ANNUAL CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEAR ENDED DECEMBER 31,
2018
Responsibility for Financial
Statements
The
Company’s management is responsible for the integrity and
fairness of presentation of these consolidated financial
statements. The consolidated financial statements have been
prepared by management, in accordance with International Financial
Reporting Standards as issued by the International Accounting
Standards Board, for review by the Audit Committee and approval by
the Board of Directors.
The
preparation of financial statements requires the selection of
appropriate accounting policies in accordance with International
Financial Reporting Standards and the use of estimates and
judgements by management to present fairly and consistently the
consolidated financial position of the Company. Estimates are
necessary when transactions affecting the current period cannot be
finalized with certainty until future information becomes
available. In making certain material estimates, the
Company’s management has relied on the judgement of
independent specialists.
The
Company’s management has developed and maintains a system of
internal accounting controls to ensure, on a reasonable and
cost-effective basis, that the financial information is timely
reported and is accurate and reliable in all material respects and
that the Company’s assets are appropriately accounted for and
adequately safeguarded.
The
consolidated financial statements have been audited by
PricewaterhouseCoopers LLP, our independent auditor. Its report
outlines the scope of its examination and expresses its opinions on
the consolidated financial statements and internal control over
financial reporting.
|
Original signed by
“David
D.Cates”
|
|
Original signed by
“Gabriel (Mac)
McDonald”
|
|
David D. Cates
|
|
Gabriel (Mac)
McDonald
|
|
President and Chief Executive
Officer
|
|
Vice-President Finance and
Chief Financial Officer
|
March 8, 2018
Management’s Report on Internal
Control over Financial Reporting
The
Company’s management is responsible for establishing and
maintaining an adequate system of internal control over financial
reporting. Management conducted an evaluation of the effectiveness
of internal control over financial reporting based on the
Internal Control –
Integrated Framework, 2013
issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, management concluded that the Company’s internal
control over financial reporting was effective as of December 31,
2018.
The
effectiveness of the Company’s internal control over
financial reporting as at December 31, 2018 has been audited by
PricewaterhouseCoopers LLP, our independent auditor, as stated in
its report which appears herein.
Changes to Internal Control over
Financial Reporting
There has not been any change
in the Company’s internal control over financial reporting
that occurred during 2018 that has materially affected, or is
reasonably likely to materially affect, the Company’s
internal control over financial reporting.
Report of
Independent Registered Public Accounting Firm
To the
Board of Directors and Shareholders of Denison Mines
Corp.
Opinions
on the Financial Statements and Internal Control over Financial
Reporting
We
have audited the accompanying consolidated statements of financial
position of Denison Mines Corp. and its subsidiaries (the company)
as of December 31, 2018 and 2017, and the related consolidated
statements of income (loss) and comprehensive income (loss),
changes in equity and cash flow for the years then ended, including
the related notes (collectively referred to as the "consolidated
financial statements"). We also have audited the company's internal
control over financial reporting as of December 31, 2018, based on
criteria established in
Internal
Control – Integrated Framework
(2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
In
our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of the company as of December 31, 2018 and 2017, and its
financial performance and its cash flows for the years then ended
in conformity with International Financial Reporting Standards as
issued by the International Accounting Standards Board. Also in our
opinion, the company maintained, in all material respects,
effective internal control over financial reporting as of December
31, 2018, based on criteria established in
Internal Control – Integrated
Framework
(2013) issued by the COSO.
Change in Accounting
Principles
As
discussed in Note 3 to the consolidated financial statements, the
company changed the manner in which it accounts for revenue and
financial instruments in 2018. The company also changed its
presentation currency in 2018, as discussed in Note
3.
Basis for
Opinions
The
company's management is responsible for these consolidated
financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting,
included in the accompanying Management's Report on Internal
Control over Financial Reporting. Our responsibility is to express
opinions on the company’s consolidated financial statements
and on the company's internal control over financial reporting
based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the
company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud, and whether effective internal control over
financial reporting was maintained in all material
respects.
