Good morning. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the NexGen Energy Limited Rook 1 Feasibility Study Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a Q&A session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. Thank you. Mr. Curyer, you may begin your conference.
Thank you, Joanna. Good morning. My name is Leigh Curyer, President and Chief Executive Officer of NexGen Energy Limited. I'd like to welcome all attending this morning's conference call. Today's call will present in detail the exciting feasibility study results, which highlight the economic power and elite environmental performance of NexGen's 100% owned Rook I project as one of the world's leading resource developments. Before we start, I would like to direct those who are joining us by phone that the feasibility study presentation will be available on NexGen's corporate website at www.nexgenenergy.ca. Once on the homepage, please click on the Corporate Presentation link, and you'll be directed to the deck that is covered during today's call. Please note, today's call and webcast will be available for viewing on the website under the Media section for your perusal at your leisure.
Slide 2, please note the forward-looking statements disclosure. S lide 3. Other members of the NexGen executive joining me on this call today are Travis McPherson, Senior Vice President of Corporate Development, and Tony George, Chief Project Officer. Myself, Travis, and Tony will provide a summation of the feasibility study results and then open the call to questions. I'd like to commence by conveying the approach NexGen and its team has taken in the completion of this feasibility study. The study's key principle and approach commenced with a detailed understanding of the environmental assessment requirements in order to incorporate and meet all design, environmental, and community aspects. The key takeaway being that this feasibility study is comprehensive on every single component, validated by extensive data collection and testing since 2013. Over eight years of continual work covering geological, geotechnical, hydrogeological, metallurgical, and all aspects of environmental and community understanding.
The economic consequence of the study is simply outstanding, placing the project as one of the world's most highly economic mineral resource projects and, from an environmental aspect, one of the most elite operations globally, and will set a new standard in environmental mine management. The results of this feasibility study will be incorporated into the environmental impact study, scheduled for completion in the H2 of 2021. The completion and release of this feasibility study is a significant milestone for NexGen and all stakeholders. It elevates the company into a new and exciting stage of the project's development. The results, which Travis is about to convey, while truly remarkable in their own right, it is important to note they reflect the, only the initial 10.7-year stage of production, as per NI 43-101, based on measured and indicated mineral resources only.
Arrow has an additional 80.7 million pounds of inferred resources not included in today's feasibility study. Further, through past drilling, we are very aware there is additional mineralization, and that the project is completely open along the fringes of Arrow, which is not included in this global resource. Even though Arrow, as it currently stands, is an incredibly large uranium resource on a global scale, we have an enormous amount of future drilling to complete in order to fully assess the true extent of mineralization in and around Arrow itself. Along strike from Arrow, northeast and southwest along the Patterson Corridor, of which approximately 90% still remains untested. Further, there are an additional 8 conductive corridors that run in parallel to the Patterson Corridor, which hosts Arrow to the east of the Rook I property, to the east and on the Rook I property.
We could have 10 rigs running for 10 years full time and still not complete a full geological evaluation of Rook I. It is truly a remarkable project and will be paramount for generations to come. I'll now pass over to Travis to detail the results of the feasibility study.
Thank you, Leigh. So the FS summary results. The after-tax NPV, IRR, and payback are all incredible and industry-leading. Very unique in terms of the combination of NPV and IRR. The consistency we've seen through PEA, released in August 2017, through to PFS in November 2018, and now the FS, is quite unique and something that demonstrates the rigor NexGen has introduced from the discovery moment back in February 2014, when we knew immediately we had a generational project. It's important to note that the consistency exhibited through all the previous studies is a function of the technical and environmental simplicity of the Rook I project and will be highly advantageous through the environmental assessment process. These FS results are based on $50 per pound uranium....
We'll get into the market subsequently, and why this is a conservative figure today, detailing a sensitivity table, demonstrating that Rook I generates extremely high returns relative to the world's best resource projects across all commodities. In terms of CapEx, it's CAD 1.3 billion in total, which is very consistent with previous studies and extremely accurate at the Class 3 level of estimate. Additionally, we've transparently detailed the CapEx spend across the detailed project schedule, whereby CAD 157 million is pre-commitment, early works capital spending, which is defined as spending to advance the project to the point of committing to complete project execution. From that point, CAD 1.143 billion in project execution capital will be spent post an irrevocable commitment to the project construction completion.
