Nexgen Energy - Q2 2023
August 10, 2023
Transcript
Operator (participant)
Good morning, welcome to the NexGen Q2 quarterly conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then one on your telephone keypad. If you would like to withdraw your question, please press star two. Thank you. I will now hand the call over to Leigh Curyer. You may begin your conference.
Leigh Curyer (CEO)
Thank you. Good morning, everyone. Ladies and gentlemen, my name is Leigh Curyer, CEO of NexGen Energy. Thank you for joining our Q2, 2023 company update and financial results call. I'll speak for about 10 minutes. Then we will move on to the Q&A. Joining me on the call today are Travis McPherson, CCO, and Benjamin Salter, Vice President of Finance, Acting CFO. Throughout the call, we will be making forward-looking statements. Please visit our website for our full disclaimers on such statements. This summer, we are seeing record temperatures globally. In July, Phoenix recorded 30 consecutive days over 43.3 degrees Celsius. There were forest fires across continents and warmer ocean temperatures. We cannot stay on the same path.
Global governments have set goals to reach net zero by 2050, with some ambitiously targeting 2030 for the first milestones. Many countries are acting now to bring more zero emissions nuclear power online, and as the cleanest and most cost-effective form of power generation, nuclear energy is the linchpin to the global energy transition. Nuclear provides reliable, carbon-free, around-the-clock power, and it is a reliable complement to the expansion of renewables, like wind and solar, as part of a clean energy mix. Currently, there are 436 nuclear reactors worldwide in operation, providing 10% of the world's electrical needs. Last month, we saw the US commission its first commercial reactor in many years, off the back of several license extensions issued over the last 12 months.
Japan brought its first nuclear reactor online in nearly a decade. Additionally, the Nuclear Energy Institute is anticipating that 300 SMRs will come online before 2050, and as reported by TradeTech, these 300 SMRs alone would increase uranium demand by 100 million pounds, which is approximately 50% of current annual demand. We continue to see notable global support for nuclear energy. The chief executive at Rolls-Royce recently said Europe will not reach its net zero targets by 2050 unless it embraces nuclear. An American entrepreneur, Sam Altman, stated that nuclear is a way better deal than anything else out there in the provision of clean, reliable energy, reinforcing the cost effectiveness of nuclear and the need for a stable power grid.
Additionally, Parnassus Investments, an investment firm known for its strong and focused ESG leadership with rigorous, fundamental, environmental, social, and governance criteria, they shifted and approved investments in nuclear. The company believes nuclear energy will be an essential fuel source in the transition to a low-carbon economy. Over the past quarter, we continue to see additional policy momentum that supports a clean energy future with nuclear at the center. European lawmakers agreed to endorse all nuclear power as a green technology for Europe's industrial revival under the proposed Net Zero Industry Act, granting it access to preferential funding. Despite a decision 40 years ago to phase out nuclear power, Sweden's government recently embraced nuclear energy as an essential way to increase electrical production and provide a stable energy system. Just this week, the government announced its plan to build 10 new conventional reactors.
This is in addition to two SMRs previously announced and the commitment to extend the lifetime of existing reactors while establishing generous loan guarantees for the additional reactors. The reality is being realized. Renewables, wind and solar alone cannot support a modern economy and population. This is the reality, and the consequence of that reality is that nuclear is the direction countries are adopting to meet the energy demands. You're undoubtedly aware of the significant US investments in nuclear energy in the US through the Inflation Reduction Act, Bipartisan Infrastructure Law, and the CHIPS and Science Act, on top of the ADVANCE Act, focused on boosting the development of nuclear technologies. Adding to this momentum is the growth of the SMR market that I mentioned earlier. Ontario recently announced it was building three SMRs to power the province....
The UK is launching an SMR competition to fund projects. France and India are launching a cooperation program around SMRs and advanced modular reactors. The demand for uranium is evident at its current price per pound, which stands just about above $56 US As the price remains steady in the mid-50s during this traditionally quiet summer period in the Northern Hemisphere, we are seeing increased interest from utilities to enter into offtake contracts. As we head into the second half of the year with the WNA in London in early September, where we historically see higher volumes transacted, we are well-positioned for a sustainable and promising long-term future for the commodity. Global nuclear capacity is currently 390 GW, with the International Energy Agency estimating it will more than double by 2050.
