Dundee Capital Markets Initiating Coverage: NexGen Energy Ltd. (July 2013)


Published on

David Talbot of Dundee Capital Markets comments on Athabasca Basin uranium explorer NexGen Energy. NexGen Energy is an exciting new uranium explorer...

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Dundee Capital Markets Initiating Coverage: NexGen Energy Ltd. (July 2013)

  1. 1. Please  see  Disclosures  and  Disclaimers  at  the  end  of  this  report.   A  division  of  Dundee  Securities  Ltd.   Dundee  Capital  Markets  is  a  registered  trademark  of  Dundee  Corporation,  used  under  license.   NexGen  Energy  Ltd.   (NXE-­‐V:  C$0.25)   July  2,  2013   BUY,    Venture  Risk Dundee  target:  N/A   David  A.  Talbot  /  (416)  350-­‐3082   dtalbot@dundeesecurities.com   Aaron  Salz  /  (416)  350-­‐3371   asalz@dundeesecurities.com   NexGen  Energy  -­‐  Athabasca's  Next  Big  Uranium  Explorer     Conclusion:  We  are  adding  NexGen  Energy  to  our  Mineral  Exploration  Watch  List   with  a  BUY  rating,  Venture  Risk  and  no  target  price.  NexGen  Energy  is  an  exciting   new  uranium  explorer,  and  one  we  believe  is  poised  to  become  the  next  premier   explorer  in  the  Athabasca  Basin.  It  has  already  amassed  an  impressive  land  package   with  two  main  projects  in  what  we  would  consider  the  two  of  the  most  prospective   areas  in  the  Athabasca  to  host  uranium.  As  this  new  name  becomes  recognized,   and  understood  to  be  an  aggressive,  multi-­‐project  explorer  with   a  focus  on  high   grade  discovery  in  the  Athabasca,  we  believe  the  stock  should  come  into  its  own.   Radio  is  adjacent  to  Roughrider  (70%  earn-­‐in).   This  flagship  project  is  along   strike  immediately  east  of  Rio  Tinto's  58  MM  lb  U3O8  Roughrider  deposit.     Rook  1  is  adjacent  to  PLS  discovery  (100%).  Project  shares  1.5km  of  strike  of   the   same   mineralized   conductor   where   Fission   Uranium   (FCU-­‐V,   Buy,   Speculative  Risk,  No  Target)  has  discovered  its  three  shallow  high  grade  zones.       Busy  summer  expected.  With  ex-­‐Uranium  One  (UUU-­‐T,  Tender,  C$2.86  Target)  and   ex-­‐Hathor   management   on   board,   and   support   from   Mega   Uranium   (MGA,   Not   Rated)  this  team  has  both  exploration  and  capital  market  prowess.  Cash  stands  at   $6  MM  with  plans  to  spend  $3.8  MM  this  year,  much  via  Radio  drilling  as  a  part  of   its  $15  MM  over  three  years  earn-­‐in  for  70%  interest.  A  smaller  recon  drill  program   and  geophysical  surveys  are  planned  at  Rook  1  near  PLS.     Two   ideally   positioned   projects.   We   believe   the   prospectivity   of   its   two   main   projects   is   immense   as   they   are   adjacent   to   what   we   consider   two   of   the   best   uranium   discoveries   in   the  past   five   years.   Radio   has  never   been   drilled   but   lies   along  trend  of  Roughrider  (Figure  1).  This  is  the  project  on  which  the  company  was   founded  and  its  earn-­‐in  was  streamlined  to  better  suit  investor  needs,  eliminating   down  the  road  dilution  and  cash  payments.  The  project  is  drill  ready   and  strong   geophysical  targets  will  be  tested  soon.  Rook  1  is  what  really  excites  -­‐  sharing  the   same   mineralized   trend   as   the   three   shallow   PLS   discoveries   (with   up   to   6.26%   U3O8  over  49.5m  including  35%  over  6m  at  R390E  Zone;  4.8%  over  22m  at  R00E   Zone).  Rook  1  remains  largely  untested  but  there  are  similar  coincident  geophysical   conductors   and   historical   radon   anomalies   which   highlights   the   potential   for   discovery  of  shallow  high  grade  uranium  at  Rook  1  (Figure  2).   Venture  Risk.  We  feel  this  rating  is  appropriate  given  the  early  stage  of  exploration,   capital  structure  and  earn-­‐in  requirements  faced.  Main  projects  are  untested  and   unproven,  and  while  proximity  to  deposits  is  encouraging,  it  doesn't  ensure  success.   A  new  firm  with  minimal  float  could  mean  low  liquidity,  particularly  in  this  market.   About   52%   of   NXE   stock   is   held   by   Mega   Uranium   and   Tigers   Realm   Minerals   including  42%  held  in  escrow  to  be  released  over  three  years,  although  we  don't   expect  it  to  be  divested.  Indigenous  land  claims  are  unlikely  in  either  project  area.     NXE-­‐V:  Price/Volume  Chart     Source:  Factset   Company  Description   NexGen  Energy  is  a  Canadian  based  uranium   exploration   and   development   company   focused   on   the   Athabasca   Basin   in   Saskatchewan.   The   company   has   a   large   land   package   in   the   Basin   with   two   highly   prospective   flagship   projects   -­‐   Radio   and   Rook  1.  Radio  is  located  in  the  NE  part  of  the   basin  on  the  Roughrider-­‐Midwest  trend.  The   company   is   currently   earning   in   to   a   70%   interest   in   the   property.   The   100%   owned   Rook  1  property  is  located  directly  northeast   and   potentially   on   strike   of   the   recent   PLS   property.  NexGen  holds  several  other  claims   in  the  area.  