In terms of average annual production, it's 29 million pounds of U3O8 through years 1 to 5, and approximately 22 million pounds life of mine over the almost 11-year FS initial mine plan, making it capable of becoming the largest future source of clean energy fuel globally, and all from Saskatchewan, the number 1 ranked mining jurisdiction globally. The average annual net cash flow after tax of over CAD 1 billion years 1 through 5, and CAD 750 million life of mine on an annual basis, would elevate NexGen to a top 15 global mining company on a free cash flow generation basis. Truly remarkable. The initial FS mine plan of 10.7 years, which is really just the initial phase.
As Leigh mentioned, the deposit remains open in all directions, and we hold a very large mineral inventory that is not included in the mine plan. It's important to note also that we are permitting for an initial 24-year mine life, as per our environmental assessment process. In terms of OpEx, it's among the industry's lowest, and particularly when looking at an all-in basis. This is attributable to the unique technical characteristics of the deposit, being basement-hosted, mon- and monometallic, lending itself to conventional and predictable mining and milling. Now I'll go through the top five feasibility study outcomes. Number one, enhanced environmental performance. The optimized facilities layout, reducing the project footprint by approximately 20% from that designed in the PFS, and lowering on-site personnel transportation and ore haulage. B, optimized shaft sizing, water usage through advanced water recycling and plant engineering, all delivering elite environmental standards.
C, confirmation of the industry-leading underground tailings management facilities preferred option from an environmental performance standpoint, which will set a new standard globally for responsible tailings management. Number two, high return on capital with a 0.9-year payback period and life of mine production flexibility. At $50 per pound uranium, Arrow is confirmed as one of the most economic mineral projects in the world, with its combination of very high NPV, very high IRR, and rapid payback period. When it comes to subsequent debt financing in the future, all of these factors are highly valuable and advantageous to NexGen. Due to the Arrow Deposit geometry, combined with the competent ground condition, this enables decoupled production areas in both the A-2 and A-3 zones, allowing for very unique strategic flexibility of production volumes throughout Arrow's life. Number three, CapEx accuracy.
The total CapEx of CAD 1.3 billion, comprised of CAD 157 million of early works and CAD 1.143 billion of pre-production execution capital. The estimate, again, is at a Class III AACE level. Number four, OpEx accuracy. Average OpEx per ton reduced by 1%, with mining, processing, and G&A costs all being reduced via the optimizations undertaken in the FS. OpEx per pound of U3O8 remains among the lowest in the industry at just $5.69 per pound. Number five, the highest level of mineral resource confidence. We are very proud that we have the first time declaration of measured mineral resources of 2.183 million tons, grading 4.35% U3O8, containing 209.6 million pounds U3O8.
Measured and indicated mineral resources grading 3.1%, containing 256.7 million pounds, supporting this initial 10.7-year mine life, which is an 11% increase in mine life from the PFS. Now I'll take a moment to talk about the uranium market briefly, and the production scheduling flexibility of Arrow. While the flexibility Arrow enables is quite important, highly unique, and strategic to ensure that market dynamics remain robust well into the future, it is key to understand that the base case in this FS is the base case for a reason. Given the lack of contracting over the past decade, combined with tremendous underinvestment and growing demand, have created a situation that requires multiple, new, large-scale uranium mines be discovered, developed, and brought into production now in order to meet the structural deficit....
UxC estimates 1.4 billion pounds of uncovered uranium requirements through 2035. An estimated annual supply gap of over 100 million pounds annually is forecasted over the same period. Therefore, our ability to flex down the Arrow production profile seems highly unlikely, although it would still mean a very robust project. Why are the fundamentals looking so good? Well, globally, we are seeing a new nuclear renaissance emerge as country after country make carbon neutrality commitments over the coming decades. This cannot be achieved even remotely, without significant growth in nuclear demand. Wood Mackenzie estimates China's nuclear capacity alone would have to increase twelvefold just to meet their 2060 commitment. On China, it is the fastest growing nuclear market in the world. Nuclear technology advancement is part of President Xi's Made in China 2025 plan, as and has continued to grow year after year.
The U.S. is currently the largest market for uranium consumption and nuclear generation, with approximately 100 reactors in operation. For the first time in multiple decades, there's widespread and bipartisan support for nuclear power, particularly with recent grid stability issues seen in places like California earlier in 2020 and most recently in Texas, and ongoing. Other countries continue to grow their nuclear capacity, including in the Middle East, led by the UAE, who brought the first of four reactors online in 2020. Saudi Arabia has made their nuclear ambitions clear by outlining a plan to bring at least 16 reactors online, and others in the region are looking to follow. Then you have the rapid development of small modular reactors, which continue to advance faster than anticipated.
