UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2022
Commission File Number 001-38072
NexGen Energy Ltd.
(Translation of registrants name into English)
Suite 3150, 1021 West Hastings Street
Vancouver, B.C., Canada V6E 0C3
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F ☐ Form 40-F ☒
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7) ☐
.
INCORPORATION BY REFERENCE
Exhibits 99.1 and 99.2 to this Report on Form 6-K are hereby incorporated by reference as Exhibits to the Registration Statement on Form F-10 of NexGen Energy Ltd. (File No. 333-253512).
EXHIBIT INDEX
Exhibit | Description | |
99.1 | Unaudited Condensed Consolidated Interim Financial Statements for the Periods Ending June 30, 2022 and 2021 | |
99.2 | Managements Discussion and Analysis For the Three and Six Months Ended June 30, 2022 | |
99.3 | Form 52-109F2 Certification of Interim Filings - Chief Executive Officer | |
99.4 | Form 52-109F2 Certification of Interim Filings - Chief Financial Officer |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 5, 2022.
NEXGEN ENERGY LTD. | ||
By: |
/s/ Harpreet Dhaliwal | |
Name: Harpreet Dhaliwal | ||
Title: Chief Financial Officer |
3
Exhibit 99.1
Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars) - Unaudited
NexGen Energy Ltd.
Condensed Interim Consolidated Statements of Financial Position
(expressed in thousands of Canadian Dollars) - Unaudited
As at June 30, 2022 | As at December 31, 2021 | |||||||
Assets |
||||||||
Current assets |
||||||||
Cash |
$ | 161,237 | $ | 201,804 | ||||
Marketable securities (Note 5) |
6,033 | 9,315 | ||||||
Amounts receivable |
862 | 1,178 | ||||||
Prepaid expenses and other assets |
2,760 | 1,028 | ||||||
170,892 | 213,325 | |||||||
Non-current assets |
||||||||
Exploration and evaluation assets (Note 6) |
365,275 | 326,543 | ||||||
Property and equipment (Note 7) |
5,966 | 6,619 | ||||||
Deposits |
76 | 76 | ||||||
Total assets |
$ | 542,209 | $ | 546,563 | ||||
Liabilities |
||||||||
Current liabilities |
||||||||
Accounts payable and accrued liabilities |
$ | 12,738 | $ | 7,499 | ||||
Lease liabilities (Note 9) |
737 | 706 | ||||||
13,475 | 8,205 | |||||||
Non-current liabilities |
||||||||
Convertible debentures (Note 8) |
61,716 | 72,011 | ||||||
Long-term lease liabilities (Note 9) |
2,086 | 2,463 | ||||||
Deferred income tax liabilities |
1,577 | 2,536 | ||||||
Total liabilities |
$ | 78,854 | $ | 85,215 | ||||
Equity |
||||||||
Share capital (Note 10) |
$ | 697,067 | $ | 695,856 | ||||
Reserves |
80,858 | 68,837 | ||||||
Accumulated other comprehensive income |
611 | 1,895 | ||||||
Accumulated deficit |
(344,800) | (332,980) | ||||||
Equity attributable to NexGen Energy Ltd. shareholders |
433,736 | 433,608 | ||||||
Non-controlling interests (Note 15) |
29,619 | 27,740 | ||||||
Total equity |
463,355 | 461,348 | ||||||
Total liabilities and equity |
$ | 542,209 | $ | 546,563 |
Nature of operations (Note 2)
Commitments (Note 14)
The accompanying notes are an integral part of these consolidated financial statements.
2
NexGen Energy Ltd.
Condensed Interim Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss)
(expressed in thousands of Canadian Dollars, except per share and share information) - Unaudited
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Expenses |
||||||||||||||||
Salaries, benefits and directors fees |
$ | 1,867 | $ | 2,026 | $ | 3,737 | $ | 4,477 | ||||||||
Office, administrative, and travel |
1,558 | 651 | 2,911 | 1,653 | ||||||||||||
Professional fees and insurance |
1,373 | 483 | 1,987 | 1,312 | ||||||||||||
Depreciation (Note 7) |
446 | 540 | 884 | 1,084 | ||||||||||||
Share-based payments (Note 10) |
6,340 | 11,381 | 13,736 | 13,578 | ||||||||||||
(11,584) | (15,081) | (23,255) | (22,104) | |||||||||||||
Finance income |
491 | 280 | 742 | 405 | ||||||||||||
Mark-to-market gain (loss) on convertible debentures (Note 8) |
28,504 | (5,913) | 10,074 | (64,922) | ||||||||||||
Interest expense on convertible debentures (Note 8) |
(529) | (492) | (1,047) | (2,720) | ||||||||||||
Interest on lease liabilities (Note 9) |
(54) | (70) | (110) | (142) | ||||||||||||
Gain on sale of assets |
- | 2,236 | - | 2,236 | ||||||||||||
Foreign exchange gain (loss) |
474 | (251) | 246 | (429) | ||||||||||||
Other income |
- | 18 | - | 18 | ||||||||||||
Income (loss) before taxes |
17,302 | (19,273) | (13,350) | (87,658) | ||||||||||||
Deferred income tax recovery (expense) |
283 | (526) | 535 | (257) | ||||||||||||
Net income (loss) |
17,585 | (19,799) | (12,815) | (87,915) | ||||||||||||
Items that may not be reclassified subsequently to profit or loss: |
||||||||||||||||
Change in fair value of convertible debenture attributable to the change in credit risk (Note 8) |
196 | 3 | 221 | (292) | ||||||||||||
Change in fair value of marketable securities (Note 5) |
(2,359) | 933 | (3,283) | 933 | ||||||||||||
Deferred income tax recovery (expense) |
300 | (114) | 422 | (64) | ||||||||||||
Net comprehensive income (loss) |
$ | 15,722 | $ | (18,977) | $ | (15,455) | $ | (87,338) | ||||||||
Net income (loss) attributable to: |
||||||||||||||||
Shareholders of NexGen Energy Ltd. |
$ | 13,484 | $ | (18,894) | $ | (12,187) | $ | (84,983) | ||||||||
Non-controlling interests |
4,101 | (905) | (628) | (2,932) | ||||||||||||
$ | 17,585 | $ | (19,799) | $ | (12,815) | $ | (87,915) | |||||||||
Net comprehensive income (loss) attributable to: |
||||||||||||||||
Shareholders of NexGen Energy Ltd. |
$ | 12,586 | $ | (18,496) | $ | (13,471) | $ | (84,776) | ||||||||
Non-controlling interests |
3,136 | (481) | (1,984) | (2,562) | ||||||||||||
$ | 15,722 | $ | (18,977) | $ | (15,455) | $ | (87,338) | |||||||||
Earnings (loss) per share attributable to NexGen Energy Ltd. shareholders (Note 16) | ||||||||||||||||
Basic earnings (loss) per share |
$ | 0.03 | $ | (0.04) | $ | (0.03) | $ | (0.19) | ||||||||
Diluted (loss) per share |
$ | (0.02) | $ | (0.04) | $ | (0.04) | $ | (0.19) | ||||||||
Weighted average common shares outstanding (Note 16) |
||||||||||||||||
Basic |
479,283,015 | 471,861,473 | 479,324,268 | 441,615,578 | ||||||||||||
Diluted |
504,256,307 | 471,861,473 | 504,390,280 | 441,615,578 |
The accompanying notes are an integral part of these consolidated financial statements.
3
NexGen Energy Ltd.
Condensed Interim Consolidated Statements of Cash Flows
(expressed in thousands of Canadian dollars) - Unaudited
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net income (loss) for the period: |
$ | 17,585 | $ | (19,799) | $ | (12,815) | $ | (87,915) | ||||||||
Adjust for: |
||||||||||||||||
Depreciation (Note 7) |
446 | 540 | 884 | 1,084 | ||||||||||||
Share-based payments (Note 10) |
6,340 | 11,381 | 13,736 | 13,578 | ||||||||||||
Mark-to-market (gain) loss on convertible debenture (Note 8) |
(28,504) | 5,913 | (10,074) | 64,922 | ||||||||||||
Interest expense on convertible debentures (Note 8) |
529 | 492 | 1,047 | 2,720 | ||||||||||||
Interest on lease liabilities (Note 9) |
54 | 70 | 110 | 142 | ||||||||||||
Deferred income tax (recovery) expense |
(283) | 526 | (535) | 257 | ||||||||||||
Unrealized foreign exchange (gain) loss |
(474) | 251 | (246) | 429 | ||||||||||||
Gain on sale of assets |
- | (2,236) | - | (2,236) | ||||||||||||
Operating cash flows before working capital |
(4,307) | (2,862) | (7,893) | (7,019) | ||||||||||||
Changes in working capital items: |
||||||||||||||||
Amounts receivable |
4 | (18) | 316 | 30 | ||||||||||||
Prepaid expenses and other |
(1,267) | (1,213) | (1,732) | (858) | ||||||||||||
Accounts payable and accrued liabilities |
(273) | (186) | (461) | 393 | ||||||||||||
Cash used in operating activities |
$ | (5,843) | $ | (4,279) | $ | (9,770) | $ | (7,454) | ||||||||
Expenditures on exploration and evaluation assets (Note 6) |
(20,121) | (4,954) | (30,816) | (12,986) | ||||||||||||
Proceeds on sale of assets |
- | 96 | - | 96 | ||||||||||||
Acquisition of equipment |
(68) | (259) | (275) | (483) | ||||||||||||
Cash used in investing activities |
$ | (20,189) | $ | (5,117) | $ | (31,091) | $ | (13,373) | ||||||||
Proceeds from bought-deal financing, net of share issuance costs (Note 10) |
- | (446) | - | 163,477 | ||||||||||||
Proceeds from common share issuance on ASX, net of share issuance costs |
- | 1,501 | - | 1,501 | ||||||||||||
Proceeds from exercise of options and warrants |
234 | 16,942 | 1,211 | 19,231 | ||||||||||||
Payment of lease liabilities (Note 9) |
(227) | (264) | (456) | (525) | ||||||||||||
Interest paid on convertible debentures |
(707) | (692) | (707) | (2,258) | ||||||||||||
Cash (used in) provided by financing activities |
$ | (700) | $ | 17,041 | $ | 48 | $ | 181,426 | ||||||||
Foreign exchange gain (loss) on cash |
474 | (251) | 246 | (429) | ||||||||||||
(Decrease) Increase in cash |
$ | (26,258) | $ | 7,394 | $ | (40,567) | $ | 160,170 | ||||||||
Cash, beginning of period |
187,495 | 226,798 | 201,804 | 74,022 | ||||||||||||
(Decrease) Increase in cash |
(26,258) | 7,394 | (40,567) | 160,170 | ||||||||||||
Cash, end of period |
$ | 161,237 | $ | 234,192 | $ | 161,237 | $ | 234,192 |
Supplemental cash flow information (Note 11)
The accompanying notes are an integral part of these consolidated financial statements.
4
NexGen Energy Ltd.
Condensed Interim Consolidated Statements of Changes in Equity
(expressed in thousands of Canadian dollars, except share information) - Unaudited
Share Capital | ||||||||||||||||||||||||||||||||
Common Shares | ||||||||||||||||||||||||||||||||
Number | Amount | Reserves | Accumulated Other Comprehensive Income (Loss) |
Accumulated Deficit |
Attributable to shareholders of NexGen Energy Ltd. |
Non- controlling |
Total | |||||||||||||||||||||||||
Balance at December 31, 2020 |
381,830,205 | $ | 255,953 | $ | 54,939 | $ | (4,339) | $ | (212,302) | $ | 94,251 | $ | 25,001 | $ | 119,252 | |||||||||||||||||
Share-based payments (Note 10) |
- | - | 14,243 | - | - | 14,243 | 1,588 | 15,831 | ||||||||||||||||||||||||
Shares issued on exercise of stock options (Note 10) |
6,450,001 | 28,961 | (11,604) | - | - | 17,357 | - | 17,357 | ||||||||||||||||||||||||
Shares issued on converted debentures (Note 8) |
48,083,335 | 230,301 | - | - | - | 230,301 | - | 230,301 | ||||||||||||||||||||||||
Shares issued for convertible debenture interest payments (Note 8) |
217,874 | 1,087 | - | - | - | 1,087 | - | 1,087 | ||||||||||||||||||||||||
Shares issued on bought-deal financing, net of share issue costs (Note 10) |
38,410,000 | 163,181 | - | - | - | 163,181 | - | 163,181 | ||||||||||||||||||||||||
Shares issued on ASX, net of share issue costs (Note 10) |
400,000 | 1,192 | - | - | - | 1,192 | - | 1,192 | ||||||||||||||||||||||||
Shares issued for the Rook I property development (Note 10) |
200,000 | 900 | (326) | - | - | 574 | - | 574 | ||||||||||||||||||||||||
Ownership changes relating to non-controlling interests |
- | - | - | - | 1,012 | 1,012 | 954 | 1,966 | ||||||||||||||||||||||||
Net loss for the period |
- | - | - | - | (84,983) | (84,983) | (2,932) | (87,915) | ||||||||||||||||||||||||
Reclass accumulated other comprehensive income related to converted debentures (Note 8) |
- | - | - | 4,015 | (4,015) | - | - | - | ||||||||||||||||||||||||
Other comprehensive income |
- | - | - | 207 | - | 207 | 370 | 577 | ||||||||||||||||||||||||
Balance at June 30, 2021 |
475,591,415 | $ | 681,575 | $ | 57,252 | $ | (117) | $ | (300,288) | $ | 438,422 | $ | 24,981 | $ | 463,403 | |||||||||||||||||
Balance at December 31, 2021 |
479,198,233 | $ | 695,856 | $ | 68,837 | $ | 1,895 | $ | (332,980) | $ | 433,608 | $ | 27,740 | $ | 461,348 | |||||||||||||||||
Share-based payments (Note 10) |
- | - | 12,377 | - | - | 12,377 | 3,525 | 15,902 | ||||||||||||||||||||||||
Shares issued on exercise of stock options (Note 10) |
183,332 | 960 | (356) | - | - | 604 | - | 604 | ||||||||||||||||||||||||
Shares issued for convertible debenture interest payments (Note 8) |
42,252 | 251 | - | - | - | 251 | - | 251 | ||||||||||||||||||||||||
Ownership changes relating to non-controlling interests |
- | - | - | - | 367 | 367 | 338 | 705 | ||||||||||||||||||||||||
Net loss for the period |
- | - | - | - | (12,187) | (12,187) | (628) | (12,815) | ||||||||||||||||||||||||
Other comprehensive loss |
- | - | - | (1,284) | - | (1,284) | (1,356) | (2,640) | ||||||||||||||||||||||||
Balance at June 30, 2022 |
479,423,817 | $ | 697,067 | $ | 80,858 | $ | 611 | $ | (344,800) | $ | 433,736 | $ | 29,619 | $ | 463,355 |
The accompanying notes are an integral part of these consolidated financial statements.