  2. 2. NexGen  Energy  Ltd.   July  2,  2013   DUNDEE  CAPITAL  MARKETS      Page  |  2 Radio  Project  -­‐  Eastern  Athabasca  -­‐  Roughrider/Midwest  Camp   Searching  for  a  Roughrider  satellite.  This  project  is  interpreted  to  be  a  continuation  of  the   east-­‐west  structural  corridor  that  hosts  the  J  Zone,  Roughrider  West,  Roughrider  East  and   Roughrider  Far  East.  In  total  that  is  71  MM  lbs  that  lies  just  along  strike.    The  Roughrider   projects  were  discovered  by  Hathor  in  2008  and  may  represent  one  of  the  most  successful   discoveries  in  recent  years.  Hathor  was  taken  out  for  $642  MM  in  late  2011  by  Rio  Tinto   after  delineating  58  MM  lbs  (avg.  grade  of  4.73%  U3O8)  of  resources.  It's  located  within  a   10km  radius  of  over  150  MM  lbs  U3O8  including  these  deposits  plus  Midwest,  Dawn  Lake,   McClean  Lake.  Radio  is  situated  close  to  infrastructure  -­‐  a  paved  highway,  power  lines,  and   just  11km  from  the  McClean  Lake  Mill  and  25km  from  the  Rabbit  Lake  Mill  (Figure  3).     Strong  geophysical  targets  ready  for  drilling.  A  detailed  aeromagnetic  and  VTEM  survey  was   completed  in  May  2011,  followed  up  by  detailed  ground  gravity  and  resistivity  surveys  last   year.  The  presence  of  similar  structural  trends  that  host  nearby  Roughrider,  Midwest  and   Dawn  Lake  mineralization  were  confirmed  on  Radio  ground.  At  least  eight  targets  have  been   identified  from  past  work.  With  drill  targets  in  mind,  NXE  plans  to  spend  $2.25  MM  on  a  12   hole,   4,400m   diamond   drilling   campaign   focused   on   the   property's   western   boundary   (Figure  4  &  5).  The  goal  is  to  drill  test  for  unconformity  style  mineralization  at  about  200-­‐ 210m  depth  and  then  follow  on  into  underlying  rocks  to  seek  Roughrider  style  basement   mineralization.     The  Radio  project  earn  in  has  evolved.  Only  exploration  spending  requirements  remain  for   NexGen  to  earn  70%  interest  in  the  property.  There  are  plans  to  spend  $2.25  MM  this  year,   an  additional  $5  MM  is  due  by  31-­‐Mar-­‐14,  $5  MM  by  31-­‐May-­‐14,  and  the  final  $5  MM  due   by  31-­‐Mar-­‐15.  On  June  26th,  NexGen  announced  it  will  settle  the  remaining  $2.9  MM  cash   obligation  and  20%  ownership  right  (fully  diluted)  to  the  optionors  by  issuing  shares.  NexGen   will   issue   26.7   MM   shares   at   $0.33,   and   4.4   MM   18-­‐month   warrants   at   $0.50.   Despite   current  dilution,  we  believe  this  deal  greatly  benefits  NexGen,  allowing  all  future  cash  to  be   spent  on  exploration  rather  than  satisfying  option  agreements.  This  removes  the  financing   overhang,  which  in  such  a  volatile  equity  and  uranium  market,  would  likely  mean  the  risk  of   financing  at  lower  than  current  levels.     Rook  1  Project  -­‐  Western  Athabasca  Basin  -­‐  PLS  Camp   Following  the  boulder  train.  The  western  side  of  the  Athabasca  Basin  has  heated  up  on  the   back  of  finding  the  large  5km  x  900m  high  grade  uranium  mineralized  boulder  field  and  the   subsequent  drilling  successes  resulting  in  multiple  spectacular  high  grade  discoveries  at  PLS.   Rook  1  project  is  directly  northeast  and  potentially  along  strike  of  the  PLS  discovery,  up-­‐ice   of   the   high   grade   boulder   field.   In   fact   there   could   be   a   potential   extension   of   the   host   conductor  (PL-­‐3B)  on  to  Rook  1.  NexGen  appears  to  have  similar  co-­‐incident  gravity  lows  and   strong  EM  conductors  that  have  been  associated  with  the  PLS  discovery  (Figure  6).   Perhaps   the   best   PLS   area   play.   Aside   from   ground   zero   of   Fission   Uranium   and   Alpha   Minerals  (AMW-­‐V,  Not  Rated)  we  believe  NexGen  has  perhaps  the  best  claims  in  the  PLS   area.   Majors   such   as   Cameco   (CCO-­‐T,   Buy,   High   Risk,   C$25.20   Target)   are   proposing   a   significant  increase  in  spending  with  JV  partner  Purepoint  Uranium  (PTU-­‐V,  Not  Rated)  and   AREVA.  AREVA  and  JV  partner  UEX  Corp.  (UEX-­‐T,  BUY,  C$1.70  target)  is  increasing  its  Shea   Creek  focus  south  of  the  96  MM  lb  deposits,  along  the  Saskatoon  Lake  Corridor  towards  PLS,   and  at  two  or  three  other  projects  to  the  east.  We  would  note  that  Azincourt's  (AAZ-­‐V,  Not   Rated)  Paterson  Lake  North  (PLN)  project  also  holds  an  interesting  piece  of  real  estate  along   a  major  N-­‐S  structural  corridor;  and  Forum  Uranium  (FDC-­‐V,  Not  Rated)  has  demonstrated   several  lake  sediment  anomalies.       Rook  1  -­‐  PLS  extension.  Not  much  is  known  about  this  particular  property  yet,  but  we  are   familiar   with   Fission/Alpha's   PLS   property.   That   is,   shallow   (<100m),   flat   lying   basement   hosted   mineralization   often   with   broad   radioactive   zones   and   a   core   of   more   intense  
  3. 3. NexGen  Energy  Ltd.   July  2,  2013   DUNDEE  CAPITAL  MARKETS      Page  |  3 alteration  and  mineralization.  It's  this  type  of  target  NexGen  hopes  to  hit  when  it  embarks   on  a  short  drill  campaign  this  summer  of  maybe  6  holes  for  1,500m.  We  note  the  property   appears  to  have  the  continuation  of  host  conductor  PL-­‐3B,  maybe  off-­‐set  by  a  fault  before   entering  the  property.  NexGen  will  likely  focus  its  initial  exploration  efforts  here.  A  ground   gravity   survey   was   recently   completed,   with   data   still   being   processed,   and   a   ground   resistivity  survey  is  planned  to  refine  drill  targets  for  later  this  summer.     Significant  Athabasca  Basin  land  package   NW  Athabasca  JV  showing  promise.  NexGen  and  50/50  JV  partner  Forum  Uranium  (FDC-­‐V,   Not  Rated)  jointly  own  60%  of  the  NW  Athabasca  project  having  earned  in  over  the  past  few   years.  Cameco  holds  27.5%  and  AREVA  the  remainder.  Located  on  the  northwest  side  of  the   Athabasca  Basin  this  is  a  modestly  explored  project  that  shows  promise.  The  Maurice  Bay   deposit  hosts  1.5  MM  lbs  but  grades  a  nice  0.6%  U3O8.  The  Maurice  Bay  Fault  Zone  A  has   returned   up   to   1.3%   over   3m   recently.   This   JV   partner's   recently   intersected   basement   hosted   mineralization   at   its   Otis   West   target,   hitting   up   to   0.152%   U3O8   over   39.5m   including  0.21%  over  24.5m  (see  our  note).  