This is a global, geopolitically motivated effort involving all of the major economies: the U.S., U.K., China, Russia, et cetera, as well as private groups, including Bill Gates. Recently, we've seen thought leaders around the world pushing policymakers to more quickly grow their nuclear capacity in order to ensure the post-COVID-19 recovery is a green one. So you have a situation with extremely stressed supply, relying on temporary and unsustainable sources of uranium, combined with demand that is growing faster than anyone predicted and has proven very resilient in the face of pandemics, extreme weather, and other things. This FS further validates NexGen's unique position of being able to provide the world's reactor fleet for the future with clean, reliable, and sustainable uranium supply. I will now pass off to our Chief Project Officer, Tony George, who will go into some specifics on the FS outcomes.
Thank you, Travis. Onto Slide 10. The completion of a feasibility study takes a team of men and women from many disciplines, covering technical, environmental, and community over many years. Today's feasibility study is the culmination of data and studies completed over more than eight years. The Rook I study, which I'll talk about now, was completed with the following independent firms: Stantec Consulting, were the lead consultant and responsible for mineral reserves, mining engineering, the underground tailings management facility, the paste tailings testing, site infrastructure, and the associated CapEx and OpEx, and were also responsible for the compilation of costs and the economic evaluation. Wood Canada were responsible for mineral processing and the processing plant design and engineering, and the waste and water management and associated CapEx and OpEx, which they fed through to Stantec for the evaluation. Roscoe Postle or RPA, were responsible for mineral resource.
Golder were responsible for environment, permitting, and social considerations, and there were various other sub-consultants, including BGC for geotechnical and hydrogeological, Arcadis for radiological studies, and UxC for the uranium market study. This slide shows the overall site layout, which encompassing, encompasses the shafts on the right-hand side, the process plant and support infrastructure, including the camp, offices, power plant, effluent treatment plant, and water management facilities. This layout has been optimized through the feasibility study to improve operability and also reduce environmental impacts. These include reduced water usage and improved water recycling, resulting in a smaller effluent treatment plant and therefore reducing the quantity of water discharged. Relocated surface ore pads resulted in reduced ore haulage, and the relocation of the camp closer to the facilities will also reduce personnel transportation, thus overall reducing our greenhouse gas emissions.
Improved operability and reduced environmental impact can be mutually beneficial, as is demonstrated in these initiatives. The design, layout, and engineering of the process facilities was also reviewed in detail through the feasibility study, and we've seen substantial reductions in site earthworks, reduced cut and fill quantities, and hence contributing to the reduction in the overall project footprint. If we move to Slide 11, of note, of course, the major focus of any feasibility study is to develop a robust capital cost estimate, which, along with more detailed OpEx, supports the economic evaluation. The CapEx, as Lee mentioned, is to a Class three level, which is ±15%, and was completed by Stantec, Wood, with the shaft designed by Thyssen Mining, and it was all compiled by Stantec.
The capital costs are based on the three-dimensional model, mechanical equipment lists, material takeoffs, vendor budget quotations on major and secondary equipment, and inputs from leading expert service providers with significant experience in construction projects in the north, in the Athabasca Basin, and globally. Indirect costs for the feasibility study were estimated from first principles to support the CapEx accuracy, and we also undertook extensive third-party reviews on aspects of the estimate to benchmark against similar projects. This feasibility study, through extensive site investigations, has optimized production of the production and exhaust shafts to ensure elite standards for radiation and ventilation management. As such, the production shaft from the pre-feasibility study increased from 6.5 meters to 8-meter diameter, but the exhaust shaft reduced to 5.5 meters from 6.5.
The dedicated shaft or pilot geotechnical holes that can be seen in the photographs here on this slide, but also in the press release, highlight the competent rock mass with no mineralization, no significant alteration, and no major structures encountered. A great deal of work was also conducted on the mine plan through the feasibility study, which resulted in the improvement in the mine layout itself, the pre-production development required, and optimized underground infrastructure design. Geotechnical studies during the feasibility study re-emphasized that the conventional longhole stoping mining method, including the use of longitudinal and transverse stopes with 30-meter level spacing and a nominal strike length of 12-24 meters. The ability to mine transverse longhole stopes through the A2 high-grade zone will support significant scheduling flexibility, enabling NexGen to uniquely correlate supply quickly and inexpensively to market conditions.