5
NexGen Energy Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2022 and 2021
(expressed in thousands of Canadian dollars, except as otherwise stated) - Unaudited
1. | REPORTING ENTITY |
NexGen Energy Ltd. (NexGen or the Company) is an exploration and development stage entity engaged in the acquisition, exploration and evaluation and development of uranium properties in Canada. The Company was incorporated pursuant to the provisions of the British Columbia Business Corporations Act on March 8, 2011. The Companys registered records office is located on the 25th Floor, 700 West Georgia Street, Vancouver, B.C., V7Y 1B3.
The Company is listed on the Toronto Stock Exchange (the TSX) under the symbol NXE, and is a reporting issuer in each of the provinces of Canada other than Québec. On July 2, 2021, the Company commenced trading on the Australian Stock Exchange (the ASX) under the symbol NXG. On March 4, 2022 the Company up-listed from NYSE American exchange (the NYSE American) and began trading on the New York Stock Exchange (NYSE) under the symbol NXE.
In February 2016, the Company incorporated four wholly owned subsidiaries: NXE Energy Royalty Ltd., NXE Energy SW1 Ltd., NXE Energy SW3 Ltd., and IsoEnergy Ltd. (collectively, the Subsidiaries). The Subsidiaries were incorporated to hold certain exploration assets of the Company. In 2016, certain exploration and evaluation assets were transferred to each of IsoEnergy Ltd. (IsoEnergy), NXE Energy SW1 Ltd. and NXE Energy SW3 Ltd. Subsequent to the transfer, IsoEnergy shares were listed on the TSX-V. As of June 30, 2022, NexGen owns 50.1% of IsoEnergys outstanding common shares (December 31, 2021 51%).
2. | NATURE OF OPERATIONS |
As an exploration and development stage company, the Company does not have revenues and historically has recurring operating losses. As at June 30, 2022, the Company had an accumulated deficit of $344,800 and working capital of $157,417. The Company will be required to obtain additional funding in order to continue with the exploration and development of its mineral properties.
The business of exploring for minerals and development of projects involves a high degree of risk. NexGen is an exploration and development company and is subject to risks and challenges similar to companies in a comparable stage. These risks include, but are not limited to, the challenges of securing adequate capital; development and operational risks inherent in the mining industry; changes in government policies and regulations; the ability to obtain the necessary environmental permits or, alternatively NexGens ability to dispose of its exploration and evaluation assets on an advantageous basis; as well as global economic and uranium price volatility; all of which are uncertain.
The underlying value of the exploration and evaluation assets is dependent upon the existence and economic recovery of mineral reserves and is subject to, but not limited to, the risks and challenges identified above. Changes in future conditions could require material write-downs of the carrying value of exploration and evaluation assets.
3. | BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES |
a) | Basis of Presentation |
These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, using accounting policies consistent with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. Certain disclosures required by IFRS have been condensed or omitted in the following note disclosures as they are disclosed or have been disclosed on an annual basis only. Accordingly, these condensed interim consolidated financial statements should be read in conjunction with the consolidated financial statements for the years ended December 31, 2021 and 2020 (annual financial statements), which have been prepared in accordance with IFRS. These condensed interim consolidated financial statements follow the same accounting policies and methods of application as the annual financial statements.
On August 4, 2022, the Audit Committee of the Board of Directors authorized these financial statements for issuance.
6
NexGen Energy Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2022 and 2021
(expressed in thousands of Canadian dollars, except as otherwise stated) - Unaudited
b) | Basis of Consolidation |
The accounts of the subsidiaries controlled by the Company are included in the condensed interim consolidated financial statements from the date that control commenced until the date that control ceases. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The subsidiaries of the Company and their geographic locations at June 30, 2022 are as follows:
Name of Subsidiary
|
Location
|
Percentage Ownership
| ||
NXE Energy Royalty Ltd. |
Canada | 100% | ||
NXE Energy SW1 Ltd. |
Canada | 100% | ||
NXE Energy SW3 Ltd. |
Canada | 100% | ||
IsoEnergy Ltd. |
Canada | 50.1% |
Intercompany balances, transactions, income and expenses arising from intercompany transactions are eliminated in full on consolidation.
4. | CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS IN ACCOUNTING POLICIES |
Judgments, estimates and assumptions are continually evaluated and are based on managements experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The significant judgments, estimates and assumptions made by management in applying the Companys accounting policies are consistent with those that applied to the annual financial statements and actual results may differ from these estimates.
5. | MARKETABLE SECURITIES |
a) | Clover, Gemini, and Tower uranium properties sale |
In April 2021, the Companys subsidiary, IsoEnergy, sold its interest in the Clover, Gemini and Tower uranium properties (Properties). IsoEnergy received cash of AUD $200 ($192) and 10,755,000 common shares of 92 Energy Pty Ltd. (92 Energy) at a price of $0.20 Australian Dollars (AUD) for a total value of AUD $2,151 ($2,068). In addition, IsoEnergy will retain a 2% Net Smelter Return (NSR) on the Properties.
The Properties had a book value of $24, which resulted in a gain of $2,236 in 2021.
7
NexGen Energy Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2022 and 2021
(expressed in thousands of Canadian dollars, except as otherwise stated) - Unaudited
b) | Mountain Lake Option Agreement |
In August 2021, IsoEnergy completed an option agreement (the Option Agreement) with International Consolidated Uranium Inc. (which subsequently changed its name to Consolidated Uranium Inc. (CUR)) to grant CUR the option to acquire a 100% interest in IsoEnergys Mountain Lake uranium property in Nunavut, Canada (the Option).
Under the terms of the Option Agreement and as consideration, CUR issued 900,000 common shares of CUR at a price of $1.64 per share for a total value of $1,476, and paid cash of $20. The Option is exercisable, at CURs election, on or before the second anniversary of receipt of TSXV approval (August 3, 2023) for additional consideration of $1,000 payable in cash or CUR shares. If the Option is exercised, IsoEnergy will be entitled to receive the following contingent payments in cash or CUR shares:
● | If the uranium spot price reaches US$50 per pound, IsoEnergy will receive an additional $410 |
● | If the uranium spot price reaches US$75 per pound, IsoEnergy will receive an additional $615 |
● | If the uranium spot price reaches US$100 per pound, IsoEnergy will receive an additional $820 |
The spot price contingent payments will expire 10 years following the date the Option is exercised.
The Mountain Lake property had a book value of $126, which resulted in a gain of $1,370 in 2021.
At the date of these financial statements the Option has not been exercised by Consolidated Uranium.
On February 22, 2022, CUR completed its spin-out of Labrador Uranium Inc. (LUR) though a plan of arrangement (the Arrangement). Pursuant to the Arrangement, CUR distributed, on a pro-rata basis, 0.214778 of LUR shares for each CUR share held by CUR shareholders on February 22, 2022. Accordingly, IsoEnergy received 193,300 LUR shares.
During the three and six months ended June 30, 2022, the Company recognized a loss of $2,359 and $3,283, respectively, associated with the mark to market valuation of the 10,775,000 shares of 92 Energy, 900,000 shares of CUR and 193,300 shares of LUR (three and six months ended June 30, 2021 - $933 gain) which is recorded in the consolidated statement of net income (loss) and comprehensive income (loss). The fair value at June 30, 2022 of the marketable securities held in 92 Energy shares was $4,304 (December 31, 2021 - $6,732), CUR shares was $1,611 (December 31, 2021 - $2,583) and LUR shares was $118 (December 31, 2021 - $nil), for a total marketable securities value at June 30, 2022 of $6,033 (December 31, 2021 - $9,315).
8
NexGen Energy Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2022 and 2021
(expressed in thousands of Canadian dollars, except as otherwise stated) - Unaudited
6. | EXPLORATION AND EVALUATION ASSETS |
Rook I | Other Athabasca Basin Properties |
IsoEnergy Properties |
Total | |||||||||||||
Acquisition Cost |
||||||||||||||||
Balance at December 31, 2021 |
$ | 235 | $ | 1,458 | $ | 26,660 | $ | 28,353 | ||||||||
Additions |
- | - | - | - | ||||||||||||
Balance as at June 30, 2022 |
$ | 235 | $ | 1,458 | $ | 26,660 | $ | 28,353 | ||||||||
Deferred exploration costs |
||||||||||||||||
Balance at December 31, 2021 |
260,941 | 9,180 | 28,069 | 298,190 | ||||||||||||
Additions: |
||||||||||||||||
General exploration and drilling |
1,434 | - | 3,527 | 4,961 | ||||||||||||
Environmental, permitting, and engagement |
6,252 | - | - | 6,252 | ||||||||||||
Technical, engineering and design |
20,665 | - | - | 20,665 | ||||||||||||
Geochemistry and assays |
- | - | 112 | 112 | ||||||||||||
Geological and geophysical |
215 | 160 | 861 | 1,236 | ||||||||||||
Labour and wages |
2,695 | - | 384 | 3,079 | ||||||||||||
Share-based payments (Note 10) |
1,378 | - | 789 | 2,167 | ||||||||||||
Travel |
159 | - | 101 | 260 | ||||||||||||
Total Additions |
32,798 | 160 | 5,774 | 38,732 | ||||||||||||
Balance as at June 30, 2022 |
$ | 293,739 | $ | 9,340 | $ | 33,843 | $ | 336,922 | ||||||||
Total costs, June 30, 2022 |
$ | 293,974 | $ | 10,798 | $ | 60,503 | $ | 365,275 | ||||||||
Rook I | Other Athabasca Basin Properties |
IsoEnergy Properties |
Total | |||||||||||||
Acquisition cost |
||||||||||||||||
Balance at December 31, 2020 |
$ | 235 | $ | 1,458 | $ | 26,778 | $ | 28,471 | ||||||||
Additions |
- | - | 27 | 27 | ||||||||||||
Dispositions |
- | - | (145) | (145) | ||||||||||||
Balance as at December 31, 2021 |
$ | 235 | $ | 1,458 | $ | 26,660 | $ | 28,353 | ||||||||
Deferred exploration costs |
||||||||||||||||
Balance at December 31, 2020 |
216,350 | 9,173 | 20,728 | 246,251 | ||||||||||||
Additions: |
||||||||||||||||
General exploration and drilling |
6,502 | - | 3,615 | 10,117 | ||||||||||||
Environmental, permitting, and engagement |
15,154 | - | 2 | 15,156 | ||||||||||||
Technical, engineering and design |
13,893 | - | 1 | 13,894 | ||||||||||||
Geochemistry and assays |
- | - | 333 | 333 | ||||||||||||
Geological and geophysical |
116 | 7 | 775 | 898 | ||||||||||||
Labour and wages |
4,925 | - | 815 | 5,740 | ||||||||||||
Share-based payments |
3,696 | - | 1,561 | 5,257 | ||||||||||||
Travel |
305 | - | 239 | 544 | ||||||||||||
Total Additions |
44,591 | 7 | 7,341 | 51,939 | ||||||||||||
Balance as at December 31, 2021 |
$ | 260,941 | $ | 9,180 | $ | 28,069 | $ | 298,190 | ||||||||
Total costs, December 31, 2021 |
$ | 261,176 | $ | 10,638 | $ | 54,729 | $ | 326,543 |
9
NexGen Energy Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2022 and 2021
(expressed in thousands of Canadian dollars, except as otherwise stated) - Unaudited
7. | PROPERTY AND EQUIPMENT |
Computer Equipment |
Software | Field Equipment and Vehicles |
Office, Furniture and Leasehold Improvements |
Road | Total | |||||||||||||||||||
Cost |
||||||||||||||||||||||||
As at December 31, 2020 |
$ 451 | $ 1,060 | $ 6,822 | $ 5,142 | $ 2,079 | $ 15,554 | ||||||||||||||||||
Reclassification |
- | - | (275) | 275 | - | - | ||||||||||||||||||
Additions |
46 | 295 | 98 | 858 | - | 1,297 | ||||||||||||||||||
Disposals |
- | - | - | (494) | - | (494) | ||||||||||||||||||
As at December 31, 2021 |
$ 497 | $ 1,355 | $ 6,645 | $ 5,781 | $ 2,079 | $ 16,357 | ||||||||||||||||||
Additions |
106 | 3 | 20 | 110 | - | 239 | ||||||||||||||||||
Balance as at June 30, 2022 |
$ 603 | $ 1,358 | $ 6,665 | $ 5,891 | $ 2,079 | $ 16,596 | ||||||||||||||||||
Accumulated Depreciation |
||||||||||||||||||||||||
As at December 31, 2020 |
$ 370 | $ 841 | $ 3,761 | $ 1,420 | $ 1,583 | $ 7,975 | ||||||||||||||||||
Reclassification |
- | - | (193) | 193 | - | - | ||||||||||||||||||
Depreciation |
57 | 202 | 612 | 885 | 389 | 2,145 | ||||||||||||||||||
Disposals |
- | - | - | (382) | - | (382) | ||||||||||||||||||
Aa at December 31, 2021 |
$ 427 | $ 1,043 | $ 4,180 | $ 2,116 | $ 1,972 | $ 9,738 | ||||||||||||||||||
Depreciation |
34 | 86 | 261 | 480 | 31 | 892 | ||||||||||||||||||
Balance as at June 30, 2022 | $ 461 | $ 1,129 | $ 4,441 | $ 2,596 | $ 2,003 | $ 10,630 | ||||||||||||||||||
Net book value at December 31, 2021 |
$ 70 | $ 312 | $ 2,465 | $ 3,665 | $ 107 | $ 6,619 | ||||||||||||||||||
Net book value at June 30, 2022 |
$ 142 | $ 229 | $ 2,224 | $ 3,295 | $ 76 | $ 5,966 |
8. | CONVERTIBLE DEBENTURES |
2016 Debentures |
2017 Debentures |
2020 Debentures |
IsoEnergy Debentures |
Total | ||||||||||||||||
Fair value at December 31, 2020 |
$ | 94,768 | $ | 86,568 | $ | 31,483 | $ | 14,034 | $ | 226,853 | ||||||||||
Fair value adjustment |
30,291 | 18,674 | 15,427 | 11,067 | 75,459 | |||||||||||||||
Settlement with shares |
(125,059) | (105,242) | - | - | (230,301) | |||||||||||||||
Fair value at December 31, 2021 |
$ | - | $ | - | $ | 46,910 | $ | 25,101 | $ | 72,011 | ||||||||||
Fair value adjustment |
- | - | (7,305) | (2,990) | (10,295) | |||||||||||||||
Fair Value at June 30, 2022 |
$ | - | $ | - | $ | 39,605 | $ | 22,111 | $ | 61,716 |
The fair value of the debentures decreased from $72,011 on December 31, 2021 to $61,716 at June 30, 2022, resulting from a mark-to-market gain of $28,700 and $10,295 for the three and six months ended June 30, 2022, respectively (three and six months ended June 30, 2021 loss of $5,910 and $65,214, respectively). The gain for the three and six months ended June 30, 2022 was bifurcated with the amount of the change in fair value of the convertible debentures attributable to changes in the credit risk of the liability recognized in other comprehensive income (loss) of a gain of $196 and $221 for the three and six months ended June 30, 2022, respectively (three and six months ended June 30, 2021 gain of $3 and loss of $292, respectively) and the remaining amount recognized in the consolidated statement of income (loss) for the three and six months ended June 30, 2022 with a gain of $28,504 and $10,074 respectively (three and six months ended June 30, 2021 loss of $5,913 and $64,922, respectively). The interest expense during the three and six months ended June 30, 2022 was $529 and $1,047, respectively (three and six months ended June 30, 2021 - $492 and $2,720, respectively).