PricewaterhouseCoopers
LLP
PwC Tower, 18
York Street, Suite 2600, Toronto, Ontario, Canada M5J
0B2
T: +1 416
863 1133, F: +1 416 365 8215,
www.pwc.com/ca
Our
audits of the consolidated financial statements included performing
procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated
financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed
risk. Our audits also included performing such other procedures as
we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
Definition
and Limitations of Internal Control over Financial
Reporting
A
company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with
authorizations of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because of its inherent
limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
(Signed)
“PricewaterhouseCoopers LLP”
Chartered
Professional Accountants, Licensed Public
Accountants
Toronto, Ontario,
Canada
March 7, 2019
We
have served as the company's auditor since at least 1996. We have
not been able to determine the specific year we began serving as
auditor of the company.
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
|
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in
thousands of Canadian dollars (“CAD”) except for share
amounts)
|
|
|
|
At December
31
2018
|
|
At December
31
2017
|
|
At January
1
2017
|
|
ASSETS
|
|
|
|
Restated
(notes
3, 5)
|
|
Restated
(notes
3, 5)
|
|
Current
|
|
|
|
|
|
|
|
Cash and cash
equivalents (note 7)
|
$
|
23,207
|
$
|
3,636
|
$
|
15,894
|
|
Investments (note
10)
|
|
-
|
|
37,807
|
|
-
|
|
Trade and other
receivables (note 8)
|
|
4,072
|
|
4,791
|
|
3,226
|
|
Inventories (note
9)
|
|
3,584
|
|
3,454
|
|
3,196
|
|
Prepaid expenses
and other
|
|
843
|
|
664
|
|
660
|
|
|
|
31,706
|
|
50,352
|
|
22,976
|
|
Non-Current
|
|
|
|
|
|
|
|
Inventories-ore
in stockpiles (note 9)
|
|
2,098
|
|
2,098
|
|
2,098
|
|
Investments (note
10)
|
|
2,255
|
|
7,359
|
|
5,049
|
|
Investments in
associates (note 11)
|
|
5,582
|
|
5,305
|
|
6,011
|
|
Restricted cash
and investments (note 12)
|
|
12,255
|
|
12,184
|
|
3,107
|
|
Property, plant
and equipment (note 13)
|
|
258,291
|
|
249,002
|
|
252,392
|
|
Total
assets
|
$
|
312,187
|
$
|
326,300
|
$
|
291,633
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities
|
$
|
5,554
|
$
|
5,756
|
$
|
5,561
|
|
Current portion
of long-term liabilities:
|
|
|
|
|
|
|
|
Deferred revenue
(note 14)
|
|
4,567
|
|
4,936
|
|
-
|
|
Post-employment
benefits (note 15)
|
|
150
|
|
250
|
|
250
|
|
Reclamation
obligations (note 16)
|
|
877
|
|
819
|
|
1,088
|
|
Other liabilities
(note 17)
|
|
1,337
|
|
3,835
|
|
2,850
|
|
|
|
12,485
|
|
15,596
|
|
9,749
|
|
Non-Current
|
|
|
|
|
|
|
|
Deferred revenue
(note 14)
|
|
33,160
|
|
33,716
|
|
-
|
|
Post-employment
benefits (note 15)
|
|
2,145
|
|
2,115
|
|
2,209
|
|
Reclamation
obligations (note 16)
|
|
29,187
|
|
27,690
|
|
27,060
|
|
Other liabilities
(note 17)
|
|
-
|
|
-
|
|
845
|
|
Deferred income
tax liability (note 18)
|
|
12,963
|
|
17,422
|
|
20,168
|
|
Total
liabilities
|
|
89,940
|
|
96,539
|
|
60,031
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
Share capital
(note 19)
|
|
1,331,214
|
|
1,310,473
|
|
1,295,235
|
|
Share purchase
warrants (note 20)
|
|
435
|
|
435
|
|
-
|
|
Contributed
surplus (note 21)
|
|
63,634
|
|
61,799
|
|
60,612
|
|
Deficit
|
|
(1,174,163)
|
|
(1,144,086)
|
|
(1,124,523)
|
|
Accumulated other
comprehensive income (note 22)
|
|
1,127
|
|
1,140
|
|
278
|
|
Total
equity
|
|
222,247
|
|
229,761
|
|
231,602
|
|
Total
liabilities and equity
|
$
|
312,187
|
$
|
326,300
|
$
|
291,633
|
|
|
|
|
|
|