Extensive test work and engineering has determined that the proven technology in a conventional uranium processing flow sheet is the most effective for the production of U3O8 from Arrow. But a key differentiator for us, of course, is the elite environmental standards and disposal of all our tailings in a purpose-built underground tailings management facility or the UGTMF. Ongoing metallurgical testing resulted in supporting and refining the process design parameters, and the FS process recovery of 97.6% confirms the predictable nature of the processing flow sheet. The FS also confirmed that all processing waste streams can be stored in the UGTMF, and so no surface tailings facility is required. The UGTMF is a reflection of NexGen's industry-leading and environmental design approach, contributing to the significant reduction of the project's surface footprint.
Test work demonstrated that the paste fill strength meets or exceed all requirements for underground disposal. Moving on to Slide 12. The OPEX estimate, built up from first principles, is, in summary, unchanged from the pre-feasibility cost per ton processed. There was a slight increase in the unit cost of the tailings facility and paste plant, and this is due to the increased cement and binder content required from the test work program. Overall, the OPEX, as mentioned by Travis earlier, is just CAD 7.58 per pound or just short of $5.70 U.S. The feasibility study also defines the peak workforce, which will be approximately 470 people, of which 290 would be on site at any given time.
The expertise required here ranges from skilled labor, equipment operators, mining professionals, technical professionals, management, and administrative staff. NexGen's community-first approach ensures all opportunities are prioritized within the local region. Moving to Slide 13. As can be seen from the table, the measured and indicated mineral resource totals 3.75 million tons, grading 3.1% U3O8, and as such, contain 257 million pounds of U3O8, which supports the 10.7-year mine life. There is an additional, though, 81 million pounds of inferred mineral resource within Arrow, not including known mineralization on the periphery and the deposit or in the subsequent mineralized zones to the northeast and southwest of Arrow, along the Patterson Corridor.
I have to say that since joining NexGen as the Chief Project Officer, the commitment and professionalism of the team in this approach to all aspects of development of the mine is impressive. We continue to build that team as we look towards the next stage of development. The data quality and thoroughness of the studies completed before I arrived is industry-leading. I've had experience evaluating and building mines in many parts of the world, and not only is Arrow a phenomenal project from a technical, environmental, and economic aspect, the NexGen team members' commitment to responsible, develop a generational project that will benefit all stakeholders for many decades to come is really infectious. I will now hand back to Leigh Curyer to conclude our presentation.
Thank you, Tony, who joins us from our Saskatoon office. Slide 14, the key takeaways. It is purely a low cost, environmentally elite asset, no doubt about it. It's long life. You can see from the middle part of the middle slide there of the mine plan in the red and the blue, it. There is extensive mineralization outside of the 10.7-year mine plan, and that mineralization remains open in just about every direction. And of course, the jurisdiction. Saskatchewan consistently ranks amongst the world's best mining jurisdictions, with leading environmental and social practices. Slide 15, details just how impressive the project is in terms of sensitivity to the uranium price. We have used $50 as the base case.
But when you look at average contracting cycles during the 2004 to 2008 period, when after a 10-year hiatus, uranium went from $10 a pound in 2004 up to $140 a pound in 2008, little over 14 times increase in just over 4 years. The average contracting long-term contracting price was actually $70 a pound. And when you move forward to where we are today and given the state of the market fundamentals that Travis outlined, large demand and supply deficit only going to be growing wider and wider as we move through this decade. The talk of the Arrow Rook I project to increases in uranium prices is truly remarkable. In round terms, $10 added to the uranium price adds another CAD 1 billion in after-tax NPV at an 8% discount rate.
It's truly remarkable $100 a pound. That's well below where we went to during the last pricing cycle, and again, absolutely phenomenal returns at those prices. I just want to make the point, we believe that this upcoming cycle is going to be steeper and for longer than what we saw in 2004 and 2008. The primary reason for that is that the top five mines that were in production back in 2004 and 2008 are no longer in production today. So we believe what's coming, and we've already seen the early signs of it, is incredibly exciting for all investors in the uranium space. Just moving on to Slide 16. Sorry, on Slide 16. The key milestones that we have in front of us.