10
NexGen Energy Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2022 and 2021
(expressed in thousands of Canadian dollars, except as otherwise stated) - Unaudited
2016 and 2017 Convertible Debentures
On February 18, 2021 and February 23, 2021, the holders of the 2016 and 2017 Debentures elected to convert their respective US$60 million aggregate principal amount of 7.5% unsecured convertible debentures, both due to mature on July 22, 2022, into common shares of the Company. The Company issued 25,794,247 and 22,289,088 common shares relating to the conversion of the principal of the 2016 and 2017 Debentures, respectively, and 89,729 and 87,316 common shares at a value of $848 relating to the accrued and unpaid interest up to the date of conversion for the 2016 and 2017 Debentures, respectively. The amounts recorded in other comprehensive income (loss) as a result of changes in credit risks of the 2016 and 2017 Debentures from inception through to conversion totaling losses of $4,016 were reclassified to accumulated deficit.
The fair value of the 2016 and 2017 Debentures at conversion was based on the number of shares issued at the closing share price on the conversion date. The closing share price on February 18, 2021 was $4.69 and $4.88 on February 23, 2021 and the conversion price for the 2016 Debentures was US$2.33 and US$2.69 for the 2017 Debentures. The fair value of the shares issued for interest was based on the closing share price on the date of issuance and recorded as interest expense in the consolidated statement of net income (loss) and comprehensive income (loss).
2020 Convertible Debentures
On May 27, 2020, the Company issued US$15 million principal amount of unsecured convertible debentures (the 2020 Debentures). The Company received proceeds of $20,889 (US$15 million) and a 3% establishment fee of $627 (US$450) was paid to the debenture holders through the issuance of 348,350 common shares and a consent fee of $355 was paid to the investors of the 2016 and 2017 Debentures in connection with the financing through the issuance of 180,270 common shares. The fair value of the 2020 Debentures on issuance date was determined to be $20,262 (US$14,550). The 2020 Debentures bear interest at a rate of 7.5% per annum, payable semi-annually in US dollars on June 10 and December 10 in each year. Two thirds of the interest (equal to 5% per annum) is payable in cash and one third of the interest (equal to 2.5% per annum) is payable, subject to any required regulatory approval, in common shares of the Company, using the volume-weighted average trading price (VWAP) of the common shares on the exchange or market that has the greatest trading volume in the Companys common shares for the 20 consecutive trading days ending three trading days preceding the date on which such interest payment is due. The 2020 Debentures are convertible, from time to time, into common shares of the Company at the option of the debenture holders under certain conditions. During the period ended June 30, 2022, the Company issued 42,252 shares for a value of $251 and paid $474 (US$375) associated with the interest payment.
The 2020 Debentures were valued using a convertible bond pricing model based on a system of two coupled Black-Scholes equations where the debt and equity components are separately valued based on different default risks and assumptions. The inputs used in the pricing model as at June 30, 2022 and December 31, 2021 are as follows:
June 30, 2022 | December 31, 2021 | |||||||
Volatility |
45.00% | 40.00% | ||||||
Expected life |
2.91 years | 3.41 years | ||||||
Risk free interest rate |
3.52% | 1.78% | ||||||
Expected dividend yield |
0% | 0% | ||||||
Credit spread |
19.62% | 16.88% | ||||||
Underlying share price of the Company |
$4.62 | $5.54 | ||||||
Conversion exercise price |
$2.34 | $2.34 | ||||||
Exchange rate (C$:US$) |
$0.777 | $0.791 |
11
NexGen Energy Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2022 and 2021
(expressed in thousands of Canadian dollars, except as otherwise stated) - Unaudited
IsoEnergy Debentures
On August 18, 2020, IsoEnergy entered into a US$6 million private placement of unsecured convertible debentures (the IsoEnergy Debentures). The IsoEnergy Debentures are convertible at the holders option at a conversion price of $0.88 into a maximum of 9,206,311 common shares of IsoEnergy. IsoEnergy received gross proceeds of $7,902 (US$6,000). A 3% establishment fee of $272 (US$180) was also paid to the debenture holders through the issuance of 219,689 common shares in IsoEnergy. The fair value of the IsoEnergy Debentures on issuance date was determined to be $7,630 (US$5,820). During the period ended June 30, 2022, IsoEnergy issued 29,644 shares for a value of $96 and paid $233 associated with the interest payment.
The IsoEnergy Debentures were valued using a convertible bond pricing model based on a system of two Black-Scholes equations where the debt and equity components are separately valued based on different default risks and assumptions. The inputs used in the pricing model as at June 30, 2022 and December 31, 2021 are as follows:
June 30, 2022 | December 31, 2021 | |||||||
Volatility |
53.13% | 50.00% | ||||||
Expected life |
3.1 years | 3.6 years | ||||||
Risk free interest rate |
3.52% | 1.78% | ||||||
Expected dividend yield |
0% | 0% | ||||||
Credit spread |
25.84% | 21.86% | ||||||
Underlying share price of IsoEnergy |
$3.10 | $3.74 | ||||||
Conversion exercise price |
$0.88 | $0.88 | ||||||
Exchange rate (C$:US$) |
$0.777 | $ 0.791 |
9. | LEASES |
(a) | Right-of-use assets |
June 30, 2022 | December 31, 2021 | |||||
Right-of-use assets, beginning of period |
$ | 2,640 | $ 3,544 | |||
Additions |
- | 29 | ||||
Disposals |
- | (147) | ||||
Depreciation |
(339) | (786) | ||||
Balance, end of period |
$ | 2,301 | $ 2,640 |
The right-of-use assets recognized by the Company are comprised of $2,301 (December 31, 2021 - $2,640) related to corporate office leases and are included in the office, furniture and leasehold improvements category in Note 7.
(b) | Lease liabilities |
June 30, 2022 | December 31, 2021 | |||||
Lease liabilities, beginning of period |
$ | 3,169 | $ 4,031 | |||
Terminations |
- | (124) | ||||
Interest expense on lease liabilities |
110 | 265 | ||||
Payment of lease liabilities |
(456) | (1,003) | ||||
Balance, end of period |
$ | 2,823 | $ 3,169 | |||
Current portion |
737 | 706 | ||||
Non-current portion |
2,086 | 2,463 | ||||
Balance, end of period |
$ | 2,823 | $ 3,169 |
12
NexGen Energy Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2022 and 2021
(expressed in thousands of Canadian dollars, except as otherwise stated) - Unaudited
The undiscounted value of the lease liabilities as at June 30, 2022 was $4,593 (December 31, 2021 - $5,268).
(c) | Amounts recognized in consolidated statements of net income (loss) |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Expense relating to variable lease payments |
$ | 104 | $ | 112 | $ | 208 | $ | 224 |
The Company engages drilling companies to carry out its drilling programs on its development, exploration and evaluation properties. The drilling companies provide all required equipment for these drilling programs. These contracts are short-term in nature and the Company has elected not to recognize right-of-use assets and associated lease liabilities in respect to these contracts but rather to recognize lease payments associated with these leases as incurred over the lease term. Payments by the Company to the drilling companies for the three and six months ended June 30, 2022 were $0.1 million and $2.3 million, respectively (three and six months ended June 30, 2021 - $nil).
10. | SHARE CAPITAL |
(a) | Authorized capital |
Unlimited common shares without par value.
Unlimited preferred shares without par value.
Share issuances for the six months ended June 30, 2022:
During the six months ended June 30, 2022, the Company issued 183,332 shares on the exercise of stock options for gross proceeds of $604 (Note 10(b)).
On June 10, 2022, the Company issued 42,252 shares relating to the interest payment on the 2020 Debentures at a fair value of $251 (Note 8).
Share issuances for the year ended December 31, 2021:
On February 3, 2021 and February 23, 2021, the Company issued an aggregate of 200,000 common shares to arms length parties to advance the development of the Rook I property at a fair value of $900.
On February 18, 2021 and February 23, 2021, the Company issued 25,794,247 and 22,289,088 common shares relating to the conversion of the principal of the 2016 and 2017 Debentures at a fair value of $125,059 and $105,242, respectively. In addition, 89,729 and 87,316 common shares were issued relating to the accrued and unpaid interest up to the date of conversion for the 2016 and 2017 Debentures at a fair value of $407 and $441, respectively.
On March 11, 2021, the Company completed a bought deal financing where 33,400,000 common shares of the Company were issued at a price of $4.50 per common share (the Offering Price) for gross proceeds of approximately $150,300. On March 16, 2021, the Company closed the over-allotment of 5,010,000 common shares of the Company at the Offering Price for additional proceeds of $22,545. In connection with the financing, $9,590 was incurred for share issue costs.
On June 10, 2021, the Company issued 40,829 shares relating to the interest payment on the 2020 Debentures at a fair value of $238.
On June 30, 2021, the Company issued 400,000 common shares at a price of AUD $5.60 for total proceeds of $2,074 in relation to its public listing on the ASX. In connection with the financing, $1,035 was incurred for share issuance costs.
On December 10, 2021, the Company issued 36,818 shares relating to the interest payment on the 2020 Debentures at a fair value of $202.
13
NexGen Energy Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2022 and 2021
(expressed in thousands of Canadian dollars, except as otherwise stated) - Unaudited
(b) | Share options |
Pursuant to the Companys stock option plan, directors may, from time to time, authorize the issuance of options to directors, officers, employees and consultants of the Company, enabling them to acquire up to 20% of the issued and outstanding common shares of the Company.
The options can be granted for a maximum term of 10 years and are subject to vesting provisions as determined by the Board of Directors of the Company.
A summary of the changes in the share options is presented below:
Options outstanding | Weighted average exercise price (C$) |
|||||||
At December 31, 2020 |
36,473,162 | $ | 2.47 | |||||
Granted |
17,400,000 | 5.61 | ||||||
Exercised |
(10,020,001) | 2.59 | ||||||
Expired |
(266,666) | 2.18 | ||||||
Forfeited |
(150,001) | 5.84 | ||||||
At December 31, 2021 |
43,436,494 | $ | 3.69 | |||||
Granted |
94,277 | 5.76 | ||||||
Exercised |
(183,332) | 3.28 | ||||||
Expired |
(33,334) | 5.44 | ||||||
Forfeited |
(180,001) | 5.33 | ||||||
At June 30, 2022 Outstanding |
43,134,104 | $ | 3.69 | |||||
At June 30, 2022 Exercisable |
33,409,824 | $ | 3.25 |
The following table summarizes information about the exercisable share options outstanding as at June 30, 2022:
Number of share options outstanding |
Number of share options exercisable |
Exercise prices (C$) | Remaining contractual life (years) |
Expiry date | ||||||||||||||
2,405,000 | 2,405,000 | 3.39 | 0.46 | December 14, 2022 | ||||||||||||||
75,000 | 75,000 | 2.39 | 0.79 | April 13, 2023 | ||||||||||||||
3,450,000 | 3,450,000 | 2.85 | 0.94 | June 8, 2023 | ||||||||||||||
100,000 | 100,000 | 2.66 | 0.97 | June 20, 2023 | ||||||||||||||
720,482 | 720,482 | 2.49 | 1.14 | August 21, 2023 | ||||||||||||||
2,300,000 | 2,300,000 | 2.41 | 1.50 | December 31, 2023 | ||||||||||||||
500,000 | 500,000 | 2.27 | 1.73 | March 21, 2024 | ||||||||||||||
250,000 | 250,000 | 2.22 | 1.74 | March 27, 2024 | ||||||||||||||
3,250,000 | 3,250,000 | 1.92 | 1.95 | June 12, 2024 | ||||||||||||||
188,679 | 188,679 | 1.59 | 2.13 | August 16, 2024 | ||||||||||||||
3,667,334 | 3,667,334 | 1.59 | 2.49 | December 24, 2024 | ||||||||||||||
4,375,000 | 4,375,000 | 1.80 | 2.95 | June 12, 2025 | ||||||||||||||
4,796,666 | 3,186,659 | 3.24 | 3.45 | December 11, 2025 | ||||||||||||||
250,000 | 166,667 | 5.16 | 3.64 | February 16, 2026 | ||||||||||||||
650,000 | 433,335 | 4.53 | 3.75 | April 1, 2026 | ||||||||||||||
8,913,332 | 5,946,666 | 5.84 | 3.95 | June 10, 2026 | ||||||||||||||
7,148,334 | 2,395,002 | 5.44 | 4.46 | December 14, 2026 | ||||||||||||||
94,277 | - | 5.76 | 4.56 | January 18, 2027 | ||||||||||||||
43,134,104 | 33,409,824 |
14
NexGen Energy Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2022 and 2021
(expressed in thousands of Canadian dollars, except as otherwise stated) - Unaudited
The following weighted average assumptions were used for Black-Scholes valuation of the share options granted:
For the three months ended June 30, |
For the six months ended June 30, |
|||||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||||
Expected stock price volatility |
- | 60.06% | 60.95% | 60.10% | ||||||||||||||
Expected life of options |
- | 5 years | 5 years | 5 years | ||||||||||||||
Risk free interest rate |
- | 0.86% | 1.68% | 0.86% | ||||||||||||||
Expected forfeitures |
- | 0% | 0% | 0% | ||||||||||||||
Expected dividend yield |
- | 0% | 0% | 0% | ||||||||||||||
Weighted average fair value per option granted in period |
- | $2.93 | $3.02 | $2.92 | ||||||||||||||
Weighted average exercise price |
- | $5.75 | $5.76 | $5.74 |
Share-based payments for options vested for the three and six months ended June 30, 2022 amounted to $7,383 and $15,903, respectively (three and six months ended June 30, 2021 $13,444 and $15,831) of which $6,340 and $13,736, respectively (three and six months ended June 30, 2021 $11,381 and $13,578) was expensed to the statement of net income (loss) and comprehensive income (loss) and $1,043 and $2,167, respectively (three and six months ended June 30, 2021 - $2,063 and $2,253) was capitalized to exploration and evaluation assets (Note 6).