To meet this increase, uranium supply will need to nearly triple, because by 2040, it would equate to a 200 million pound deficit and growing. On the supply side, we have not seen the increase needed to meet the rising demand due to mine depletion, rising costs, and geopolitical instability. While we may be turning a corner in exploration and mining, especially when it comes to the Athabasca Basin, it still won't be enough to meet the rising demand. In addition to NexGen, there are a number of additional mining and exploration companies advancing respective projects, targeting to be in production during the next decade. That means action now. Our Rook I project will be the cornerstone to closing the gap within four years of permitting approval, delivering up to 29 million pounds of uranium annually.
With NexGen's Rook I project located in a premier, stable democracy of Saskatchewan, Canada, NexGen is committed to being a partner of choice for fuel buyers and nations actively seeking to mitigate or exclude volatile nations from their supply chains. Rook I, coming online within four years of permit approval, is a critical, as it will help accomplish 3 imperatives: One, provide the world with reliable Western supply, curtailing outside influence on our energy markets. Two, secure the energy transition for nations allied to energy security and targeting net zero. 3, avoid supply chain issues, as we're currently seeing in the electrical vehicle market. Business leaders must be able to drive the quarter and have the experience, vision, and courage to see the bigger picture, and that picture is ever-expanding.
Having a strategy in place that anticipates and mitigates risk for customers, investors, employees, and allied nations, as well as their citizens, is how we approach it at NexGen, whilst being highly leveraged to terrific economic outcomes. We recently shared some of this thinking because we fundamentally believe businesses have no reason to wait on policy mandates to do the right thing. Those four commitments, we will only sell to nations who are allied for energy security and targeting net zero. We will maintain a checklist of standards for all partners in the chain of custody of our uranium. We will keep our supply chain and operations onshore in these nations to guarantee the highest levels of security, safety, labor standards, and local community partnership. We will advocate for policies that support sensibly produced uranium to set a new standard for the industry.
While these commitments have been embedded in the NexGen strategy from the beginning, our supply chain diversity has become central to the discussion around decarbonization. We wanted to bring them forward, and our recent news affirms our approach. The coup in Niger has put the country's uranium exports in serious question. Niger exports 6% or produces 6% of the world's total supply, and approximately 20% of Europe's uranium. Additionally, the East's increasingly complicated geopolitical situation is a major risk for those operating there and for their investors. These events underscore the need to reduce the influence of governments that may not share our core values and interests. Conventional approaches to stakeholder engagement and risk management must evolve to meet present-day dynamics. This applies across many industries, and mining is no different.
A lot has changed since the 1970s, and we need leaders who can embrace the opportunities those changes create. This is why, after decades in the sector, I founded NexGen in 2011. Uranium is far too essential to our future to rest on industry practices of the past. Customers require suppliers who can meet environmental, social, labor, and security standards and act as reliable partners to advance their businesses. Communities deserve meaningful partnerships that create sustainable generational impact through positive social, economic, and environmental outcomes, that extend beyond mine-dependent opportunities. Doing things the NexGen way has led to amazing outcomes, and it extends to our relationships with indigenous communities in Saskatchewan.
I am proud to say that during this past quarter, we signed an industry-leading impact benefit agreement with the Métis Nation—Saskatchewan Northern Region II and the Métis Nation—Saskatchewan, covering all phases of the Rook I project. The IBA defines the environmental, cultural, economic, employment, and other benefits to be provided to the Métis Nation—Saskatchewan, NR2, by NexGen in respect to the project, and to confirm community consent and support for the project throughout its complete life cycle. This agreement follows the signing of benefit agreements with each of the Clearwater River Dene Nation, the Birch Narrows Dene Nation, and the Buffalo River Dene Nation. That's 100% support from all our local indigenous communities. This is a historical milestone for a Canadian mining company, and a critical step to advancing the Rook I project.
We are proud to share that the communities have joined us in advocating for regulatory approvals to realize the opportunity ahead for all of us. NexGen has reached a significant milestone in advancing the regulatory approvals for the 100% owned Rook I Project, by submitting the final provincial environmental assessment and federal license application during the quarter. We have also received provincial approval for the commencement of the 2023 site infrastructure and confirmation program at Rook I. This program includes comprehensive field work focused on infrastructure upgrades, which will support the increased activity at site with the freeze holes on the critical path. The program is going smoothly and is expected to be executed on time and budget.