|
|
|
Issued and
outstanding common shares (note 19)
|
589,175,086
|
|
559,183,209
|
|
540,722,365
|
|
|
Commitments
and contingencies (note 27)
|
|
|
|
|
|
|
|
Subsequent
events (note 29)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of the consolidated financial
statements
|
||||||
On behalf of the Board of
Directors
:
|
"signed"
|
"signed"
|
|
Catherine
J.G. Stefan
|
Brian
Edgar
|
|
Director
|
Director
|
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Notes to the consolidated financial statements for the years ended
December 31, 2018 and 2017
|
|
|
(Expressed in CAD
dollars except for shares and per share amounts)
|
|
1.
NATURE OF
OPERATIONS
Denison Mines
Corp. (“DMC”) and its subsidiary companies and joint
arrangements (collectively, “Denison” or the
“Company”) are engaged in uranium mining related
activities, which can include acquisition, exploration and
development of uranium properties, extraction, processing and
selling of uranium.
The Company has a
90.0% interest in the Wheeler River Joint Venture
(“WRJV”), a 65.92% interest in the Waterbury Lake
Uranium Limited Partnership (“WLULP”), a 22.5% interest
in the McClean Lake Joint Venture (“MLJV”) (which
includes the McClean Lake mill) and a 25.17% interest in the
Midwest Joint Venture (“MWJV”), each of which are
located in the eastern portion of the Athabasca Basin region in
northern Saskatchewan, Canada. The McClean Lake mill provides toll
milling services to the Cigar Lake Joint Venture
(“CLJV”) under the terms of a toll milling agreement
between the parties (see note 14). In addition, the Company has
varying ownership interests in a number of other development and
exploration projects located in Canada.
The Company
provides mine decommissioning and environmental consulting services
(collectively “environmental services”) to third
parties through its Denison Environmental Services
(“DES”) division and is also the manager of Uranium
Participation Corporation (“UPC”), a publicly-listed
investment holding company formed to invest substantially all of
its assets in uranium oxide concentrates (“U
3
O
8
“) and
uranium hexafluoride (“UF
6
”). The
Company has no ownership interest in UPC but receives fees for
management services and commissions from the purchase and sale of
U
3
O
8
and
UF
6
by
UPC.
DMC is
incorporated under the Business Corporations Act (Ontario) and
domiciled in Canada. The address of its registered head office is
40 University Avenue, Suite 1100, Toronto, Ontario, Canada, M5J
1T1.
References to
“2018” and “2017” refer to the year ended
December 31, 2018 and the year ended December 31, 2017
respectively.
2.
STATEMENT
OF COMPLIANCE
These
consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting
Standards Board (“IASB”).
These financial
statements were approved by the board of directors for issue on
March 7, 2019.
3.
ACCOUNTING
POLICIES, ACCOUNTING CHANGES AND COMPARATIVE NUMBERS
Significant
accounting policies
These
consolidated financial statements are presented in Canadian dollars
and all financial information is presented in Canadian dollars,
unless otherwise noted. Effective January 1, 2018, the Company
changed its presentation currency from U.S. dollars
(“USD”) to Canadian dollars (“CAD”). The
comparative periods have been restated to reflect this change in
presentation currency and they have also been restated to reflect
the adoption of IFRS 9, Financial Instruments, and IFRS 15, Revenue
from Contracts with Customers. Refer to the “Accounting
Changes for fiscal 2018” section below and note 5 for more
information.