11. | SUPPLEMENTAL CASH FLOW INFORMATION |
The Company did not have any cash equivalents as at June 30, 2022 and December 31, 2021.
a) | Schedule of non-cash investing and financing activities: |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Capitalized share-based payments |
$ | 1,043 | $ | 2,063 | $ | 2,167 | $ | 2,253 | ||||||||
Exploration and evaluation asset expenditures included in accounts payable and accrued liabilities |
(1,792) | 927 | 5,750 | 3,456 | ||||||||||||
Interest expense included in accounts payable and accrued liabilities |
(441) | (363) | 77 | 77 | ||||||||||||
Share consideration on sale of properties |
- | 2,068 | - | 2,068 | ||||||||||||
12. | RELATED PARTY TRANSACTIONS |
The remuneration of key management which includes directors and management personnel responsible for planning, directing, and controlling the activities of the Company during the period was as follows:
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||||||
Short-term compensation(1) |
$ | 1,014 | $ | 1,789 | $ | 1,989 | $ | 2,437 | ||||||||||||
Share-based payments(2) |
5,928 | 11,615 | 12,777 | 13,263 | ||||||||||||||||
Consulting fees(3) (4) |
55 | 34 | 166 | 67 | ||||||||||||||||
$ | 6,997 | $ | 13,438 | $ | 4,932 | $ | 15,767 |
(1) Short-term compensation to key management personnel for the three and six months ended June 30, 2022 amounted to $1,014 and $1,989 (2021 - $1,789 and $2,437) of which $961 and $1,886 (2021 - $1,638 and $2,236) was expensed and included in salaries, benefits, and directors fees on the statement of net income (loss) and comprehensive income (loss). The remaining $53 and $103 (2021 - $151 and $201) was capitalized to exploration and evaluation assets.
15
NexGen Energy Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2022 and 2021
(expressed in thousands of Canadian dollars, except as otherwise stated) - Unaudited
(2) Share-based payments to key management personnel for the three and six months ended June 30, 2022 amounted to $5,928 and $12,777 (2021 - $11,615 and $13,263) of which $5,805 and $12,529 (2021 - $11,255 and $12,889) was expensed and $123 and $248 (2021 - $360 and $374) was capitalized to exploration and evaluation assets.
(3) The Company used consulting services from a company associated with one of its directors in relation to advice on corporate matters for the three and six months ended June 30, 2022 amounting to $32 and $65 (2021 - $32 and $65).
(4) The Company used consulting services from a company associated with one of its employees in relation to various studies for the three and six months ended June 30, 2022 amounting to $23 and $101 (2021 - $nil and $nil).
As at June 30, 2022, there was $47 (December 31, 2021 - $58) included in accounts payable and accrued liabilities owing to its directors and officers for compensation.
13. | CAPITAL MANAGEMENT |
The Company manages its capital structure and adjusts it, based on the funds available to the Company, to support the acquisition, exploration, development and evaluation of assets. To effectively manage the entitys capital requirements, the Company has in place a planning, budgeting, and forecasting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its operating and growth objectives. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Companys management to sustain the future development of the business.
In the management of capital, the Company considers all components of equity and debt, net of cash, and is dependent on third party financing, whether through debt, equity, or other means. Although the Company has been successful in raising funds to date, there is no assurance that the Company will be successful in obtaining required financing in the future or that such financing will be available on terms acceptable to the Company.
The properties in which the Company currently has an interest are in the exploration and development stage. As such, the Company has historically relied on the equity markets and convertible debt to fund its activities. The Company will continue to assess new properties and seek to acquire an interest in additional properties if it determines that there is sufficient geologic or economic potential and if it has adequate financial resources to do so.
The Company is not subject to externally imposed capital requirements. There were no changes in the Companys approach to capital management during the period.
In the management of capital, the Company includes the components of equity, and convertible debentures, net of cash.
Capital, as defined above, is summarized in the following table:
June 30, 2022 | December 31, 2021 | |||||||
Equity |
$ | 463,355 | $ | 461,348 | ||||
Convertible debentures (Note 8) |
61,716 | 72,011 | ||||||
525,071 | 533,359 | |||||||
Less: Cash |
(161,237) | (201,804) | ||||||
$ | 363,834 | $ | 331,555 |
14. | FINANCIAL INSTRUMENTS AND RISK MANAGEMENT |
The Companys financial instruments consist of cash, marketable securities, amounts receivable, accounts payable and accrued liabilities and convertible debentures.
Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values.
16
NexGen Energy Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2022 and 2021
(expressed in thousands of Canadian dollars, except as otherwise stated) - Unaudited
The three levels of the fair value hierarchy are:
● | Level 1 unadjusted quoted prices in active markets for identical assets or liabilities |
● | Level 2 inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and |
● | Level 3 inputs that are not based on observable market data. |
The fair values of the Companys cash, amounts receivable, and accounts payable and accrued liabilities approximate their carrying values due to their short-term nature.
The marketable securities are re-measured at fair value at each reporting date with any change in fair value recognized in other comprehensive income (loss) (Note 5). The marketable securities are classified as Level 1.
The convertible debentures are re-measured at fair value at each reporting date with any change in fair value recognized in the consolidated statement of net income (loss) with the exception that under IFRS 9, the change in fair value that is attributable to change in credit risk is presented in other comprehensive income (loss) (Note 8). The convertible debentures are classified as Level 2.
Financial Risk
The Company is exposed to varying degrees of a variety of financial instrument-related risks. The Board approves and monitors the risk management processes, controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:
Credit Risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Financial instruments potentially subject to credit risk are cash and amounts receivable. The Company holds cash with large Canadian banks. The Companys amounts receivable consists of input tax credits receivable from the Government of Canada and interest accrued on cash. Accordingly, the Company does not believe it is subject to significant credit risk.
The Companys maximum exposure to credit risk is as follows:
June 30, 2022 | December 31, 2021 | |||||||
Cash |
$ | 161,237 | $ | 201,804 | ||||
Amounts receivable |
862 | 1,178 | ||||||
$ | 162,099 | $ | 202,982 |
Liquidity Risk
Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity requirements are managed based on expected cash flows to ensure that there is sufficient capital to meet short-term obligations. The Companys approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at June 30, 2022, NexGen had cash of $161,237 to settle current liabilities of $13,475.
The Companys significant undiscounted commitments at June 30, 2022 are as follows:
Less than 1 year |
1 to 3 years |
4 to 5 years |
Over 5 years |
Total | ||||||||||||||||
Trade and other payables |
$ | 12,738 | $ | - | $ | - | $ | - | $ | 12,738 | ||||||||||
Convertible debentures (Note 8) |
- | 61,716 | - | - | 61,716 | |||||||||||||||
Lease liabilities (Note 9) |
1,346 | 3,247 | - | - | 4,593 | |||||||||||||||
$ | 14,084 | $ | 64,963 | $ | - | $ | - | $ | 79,047 |
17
NexGen Energy Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2022 and 2021
(expressed in thousands of Canadian dollars, except as otherwise stated) - Unaudited
Foreign Currency Risk
The functional currency of the Company and its subsidiaries is the Canadian dollar. The Company is affected by currency transaction risk and currency translation risk. Consequently, fluctuations of the Canadian dollar in relation to other currencies impact the fair value of financial assets, liabilities and operating results. Financial assets and liabilities subject to currency translation risk primarily includes US dollar denominated cash, US dollar accounts payable, 2020 Debentures and IsoEnergy Debentures. The Company maintains Canadian and US dollar bank accounts in Canada.
The Company is exposed to foreign exchange risk on its US dollar denominated 2020 Debentures and IsoEnergy Debentures. At maturity, the US$21 million principal amount of the 2020 Debentures and IsoEnergy Debentures is due in full, and prior to maturity, at a premium upon the occurrence of certain events. The Company holds sufficient US dollars to make all cash interest payments due under the 2020 Debentures and IsoEnergy Debentures until maturity but not to pay the principal amount. Accordingly, the Company is subject to risks associated with fluctuations in the Canadian/US dollar exchange rate that may make the 2020 Debentures and IsoEnergy Debentures more costly to repay.
As at June 30, 2022, the Companys US dollar net financial liabilities were US$35,959. Thus a 10% change in the Canadian dollar versus the US dollar exchange rates would give rise to a $4,630 change in net income (loss) and comprehensive income (loss).
The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks at this time.
Equity and Commodity Price Risk
The Company is exposed to price risk with respect to commodity and equity prices. Equity price risk is defined as the potential adverse impact on the Companys earnings due to movements in individual equity prices or general movements in the level of the stock market. Accordingly, significant movements in share price may affect the valuation of the Marketable Securities and Convertible Debentures which may adversely impact its earnings.
Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatility. Future declines in commodity prices may impact the valuation of long-lived assets. The Company closely monitors commodity prices of uranium, individual equity movements, and the stock market to determine the appropriate course of action, if any, to be taken by the Company.
Interest Rate Risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company holds its cash in bank accounts that earn variable interest rates. Due to the short-term nature of these financial instruments, fluctuations in market rates do not have a significant impact on the estimated fair value of the Companys cash balances as of June 30, 2022. The Company manages interest rate risk by maintaining an investment policy for short-term investments. This policy focuses primarily on preservation of capital and liquidity. The Company monitors the investments it makes and is satisfied with the credit rating of its banks. The 2020 Debentures and IsoEnergy Debentures, in an aggregate principal amount of US$21 million, carry fixed interest rates of 7.5% and 8.5% respectively and are not subject to interest rate fluctuations.
15. | NON-CONTROLLING INTERESTS |
As at June 30, 2022, NexGen held 100% ownership of the subsidiaries with the exception of IsoEnergy, where it retained 50.1% of IsoEnergys outstanding common shares (December 31, 2021 51%) (Note 3b).
For financial reporting purposes, the assets, liabilities, results of operations, and cash flows of the Companys wholly owned subsidiaries and non-wholly owned subsidiary, IsoEnergy, are included in NexGens consolidated financial statements. Third party investors share of the net income (loss) of IsoEnergy is reflected in the net income (loss) and comprehensive income (loss) attributable to non-controlling interests in the consolidated statements of net income (loss) and comprehensive income (loss).
As at June 30, 2022, the non-controlling interests in IsoEnergy was $29,619 (December 31, 2021 - $27,740).
18
NexGen Energy Ltd.
Notes to the Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2022 and 2021
(expressed in thousands of Canadian dollars, except as otherwise stated) - Unaudited
16. | EARNINGS (LOSS) PER SHARE |
Basic net earnings (loss) per share provides a measure of the interests of each ordinary common share in the Companys performance over the period. Diluted net earnings (loss) per share adjusts basic net income (loss) per share for the effect of all dilutive potential common shares.
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||||||
Basic earnings (loss) per share |
||||||||||||||||||||
Net income (loss) attributable to NexGen shareholders |
$ | 13,484 | $ | (18,894) | $ | (12,187) | $ | (84,983) | ||||||||||||
Weighted average number of common shares |
479,283,015 | 471,861,473 | 479,324,268 | 441,615,578 | ||||||||||||||||
Basic earnings (loss) per share |
$ | 0.03 | $ | (0.04) | $ | (0.03) | $ | (0.19) | ||||||||||||
Diluted earnings (loss) per share |
||||||||||||||||||||
Net income (loss) attributable to NexGen shareholders |
$ | 13,484 | $ | (18,894) | $ | (12,187) | $ | (84,983) | ||||||||||||
Interest expense on convertible debentures attributable to NexGen shareholders |
450 | - | 884 | - | ||||||||||||||||
Mark to market gain on convertible debentures attributable to NexGen shareholders |
(23,489) | - | (8,643) | - | ||||||||||||||||
Diluted loss available to NexGen shareholders |
$ | (9,555) | $ | (18,894) | $ | (19,946) | $ | (84,983) | ||||||||||||
Weighted average number of common shares |
479,283,015 | 471,861,473 | 479,324,268 | 441,615,578 | ||||||||||||||||
Effect of conversion of 2020 Debentures |
8,184,615 | - | 8,184,615 | - | ||||||||||||||||
Effect of share options on issue |
16,788,677 | - | 16,881,397 | - | ||||||||||||||||
Weighted average number of common shares (diluted) |
504,256,307 | 471,861,473 | 504,390,280 | 441,615,578 | ||||||||||||||||
Diluted loss per share |
$ | (0.02) | $ | (0.04) | $ | (0.04) | $ | (0.19) |
As at June 30, 2022, nil (June 30, 2021 39,846,495) options were excluded from the diluted weighted average number of common shares calculation.
19
Exhibit 99.2
Managements Discussion and Analysis
For the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
CONTENTS
Cautionary Note Regarding Forward-Looking Information |
4 | |||
Business Overview |
5 | |||
Q2 2022 and Year to Date 2022 Highlights |
5 | |||
Operations Outlook |
10 | |||
Health, Safety and Environment |
11 | |||
Financial Results for the Period |
12 | |||
Financial Position Summary |
14 | |||
Liquidity and Capital Resources |
15 | |||
Capital Management |
16 | |||
Contractual Obligations and Commitments |
17 | |||
Summary of Quarterly Results |
17 | |||
Related Party Transactions |
18 | |||
Outstanding Share Data |
18 | |||
Outstanding Convertible Debentures |
18 | |||
Off-Balance Sheet Arrangements |
19 | |||
Segment Information |
19 | |||
Accounting Policy Overview |
19 | |||
Critical Accounting Policies and Judgements |
19 | |||
Key Sources of Estimation Uncertainty |
19 | |||
Changes in Accounting Policies including Initial Adoption |
19 | |||
Financial Instruments and Risk Management |
20 | |||
Risk Factors |
20 | |||
Financial Risks |
20 | |||
Other Risk Factors |
22 | |||
Disclosure Controls, Procedures, and Internal Controls Over Financial Reporting |
26 | |||
Changes in Internal Controls |
26 | |||
Limitations of Controls and Procedures |
26 | |||
Technical Disclosure |
26 | |||
Approval |
27 |
2
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
This Managements Discussion and Analysis (MD&A) was prepared as of August 4, 2022 and provides an analysis of the financial and operating results of NexGen Energy Ltd (NexGen or the Company) for the three and six months ended June 30, 2022. Additional information regarding NexGen, including its Annual Information Form for the year ended December 31, 2021, as well as other information filed with the Canadian, US and Australian securities regulatory authorities, is available under the Companys profile on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com, on the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) at www.edgar.gov, and on the Australian Stock Exchange (ASX) at www.asx.com.au, respectively. All monetary amounts are in thousands of Canadian dollars unless otherwise specified.
The following discussion and analysis of the financial condition and results of operations of NexGen should be read in conjunction with the Companys unaudited consolidated financial statements for the three and six months ended June 30, 2022 and June 30, 2021 (the Interim Statements), as well as the audited consolidated financial statements for the year ended December 31, 2021 and December 31, 2020 (the Annual Financial Statements) and the related notes, which have been prepared in accordance with International Financial Reporting Standards (IFRS).
In accordance with IFRS, IsoEnergy Ltd.s (IsoEnergy) financial results are consolidated with those of NexGen, including in this MD&A. However, IsoEnergy is listed on the TSX Venture Exchange under the ticker symbol ISO and has its own management, directors, internal control processes and financial budgets and finances its own operations. Further information regarding IsoEnergy is available under its own profile on www.sedar.com.
Management is responsible for the Interim Statements and this MD&A. The Audit Committee of the Companys Board of Directors (the Board) reviews and recommends for approval to the Board, who then review and approve, the Interim Statements and this MD&A. This MD&A contains forward-looking information. Please see the section, Cautionary Note Regarding Forward-Looking Information for a discussion of the risks, uncertainties and assumptions used to develop the Companys forward-looking information.
3
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
This MD&A contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of applicable Canadian securities legislation. Forward-looking information and statements include, but are not limited to, statements with respect to planned exploration and development activities, the future interpretation of geological information, the cost and results of exploration and development activities, future financings, the future price of uranium and requirements for additional capital.