The  zone  can  be  traced  for  roughly  50m  already,   but  holes  on  two  other  sections  were  interpreted  to  have  undershot  the  mineralization   -­‐   suggesting  potential  for  further  expansion.  There  appears  to  be  a  broad  zone  of  uranium   located  within  the  footwall  of  the  Oits  Fault,  suggesting  a  significant  mineralization  system   may   be   present.   This   east-­‐west   structure   remains   open   to   the   east,   and   is   essentially   n  the  JV  heading   back  until  next  winter  when  drilling  can  be  conducted  more  cost  effectively  on  the  frozen   muskeg.     Mega  Uranium  Canadian  project  pipeline  waiting  in  the  wings.  In  addition  to  Radio,  Rook  1   and   NW   Athabasca,   NexGen   has   an   extensive   land   package   of   projects   in   just   about   all   regions   of   the   Athabasca   Basin.   These   came   over   as   a   part   of   Mega   Uranium's   strategic   alliance  with  NexGen,  where  we  saw  Mega  take  shares  in  NXE  in  exchange  for  cash  and  its   existing  Athabasca  projects  (essentially  everything  but  Radio).  Projects  on  the  south  western   and  western  side  of  the  basin  include:  Castle  North  and  South,  Gartner  Lake,  Maybelle  River,   R  Seven,  Bishop  1,  Meanwell  Lake,  Bishop  2,  Virgin  Trend,  Sand  Hill  Lake,  Dufferin  Lake  and   Rook  2  (Figure  7).  On  the  eastern  side  of  the  basin:  Fleming  Lake,  BZ,  Carlson  Creek,  and   Thorburn  Lake  (Figure  8).  We  only  expect  claim  maintenance  spending  at  the  majority  of  the   projects  while  NexGen  focuses  on  its  two  projects  and  Forum  on  the  other.  There  is  no  hurry   to  carry  out  any  exploration  elsewhere  in  the  current  junior  exploration  or  uranium  market.   Strengthening  Management  and  Board  Depth   Extensive  capital  market   and   uranium   expertise.  CEO   Leigh   Curyer   has   over  18  years   of   experience   in   the   resources   and   corporate   sector,   most   recently   as   CFO   and   head   of   corporate  development  at  Southern  Cross  Resources  (now  Uranium  One).  Gordon  Bogden,   Chairman,  has  30  years  of  experience  in  the  mining  industry,  specifically  on  the  debt  and   equity   capital   market   side   acting   most   recently   as   Vice   Chairman,   Metals   and   Mining   at   Standard   Chartered   Bank.  Recent   hires   James   Sykes   and   Matthew   Schwab   are   ex   Hathor   (now  Rio  Tinto)  exploration  geologists.  Mr.  Sykes  joins  as  a  Senior  Geologist  and  Mr.  Schwab   as   an   Exploration   Geologist.   The   two   played   key   roles   in   discovering   and   defining   mineralization  at  Roughrider.         Capital  structure   NexGen  officially  began  trading  on  23-­‐Apr-­‐13  on  the  TSX-­‐V.  As  a  private  company  NexGen   was  highly  successful,  raising  $15.6  MM  over  the  past  twelve  months.  There  are  85.7  MM   shares   outstanding   and   100.4   MM   shares   fully   diluted   (pre-­‐Radio   cash   portion   buyout).   NexGen  will  issue  26.7  MM  shares  at  $0.33,  and  4.4  MM   18-­‐month  warrants  at  $0.50  to   settle  the  remaining  $2.9  MM  cash  obligation  and  20%  ownership  right  (fully  diluted)  to  the   optionors.   Pre-­‐deal,   about  52%   of   NXE   stock   is   held   by   Mega   Uranium   and  Tigers   Realm  
  4. 4. NexGen  Energy  Ltd.   July  2,  2013   DUNDEE  CAPITAL  MARKETS      Page  |  4 Minerals  (seed  capital).  Mega  obtained  interest  through  a  deal  that  saw  $5  MM  in  cash  and   all  Mega's  Canadian  assets  transferred  to  NexGen.  About  42%  of  shares  outstanding  held  in   escrow  to  be  released  over  three  years  (by  Mega  and  Tigers  Realm),  although  there  is  every   indication  that  it  won't  be  divested  by  these  two  strategic  partners.  Mega  owns  25%  (again,   pre-­‐deal)  but  is  willing  to  be  diluted  downward  as  new  investors  come  into  the  company.     Numerous  pending  catalysts:   Q3/13  -­‐  Resistivity  survey  work  on  Rook  1  and  other  southwestern  Athabasca  claims.   We   expect   to   gain   more   insight   into   potential   targets   around   the   PLS   area   claims.   Specific  attention  will  be  paid  to  confirming  that  Fission's  PLS  EM  conductors  continue   on   to   Rook   1.   While   not   necessarily   stock   moving   news,   positive   geophysical   results   increase  the  chances  of  drill  success.     Q3/13  2013   -­‐  Drill  results  from  Radio.  We  expect  to  start  seeing  some   assay  results   from   the   planned   12   hole,   4,400m   diamond   drilling   program.   There   should   be   good   knowledge  carryover  as  former  Hathor-­‐Rio  Tinto  geologists  have  just  joined  the  team.   Q3/13-­‐Q4/13  -­‐  Drill  results  from  Rook  1.  A  short  drill  campaign  of  maybe  6  holes  for   1,500m  is  planned.  Given  the  projects  proximity  to  PLS  and  potential  for  similar  style   mineralization  this  is  likely  to  be  the  largest  catalyst  immediately  pending.     Winter  2014   -­‐  About  $10  MM  must  be  spent  by  the  end  of   May  2014  on  the  Radio   project.  This  will  certainly  require  another  round  of  drilling.   Winter   2014   -­‐   We   also   expect   the   Forum/NexGen   JV   at   Athabasca   NW   to   complete   another   round   of   drilling   in   the   Maurice   Bay   area,   targeting   Otis   West   (0.152%   over   39.5m)  and  perhaps  Otis  East  amongst  other  gravity  low  targets.   Valuation  -­‐  Still  Early  Stage   We  do  not  assign  value  or  a  target  price  to  NexGen  given  its  early  stage  nature  and  lack  of   resources.  You  buy  this  stock  for  the  capital  appreciation  potential  that  comes  when  sharing   in  the  potential  of  a  high  grade  uranium  discovery.  We  present  a  peer  comparison  table   (Table  1)  and  relative  stock  price  performance  chart  for  this  new  stock  (Figure  9)  showing   NexGen  lags  its  peer  since  April  29th,  2013.  However,  having  missed  the  winter  drill  season,   the  company  should  report  news  flow  for  the  market  to  absorb  going  forward.  As  this  new   name   becomes   more   recognized,   and   understood   to   be   a   more   aggressive,   multi-­‐project   explorer   with   a   focus   on   discovering   high   grades   in   the   Athabasca,   we   believe   the   stock   should  come  into  its  own.    
