NexGen Energy (TSX: NXE; NYSE: NXE) has signed a US$30 million financing agreement with Queen’s Road Capital Investment (TSXV: QRC) and plans to use the funds to advance work at its flagship Arrow deposit, part of the company’s Rook 1 project in Saskatchewan.
“Warren Gilman, chairman and chief executive officer of Queen’s Road Capital, is a long-time shareholder and supporter of NexGen and also joined our board in 2017,” Leigh Curyer, NexGen’s CEO, said in an interview. “Warren came to us and wanted to invest in uranium, but only wanted to invest in world-class projects and world-class management teams. We met both those criteria.”
A leading financier to the global resource sector, Queen’s Road Capital Investment makes investments in privately held and publicly traded resource companies and acquires and holds securities for both long-term capital appreciation and short-term gains, says the company.
The financing consists of a US$15 million private placement (11.6 million common shares at C$1.80 per share) and US$15 million in unsecured convertible debentures. The debentures carry a 7.5% coupon over a five-year term and can be converted into about 8.9 million common shares at C$2.34 per share.
“This agreement is identical to our previous financing agreement for US$110 million with CEF Holdings back in 2017,” Curyer said. “When you consider the pricing of both agreements at a 5% premium to the 20-day VWAP, I think it speaks very highly to overall financing for NexGen and also Queen’s Road Capital.”
News of the financing on May 11 sent the company’s shares up 3.6% to $2.04, which Curyer said is “a solid indication of the market’s appreciation of this financing agreement.”
NexGen Energy is now extremely well-funded with about $75 million in the treasury on the closure of the agreement, he added, “so, we are very well placed to complete the feasibility study for our Arrow deposit by the end of this year, subject to the business returning to normal after the coronavirus outbreak.”
The mining executive also pointed to the investor rights agreement in the transaction, which he said will provide for voting alignment, standstill and transfer restriction covenants for as long as Queen’s Road Capital holds at least 5% of NexGen’s shares on a partially diluted basis, or until there is a change of control.
“The rights agreement means that the investor and debenture holders will support management and the board in resolutions forwarded to the shareholders,” said Curyer, “which is very important for any hostile M&A attention we might receive.”
NexGen’s wholly-owned Arrow deposit has indicated mineral resource of 2.89 million tonnes grading 4.03% U3O8 for 256.6 million lb. contained U3O8, including a high-grade core of 0.46 million tonnes grading 17.85% U3O8 for 181 million lb. U3O8 . Inferred resources add 4.84 million tonnes grading 0.86% U3O8 for 91.7 million lb. U3O8 .
Colin Healey, a mining analyst at Haywood Securities said in a research note that NexGen is his top pick in the uranium sector “due to the disruptive potential of the Arrow deposit.”
“We continue to be very bullish on NexGen, as we believe it controls one of the best undeveloped resources globally, in any commodity,” he stated in his note to clients.
Brian MacArthur of Raymond James increased his target price on NexGen following news of the financing from $4.00 per share to $4.25.
At press time in Toronto, NexGen Energy was trading at $2.10 per share within a 52-week trading range of 76¢ and $2.31.
The company has 355 million common shares outstanding for a $757-million market capitalization.