Generally, but not always, forward-looking information and statements can be identified by the use of forward-looking terminology such as plans, expects, is expected, budget, scheduled, estimates, forecasts, intends, anticipates, or believes or the negative connotation thereof or variations of such words and phrases or state that certain actions, events or results may, could, would, might or will be taken, occur or be achieved or the negative connotation thereof.
Forward-looking information and statements are based on the then current expectations, beliefs, assumptions, estimates and forecasts about NexGens business and the industry and markets in which it operates. Forward-looking information and statements are made based upon numerous assumptions, including among others the results of planned exploration and development activities are as anticipated, the price of uranium, the cost of planned exploration and development activities, that financing will be available if and when needed and on reasonable terms; that financial, uranium and other markets will not be adversely affected by a global pandemic (including COVID-19); that third-party contractors, equipment, supplies and governmental and other approvals required to conduct NexGens planned exploration and development activities will be available on reasonable terms and in a timely manner and that general business and economic conditions will not change in a material adverse manner; the expectations regarding mineral reserves and mineral resources; realization of mineral reserves and mineral resource estimates; and results, estimates, assumptions and forecasts in the Rook I FS Technical Report (as defined below). Although the assumptions made by the Company in providing forward looking information or making forward looking statements are considered reasonable by management at the time, there can be no assurance that such assumptions will prove to be accurate.
Forward-looking information and statements also involve known and unknown risks and uncertainties and other factors, which may cause actual results, performances and achievements of NexGen to differ materially from any projections of results, performances and achievements of NexGen expressed or implied by such forward-looking information or statements, including, among others, negative operating cash flow and dependence on third-party financing, uncertainty of the availability of additional financing, the risk that pending assay results will not confirm previously announced preliminary results, imprecision of mineral resource estimates, the appeal of alternate sources of energy and sustained low uranium prices, aboriginal title and consultation issues, exploration and development risks, reliance upon key management and other personnel, deficiencies in the Companys title to its properties, uninsurable risks, failure to manage conflicts of interest, failure to obtain or maintain required permits and licenses, changes in laws, regulations and policy, competition for resources,; and financing and other factors discussed or referred to in the Companys most recent Annual Information Form under Risk Factors.
Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in the forward-looking information or implied by forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended.
There can be no assurance that forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking statements or information. The forward-looking information and statements contained in this MD&A are made as of the date of this MD&A and, accordingly, are subject to change after such date. The Company undertakes no obligation to update or reissue forward-looking information as a result of new information or events except as required by applicable securities laws.
4
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
BUSINESS OVERVIEW
NexGen is a British Columbia corporation with a focus on developing into production the 100% owned Rook I Project (Rook I Project or the Project) located in the southwestern Athabasca Basin of Saskatchewan, Canada. NexGen has a highly experienced team of uranium industry professionals with a successful track record in the discovery of uranium deposits and in the development of projects from discovery to production. NexGen also owns a portfolio of highly prospective exploration uranium properties in the southwestern Athabasca Basin of Saskatchewan, Canada.
The Rook I Project is the location of the Companys Arrow Deposit discovery in February 2014. The Arrow Deposit has measured and indicated Mineral Resources totalling 3.75 million tonnes (Mt) grading 3.10% U3O8 containing 257 million (M) lbs U3O8. The Probable Mineral Reserves were estimated at 240 M lbs U3O8 contained in 4.6Mt grading 2.37% U3O8. See Feasibility Study below.
The Company has also intersected numerous other mineralized zones on trend from Arrow along the Patterson Corridor on Rook I which are subject to further exploration before economic potential can be assessed. The Rook I Project consists of thirty-two (32) contiguous mineral claims totaling 35,065 hectares.
The Company is listed on the Toronto Stock Exchange (the TSX) and the New York Stock Exchange (the NYSE) under the symbol NXE, and on the ASX under the symbol NXG.
The Company currently holds 50.1% of the outstanding common shares of IsoEnergy.
Q2 2022 AND YEAR TO DATE 2022 HIGHLIGHTS
Corporate
On March 4, 2022, the Company up-listed from the NYSE American LLC to NYSE under the symbol NXE.
Operational
On April 25, 2022, the Company announced the signing of an impact benefit agreement (IBA) with the Clearwater River Dene Nation (the CRDN) which related to the environmental, cultural, economic, employment and other benefits to be provided to the CRDN by the Company in respect of the Rook I Project, and confirmed the consent and support of the CRDN for the Rook I Project.
During the quarter, work advanced on the Environmental Assessment (EA) for the Project, with the final assessment work conducted in support of the development of the draft Environmental Impact Statement (the EIS) submission. On June 21, 2022, the Company announced that it completed the submission of its draft EIS to the Saskatchewan Ministry of Environment and the Canadian Nuclear Safety Commission (the CNSC). The EIS submission included letters of support for the Rook I Project from each of the CRDN, Birch Narrows Dene Nation (the BNDN), and Buffalo River Dene Nation (the BRDN), which all have also endorsed the Rook I Project through the execution of benefit agreements with NexGen.
The submission of the EIS follows the Provincial and Federal EA processes that commenced in April 2019 following regulatory acceptance of NexGens Rook I Project description. On July 12, 2022, the CNSC announced their acceptance of the EIS which followed a 30-day period during which the CNSC conducted a conformance review of the EIS submission and confirmed no comments or conditions. Further, the acceptance marks the formal commencement of the 90-day period during which the CNSC will coordinate both the Federal technical and public review of the EIS.
5
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
During the period, NexGen advanced Front End Engineering Design (FEED). This work began in the fourth quarter of 2021 and the Company continues to optimally advance the Rook I Project through FEED.
On July 28, 2022, the Company announced the results of its 2021 regional exploration drilling program at the Rook I Project, including intersections of mineralization in AR-21-268 (Below Arrow) and RK-21-140 (Camp East).
NexGen also announced the commencement of a 2022 exploration drill program focused on regional exploration targets at the Rook I Project and an extensive geophysical program over high priority areas (SW1, SW2, and SW3 properties) of NexGens mineral tenure in the southwest Athabasca Basin, Saskatchewan.
Operations Review Rook I Project
Project Development
In Q1 2021, NexGen completed an independent feasibility study (FS) and issued a news release outlining the results on February 22, 2021. The FS validated the previous stage engineering, produced a Class 3 (AACE) capital and operating cost estimate that are summarized in the National Instrument 43-101 - Standards of Disclosure for Mineral Projects (NI 43-101) technical report entitled Arrow Deposit, Rook I Project, Saskatchewan, Nl 43-101 Technical Report on Feasibility Study dated March 10, 2021 (the Rook 1 FS Technical Report), and it supports the EA process and licensing application activities.
Feasibility Study
The Rook I FS Technical Report includes updated Mineral Reserve and Mineral Resource estimates for the Arrow Deposit. The information contained in this MD&A regarding the Rook I Project has been derived from the Rook I FS Technical Report, is subject to certain assumptions, qualifications and procedures described in the Rook I FS Technical Report and is qualified in its entirety by the full text of the Rook I FS Technical Report. Reference should be made to the full text of the Rook I FS Technical Report.
6
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
Highlights
Summary of Arrow Deposit Feasibility Study(1)
U3O8 Price used in Economic Model(2) | $50/lb (Base Case) | $60/lb(3) | ||
After-Tax NPV @ 8% |
$3.47 Billion | $4.40 Billion | ||
After-Tax Internal Rate of Return (IRR) |
52.4% | 59.5% | ||
After-Tax Payback |
0.9 Year | 0.8 Year | ||
Pre-Commitment Early Works Capital |
$158 Million | $158 Million | ||
Project Execution Capital |
$1,142 Million | $1,142 Million | ||
Total Initial Capital Costs (CAPEX) |
$1,300 Million | $1,300 Million | ||
Average Annual Production (Years 1-5) |
28.8 M lbs U3O8 | 28.8 M lbs U3O8 | ||
Average Annual After-Tax Net Cash Flow (Years 1-5) |
$1,038 Million | $1,255 Million | ||
Average Annual Production (Life of Mine) |
21.7 M lbs U3O8 | 21.7 M lbs U3O8 | ||
Average Annual After -Tax Net Cash Flow (Life of Mine) |
$763 Million | $929 Million | ||
Nominal Mill Capacity |
1,300 tonnes per day | 1,300 tonnes per day | ||
Average Annual Mill Feed Grade |
2.37% U3O8 | 2.37% U3O8 | ||
Mine Life |
10.7 Years | 10.7 Years | ||
Average Annual Operating Cost (OPEX, Life of Mine) |
$ 7.58 (US$5.69)/lb U3O8 |
$ 7.58 (US$5.69)/lb U3O8 |
1) | The economic analysis was based on the timing of a final investment decision (FID) and does not include the Pre-Commitment Early Works Capital, which are costs NexGen intends on expending prior to the FID. Pre-Commitment Early Works scope includes site preparation, and the supporting infrastructure (concrete batch plant, Phase I camp accommodations and bulk fuel storage) required to support full Project Execution Capital. |
2) | FS Base Case analysis is based on CAD $1.00 = US $0.75. |
3) | For illustrative purposes, an alternative to the Base Case using $60/lb U308 is shown. See below Economic Results for further discussion on the sensitivity analysis in the FS. |
Mineral Resources
The updated Mineral Resource estimate has an effective date of June 19, 2019 and builds upon the Mineral Resource estimate used in the Companys previously released pre-feasibility study by incorporating additional holes drilled in 2018 and 2019. The updated Mineral Resource estimate is principally comprised of Measured Mineral Resources of 209.6 M lbs of U3O8 contained in 2,183 kt grading 4.35% U3O8 as well as, Indicated Mineral Resources of 47.1 M lbs of U3O8 contained in 1,572 kt grading 1.36% U3O8, and Inferred Mineral Resources of 80.7 M lbs of U3O8 contained in 4,399 kt grading 0.83% U3O8, summarized in the table below.
7
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
Arrow Deposit Mineral Resource Estimate
FS Mineral Resource | ||||||
Structure | Tonnage (k tonnes) |
Grade (U3O8%) | Contained Metal (U3O8 M lb) | |||
Measured | ||||||
A2 LG |
920 | 0.79 | 16.0 | |||
A2 HG |
441 | 16.65 | 161.9 | |||
A3 LG |
821 | 1.75 | 31.7 | |||
Total: |
2,183 | 4.35 | 209.6 | |||
Indicated | ||||||
A2 LG |
700 | 0.79 | 12.2 | |||
A2 HG |
56 | 9.92 | 12.3 | |||
A3 LG |
815 | 1.26 | 22.7 | |||
Total: |
1,572 | 1.36 | 47.1 | |||
Measured and Indicated | ||||||
A2 LG |
1,620 | 0.79 | 28.1 | |||
A2 HG |
497 | 15.9 | 174.2 | |||
A3 LG |
1,637 | 1.51 | 54.4 | |||
Total: |
3,754 | 3.1 | 256.7 | |||
Inferred | ||||||
A1 LG |
1,557 | 0.69 | 23.7 | |||
A2 LG |
863 | 0.61 | 11.5 | |||
A2 HG |
3 | 10.95 | 0.6 | |||
A3 LG |
1,207 | 1.12 | 29.8 | |||
A4 LG |
769 | 0.89 | 15.0 | |||
Total: |
4,399 | 0.83 | 80.7 |
Notes:
1. | CIM Definition Standards were followed for Mineral Resources. Mineral Resources are reported inclusive of Mineral Reserves. |
2. | Mineral Resources are reported at a cut-off grade of 0.25% U3O8 based on a long-term price of US$50 per lb U3O8 and estimated costs. |
3. | A minimum mining width of 1.0 m was used. |
4. | The effective date of Mineral Resources is June 19, 2019 |
5. | Numbers may not add due to rounding. |
6. | Mineral Resources that are not Mineral Reserves do not have demonstrated economics. |
Mineral Reserves
The Rook I FS Technical Report defines Probable Mineral Reserves of 239.6 M lbs of U3O8 contained in 4,575 kt grading 2.37% U3O8 from the Measured and Indicated Mineral Resources, summarized in the table below. The Probable Mineral Reserves include diluting materials and allowances for losses which may occur when material is mined. Although a majority of the Mineral Reserves are based on Measured Mineral Resources, it was decided to allocate 100% of the Mineral Reserves to the Probable category (as opposed to the Proven category), due to the Rook I Project is currently at a development stage.
8
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
Arrow Probable Mineral Reserves
Probable Mineral Reserves | ||||||
Structure | Tonnage (k tonnes) |
Grade (U3O8%) |
Contained Metal (U3O8 M lb) | |||
A2 |
2,594 | 3.32% | 190.0 | |||
A3 |
1,982 | 1.13% | 49.5 | |||
Total |
4,575 | 2.37% | 239.6 |
Notes:
1. | CIM definitions were followed for Mineral Reserves. |
2. | Mineral Reserves are reported with an effective date of January 21, 2021. |
3. | Mineral Reserves include transverse and longitudinal stopes, ore development, marginal ore, special waste and a nominal amount of waste required for mill ramp-up and grade control. |
4. | Stopes were estimated at a cut-off grade of 0.30% U3O8. |
5. | Marginal ore is material between 0.26% U3O8 and 0.30% U3O8 that must be extracted to access mining areas. |
6. | Special waste in material between 0.03% and 0.26% U3O8 that must be extracted to access mining areas. 0.03% U3O8 is the limit for what is considered benign waste and material that must be treated and stockpiled in an engineered facility. |
7. | Mineral Reserves are estimated using a long-term metal price of US$50 per pound U3O8, and a 0.75 US$/C$ exchange rate (C$1.00 = US$0.75). The cost to ship the yellow cake product to a refinery is considered to be included in the metal price. |
8. | A minimum mining width of 3.0 m was applied for all long hole stopes. |
9. | Mineral Reserves are estimated using a combined underground mining recovery of 95.5% and total dilution (planned and unplanned) of 33.8%. |
10. | The density varies according to the U3O8 grade in the block model. Waste density is 2.464 t/m3. |
11. | Numbers may not add due to rounding. |
Economic Results
The Rook I FS Technical Report was based on a uranium price estimate of US$50/lb U3O8 per pound, net of yellow cake transportation fees and a fixed USD:CAD conversion rate of 0.75 (the Base Case).
The economic analysis is based on the timing of a final investment decision (FID), and it does not include the pre-commitment early works capital costs, which are costs NexGen intends, in part or entirely, on expending prior to the FID. The pre-commitment early works scope includes preparing the site, completing initial freeze hole drilling, and building the supporting infrastructure (i.e., concrete batch plant, Phase I camp accommodations, and bulk fuel storage) required for the Rook I Project. Costs for the pre-commitment early works will total an estimated $158 million.
The Rook I FS Technical Report returned an after-tax NPV@8% of $3.47 billion and an IRR of 52.4% for the Base Case. The economic model was subjected to a sensitivity analysis to determine the effects of changing metals prices, grade, metal recovery, exchange rate, OPEX, CAPEX, labour and reagent costs. The NPV is most sensitive to metals prices, grade, metal recovery, and exchange rate. The sensitivity of the after-tax NPV and IRR are summarized in the following table using the price of uranium as the dependent variable.