  5. 5. NexGen  Energy  Ltd.   July  2,  2013   DUNDEE  CAPITAL  MARKETS      Page  |  5 Figure  1:  Radio  property  location  map  on  the  eastern  side  of  the  Athabasca  Basin.  The   project   is   within   a   10km   radius   of   150   MM   lbs   of   delineated   uranium   (including   Roughrider,  Midwest  A,  Midwest  Lake).       Source:  Company  Reports        
  6. 6. NexGen  Energy  Ltd.   July  2,  2013   DUNDEE  CAPITAL  MARKETS      Page  |  6 Figure  2:  Rook  1  claims  adjacent  to  PLS.  The  host  conductor  for  PLS  (PL-­‐3B)  may  continue   onto  NexGen's  property  -­‐  NexGen  will  confirm  this  through  resistivity  surveys  this  summer.       Source:  Company  Reports     Figure  3:  Air  photo  of  the  Midwest-­‐Roughrider  camp  and  the  proximity  of  nearby  deposits   in  relation  to  Radio.  Note:    J-­‐Zone  now  measures  13  MM  lbs.     Source:  Company  Reports    
  7. 7. NexGen  Energy  Ltd.   July  2,  2013   DUNDEE  CAPITAL  MARKETS      Page  |  7 Figure  4:  Ground  resistivity  map  showing  the  Midwest  trend.  The  immediate  drill  target   area  on  Radio  will  focus  along  the  western  boundary  of  the  property,  in  contract  with  Rio   Tinto's  Midwest  NE  project  that  hosts  Roughrider.     Source:  Company  Reports       Figure  5:  Geological  and  geophysical  plan  maps  showing  the  future  drill  targets  on  Radio.     Source:  Company  Reports    
  8. 8. NexGen  Energy  Ltd.   July  2,  2013   DUNDEE  CAPITAL  MARKETS      Page  |  8 Figure  6:  PLS  DC  resistivity  map  and  Rook  1  VTEM  airborne  survey  showing  potential  for   the  structural  trend  that  hosts  PLS  mineralization  to  continue  on  to  NexGen's  Rook  1.     Source:  Company  Reports       Figure  7:  PLS  area   and  Western  Athabasca  Basin  claim  map.  Note  how   the  majority  of   projects  straddle  the  margin  of  the  Athabasca  Basin  where  access  to  the  unconformity  or   basement  rocks  is  often  easier.       Source:  Company  Reports    
  9. 9. NexGen  Energy  Ltd.   July  2,  2013   DUNDEE  CAPITAL  MARKETS      Page  |  9 Figure  8:  Eastern  Athabasca  Basin  claim  map.  NexGen  claims  are  denoted  in  red.       Source:  Company  Reports     Figure  9:  NexGen  stock  performance  since  listing  relative  to  its  producer,  developer  and  explorer  peers.  Neighbor  Fission   Uranium  leads  the  pack  due  to  its  ongoing  exploration  success  at  PLS.  NexGen  has  underperformed  its  peers  since  listing  as   it  remains  a  relatively  unknown  name  and  missed  the  news  cycle  for  winter  exploration.  We  expect  that  to  change  through   the  summer.     Source:  FactSet,  Dundee  Capital  Markets     Apr  29,  2013 May  06,  2013 May  13,  2013 May  20,  2013 May  27,  2013 Jun  03,  2013 Jun  10,  2013 Jun  17,  2013 Jun  24,  2013 50 60 70 80 90 100 110 120 130 140 150 -39.24% -2.17% -1.44% 7.70% 15.79% Source:  FactSet  Prices NexGen  Energy  Ltd.  vs.  Peers Indexed  Price  Performance Price  (Indexed  to  100) NexGen  Energy  Ltd. Producers Developers Explorers Fission  Uranium  Corp.
  10. 10. NexGen  Energy  Ltd.   July  2,  2013   DUNDEE  CAPITAL  MARKETS      Page  |  10 Table  1:  Explorer  peer  comparison  chart.  NexGen  is  highlighted  in  orange.     Source:  Company  Reports,  FactSet,  Dundee  Capital  Markets     Explorers: Last  Price Shares  O/S Mkt.  Cap Cash Debt EV Reserves Resources Total   Compliant   EV/lb Rating Risk Target NAV P/NAV C$ MM C$  MM C$  MM C$  MM C$  MM MM  lbs   MM  lbs   MM  lbs   US$/lb C$ 1  mo 3mo 6mo 1yr Fission  Uranium   0.63 150 91.43 17.00 0.00 74.43 0 0 0 -­‐ Buy Speculative n/a -­‐7% -­‐ -­‐ -­‐ n/a n/a Alpha  Minerals   3.80 23 85.74 16.00 0.00 69.74 0 0 0 -­‐ -­‐2% -­‐20% 129% 678% Kivalliq  Energy   0.29 189 60.50 5.38 0.00 55.12 0 43 43 1.27 Buy Speculative n/a -­‐9% -­‐3% -­‐19% -­‐19% n/a n/a Mawson  Resources   0.50 56 26.88 6.85 0.00 20.03 0 0 0 -­‐ Buy Speculative n/a -­‐15% -­‐53% -­‐66% -­‐69% n/a n/a U3O8  Corp 0.14 161 21.69 3.61 0.00 18.08 0 48 48 0.38 Buy Speculative n/a -­‐16% -­‐33% -­‐37% -­‐56% n/a n/a Pele  Mountain     0.06 160 9.19 1.12 0.00 8.07 0 49 49 0.16 0% -­‐15% 10% -­‐21% Purepoint  Uranium   0.06 107 5.87 1.08 0.00 4.79 0 0 0 -­‐ -­‐19% -­‐21% -­‐15% -­‐35% Vena  Resources   0.08 65 4.57 0.32 0.30 4.55 0 36 36 0.13 -­‐38% -­‐52% -­‐59% -­‐81% Nexgen  Energy 0.25 42 10.44 6.00 0.00 4.44 0 0 0 -­‐ Buy Venture n/a -­‐12% -­‐39% -­‐39% -­‐ n/a n/a Azincourt  Resources 0.23 27 5.74 2.00 0.00 3.74 0 0 0 -­‐ -­‐22% 156% 77% -­‐12% Forum  Uranium   0.28 19 5.70 2.00 0.00 3.70 0 0 0 -­‐ Buy Venture NA -­‐22% -­‐32% -­‐25% -­‐59% n/a n/a Uracan  Resources   0.05 29 1.29 0.04 0.01 1.26 0 44 44 0.03 -­‐18% -­‐44% -­‐47% -­‐74% Canalaska  Uranium   0.10 22 2.38 1.46 0.00 0.92 0 0 0 -­‐ -­‐13% -­‐41% -­‐38% -­‐68% Bayswater  Uranium   0.06 23 1.02 0.14 0.00 0.87 0 16 16 0.06 -­‐15% -­‐31% -­‐35% -­‐56% Crosshair  Energy   0.03 66 1.64 0.86 0.00 0.79 0 21 21 0.04 -­‐67% -­‐75% -­‐77% -­‐86% Blue  Sky  Uranium   0.05 24 1.18 0.73 0.00 0.45 0 0 0 -­‐ -­‐6% -­‐40% -­‐55% -­‐73% Anthem  Resources 0.07 35 2.48 6.00 0.00 -­‐3.52 0 0 0 -­‐ 0% -­‐36% -­‐46% -­‐81% AVERAGE 15.73 0.29 -­‐17% -­‐24% -­‐22% -­‐8% n/a Performance
  11. 11. NexGen  Energy  Ltd.   July  2,  2013   DUNDEE  CAPITAL  MARKETS      Page  |  11   Source:  Company  Reports,  FactSet,  Dundee  Capital  Markets     NexGen Energy Ltd. NXE-V C$ 0.25 Rating BUY Target N/A Shares O/S (MM) 85.7 Risk Float (MM) 56.7 Fully Diluted Shares (MM) 100.4 12-Month Return N/A Close 0.25C$ Basic Mkt. Capitalization ($MM) 13.4C$ All figures in C$, unless stated otherwise MANAGEMENT & COMPANY CONTACTS Leigh Curyer CEO James Sykes Senior Geologist Matthew Schwab Exploration Geologist Gordon Bogden Chairman www.nexgenenergy.ca +61 409 679 104 CAPITAL STRUCTURE Strike Basic In-the- Proceeds (C$) (MM) Money ($MM) Shares Outstanding 85.7 Options 0.40 5.8 - - Warrants 0.40-0.60 7.9 - - Fully Diluted Shares 99.3 - - OWNERSHIP (est.) Basic % * As reported by Thomson (MM) Mega Uranium 21.9 25.5% Sheldon Inwentash 3.0 3.5% Leigh Curyer 0.8 0.9% John Arlen Hansen 0.4 0.5% Sophia Shane 0.4 0.4% BALANCE SHEET Mar-13 Year-end December (C$MM) Assets Cash and Equivalents 4.1 Other current assets 0.2 Current Assets 4.3 PP&E 16.2 Other Assets 0.0 Total Assets 20.6 Liabilities Current liabilities 0.2 Long-term debt - Other 1.5 