NexGen Climbs as Li Ka-shing Doubles Down on Uranium Explorer

(Bloomberg) -- Hong Kong billionaire Li Ka-shing isn’t fazed by a commodity that’s been on the skids for five years. He just more than doubled down on his investment in a Canadian uranium explorer.

NexGen Energy Ltd. soared as much as 11 percent Friday after announcing $110 million in financing from CEF Holdings Ltd., which is 50 percent-owned by Li’s CK Hutchinson Holdings Ltd. That follows a previous deal for $60 million a year ago.

“It’s a very strong validation from Li of the need for nuclear power in that part of the world,” NexGen Chief Executive Officer Leigh Curyer said by phone from Vancouver. “Uranium prices are at historic lows, and the world’s top two producing miners are experiencing economic difficulties -- that means the price of uranium has to rise.”

Under the deal’s structure, Li and his son Victor also will be allowed to appoint one of the company’s seven board members, according to Curyer.  

“Seriously valuable rock” is how Cormark Securities Inc.’s Tyron Breytenbach has described NexGen’s Arrow project in Saskatchewan, considered one of the world’s most promising deposits of the metal used by power plants to produce nuclear energy.

Larger-Than-Anticipated

NexGen, which is up 23 percent this year in Toronto trading, had sought more financing after exploration studies indicated a resource base much larger than originally anticipated -- 300 million pounds instead of the 202 million pounds the company had stated just a year earlier.

The latest investment is enough to meet the Vancouver-based explorer’s financing requirements for the next three to four years, which should get Arrow through exploration until it requires fresh funds for production infrastructure, according to Curyer.

Arrow is expected to start production early in the next decade, when a global uranium glut is set to tighten as older mines close and new reactors in Asia and the Middle East fuel demand. Uranium prices have been depressed since the 2011 earthquake and tsunami that crippled Tokyo Electric Power Co.’s Fukushima Daiichi power station, bringing the uranium market to its knees.

Uranium is trading at about $20.50 a pound on the spot market after falling to a 12-year low of $17.75 a pound in November, according to Denver-based TradeTech. Forecasters predict uranium spot prices may recover to $62 a pound by 2020, according to estimates compiled by Bloomberg.

To contact the reporters on this story: Natalie Obiko Pearson in Vancouver at npearson7@bloomberg.net, Natalie Wong in Toronto at nwong133@bloomberg.net.

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net, Steven Frank, Joe Richter