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 May 2019
Commission File Number 001-38072
___________________
NexGen Energy Ltd.
Suite 3150, 1021 – West Hastings Street ___________________
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 þ
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) ☐
. |
DOCUMENTS FILED AS PART OF THIS FORM 6-K
See the Exhibit Index hereto.
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 May 10, 2019.
NEXGEN ENERGY LTD. | |||
By: | /s/ Bruce Sprague | ||
Name: | Mr. Bruce Sprague | ||
Title: | CFO and Corporate Secretary |
EXHIBIT INDEX
Exhibit 99.1
Unaudited Condensed Consolidated Interim Financial Statements of
NEXGEN ENERGY LTD.
March 31, 2019 and 2018
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NEXGEN ENERGY LTD. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION (Expressed in Canadian Dollars) (Unaudited) As at | ||||||||||||
Note |
March 31, 2019 | December 31, 2018 | ||||||||||
ASSETS | ||||||||||||
Current | ||||||||||||
Cash and cash equivalents | $ | 103,853,612 | $ | 125,059,189 | ||||||||
Amounts receivable | 1,259,839 | 386,939 | ||||||||||
Prepaid expenses and other assets | 589,717 | 266,353 | ||||||||||
105,703,168 | 125,712,481 | |||||||||||
Non-current | ||||||||||||
Deposits | 119,838 | 514,711 | ||||||||||
Exploration and evaluation assets | 5 | 212,359,046 | 194,128,594 | |||||||||
Property and equipment | 8 | 9,296,600 | 6,511,779 | |||||||||
221,775,484 | 201,155,084 | |||||||||||
TOTAL ASSETS | $ | 327,478,652 | $ | 326,867,565 | ||||||||
LIABILITIES | ||||||||||||
Current | ||||||||||||
Accounts payable and accrued liabilities | $ | 8,528,611 | $ | 5,966,921 | ||||||||
Current portion of lease liabilities | 4, 6 | 637,437 | — | |||||||||
Flow-through share premium liability | 7 | 357,890 | 550,392 | |||||||||
9,523,938 | 6,517,313 | |||||||||||
Non-current | ||||||||||||
Deferred income tax liability | 469,149 | 199,366 | ||||||||||
Deferred lease inducement | — | 33,412 | ||||||||||
Long-term lease liabilities | 4, 6 | 2,472,276 | — | |||||||||
Convertible debentures | 9 | 122,233,444 | 138,190,884 | |||||||||
125,174,869 | 138,423,662 | |||||||||||
TOTAL LIABILITIES | 134,698,807 | 144,940,975 | ||||||||||
EQUITY | ||||||||||||
Share capital | 10 | 210,450,776 | 208,711,135 | |||||||||
Reserves | 10 | 43,766,931 | 41,629,049 | |||||||||
Accumulated other comprehensive income | 97,675 | 97,675 | ||||||||||
Accumulated deficit | (77,909,447 | ) | (85,143,089 | ) | ||||||||
176,405,935 | 165,294,770 | |||||||||||
Non-controlling interests | 16,373,910 | 16,631,820 | ||||||||||
TOTAL EQUITY | 192,779,845 | 181,926,590 | ||||||||||
TOTAL LIABILITIES AND EQUITY | $ | 327,478,652 | $ | 326,867,565 |
Nature of operations (Note 2)
Commitments (Notes 6 and 7)
Subsequent events (Note 16)
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on May 9, 2019.
2 |
NEXGEN ENERGY LTD. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF PROFIT AND COMPREHENSIVE PROFIT | |||
(Expressed in Canadian Dollars) (Unaudited) For the three months ended | |||
Note | March 31, 2019 | March 31, 2018 | ||||||||||
Salaries, benefits and directors’ fees | 11 | $ | 906,709 | $ | 977,175 | |||||||
Office and administrative | 561,508 | 472,944 | ||||||||||
Professional fees | 734,503 | 613,943 | ||||||||||
Travel | 273,192 | 202,771 | ||||||||||
Depreciation | 8 | 588,662 | 283,599 | |||||||||
Share-based payments | 10, 11 | 2,442,373 | 1,707,557 | |||||||||
Finance income | (606,207 | ) | (592,545 | ) | ||||||||
Rental income | (7,576 | ) | — | |||||||||
Mark to market (gain) on convertible debentures | 9 | (15,957,439 | ) | (35,223,636 | ) | |||||||
Interest expense | 9 | 2,991,375 | 2,845,576 | |||||||||
Interest on lease liabilities | 6 | 55,501 | — | |||||||||
Foreign exchange loss (gain) | 964,386 | (1,322,558 | ) | |||||||||
Gain on disposal of equipment | — | (750 | ) | |||||||||
Profit from operations | $ | (7,053,013 | ) | $ | (30,035,924 | ) | ||||||
Deferred income tax expense | 77,281 | 9,032 | ||||||||||
Profit and comprehensive profit for the period | $ | (6,975,732 | ) | $ | (30,026,892 | ) | ||||||
Profit and comprehensive profit attributable to: | ||||||||||||
Shareholders of NexGen Energy Ltd. | $ | (7,233,642 | ) | $ | (30,242,199 | ) | ||||||
Non-controlling interests in IsoEnergy Ltd. | 257,910 | 215,307 | ||||||||||
Profit and comprehensive profit for the period | $ | (6,975,732 | ) | $ | (30,026,892 | ) | ||||||
Loss (profit) per common share attributable to the | ||||||||||||
Company’s common shareholders (Note 17) | ||||||||||||
Basic Loss (profit) per common share | $ | (0.02 | ) | $ | (0.09 | ) | ||||||
Diluted Loss (profit) per common share | $ | 0.01 | $ | 0.01 | ||||||||
Weighted average number of common shares | ||||||||||||
Outstanding (Note 17) | ||||||||||||
Basic | 351,660,160 | 342,627,246 | ||||||||||
Diluted | 409,478,063 | 407,144,390 |
The accompanying notes are an integral part of the condensed consolidated interim financial statements
3 |
NEXGEN ENERGY LTD. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY | |||
(Expressed in Canadian Dollars) (Unaudited) | |||
|
Accumulated | ||||||||||||||||||||||||||||||||
Number of | other | |||||||||||||||||||||||||||||||
Common | Share | comprehensive | Accumulated | Non-controlling | ||||||||||||||||||||||||||||
Note | Shares | Capital | Reserves | Income | Deficit | Interests | Total | |||||||||||||||||||||||||
Balance as at December 31, 2017 | 339,339,356 | $ | 196,311,184 | $ | 28,050,059 | $ | – | $ | (88,038,390 | ) | $ | 12,017,852 | $ | 148,340,705 | ||||||||||||||||||
Exercise of options | 10 | 3,988,334 | 3,295,662 | (1,318,327 | ) | – | – | – | 1,977,335 | |||||||||||||||||||||||
Share-based payments | 10 | – | – | 2,368,060 | – | – | – | 2,368,060 | ||||||||||||||||||||||||
Issue of shares of subsidiary to | ||||||||||||||||||||||||||||||||
non-controlling interests | – | – | – | – | (672,131 | ) | 1,954,181 | 1,282,050 | ||||||||||||||||||||||||
Profit (loss) for the period | – | – | – | – | 30,242,199 | (215,307 | ) | 30,026,892 | ||||||||||||||||||||||||
Impact of adopting IFRS 9 | – | – | – | (503,146 | ) | 503,146 | – | – | ||||||||||||||||||||||||
Balance as at March 31, 2018 | 343,327,690 | $ | 199,606,846 | $ | 29,099,792 | $ | (503,146 | ) | $ | (57,965,176 | ) | $ | 13,756,726 | $ | 183,995,042 | |||||||||||||||||
Balance as at December 31, 2018 | 351,237,062 | $ | 208,711,135 | $ | 41,629,049 | $ | 97,675 | $ | (85,143,089 | ) | $ | 16,631,820 | $ | 181,926,590 | ||||||||||||||||||
Exercise of options | 10 | 858,333 | 1,739,641 | (690,975 | ) | – | – | – | 1,048,666 | |||||||||||||||||||||||
Share-based payments | 10 | – | – | 2,828,857 | – | – | – | 2,828,857 | ||||||||||||||||||||||||
Profit (loss) for the period | – | – | – | – | 7,233,642 | (257,910 | ) | 6,975,732 | ||||||||||||||||||||||||
Balance as at March 31, 2019 | 352,095,395 | $ | 210,450,776 | $ | 43,766,931 | $ | 97,675 | $ | (77,909,447 | ) | $ | 16,373,910 | $ | 192,779,845 |
The accompanying notes are an integral part of the condensed consolidated interim financial statements
4 |
NEXGEN ENERGY LTD. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS |
(Expressed in Canadian Dollars) (Unaudited) For the three months ended |
March 31, 2019 | March 31, 2018 | |||||||
Cash flows (used in) from operating activities | ||||||||
Profit for the period | $ | 6,975,732 | $ | 30,026,892 | ||||
Items not involving cash: | ||||||||
Depreciation | 588,662 | 283,599 | ||||||
Share-based payments | 2,442,373 | 1,707,557 | ||||||
Amortization of deferred lease inducement | – | (10,024 | ) | |||||
Unrealized foreign exchange loss (gain) on cash and cash equivalents | 936,423 | (1,384,008 | ) | |||||
Deferred income tax expense | 77,281 | 9,032 | ||||||
Mark to market gain on convertible debentures | (15,957,439 | ) | (35,223,636 | ) | ||||
Interest expense | 2,991,375 | 2,845,576 | ||||||
Interest on lease liabilities | 55,501 | – | ||||||
Gain on disposal of equipment | – | 750 | ||||||
Changes in non-cash working capital items: | ||||||||
Amounts receivable | (621,363 | ) | (18,676 | ) | ||||
Prepaid expenses | (323,364 | ) | (18,561 | ) | ||||
Deposits | 394,873 | (3,821 | ) | |||||
Accounts payable and accrued liabilities | (2,150,419 | ) | (695,429 | ) | ||||
(4,590,365 | ) | (2,480,749 | ) | |||||
Cash flows (used in) investing activities | ||||||||
Exploration and evaluation asset expenditures | (16,022,858 | ) | (7,392,881 | ) | ||||
Acquisition of equipment | (536,429 | ) | (776,386 | ) | ||||
(16,559,287 | ) | (8,169,267 | ) | |||||
Cash flows (used in) from financing activities | ||||||||
Cash from exercise of options, net of share issuance costs | 1,048,666 | 1,977,335 | ||||||
Payment of interest on lease liabilities | (55,501 | ) | – | |||||
Payment of principal on lease liabilities | (112,667 | ) | – | |||||
880,498 | 1,977,335 | |||||||
Change in cash and cash equivalents | (20,269,154 | ) | (8,672,681 | ) | ||||
Cash and cash equivalents, beginning of period | 125,059,189 | 164,943,850 | ||||||
Effect of exchange rate fluctuations on cash held | (936,423 | ) | 1,384,008 | |||||
Cash and cash equivalents, end of period | $ | 103,853,612 | $ | 157,655,177 | ||||
Cash and cash equivalents consist of: | ||||||||
Cash | $ | 103,853,612 | $ | 153,705,975 | ||||
Cash equivalents | – | 3,949,202 | ||||||
Cash and cash equivalents | $ | 103,853,612 | $ | 157,655,177 | ||||
Supplemental disclosure with respect to cash flows (Note 15) |
The accompanying notes are an integral part of the condensed consolidated interim financial statements
5 |
NEXGEN ENERGY LTD. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 & 2018 |
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 Company’s registered records office is located on the 25th Floor, 700 West Georgia Street, Vancouver, B.C., V7Y 1B3.
On April 19, 2013, the Company (as it was then called, Clermont Capital Inc. (“Clermont”)) completed its qualifying transaction, which was effected pursuant to an amalgamation agreement dated December 31, 2012 (the “Amalgamation Agreement”) amongst Clermont, 0957633 B.C. Ltd., a wholly owned subsidiary of Clermont, and NexGen Energy Ltd. (“Old NexGen”). Pursuant to the Amalgamation Agreement, the shareholders of Old NexGen were issued one common share of Clermont (on a post-share consolidation basis) for everyone Old NexGen common share held immediately prior to the completion of the amalgamation. In connection with the Qualifying Transaction, Clermont also completed a consolidation of its common shares on a 2.35:1 basis and changed its name to “NexGen Energy Ltd.”. The Company’s acquisition of Old NexGen was accounted for as a reverse takeover.
The Company commenced trading on the TSX Venture Exchange (“TSX-V”) as a Tier 2 Issuer under the symbol “NXE” on April 23, 2013. On August 7, 2015, the Company became a Tier 1 Issuer. On July 15, 2016, NexGen graduated and commenced trading on the Toronto Stock Exchange (“TSX”) under its existing symbol. The Company’s common shares ceased trading on the OTCQX Best Market under the symbol “NXGEF” upon the commencement of trading on the NYSE American LLC (“NYSE American”) under the symbol “NXE” on May 17, 2017.