Shareholders equity 18.8 Total Liabilities and Equity 20.6 PROJECTED BURN RATE (est.) (C$MM) Fiscal 2012YE cash balance (est.) 6.3 Exploration Expenditures (est.) (3.8) General and Admin Expense (est.) (2.0) Warrant/Option Exercise (est.) - Project Financing (est.) - Capital Expenditures - Fiscal 2013YE Cash Balance (est.) 0.5 LAST FINANCING *The company officially listed on April 23, 2013 *As a private company it raised $15.6 MM Total Mineral Inventory Uranium t (MM) % U3O8 MM lbs Radio - - - Rook 1 - - - Venture Stage: Exploration Deposit: Unconformity-style uranium Location: Interpreted to be a continuation of the E-W structural corridor that hosts J Zone, Roughrider and Roughrider Far East. Located on the eastern side of the Athabasca Basin. Resources at Roughrider deposits total 58 MM lbs at an average grade of 4.73% U3O8. Geology: Given that Radio could be a potential expansion of Roughrider, we can expect similar style mineralization. Uranium mineralization is often highly variable in thickness and style. Occurring close to major unconformities between quartz-rich sandstones and deformed metamorphic basement rocks. High grade mineralization can be medium to coarse grained rock, semi-massive to massive pitchblende in a sometimes worm-rock texture, and texturally complex redox- controlled mineralization. Lower grade mineralization can occur as disseminated grains of pitchblende, fracture-lining, ore veins of pitchblende. Footprint size is typically small, potentially several hundred meteres long and only about 100m wide. Known deposits are often steeply dipping in nature. Previous The company completed detailed aeromagnetic and VTEM surveys over the property in May 2011. Structural trends similar to those hosting mineralization at adjacent Roughrider, Midwest and Dawn Lake were identified. During 2012 NexGen completed detailed ground gravity and resistivity surveys on 200m line separation oriented N-S over the entire property. At least eight priority targets have been identified from this work. Future Plans: The company has planned a 4,400m diamond drill program, for about 12 holes, focused immediately east of Radio's western boundary, targeting interpreted structural extensions of Roughrider. Stage: Exploration Deposit: Unconformity-style uranium Location: Adjacent to PLS property, up-ice of the boulder field. NexGen could potentially have the best claims in the area. Geology: Same as Radio. Previous Little work has been done on the property except for some early geophysical survey work. NexGen does appear to have similar co-incident gravity lows and strong EM conductors that have been associated with the recent PLS discovery to the south. In fact NexGen has about 1.5 km of the same mineralized conductor that hosts PLS three zones going on to its property. Future Plans: Ground resistivity is planned on the southern section/along strike of PLS. This will help identify targets for a small 1,500m drill program later in the year. Other Projects: 100% owned projects Rook 1, R-Seven, Meanwell Lake, Bishop 1, Bishop 2. An updated geophysical interpretation is currently underway. Planning an area wide radiometric/magnetic/VLF-EM survey for late spring/early summer. Radio, Athabasca Basin, Saskatchewan 70% earn-in MAIN PROPERTIES Rook 1 (SW package), Athabasca Basin, Saskatchewan 100%
  12. 12. NexGen  Energy  Ltd.   July  2,  2013   DUNDEE  CAPITAL  MARKETS      Page  |  12 Disclosures  &  Disclaimers   This  research  report  (as  defined  in  IIROC  Rule  3400)  is  issued  and  approved  for  distribution  in  Canada  by  Dundee  Securities   Markets  and  Dundee  Goodman  Private  Wealth.  Dundee  Capital  Markets  is  a  member  of  the  Canadian  Investor  Protection   Fund,   the   Investment   Industry   Regulatory   Organization   of   Canada   and   an   investment   fund   manager   registered   with   the   securities  commissions  across  Canada.  Dundee  Capital  Markets  is  a  subsidiary  of  Dundee  Corporation.     Research  Analyst  Certification:  Each  Research  Analyst  involved  in  the  preparation  of  this  research  report  hereby  certifies  that:   (1)   the   views   and   recommendations   expressed   herein   accurately   reflect   his/her   personal   views   about   any   and   all   of   the   securities  or  issuers  that  are  the  subject  matter  of  this  research  report;  and  (2)  his/her  compensation  is  not  and  will  not  be   directly  related  to  the  specific  recommendations  or  views  expressed  by  the  Research  Analyst  in  this  research  report.  The   Research  Analyst  involved  in  the  preparation  of  this  research  report  does  not  have  authority  whatsoever  (actual,  implied  or   apparent)  to  act  on  behalf  of  any  issuer  mentioned  in  this  research  report.   U.S.  Residents:  Dundee  Securities  Inc.  is  a  U.S.  registered  broker-­‐dealer,  a  member  of  FINRA  and  an  affiliate  of  Dundee  Capital   Markets.   Dundee   Securities   Inc.   accepts   responsibility   for   the   contents   of   this   research   report,   subject   to   the   terms   and   limitations  as  set  out  above.  U.S.  residents  seeking  to  effect  a  transaction  in  any  security  discussed  herein  should  contact   Dundee  Securities  Inc.  directly.  Research  reports  published  by  Dundee  Capital  Markets  are  intended  for  distribution  in  the   United  States  only  to  Major  Institutional  Investors  (as  such  term  is  defined  in  SEC  15a-­‐6  and  Section  15  of   the  Securities   Exchange  Act  of  1934,  as  amended)  and  are  not  intended  for  the  use  of  any  person  or  entity.   UK   Residents:     Dundee   Securities   Europe   LLP,   an   affiliate   of   Dundee   Capital   Markets,   is   authorized   and   regulated   by   the   Research  prepared  by  UK-­‐based  analysts  is  under  the  supervision  of  and  is  issued  by  its  affiliate,  Dundee  Capital  Markets.   Dundee  Securities  Europe  LLP  is  responsible  for  compliance  with  applicable  rules  and  regulations  of  the  FCA,  including  Chapter   FCA  Rules ommendations  (as  defined  in   the  FCA  Rules)  in  reports  prepared  by  UK-­‐based  analysts.    Dundee  Capital  Markets    and  Dundee  Securities  Europe  LLP  have   implemented  written  procedures  designed  to  identify  and  manage  potential  conflicts  of  interest  that  arise  in  connection  with   the  preparation  and  distribution  of  their  research.  