Before we get into the financial update, I wanted to reflect on some exploration drill programs on our Rook I property regionally and the SW1 property in the southwest of the Athabasca Basin. Our drilling will continue to test high-priority targets on, on both those properties, and we'll provide a further update on this program once it's complete. Total meters to be drilled during 2023 has increased to 22,500 meters. For an overview of our financial position ending on the 30th of June, 2023. NexGen had a working capital of CAD 89 million as of June 30, 2023. To the end of the quarter, NexGen has deployed approximately CAD 39.4 million in the successful permitting, exploration, and development of the Rook I project.
On the financing side, last quarter, we shared that we've received strong expressions of interest, totaling over $1 billion in debt. We've recently heard from additional parties also expressing their interest on that news becoming public. This engagement is a testament to the economic and ESG profile of Rook I and the strong investor support eager to bring the Rook I project online. As we look forward to the rest of 2023 and into 2024, we are scheduled to meet critical milestones to advance the Rook I project. These include: the acceptance and approval of the final provincial environmental assessment. Two. The submission and acceptance of the final federal environmental assessment. Three. Completion of the final licensing and securing a commission hearing date for the conclusion of the permitting process.
While the Rook I site program progresses on time and within budget, I'm proud of the work of the NexGen team. As a leader in the energy transition, we will continue to share our commitments with the world and bring to bear a generational project that will benefit all shareholders and local communities while upholding industry-leading economic, social, labor, and environmental standards. Now, let's transition to the Q&A, and we encourage questions from all, from all of you. I'll hand it over to the moderator to commence.
Operator (participant)
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. Should you wish to cancel your request, please press the star followed by the two. Your first question is from Andrew Wong from RBC. Please ask your question.
Andrew Wong (Managing Director and Senior Equity Research Analyst)
Hi, good morning. Thanks for taking my questions, and thanks for the update. I'm just kind of curious, wanted to ask about your strategy to focus on selling to nations who are allied for energy security, just wondering, like, how, how do you make that distinction? Which countries would that include or exclude today? Yeah, just, just wanted to hear more about that. Thanks.
Leigh Curyer (CEO)
Well, I think that, yeah, the recent events that we're seeing around the world in some countries where nations that are focused on the sensible provision of power to their, their populations is the, the key definition of that. Obviously, Canada, US, and many countries in Europe fall into that category. You know, when we're talking about such an important global objective, it requires leadership. Unfortunately, not all players on the planet at times behave in the interests of all. You know, we are very openly stating what our values are and the direction in which we will head.
It's basically open for any country to behave sensibly and act as a, as a good world neighbor, and they will be the countries that we will sell our offtake to.
Andrew Wong (Managing Director and Senior Equity Research Analyst)
Okay. maybe just switching gears here a little bit. You know, obviously, a lot of geopolitical challenges, in the uranium market. definitely a lot of interest now in nuclear, and we're seeing a renaissance in the nuclear industry. Clearly a need for more uranium, and Canada can play a critical role, and so can NexGen. Does that help with your approvals process? Is there any update on the timeline for federal permitting?
Leigh Curyer (CEO)
Yeah, I, I think it is actually really just blowing the wind stronger into our backs. You know, we've, we've heard many statements from the Environment Minister Wilkinson and also the Chrystia Freeland, regarding the acceleration of projects involving clean energy metals and the provision of energy in order to export to those good neighbor countries. Look, we were already very advanced on the permitting front, there's no doubt about that, and, and, and making significant progress. Yeah, it's always nice to hear from a federal and provincial political level, the support for your, your business initiatives.
Saskatchewan, earlier in the year, launched their critical minerals strategy, and they used our office in Saskatoon to launch that strategy, where they openly stated a doubling of uranium production by 2030. You know, that's our project, Denison's project, no doubt. Yeah, incredibly positive tailwinds by both provincial and federal governments in Canada. Again, I've said it in the past, Canada is an outstanding country for the development of resources projects, particularly uranium projects, and it's very rigorous. And that rigor is in the interests of the long-term success of a project.
As I mentioned, when dealing with such a key component of energy transition and, and sensible energy, policy is the key ingredient to a higher standard of living for the entire world's population, it rightfully has a very rigorous approach, and, and we absolutely adopt that and appreciate that.