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 the three months ended June 30, 2016, certain exploration and evaluation assets were transferred to each of IsoEnergy Ltd. (“IsoEnergy”), NXE Energy SW1 Ltd. and NXE Energy SW3 Ltd. (Note 5). Subsequent to the transfer, IsoEnergy shares were issued to third parties pursuant to external financings and listed its common shares on the TSX-V, with NexGen retaining 53.35% of IsoEnergy’s outstanding common shares as at March 31, 2019 (December 31, 2018 - 53.35%).
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 March 31, 2019, the Company had an accumulated deficit of $77,909,447 and working capital of $96,179,230. The Company will be required to obtain additional funding in order to continue with the exploration and development of its mineral properties and to repay its convertible debentures (Note 9), if required.
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 NexGen's 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 PRESENTATION
Statement of Compliance
These condensed consolidated interim financial statements for the three months ended March 31, 2019, including comparatives, have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting. They do not include all of the information required by International Financial Reporting Standards (“IFRS”) for annual financial statements and should be read in conjunction with the Company’s consolidated financial statements as at and for the year ended December 31, 2018. Accordingly, accounting policies applied other than as discussed in Note 4 are the same as those applied in the Company’s annual financial statements. These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on May 9, 2019.
6 |
NEXGEN ENERGY LTD. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 & 2018 |
3. BASIS OF PRESENTATION (continued)
Basis of Presentation
These condensed consolidated interim financial statements have been prepared on a historical cost basis, except for certain financial instruments which have been measured at fair value, including the convertible debentures issued by the Company (Note 9). In addition, these condensed consolidated interim financial statements have been prepared using the accrual basis of accounting, except for cash flow information. All monetary references expressed in these notes are references to Canadian dollar amounts (“$”), except otherwise noted. These financial statements are presented in Canadian dollars, which is the functional currency of the Company and its subsidiaries.
Critical accounting judgments, estimates and assumptions
The preparation of the condensed consolidated interim financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the condensed consolidated interim financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable in the circumstances. Uncertainty about these judgments, estimates and assumptions could result in a material adjustment to the carrying amount of the asset or liability affected in future periods. Significant areas of estimation uncertainty are the same as those described in the Company’s 2018 annual financial statements, except for significant judgements and key sources of estimation uncertainty related to the application of IFRS 16, which are described in Note 4.
Where the fair value of financial assets and financial liabilities recorded in the financial statements cannot be derived from active markets, their fair value is determined using valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
4. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by the Company are set out in Note 4 to the annual financial statements for the year ended December 31, 2018, and have been consistently followed in the preparation of these condensed consolidated interim financial statements except for the following change in accounting policy:
Change in accounting policy:
The Company has adopted IFRS 16 Leases (“IFRS 16”), as of January 1, 2019, using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS 17 Leases (“IAS 17”). IFRS 16 specifies how to recognize, measure, present and disclose leases. IFRS 16 provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all major leases. The impact of the transition is shown in Note 4(e) below.
The following is the Company’s new accounting policy for leases under IFRS 16:
(a) | Classification |
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contracts conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:
- | The contract involves the use of an identified asset - this may be specific explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; |
- | The Company has the right to obtain substantially all of the economic benefit from use of the asset throughout the period of use; and |
- | The Company has the right to direct the use of the asset. The Company has this right when is has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. |
7 |
NEXGEN ENERGY LTD. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 & 2018 |
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) | Measurement |
The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of the right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
(c) | Remeasurement |
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss in the carrying amount of the right-of-use asset has been reduced to zero.
(d) | Short-term leases and leases of low-value assets |
The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The lease payments associated with these leases is recognized as an expense on a straight-line basis over the lease term.
(e) | Impact of transition to IFRS 16 |
On initial application, the Company has elected to measure right-of-use assets at an amount equal to the corresponding lease liability adjusted by the amount of any prepaid or accrued lease payments. Right-of-use assets and lease obligations of $2,826,512 and $3,222,380, respectively, were recorded as of January 1, 2019, with no net impact on retained earnings. When measuring lease liabilities, the Company discounted lease payments using an incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 7.40%.
5. EXPLORATION AND EVALUATION ASSETS
(a) | Rook I Property |
The Rook I Project is located in Northern Saskatchewan, approximately 40 kilometres (km) east of the Saskatchewan - Alberta border, approximately 150 km north of the town of La Loche and 640 km northwest of the City of Saskatoon and consists of 32 contiguous mineral claims totalling 35,065 hectares.
The Rook I Project hosts the Arrow deposit discovered in February 2014, the Bow discovery in March 2015, the Harpoon discovery in August 2016 and the Arrow South discovery in July 2017. The Company released an updated mineral resource estimate and the results of a pre-feasibility study in November 2018, in each case, in respect of the Arrow deposit.
NexGen has a 100% interest in the claims subject only to: (i) a 2% net smelter return royalty (“NSR”); and (ii) a 10% production carried interest, in each case, only on claims S-113928 to S-113933 (the Arrow deposit is not located on any of these claims). The NSR may be reduced to 1% upon payment of $1 million. The 10% production carried interest provides for the owner to be carried to the date of commercial production.
8 |
NEXGEN ENERGY LTD. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 & 2018 |
5. EXPLORATION AND EVALUATION ASSETS (continued)
(b) | Other Athabasca Basin Properties |
The Other Athabasca Basin Properties are a portfolio of early stage mineral properties in the Athabasca Basin. The properties are grouped geographically as “SW1”, “SW2” and “SW3”. The SW2 properties are held directly by NexGen. The SW1 and SW3 properties are held by NXE Energy SW1 Ltd. and NXE Energy SW3 Ltd., respectively, each a wholly owned subsidiary.
(c) | IsoEnergy Properties |
The IsoEnergy Properties consist of (i) a 100% interest in the Radio Project, Saskatchewan (subject to a 2% net smelter return royalty and 2% gross overriding royalty); (ii) a 100% interest in the Thorburn Lake Project, Saskatchewan (subject to a 1% net smelter return royalty and a 10% carried interest which can be reduced to 1% at the holder’s option upon completion of a bankable feasibility study); (iii) a 100% interest, in each of the Madison, 2Z, Carlson Creek and North Thorburn properties, Saskatchewan; (iv) a 100% interest in the Mountain Lake property, Nunavut; (v) a 100% interest in the Geiger property, Saskatchewan; (vi) a 100% interest in the Laroque East property, Saskatchewan that consists of 6 mineral claims constituting 3,200 hectares; and (vi) a portfolio of newly staked claims in Saskatchewan, all of which are early stage exploration properties.
The following is a summary of the capitalized costs on the projects described above.
Rook I | Other Athabasca Basin Properties | IsoEnergy Properties | Total | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Acquisition costs: | ||||||||||||||||
Balance, December 31, 2018 | 235,077 | 1,457,607 | 26,622,545 | 28,315,229 | ||||||||||||
Additions | – | – | – | – | ||||||||||||
Balance, March 31, 2019 | 235,077 | 1,457,607 | 26,622,545 | 28,315,229 | ||||||||||||
Deferred exploration costs: | ||||||||||||||||
Balance, December 31, 2018 | 148,658,925 | 6,530,533 | 10,623,907 | 165,813,365 | ||||||||||||
Additions: | ||||||||||||||||
Drilling | 9,986,570 | – | 927,113 | 10,913,683 | ||||||||||||
General exploration | 1,715,210 | – | 266,574 | 1,981,784 | ||||||||||||
Geological and geophysical | 2,551,284 | 71,261 | 88,677 | 2,711,222 | ||||||||||||
Labour and wages | 1,883,620 | – | 150,385 | 2,034,005 | ||||||||||||
Share-based payments (Note 10) | 357,981 | – | 28,503 | 386,484 | ||||||||||||
Travel | 183,568 | – | 19,706 | 203,274 | ||||||||||||
16,678,233 | 71,261 | 1,480,958 | 18,230,452 | |||||||||||||
Balance, March 31, 2019 | 165,337,158 | 6,601,794 | 12,104,865 | 184,043,817 | ||||||||||||
Total costs, March 31, 2019 | 165,572,235 | 8,059,401 | 38,727,410 | 212,359,046 |
9 |
NEXGEN ENERGY LTD. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 & 2018 |
5. EXPLORATION AND EVALUATION ASSETS (continued)
Rook I | Other Athabasca Basin Properties | IsoEnergy Properties | Total | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Acquisition costs: | ||||||||||||||||
Balance, December 31, 2017 | 235,077 | 1,457,607 | 24,737,248 | 26,429,932 | ||||||||||||
Additions | – | – | 1,885,297 | 1,885,297 | ||||||||||||
Balance, December 31, 2018 | 235,077 | 1,457,607 | 26,622,545 | 28,315,229 | ||||||||||||
Deferred exploration costs: | ||||||||||||||||
Balance, December 31, 2017 | 112,937,959 | 4,942,297 | 8,102,367 | 125,982,623 | ||||||||||||
Additions: | – | – | ||||||||||||||
Drilling | 16,761,145 | – | 1,103,960 | 17,865,105 | ||||||||||||
General exploration | 2,885,003 | (23,200 | ) | 142,069 | 3,003,872 | |||||||||||
Geological and geophysical | 7,650,358 | 1,611,436 | 256,224 | 9,518,018 | ||||||||||||
Labour and wages | 5,008,846 | – | 693,611 | 5,702,457 | ||||||||||||
Share-based payments (Note 10) | 2,883,711 | – | 235,852 | 3,119,563 | ||||||||||||
Travel | 531,903 | – | 89,824 | 621,727 | ||||||||||||
35,720,966 | 1,588,236 | 2,521,540 | 39,830,742 | |||||||||||||
Balance, December 31, 2018 | 148,658,925 | 6,530,533 | 10,623,907 | 165,813,365 | ||||||||||||
Total costs, December 31, 2018 | 148,894,002 | 7,988,140 | 37,246,452 | 194,128,594 |
6. LEASES
Right-of-use assets
Office Leases | Vehicle Leases | Total Right-of-use Assets | ||||||||||
Right-of-use assets created on adoption of IFRS 16 on January 1, 2019 | $ | 2,472,349 | $ | 354,163 | $ | 2,826,512 | ||||||
Depreciation of right-of-use assets | (121,400 | ) | (29,965 | ) | (151,365 | ) | ||||||
Right-of-use asset balance, March 31, 2019 | $ | 2,350,949 | $ | 324,198 | $ | 2,675,147 | ||||||
Office and vehicle lease right-of-use assets are included in property and equipment in the office, furniture and leasehold improvements, and field equipment categories, respectively (Note 8).
10 |
NEXGEN ENERGY LTD. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 & 2018 |
6. LEASES (continued)
Lease obligation adoption summary of IFRS 16 on January 1, 2019
Three months ended | ||||
March 31, 2019 | ||||
Lease obligation created on adoption of IFRS 16 on January 1, 2019 | $ | 3,222,380 | ||
Interest on lease liabilities | 55,501 | |||
Lease payments | (168,168 | ) | ||
Balance, end of the period | $ | 3,109,713 | ||
Less Current portion | (637,437 | ) | ||
Long-term lease liabilities | $ | 2,472,276 |
On January 1, 2019 the Company adopted IFRS 16 - Leases retrospectively with the cumulative effect on initially applying the standard recognized at the date of initial application (see Note 4).
The leases are for office space and vehicle leases that extend to 2025 and 2022, respectively. The discount rates applied to the leases for office spaces and vehicles are 7.50% and 6.74%, respectively. In addition to the lease payments the Company pays $422,185 annually related to operating costs and realty taxes of the leased office spaces. The amount is reassessed annually based on actual costs incurred.
In addition to the leased assets above the Company engages drilling companies to carry out its drilling programs on its exploration and evaluation properties. The drilling company provides all required equipment. These contracts are short-term and the Company has elected not to apply the requirements of IFRS 16 to them. Payments to the drilling company in the three months ended March 31, 2019 were $8,204,030.
7. COMMITMENTS
Flow-through expenditures:
IsoEnergy has raised funds through the issuance of flow-through shares. Based on Canadian tax law, IsoEnergy is required to spend this amount on eligible exploration expenditures by December 31 of the year after the year in which the shares were issued.
The premium paid for a flow-through share, which is the price paid for the share over the market price of the share, is recorded as a flow-through share premium liability. This liability is subsequently reduced when the required exploration expenditures are made, and accordingly, a recovery of flow-through premium is then recorded as a reduction in the deferred tax expense.
As of March 31, 2019, IsoEnergy must fulfill approximately $2,624,524 of the required eligible exploration expenditures before December 31, 2019. As the commitment is satisfied, the remaining balance of the flow-through premium liability will be recognized as income.