The preparation
of the consolidated financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amount of assets, liabilities, revenue and expenses. Actual results
may vary from these estimates.
Estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognized in the period in which the
estimates are revised and in any future periods affected. The areas
involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the consolidated
financial statements are disclosed in note 4.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
The significant
accounting policies used in the preparation of these consolidated
financial statements are described below:
A.
Consolidation
principles
The financial
statements of the Company include the accounts of DMC, its
subsidiaries, its joint operations and its investments in
associates.
Subsidiaries
Subsidiaries are
all entities (including structured entities) over which the group
has control. The group controls an entity where the group is
exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through
its power to direct the activities of the entity. Subsidiaries are
fully consolidated from the date on which control is transferred to
the group and are deconsolidated from the date that control ceases.
Intercompany transactions, balances and unrealized gains and losses
from intercompany transactions are eliminated.
Joint
Operations
Joint operations
include various mineral property interests which are held through
option or contractual agreements. These arrangements involve joint
control of one or more of the assets acquired or contributed for
the purpose of the joint operation. A joint operation may or may
not be structured through a separate financial vehicle. The
consolidated financial statements of the Company include its share
of the assets in such joint operations, together with its share of
the liabilities, revenues and expenses arising jointly or otherwise
from those operations. All such amounts are measured in accordance
with the terms of each arrangement.
Investments
in associates
An associate is
an entity over which the Company has significant influence and is
neither a subsidiary, nor an interest in a joint operation.
Significant influence is the ability to participate in the
financial and operating policy decisions of the entity without
having control or joint control over those policies.
Associates are
accounted for using the equity method. Under this method, the
investment in associates is initially recorded at cost and adjusted
thereafter to record the Company’s share of post-acquisition
earnings or loss of the associate as if the associate had been
consolidated. The carrying value of the investment is also
increased or decreased to reflect the Company’s share of
capital transactions, including amounts recognized in other
comprehensive income, and for accounting changes that relate to
periods subsequent to the date of acquisition. Dilution gains or
losses arising from changes in the interest in investments in
associates are recognized in the statement of income or
loss.
The Company
assesses at each period-end whether there is any objective evidence
that an investment in an associate is impaired. If impaired, the
carrying value of the Company's share of the underlying assets of
the associate is written down to its estimated recoverable amount,
being the higher of fair value less costs of disposal or value in
use, and charged to the statement of income or loss.
B.
Foreign
currency translation
Functional
and presentation currency
Items included in
the financial statements of each entity in the DMC group are
measured using the currency of the primary economic environment in
which the entity operates (“the functional currency”).
Primary and secondary indicators are used to determine the
functional currency. Primary indicators include the currency that
mainly influences sales prices, labour, material and other costs.
Secondary indicators include the currency in which funds from
financing activities are generated and in which receipts from
operating activities are usually retained. Typically, the local
currency has been determined to be the functional currency of
Denison’s entities.
The financial
statements of entities that have a functional currency different
from the presentation currency of DMC (“foreign
operations”) are translated into Canadian dollars as follows:
assets and liabilities-at the closing rate at the date of the
statement of financial position, and income and expenses-at the
average rate of the period (as this is considered a reasonable
approximation to actual rates). All resulting changes are
recognized in other comprehensive income or loss as cumulative
foreign currency translation adjustments.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
When the Company
disposes of its entire interest in a foreign operation, or loses
control, joint control, or significant influence over a foreign
operation, the foreign currency gains or losses accumulated in
other comprehensive income or loss related to the foreign operation
are recognized in the statement of income or loss as translational
foreign exchange gains or losses.
Transactions
and balances
Foreign currency
transactions are translated into an entity’s functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of foreign currency transactions and from the
translation at year-end exchange rates of monetary assets and
liabilities denominated in currencies other than an
operation’s functional currency are recognized in the
statement of income or loss as transactional foreign exchange gains
or losses.