NexGen's had a very exciting start to 2021. With today's release of this major milestone, and with last week's announcement that our major shareholder, CEF, a partnership headed by Li Ka-shing, CK Hutchison Holdings Limited , and CIBC, elected to convert their $120 million indentures to equity, increasing their ownership from 8.7% to 18.7%. Ownership governed by a shareholder rights agreement, reflecting alignment with the company's long-term objectives, which places NexGen on an incredibly strong platform for the upcoming milestones over 2021 and beyond. These milestones being: community agreements, which are in progress. The maiden sustainability ESG report, which we're very much looking forward to release in, during this quarter, before the end of March 31. Team additions, Tony mentioned it. We're continually building out the team and attracting top quality personnel to the organization.
Our environmental impact statement submission in the H2 of 2021, along with our licensing submission in the H2 of 2021. The environmental and economic results of the Rook I feasibility study place the project as one of the leading global resource projects. Today's delivery is a significant milestone, which transitions NexGen into the next stage of advancement. The results will be included in the environmental assessment licensing process, which incorporates, importantly, engagement, consultation, monitoring, and data collection since 2013, over eight years ago. NexGen's team's commitment to elite standards is evident, not just through this feasibility study, but all aspects of the organization as a whole. A project with a minimal physical and carbon footprint, NexGen is uniquely positioned to become a world leader in the production of clean energy fuel from an environmentally elite operation.
The global energy matrix is undertaking an enormous shift that will rely heavily on nuclear energy to deliver the mega carbon decarbonization commitment for today and future generations. Nuclear has proven to be the safest, cleanest, and most reliably efficient form of power generation known to mankind. With all major countries signaling significant infrastructure spending and reprioritizing green energy policy as their major focus over this coming decade and beyond, Rook 1 will be a material component in the delivery of those global objectives. I would like to conclude by taking this opportunity to congratulate the entire NexGen team and our stakeholders. Thank you to the local communities where we operate, as well as the government of Saskatchewan and the federal government of Canada, for their outstanding commitment and support in the execution of Rook 1's project to date. I'll now open the call to questions.
Thank you. Ladies and gentlemen, we will now begin the Q&A session. Should you have a question, please press the star followed by the one on your touch tone phone. You will hear a three-tone prompt acknowledging your request. If you are using a speakerphone, please lift the handset before pressing any keys. First question comes from Andrew Wong. Please go ahead.
Hey, good morning, guys. Good job on that. It's... I'm sure you guys worked really hard, and it took a while, but it, it, it looks good. So you've talked a lot about production flexibility in the market, just to match the, the demand. And I'm curious what your thoughts are on Arrow. Like, I, I know that we're all very positive on the uranium market, but, you know, some of these things sometimes can take time to, to develop and improve over time. So what if there is a situation where uranium market is still, you know, it's getting up there, but not quite to the level where we, we all think it could get to, but Arrow is ready for construction? Like, what would the, the, the decision be around that?...
Would you go forward with it or would you wait for the market to develop a little bit more? I'm just curious about the thoughts around that. Thank you.
Thank you, Andrew. Look, I want to be very clear here. We'll be proceeding into construction under any pricing environment. Arrow will be one of the lowest cost producers from the world's best sovereign jurisdiction, and its production flexibility and significant economics means that it will break even at even a very minimal production rate. We are very adamant that we don't believe that will be the case. I think the world needs not just one Arrow, it's going to need multiple Arrows, particularly as we head into the middle part of this decade. So whilst I hear your question. I think, well, the answer is Arrow's got unbelievable production flexibility and will still make money even at a very low rate of production.
But we want to be very clear here, we don't believe that's going to be the case. And Arrow is certainly not going to be sufficient to fill the gap that we see materializing even as early in the middle part of this decade that we're in.
That's great, and it's good to have that flexibility, and I think that makes a lot of sense. NexGen has spent a lot of time and resources building a strong relationship with the local communities. Can you talk a little bit more about what the company's done there and what their relationships are like with the local communities? We see a lot of projects, and I think that's great. So if you can just talk about that. Thank you.
Thanks, Andrew, and it's something that we, we really like talking about. Since 2013, before we drilled even the very first meter of exploration drilling, we went and introduced ourselves to all the communities in the local project area, and at all times maximized economic employment. But also, community programs. We're well known for our breakfast club program in La Loche throughout all the schools, which is now being replicated in other communities throughout Canada. Our education programs, which currently see six students from La Loche now on full bursaries in university. Culture cabins. It is very, very a very proud aspect of what NexGen does, and it's incumbent on all shareholders of NexGen to subscribe to doing that.