NPV and IRR Sensitivity to Uranium Price
Uranium Price (US$/lb U3O8) | After-Tax NPV | After-Tax IRR | ||
$100/lb U3O8 |
$8.13 Billion | 81.6% | ||
$90/lb U3O8 |
$7.20 Billion | 76.8% | ||
$80/lb U3O8 |
$6.27 Billion | 71.5% | ||
$70/lb U3O8 |
$5.33 Billion | 65.8% | ||
$60/lb U3O8 |
$4.40 Billion | 59.5% | ||
$50/lb U3O8 (Base Case) |
$3.47 Billion | 52.4% | ||
$40/lb U3O8 |
$2.53 Billion | 44.0% |
9
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
Permitting, Regulatory, and Engagement
During the quarter, work advanced on the EA for the Project, with continued technical, modelling and assessment work conducted in support of the development of the draft EIS, and submission of the EIS was completed on June 21, 2022. On July 12, 2022, the CNSC announced their acceptance of the EIS which followed a 30-day period during which the CNSC conducted a conformance review of the EIS submission and confirmed no comments or conditions. Further, the acceptance marks the formal commencement of the 90-day period during which the CNSC will coordinate both the Federal technical and public review of the EIS.
Similarly, work advanced on the Licence Application in order to obtain a Uranium Mine and Mill Licence from the CNSC for the Project.
The Company is continuing its longstanding engagement with the communities within the proximity to the Rook I Project, as per the Study Agreements entered into with four Indigenous groups in Q4 2019 (the Study Agreements). The Study Agreements provide the following:
● | a framework for working collaboratively to advance the EA and exchange information that will be used to inform the Crown as it undertakes its duty to consult. |
● | funding to each Indigenous group and outline a collaborative process for formal engagement to support the inclusion of Indigenous knowledge in the EA. |
● | outline processes for identifying potential effects to Indigenous rights, treaty rights, and socio-economic interests, and determining avoidance and accommodation measures in relation to the Rook I Project. |
The Company and the Indigenous communities have committed to engagement through Joint Working Groups (JWGs) to support the inclusion of each communitys traditional knowledge throughout the EA process, including incorporating traditional land use and dietary studies undertaken by each of the respective communities. The Company has and will continue to provide funding for all aspects of the above, including the JWGs, and to lead, review and independently confirm the Traditional Land Use studies for inclusion into the EA. Further, the Study Agreements confirm that the parties will negotiate benefit agreements in good faith.
In Q2 2022, the Company signed an IBA with the CRDN. During 2021, the Company signed an IBA with the BRDN and a Mutual Benefit Agreement (MBA) with the BNDN covering all phases of the Rook I Project.
OPERATIONS OUTLOOK
The Company intends to advance the development of the Rook I Project as outlined in the Rook I FS Technical Report. The work will include:
● | completing FEED with Hatch Ltd. by advancing overall engineering to a 40-45% level of completion, that will form the control budget, and define a project execution schedule (Level 3 Schedule); and |
● | conducting site confirmation and process plant optimization studies to support FEED. |
Through 2022, the Company will continue to advance the EA and licensing activities towards the submission of the Final EIS and Licensing application in order to obtain a Uranium Mine and Mill License from the CNSC, and continue engagement with regulators and communities.
10
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
HEALTH, SAFETY AND ENVIRONMENT
NexGen places the health and safety of its people as the highest priority and is committed to sustainable development in a safe and responsible manner. NexGen recognizes that the long-term sustainability of its business is dependent upon elite stewardship in the protection of the environment, protection of its people and the careful management of the exploration, development, and extraction of mineral resources.
Management is focused on optimizing its strong culture of safety, which includes equipping people with the tools, training, and mindset to result in constant safety awareness. NexGen strives for an incident-free workplace, while also recognizing the need for emergency preparedness. The Company has a site-specific emergency response plan and conducts periodic exercises followed by critical analysis that evaluates the response and recommends improvements. This plan is reviewed annually.
NexGen takes a proactive and long-term approach to risk management that supports investment in the practices needed to be successful and meet commitments.
The Company has implemented comprehensive COVID-19 protocols at each of its locations that are in line with the respective regional health authorities guidelines.
11
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
FINANCIAL RESULTS FOR THE PERIOD
Financial results for the three and six months ended June 30, 2022 and 2021 (Unaudited)
$000s |
Three months June 30, 2022 |
Three months June 30, 2021 |
Six months ended June 30, 2022 |
Six months June 30, 2021 |
||||||||||||
Salaries, benefits, and directors fees |
$ | 1,867 | $ | 2,026 | $ | 3,737 | $ | 4,477 | ||||||||
Office, administrative, and travel |
1,558 | 651 | 2,911 | 1,653 | ||||||||||||
Professional fees and insurance |
1,373 | 483 | 1,987 | 1,312 | ||||||||||||
Depreciation |
446 | 540 | 884 | 1,084 | ||||||||||||
Share-based payments |
6,340 | 11,381 | 13,736 | 13,578 | ||||||||||||
(11,584) | (15,081) | (23,255) | (22,104) | |||||||||||||
Finance income |
491 | 280 | 742 | 405 | ||||||||||||
Mark to market gain (loss) on convertible debentures |
28,504 | (5,913) | 10,074 | (64,922) | ||||||||||||
Interest expense on convertible debentures |
(529) | (492) | (1,047) | (2,720) | ||||||||||||
Interest on lease liabilities |
(54) | (70) | (110) | (142) | ||||||||||||
Gain on sale of assets |
- | 2,236 | - | 2,236 | ||||||||||||
Foreign exchange gain (loss) |
474 | (251) | 246 | (429) | ||||||||||||
Other income |
- | 18 | - | 18 | ||||||||||||
Income (loss) before taxes |
$ | 17,302 | $ | (19,273) | $ | (13,350) | $ | (87,658) | ||||||||
Deferred income tax recovery (expense) |
283 | (526) | 535 | (257) | ||||||||||||
Net income (loss) |
$ | 17,585 | $ | (19,799) | $ | (12,815) | $ | (87,915) | ||||||||
Basic earnings (loss) per share attributable to NexGen shareholders |
$ | 0.03 | $ | (0.04) | $ | (0.03) | $ | (0.19) | ||||||||
Diluted loss per share attributable to NexGen shareholders |
$ | (0.02) | $ | (0.04) | $ | (0.04) | $ | (0.19) |
Three months ended June 30, 2022 versus three months ended June 30, 2021
During the three months ended June 30, 2022 (the Current Quarter), NexGen recorded net income of $17.6 million or $0.03 basic earnings per share attributable to NexGen shareholders compared to the three months ended June 30, 2021 (the Comparative Quarter) with a net loss of $19.8 million or $0.04 basic loss per share attributable to NexGen shareholders, representing an improvement of $37.4 million quarter over quarter. The improved result was primarily due to the following:
● | Salaries, benefits, and directors fees of $1.9 million in the Current Quarter remained consistent with the Comparative Quarter. |
● | Office, administrative, and travel costs increased by $0.9 million in the Current Quarter compared to the Comparative Quarter. The increase is primarily related to additional travel (in line with Covid-19 guidelines), implementation of a new enterprise resource planning system, and costs related to IsoEnergy expanding its executive team. |
● | Professional fees and insurance increased by $0.9 million from $0.5 million in the Comparative Quarter to $1.4 million in the Current Quarter primarily due to increased insurance costs, additional recruiting costs for new staff to support the Rook I Project, the timing of filing fee payments, and increased corporate development costs in IsoEnergy. |
12
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
● | Share based compensation decreased by $5.1 million from $11.4 million during the Comparative Quarter to $6.3 million in the Current Quarter. The decrease is primarily due to the grant of stock options in the Comparative Quarter compared to no stock option granted in the Current Quarter. The remaining share based compensation relates to the amortization of the Black Scholes grant values of previous grants. |
● | The Company recognized a mark-to-market gain on the Convertible Debentures (as defined in the Outstanding Convertible Debentures section below) of $28.5 million during the Current Quarter compared to a mark-to-market loss of $5.9 million during the Comparative Quarter. Mark-to-market gains and losses result from the fair value re-measurement of the Convertible Debentures at each reporting date, with any changes in the fair value being recognized in the net income (loss) and comprehensive income (loss) for the period. The mark-to-market gain for the Current Quarter is mainly due to a decrease in the Company and IsoEnergys share price during the Current Quarter. |
● | Deferred income tax expense decreased by $0.8 million from a $0.5 million expense in the Comparative Quarter to a $0.3 million recovery in the Current Quarter. The difference is mainly due to the recognition of a deferred tax expense in the Comparative Quarter from the gain on sale of assets in IsoEnergy compared to none in the Current Quarter. |
Six months ended June 30, 2022 versus six months ended June 30, 2021
During the six months ended June 30, 2022 (the Current Period), NexGen recorded a net loss of $12.8 million or $0.03 basic loss per share attributable to NexGen shareholders compared to the six months ended June 30, 2021 (the Comparative Period) with a net loss of $87.9 million or $0.19 basic loss per share attributable to NexGen shareholders, representing a decrease in net loss of $75.1 million quarter over quarter. The decrease in net loss was primarily due to the following:
● | Salaries, benefits, and directors fees decreased by $0.8 million from $4.5 million during the Comparative Period to $3.7 million for the Current Period. The Current Period included costs related to the increased workforce and the appointment of key personnel since the Comparative Period. The Comparative Period included the financial impact of the resignation of IsoEnergys former CEO. |
● | Office, administrative, and travel costs increased by $1.2 million in the Current Period compared to the Comparative Period. The increase is primarily related to additional travel (in line with Covid-19 guidelines), implementation of a new enterprise resource planning system, and costs related to IsoEnergy expanding its executive team. |
● | Professional fees and insurance increased by $0.7 million from $1.3 million in the Comparative Period to $2.0 million in the Current Period due to increased insurance costs, additional recruiting costs for new staff to support the Rook I Project and increased corporate development and legal fees in IsoEnergy. |
● | Share based compensation in the Current Period was $13.7 million compared to $13.6 million in the Comparative Period. The Current Period share based compensation primarily related to the amortization of Black Scholes grant values for the stock options granted in 2021. The Comparative Period share based compensation related primarily to the Black Scholes grant values of the stock options granted during the Comparative Period. |
● | The Company recognized a mark-to-market gain on the Convertible Debentures (as defined in the Outstanding Convertible Debentures section below) of $10.1 million during the Current Period compared to a mark-to-market loss of $64.9 million during the Comparative Period. |
13
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
Mark-to-market gains and losses result from the fair value re-measurement of the Convertible Debentures at each reporting date, with any changes in the fair value being recognized in net income (loss) and comprehensive income (loss) for the period. The mark-to-market gain for the Current Period is mainly due to a decrease in the Company and IsoEnergys share price during the Current Period. |
● | The interest expense on the Convertible Debentures decreased by $1.7 million from $2.7 million in the Comparative Period to $1.0 million in the Current Period. The decrease is due to the conversion of the 2016 and 2017 Debentures into common shares of the Company in the first quarter of 2021. |
● | Deferred income tax expense decreased by $0.8 million from a $0.3 million expense in the Comparative Period to a $0.5 million recovery in the Current Period. The difference is mainly due to the recognition of a deferred tax expense in the Comparative Period from the gain on sale of assets in IsoEnergy compared to none in the Current Period. |
Financial Position Summary
Statement of financial position summary as at June 30, 2022 (Unaudited) and December 31, 2021 (Audited)
$000s | June 30, 2022 | December 31, 2021 | ||||||
Current assets |
||||||||
Cash |
$ | 161,237 | $ | 201,804 | ||||
Marketable securities |
6,033 | 9,315 | ||||||
Amounts receivable |
862 | 1,178 | ||||||
Prepaid expenses and other assets |
2,760 | 1,028 | ||||||
170,892 | 213,325 | |||||||
Non-current assets |
||||||||
Exploration and evaluation assets |
365,275 | 326,543 | ||||||
Property and equipment |
5,966 | 6,619 | ||||||
Deposits |
76 | 76 | ||||||
Total assets |
$ | 542,209 | $ | 546,563 | ||||
Current liabilities |
||||||||
Accounts payable and accrued liabilities |
$ | 12,738 | $ | 7,499 | ||||
Lease liabilities |
737 | 706 | ||||||
13,475 | 8,205 | |||||||
Non-current liabilities |
||||||||
Convertible debentures |
61,716 | 72,011 | ||||||
Long-term lease liabilities |
2,086 | 2,463 | ||||||
Deferred income tax liabilities |
1,577 | 2,536 | ||||||
Total liabilities |
78,854 | 85,215 | ||||||
Equity |
||||||||
Equity attributable to NexGen Energy Ltd. Shareholders |
433,736 | 433,608 | ||||||
Non-controlling interests |
29,619 | 27,740 | ||||||
Total equity |
$ | 463,355 | $ | 461,348 |
14
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
Liquidity and Capital Resources
On March 11, 2021 and March 16, 2021, NexGen closed a bought deal equity offering (the Offering) for aggregate gross proceeds of approximately $150.3 million and the associated over-allotment option (the Over-Allotment Option) for aggregate gross proceeds of approximately $22.5 million, respectively, for total gross proceeds of approximately $172.8 million. The Company intends to apply the net proceeds of the Offering and Over-Allotment Option towards the development of the Rook I Project, including site investigations, process plant optimizations and engineering, pre-commitment early works, and for general working capital. The following table sets forth a comparison of the disclosure regarding NexGens estimated use of proceeds in its final short form prospectus dated March 8, 2021, which is available on SEDAR at www.sedar.com, and its actual use of such funds as at June 30, 2022:
$000s | Estimated Use of Net Proceeds | Actual Use of Net Proceeds | ||||||
Development of Rook I Project |
||||||||
Site Investigation |
$ 9,000 | $ 8,267 | ||||||
Process Plant Optimizations |
1,500 | 697 | ||||||
Engineering |
35,000 | 24,426 | ||||||
Pre-Commitment Early Works |
94,500 | - | ||||||
General working capital |
23,290 | - | ||||||
Total1 |
$ 163,290 | $ 33,390 |
1 The net proceeds of the Offering and the Over-Allotment Option reflect the aggregate gross proceeds of $172.8 million after deducting underwriters fees and transaction expenses of $9.5 million.
The Companys actual use of net proceeds from the Offering remains on schedule and as planned.
NexGen had a working capital surplus of $157.4 million as at June 30, 2022 (December 31, 2021 $205.1 million). The Company currently has sufficient cash to fund its current operating and administration costs.
The decrease in working capital of $47.7 million from December 31, 2021 to June 30, 2022 was primarily attributable to expenditure to advance the Rook I Project.