A continuity of the flow-through share premium liability is as follows:
Three months ended | Year ended | |||||||
March 31, 2019 | December 31, 2018 | |||||||
Balance, beginning of the period | $ | 550,392 | $ | 109,251 | ||||
Liability incurred on flow-through shares issued | – | 784,892 | ||||||
Settlement of flow-through share liability on expenditure made | (192,502 | ) | (343,751 | ) | ||||
Balance, end of the period | $ | 357,890 | $ | 550,392 |
11 |
NEXGEN ENERGY LTD. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 & 2018 |
8. PROPERTY AND EQUIPMENT
Computing Equipment | Software | Field
Equipment | Office, Furniture and Leasehold Improvements | Road | Total | |||||||||||||||||||
Cost | ||||||||||||||||||||||||
Balance at December 31, 2017 | $ | 235,586 | $ | 378,733 | $ | 4,218,220 | $ | 215,172 | $ | 1,773,585 | $ | 6,821,296 | ||||||||||||
Additions | 69,863 | 371,281 | 2,333,896 | 16,685 | 305,810 | 3,097,535 | ||||||||||||||||||
Disposals | – | – | (54,075 | ) | – | – | (54,075 | ) | ||||||||||||||||
Balance at December 31, 2018 | 305,449 | 750,014 | 6,498,041 | 231,857 | 2,079,395 | 9,864,756 | ||||||||||||||||||
Assets recognized on adoption of | ||||||||||||||||||||||||
IFRS 16 (Notes 4 and 6) | – | – | 354,163 | 2,472,349 | – | 2,826,512 | ||||||||||||||||||
Additions | 52,480 | 158,385 | 35,525 | 302,476 | – | 548,866 | ||||||||||||||||||
Balance at March 31, 2019 | $ | 357,929 | $ | 908,399 | $ | 6,887,729 | $ | 3,006,682 | $ | 2,079,395 | $ | 13,240,134 | ||||||||||||
Accumulated Depreciation | ||||||||||||||||||||||||
Balance at December 31, 2017 | $ | 127,923 | $ | 235,944 | $ | 1,121,800 | $ | 90,530 | $ | 262,025 | $ | 1,838,222 | ||||||||||||
Depreciation | 79,703 | 180,188 | 842,944 | 45,198 | 409,982 | 1,558,015 | ||||||||||||||||||
Disposals | – | – | (43,260 | ) | – | – | (43,260 | ) | ||||||||||||||||
Balance at December 31, 2018 | 207,626 | 416,132 | 1,921,484 | 135,728 | 672,007 | 3,352,977 | ||||||||||||||||||
Depreciation | 17,059 | 56,674 | 259,361 | 143,589 | 113,874 | 590,557 | ||||||||||||||||||
Balance at March 31, 2019 | $ | 224,685 | $ | 472,806 | $ | 2,180,845 | $ | 279,317 | $ | 785,881 | $ | 3,943,534 | ||||||||||||
Net book value: | ||||||||||||||||||||||||
At December 31, 2018 | $ | 97,823 | $ | 333,882 | $ | 4,576,557 | $ | 96,129 | $ | 1,407,388 | $ | 6,511,779 | ||||||||||||
At March 31, 2019 | $ | 133,244 | $ | 435,593 | $ | 4,706,884 | $ | 2,727,365 | $ | 1,293,514 | $ | 9,296,600 |
9. CONVERTIBLE DEBENTURES
March 31, 2019 | December 31, 2018 | |||||||
2016 Debentures (a) | $ | 64,482,323 | $ | 72,481,375 | ||||
2017 Debentures (b) | 57,751,121 | 65,709,509 | ||||||
Convertible Debentures | $ | 122,233,444 | $ | 138,190,884 |
(a) | 2016 Debentures |
On June 10, 2016, the Company issued US$60 million principal amount of convertible debentures (the “2016 Debentures”) which were determined to be a hybrid financial instrument comprised of the host debt contract and multiple embedded derivatives. The Company received gross proceeds of $76,416,000 (US$60 million) and net proceeds of $72,363,602 (US$56,852,383) after deducting $4,052,398 (US$3,147,617) in transaction costs from the issue of the 2016 Debentures. A 3% establishment fee of $2,292,480 (US$1.8 million) was also paid to the debenture holders through the issuance of 1,005,586 common shares. The fair value of the 2016 Debentures on issuance date was determined to be $74,123,520 (US$58.2 million).
Pursuant to an amended and restated trust indenture dated July 21, 2017, the maturity date of the 2016 Debentures was extended to July 22, 2022.
12 |
NEXGEN ENERGY LTD. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 & 2018 |
9. CONVERTIBLE DEBENTURES (continued)
The fair value of the 2016 Debentures decreased from $72,481,375 (US$53,131,047) on December 31, 2018 to $64,482,323 (US$48,254,376) at March 31, 2019, resulting in a gain of $7,999,052 (US$4,876,671) for the three-month period ended March 31, 2019. This gain, combined with the gain on the 2017 Debentures (see Note 9(b)) for the period ended March 31, 2019 was recorded in loss (profit) for the period.
March 31, 2019 | December 31, 2018 | |||||||
Fair value of 2016 Debentures, beginning of period | $ | 72,481,375 | $ | 90,742,373 | ||||
Fair value adjustment during the period | (7,999,052 | ) | (18,260,998 | ) | ||||
Interest payable | 1,495,688 | 354,480 | ||||||
2016 Debentures and interest payable | 65,978,011 | 72,835,855 | ||||||
Less: interest payable included in accounts payable & accrued liabilities | (1,495,688 | ) | (354,480 | ) | ||||
2016 Debentures, end of period | $ | 64,482,323 | $ | 72,481,375 | ||||
The 2016 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 2016 Debentures pricing model as at March 31, 2019 and December 31, 2018 are as follows:
March 31, 2019 | December 31, 2018 | |||||||
Volatility | 38.00 | % | 38.00 | % | ||||
Expected life in years | 3.31 years | 3.56 years | ||||||
Risk free interest rate | 2.22 | % | 2.58 | % | ||||
Expected dividend yield | 0 | % | 0 | % | ||||
Credit spread | 25.79 | % | 25.79 | % | ||||
Underlying share price of the Company | $ | 2.16 | $ | 2.41 | ||||
Conversion exercise price | US$2.3261 | US$2.3261 | ||||||
Exchange rate (C$:US$) | $ | 0.7483 | $ | 0.7330 |
(b) | 2017 Debentures |
On July 21, 2017, the Company issued US$60 million principal amount of convertible debentures (the “2017 Debentures”) which were also determined to be a hybrid financial instrument comprised of the host debt contract and multiple embedded derivatives. The Company received gross proceeds of $75,294,000 (US$60 million) and net proceeds of $72,482,854 (US$57,759,864) after deducting $2,811,146 (US$2,240,136) in transaction costs from the issue of the 2017 Debentures. A 3% establishment fee of $2,258,820 (US$1.8 million) was also paid to the debenture holders through the issuance of 869,271 common shares. The fair value of the 2017 Debentures on issuance date was determined to be $73,035,180 (US$58,200,000).
The fair value of the 2017 Debentures decreased from $65,709,509 (US$48,167,064) on December 31, 2018 to $57,751,121 (US$43,217,182) at March 31, 2019, resulting in a gain of $7,958,388 (US$4,949,882) for the three-month period ended March 31, 2019. This gain, combined with the gain on the 2016 Debentures (see Note 9(a)) for the period ended March 31, 2019 was recorded in loss (profit) for the period.
March 31, 2019 | December 31, 2018 | |||||||
Fair value of 2017 Debentures, beginning of period | $ | 65,709,509 | $ | 80,627,593 | ||||
Fair value adjustment during the period | (7,958,388 | ) | (14,918,084 | ) | ||||
Interest payable | 1,495,689 | 354,480 | ||||||
2017 Debentures and interest payable | 59,246,810 | 66,063,989 | ||||||
Less: interest payable included in accounts payable & accrued liabilities | (1,495,689 | ) | (354,480 | ) | ||||
2017 Debentures, end of period | $ | 57,751,121 | $ | 65,709,509 |
The 2017 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.
13 |
NEXGEN ENERGY LTD. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 & 2018 |
9. CONVERTIBLE DEBENTURES (continued)
The inputs used in the 2017 Debentures pricing model as at March 31, 2019 and December 31, 2018 are as follows:
March 31, 2019 | December 31, 2018 | |||||||
Volatility | 38.00 | % | 38.00 | % | ||||
Expected life in years | 3.31 years | 3.56 years | ||||||
Risk free interest rate | 2.22 | % | 2.58 | % | ||||
Expected dividend yield | 0 | % | 0 | % | ||||
Credit spread | 25.79 | % | 25.79 | % | ||||
Underlying share price of the Company | $ | 2.16 | $ | 2.41 | ||||
Conversion exercise price | US$2.6919 | US$2.6919 | ||||||
Exchange rate (C$:US$) | $ | 0.7483 | $ | 0.7330 |
General Terms
At inception, for each of the 2016 Debentures and 2017 Debentures (collectively, the “Convertible Debentures”), the Company made an irrevocable election under IAS 39 to designate the Convertible Debentures as a financial liability at fair value through profit or loss. At their respective initial recognition date, the entire convertible instrument was measured at fair value with associated transaction costs expensed as incurred. Subsequent to initial recognition, the convertible financial instrument is marked to market at each financial reporting date and any change in fair value is recognized in profit or loss with the exception that the change in fair value that is attributable to change in credit risk is presented in other comprehensive income.
The Convertible 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, with the first interest payment on the 2017 Debentures due on December 10, 2017. 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 Company’s common shares for the 20 consecutive trading days ending three trading days preceding the date on which such interest payment is due. For this purpose, the VWAP shall be converted into US dollars on each of the 20 days in the period, using the indicative rate of exchange for such currency as reported by the Bank of Canada.
The 2016 Debentures and 2017 Debentures are convertible, from time to time, into common shares of the Company at the option of the debenture holders at any time prior to maturity at a price per common share of US$2.3261 and US$2.6919, respectively (the “Conversion Price”).
The 2016 Debentures and 2017 Debentures are not redeemable by the Company prior to June 10, 2019 and July 21, 2020, respectively. On or after June 10, 2019 and July 21, 2020 and prior to July 22, 2022, the 2016 Debentures and 2017 Debentures, respectively, may be redeemed by the Company, in whole or in part, at any time that the 20-day VWAP of the common shares exceeds 130% of the Conversion Price, on not less than 30 days’ prior notice to the debenture holders. For this purpose, the VWAP shall be converted into US dollars on each of the 20 days in the period, using the indicative rate of exchange for such currency as reported by the Bank of Canada.
Upon completion of a change of control (which includes in the case of the holders’ right to redeem the Convertible Debentures, a change in the Chief Executive Officer of the Company), the holders of the Convertible Debentures or the Company may require the Company to purchase or the holders to redeem, as the case may be, any outstanding Convertible Debentures in cash at: (i) on or prior to June 10, 2019 and July 21, 2020 for the 2016 Debentures and 2017 Debentures, respectively, 130% of the principal amount; and (ii) at any time thereafter, 115% of the principal amount, in each case plus accrued but unpaid interest, if any. In addition, upon the public announcement of a change of control that is supported by the Board, the Company may require the holders of the Convertible Debentures to convert the Convertible Debentures into common shares at the Conversion Price provided the consideration payable upon the change of control exceeds the Conversion Price and is payable in cash.
14 |
NEXGEN ENERGY LTD. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 & 2018 |
9. CONVERTIBLE DEBENTURES (continued)
A “change of control” of the Company is defined as consisting of: (a) the acquisition by a person or group of persons acting jointly or in concert of voting control or direction over 50% or more of the Company’s outstanding common shares; (b) the amalgamation, consolidation or merger of the Company with or into another entity as a result of which the holders of the common shares immediately prior to such transaction, directly or indirectly, hold less than 50% of voting control or direction over the entity carrying on the business of the Company following such transaction; (c) the sale, assignment, transfer or other disposition of all or substantially all of the property or assets of the Company to another entity in which the holders of the common shares immediately prior to such transaction, directly or indirectly, hold less than 50% of voting control or direction over the other entity following such transaction; or (d) the removal by resolution of the shareholders of the Company, of more than 51% of the then incumbent directors of the Company which removal has not been recommended in the Company’s management information circular, or the failure to elect to the Company’s board of directors a majority of the directors proposed for election by management in the Company’s management information circular.
10. SHARE CAPITAL AND RESERVES
Authorized Capital - Unlimited number of common shares with no par value and unlimited number of preferred shares.
Issued
For the period ended March 31, 2019:
(a) | During the three months ended March 31, 2019, the Company issued a total of 858,333 common shares on the exercise of 150,000 options at a price of $0.46, 50,000 options at a price of $0.50, 325,000 options at a price of $0.64 and 333,333 options at a price of $ 2.24 for total proceeds of $1,048,666. As a result of the exercises, $690,975 was reclassified from reserves to share capital. |
For the period ended March 31, 2018:
(a) | During the three months ended March 31, 2018, the Company issued a total of 3,988,334 common shares on the exercise of 3,605,000 options at a price of $0.40, 50,000 options at a price of $0.64 and 333,334 options at a price of $1.51 for total proceeds of $1,977,335. As a result of the exercises, $1,318,327 was reclassified from reserves to share capital. |
Stock Options
Pursuant to the Company’s 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.