Andrew Wong (Managing Director and Senior Equity Research Analyst)
Okay. Thank you.
Operator (participant)
Thank you. Your next question is from Alexander Pearce, from BMO. Please ask your question.
Alexander Pearce (Managing Director and Senior Equity Research Analyst)
Morning, all. Leigh, you touched on this already. You know, given that additional uncertainty you mentioned in Niger, can you provide a little bit more commentary on how your conversations with utilities have changed in the last few months? Do you think we're getting closer to the point where utilities, you know, may be willing, more willing to sign kind of mutually acceptable contracting terms or prepayments, et cetera, that could help finance the project when the time comes?
Leigh Curyer (CEO)
Yeah. Hi, Alex. Yeah, that... Look, I, I think the, the Niger thing has been on the back or in addition to what was already occurring. You know, it, it's... We're, we're seeing more RFPs being issued in the sector, which I think is highlighting that utilities are really starting to focus on their supply chains and, and the, and actually the materialization of that sovereign risk that was already around over 70% of mine production worldwide, has always been there, but now it's materializing in the form of, you know, we see the actions of, of, of Russia at the moment and now the coup in Niger. It really is highlighting that, that sovereign risk that's always been there.
Naturally, a lot of the, the Western world and European and Middle Eastern, and, and Asian countries are, are looking at that supply chain. Some, some countries are more vulnerable than others, given their past reliance, on, on some of those sovereign locations that are now, in question. So I think you will see, over time, a change in the way, you know, some of the elements around contracting. What utilities want to see, though, is strong, you know, sovereign jurisdiction that's, that's reliable, and also strong technical, delivery and certainty around production volumes. Being in Saskatchewan, meets the first box and the second box, well, everyone's well aware of the, the technical strength of our project with the high levels of certainty around production volumes.
You know, moving into, you know, the latter part of this decade and into the, the following decades, yeah, our profile certainly meets those two ingredients that utilities are seeking.
Alexander Pearce (Managing Director and Senior Equity Research Analyst)
Great. Thanks, Leigh.
Leigh Curyer (CEO)
Thanks, Alex.
Operator (participant)
Thank you. Your next question is from Winston Miles, from Eight Capital. Please ask your question.
Winston Miles (Principal, Co-Head of Institutional Sales)
Hey, Leigh. How, how's it going? Just wanted to wish you congrats on, on all the success this year and, and progress at the Rook I Project so far in 2023. There's been a lot of talk by other companies, especially in the sector around your, your contracting strategy. You know, I, I guess my question is, are they accurate with their, you know, assertions, you could kinda quote, unquote, "dump," you know, all your production into spot? Then part two to that question would be, you know, how does your contracting strategy impact the, the debt process you've, you've undertaken? Thanks a lot.
Leigh Curyer (CEO)
Yeah, sure. I'll, I'll answer the first part of that question, Winston, and then hand over to Travis on the, the debt side, who's running that process. Look, we've been very, very clear, irrespective of how it's, it's been commentated by others, that we are simply taking an approach which reflects the technical and sovereign nature of our project. So, we are going to, to contract on that basis. Basically what we're, we're going to do is really be heavily levered to prices at the time of delivery.
We, our position is that the uranium price needs to go considerably higher in order to encourage production from a number of these development projects that are nearing permitting approval and even nearing production, such as the Denison's, Boss Energy's, Paladin are out there as well. Because of the supply gap being so great, we need a diversified uranium supply mine, uranium supply, particularly in countries that don't exhibit the sovereign risk of other countries as we speak, that produce, you know, a large portion of the world's uranium. We are purely going to leverage our sovereign aspect and our, and our highly competent technical nature, which provides very high certainty around production volumes.
We'll be entering most likely into shorter term contracts over shorter periods from that fact, which basically keeps our company exposed to future uranium prices in a sensible manner. We will be contracting portions of our production, there's no doubt about that. They will be tied to market prices at the time of delivery. It's very, very clear, I think the contracts are going to be moving more weighted to market prices at the time of delivery as we move forward. You know, we are incredibly levered to that development. On the second part.
