NexGen Energy Rook I project
Credit: Greg Huszar/NexGen Energy

Exploration camp on NexGen Energy’s Rook I Property in northern Saskatchewan

Many industry watchers foresee a uranium supply crunch into the 2030s, and this Vancouver company owns the world’s largest undeveloped project

The stock: None but the roughest of roughnecks these days would deny that we’re in the midst of an energy transition away from carbon-emitting fossil fuels. What’s not crystal clear is what’s going to replace them as a source of energy to charge our cellphones, heat our homes and power our cars. Renewables like wind and solar energy are growing fast and increasingly cheap, but they still suffer from the problem of intermittency. Especially in our northern climes, the sun doesn’t always shine nor the wind always blow. That’s a big reason why nuclear power and, with it, uranium exploration companies like NexGen Energy (TSX, NYSE:NXE), are having yet another moment.

The drivers: Low uranium prices over the past decade saw investment in new mine capacity lag, such that the industry wont be able to meet the growing demand forecast into the 2030s by the World Nuclear Association. Indeed, some analysts foresee producers becoming buyers to fulfill their contracts with electrical utilities as supply tightens after 2023. 

Vancouver-headquartered NexGen owns mineral rights to a handful of exploration properties in Saskatchewan, the province that gave rise to the world’s largest publicly traded uranium miner, Cameco Corp. (TSX:CCO, NYSE:CCJ). Last February, NexGen received a positive independent feasibility study on its Rook I project, which accesses the Arrow Deposit. The company describes Rook I as “the largest development-stage uranium deposit in the world.”

Institutional investors, which own nearly three-quarters of NexGen’s shares, seem to get the thesis. The largest holder of NXE is Hong Kong billionaire Li Ka-shing’s CEF Holdings.

After starting the year at $3.51 and trading in the $5 range most of the summer, NexGen stock took a leg up over the past week to $7.32 at Tuesday’s close, for a not-inconsiderable market cap of $3.5 billion. The recent rise probably had something to do with the August launch of the Sprott Physical Uranium Trust, a vehicle for investors to get direct exposure to the commodity, which sparked a 15-percent jump in spot uranium prices.  

Word on the street: “As a developer of the best undeveloped uranium asset, we see NexGen as having significant leverage to the long-term uranium market recovery, although shares are close to fairly valued,” RBC Dominion Securities analysts Andrew D. Wong and Stephen Morton wrote in a report on September 2. In the week since, NXE has overshot their $7 price target.

Coming and going: Insider filings reveal that in late August, Absolute Software Corp. (TSX:ABST) president and CEO Christy Wyatt bought 9,100 shares of the Vancouver-based company, at a cost of more than $100,000. Insider purchases of this sort are considered a bullish signal for retail investors because, well, the CEO, of all people, ought to know when its a good time to buy. We profiled Absolute in this space in June.