Stock option transactions and the number of stock options are summarized as follows:
Number of Stock Options |
Weighted Average Exercise Price | |||||||
Outstanding at December 31, 2017 | 37,858,334 | $ | 1.42 | |||||
Granted | 9,045,482 | 2.64 | ||||||
Exercised | (10,458,334 | ) | 0.49 | |||||
Forfeited | (208,334 | ) | 3.23 | |||||
Outstanding at December 31, 2018 | 36,237,148 | $ | 1.98 | |||||
Granted | 750,000 | 2.25 | ||||||
Exercised | (858,333 | ) | 1.22 | |||||
Forfeited | (108,333 | ) | 2.78 | |||||
Outstanding at March 31, 2019 | 36,020,482 | $ | 1.98 | |||||
Number of options exercisable | 27,656,826 | $ | 1.78 | |||||
15 |
NEXGEN ENERGY LTD. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 & 2018 |
10. SHARE CAPITAL AND RESERVES (continued)
As at March 31, 2019, the Company has stock options outstanding and exercisable as follows:
Number of Options |
Number Exercisable |
Exercise Price |
Remaining Contractual Life (Years) |
Expiry Date | |
800,000 | 800,000 | $ 2.650 | 0.04 | April 15, 2019 | |
175,000 | 175,000 | $ 2.240 | 0.04 | April 15, 2019 | |
475,000 | 475,000 | $ 3.390 | 0.04 | April 15, 2019 | |
2,450,000 | 2,450,000 | $ 0.400 | 0.15 | May 23, 2019 | |
3,300,000 | 3,300,000 | $ 0.460 | 0.73 | December 24, 2019 | |
2,850,000 | 2,850,000 | $ 0.500 | 1.16 | May 27, 2020 | |
3,250,000 | 3,250,000 | $ 0.640 | 1.72 | December 16, 2020 | |
250,000 | 250,000 | $ 2.690 | 2.19 | June 8, 2021 | |
4,425,000 | 4,425,000 | $ 2.650 | 2.23 | June 23, 2021 | |
2,750,000 | 2,750,000 | $ 2.240 | 2.71 | December 15, 2021 | |
250,000 | 166,667 | $ 3.110 | 3.06 | April 22, 2022 | |
1,475,000 | 983,333 | $ 2.930 | 3.62 | November 13, 2022 | |
3,775,000 | 2,516,667 | $ 3.390 | 3.71 | December 14, 2022 | |
475,000 | 158,333 | $ 2.390 | 4.04 | April 13, 2023 | |
4,525,000 | 1,508,333 | $ 2.850 | 4.19 | June 8, 2023 | |
100,000 | 33,333 | $ 2.660 | 4.22 | June 20, 2023 | |
720,482 | 240,160 | $ 2.490 | 4.39 | August 21, 2023 | |
3,225,000 | 1,075,000 | $ 2.410 | 4.76 | December 31, 2023 | |
500,000 | 166,667 | $ 2.270 | 4.98 | March 21, 2024 | |
250,000 | 83,333 | $ 2.220 | 4.99 | March 27, 2024 | |
36,020,482 | 27,656,826 |
The stock options granted by the Company will vest and become exercisable in three equal instalments with one-third of the Options vesting on the Grant Date, and one-third vesting on each of the dates that is the first and second anniversary after the Grant Date.
The Company uses the Black-Scholes option pricing model to calculate the fair value of stock options granted. The model requires management to make estimates, which are subjective and may not be representative of actual results. Changes in assumptions can materially affect estimates of fair values. The following weighted average assumptions were used to estimate the weighted average grant date fair values for the three-month periods ended March 31, 2019 and March 31, 2018:
March 31, 2019 | March 31, 2018 | |||||||
Expected stock price volatility | 65.60 | % | 81.72 | % | ||||
Expected life of options | 5.00 years | 5.00 years | ||||||
Risk free interest rate | 1.81 | % | 1.53 | % | ||||
Expected forfeitures | 0 | % | 0 | % | ||||
Expected dividend yield | 0 | % | 0 | % | ||||
Weighted average fair value per option granted in period | $ | 1.26 | $ | 2.13 |
Share-based payments for options vested for the three months ended March 31, 2019 amounted to $2,828,857 (2018 - $2,368,060) of which $2,442,373 (2018 - $1,707,557) was expensed to the statement of loss (profit) and comprehensive loss (profit) and $386,484 (2018 - $660,503) was capitalized to exploration and evaluation assets (Note 5).
16 |
NEXGEN ENERGY LTD. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 & 2018 |
11. RELATED PARTY TRANSACTIONS
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of executive and non-executive members of the Company’s Board of Directors, corporate officers and related companies.
Remuneration attributed to key management personnel can be summarized as follows:
For the three months ended | ||||||||
March 31, 2019 | March 31, 2018 | |||||||
Short-term compensation(1) | $ | 778,807 | $ | 943,608 | ||||
Share-based payments (stock options)(2) | 2,196,201 | 1,684,385 | ||||||
$ | 2,975,008 | $ | 2,627,993 |
(1) Short-term compensation to key management personnel for the three months ended March 31, 2019 amounted to $778,807 (2018 - $943,608) of which $593,602 (2018 - $670,450) was expensed and included in salaries, benefits and directors’ fees on the statement of loss and comprehensive loss. The remaining $185,205 (2018 - $273,158) was capitalized to exploration and evaluation assets.
(2) Share-based payments to key management personnel for the three months ended March 31, 2019 amounted to $2,196,201 (2018 - $1,684,385) of which $2,162,257 (2018 - $1,358,967) was expensed and $33,944 (2018 - $325,418) was capitalized to exploration and evaluation assets.
As at March 31, 2019, there was $nil (December 31, 2018 - $1,415,900) included in accounts payable and accrued liabilities owing to its directors and officers for compensation.
12. CAPITAL MANAGEMENT
The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition, exploration and evaluation of assets. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain the future development of the business.
In the management of capital, the Company considers all components of equity and debt 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.
Management reviews its capital management approach on an on-going basis and believes that this approach, given the relative
size of the Company, is reasonable.
The Company is not subject to externally imposed capital requirements. There were no changes in the Company’s approach to capital management during the period.
13. | FINANCIAL INSTRUMENTS |
The Company’s financial instruments consist of cash and cash equivalents, amounts receivable, accounts payable and accrued liabilities and the Convertible Debentures.
The fair values of the Company’s cash and cash equivalents, amounts receivable and accounts payable and accrued liabilities approximate their carrying value, due to their short-term maturities or liquidity.
17 |
NEXGEN ENERGY LTD. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 & 2018 |
13. | FINANCIAL INSTRUMENTS (continued) |
Fair Value Measurement
The Company classifies the fair value of financial instruments according to the following hierarchy based on the amount of observable inputs used to value the instrument:
• | Level 1 - quoted prices in active markets for identical assets or liabilities. |
• | Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). |
• | Level 3 - inputs for the asset or liability that are not based on observable market data. |
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 (Note 9). The Convertible Debentures are classified as Level 2.
As at March 31, 2019, the Company’s risk exposures and the impact on the Company’s financial instruments are summarized below:
(a) 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 cash equivalents and amounts receivable. The Company holds cash and cash equivalents with large Canadian and Australian banks. Credit risk is concentrated as a large portion of the Company’s cash and cash equivalents is held at one financial institution. Management believes the risk of loss to be remote. The Company’s amounts receivable consists of input tax credits receivable from the Government of Canada and interest accrued on cash equivalents. Accordingly, the Company does not believe it is subject to significant credit risk.
(b) Liquidity Risk
Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. The Company attempts to manage liquidity risk by maintaining sufficient cash and cash equivalent balances. Liquidity requirements are managed based on expected cash flows to ensure that there is sufficient capital to meet short-term obligations. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at March 31, 2019, NexGen had cash and cash equivalents of $103,853,612 to settle accounts payable and accrued liabilities of $8,528,611.
(c) Market Risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates and commodity and equity prices.
(i) 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 and cash equivalents 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 Company’s cash and cash equivalent balances as of March 31, 2019. 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 Convertible Debentures, in an aggregate principal amount of US$120 million, carry a fixed interest rate of 7.5% and hence, are not subject to interest rate fluctuations.
(ii) 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 include US dollar denominated cash and US dollar accounts payable and accrued liabilities. The Company maintains Canadian and US dollar bank accounts in Canada.
18 |
NEXGEN ENERGY LTD. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 & 2018 |
13. | FINANCIAL INSTRUMENTS (continued) |
The Company is exposed to foreign exchange risk on its US dollar denominated Convertible Debentures. At maturity the US$120 million principal amount of the Convertible Debentures is due in full, and prior to then at a premium upon the occurrence of certain events, including a change of control. 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.
(iii) 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 Company’s earnings due to movements in individual equity prices or general movements in the level of the stock market. Accordingly, significant movements in the Company’s share price may affect the valuation of the 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.
Sensitivity Analysis
As at March 31, 2019, the Company’s US dollar net financial liabilities were US$57,910,513. Thus a 10% change in the Canadian dollar versus the US dollar exchange rates would give rise to a $7,738,598 change in loss (profit) and comprehensive loss (profit).
The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks at this time.
14. | SEGMENT INFORMATION |
The Company operates in one reportable segment, being the acquisition, exploration and development of uranium properties. All of the Company’s non-current assets are located in Canada.
15. | SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS |
The significant non-cash transactions during the three-month period ended March 31, 2019 included:
a) | At March 31, 2019, $4,584,823 of exploration and evaluation asset expenditures and $10,542 of equipment expenditures were included in accounts payable and accrued liabilities. |
b) | At March 31, 2019, $2,991,375 of interest expense related to the convertible debentures was included in accounts payable and accrued liabilities. |
c) | The Right-of-use lease asset of $2,826,512 and related lease liability of $3,222,380 recorded in the three months ended March 31, 2019 were non-cash (see Note 4 & 6). |
d) | Share-based payments of $386,484 was included in exploration and evaluation assets (Note 5). |
e) | The re-allocation upon exercise of stock options from reserves to share capital of $690,975. |
19 |
NEXGEN ENERGY LTD. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 & 2018 |
15. | SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (continued) |
The significant non-cash transactions during the three-month period ended March 31, 2018 included:
a) | At March 31, 2018, $5,619,383 of exploration and evaluation asset expenditures and $428,377 of equipment expenditures were included in accounts payable and accrued liabilities. |
b) | At March 31, 2018, $2,845,576 of interest expense related to the convertible debentures was included in accounts payable and accrued liabilities. |
c) | Share-based payments of $660,503 was included in exploration and evaluation assets (Note 5). |
d) | The re-allocation upon exercise of stock options from reserves to share capital of $1,318,327. |
e) | In the three months ended March 31, 2018 IsoEnergy issued 3,330,000 shares valued at $1,282,050 and a cash payment of $200,000 to expand its interest in the Geiger property (see Note 5(c)). |
16. | SUBSEQUENT EVENTS |
Subsequent to period end March 31, 2019, the Company issued 175,000 common shares on the exercise of 175,000 stock options at a price of $2.24 for total proceeds of $392,000.
17. LOSS (PROFIT) PER SHARE
Basic net income per share provides a measure of the interests of each ordinary common share in the Company’s performance over the year. Diluted net income per share adjusts basic net income per share for the effect of all dilutive potential common shares.
March 31, 2019 | March 31, 2018 | |||||||
Basic (profit) per share | ||||||||
(Profit) attributable to common shareholders | $ | (7,233,642 | ) | $ | (30,242,199 | ) | ||
Weighted average number of common shares | 351,660,160 | 342,627,246 | ||||||
Basic (profit) per share | $ | (0.02 | ) | $ | (0.09 | ) | ||
Diluted loss (profit) per share | ||||||||
Loss (profit) available to common shareholders | $ | (7,233,642 | ) | $ | (30,242,199 | ) | ||
Interest expense on convertible debentures | 2,991,375 | 2,845,576 | ||||||
Mark to market gain on convertible debentures | (15,957,439 | ) | (35,223,636 | ) | ||||
Diluted Loss available to common shareholders (diluted) | $ | 5,732,422 | $ | 2,135,861 | ||||
Weighted average number of common shares | 351,660,160 | 342,627,246 | ||||||
Effect of conversion of convertible debentures | 48,083,337 | 48,083,337 | ||||||
Effect of share options on issue | 9,734,566 | 16,433,807 | ||||||
Weighted average number of common shares (diluted) at March 31 | 409,478,063 | 407,144,390 | ||||||
Diluted loss per common shares | $ | 0.01 | $ | 0.01 | ||||
At March 31, 2019, 20,578,815 options (2018: 6,200,000) were excluded from the diluted weighted-average number of common shares calculation because their effect would have been anti-dilutive.