C.
Cash and
cash equivalents
Cash and cash
equivalents include cash on hand, deposits held with banks, and
other short-term highly liquid investments with original maturities
of three months or less which are subject to an insignificant risk
of changes in value.
D.
Financial
instruments
Financial assets
and financial liabilities are recognized when the Company becomes a
party to the contractual provisions of the financial instrument.
Financial assets are derecognized when the rights to receive cash
flows from the assets have expired or have been transferred and the
Company has transferred substantially all risks and rewards of
ownership. Financial liabilities are derecognized when the
obligations specified in the contract are discharged, cancelled or
expire.
At initial
recognition, the Company classifies its financial instruments in
the following categories:
Financial
assets and liabilities at fair value through profit or loss
(“FVTPL”)
A financial asset
is classified in this category if it is a derivative instrument, an
equity instrument for which the Company has not made the
irrevocable election to classify as fair value through other
comprehensive income (“FVTOCI”), or a debt instrument
that is not held within a business model whose objective includes
holding the financial assets in order to collect contractual cash
flows that are solely payments of principal and interest.
Derivative financial liabilities and contingent consideration
liabilities related to business combinations are also classified in
this category. Financial instruments in this category are
recognized initially and subsequently at fair value. Transaction
costs are expensed in the statement of income or loss. Gains and
losses arising from changes in fair value are presented in the
statement of income or loss – within other income (expense) -
in the period in which they arise.
Financial
assets at amortized cost
A financial asset
is classified in this category if it is a debt instrument and / or
other similar asset that is held within a business model whose
objective is to hold the asset in order to collect the contractual
cash flows (i.e. principal and interest). Financial assets in this
category are initially recognized at fair value plus transaction
costs and subsequently measured at amortized cost using the
effective interest method less a provision for impairment. Interest
income is recorded in the statement of income or loss through
finance income.
Financial
liabilities at amortized cost
All financial
liabilities that are not recorded as FVTPL are classified in this
category and are initially recognized less a discount (when
material) to reduce the financial liabilities to fair value and
less any directly attributable transaction costs. Subsequently,
financial liabilities are measured at amortized cost using the
effective interest method. Interest expense is recorded in net
income through finance expense.
Refer to the
“Fair Value of Financial Instruments” section of note
26 for the Company’s designation of its financial assets and
liabilities.
E.
Impairment
of financial assets
At each reporting
date, the Company assesses the expected credit losses associated
with its financial assets that are not carried at FVTPL. Expected
credit losses are calculated based on the difference between the
contractual cash flows and the cash flows that the Company expects
to receive, discounted, where applicable, based on the assets
original effective interest rate.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
For “Trade
and other receivables”, the Company calculates expected
credit losses based on historical credit loss experience, adjusted
for forward-looking factors specific to debtors and the economic
environment. In recording an impairment loss, the carrying amount
of the asset is reduced by this computed amount either directly or
indirectly through the use of an allowance account.
F.
Inventories
Expenditures,
including depreciation, depletion and amortization of production
assets, incurred in the mining and processing activities that will
result in future concentrate production are deferred and
accumulated as ore in stockpiles, in-process inventories and
concentrate inventories. These amounts are carried at the lower of
average costs or net realizable value (“NRV”). NRV is
the difference between the estimated future concentrate price (net
of selling costs) and estimated costs to complete production into a
saleable form.
Stockpiles are
comprised of coarse ore that has been extracted from the mine and
is available for further processing. Mining production costs are
added to the stockpile as incurred and removed from the stockpile
based upon the average cost per tonne of ore produced from mines
considered to be in commercial production. The current portion of
ore in stockpiles represents the amount expected to be processed in
the next twelve months.
In-process and
concentrate inventories include the cost of the ore removed from
the stockpile, a pro-rata share of the amortization of the
associated mineral property, as well as production costs incurred
to process the ore into a saleable product. Processing costs
typically include labor, chemical reagents and directly
attributable mill overhead expenditures. Items are valued at
weighted average cost.