The net change in cash position at June 30, 2022 compared to March 31, 2022 was a decrease of $26.3 million, attributable to the following components of the statement of cash flows:
● | NexGens operating outflow before working capital adjustments was $4.3 million during the Current Quarter (Comparative Quarter outflow of $2.9 million) due to the non-recurring nature of the resignation of IsoEnergys former CEO in the Comparative Quarter, offset by increased operational costs in the Current Quarter. |
● | Investing activities used $20.2 million in the Current Quarter, associated primarily with the development of the Rook I Project (Comparative Quarter outflow of $5.1 million). |
● | Financing activities used $0.7 million in the Current Quarter (Comparative Quarter inflow of $17.0 million) primarily due to the payment of interest. The Comparative Quarter inflow was due to stock option exercises resulting in $16.9 million of cash inflows compared to $0.2 million in the Current Quarter. |
15
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
The net change in cash position at June 30, 2022 compared to December 31, 2021 was a decrease of $40.6 million, attributable to the following components of the statement of cash flows:
● | NexGens operating outflow before working capital adjustments was $7.9 million during the Current Period (Comparative Period outflow of $7.0 million) due to increased operational costs in the Current Period. |
● | Investing activities used $31.1 million in the Current Period, associated primarily with the development of the Rook I Project (Comparative Period outflow of $13.4 million). |
● | Financing activities generated $0.1 million in the Current Period (Comparative Period inflow of $181.4 million), primarily related to the proceeds from the exercise of stock options. The Comparative Period included the Offering and Over-Allotment Option for net proceeds of $163.5 million that did not occur in the Current Period. |
Capital Management
The Company manages its capital structure, and adjusts it, based on the funds available to the Company, to support the acquisition, exploration and evaluation of assets. To effectively manage the entitys capital requirements, the Company has in place a planning, budgeting and forecasting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its operating and growth objectives.
In the management of capital, the Company considers all components of equity and debt, net of cash, and is dependent on third-party financing, whether through debt, equity, or other means. Although the Company has been successful in raising funds to date, there is no assurance that the Company will be successful in obtaining the required financing in the future or that such financing will be available on terms acceptable to the Company.
The properties in which the Company currently has an interest are in the exploration and development stage. As such, the Company has historically relied on the equity markets to fund its activities. The Company will continue to assess new properties and seek to acquire an interest in additional properties if it determines that there is sufficient geologic or economic potential and if it has adequate financial resources to do so.
As discussed in the section above entitled Liquidity and Capital Resources, the Company completed the Offering and Over-Allotment Option, raising gross proceeds of approximately $172.8 million in the period ended March 31, 2021. The Company holds sufficient US dollars to make all interest payments due under the Convertible Debentures until maturity.
The Company is not subject to externally imposed capital requirements. There were no changes in the Companys approach to capital management during the period ended June 30, 2022.
16
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
Contractual Obligations and Commitments
Significant Undiscounted Obligations and Commitments as at June 30, 2022 (Unaudited)
$000s | Less than 1 year |
1 to 3 years |
4 to 5 years |
Over 5 years |
Total | |||||||||||||||
Trade and other payables |
$ | 12,738 | $ | - | $ | - | $ | - | $ | 12,738 | ||||||||||
Convertible debenture |
- | 61,716 | - | - | 61,716 | |||||||||||||||
Lease liabilities |
1,346 | 3,247 | - | - | 4,593 | |||||||||||||||
$ | 14,084 | $ | 64,963 | $ | - | $ | - | $ | 79,047 |
Summary of Quarterly Results
Summary of Quarterly Results (Unaudited)
For the three months ended | ||||||||||||||||
$000s except per share amounts | June 30, 2022 |
Mar 31, 2022 |
Dec 31, 2021 |
Sept 30, 2021 |
||||||||||||
Finance income |
491 | 251 | 246 | 259 | ||||||||||||
Net income (loss) |
17,585 | (30,402) | (19,106) | (19,929) | ||||||||||||
Net income (loss) for the period attributable to shareholders of NexGen Energy Ltd. |
13,484 | (25,673) | (16,276) | (17,827) | ||||||||||||
Basic earnings (loss) per share |
0.03 | (0.05) | (0.03) | (0.04) | ||||||||||||
Diluted loss per share |
(0.02) | (0.05) | (0.03) | (0.04) |
For the three months ended | ||||||||||||||||
$000s except per share amounts | June 30, 2021 |
Mar 31, 2021 |
Dec 31, 2020 |
Sept 30 2020 |
||||||||||||
Finance income |
280 | 125 | 84 | 87 | ||||||||||||
Net income (loss) |
(19,799) | (68,116) | (64,117) | (21,515) | ||||||||||||
Net income (loss) for the period attributable to shareholders of NexGen Energy Ltd. |
(18,894) | (66,090) | (59,965) | (21,680) | ||||||||||||
Basic earnings (loss) per share |
(0.04) | (0.17) | (0.16) | (0.06) | ||||||||||||
Diluted loss per share |
(0.04) | (0.17) | (0.16) | (0.06) |
NexGen does not derive any revenue from its operations except for interest income from its cash. Its primary focus is the acquisition, exploration, evaluation and development of resource properties in addition to the development of the Rook I Project.
The significant fluctuations in income(loss) are mainly the result of mark-to-market gains or losses recognized on the fair value re-valuation of the Convertible Debentures at each quarter driven primarily by the change in share price of the Company and IsoEnergy, with any changes in the fair value being recognized in the income(loss) for the quarter.
Interest income recorded as finance income has fluctuated depending on cash balances available to generate interest and the earned rate of interest.
The income(loss) per period has also fluctuated depending on the Companys activity level and periodic variances in certain items. Quarterly periods are therefore not comparable due to the nature and timing of exploration and development activities.
17
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
Related Party Transactions
Compensation of Key Management and Directors
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
$000s | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Short-term compensation (1) |
$ | 1,014 | $ | 1,789 | $ | 1,989 | $ | 2,437 | ||||||||
Share-based payments(2) |
5,928 | 11,615 | 12,777 | 13,263 | ||||||||||||
Consulting fees (3) |
55 | 34 | 166 | 67 | ||||||||||||
$ | 6,997 | $ | 13,438 | $ | 14,932 | $ | 15,767 |
(1) Short-term compensation to key management personnel for the three and six months ended June 30, 2022 amounted to $1,014 and $1,989 (2021 - $1,789 and $2,437) of which $961 and $1,886 (2021 - $1,638 and $2,236) was expensed and included in salaries, benefits, and directors fees on the statement of net income (loss) and comprehensive income (loss). The remaining $53 and $103 (2021 - $151 and $201) was capitalized to exploration and evaluation assets.
(2) Share-based payments to key management personnel for the three and six months ended June 30, 2022 amounted to $5,928 and $12,777 (2021 - $11,615 and $13,263) of which $5,805 and $12,529 (2021 - $11,255 and $12,889) was expensed and $123 and $248 (2021 - $360 and $374) was capitalized to exploration and evaluation assets.
(3) The Company used consulting services from Flying W Consulting Inc., which is associated with Brad Wall, a director of the Company in relation to advice on corporate matters for the three and six months ended June 30, 2022 amounting to $32 and $65 (2021 - $32 and $65) pursuant to a consulting contract providing for a monthly service fee of $11 and terminable upon three months notice.
(4) The Company used consulting services from Weymark Consulting Ltd., which is associated with Ryan Weymark, an employee of the Company during the Current Period, in relation to various studies for the three and six months ended June 30, 2022 amounting to $23 and $101 (2021 - $nil and $nil) pursuant to a consulting contract based on an hourly rate and terminable at any time.
As at June 30, 2022 there was $47 (December 31, 2021 - $58) included in accounts payable and accrued liabilities owing to its directors and officers for compensation.
Outstanding Share Data
The authorized capital of NexGen consists of an unlimited number of common shares and an unlimited number of preferred shares. As at August 4, 2022, there were 479,423,817 common shares, 43,117,437 stock options with exercise prices ranging between $1.59 and $5.84, and no preferred shares issued and outstanding.
Outstanding Convertible Debentures
On May 27, 2020, the Company completed a private placement for aggregate gross proceeds of US$30 million (the 2020 Financing) comprised of: (a) 11,611,667 common shares at a price of $1.80 per share, for gross proceeds of US$15 million; and (b) US$15 million in aggregate principal amount of 7.5% unsecured convertible debentures (the 2020 Debentures) with Queens Road Capital Investments Ltd. (QRC). As at August 4, 2022, US$15 million of principal of the 2020 Debentures remain outstanding.
On August 18, 2020, IsoEnergy entered into an agreement with QRC for gross proceeds of US$6 million private placement of 8.5% unsecured convertible debentures (the IsoEnergy Debentures, and together with the 2020 Debentures, the Convertible Debentures). The IsoEnergy Debentures are convertible at the holders option at a conversion price of $0.88 into a maximum of 9,206,311 common shares of IsoEnergy. As at August 4, 2022, US$6 million of principal of the IsoEnergy Debentures remain outstanding.
18
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
Convertible Debenture |
Principal | Conversion Price | Type of shares issuable upon conversion |
Number of shares issuable upon conversion (1) | ||||
2020 Debentures |
US$15 million | $2.34 | Common shares of NexGen |
8,237,179 | ||||
IsoEnergy Debentures |
US$6 million | $0.88 | Common shares of IsoEnergy |
8,761,364 |
(1) Converted to Canadian dollars using closing foreign exchange rate of 1.285 on August 4, 2022.
OFF-BALANCE SHEET ARRANGEMENTS
NexGen has not entered into any material off-balance sheet arrangements such as guarantee contracts, contingent interests in assets transferred to unconsolidated entities, derivative instrument obligations, or with respect to any obligations under a variable interest entity arrangement.
SEGMENT INFORMATION
The Company operates in one reportable segment, being the acquisition, exploration and development of uranium properties. All of the Companys non-current assets are located in Canada.
ACCOUNTING POLICY OVERVIEW
Critical Accounting Policies and Judgements
The critical judgements that the Companys management has made in the process of applying the Companys accounting policies, apart from those involving estimations, that have the most significant effect on the amounts recognized in the Companys consolidated financial statements include impairment of exploration and evaluation assets, deferred income taxes, convertible debentures, and share-based payments. Refer to the Annual Financial Statements for further detail of the Companys Critical Accounting Estimates.
Key Sources of Estimation Uncertainty
The preparation of consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to the consolidated financial statements. Estimates and assumptions are continuously evaluated and are based on managements experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The significant assumptions about the future and other major sources of estimation uncertainty as at the end of the reporting period that have a significant risk of resulting in a material adjustment to the carrying amounts of the Companys assets and liabilities include impairment of exploration and evaluation assets, deferred income taxes, convertible debentures, and share-based payments. Refer to the Annual Financial Statements for further detail of the Companys Critical Accounting Estimates.
Changes in Accounting Policies including Initial Adoption
The Company has had no significant changes in accounting policies. Refer to the Annual Financial Statements for further details of the Companys changes in accounting policies.
19
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Companys financial instruments consist of cash, amounts receivables, accounts payable and accrued liabilities and convertible debentures.
Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values.
The three levels of the fair value hierarchy are:
● | Level 1 unadjusted quoted prices in active markets for identical assets or liabilities |
● | Level 2 inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and |
● | Level 3 inputs that are not based on observable market data. |
The fair values of the Companys cash, amounts receivables, and accounts payable and accrued liabilities approximate their carrying values due to their short-term nature.
The marketable securities are re-measured at fair value at each reporting date with any change in fair value recognized other comprehensive income (loss). The marketable securities are classified as Level 1.
The Convertible Debentures are re-measured at fair value at each reporting date with any change in fair value recognized in profit or loss with the exception that under IFRS 9, the change in fair value that is attributable to change in credit risk is presented in other comprehensive income (loss). The Convertible Debentures are classified as Level 2.
Risk Factors
Readers of this Managements Discussion and Analysis should give careful consideration to the information included or incorporated by reference in this document and the Companys condensed interim consolidated financial statements and related notes for the three and six months ended June 30, 2022. For further details of risk factors, please refer to the most recent Annual Information Form dated February 25, 2022 filed on SEDAR at http://www.sedar.com, the Annual Financial Statements, and the below discussions.
Financial Risks
The Company is exposed to varying degrees of a variety of financial instrument related risks. The Board approves and monitors the risk management processes, inclusive of counterparty limits, controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:
Credit Risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Financial instruments potentially subject to credit risk are cash and amounts receivable. The Company holds cash with large Canadian banks. The Companys amounts receivable consists of input tax credits receivable from the Government of Canada and interest accrued on cash. Accordingly, the Company does not believe it is subject to significant credit risk.
20
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
The Companys maximum exposure to credit risk is as follows:
June 30, 2022 | December 31, 2021 | |||||||
Cash |
$ | 161,237 | $ | 201,804 | ||||
Amounts receivable |
862 | 1,178 | ||||||
$ | 162,099 | $ | 202,982 |
Liquidity Risk
Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity requirements are managed based on expected cash flows to ensure that there is sufficient capital to meet short-term obligations. The Companys approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at June 30, 2022, NexGen had cash of $161,237 to settle current liabilities of $13,475.
Foreign Currency Risk
The functional currency of the Company and its subsidiaries is the Canadian dollar. The Company is affected by currency transaction risk and currency translation risk. Consequently, fluctuations of the Canadian dollar in relation to other currencies impact the fair value of financial assets, liabilities and operating results. Financial assets and liabilities subject to currency translation risk primarily includes US dollar denominated cash, US dollar accounts payable, and the Convertible Debentures. The Company maintains Canadian and US dollar bank accounts in Canada.
The Company is exposed to foreign exchange risk on its US dollar denominated Convertible Debentures. At maturity the US$21 million principal amount of the Convertible Debentures is due in full, and prior to maturity, at a premium upon the occurrence of certain events. The Company holds sufficient US dollars to make all cash interest payments due under the Convertible Debentures until maturity but not to pay the principal amount. Accordingly, the Company is subject to risks associated with fluctuations in the Canadian/US dollar exchange rate that may make the Convertible Debentures more costly to repay.
As at June 30, 2022, the Companys US dollar net financial liabilities were US$35,959. Thus a 10% change in the Canadian dollar versus the US dollar exchange rates would give rise to a $4,630 change in net income (loss) and comprehensive income (loss).
The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks at this time.
Equity and Commodity Price Risk
The Company is exposed to price risk with respect to commodity and equity prices. Equity price risk is defined as the potential adverse impact on the Companys earnings due to movements in individual equity prices or general movements in the level of the stock market. Accordingly, significant movements in share price may affect the valuation of the marketable securities and Convertible Debentures which may adversely impact its earnings.
Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatility. Future declines in commodity prices may impact the valuation of long-lived assets. The Company closely monitors commodity prices of uranium, individual equity movements, and the stock market to determine the appropriate course of action, if any, to be taken by the Company.
21
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
Interest Rate Risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company holds its cash in bank accounts that earn variable interest rates. Due to the short-term nature of these financial instruments, fluctuations in market rates do not have a significant impact on the estimated fair value of the Companys cash balances as of June 30, 2022. The Company manages interest rate risk by maintaining an investment policy for short-term investments. This policy focuses primarily on preservation of capital and liquidity. The Company monitors the investments it makes and is satisfied with the credit rating of its banks. The 2020 Debentures and IsoEnergy Debentures, in an aggregate principal amount of US$21 million, carry fixed interest rates of 7.5% and 8.5% respectively and are not subject to interest rate fluctuations.