18. | COMPARATIVE FIGURES |
Certain amounts have been reclassified to conform with current period presentation.
20 |
Exhibit 99.2
NEXGEN ENERGY LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Three Months Ended March 31, 2019
Dated May 9, 2019
NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
GENERAL
This management’s discussion and analysis (“MD&A”) is management’s interpretation of the results and financial condition of NexGen Energy Ltd. (“NexGen” or the “Company”) for the three months ended March 31, 2019 and includes events up to the date of this MD&A. This discussion should be read in conjunction with the unaudited condensed consolidated interim financial statements as at and for the three months ended March 31, 2019 and the notes thereto (together, the “Interim Financial Statements”) and other corporate filings including NexGen’s annual information form for the year ended December 31, 2018 (the “AIF”) dated March 31, 2019, all of which is available under the Company’s profile on SEDAR at www.sedar.com. All dollar figures stated herein are expressed in Canadian dollars, unless otherwise specified. This MD&A contains forward-looking information. Please see the section, “Note Regarding Forward-Looking Information” for a discussion of the risks, uncertainties and assumptions used to develop the Company’s forward-looking information.
It is important to note that in accordance with International Financial Reporting Standards (“IFRS”), IsoEnergy Ltd.’s (“IsoEnergy”) financial results are consolidated with those of NexGen, including in this MD&A. However, IsoEnergy is a listed entity with its own management, directors, internal control processes and financial budgets and finances its own operations.
Financial Statements
Management is responsible for the Interim Financial Statements referred to in this MD&A. The Audit Committee of the Company’s Board of Directors (the “Board”) has been delegated the responsibility of reviewing and approving the Interim Financial Statements and MD&A.
The Interim Financial Statements have been prepared in accordance with IAS 34, Interim Financial Reporting, and should be read in conjunction with NexGen’s audited financial statements for the year ended December 31, 2018 (the “Annual Financial Statements”), which have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”). Based on the nature of the Company’s activities, both presentation and functional currency is Canadian dollars.
The Company’s Interim Financial Statements have been prepared using IFRS applicable to a going concern, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The ability of the Company to continue as a going concern in the long-term is ultimately dependent on its ability to obtain financing and achieve future profitable operations.
Technical Disclosure
All scientific and technical information in this MD&A has been reviewed and approved by Mr. Troy Boisjoli, Geoscience Licensee, Vice President - Operations & Project Development for NexGen. Mr. Boisjoli is a qualified person for the purposes of National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”), and 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.
For details of the Rook I Project including the key assumptions, parameters and methods used to estimate the updated mineral resource and Pre-Feasibility Study (“PFS”) set forth below, please refer to the technical report entitled “Technical Report on the Pre-Feasibility Study of the Arrow Deposit, Rook I Property, Province of Saskatchewan, Canada” ( the “Rook I PFS Technical Report”). The Rook I PFS Technical Report is filed under the Company’s profile on SEDAR (www.sedar.com) and EDGAR (www.sec.gov/edgar.shtml). The Rook I PFS Technical Report has been reviewed and approved by Paul O’Hara, P.Eng. of Wood PLC (“Wood”), David Robson, P.Eng.and Jason Cox, P.Eng. of Roscoe Postle Associates Inc. (“RPA”), each of whom is a “qualified person” under NI 43-101.
2 |
NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
The Mineral Resource Estimate was completed by Mr. Mark Mathisen, C.P.G., Senior Geologist at RPA and Mr. David Ross, P.Geo., Director of Resource Estimation and Principal Geologist at RPA. Both are independent Qualified Persons in accordance with the requirements of National Instrument (NI) 43-101 and they have approved the disclosure herein. All other technical information in this news release has been approved by Mr. Troy Boisjoli, Geoscientist Licensee, Vice President - Operations & Project Development for NexGen. Mr. Boisjoli is a qualified person for the purposes of NI 43-101 and 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.
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.
BACKGROUND
NexGen was incorporated pursuant to the Business Corporations Act (British Columbia) on March 8, 2011 as "Clermont Capital Inc.", a capital pool company within the meaning of Policy 2.4 - Capital Pool Companies of the TSX Venture Exchange. On April 19, 2013, the Company completed its "qualifying transaction" and in connection therewith consolidated its common shares on a 2.35:1 basis and changed its name to "NexGen Energy Ltd.".
NexGen is a Canadian based uranium exploration and development company engaged in the exploration and development of its portfolio of uranium properties located in the Province of Saskatchewan, Canada. NexGen's principal asset is its 100% interest in the Rook I project, a project in the Athabasca Basin, Saskatchewan (the "Rook I Project").
The Rook I Project is located in the southwest Athabasca Basin and is the location of the Company’s Arrow discovery in February 2014, the Bow discovery in March 2015, the Harpoon discovery in August 2016 and the South Arrow discovery in July 2017. 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 NYSE American, LLC (“NYSE American”) under the symbol “NXE” and is a reporting issuer in each of the provinces of Canada other than Québec.
The Company has three wholly owned subsidiaries: NXE Energy Royalty Ltd., NXE Energy SW1 Ltd. and NXE Energy SW3 Ltd. (collectively, the “Subsidiaries”). The Company also holds 53.35% of the outstanding common shares of IsoEnergy, as of the date hereof.
In the year ended December 31, 2017, the Company completed a financing raising aggregate gross proceeds of US$110 million (the “Financing”) consisting of a private placement of: (a) 24,146,424 common shares at a price of US$2.0707 per share, for gross proceeds of US$50 million (the “Placement Shares”); and (b) US$60 million in aggregate principal amount of 7.5% unsecured convertible debentures (the “2017 Debentures”) with affiliates of CEF Holdings Limited and/or its shareholders (collectively, the “Investors”) and in connection therewith (i) extended the maturity date of the existing 7.5% unsecured convertible debentures (the “2016 Debentures” and together with the 2017 Debentures, the “Convertible Debentures”) from June 11, 2021 to July 22, 2022 to match the maturity date of the 2017 Debentures; and (ii) revised and consolidated certain other non-financial provisions of the 2016 Debentures, including the strategic alignment provisions, into an investor rights agreement, described in detail below under “Discussion of Operations”.
3 |
NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
OVERALL PERFORMANCE
General
In the three months ended March 31, 2019, the Company continued exploration and development activities at its Rook I Project including the completion of 37,863.4 metres of drilling at the Arrow deposit.
As an exploration and development stage company, the Company does not have revenues and historically has recurring operating losses. As at March 31, 2019, the Company had cash and cash equivalents of $103,853,612 (December 31, 2018: $125,059,189; March 31, 2018: $157,655,177), an accumulated deficit of $77,909,447 (December 31, 2018: $85,143,089; March 31, 2018: $57,965,176) and working capital of $96,179,230 (December 31, 2018: $119,195,168; March 31, 2018: $147,891,286).
The Interim Financial Statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
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 Company’s 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 Company’s exploration and evaluation assets in the future.
In particular, the Company does not generate revenue. As a result, the Company is ultimately dependent on third party financing to continue exploration and development activities on the Company’s properties, maintain capacity and satisfy contractual obligations including servicing the interest payments due on its convertible debentures and repaying the principal amount thereof at maturity (or sooner in the event of redemption in accordance with the terms of the 2017 Debentures and 2016 Debentures, (collectively, the “Convertible Debentures"). Accordingly, the Company’s 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 Company’s most recent annual information form, filed March 4, 2019.
At maturity of the Convertible Debentures, the US$120 million principal amount is due in full, and prior to then at a premium upon the occurrence of certain events, including a change of control. The Company holds sufficient US dollars to make all interest payments due under the Convertible Debentures until maturity but not to pay the entire 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. In addition, unless the Company commences generating revenue prior to the maturity date of the Convertible Debentures (or sooner in the event of redemption in accordance with the terms of the Convertible Debentures), the Company will have to raise funds to repay the principal amount of the Convertible Debentures and there can be no assurance that the Company will be able to raise sufficient funds when required, at all, or on reasonable terms.
4 |
NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
SELECTED FINANCIAL INFORMATION
The following financial data is derived from the Interim Financial Statements and should be read in conjunction with NexGen’s audited Annual Financial Statements and unaudited condensed consolidated interim financial statements for the three months ended March 31, 2019 and March 31, 2018:
For the three months ended March 31, 2019 | For the three months ended March 31, 2018 | |||||||
Total Revenue | $ | — | $ | — | ||||
Profit and comprehensive profit for the year | (6,975,732 | ) | (30,026,892 | ) | ||||
Basic Loss (profit) per Common Share | (0.02 | ) | (0.09 | ) | ||||
Diluted Loss (profit) per Common Share | 0.01 | 0.01 | ||||||
Operating expenses | ||||||||
Salaries, benefits and directors’ fees | $ | 906,709 | $ | 977,175 | ||||
Office and administrative | 561,508 | 472,944 | ||||||
Professional fees | 734,503 | 613,943 | ||||||
Travel | 273,192 | 202,771 | ||||||
Depreciation | 588,662 | 283,599 | ||||||
Share-based payments | 2,442,373 | 1,707,557 | ||||||
Finance income | (606,207 | ) | (592,545 | ) | ||||
Rental income | (7,576 | ) | — | |||||
Mark to market (gain) on convertible Debentures | (15,957,439 | ) | (35,223,636 | ) | ||||
Interest expense | 2,991,375 | 2,845,576 | ||||||
Interest on lease liabilities | 55,501 | — | ||||||
Foreign exchange loss (gain) | 964,386 | (1,322,558 | ) | |||||
Gain on disposal of equipment | — | (750 | ) | |||||
Profit from operations | $ | (7,053,013 | ) | $ | (30,035,924 | ) | ||
Deferred income tax expense | 77,281 | 9,032 | ||||||
Profit and comprehensive profit for the year | $ | (6,975,732 | ) | $ | (30,026,892 | ) | ||
Loss (profit) and comprehensive loss (profit) attributable to: | ||||||||
Shareholders of NexGen Energy Ltd. | $ | (7,233,642 | ) | $ | (30,242,199 | ) | ||
Non-controlling interests in IsoEnergy Ltd. | 257,910 | 215,307 | ||||||
Profit and comprehensive profit for the year | $ | (6,975,732 | ) | $ | (30,026,892 | ) | ||
Loss (profit) per common share attributable to the Company’s common shareholders | ||||||||
Basic Loss (profit) per Common Share | $ | (0.02 | ) | $ | (0.09 | ) | ||
Diluted Loss (profit) per Common Share | $ | 0.01 | $ | 0.01 | ||||
Weighted average number of common shares outstanding | ||||||||
Basic | 351,660,160 | 342,627,246 | ||||||
Diluted | 409,478,063 | 407,144,390 | ||||||
Three months ended March 31, 2019 vs three months ended March 31, 2018
In the three months ended March 31, 2019, NexGen recognized a net profit of $6,975,732 or $0.02 per common share, compared to a net profit of $30,026,892 or $0.09 per common share for the three months ended March 31, 2018.
5 |
NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
The Company recognized a mark to market gain on Convertible Debentures of $15,957,439 during the three months ended March 31, 2019 as compared to a mark to market gain of $35,223,636 in the three months ended March 31, 2018. This mark to market gain results from the fair value re-measurement of the Convertible Debentures at each report date, with any changes in the fair value being recognized in the loss (profit) and comprehensive loss (profit) for the period. The mark to market gain for the three months ended March 31, 2019 is mainly due to the decrease in the Company’s share price from $2.41 at December 31, 2018 to $2.16 at March 31, 2019. The mark to market gain for the three months ended March 31, 2018 is mainly due to the decrease in the Company’s share price from $3.21 at December 31, 2017 to $2.22 at March 31, 2018.
The Company recognized a foreign exchange gain of $1,322,558 in the three months ended March 31, 2018 compared to a foreign exchange loss of $964,386 in the three months ended March 31, 2019. These amounts are derived from foreign exchange rate fluctuations realized on US dollar denominated transactions and payments translated into Canadian dollars as well as unrealized foreign exchange rate fluctuations on US dollar cash and accounts payable balances held on March 31, 2019. The foreign exchange gain was due mainly to cash and cash equivalents held in US dollars and the strength of US dollars during the three months ended March 31, 2018. The foreign exchange loss was due mainly to cash and cash equivalents held in US dollars and the weakness of US dollars during the three months ended March 31, 2019.
Salaries, benefits and directors’ fees decreased from $977,175 in the three months ended March 31, 2018 to $906,709 in the three months ended March 31, 2019 mainly due to the departures of senior management after March 31, 2018; partially offset by increase in executive and management level personnel in late 2018.
Office and administrative costs increased from $472,944 in the three months ended March 31, 2018 to $561,508 in the three months ended March 31, 2019 mainly due to timing of regulatory filing fees and marketing in the three months ended March 31, 2019.
