Hong Kong billionaire Li Ka-shing is betting that uranium prices, down more than 60 percent from a 2011 record, are set for a comeback.
CK Hutchinson Holdings Ltd., 50 percent controlled by Li, and affiliated shareholders, are buying US$60 million in convertible bonds from NexGen Energy Ltd. which is raising money to develop uranium projects in Saskatchewan, Bloomberg reports.
“His involvement is a very good sign to generate funds out there about uranium’s fundamentals,” NexGen chief executive 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 stock rose 5 percent in Toronto to C$2.50, the highest in six weeks.
Uranium is trading at about US$27 a pound, down from over US$70 in January 2011 before prices slumped following the Fukushima disaster in Japan.
Forecasters predict uranium may average US$44 a pound by 2017, according to estimates compiled by Bloomberg.
CK Hutchinson did not 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, although 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 (US$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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