Hong Kong Billionaire Li Bets on Uranium With NexGen Deal

  • NexGen raising $60 million to develop project in Saskatchewan
  • Uranium market set to tighten as mines near end of lifespans

Hong Kong’s richest man Li Ka-shing is making a bet that uranium prices, down more than 60 percent from a 2011 record, are set for a comeback.

NexGen Energy Ltd. has agreed to sell $60 million in convertible bonds to CEF Holdings Ltd. and affiliated shareholders to raise money to help develop uranium projects in Saskatchewan, the company said Wednesday in a statement. CEF Holdings is 50 percent-owned by Li’s CK Hutchinson Holdings Ltd.

“His involvement is a very good sign to generalist funds out there about uranium’s fundamentals,” NexGen Chief Executive Officer Leigh Curyer said by phone from Vancouver, where NexGen is based. “The current spot prices seem low but the fundamentals indicate there’s going to be a very large demand and supply gap -- that’s what you’re making a call on.”

NexGen expects to start production in the early 2020s, when the uranium market is set to tighten as older mines in Namibia and Australia end operations while demand from nuclear utilities in Asia and the Middle East ramps up, he said. 

The company’s shares rose 5 percent in Toronto to C$2.50, the highest in six weeks.

Higher Forecasts

Uranium is trading at about $27 a pound, down from over $70 in January 2011 before prices slumped following the Fukushima disaster in Japan. Forecasters predict uranium may average $44 a pound by 2017, according to estimates compiled by Bloomberg.

CK Hutchinson didn’t immediately respond to e-mails and a phone call made after hours to its headquarters in Hong Kong.

NexGen’s Arrow project is “the most promising uranium discovery in years,” Cormark Securities Inc. analyst Tyron Breytenbach said in a May 20 note. The asset is “a desirable takeout target for established producers.”

Curyer said the project “clearly” interests potential acquirers, though he declined to specify whether NexGen has been approached by suitors.

NexGen intends to reach production on its own, he said. “That’s our intention unless someone comes along with an offer that’s better than we can do by ourselves.”

Selling the unsecured convertible debentures to CEF Holdings will raise NexGen’s cash reserves to C$100 million ($76 million), according to the statement. That will be enough to complete exploration and development activities, Curyer said.

The company will issue a resource update by late this year, he said.

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