Travis McPherson (Chief Commercial Officer)
Yeah. Yeah, Winston, so on the debt side, I, I would say the lenders that we're speaking to, and there are more coming to the table, as Leigh mentioned earlier, wholeheartedly agree with our strategy, frankly. They see the opportunity to maintaining. They know the position of this asset in the uranium market, and taking advantage of production flexibility is important to optimizing the economic outcomes, which obviously benefits these lenders. From a debt side, one thing we fleshed out very early with them is, you know, this isn't a typical mine, whether it's uranium or another commodity. Price hedging, and a requirement for that is not required. As Leigh points out, is not required, for one reason, which is the technical profile of the mine and the consequential cost profile.
Also philosophically, with respect to this opportunity at hand, to, to, flex up and down the mine according to market demands, to make sure that the uranium price stays stable and can bring online, you know, more stability of production, particularly in the West. From a debt side, we will be signing a minor portion of production under volume-based contracts, no pricing mechanisms required, meaning full spot exposure at the time of delivery is fully accepted and agreed to by the lenders.
Winston Miles (Principal, Co-Head of Institutional Sales)
Excellent. Thank you.
Leigh Curyer (CEO)
Thanks, Winston.
Operator (participant)
Thank you. Your next question is from Chris Thompson, from PI Financial. Please ask your question.
Chris Thompson (Senior Equity Research Analyst)
Hi, good morning, gentlemen. Thanks for the intro there, Leigh. Good, good discussion, good recap, I guess, on, on what's happening with the uranium market. Wholeheartedly agree. Just a couple of quick questions, I hope you don't mind. I just wanna unpack some of the details that relate, I guess, to on the permitting side. You know, my understanding is we're waiting for the conclusion of the final, I guess, provincial EIS approval, permitting, sometime this month. Is, is that correct?
Leigh Curyer (CEO)
Yeah, it's, it's imminent. How-- exactly how far away that is, we'll, we'll, we'll see. But it's, it's fully with the environment department of the province of Saskatchewan. This is where we're referring to the provincial environmental approval here. On a daily basis, we have done everything that we are able to do. So, you know, latest feedback is that it-- we, we can expect it imminently. That will then commence a 30-day public record period, then at the conclusion of that, well, the Environment Minister will be in a position to grant approval. You know, we recently, Foran Mining, with a project in Saskatchewan, received approval within 14 days following the conclusion of that 30-day public record period. So, Chris, it's imminent.
I can tell you, the whole team here at NexGen, there's not a day that, you know, on a daily basis, we ensure that we've done everything we, we possibly can. It's imminent. In parallel to that, you know, we've got the engineering, proceeding really, really well, and site construction preparation, being undertaken at site as we speak.
Chris Thompson (Senior Equity Research Analyst)
Great. Thanks, Leigh. Then, I guess, the federal, the federal EIS side of things, when do you anticipate... I mean, I, I'm asking you questions you probably don't know answers to, but I wanted to just provide just a little bit of color on the sort of lag, I guess, between provincial approval and federal.
Leigh Curyer (CEO)
Yeah, well, look, Chris, it's a very detailed and rigorous process.
Chris Thompson (Senior Equity Research Analyst)
Mm-hmm.
Leigh Curyer (CEO)
The provincial one is, is incredibly material, and the federal one will always come after the provincial one. We've ran, you know, the process in tandem, and we've already completed a 120-day public comment period in 2022, on the federal basis. We know all the questions that came in. The large majority of those questions were clarifications, and referencing certain paragraphs in the EIS, which, as you, as you are aware, is a very large document.
We've also, at the same time, have very, like, letters of support from each of the four communities in the project area, expressing their support for immediate regulatory approval. On receiving the provincial environmental assessment, we, we already have, with the signing of that fourth agreement during the quarter, 100% community support, and that's been expressed both provincially and federally. I suspect the federal process will be within a reasonable timeframe following the provincial approval, and that's the indications we've received federally right throughout. I think you'll see, you know, things start to accelerate on the federal level once that provincial approval is in place.
I, I, I wanna be clear, once that provincial approval is in place, that, that federal process is gonna be running in parallel to a lot of activity at site. So, you know, the federal government and, and CNSC see what's happening and, and, see the support from the local communities and, looking forward to delivering Canada's next uranium mine.