Dundee  Capital  Markets    is  responsible  (i)  for  ensuring  that  the  research   publications   are   compliant  with   IIROC   Rule  3400  Research  Restrictions   and   Disclosure  Requirements.   And   (ii)   including   all   required  conflict  of  interest  disclosures.   General:     This  research  report  is  provided,  for  informational  purposes  only,  to  institutional  investor  and  retail  clients  of  Dundee  Capital   Markets  in  Canada.  This  research  report  is  not  an  offer  to  sell   or  the  solicitation  of  an  offer  to  buy  any  of  the  securities   discussed  herein.     The  information  contained  in  this  research  report  is  prepared  from  publicly  available  information,  internally  developed  data   and  other  sources  believed  to  be  reliable,  but  has  not  been  independently  verified  by  Dundee  Capital  Markets  and  Dundee   Capital  Markets  makes  no  representations  or  warranties  with  respect  to  the  accuracy,  correctness  or  completeness  of  such   information   and   they   should   not   be   relied   upon   as   such.   All   estimates,   opinions   and   recommendations   expressed   herein   constitute  judgments  as  of  the  date  of  this  research  report  and  are  subject  to  change  without  notice.  Dundee  Capital  Markets   does  not  accept  any  obligation  to  update,  modify  or  amend  this  research  report  or  to  otherwise  notify  a  recipient  of  this   research  report  in  the  event  that  any  estimates,  opinions  and  recommendations  contained  herein  change  or  subsequently   becomes  inaccurate  or  if  this  research  report  is  subsequently  withdrawn.     Past   performance   is   not   a   guarantee   of   future   results,   and   no   representation   or   warranty,   express   or   implied,   is   made   regarding  future  performance  of  any  security  mentioned  in  this  research  report.  The  price  of  the  securities  mentioned  in  this   research  report  and  the  income  they  produce  may  fluctuate  and/or  be  adversely  affected  by  market  factors  or  exchange  rates,   and  investors  may  realize  losses  on  investments  in  such  securities,  including  the  loss  of  investment  principal.  Furthermore,  the   securities  discussed  in  this  research  report  may  not  be  liquid  investments,  may  have  a  high  level  of  volatility  or  may  be  subject   to  additional  and  special  risks  associated  with  securities  and  investments  in  emerging  markets  and/or  foreign  countries  that   may  give  rise  to  substantial  risk  and  are  not  suitable  for  all  investors.  Dundee  Capital  Markets  accepts  no  liability  whatsoever   for  any  loss  arising  from  any  use  or  reliance  on  this  research  report  or  the  information  contained  herein.    
  13. 13. NexGen  Energy  Ltd.   July  2,  2013   DUNDEE  CAPITAL  MARKETS      Page  |  13 The  securities  discussed  in  this  research  report  may  not  be  suitable  for  all  types  of  investors  and  such  reports  do  not  take  into   account  particular  investment  needs,  objectives  and  financial  circumstances  of  a  particular  investor.  An  investor  should  not   rely  solely  on  investment  recommendations  contained  in  this  research  report,  if  any,  as  a  substitution  for  the  exercise  of  their   own  independent  judgment  in  making  an  investment  decision  and,  prior  to  acting  on  any  of  contained  in  this  research  report,   investors  are  advised  to  contact  his  or  her  investment  adviser  to  discuss  their  particular  circumstances.     Non-­‐client   recipients   of   this   research   report   should   consult   with   an   independent   financial   advisor   prior   to   making   any   investment  decision  based  on  this  research  report  or  for  any  necessary  explanation  of  its  contents.  Dundee  Capital  Markets   will  not  treat  non-­‐client  recipients  of  this  research  report  as  its  clients  by  virtue  of  such  persons  receiving  this  research  report.     Nothing   in   this   research   report   constitutes   legal,   accounting   or   tax   advice.   Investors   should   consult   with   his   or   her   own   independent  legal  or  tax  adviser  in  this  regard.     Dundee  Capital  Markets  Research  is  distributed  by  email,  website  or  hard  copy.  Dissemination  of  initial  research  reports  and   any  subsequent  research  reports  is  made  simultaneously  to  a  pre-­‐determined  list  of  Dundee  Capital  Markets'  Institutional   Sales   and   Trading   representative   clients   and   Dundee   Goodman   Private   Wealth   retail   private   client   offices.   The   policy   of   Dundee  Capital  Markets  with  respect  to  Research  reports  is  available  on  the  Internet  at  www.dundeecapitalmarkets.com.   Dundee  Capital  Markets  has  written  procedures  designed  to  identify  and  manage  potential  conflicts  of  interest  that  arise  in   connection  with  its  research  and  other  businesses.   The  compensation  of  each  Research  Analyst/Associate  involved  in  the   preparation  of  this  research  report  is  based  competitively  upon  several  criteria,  including  performance  assessment  criteria   based   on   quality   of  research.   The  Research  Analyst   compensation   pool   includes   revenues   from   several   sources,   including   sales,  trading  and  investment  banking.  Research  analysts  do  not  receive  compensation  based  upon  revenues  from  specific   investment  banking  transactions.  Dundee  Capital  Markets  generally  restricts  any  research  analyst  and  any  member  of  his  or   her  household  from  executing  trades  in  the  securities  of  a  company  that  such  research  analyst  covers.     Certain  discretionary  client  portfolios  are  managed  by  portfolio  managers  and/or  dealing  representatives  in  its  private  client   advisory  division,  Dundee  Goodman  Private  Wealth.  The  aforementioned  portfolio  managers  and/or  dealing  representatives   are  segregated  from  Research  and  they  may  trade  in  securities  referenced  in  this  research  report  both  as  principal  and  on   behalf  of  clients  (including  managed  accounts  and  investment  funds).  