comes from the line of Brian MacArthur of Raymond James. Please go ahead.

Speaker 7

Good morning and thank you for taking my question. Sorry, can we just go back to the $161,000,000 you talked about spending this year? I have two questions. 1, is any of all of that included in the new $2,200,000,000 capital estimate? And 2, you spent $58,000,000 as I look at the financials so far.

Speaker 7

Can I assume that the rest of that $100,000,000 is spent in the last 6 months of the year or is part of that as you said subject to permits and things like that? If you just go over that again, I'm just trying to figure out

Speaker 6

the exact cash flows here please.

Speaker 1

Yes. You're right Brian on both fronts. So some of that $161,000,000 is for full year. We have already spent $50 odd 1,000,000 of that in the 1st 6 months And some of those items are still like plant and equipment, deposits on plant equipment and like the freeze plant etcetera and deposits on hoists etcetera that we won't take delivery of until we have approval. So only activities that you're seeing at site are fully approved activities, but of that 161, some are plant equipment for when we will which would be part of that CapEx.

Speaker 7

Okay. That's clear. Second question, you talk about the NPV of over $6,000,000,000 at $95,000,000 uranium. Can I as I understand that there's going to be no updated filing for all these new economics, but did you sort of assume in that, that value was a T minus 3 like we did before, I? E, that value you'd assume sort of 3 years of construction?

Speaker 7

Again, I just want to make sure because obviously this generates so much cash that time value a year here or there makes a big difference. Is that correct when you did that calculation?

Speaker 3

That's correct.

Speaker 7

Thanks. Yes, on

Speaker 3

the same basis like for like as the FS.

Speaker 7

Okay, great. Thanks. Just to be clear. And then the third question, obviously, very interesting exploration results. Technically, the way you worded this now is you can produce up to £30,000,000 under the new economic study.

Speaker 7

But just to be clear, in the permitting, is your capped at £30,000,000 or is it capped per ton per day? I guess where I'm going with this is, obviously before you if you start to be very successful in PCE, you can extend the mine life a lot and therefore you may even we have a strong market, maybe you want to produce more than £30,000,000 in the early years. Would you be able to do that technically under the permit or are you actually capped at £30,000,000? Because obviously, if you can extend the mine life a lot with PCE, it changes maybe what you want to do in a strong market?

Speaker 1

Yes. I think, Brian, you need to look at that on the well, obviously, there's permitting battery limits. There is flex in that in the design of what we've put forward, but I wouldn't say it's material flex. Any material change to the project would require a subsequent permitting addendum. So, I think you should think of any new discovery as adding mine life at that £30,000,000 per annum capability.

Speaker 7

Great, thanks. That's what I thought, but I just wanted to check.

Speaker 1

Thank you very much. I appreciate you taking my questions. Thank you, Brian.

Operator

Your next question comes from the line of Roland Vetter. Please go ahead.

Speaker 8

Hello, good morning. Could you please explain how you will structure contracts with utilities? For example, if you contract a specific year and there would be delays, which are possible, there could be material financial impact on you. So how do you deal with uncertainty when you will

Speaker 3

produce? Yes, we're not going to sign any contracts pre permits that would have any kind of financial impacts if there are delays because they'll actually be tied to the start of commercial production, which will have a series of tests around defining it. But that's how you mitigate that. And the to be put in that position of financial burden in the event that there's any kind of timing uncertainty, which to Lee's earlier point on permitting, there is some that exist right now because we aren't in total control of this final aspect of the permitting process.

Speaker 8

Okay. But if you, for example, buying the contracts to start of commercial operation, it could also mean the utility doesn't precisely know in more detail to get the volume. Is this correct?

Speaker 3

Yes, correct. Okay.

Speaker 8

And the second question, if I understood correctly, you said that you expect production before the end of this decade. Could you be a bit more precise? Because I think in the interview in the spring, you mentioned that it could be beginning of 'twenty eight. There was a press article not too long ago, which mentioned more 29. Could you narrow a little bit down the year when do you think that you can really produce on a large scale?

Speaker 1

Yes. Well, I can only comment to what we have said, whether a press article suggested something else. Yes, I can't really comment. But I want to be very, very clear that we have given the best guidance possible with respect to timing with all things being equal and based on our expectation and substance of our replies to the remaining 49 aspects. And I'm being very respectful of the CNSC, they're the regulator and they'll make the determination ultimately.

Speaker 1

All things going according to plan and as we expect, we expect the EIS will be deemed final imminently at the end of this review period, which concludes end of this month early next. And obviously there will be some dialogue and how long that takes. I can't be more specific. It will depend on the responses from the CNSC, but we're in the final stages and all aspects are very, very important and need to be resolved. From that moment, it will be 40 months as per the feasibility study in terms of getting into production.

Speaker 1

So I'd love to I look forward to the day we can be very, very specific And that day is coming, but respecting the permitting process. And just to add to your earlier question, as we get close as we get that permit, well we've got greater visibility on timing, which means the ability to enter into contracts increases and then as we get through the construction period and about to approach that start date, you'll naturally see an increase in the amount of volume of our production that will be agreed under offtakes. So yes, that is the approach that we're taking and the best guidance I can give you based on what I know today.

Speaker 8

Okay. Thank you very much.

Speaker 1

Thank you.

Operator

There are no further questions at this time. I'd now like to turn the call back over to Lee Carrier for final closing remarks. Please go ahead.

Speaker 1

Yes. Thank you, Calvin, and thank you everyone for listening today. Incredibly exciting time for the company, the dual process of being in the final stages of federal approval respecting the CNSC's process. And at the same time, has lightning struck twice with respect to mineralization on the Rook One property. It's as everyone is aware, ARO is a geological phenom and we found it very, very early in our drilling on the Rookwan property of the 21st drill hole, but it was actually the 1st drill hole within a 4.5 kilometer radius.

Speaker 1

We and everyone involved with that program did an amazing job. But we always felt, did we find the only mother lode so early on a 320,000 hectare exploration portfolio. Probability was that we only found 1 or the number. And what we're seeing in the very early stages of PC is incredibly exciting and right next door to it's probably its most analogous comparable. And to get the high grade intercepts, the ultra high grade greater than 61,000 CPS in 4 of the holes over large distances, Incredibly exciting because when you consider how to intercept those so frequently over such large distances, we have all the ingredients of another phenomenal discovery.

Speaker 1

Time will tell and this deposit will go down some path, but we have all the characteristics of another significant mineralized And we look forward to those drill rigs standing going forward. So thank you everyone for your time and interest. And as always, myself, Travis, Monique, Stacy and the team are available to answer any questions that you may have. Thank you.

Operator

Ladies and gentlemen, this concludes our conference call for today. We thank you for participating and ask that you please disconnect your lines.

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Earnings Conference Call
enCore Energy Q2 2024
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