Chris Thompson (Senior Equity Research Analyst)
Beautiful, Leigh. Then just finally, just one quick, quick question, and it's something that I guess Travis did allude to a couple of minutes ago, and that is the ability of the operation to flex up, flex down production. Could you maybe expand a little bit on that, and how are you going to be communicating that to the market? Obviously, this is not a discussion now, but something that I think the market's going to want to know a little bit more detail on, you know, as you, as you start development.
Leigh Curyer (CEO)
Yeah. So with the deposit being in such highly competent, basement rock, we, we can flex production up and flex production down from one quarter to the next. We also have such an incredibly low cost base, that the economics obviously, play into that, that, that flexibility. We are purely and very simply leveraging the technical nature of the setting in being able to deliver that to the market. You know, it is, I think, a highly advantageous element of the Rook I Project that is meeting a demand by the utility sector. To answer your question, Chris, it is purely around the technical setting and the low economic cost of producing a pound, which facilitates that flexibility.
Travis McPherson (Chief Commercial Officer)
Yeah, to be clear, Chris-
Chris Thompson (Senior Equity Research Analyst)
Go ahead, Travis.
Travis McPherson (Chief Commercial Officer)
To be clear, Chris, we're very confident on what we've outlined in terms of production volumes. Like, we don't see a world where we need less uranium from a mine like Arrow. This is just to say that we have that optionality to make sure the uranium price stays at a strong, sustainable price for the long term.
Leigh Curyer (CEO)
Mm-hmm. And the feasibility study, based, based on 1,300 tons a day, well, you know, we are also putting in flexibility into that as well, because we actually are very strong advocates that the world needs more than three Arrows online by 2030, and yet they don't exist with respect to that size and scale. Yeah, that's, that's our position.
Chris Thompson (Senior Equity Research Analyst)
Beautiful, guys. Thank you very much.
Leigh Curyer (CEO)
Thanks, Chris.
Operator (participant)
Thank you. Your next question is from Brian MacArthur from Raymond James. Please ask your question.
Brian MacArthur (Managing Director and Head of Mining Research)
Hi, good morning, and thank you for taking my question. I just want to follow up on the potential debt. Obviously, you're getting a lot more interest than you had a little while ago. Do you still think you'll have stuff in place at Q4, or does it make more sense to wait longer, or is it irrelevant because the way you're gonna sign the contracts, it's just you're gonna get delivered spot in the future, so there's no real value in waiting to get a higher price, you're better to just get money in the door upfront?
Travis McPherson (Chief Commercial Officer)
Yeah, I'd say, you know, with these other parties coming to the table, we're definitely flushing those out and seeing their level of interest. So that may push it back a little bit from Q4 into early in the new year, but generally still tracking well and definitely not on the critical path in terms of a hold up or anything to actually start construction activities and shaft sinking the moment we get that approval to do so.
Brian MacArthur (Managing Director and Head of Mining Research)
Thank you. Maybe just, Leigh, you've talked about four years after permitting. Not to get technical on this, are we talking four years after you received the permits or after CNSC licensing? I mean, obviously, what I'm really trying to get here is when do you think first production is potentially at the mine now?
Leigh Curyer (CEO)
Yeah, so it, basically on the provincial permitting, the feasibility study, if we were to start from scratch, said 42 months. We're going off the engineering schedule with respect to that timeline, but it is subject primarily to the provincial permitting approval. In some elements, we've already got a head start because we've already got an accommodation camp there. We're expanding it. We've already cleared the pads for the sinking of the production shaft and the exhaust shaft, and we're doing the pre-hole preparations as we speak. We are already eating into that 42-month timeline from from point, you know, or time zero.
There's those two components, which is, which is influencing that, and it's, and it's subject to the timing of the actual provincial approval as the primary gating item. If you, if, you know, if we receive the provincial permit this, this quarter or next, well, next quarter, in Q4 2023, you can reasonably assume, based on all those factors, it's, it's gonna be around four years or within four years following that approval, based on the engineering schedule as, as currently defined.
Brian MacArthur (Managing Director and Head of Mining Research)
Great. Thank you. Maybe if I ask one other philosophical question. You've talked about, you've got obviously a very unique asset, large, good jurisdiction, low cost, and you're gonna be somewhat selective in who you sell to. Do you think that'll allow you to get a premium price from, from those customers versus what historically maybe been quoted in the market? Will you be able to build in anything for that, do you think?