Professional fees increased from $613,943 in the three months ended March 31, 2018 to $734,503 in the three months ended March 31, 2019 due to an increase in consultant and audit fees pertaining to various corporate matters in the three months ended March 31, 2019.
Travel expenses increased from $202,771 in the three months ended March 31, 2018 to $273,192 in the three months ended March 31, 2019, primarily due to increases in marketing related travel, in person board meetings and general corporate activity in the three months ended March 31, 2019.
Depreciation increased from $283,599 in the three months ended March 31, 2018 to $588,662 in the three months ended March 31, 2019 due to an increase in the amortization of property and equipment, related to the adoption of IFRS 16 - Leases standard.
Share-based payments charged to the statement of loss (profit) and comprehensive loss (profit) increased from $1,707,557 in the three months ended March 31, 2018 to $2,442,373 in the three months ended March 31, 2019. These are non-cash charges derived by the graded vesting method of the Black-Scholes values. Stock options granted to directors and employees vest over two years with the corresponding share-based compensation expense being recognized over this period. Variances in share-based compensation expense are expected from period to period depending on many factors, including whether options are granted in a period and whether options have fully vested or have been cancelled in a period. During the three months ended March 31, 2019, the Company granted 750,000 stock options with a weighted average fair value per option of $2.25.
Finance income was comparable in the amount of $592,545 in the three months ended March 31, 2018 to $606,207 in the three months ended March 31, 2019 mainly due to increased interest rates in the three months ended March 31, 2019.
6 |
NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
Rental income increased from $nil in the three months ended March 31, 2018 to $7,576 in the three months ended March 31, 2019 due to amounts received by IsoEnergy from NxGold Ltd. for an office sublease where amounts previously received were netted against the related expense.
Interest expense increased from $2,845,576 in the three months ended March 31, 2018 to $2,991,375 in the three months ended March 31, 2019 due to the strengthening US$ foreign exchange rate on the interest related to the 2016 and 2017 Debentures, with the Convertible Debentures bearing interest at a rate of 7.5% per annum, payable semi-annually.
Interest on lease liabilities increased from $nil in the three months ended March 31, 2018 to $55,501 in the three months ended March 31, 2019 due to office leases, in relation to the adoption of IFRS 16 - Leases standard.
Deferred income tax expense of $77,281 was recognized in the three months ended March 31, 2019 as compared to $9,032 in the three months ended March 31, 2018. This relates to IsoEnergy’s deferred income tax expense due to the higher flow-through share renunciation. In the three months March 31, 2019 IsoEnergy renounced $1,411,684 (three months ended March 31, 2018 - $762,504) of flow through share expenditures.
Financial Position
The following financial data is derived from the Interim Financial Statements and should be read in conjunction with NexGen’s audited Annual Financial Statements and unaudited interim financial statements for the three months ended March 31, 2019:
March 31, 2019 | December 31, 2018 | March 31, 2018 | ||||||||||
Exploration and evaluation assets | $ | 212,359,046 | $ | 194,128,594 | $ | 166,754,474 | ||||||
Total assets | $ | 327,478,652 | $ | 326,867,565 | $ | 331,094,068 | ||||||
Total current liabilities | $ | 9,523,938 | $ | 6,517,313 | $ | 10,508,072 | ||||||
Total non-current liabilities | $ | 125,174,869 | $ | 138,423,662 | $ | 136,590,954 | ||||||
Distributions or cash dividends declared per share | $ | - | $ | - | $ | - |
Financial Position as at March 31, 2019 vs December 31, 2018
NexGen had cash and cash equivalents totaling $103,853,612 as at March 31, 2019 compared to $125,059,189 as at December 31, 2018. This decrease in cash and cash equivalents was due to exploration and evaluation asset and equipment expenditures of $16,022,858 and $536,429, respectively, $4,590,365 of cash used in operating activities and $168,168 of cash used to pay lease liabilities; offset by $1,048,666 of cash received from stock option exercises.
Exploration and evaluation assets increased from $194,128,594 as at December 31, 2018 to $212,359,046 as at March 31, 2019 due to an increase in expenditures made on exploration and evaluation assets and commencement of the Feasibility Study referred to in Discussion of Operations.
Current liabilities increased from $6,517,313 as at December 31, 2018 to $9,523,938 as at March 31, 2019. The majority of this increase is related to the timing of payments for exploration and evaluation expenditures, interest accruals for the Convertible Debentures and the current portion of lease liabilities related to the adoption of IFRS 16 - Leases.
Non-current liabilities decreased from $138,423,662 as at December 31, 2018 to $125,174,869 as at March 31, 2019 due to the net decrease in fair value of the Convertible Debentures resulting primarily from fluctuations in the Company’s share price and foreign exchange rates since December 31, 2018; partially offset by the recording of Long-term lease liability related to the adoption of IFRS 16 - Leases.
7 |
NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
DISCUSSION OF OPERATIONS
The Convertible Debentures mature on July 22, 2022 (the “Maturity Date”) and bear interest at a rate of 7.5% per annum, payable semi-annually in arrears, with 5.0% of such interest payable in cash and the remaining 2.5% payable in common shares of the Company, issuable at a price equal to the volume-weighted average trading price of the common shares calculated in US dollars on the exchange or market which has the greatest trading volume in the Company’s common shares for the 20 consecutive trading days (“20-day VWAP”) ending three trading days preceding the date such interest payment is due.
The 2017 Debentures are convertible at the holders’ option, in whole or in part, into common shares at a conversion price (the “2017 Conversion Price”) of US$2.6919 per share, subject to adjustment. The Company may redeem the 2017 Debentures, in whole or in part, from July 21, 2020 and prior to the Maturity Date at a price equal to the outstanding principal amount plus accrued and unpaid interest up to the redemption date, provided the 20-day VWAP of the common shares for the period ending three trading days preceding the date immediately prior to the date the redemption notice is given exceeds 130% of the 2017 Conversion Price.
The 2016 Debentures are convertible at the holder’s option, in whole or in part, into common shares of the Corporation at a conversion price (the “2016 Conversion Price”) of US$2.3261 per common share, subject to adjustment. The Company may redeem the 2016 Debentures in whole or in part from June 10, 2019 and prior to the Maturity Date at a price equal to the outstanding principal amount plus accrued and unpaid interest up to the redemption date, provided the 20-day VWAP of the common shares for the period ending three trading days preceding the date immediately prior to the date the redemption notice is given exceeds 130% of the 2016 Conversion Price.
Upon completion, of a change of control (which includes in the case of the Investors’ right to require the Company to redeem the Convertible Debentures, a change in the Chief Executive Officer of the Company), the Investors of the Convertible Debentures may require the Company to redeem, or the Company has the right to redeem, any outstanding Convertible Debentures in cash at: (i) on or prior to July 21, 2020 for the 2017 Debenture and on or prior to June 10, 2019 for the 2016 Debenture, 130% of the principal amount; and (ii) at any time thereafter, 115% of the principal amount, in each case plus accrued but unpaid interest, if any. In addition, upon the public announcement of a change of control that is supported by the Board, the Company may require the Investors of the Convertible Debentures to convert the Convertible Debentures into common shares of the Company at the 2017 Conversion Price or 2016 Conversion Price, as applicable, provided the consideration payable upon the change of control exceeds the 2017 Conversion Price or 2016 Conversion Price, respectively, and is either payable in cash or is payable in property or securities which the holders of the 2017 Debentures or 2016 Debentures, as applicable, in their sole discretion, wish to receive.
A “change of control” of the Company is defined as: (i) the acquisition by any transaction, directly or indirectly, by a person or group of persons acting jointly or in concert of voting control or direction over 50% or more of the Company’s outstanding common shares; (ii) the amalgamation, consolidation or merger of the Company with or into another entity as a result of which the holders of the common shares immediately prior to such transaction, directly or indirectly, hold less than 50% of voting control or direction over the entity carrying on the business of the Company following such transaction; (iii) the sale, assignment, transfer or other disposition of all or substantially all of the property or assets of the Company to another entity in which the holders of the common shares immediately prior to such transaction, directly or indirectly, hold less than 50% of voting control or direction following such transaction; or (iv) the removal by resolution of the shareholders of the Company, of more than 51% of the then incumbent directors of the Company which removal has not been recommended in the Company’s management information circular, or the failure to elect to the Board a majority of the directors proposed for election by management in the Company’s management information circular.
8 |
NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
In consideration for the increased investment in the Company pursuant to the Financing, the Company and the Investors entered into an investor rights agreement (the “Investor Rights Agreement”) dated July 21, 2017 which provides for the following and replaced those similar provisions contained in the 2016 Debentures. The Investor Rights Agreement provides that:
(a) | for so long as the Investors hold at least 10% of the common shares (on a partially diluted basis), the Investors agreed: (i) not to tender or agree to tender (or convert) the Convertible Debentures or any common shares then held to an unsolicited takeover bid that constitutes a change of control, (ii) to exercise the votes attached to all common shares then held in respect of any change of control transaction, and deposit or tender such common shares, in accordance with the recommendation of the Board, (iii) to abstain or withhold votes in respect of any common shares they hold in respect of the election of individuals to the Board who are not nominees of management, and (iv) in respect of non-change of control matters, not to exercise the votes attached to any common shares they hold contrary to the recommendation of the Board; |
(b) | for so long as the Investors hold at least 10% of the common shares (on a partially diluted basis), the Investors agreed to a standstill whereby they will, among other things, not acquire any securities of the Company or solicit proxies or otherwise attempt to influence the conduct of security holders of the Company; |
(c) | for so long as the Investors hold at least 10% of the common shares (on a partially diluted basis), the Investors are subject to restrictions on disposition applicable to any common shares they hold, consisting of giving prior notice to the Company of any proposed disposition (within a 30 day period) of more than 0.5% of the number of common shares then outstanding and either: (i) disposing of such common shares to specific willing investors identified by the Company within a seven-day period; or (ii) thereafter, disposing of such common shares either through a broad distribution on the public markets or in a private transaction or block trade to anyone other than specific investors identified by the Company within the seven-day period; and |
(d) | for so long as the Investors hold at least 15% of the common shares (on a partially diluted basis), CEF Holdings Limited has the right to nominate one director to the Board. |
Each of the foregoing covenants other than (d) shall terminate upon a completion of a Fundamental Change. A Fundamental Change means the occurrence of any of the transactions involved or items (i), (ii) or (iii) of the definition of Change of Control set out above and a change in the Company’s Chief Executive Officer.
On September 18, 2017, the Company issued 111,110 common shares for the acquisition of the remaining 40% interest in the Dufferin Lake property (“Dufferin”). Dufferin comprises five contiguous mineral dispositions covering an area of 10,910 hectares and is located approximately 360 kilometres northwest of La Ronge, Saskatchewan.
Exploration
On December 4, 2018, the Company commenced a 126,000 metre drill program using ten drill rigs. The objectives of this drill program are (i) conversion of Indicated Mineral Resources to the Measured category; (ii) conversion of Inferred Mineral Resources to the Indicated category; (iii) geotechnical and hydrogeological characterization of the rock mass in areas of potential mine development and Underground Tailings management Facility (UGTMF). As of March 31, 2019, the Company has completed a total of 41,087.9 m, of which 37,863.4 m were drilled during Q1 2019.
9 |
NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
Highlights of the 2019 winter drill program include the Eighty-one drill holes have been successfully completed within Objective (i) drilling, one hole was abandoned due to excessive deviation through overburden, and ten holes were in-progress at the end of Q1 2019; Within Objective (iii) drilling four holes have been completed within the UGTMF area, and positively indicate the area contains suitable rock-mass and hydraulic conductivity to facilitate underground development. One hole was drilled to the Athabasca Unconformity above the proposed UGTMF area while another hole was drilled to the unconformity above the Arrow Deposit. Of the Objective (iii) holes, five have had vibrating water piezometers (VWP) installed, to facilitate ongoing monitoring of groundwater pressure changes - one hole in the UGTMF area was left open for potential of a Westbay multilevel groundwater monitoring system to be installed.