Materials and
other supplies held for use in the production of inventories are
carried at average cost and are not written down below that cost if
the finished products in which they will be incorporated are
expected to be sold at or above cost. However, when a decline in
the price of concentrates indicates that the cost of the finished
products exceeds net realizable value, the materials are written
down to net realizable value. In such circumstances, the
replacement cost of the materials may be the best available measure
of their net realizable value.
G.
Property,
plant and equipment
Plant
and equipment
Property, plant
and equipment are recorded at acquisition or production cost and
carried net of depreciation and impairments. Cost includes
expenditures incurred by the Company that are directly attributable
to the acquisition of the asset. Subsequent costs are included in
the asset’s carrying amount or recognized as a separate
asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Company
and the cost can be measured reliably. The carrying amount of a
replaced asset is derecognized when replaced. Repairs and
maintenance costs are charged to the statement of income during the
period in which they are incurred.
Depreciation is
calculated on a straight line or unit of production basis as
appropriate. Where a straight line methodology is used, the assets
are depreciated to their estimated residual value over an estimated
useful life which ranges from three to twenty years depending upon
the asset type. Where a unit of production methodology is used, the
assets are depreciated to their estimated residual value over the
useful life defined by management’s best estimate of
recoverable reserves and resources in the current mine plan. When
assets are retired or sold, the resulting gains or losses are
reflected in the statement of income or loss as a component of
other income or expense. The Company allocates the amount initially
recognized in respect of an item of property, plant and equipment
to its significant parts and depreciates separately each such part.
Residual values, method of depreciation and useful lives of the
assets are reviewed at least annually and adjusted if
appropriate.
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|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
Where
straight-line depreciation is utilized, the range of useful lives
for various asset classes is generally as follows:
|
Buildings
|
15 -
20 years;
|
|
Production machinery and
equipment
|
5 - 7 years;
|
|
Other
|
3 – 5 years.
|
Mineral
property acquisition, exploration, evaluation and development
costs
Costs relating to
mineral and / or exploration rights acquired through a business
combination or asset acquisition are capitalized and reported as
part of “Property, plant and equipment”.
Exploration
expenditures are expensed as incurred.
Evaluation
expenditures are expensed as incurred, until an area of interest is
considered by management to be sufficiently advanced. Once this
determination is made, the area of interest is classified as an
evaluation stage mineral property, a component of the
Company’s mineral properties, and all further non-exploration
expenditures for the current and subsequent periods are
capitalized. These expenses can include further evaluation
expenditures such as mining method selection and optimization,
metallurgical sampling test work and costs to further delineate the
ore body to a higher confidence level.
Once commercial
and technical viability has been established for a property, the
property is classified as a development stage mineral property and
all further development costs are capitalized to the asset. Further
development costs include costs related to constructing a mine,
such as shaft sinking and access, lateral development, drift
development, engineering studies and environmental permitting,
infrastructure development and the costs of maintaining the site
until commercial production.
Such capital
costs represent the net expenditures incurred and capitalized as at
the balance sheet date and do not necessarily reflect present or
future values.
Once a
development stage mineral property goes into commercial production,
the property is classified as “Producing” and the
accumulated costs are amortized over the estimated recoverable
resources in the current mine plan using a unit of production
basis. Commercial production occurs when a property is
substantially complete and ready for its intended use.
Proceeds received
from the sale of an interest in a property are credited against the
carrying value of the property, with any difference recorded as a
gain or loss on sale.
H.
Impairment
of non-financial assets
Property, plant
and equipment assets are assessed at the end of each reporting
period to determine if there is any indication that the asset may
be impaired. If any such indication exists, an estimate of the
recoverable amount of the asset is made. For the purpose of
measuring recoverable amounts, assets are grouped at the lowest
level, or cash generating unit (“CGU”), for which there
are separately identifiable cash inflows. The recoverable amount is
the higher of an asset’s fair value less costs of disposal
and value in use (being the present value of the expected future
cash flows of the relevant asset or CGU, as determined by
management). An impairment loss is recognized for the amount by
which the CGU’s carrying amount exceeds its recoverable
amount.