Leigh Curyer (CEO)
Yeah, Brian, you're, you're, you're exactly right. It is a very unique asset that hasn't been in the market before, and all we are doing is leveraging it, given its, its characteristics, both sovereign-wise and technically and cost-wise. I think as you see other dynamics in the market playing out around, you know, sovereign risk, around certain sources of production and technical risk, and then the advent of highly focused investment funds expecting companies to have elite ESG profiles, you know, that environment with a very tightening market, with limited supply from good, good, good actors, I think it could eventuate into that that situation. I, I think all we're... Well, I don't think.
All we are doing is keeping leverage to that outcome, which I think is, is paramount and in the interest of investors and stakeholders, community, governments, everyone associated with the project. Gotta, gotta also take into account that, you know, the cost of the uranium going into a nuclear utility makes up such a small component of the overall cost. You know, utilities, or the, or the, the, the ability for them to pay substantially higher prices, whilst they don't want to pay an extra $1 than they have to, but, you know, the market is the market, and, and given the low cost that uranium makes up of an overall nuclear utility, terrific scope to, to for higher prices going forward.
Brian MacArthur (Managing Director and Head of Mining Research)
Great. Thanks, Leigh and Travis, for answering my questions. I'll get back in line. Thank you.
Leigh Curyer (CEO)
Thank you, Brian.
Operator (participant)
Thank you. Once again, should you wish to ask a question, please press star one. Your next question is from Graham Tanaka from Tanaka Capital Management. Please ask your question.
Graham Tanaka (President and Chief Investment Officer)
Yeah. Thank you, Leigh and Travis. I've got a couple questions. One relates to sort of the macro. You talked about the need for over three Arrows to come online by 2030. What is your best guess as to what the price would have to be, a clearing market price, to incentivize additional mines to be able to meet that demand? What kind of price level would you need to see in US dollars, and where would that come from? Are there any prospects that are close? Thanks.
Leigh Curyer (CEO)
Yes, so you, you need to look at it, what's the, the region, I think, regionally, because obviously, the Athabasca Basin has significantly higher grades and lower cost profiles than other countries. In the US, you know, there's, there's projects under development, but lower grade and hence have a higher, higher economic cost, and then in, in Australia as well. You've got some smaller projects, ISL, going into production, which, which have a slightly lower cost base. It, it, it, it's, it really depends on the nature of the projects that we're talking about. Obviously, the Athabasca Basin projects require a lower US price to get in production. I would say that the US and Australia need higher prices.
You know, in the past, when we saw uranium prices go to $140 a pound in the late 2000s, a lot of the US project, development projects did not go into production. Projects in Namibia, as well, did not go into production with uranium prices over $100. Look, as you're aware, I'm a formerly a chartered accountant. I'm very cost driven and data focused and, and look at cost structures in terms of defining our strategy ourselves and, and understanding where we, we, we're placed in it. I think overall, to answer your question simply, uranium prices are going significantly higher. We see, you know, production at the moment, barely breaking even, even at current prices.
I believe the uranium price is going significantly higher, and it has to go significantly higher to get additional production on board on a diversified front. It's more than just the Athabasca Basin developers, it's also we need development in the US. We need development projects in Australia, all coming online, to meet this very important world goal of sensible energy provision.
Graham Tanaka (President and Chief Investment Officer)
Okay, so, so would you hazard a guess at what kind of clearing price would be needed or price to be seen back over $100 or $90 or $80 US? What kind of level do you think needs to incentivize additional mine additions?
Leigh Curyer (CEO)
Well, sure. In the US, you want to see over $100 a pound to see any material increase in uranium production.
Graham Tanaka (President and Chief Investment Officer)
Okay.
Leigh Curyer (CEO)
When you consider they consume 50 million pounds per annum, yet produce less than 1, that's probably going to be one of the driving metrics in this market moving forward.
Travis McPherson (Chief Commercial Officer)
One of the, one of the interesting things, Graham, is like it is less of a question about price, because even if we had $100 uranium today and had that for the next 5 years, it's not clear at all where you get to those three Arrows. Like, they just, they're not in the pipeline. We went through, you know, post-Fukushima, a very long period of time, like over a decade, where there was no investor appetite, no exploration being done anywhere outside of ourselves, Denison, Fission, and a couple others globally. You need to have elevated prices, of what Leigh was mentioning, in terms of those incentive prices, but it's not like you just get those incentive prices and a bunch of production comes online.