We enjoy fantastic relationships with the local communities, and it's based on the respect that we have for all communities and all stakeholders. I think it's a real identifier of the organization and something that comes to us naturally and is very genuine.
That's great. I'll just hop back in the queue. Thank you very much.
Thanks, Andrew.
Thank you. The next question comes from Alexander Pearce. Please go ahead.
Great. Morning, all. So great to see the study out. So you've got two questions from me. So, I saw the head grade is lower versus the PFS, and I just wondered whether you could just go into a little bit more detail as what has, what's driven the lower head grade overall. And then the second question really just relates to your plans this year. Obviously, you've touched on the conversion, the convertibles last week. That's given you pretty significantly more balance sheet flexibility. Does that change your exploration plans this year, or are you going to put a few more drills on the ground and maybe build out that significant resource potential you were talking about?
Yes. Thank you, Alex. And look, with respect to the resource, it's purely a function of elevating the project into the higher category of measured. The estimation things are far more conservative. One example is grade capping. We've got very significant lengths of mineralization, which have been capped because of the extreme grade of the mineralization. It's purely a function of that. The deposit is enormous, as we all know, and has an incredibly high-grade heart. We are very happy with the result of the resource statement. And as we know, as per that figure on one of our images, shows that we're only using the high-grade heart of the Arrow mineralization. With respect to the CEF conversion, yes, you're absolutely correct.
We have significantly improved the balance sheet flexibility at NexGen, and future drilling is always something that we're very excited about. We have been focused on the feasibility study. It's been all hands on deck with respect to that. Now that that's completed, and we're well into the final stages of the EIS, it does free up our geological team to get back with some drill rigs on the ground, and that's something that we're currently contemplating and going through our processes as to where we're going to target. It will be in and around Arrow, but also, you know, extensions of Arrow and possibly new areas of mineralization along that Patterson Corridor. It really is an embarrassment of riches in terms of the number of prospective areas we've got to drill.
But i nvestors can start getting excited that we will have the drill rigs heading out there once the pandemic is under control and the safety of the community and the employees is at the forefront of that timing.
Great, thanks. And the question about the low head grade?
It's a function of, as I said, with the mineral resource estimate going into the Measured category, it's just purely a function of the, the more conservative factors-
Oh, I see.
That have been applied.
I wonder whether it was maybe some more dilution in there specifically, but just the top cut, basically.
C orrect.
Okay, thanks.
The next question comes from Justin Chan. Please go ahead.
Hi, guys. Congratulations on the study. I think it's... we knew this was a great project, and it's great to see that, you know, the parameters are confirmed this way. My first one's on the TMF. I'm just curious, as you drill or if you find more mineralization to put through the plant, can you talk us through how that, the design of the TMF would enable... I guess, how would-- how, where would you put the material if you do end up with more life of mine tailings? And, are there any, you know... I guess, how does the design incorporate flexibility for that?
We have drilled the area of the UGTMF to ensure that there's no mineralization there, and the drilling to date certainly suggests that. Given our very detailed understanding of the mineralization and the corridor that hosts it, there is absolutely no question that there is no mineralization in that proposed area of the UGTMF. So we're very comfortable with and very happy with the design layout and where that is located.
Gotcha. And in terms of ability to add more material to that UGTMF, if your mine life extends, can you talk us through, I guess, those considerations? Would you just add another level to it, or is there inbuilt flexibility? I guess when you scenario plan, how do you think about mine life extensions?
Ab solutely. That, we'd just add to it, increase the size. It, it's, we've got plenty of room there. And so, yes, we've got complete flexibility. Adding mine life, we'll just add chambers.
Gotcha. Is there any hard, hard number where you would look at putting, finding a new area, or is it not really within anything conceivable? Would it be the same place?
No, there's not. I think it's important to note that we are talking about a very small project here, a very small volume of rock that we're handling. We've got an enormous area to work with, but it's very, very tiny. So there's no hard caps with respect to that. And look, we are very confident, and I think everyone who looks at the project has the same conclusion: There's significantly a lot more mineralization in and around Arrow, and we've taken that on board with the design of the underground tailings management facility and where it would go if extended. So, we're certainly not capped for space.
Gotcha. In terms of the geotechnical work that you put in, I'm just curious, what were the key items for you that you were hoping to confirm? Was it just essentially, you know, rock mass stability or... And can you just talk us through, I guess, what your testing showed you?