Other Risk Factors
The operations of the Company are speculative due to the high-risk nature of its business which is the exploration of mining properties. For a comprehensive list of the risks and uncertainties facing the Company, please see Risk Factors in the Companys most recent annual information form and below under Industry and Economic Factors that May Affect the Business. These are not the only risks and uncertainties that NexGen faces. Additional risks and uncertainties not presently known to the Company or that the Company currently considers immaterial may also impair its business operations. These risk factors could materially affect the Companys future operating results and could cause actual events to differ materially from those described in forward-looking statements relating to the Company.
During 2020, the World Health Organization declared a global pandemic known as COVID-19 and governments around the world enacted measures to combat the spread of the virus. The duration and impact of the COVID-19 outbreak is not known at this time, but the risks to the Company may include, but are not limited to, delays in the previously disclosed timelines and activity levels associated with the Companys baseline engineering, environmental assessment and the ability to raise funds through debt and equity markets. To date, the Companys operations and ability to raise funds have not been significantly impacted. The Company has implemented proper COVID-19 protocols at each of its locations that are in line with the respective regional health authorities COVID-19 guidelines.
Negative Impacts by an Outbreak of Infectious Disease or Pandemic
An outbreak of infectious disease, pandemic or a similar public health threat, such as the COVID-19 pandemic, and the response thereto, could adversely impact the Company, both operationally and financially. The global response to the COVID-19 pandemic has resulted in, among other things, border closures, severe travel restrictions and extreme fluctuations in financial and commodity markets. Additional measures may be implemented by one or more governments around the world in jurisdictions where the Company operates. Labour shortages due to illness, Company or government-imposed isolation programs, or restrictions on the movement of personnel or possible supply chain disruptions could result in a reduction or interruption of the Companys operations, including operational shutdowns or suspensions. The inability to continue ongoing exploration and development work could have a material adverse effect on the Companys future cash flows, earnings, results of operations and financial condition. The extent to which COVID-19 and any other pandemic or public health crisis impacts the Companys business, affairs, operations, financial condition, liquidity, availability of credit and results of operations will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of and the actions required to contain the COVID-19 pandemic or remedy its impact, among others.
22
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
Negative Operating Cash Flow and Dependence on Third Party Financing
The Company has no source of operating cash flow and there can be no assurance that the Company will ever achieve profitability. Accordingly, the Company is dependent on third-party financing to continue exploration activities on the Companys properties, maintain capacity and satisfy contractual obligations. Accordingly, the amount and timing of expenditures depends on the Companys cash reserves and access to third-party financing. Failure to obtain such additional financing could result in delay or indefinite postponement of further exploration and development of the Companys properties, including the Rook I Project, or require the Company to sell one or more of its properties (or an interest therein). In particular, there can be no assurance that the Company will have achieved profitability prior to the maturity date and may be required to finance the repayment of all or a part of the principal amount of the Convertible Debentures. Failure to repay the Convertible Debentures in accordance with the terms thereof would have a material adverse effect on the Companys financial position.
Uncertainty of Additional Financing
As stated above, the Company is dependent on third-party financing, whether through debt, equity, or other means. Although the Company has been successful in raising funds to date, there is no assurance that the Company will be successful in obtaining required financing in the future or that such financing will be available on terms acceptable to the Company. The Companys access to third-party financing depends on several factors including the price of uranium, the results of ongoing exploration, the Companys obligations under the Convertible Debentures, a claim against the Company, a significant event disrupting the Companys business or uranium industry generally, or other factors may make it difficult or impossible to obtain financing through debt, equity, or other means on favourable terms, or at all. As previously stated, failure to obtain such additional financing could result in delay or indefinite postponement of further exploration and development of the Companys properties, including the Rook I Project, or require the Company to sell one or more of its properties (or an interest therein).
The Price of Uranium Price and Alternate Sources of Energy
The price of the Companys securities is highly sensitive to fluctuations in the price of uranium. Historically, the fluctuations in these prices have been, and are expected to continue to be, affected by numerous factors beyond the Companys control. Such factors include, among others: demand for nuclear power; political and economic conditions, including the outbreak of war or levying of sanctions, in or by uranium producing and consuming countries; public and political response to a nuclear accident; improvements in nuclear reactor efficiencies; reprocessing of used reactor fuel and the re-enrichment of depleted uranium tails; sales of excess inventories by governments and industry participants; and production levels and production costs in key uranium producing countries.
In addition, nuclear energy competes with other sources of energy like oil, natural gas, coal and hydroelectricity. These sources are somewhat interchangeable with nuclear energy, particularly over the longer term. If lower prices of oil, natural gas, coal and hydroelectricity are sustained over time, it may result in lower demand for uranium concentrates and uranium conversion services, which, among other things, could lead to lower uranium prices. Growth of the uranium and nuclear power industry will also depend on continuing and growing public support for nuclear technology to generate electricity. Unique political, technological and environmental factors affect the nuclear industry, exposing it to the risk of public opinion, which could have a negative effect on the demand for nuclear power and increase the regulation of the nuclear power industry. An accident at a nuclear reactor anywhere in the world could affect acceptance of nuclear energy and the future prospects for nuclear generation.
23
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
All of the above factors could have a material and adverse effect on the Companys ability to obtain the required financing in the future or to obtain such financing on terms acceptable to the Company, resulting in material and adverse effects on its exploration and development programs, cash flow and financial condition.
Exploration Risks
Exploration for mineral resources involves a high degree of risk and few properties that are explored are ultimately developed into producing mines. The risks and uncertainties inherent in exploration activities include but are not limited to: general economic, market and business conditions, the regulatory process and actions, failure to obtain necessary permits and approvals, technical issues, new legislation, competitive and general economic factors and conditions, the uncertainties resulting from potential delays or changes in plans, the occurrence of unexpected events and managements capacity to execute and implement its future plans. There is also no assurance that even if commercial quantities of ore are discovered that it will be developed and brought into commercial production. The commercial viability of a mineral deposit once discovered is also dependent upon a number of factors, most of which factors are beyond the control of the Company and may result in the Company not receiving adequate return on investment capital.
Uninsurable Risks
Mining operations generally involve a high degree of risk. Exploration, development and production operations on mineral properties involve numerous risks, including but not limited to unexpected or unusual geological operating conditions, seismic activity, rock bursts, cave-ins, fires, floods, landslides, earthquakes and other environmental occurrences, and political and social instability, any of which could result in damage to, or destruction of life or property, environmental damage and possible legal liability. Although the Company believes that appropriate precautions to mitigate these risks are being taken, operations are subject to hazards such as equipment failure or failure of structures, which may result in environmental pollution and consequent liability. It is not always possible to obtain insurance against all such risks and the Company may decide not to insure against certain risks because of high premiums or other reasons. Should such liabilities arise, they could reduce or eliminate the Companys future profitability and result in increasing costs and a decline in the value of the common shares. While the Company may obtain insurance against certain risks in such amounts as it considers adequate, the nature of these risks is such that liabilities could exceed policy limits or be excluded from coverage. The potential costs that could be associated with any liabilities not covered by insurance or in excess of insurance coverage may cause substantial delays and require significant capital outlays, thereby adversely affecting the Companys business and financial condition.
Reliance upon Key Management and Other Personnel
The Company relies on the specialized skills of management in the areas of mineral exploration, geology and business negotiations and management. The loss of any of these individuals could have an adverse effect on the Company. The Company does not currently maintain key-man life insurance on any of its key employees. In addition, as the Companys business activity continues to grow, it will require additional key financial, administrative and qualified technical personnel. Although the Company believes that it will be successful in attracting, retaining and training qualified personnel, there can be no assurance of such success. If it is not successful in attracting, retaining and training qualified personnel, the efficiency of the Companys business could be affected, which could have an adverse impact on its future cash flows, earnings, results of operation and financial condition.
24
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
Imprecision of Mineral Resource Estimates
Mineral Resource figures are estimates, and no assurances can be given that the estimated levels of uranium will be produced. Such estimates are expressions of judgment based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. While the Company believes that its Mineral Resource estimate is well established and reflects managements best estimates, by their nature, Mineral Resource estimates are imprecise and depend, to a certain extent, upon statistical inferences which may ultimately prove unreliable. Should the Company encounter mineralization or formations different from those predicted by past sampling and drilling, resource estimates may have to be adjusted.
These are not the only risks and uncertainties that NexGen faces. Additional risks and uncertainties not presently known to the Company or that the Company currently considers immaterial may also impair its business operations. These risk factors could materially affect the Companys future operating results and could cause actual events to differ materially from those described in forward-looking statements relating to the Company.
Industry and Economic Factors that May Affect the Business
The business of mining for minerals involves a high degree of risk. NexGen is an exploration and development company and is subject to risks and challenges similar to companies in a comparable stage and industry. These risks include, but are not limited to, the challenges of securing adequate capital, exploration, development and operational risks inherent in the mining industry; changes in government policies and regulations; the ability to obtain the necessary permitting; as well as global economic and uranium price volatility; all of which are uncertain.
The underlying value of the Companys exploration and evaluation assets is dependent upon the existence and economic recovery of mineral reserves and is subject to, but not limited to, the risks and challenges identified above. Changes in future conditions could require material write-downs of the carrying value of the Companys exploration and evaluation assets.
In particular, the Company does not generate revenue. As a result, the Company continues to be dependent on third-party financing to continue exploration and development activities on the Companys properties, maintain capacity and satisfy contractual obligations including servicing the interest payments due on the Convertible Debentures and repaying the principal amount thereof at maturity (or sooner in the event of redemption in accordance with the terms of the Convertible Debentures). Accordingly, the Companys future performance will be most affected by its access to financing, whether debt, equity or other means.
Access to such financing, in turn, is affected by general economic conditions, the price of uranium, exploration risks and the other factors described in the section entitled Risk Factors in the Companys most recent annual information form.
For further information on Risk Factors, refer to those set forth in the Companys Annual Information Form dated February 25, 2022, filed under the Companys profile on SEDAR at www.sedar.com on EDGAR at www.sec.gov.
25
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
DISCLOSURE CONTROLS, PROCEDURES, AND INTERNAL CONTROLS OVER FINANCIAL REPORTING
Management maintains appropriate information systems, procedures and controls to provide reasonable assurance that information that is publicly disclosed is complete, reliable and timely. The Chief Executive Officer (the CEO) and Chief Financial Officer (the CFO) of the Company, along with the assistance of management under their supervision, have designed disclosure controls and procedures to provide reasonable assurance that material information relating to the Company is made known to the CEO and CFO, and have designed internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.
Changes in Internal Controls
During the six months ended June 30, 2022, there were no changes in the Companys internal control over financial reporting that materially affected or are reasonably likely to materially affect the Companys internal control over financial reporting.
Limitations of Controls and Procedures
The Companys management, including the Chief Executive Officer and Chief Financial Officer, believe that any disclosure controls and procedures or internal controls over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design of any systems of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.
TECHNICAL DISCLOSURE
All scientific and technical information in this MD&A is derived from the Companys Rook I FS Technical Report. For details of the Rook I Project, including the key assumptions, parameters and methods used to estimate the updated Mineral Resource, please refer to the Rook I FS Technical Report filed under the Companys profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
All scientific and technical information in this MD&A has been reviewed and approved by Mr. Anthony (Tony) George, P.Eng., Chief Project Officer and Mr. Jason Craven, P.Geo., Manager, Exploration for NexGen. Each of Mr. George and Mr. Craven is a qualified person for the purposes of NI 43-101. Mr. Craven has verified the sampling, analytical, and test data underlying the
information or opinions contained herein by reviewing original data certificates and monitoring all of the data collection protocols.
26
NexGen Energy Ltd.
Managements Discussion and Analysis for the three and six months ended June 30, 2022
(expressed in thousands of Canadian dollars, except as noted)
Natural gamma radiation in drill core reported in this MD&A was measured in counts per second (cps) using a Radiation Solutions Inc. RS-120 gamma-ray scintillometer. The reader is cautioned that total count gamma readings may not be directly or uniformly related to uranium grades of the rock sample measured; they should be used only as a preliminary indication of the presence of radioactive minerals.
All references in this MD&A to Mineral Resource, Inferred Mineral Resource, Indicated Mineral Resource and Measured Mineral Resource have the meanings ascribed to those terms by the Canadian Institute of Mining, Metallurgy and Petroleum, as the CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by CIM Council, as amended mineral e Canadian Institute of Mining, Metallurgy and Petroleum, as the CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by CIM Council, as amended. The requirements of NI 43-101 are different than SEC disclosure requirements applicable to mineral reserves and mineral disclosure. Therefore, disclosure relating to Mineral Reserves and Mineral Resources contained herein is not comparable to disclosure by issuers required to comply with SEC disclosure requirements.
APPROVAL
The Board approved the disclosure contained in this MD&A. A copy of this MD&A will be provided to anyone who requests it and can be located, along with additional information, including the Companys current annual information form, on the Companys profile on SEDARs website at www.sedar.com, on EDGAR at www.sec.gov, on the ASX at www.asx.com.au or by contacting the Companys Corporate Secretary, located at Suite 3150, 1021 West Hastings Street, Vancouver, BC V6E 0C3 or at (604) 428-4112.
27
Exhibit 99.3
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Leigh Curyer, Chief Executive Officer of NexGen Energy Ltd., certify the following:
1. | Review: I have reviewed the interim financial report and interim MD&A (together, the interim filings) of NexGen Energy Ltd. (the issuer) for the interim period ended June 30, 2022. |
2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
4. | Responsibility: The issuers other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings, for the issuer. |
5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuers other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
(a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
(i) | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
(ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
(b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuers GAAP. |
5.1 | Control framework: The control framework the issuers other certifying officer(s) and I used to design the issuers ICFR is the Internal control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). |
5.2 | N/A |
5.3 | N/A |
6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuers ICFR that occurred during the period beginning on April 1, 2022 and ended on June 30, 2022 that has materially affected, or is reasonably likely to materially affect, the issuers ICFR. |
Date: August 5, 2022 |
Leigh Curyer |
|
Leigh Curyer |
Chief Executive Officer |
Exhibit 99.4
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Harpreet Dhaliwal, Chief Financial Officer of NexGen Energy Ltd., certify the following:
1. | Review: I have reviewed the interim financial report and interim MD&A (together, the interim filings) of NexGen Energy Ltd. (the issuer) for the interim period ended June 30, 2022. |
2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
4. | Responsibility: The issuers other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings, for the issuer. |
5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuers other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
(a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
(i) | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
(ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
(b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuers GAAP. |
5.1 | Control framework: The control framework the issuers other certifying officer(s) and I used to design the issuers ICFR is the Internal control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). |
5.2 | N/A |
5.3 | N/A |
6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuers ICFR that occurred during the period beginning on April 1, 2022 and ended on June 30, 2022 that has materially affected, or is reasonably likely to materially affect, the issuers ICFR. |
Date: August 5, 2022 |
Harpreet Dhaliwal |
|
Harpreet Dhaliwal |
Chief Financial Officer |