Graham Tanaka (President and Chief Investment Officer)
Right.
Travis McPherson (Chief Commercial Officer)
It's going to take a long time to get discoveries made, developed, et cetera.
Graham Tanaka (President and Chief Investment Officer)
Okay. This links up with my next question, which is: What is the upside flexibility for NexGen to be able to increase its production both at the future mill and the mine itself at Arrow? As I believe, if you can confirm it, it was, it's still open at depth and to two other, two or three directions. And as well, what do you need to do from an exploration development point of view, to bring on another Arrow and one of the other Patterson corridors, which you are exploring today? Thank you.
Leigh Curyer (CEO)
Yes. Well, we, we currently have a resource base of 350 million pounds. It's, it's very, very significant. So our proposed mine plan, you know, at 1,300 tons a day is very, very small physically, yet will produce around 30 million pounds per annum. It's clearly evident that that could be expanded in the future. As we speak, we are going in at that 30 million pound per annum capability. There's undoubtedly huge exploration upside at Rook I alone, and we've got two other land packages as well that along the boundary of the Athabasca Basin in the underprivileged southwestern region.
Just on the Patterson Corridor alone, like we found Arrow on the very first, or Rook I, the Arrow deposit on the Rook I project on, on the very first drill hole within a 4.5 km radius. There's Fission, 7 km along the same corridor with 130 million pounds. F3 have recently made a discovery up the road adjacent to our SW1 project, where we're, we're exploring at the moment. Yeah, I think you're gonna see that area producing uranium for many, many, many decades. Even the Patterson Corridor and the Rook I project, we've really only explored probably less than 10% of it as we speak. We've got another eight corridors in parallel on that project that we need to explore.
You know, with that, but also having hit mineralization below Arrow, I think it's undoubtedly that there's resource expansion, very high resource expansion potential, as we continue to explore.
Graham Tanaka (President and Chief Investment Officer)
I just was wondering, to what extent, if there really is a great shortage and the price goes way, say, considerably above $100, would NexGen be incentivized to crank up production and also expand the mill operation? How much would that cost?
Leigh Curyer (CEO)
Yeah, well, certainly possible. We haven't done that costing yet, based on what we've already learned about our current proposed mine, I'm, I'm absolutely confident it would be both economically and technically achievable.
Graham Tanaka (President and Chief Investment Officer)
Okay, great. Thank you very much. Good luck.
Leigh Curyer (CEO)
Thank you.
Operator (participant)
Thank you. Your next question is from Andrew Wong of RBC. Please ask your question.
Andrew Wong (Managing Director and Senior Equity Research Analyst)
Hi, thanks for the follow-up. I just wanted to ask, what kind of construction works and, you know, just, just what kind of site works can you get done with the provincial permitting? Also, you know, given that your provincial permitting could be imminent, what kind of construction do you plan to have done within the next six to 12 months? Thanks.
Leigh Curyer (CEO)
Yeah. So we're got a lot of the early-stage items, 100% engineered at the start of the construction period. The detailed final engineering that we're doing is focused mainly on the surface infrastructure and surrounding the mill. We're, yeah, on receiving permit approval, we can get into it immediately. The work will primarily revolve around the shafts to begin with, and noting that we are not actually touching any uranium during the first three years of construction. It's all very benign activities, and we're currently detailing those with the province as we speak.
Andrew Wong (Managing Director and Senior Equity Research Analyst)
Okay, great. Thanks.
Leigh Curyer (CEO)
Thanks, Andrew.
Operator (participant)
Thank you. There are no further questions at this time. I will now hand the call over back to Leigh Curyer. Thank you.
Leigh Curyer (CEO)
Thank you, host. Yes, thank you for everyone's attention. It's a very exciting time for the company. You know, a very significant inflection point, going from pre-provincial approval to post-provincial approval imminently. The company is ready, the team is ready. That with the overlying market developments, both on the demand side and the supply side, make an incredibly exciting time for all of our shareholders and stakeholders. Again, it's an absolute privilege to be involved, and the commitment of the team is absolute. Thank you for everyone, thank you, everyone, for your attention. If there's any additional questions that you may have, please don't hesitate to reach out to Monica, Travis, or myself.
Yeah, we look forward to speaking with you again.