Q uite right. With respect to the underground tailings management facility, first of all, proving there's no mineralization there. Secondly, competent rock, and then also the hydrology, as well. So we've tested it extensively and have had consistent results on those three factors with respect to that design.
Got you. And just my last one. I'm conscious I've hogged the line for a while now. In terms of the feasibility study and the leverage that gives you with utilities and the contracting market, do you think it gives you a big advantage from where you were before? Or, given the size and strength of the project, did you already have that leverage? Does this change anything in that respect for you, do you think?
I think it doesn't really change. I think one of the strengths of these results of today's result and also the prior results, like we've had a PEA in August of 2017, a PFS in November of 2018, and now the FS. And we've shown incredible consistency throughout those three studies, and I think that's important. So to answer your question, I believe the utilities are going to. It's just extra validation here. Obviously, we've also met it at an ultimate level of validation. But I think the fact that the technical setting of Arrow plus its jurisdiction really does speak volumes with respect to the utility demand for a project such as ours.
I believe it just is. Today's result is further validation for the utilities that they were aware of in the past.
Gotcha. Well, I think that's it for me, but thanks, thanks very much, guys, and, and congratulations.
Thank you, Justin.
Thank you. The next question comes from Brian MacArthur. Please go ahead.
Good morning. Sorry, I want to just go back to the flexibility again. A couple of questions. I guess first, you made a comment that you'll develop it no matter what, but it may be at a lower production rate. I just want to confirm, even if you were to run it at 15 million pounds, say, at the beginning instead of 30, given the high grade, the geometry, your costs actually don't change. And your comment about still making money with more an assumption that the price would be lower in that environment, more than the costs are gonna change significantly. I assume it would still be very, very economic, even if you ran it at a much lower rate.
Absolutely, Brian. A nd look, I think the economics with where they're at, and such the low cost at $5.69 a pound, and that cost is all in cost, just provides enormous flexibility depending on the market circumstances at the time. You know, we have identified a production rate per annum, based on the actual mine itself, and the mineralization as it sits, and that speaks to about a 1,300 ton a day operation. It's incredibly small. But to answer your question, if I have, I have done that well, incredible flexibility up in terms of you could produce at a much lower rate and still make money. I think Arrow is highly unique in that sense.
So maybe turning the question around then, as you said, you've been pretty consistent through the three studies, but you originally started at 1,450 tons a day. Where's the bottleneck in the system? Let's go the other way and say, maybe the market's even better than you think. Can you actually, you know, a lot of systems are based for 10% flexibility, and 10% on 1,300 tons is a fair bet if you're putting grades through like this. Where's the bottleneck? Is it the underground tailings, or do you actually have the flexibility to go up over, you know, 29 million pounds in the early years, if, if the market's there?
Look, yes, we could. There's no real bottlenecks. O bviously, the shaft sizing ultimately would become would be limited to if we significantly went up over and above the 1,300 tons a day. But there's no bottlenecks from the underground tailings management facilities. It's just a it would be a function of moving more rock. So we'll be happy to tackle that in the market where there's a demand for even greater than 29 million pounds from Arrow. W e're comfortable in either scenario.
That's great. Well, it's nice to have lots of flexibility going forward. Thanks very much.
A nd Brian, just to conclude, I think that's the key point here. Given the technical characteristics of the project, there's enormous flexibility with respect to Arrow at the production range we've outlined.
Maybe at least, sorry, one final question. You still hope first production 2025, 2026?
It's very difficult to put an exact date on it. It's achievable, but it's obviously subject to the environmental assessment process, and we certainly respect that process. What I can tell everyone, it will be in production as soon as it's possible, based on the commitment and dedication of the NexGen team.
Fair enough. Thanks very much.
The next question comes from Colin Healey. Please go ahead.
Hey, guys. I guess I'd offer my congratulations also. It's, you know, incredible project, and I've been a huge proponent of it for since the outset. Most of my questions have been covered off, but maybe just talk about, I know it's early days, but what would your vision be for the financing of the CapEx of the project? You know, you obviously have some really strong strategic partners with deep pockets. Just wondered if you had any ideas about that at this time.
Thanks, Colin, and yes, you have been there right from the very beginning, and I and myself and Travis and the whole team certainly appreciate your interest in our project over the journey. Given the payback of the project and the economics, it's just amenable to a large percentage of debt financing, and so it's a one of the absolute strengths of the project. So we will obviously look at maximizing that debt component. And I think the takeaway for all investors today is that the equity component that will be raised as part of that financing through to positive cash flow will be very, very low in the whole scheme of things.