Mineral property
assets are tested for impairment using the impairment indicators
under IFRS 6 “Exploration for and Evaluation of Mineral
Resources” up until the commercial and technical feasibility
for the property is established. From that point onwards, mineral
property assets are tested for impairment using the impairment
indicators of IAS 36 “Impairment of
Assets”.
I.
Employee
benefits
Post-employment
benefit obligations
The Company
assumed the obligation of a predecessor company to provide life
insurance, supplemental health care and dental benefits, excluding
pensions, to its former Canadian employees who retired from active
service prior to 1997. The estimated cost of providing these
benefits is actuarially determined using the projected benefits
method and is recorded on the balance sheet at its estimated
present value. The interest cost on this unfunded liability is
being accreted over the remaining lives of this retiree group.
Experience gains and losses are being deferred as a component of
accumulated other comprehensive income or loss and are adjusted, as
required, on the obligations re-measurement date.
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|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
Stock-based
compensation
The Company uses
a fair value-based method of accounting for stock options to
employees and to non-employees. The fair value is determined using
the Black-Scholes option pricing model on the date of the grant.
The cost is recognized on a graded method basis, adjusted for
expected forfeitures, over the applicable vesting period as an
increase in stock-based compensation expense and the contributed
surplus account. When such stock options are exercised, the
proceeds received by the Company, together with the respective
amount from contributed surplus, are credited to share
capital.
The Company also
has a share unit plan pursuant to which it may grant share units to
employees – the share units are equity-settled awards. The
Company determines the fair value of the awards on the date of
grant. The cost is recognized on a graded method basis, adjusted
for expected forfeitures, over the applicable vesting period as an
increase in share-based compensation expense and the contributed
surplus account. When such share units are settled for common
shares, the applicable amounts of contributed surplus are credited
to share capital.
Termination
benefits
The Company
recognizes termination benefits when it is demonstrably committed
to either terminating the employment of current employees according
to a detailed formal plan without possibility of withdrawal, or
providing benefits as a result of an offer made to encourage
voluntary termination. Benefits falling due more than twelve months
after the end of the reporting period are discounted to their
present value.
J.
Reclamation
provisions
Reclamation
provisions, any legal and constructive obligation related to the
retirement of tangible long-lived assets, are recognized when such
obligations are incurred and if a reasonable estimate of the value
can be determined. These obligations are measured initially at the
present value of expected cash flows using a pre-tax discount rate
reflecting risks specific to the liability and the resulting costs
are capitalized and added to the carrying value of the related
assets. In subsequent periods, the liability is adjusted for the
accretion of the discount and the expense is recorded in the
statement of income or loss. Changes in the amount or timing of the
underlying future cash flows or changes in the discount rate are
immediately recognized as an increase or decrease in the carrying
amounts of the related asset and liability. These costs are
amortized to the results of operations over the life of the asset.
Reductions in the amount of the liability are first applied against
the amount of the net reclamation asset on the books with any
excess value being recorded in the statement of income or
loss.
The
Company’s activities are subject to numerous governmental
laws and regulations. Estimates of future reclamation liabilities
for asset decommissioning and site restoration are recognized in
the period when such liabilities are incurred. These estimates are
updated on a periodic basis and are subject to changing laws,
regulatory requirements, changing technology and other factors
which will be recognized when appropriate. Liabilities related to
site restoration include long-term treatment and monitoring costs
and incorporate total expected costs net of recoveries.
Expenditures incurred to dismantle facilities, restore and monitor
closed resource properties are charged against the related
reclamation liability.
K.
