NexGen Energy Provides Rook I Update, Costs $645 Million More Than Expected

NexGen Energy NXE has announced that construction costs for its Rook I uranium project in Saskatchewan have soared nearly 70% above the previous estimate from 2021.

The updated capital cost now stands at $1.6 billion, up from around $950 million, showcasing the challenge of domestic uranium production.

 "The updated capital cost presents an all-encompassing spend to bring the Rook I project into production based on robust, proven mining and construction methodologies, with a payback period of 12 months," said CEO Leigh Curyer.

Operating costs are projected to nearly double to $10 per pound of uranium oxide (U3O8), compared to $5.4 per pound in the earlier study. Consequently, the project's after-tax net present value has fallen from $5.55 billion to $4.54 billion, and the internal rate of return has dropped from 79% to 45%.

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Regardless of the cost hike, Alexander Pearce, a mining analyst at BMO Capital Markets, remains optimistic.

"Despite an increase in cash cost to about $10 per lb., the asset would remain one of the largest and lowest cost uranium mines globally," he said, per a Bloomberg report.

The Rook I project is in Saskatchewan's Athabasca Basin, known for its rich uranium deposits. It aims to produce 21.7 million pounds of U3O8 annually and has a potential production capacity of up to 30 million pounds. The site holds 3.7 million measured and indicated tons with an average grade of 3.1% U3O8. 

The new cost estimates reflect $220 million attributed to price inflation and $425 million from enhanced engineering and procurement activities since March 2021. NexGen is advancing its project engineering, now 45% complete, up from 18% during the feasibility study.

The company's strategy includes incorporating underground tailings management to reduce environmental impact and lower closure costs to an estimated $50 million, significantly less than other uranium mines in Canada. Rook I's unique design integrates progressive reclamation, reducing future liabilities and ensuring a safer, more efficient operation.

The project has already received provincial environmental approval and is awaiting the completion of the federal review process. NexGen is looking to begin construction soon after receiving the green light from federal authorities.

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