So, you know, we've got tremendous flexibility on that project there. And that's something that Travis and I have been working on in parallel, and you'll see our efforts on that front at the end of this year. Once we're close to submitting that environmental impact statement, we will really ramp up pursuing and concluding that project debt financing at that time. But suffice to say, the project can handle a very high percentage of debt, and there will be a very low component of equity raised between now and positive cash flow.
Fantastic. I think that wraps it up for me. As I said, I was covered off with the other questions. Thank you.
Thank you, Colin.
Thank you. The next question is a follow-up from Craig Hutchison. Please go ahead.
Hey, guys. This is my first question. Again, congrats on the study this morning. My question is on the timeline construction. You know, with the change to the shaft, getting the diameter has gone up here, I think, to 8 meters. What's the timeline to sink that shaft?
I'll just might hand over to Travis or Tony on this one, but we'll start with Travis.
Sorry, could you repeat the question, Craig?
I just with the change to the shaft design, just curious in terms of construction timeline. I imagine that's those are the longest items to do. What's the timeline to sink that shaft?
W e'll defer to Tony, but, but, generally speaking, the timeline, given the increase in one shaft diameter and the decrease in the other, the shaft sinking schedule hasn't materially changed at all. But, but Tony can give you some further color on that.
I t's about, I think it's about 2.5 years. There's some pre-work as well, but the shaft sinking itself is unchanged. I'd have to dig, pull up a schedule to answer that question, but the shaft sinking rate isn't particularly affected by the diameter. They both go down about the same rate.
Okay. Maybe just a question. Grades have been asked a few times here, but let's say the grade profile in the first few years, obviously, common between the feasibility and the pre-feasibility study. Is there a zone that didn't true up as much as you guys expected, maybe the A3 low-grade zone or something later in the mine life?
No, no. It's very much purely a function of the parameters that have been applied to the estimate being far more conservative than what you see in the PFS. So that, that mineralization hasn't disappeared. I think it's purely... Well, I don't think it's purely a function of that. We've just got far greater conservatism around the parameters to estimate the measured category of the resource.
Okay. I have one last question for you guys. Is there any way you can give us cost with royalties, what that operating cost would be, plus to guide on a, on a a U.S. dollar basis? Do you have that number at hand?
Sorry, Craig. You are just breaking up. If you could just repeat your question, please.
Sorry, I was just wondering if you had the provide us with the all-in costs, including the Saskatchewan royalties, whether you have that number as well, in addition to just the costs per site.
We'll send them to you. We have them, but we'll send them through to you, Craig.
Perfect. Thanks, guys.
And we'll put them on the website as well.
That's great. Thank you.
Thank you, Craig.
Thank you. The last question comes from Katie Lachapelle. Please go ahead.
Hi, guys. Congrats on some very impressive results. Most of my questions have also already been taken. Maybe just one with respect to project permitting. Can you provide an update with the ongoing negotiations of impact benefit agreements? When could we expect to maybe hear some further news on this? And, and is the plan really to have the agreement still all signed prior to final submission of your EIS?
T hanks, Katie. Look, the negotiations are ongoing, as we're very confident that they will conclude. And they're progressing very, very well. We're currently negotiating with four local communities in the local project area. And I've got to say, the commitment to those negotiations is absolutely outstanding. So we are confident over the next period or 2021, you're going to see those agreements materialize. And we're looking forward to concluding those agreements. So to answer your question, they're progressing very, very well. And 2021, just watch this space.
That's all for me. Thanks, guys.
Thank you, Katie.
Thank you. There are no further questions at this time. You may proceed.
Thank you. So, any questions? No, all good. Okay. Well, look, I'd just really like to conclude by thanking everyone for their attention this morning, but also those on the call that have been with us since the day we started the company. Results like this involve many, many people and shareholders, communities, government, engineering firms. We have a huge pool of people who are all committed to this objective, and it's an absolute pleasure and honor to be the CEO of the organization in leading these objectives. And, I just wanna personally thank everyone on this call and throughout the journey for today's milestone.
But we are equally as excited about the milestones that we have in front of us, many of which are due to materialize based on all the work completed over the years. So, it's an exciting stage for us, exciting period coming up, and a highly committed team who is working daily to deliver it. So, thank you all.
Ladies and gentlemen, this concludes the conference call for today. We thank you for participating, and we ask that you please disconnect your lines. Enjoy the rest of your day.