Furthermore,  Dundee  Capital  Markets  may  have  had,   and  may  in  the  future  have,  long  or  short  positions  in  the  securities  discussed  in  this  research  report  and,  from  time  to  time,   may  have  executed  or  may  execute  transactions  on  behalf  of  the  issuer  of  such  securities  or  its  clients.     Should   this   research   report   provide   web   addresses   of,   or   contain   hyperlinks   to,   third   party   web   sites,   Dundee   has   not   reviewed  the  contents  of  such  links  and  takes  no  responsibility  whatsoever  for  the  contents  of  such  web  sites.  Web  addresses   and/or  hyperlinks  are  provided  solely  for  the  recipient's  convenience  and  information,  and  the  content  of  third  party  web  sites   is  not  in  any  way  incorporated  into  this  research  report.  Recipients  who  choose  to  access  such  web  addresses  or  use  such   hyperlinks  do  so  at  their  own  risk.   Unless  publications  are  specifically  marked  as  research  publications  of  Dundee  Capital  Markets,  the  views  expressed  therein   (including  recommendations)  are  those  of  the  author  and,  if  applicable,  any  named  issuer  or  Investment  dealer  alone  and  they   have  not  been  approved  by  nor  are  they  necessarily  those  of  Dundee  Capital  Markets.  Dundee  Capital  Markets.  expressly   disclaims  any  and  all  liability   for  the  content  of   any  publication  that  is  not  expressly  marked  as  a  research  publication  of   Dundee  Capital  Markets.   Forward-­‐looking  statements  are  based  on  current  expectations,  estimates,  forecasts  and  projections  based  on  beliefs  and   assumptions   made   by   the   author.   These   statements   involve   risks   and   uncertainties   and   are   not   guarantees   of   future   performance  or  results  and  no  assurance  can  be  given  that  these  estimates  and  expectations  will  prove  to  have  been  correct,   and  actual  outcomes  and  results  may  differ  materially  from  what  is  expressed,  implied  or  projected  in  such  forward-­‐looking   statements.   An  affiliate  of  Dundee  is  an  investor  in  the  TMX  Group  Limited.    Dundee  may  from  time  to  time  conduct  research  on,  advise  on   or  trade  in  securities  listed  on  or  that  clear  through  a  TMX  Affiliate.   ©  Dundee  Securities  Ltd.  Any  reproduction  or  distribution  in  whole  or  in  part  of  this  research  report  without  permission  is   prohibited.   Informal  Comment:   pertain  to  news  flow  and  do  not  contain  any  change  in  analysts'  opinion,  estimates,  rating  or  target  price.    Any  rating(s)  and  target  
  14. 14. NexGen  Energy  Ltd.   July  2,  2013   DUNDEE  CAPITAL  MARKETS      Page  |  14 price(s)  in  an  Informal  Comment  are  from  prior  formal  published  research  reports.    A  link  is  provided  in  any  Informal  Comment  to  all   company  specific  disclosures  and  analyst  specific  disclosures  for  companies  under  coverage,  and  general  disclosures  and  disclaimers.         Mineral   Exploration   Watchlist:     Dundee   Capital   Markets   has   not   initiated   formal   continuing   coverage   of   Mineral   Exploration   Watchlist  companies.    The  companies  will  have  recommendations  and  risk  ratings  as  per  our  regular  rating  system,  see  Explanation   of   Recommendations   and   Risk   Ratings   for   details.     Risk   ratings   will   be   either   Speculative   or   Venture.     Speculative   Risk   rated   companies  are  those  companies  that  have  published  National  Instrument  43-­‐101  or  JORC  compliant  resources  or  reliable  historic   resources  and/or  economic  evaluations  (scoping,  pre-­‐feasibility  or  feasibility  studies)  for  material  project(s)  that  could  reasonably   form  the  basis  of  a  discounted  cash  flow  analysis.  Venture  Risk  rated  companies  are  those  companies  that  are  generally  at  an  earlier   stage  of  exploration  and/or  development,  where  no  material  resource  estimate,  historic  or  compliant,  exists.    No  price  targets  will   be  set  for  Mineral  Exploration  Watchlist  companies  as  there  are  limited  financial  metrics  upon  which  to  base  a  reasonable  valuation.     Valuation  methodologies  and  models  will  not  be  provided  for  Mineral  Exploration  Watchlist  companies.    Dundee  clients  should   consult  their  investment  advisor  as  to  the  appropriateness  of  an  investment  in  the  securities  mentioned.   Oil   &   Gas   Exploration   Watchlist:   Dundee   Capital   Markets   has   not   initiated   formal   continuing   coverage   of   Oil   &   Gas  Exploration  Watchlist  companies.  The  companies  will  have  recommendations  and  risk  ratings  as  per  our  regular  rating   system,  see  Explanation  of  Recommendations  and  Risk  Ratings  for  details.  Risk  ratings  will  be  either  Speculative  or  Venture.   Speculative   Risk   rated   companies   are   those   companies   that   have   published   National   Instrument   51-­‐101   or  SPE   compliant   resources  or  reliable  historic  resources  and/or  economic  evaluations  for  material  project(s)  that  could  reasonably  form  the   basis  of  a  discounted  cash  flow  analysis.  Venture  Risk  rated  companies  are  those  companies  that  are  generally  at  an  earlier   stage  of  exploration  and/or  development,  where  no  material  resource  estimate  exists,  or  there  is  significant  uncertainty  with   respect  to  firm  drilling  timing  and  prospects.  No  price  targets  will  be  set  for  Oil  &  Gas  Exploration  Watchlist  companies  as   there  are  limited  financial  metrics,  or  resource  information  available,  upon  which  to  base  a  reasonable  valuation.  Dundee   clients  should  consult  their  investment  advisor  as  to  the  appropriateness  of  an  investment  in  the  securities  mentioned.   Presentations  do  not  include  disclosures  that  are  specific  to  analysts  and  specific  to  companies  under  coverage.    Please  refer  to   formal  published  research  reports  for  company  specific  disclosures  and  analyst  specific  disclosures  for  companies  under  coverage.     Please  refer  to  formal  published  research  reports  for  valuation  methodologies  used  in  determining  target  prices  for  companies   under  coverage.   