Mineral Resource Update
On November 5, 2018, the Company announced the following updated mineral resource estimate on the Rook I Project having an effective date of May 25, 2018:
Structure | Tonage (Tonnes) | Grade (U3O8%) | Metal U3O8 (U3O8 lbs) |
Indicated Mineral Resource | |||
A2 LG | 1,240,000 | 0.79 | 21,700,000 |
A2 HG | 460,000 | 17.85 | 181,000,000 |
A3 LG | 1,010,000 | 0.70 | 15,500,000 |
A3 HG | 180,000 | 9.68 | 38,400,000 |
Total | 2,890,000 | 4.03 | 256,600,000 |
Inferred Mineral Resource | |||
A1 | 1,510,000 | 0.72 | 23,900,000 |
A2 LG | 1,290,000 | 0.70 | 19,900,000 |
A2 HG | 5,000 | 12.70 | 1,400,000 |
A3 LG | 1,230,000 | 1.11 | 30,000,000 |
A3 HG | 1,000 | 9.07 | 200,000 |
A4 | 800,000 | 0.92 | 16,300,000 |
Total | 4,840,000 | 0.86 | 91,700,000 |
Notes:
1. | CIM Definition Standards were followed for Mineral Resources, Mineral Resources are reported inclusive of Mineral Reserves. CIM defines Mineral Resource as a concentration or occurrence of a natural, solid, inorganic or fossilized organic material in or on the Earth’s crust in such a form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics, and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. |
2. | Mineral Reserves include transverse and longitudinal stopes, ore development and incremental ore. |
3. | Stopes and ore development were estimated at a cut-off grade of 0.25% U3O8. |
4. | Incremental ore is material between 0.03% U3O8 and 0.25% U3O8 that must be extracted to access mining areas. 0.0% U3O8 is the limit for what is considered benign waste and material that be must be treated and stockpiled in an engineered facility. |
5. | No by-product credits have been included in the Mineral Reserve statement. |
6. | Mineral resources are estimated using a long-term metal price of US$45 per pound U3O8, and a 0.75 US$/C$ exchange rate (C$1.00 = US$0.75). |
7. | A minimum mining width of 3.0 m was applied for all longhole stopes. |
8. | The density varies according to the U3O8 grade in the block model. Waste density is 2.464 t/m3. |
9. | Numbers may not add due to rounding. |
10 |
NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
Probable Mineral Reserves
On November 5, 2018, the Company announced the following maiden Probable Mineral Reserves on the Rook I Project having an effective date of May 25, 2018. The Probable Mineral Reserves include diluting materials and allowances for losses which may occur when material is mined:
Probable Mineral Reserves | |||
Structure | Tonnage (Tonnes) | Grade (U3O8%) | Metal U3O8 (U3O8 lb) |
A2 | 2,057,600 | 4.13% | 187,400,000 |
A3 | 1,375,500 | 1.54% | 46,700,000 |
Total | 3,433,100 | 3.09% | 234,100,000 |
Pre-Feasibility Study (“PFS”)
On November 5, 2018, the Company announced the results of the PFS in respect of the Arrow deposit which was based on the updated mineral resource estimate set forth above.
PEA | PFS | Variance | |
After-Tax Net Present Value (8% discount) | CAD $3.49 Billion | CAD $3.7 Billion | +6% |
After-Tax Internal Rate of Return (IRR) | 56.7% | 56.8% | 0% |
After-Tax Payback | 1.1 Years | 1.2 Years | +9% |
Initial Capital Costs (CAPEX) | CAD $1.19 Billion | CAD $1.25 Billion | +5% |
Average Annual Production (Life of Mine) | 18.5 M lbs U3O8 | 25.4 M lbs U3O8 | +37% |
Average Annual Production (Years 1-5) | 27.6 M lbs U3O8 | 29.0 M lbs U3O8 | +5% |
Average Annual Throughput | 1,448 tonnes per day | 1,039 tonnes per day | -28% |
Average Annual Grade | 1.73% U3O8 | 3.09% U3O8 | +79% |
Mine Life | 15 Years | 9 Years | -6 years |
Average Annual After -Tax Net Cash Flow (Life of Mine) | CAD $553 Million | CAD $909 Million | +64% |
Average Annual Operating Cost (Life of Mine) |
CAD $8.37 (US $6.70)/lb U3O8 |
CAD $ 5.81 (US $4.36)/lb U3O8 |
-31% |
Operating Margins (Life of Mine) | 85.5% | 90.6% | +6% |
Note: PEA based on $1.00 = US $0.80, PFS based on $1.00 = US $0.75
The PFS resource only includes Indicated Mineral Resource as per CIM guidelines. Indicated Mineral Resources are that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit Inferred Mineral Resource. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.
The PFS envisioned a standalone mine, mill and ancillary site infrastructure to support a nine-year mine life.
11 |
NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
Mine
A detailed mine plan based on conventional long-hole stope mining was engineered using Indicated Mineral Resources only. Geotechnical studies during Pre-Feasibility supported the conventional longhole stoping mining method including the use of longitudinal and transverse stopes, 30 metre level spacing, and the nominal stope strike length of 15 metres to 30 metres. This represents an excellent stope stability range for underground mining in highly competent conditions. The geometry of the Arrow deposit enables decoupled production areas in both the A2 and A3, enabling flexibility of mine sequencing.
Mill
The PFS confirmed processing and production of Yellowcake from the Arrow deposit with conventional processing technology. The main components of the processing plant are:
• | Grinding |
• | Leaching |
• | Liquid-Solid Separation via Counter Current Decantation |
• | Solvent Extraction |
• | Yellowcake Precipitation |
• | Yellowcake Packaging |
• | Paste Tailings Plant |
Detailed metallurgical study resulted in process recovery increasing to 97.6% (versus 96% in the PEA). In addition, the ammonia strip process envisioned in the PEA was updated to an acid strip process in the PFS, resulting in the complete elimination of ammonia in the processing facility. Elimination of ammonia from the processing facility will ultimately lead to improved effluent discharge performance.
The PFS also confirmed that all processed waste streams can be stored in an Underground Tailings Management Facility (“UGTMF”). The PFS also confirmed the geotechnical design, size and sequencing of the UGTMF as it relates to the mine plan. The UGTMF will significantly reduce the surface footprint of the Rook I project and represents continued and ongoing reclamation during operations, allowing for industry leading environmental sensitivity.
Cost Estimate
A capital cost estimate (Class 4 - AACE International classification guidelines) was produced from the PFS. The pre-production capital costs (CAPEX) for the contemplated underground mine, process plant and supporting infrastructure at Arrow are estimated at $1.247 billion with sustaining capital costs of $262 million (included $0.48 million for decommissioning). Wood and RPA estimated the capital costs based on a three-dimensional civil model, a mechanical equipment list, material takeoffs, vendor budget quotations on major and secondary equipment, and inputs from leading expert service providers who have experience in construction projects and cost estimation both in the Athabasca Basin and globally. Pre-production construction is envisioned to be complete in three years, the construction phase will be supported by a labour force consisting of skilled labour, trades persons, professionals and administration.
Preliminary Economic Assessment
The Company’s PFS built upon the independent maiden Preliminary Economic Assessment (“PEA”), which the Company released on July 31, 2017 of the basement-hosted Arrow deposit and a standalone mine and mill at the Rook I Project. The maiden PEA was completed by RPA and is based on the mineral resource estimate announced by the Company in March 2017 (with an effective date of December 20, 2016). The PEA highlights include a 14.4-year mine life with an after-tax NPV of $3.49 Billion, 56.7% IRR, and a 1.1-year payback. Pre-production capital costs were estimated at $1.19 Billion and unit operation costs in years 1-5 were $5.53/lb U3O8 with a life of mine (LOM) operating cost of $8.37/lb U3O8. The PEA economics were supported by a robust production profile averaging 27.6M lb U3O8 in years 1-5 with an average LOM production rate of 18.5M lb U3O8. The March 2017 Mineral Resource Estimate formed the basis of the PEA which included Indicated Mineral Resources of 1.18Mt containing 179.5M lb U3O8 grading 6.88% U3O8 and Inferred Mineral Resources of 4.25Mt containing 122.1M lb U3O8 grading 1.3% U3O8.
12 |
NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
The PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Outlook
The Company plans to continue developing the Rook I Project while commencing its Feasibility Study (“FS”). To support the FS, the Company is completing a 126,000 metre drill program focused on converting Mineral Resources from Indicated to Measured and Inferred to Indicated. Additionally, the drill program will also focus on the geotechnical and hydrogeological characterization of the rock-mass in areas of potential mine development and Underground Tailings Management Facility.
As stated above, 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 Company’s properties, maintain capacity and satisfy contractual obligations (including servicing the interest payments due on the Convertible Debentures and repaying the principal amount thereof when due). Accordingly, the Company’s future performance and activities 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 results, and the other factors described below under “Risk Factors”.
Summary of Quarterly ResultS
The following financial information is derived from the Company’s financial statements, prepared in accordance with IFRS and presented in Canadian dollars. It should be read in conjunction with the Company’s unaudited condensed consolidated interim financial statements for each of the past eight quarters, as well as the Annual Financial Statements.
(Expressed in Canadian dollars) | 2019 Mar 31 | 2018 Dec 31 | 2018 Sep 30 | 2018 Jun 30 | 2018 Mar 31 | 2017 Dec 31 | 2017 Sep 30 | 2017 Jun 30 | ||||||||||||||||||||||||
Finance income | $ | 606,207 | $ | 660,899 | $ | 615,995 | $ | 617,126 | $ | 592,545 | $ | 548,994 | $ | 448,744 | $ | 133,549 | ||||||||||||||||
Loss (profit) for the period | $ | (6,975,732 | ) | $ | (15,089,688 | ) | $ | 19,215,320 | $ | 24,409,654 | $ | (30,026,892 | ) | $ | 32,200,006 | $ | 2,051,191 | $ | (3,127,153 | ) | ||||||||||||
Loss (profit) for the period attributable to common shareholders | $ | (7,233,642 | ) | $ | (15,334,672 | ) | $ | 19,002,306 | $ | 24,304,876 | $ | (30,242,199 | ) | $ | 31,977,508 | $ | 1,828,692 | $ | (3,324,392 | ) | ||||||||||||
Loss (profit) per common share attributable to common shareholders | ||||||||||||||||||||||||||||||||
- Basic | (0.02 | ) | (0.04 | ) | $ | 0.06 | $ | 0.07 | $ | (0.09 | ) | $ | 0.10 | $ | 0.01 | $ | (0.01 | ) | ||||||||||||||
- Diluted | 0.01 | 0.08 | $ | 0.06 | $ | 0.07 | $ | 0.01 | $ | 0.10 | $ | 0.01 | $ | 0.01 |
NexGen does not derive any revenue from its operations except for interest income from its cash and cash equivalent balances. Its primary focus is the acquisition, exploration, evaluation and development of resource properties.
The significant fluctuations in loss (profit), particularly for the quarterly periods from June 30, 2017 to March 31, 2019, 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, with any changes in the fair value being recognized in the loss (profit) for the quarter.
Interest income recorded as finance income has fluctuated depending on cash and cash equivalent balances available to generate interest and the earned rate of interest.
The loss (profit) per period has fluctuated depending on the Company’s 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.
13 |
NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
Liquidity AND CAPITAL RESOURCES
NexGen has no revenue-producing operations, earns only minimal interest income on cash and cash equivalents, and historically has recurring operating losses. As at March 31, 2019, the Company had an accumulated deficit of $77,909,447.
As at the date of this MD&A, the Company has approximately $94.36 million in cash and cash equivalents and approximately $8.21 million in current liabilities. The Company’s working capital balance as at the date of this MD&A is approximately $88.64 million.
On July 21, 2017, the Company completed the Financing raising total gross proceeds of US$110 million. The Financing positions the Company to continue its planned exploration and development activities at the Rook I Project and planned pre-development activities and assessments, while maintaining current corporate capacity (including servicing the interest payments on the Convertible Debentures), which includes wages, consulting fees, professional fees, costs associated with the Company’s office in Vancouver and Saskatoon and fees and expenditures required to maintain all of its tenements.
The Company does not have any commitments for capital expenditures. However, as of the date hereof, the Company has the following contractual obligations:
(Expressed in Canadian dollars) | ||||||||||||||||||||
Contracts and leases | Total | Less than 1 year | 1-3 years | 3-5 years | After 5 years | |||||||||||||||
Convertible debentures(1) | $ | 180,331,667 | $ | 7,800,000 | $ | 15,600,000 | $ | 156,931,667 | (3) | $ | - | |||||||||
Vehicle Leases | 357,095 | $ | 138,050 | $ | 219,045 | $ | - | $ | - | |||||||||||
Office leases(2) | 3,428,981 | 684,615 | 1,020,014 | 1,395,055 | 329,297 | |||||||||||||||
Total contractual obligations | $ | 184,117,743 | $ | 8,622,665 | $ | 16,839,059 | $ | 158,326,722 | $ | 329,297 | ||||||||||
(1) Cash interest payments on 2016 and 2017 Debentures converted from US$ into C$ at a rate of 1.30. | ||||||||||||||||||||
(2) Leases pertain to Vancouver corporate head office, Saskatoon offices and IsoEnergy's corporate head office. | ||||||||||||||||||||
(3) This includes repayment of the US$120 million principal amount of 2016 and 2017 Debentures which, if not converted prior to maturity, | ||||||||||||||||||||
will become due and payable (converted from US$ into C$ at a rate of 1.30). |
On an ongoing basis, and particularly in light of current market conditions for mineral exploration, management evaluates and adjusts its planned level of activities, including planned, exploration and committed administrative costs, to maintain adequate levels of working capital.
As previously stated, the Company is dependent on external financing, including equity issuances and debt financing, to fund its activities. Circumstances that could impair the Company’s ability to raise future additional funds include general economic conditions, the price of uranium and the other factors set forth below under “Risk Factors” in the Company’s current annual information form and above under “Industry and Economic Factors that May Affect the Business”.
