The ASX uranium share I'm going to talk about could significantly benefit from the growth in nuclear energy. That business is Nexgen Energy (Canada) CDI (ASX: NXG).
The world is looking to reduce emissions over the coming decades, and nuclear energy could play a part in that, according to some stakeholders.
The International Atomic Energy Agency (IAEA) said in late 2023 how it sees nuclear energy generation growing to 2050:
In the high case scenario of the new outlook, nuclear installed capacity is seen more than doubling by 2050 to 890 gigawatts electric (GW(e)) compared with today's 369 GW(e). In the low case, capacity increases to 458 GW(e). From last year's outlook, the high and low cases have risen by 2% and 14%, respectively.
…Amid a rapidly transforming global energy landscape, intensified by the COVID-19 pandemic, geopolitical situation, and military conflict, the significant increase in the capacity forecast underlines how more and more countries view nuclear energy as a resilient, reliable and low carbon energy source. The report also reflects nuclear power's importance in ensuring energy security to prevent future fluctuations in availability and prices.
Let's get into why the ASX uranium share Nexgen Energy is an attractive option.
Get energetic about Nexgen shares?
L1 Capital is a fund manager who's excited about the business. It notes that Nexgen is preparing to develop Arrow, the world's largest undeveloped uranium deposit located in Saskatchewan, Canada.
L1 says this will be a "major, new, strategic Western source to address the looming uranium market deficit".
The fund manager points out that the company is about to enter the final stage of federal approval, with a commission hearing expected in the first half of FY25.
After that approval has been granted, the ASX uranium share can commence full-scale project construction.
Once it's developed, the Arrow uranium deposit has the potential to generate more than C$2 billion of cash flow annually. L1 said that's a highly attractive proposition because of Nexgen's relatively low market capitalisation. According to the ASX, it currently has a market capitalisation of around $6 billion.
Latest announcements
In the last couple of months, there were two positive bits of news.
Nexgen announced its first uranium sales contracts for 5 million pounds with major US utilities. The contracts have market-related pricing mechanisms, and the short-term agreements position the business to "maximise value" in a strengthening uranium market.
At the end of January 2024, it said it had commenced an expanded 43,000 metre drill program at the Patterson Corridor East (PCE), located 3.5km east of the Arrow deposit. The initial results at PCE revealed "vein-type uranium mineralisation intersected with the competent basement rock, highly analogous to Arrow."
ASX uranium share snapshot
Over the past year, the Nexgen share price has fallen 11%, so it's cheaper for interested investors.