Ideas  of  Interest:  Dundee  Capital  Markets  from  time  to  time  publishes  reports  on  securities  for  which  it  does  not  and  may  not   choose  to  provide  continuous  research  coverage.  Such  reports  are  published  as  Ideas  of  Interest.     IIROC   Rule   3400   Disclosures   and/or   FCA   COBS   12.4.10   Disclosures:   Disclosures   required   under   Rule   3400   for   sector   research   reports  covering  six  or  more  issuers  can  be  found  on  the  Dundee  Capital  Markets  website  at  www.dundeecapitalmarkets.com  in  the   Research  Section.  Other  Services  means  the  participation  of  Dundee  in  any  institutional  non-­‐brokered  private  placement  exceeding   $5  million.    Where  Dundee  Capital  Markets  and  its  affiliates  collectively  beneficially  own  1%  or  more  (or  for  the  purpose  of  FCA   re   controlled,  but  not  beneficially  owned  by  Dundee  Capital  Markets.         Explanation  of  Recommendations  and  Risk  Ratings   Dundee  target:  represents  the  price  target  as  required  under  IIROC  Rule  3400.    Valuation  methodologies  used  in  determining  the  price   target(s)  for  the  issuer(s)  mentioned  in  this  research  report  are  contained  in  current  and/or  prior  research.  Dundee  target  N/A:  a  price   target  and/or  NAV  is  not  available  if  the  analyst  deems  there  are  limited  financial  metrics  upon  which  to  base  a  reasonable  valuation.   Recommendations:   BUY:   Total   returns   expected   to   be   materially   better   than   the   overall   market   with   higher   return   expectations  needed  for  more  risky  securities.  NEUTRAL:  Total  returns  expected  to  be  in  line  with  the  overall  market.  SELL:   Total  returns  expected  to  be  materially  lower  than  the  overall  market.  TENDER:  The  analyst  recommends  tendering  shares  to   a  formal  tender  offer.  UNDER  REVIEW:  The  analyst  will  place  the  rating  and/or  target  price  Under  Review  when  there  is  a   significant   material   event  with   further   information   pending;   and/or  when   the   analyst   determines   it   is   necessary   to   await   adequate   information   that   could   potentially   lead   to   a   re-­‐evaluation   of   the   rating,   target   price   or   forecast;   and/or   when   coverage  of  a  particular  security  is  transferred  from  one  analyst  to  another  to  give  the  new  analyst  time  to  reconfirm  the   rating,  target  price  or  forecast.   Risk  Ratings:  risk  assessment  is  defined  as  Medium,  High,  Speculative  or  Venture.  Medium:  securities  with  reasonable  liquidity   and  volatility  similar  to  the  market.    High:  securities  with  poor  liquidity  or  high  volatility.  Speculative:  where  the  company's   business  and/or  financial  risk  is  high  and  is  difficult  to  value.  Venture:  an  early  stage  company  where  the  business  and/or   financial  risk  is  high,  and  there  are  limited  financial  metrics  upon  which  to  base  a  reasonable  valuation.    
  15. 15. NexGen  Energy  Ltd.   July  2,  2013   DUNDEE  CAPITAL  MARKETS      Page  |  15 Investors  should  not  deem  the  risk  ratings  to  be  a  comprehensive  account  of  all  of  the  risks  of  a  security.    Investors  are   directed   to   read   Dundee   Capital   Markets   Research   reports   that   contain   a   discussion   of   risks   which   is   not   meant   to   be   a   comprehensive  account  of  all  the  risks.    Investors  are  directed  to  read  issuer  filings  which  contain  a  discussion  of  risk  factors     Medium  and  High  Risk  Ratings  Methodology:  Medium  and  High  risk  ratings  are  derived  using  a  predetermined  methodology   based  on  liquidity  and  volatility.  Analysts  will  have  the  discretion  to  raise  but  not  lower  the  risk  rating  if  it  is  deemed  a  higher   risk  rating  is  warranted.  Risk  in  relation  to  forecasted  price  volatility  is  only  one  method  of  assessing  the  risk  of  a  security  and   actual  risk  ratings  could  differ.       Securities  with  poor  liquidity  or  high  volatility  are  considered  to  be  High  risk.  Liquidity  and  volatility  are  measured  using  the   following  methodology:  a)  Price  Test:  All  securities  with  a  price  <=  $3.00  per  share  are  considered  high  risk  for  the  purpose  of   this  test.  b)  Liquidity  Test:  This  is  a  two-­‐tiered  calculation  that  looks  at  the  market  capitalization  and  trading  volumes  of  a   company.  Smaller  capitalization  stocks  (<$300MM)  are  assumed  to  have  less  liquidity,  and  are,  therefore,  more  subject  to   price  volatility.  In  order  to  avoid  discriminating  against  smaller  cap  equities  that  have  higher  trading  volumes,  the  risk  rating   will  consider  12  month  average  trading  volumes  and  if  a  company  has  traded  >70%  of  its  total  shares  outstanding  it  will  be   d  beta  are   compared  against  the  diversified  equity  benchmark.  Canadian  equities  are  compared  against  the  TSX  while  U.S.  equities  are   compared  against  the  S&P  500.  Generally,  if  the  volatility  of  a  stock  is  20%  greater  than  its  benchmark  and  the  beta  of  the   stock  is  higher  than  its  sector  beta,  then  the  security  will  be  considered  a  high  risk  security.  Otherwise,  the  security  will  be   deemed  to  be  a  medium  risk  security.  Periodically,  the  equity  risk  ratings  will  be  compared  to  downside  risk  metrics  such  as   Value  at  Risk  and  Semi-­‐Variance  and  appropriate  adjustments  may  be  made.  All  models  used  for  assessing  risk  incorporate   some  element  of  subjectivity.   SECURITY  ABBREVIATIONS:  NVS  (non-­‐voting  shares);  RVS  (restricted  voting  shares);  RS  (restricted  shares);  SVS  (subordinate   voting  shares).       Dundee  Capital  Markets  Equity  Research  Ratings   As  at  March  31,  2013     Source:    Dundee  Capital  Markets   86% 13% 1% 31% 22% 0% 0% 11% 22% 33% 44% 55% 66% 77% 88% 99% Buy Neutral Sell % of companies covered by Dundee Capital Markets in each rating category % of companies within each rating category for which Dundee Capital Markets has provided investment banking services for a fee in the past 12 months.