The Company has not paid any dividends and management does not expect that this will change in the near future.
Working capital is primarily held in cash and cash equivalents, significantly reducing any liquidity risk of financial instruments held by NexGen.
Off-Balance Sheet Arrangements
The Company had no off-balance sheet arrangements as at March 31, 2019 or as at the date hereof.
14 |
NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
Transactions With Related Parties
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of executive and non-executive members of the Company’s Board of Directors, corporate officers and related companies.
Remuneration attributed to key management personnel can be summarized as follows:
For the three months ended | ||
March 31, 2019 | March 31, 2018 | |
Short-term compensation(1) | $ 778,807 | $ 943,608 |
Share-based payments (stock options)(2) | $ 2,196,201 | $ 1,684,385 |
$ 2,975,008 | $ 2,627,993 |
Notes: |
(1) Short-term compensation to key management personnel for the three months ended March 31, 2019 amounted to $778,807 (2018 - $943,608) of which $593,602 (2018 - $670,450) was expensed and included in salaries, benefits and directors’ fees on the statement of loss and comprehensive loss. The remaining $185,205 (2018 - $273,158) was capitalized to exploration and evaluation assets.
(2) Share-based payments to key management personnel for the three months ended March 31, 2019 amounted to $2,196,201 (2018 - $1,684,385) of which $2,162,257 (2018 - $1,358,967) was expensed and $33,944 (2018 - $325,418) was capitalized to exploration and evaluation assets.
As at March 31, 2019, there was $nil (December 31, 2018 - $1,415,900) 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 May 9, 2019, there were 354,320,395 common shares, 32,520,482 stock options and no preferred shares issued and outstanding.
Set forth below are details regarding the outstanding stock options.
Number of Options |
Number Exercisable |
Exercise Price |
Remaining Contractual Life (Years) |
Expiry Date | ||
400,000 | 400,000 | $ 0.400 | 0.15 | May 23, 2019 | ||
3,300,000 | 3,300,000 | $ 0.460 | 0.73 | December 24, 2019 | ||
2,850,000 | 2,850,000 | $ 0.500 | 1.16 | May 27, 2020 | ||
3,250,000 | 3,250,000 | $ 0.640 | 1.72 | December 16, 2020 | ||
250,000 | 250,000 | $ 2.690 | 2.19 | June 8, 2021 | ||
4,425,000 | 4,425,000 | $ 2.650 | 2.23 | June 23, 2021 | ||
2,750,000 | 2,750,000 | $ 2.240 | 2.71 | December 15, 2021 | ||
250,000 | 250,000 | $ 3.110 | 3.06 | April 22, 2022 | ||
1,475,000 | 983,333 | $ 2.930 | 3.62 | November 13, 2022 | ||
3,775,000 | 2,516,667 | $ 3.390 | 3.71 | December 14, 2022 | ||
475,000 | 316,667 | $ 2.390 | 4.04 | April 13, 2023 | ||
4,525,000 | 1,508,333 | $ 2.850 | 4.19 | June 8, 2023 | ||
100,000 | 33,333 | $ 2.660 | 4.22 | June 20, 2023 | ||
720,482 | 240,160 | $ 2.490 | 4.39 | August 21, 2023 | ||
3,225,000 | 1,075,000 | $ 2.410 | 4.76 | December 31, 2023 | ||
500,000 | 166,667 | $ 2.270 | 4.98 | March 21, 2024 | ||
250,000 | 83,333 | $ 2.220 | 4.99 | March 27, 2024 | ||
Total | 32,520,482 | 24,398,493 |
15 |
NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the condensed consolidated interim financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable in the circumstances. Uncertainty about these judgments, estimates and assumptions could result in a material adjustment to the carrying amount of the affected asset or liability in future periods.
Information about significant areas of estimation uncertainty considered by management in preparing the Interim Financial Statements is as follows:
(i) Impairment
At the end of each financial reporting period the carrying amounts of the Company’s non-financial assets are reviewed to determine whether there is any indication of an impairment loss or reversal of previous impairment. Where such an indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. With respect to exploration and evaluation assets, the Company is required to make estimates about future events and circumstances regarding whether the carrying amount of intangible exploration assets exceeds its recoverable amount. Recoverability is dependent on various factors, including the discovery of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete development and upon future profitable production or proceeds from the disposition of the exploration and evaluation assets themselves. Additionally, there are numerous geological, economic, environmental and regulatory factors and uncertainties that could impact management’s assessment as to the overall viability of its properties or the ability to generate future cash flows necessary to cover or exceed the carrying value of the Company’s exploration and evaluation asset properties.
(ii) Share-based payments
The Company uses the Black-Scholes option pricing model to determine the fair value of options and warrants in order to calculate share-based payments expense and the fair value of warrants. The Black-Scholes model involves six key inputs to determine fair value of an option or warrant: risk-free interest rate, exercise price, market price at date of issue, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates that involve considerable judgment and are or could be affected by significant factors that are out of the Company’s control. The Company is also required to estimate the future forfeiture rate of options based on historical information in its calculation of share-based payments expense.
(iii) Fair value of financial instruments
The Company measures its financial instruments at fair value. Where the fair value of financial assets and financial liabilities recorded in the financial statements cannot be derived from active markets, their fair value is determined using valuation techniques including a convertible note valuation model for the Convertible Debentures. The inputs used in these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
16 |
NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
changes in accounting policies
The accounting policies followed by the Company are set out in Note 4 to the Annual Financial Statements and have been consistently followed in the preparation of these financial statements except for the following change in accounting policy:
In the period ended March 31, 2019, the Company transitioned to IFRS 16 - Leases, as of January 1, 2019, using the modified retrospective approach and therefore comparative information has not been restated and continues to be reported under IAS 17 Leases (“IAS 17”). On initial application, the Company has elected to record right-of-use assets based on the corresponding lease liability. Right-of-use assets and lease obligations of $2,826,512 and $3,222,380, respectively, were recorded as of January 1, 2019, with no net impact on retained earnings. When measuring lease liabilities, the Company discounted lease payments using an incremental borrowing rate at January 1, 2019. The right-of-use asset was measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The weighted-average rate applied is 7.40%. Additional detail on the effect of adopting IFRS 16 - Leases are contained in Note 4 to the Interim Financial Statements.
Capital Management
The Company manages its capital structure, and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition, exploration and evaluation of assets. The Board does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain the future development of the business.
In the management of capital, the Company considers all components of equity 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 “Overall Performance”, the Company completed a Financing raising gross proceeds of US$110 million in the year ended December 31, 2017. In addition to holding sufficient US dollars to make all interest payments due under the Convertible Debentures until maturity, the Company is investing the remaining funds from the Financing into short-term products offering the highest yields.
The Company is not subject to externally imposed capital requirements. There were no changes in the Company’s approach to capital management during the three months ended March 31, 2019.
Financial Instruments and Other instruments
The Company’s financial instruments consist of cash and cash equivalents, amounts receivable, accounts payable and accrued liabilities, and convertible debentures. The risks associated with these financial instruments are discussed below.
The fair values of the Company’s cash and cash equivalents, amounts receivable and accounts payable and accrued liabilities approximate their carrying value, due to their short-term maturities or prompt liquidation ability. The Company’s cash and cash equivalents are initially recorded at fair value and subsequently at amortized cost with accrued interest recorded in amounts receivable.
The fair value of the Company’s Convertible Debentures is re-measured at its fair value at each reporting date with any change in fair value recognized in profit or loss.
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NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
The Company’s risk exposure and the impact on its financial instruments are summarized below:
(a) 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 cash equivalents, short-term investments and amounts receivable. The Company holds cash and cash equivalents and short-term investments with large Canadian and Australian banks. Credit risk is concentrated as a significant amount of the Company’s cash and cash equivalents on hand and short-
term investments are held at two financial institutions. Management believes the risk of loss to be remote. The Company’s amounts receivable consists of input tax credits receivable from the Government of Canada and interest accrued on cash equivalents and short-term investments. Accordingly, the Company does not believe it is subject to significant credit risk.
(b) Liquidity Risk
Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. The Company attempts to manage liquidity risk by maintaining sufficient cash and cash equivalent balances. Liquidity requirements are managed based on expected cash flows to ensure that there is sufficient capital to meet short-term obligations. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at March 31, 2019, NexGen had cash and cash equivalents of $103,853,612 to settle accounts payable and accrued liabilities of $8,528,611. The Company has issued Convertible Debentures with an aggregate repayment amount of US120 million which mature on July 22, 2022 if not converted or repaid prior to that date.
(c) Market Risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates and commodity and equity prices.
(i) 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 and cash equivalents 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 estimated fair values of the Company’s cash and cash equivalent balances as of March 31, 2019. The Company manages interest rate risk by maintaining an investment policy for short-term investments held in cash equivalents. This policy focuses primarily on preservation of capital and liquidity. The Company monitors its investments and is satisfied with the credit rating of its banks. The Convertible Debentures, in an aggregate principal amount of US$120 million, carry a fixed interest rate of 7.5% and hence, are not subject to interest rate fluctuations.
(ii) 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 include Australian and US dollar denominated cash and US dollar accounts payable and accrued liabilities. The Company maintains a Canadian and US dollar bank accounts in Canada.
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NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
The Company is exposed to foreign exchange risk on its US dollar denominated Convertible Debentures. At maturity the US$120 million principal amount of the Convertible Debentures is due in full, and prior to then at a premium upon the occurrence of certain events, including a change of control. The Company holds sufficient US dollars to make all interest payments due under the Convertible Debentures until maturity but not to pay the entire 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.
(iii) 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 Company’s earnings due to movements in individual equity prices or general movements in the level of the stock market. Accordingly, significant movements in the Company’s share price may affect the valuation of the 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 the price of uranium, individual equity movements, and the stock market to determine the appropriate course of action, if any, to be taken by the Company.
Sensitivity Analysis
As at March 31, 2019, the Company’s US dollar net financial liabilities were US$57,910,513. Thus a 10% change in the Canadian dollar versus the US dollar exchange rates would give rise to a $7,738,598 change in loss (profit) and comprehensive loss (profit).
The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks at this time.
INTERNAL CONTROL OVER FINANCIAL REPORTING (ICFR)
The Company’s management is responsible for designing and maintaining an adequate system of internal controls over financial reporting as required under National Instrument 52-109 - Certification of Disclosure in Issuers’ Annual and Interim Filings. The Company’s internal controls over financial reporting are based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsorship Organizations of the Treadway Commission (COSO).
Any internal control system, no matter how well designed, has inherent limitations. Therefore, internal controls can only provide reasonable assurance with respect to financial statement preparation and presentation.
There have not been any changes in the Company’s internal control over financial reporting during the Company’s most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
RISK FACTORS
The operations of the Company are speculative due to the high-risk nature of its business which is the exploration and development of mining properties. For a comprehensive list of the risks and uncertainties facing the Company, please see “Risk Factors” in the Company’s most recent annual information form and above 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 Company's future operating results and could cause actual events to differ materially from those described in forward-looking statements relating to the Company.
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NEXGEN ENERGY LTD. For the three months ended March 31, 2019 |
SEGMENT INFORMATION
The Company operates in one reportable segment, being the acquisition, exploration and development of uranium properties. All of the Company’s non-current assets are located in Canada.
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 NexGen’s business and the industry and markets in which it operates. Forward-looking information and statements are made based upon numerous assumptions, including among others, that the proposed transaction will be completed, 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 third party contractors, equipment, supplies and governmental and other approvals required to conduct NexGen’s 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. 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 Company’s 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 Company’s Annual Information Form dated March 4, 2019 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.
Approval
The Audit Committee and the Board of NexGen have 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, on the Company’s profile SEDAR website at www.sedar.com or by contacting the Corporate Secretary, located at Suite 3150, 1021 West Hastings Street, Vancouver, BC V6E 0C3 or at (604) 428-4112.
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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 March 31, 2019. |
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 issuer’s 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 issuer’s 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 issuer’s GAAP. |
5.1 | Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s 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 |
(b) | summary financial information about the proportionately consolidated entity, special purpose entity or business that the issuer acquired that has been proportionately consolidated or consolidated in the issuer’s financial statements. |
6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2019 and ended on March 31, 2019 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: May 9, 2019
“Leigh Curyer”
_______________________
Leigh Curyer
Chief Executive Officer
Exhibit 99.4
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Bruce Sprague, 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 March 31, 2019. |
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 issuer’s 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 issuer’s 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 issuer’s GAAP. |
5.1 | Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s 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 |
(b) | summary financial information about the proportionately consolidated entity, special purpose entity or business that the issuer acquired that has been proportionately consolidated or consolidated in the issuer’s financial statements. |
6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2019 and ended on March 31, 2019 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: May 9, 2019
“Bruce Sprague”
_______________________
Bruce Sprague
Chief Financial Officer