Provisions
Provisions for
restructuring costs and legal claims, where applicable, are
recognized in liabilities when the Company has a present legal or
constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the
obligation, and the amount can be reliably estimated. Provisions
are measured at management’s best estimate of the expenditure
required to settle the obligation at the end of the reporting
period, and are discounted to present value where the effect is
material. The Company performs evaluations to identify onerous
contracts and, where applicable, records provisions for such
contracts.
L.
Current
and deferred Income tax
Current income
tax payable is based on taxable income for the period. Taxable
income differs from income as reported in the statement of income
or loss because it excludes items of income or expense that are
taxable or deductible in other periods and it further excludes
items that are never taxable or deductible. The Company’s
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet
date.
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|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
Deferred income
taxes are accounted for using the balance sheet liability method.
Deferred income tax assets and liabilities are computed based on
temporary differences between the financial statement carrying
values of the existing assets and liabilities and their respective
income tax bases used in the computation of taxable income.
Computed deferred tax liabilities are generally recognized for all
taxable temporary differences and deferred tax assets are
recognized to the extent that it is probable that taxable income
will be available against which deductible temporary differences
can be utilized. Such assets and liabilities are not recognized if
the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable
income nor the accounting income. Deferred tax liabilities are
recognized for taxable temporary differences arising on investments
in subsidiaries and investments, and interests in joint ventures,
except where the Company is able to control the reversal of the
temporary differences and it is probable that the temporary
differences will not reverse in the foreseeable future. The
carrying amount of deferred tax assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable
that sufficient taxable earnings will be available to allow all or
part of the asset to be recovered.
Deferred tax is
calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset realized, based
on tax rates and tax laws that have been enacted or substantively
enacted by the balance sheet date. Deferred tax is charged or
credited to income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
recorded within equity.
Income tax assets
and liabilities are offset when there is a legally enforceable
right to offset the assets and liabilities and when they relate to
income taxes levied by the same tax authority on either the same
taxable entity or different taxable entities where there is an
intention to settle the balance on a net basis.
M.
Flow-through
common shares
The
Company’s Canadian exploration activities have been financed
in part through the issuance of flow-through common shares whereby
the Canadian income tax deductions relating to these expenditures
are claimable by the subscribers and not by the Company. The
proceeds from issuing flow-through shares are allocated between the
offering of shares and the sale of tax benefits. The allocation is
based on the difference (“premium”) between the quoted
price of the Company’s existing shares and the amount the
investor pays for the actual flow-through shares. A liability is
recognized for the premium when the shares are issued, and is
extinguished when the tax effect of the temporary differences,
resulting from the renunciation of the tax deduction to the
flow-through shareholders, is recorded - with the difference
between the liability and the value of the tax assets renounced
being recorded as a deferred tax expense. The tax effect of the
renunciation is recorded at the time the Company makes the
renunciation to its subscribers – which may differ from the
effective date of renunciation. If the flow-through shares are not
issued at a premium, a liability is not established, and on
renunciation the full value of the tax assets renounced is recorded
as a deferred tax expense.
N.
Revenue
recognition
Revenue
from pre-sold toll milling services
Revenue from the
pre-sale of toll milling arrangement cash flows is recognized as
the toll milling services are provided. At contract inception, the
Company estimates the expected transaction price of the toll
milling services being sold based on available information and
calculates an average per unit transaction price that applies over
the life of the contract. This unit price is used to draw-down the
deferred revenue balance as the toll milling services occur. When
changes occur to the timing, or volume of toll milling services,
the per unit transaction price is adjusted to reflect the change
(such review to be done annually, at a minimum), and a cumulative
catch up adjustment is made to reflect the updated rate. The amount
of the upfront payment received from the toll milling pre-sale
arrangements includes a significant financing component due to the
longer term nature of such agreements. As such, the Company also
recognizes accretion expense on the deferred revenue balance which
is recorded in net income through “Finance expense,
net”.
Revenue
from environmental services (i.e. DES)
Environmental
service contracts represent a series of distinct performance
obligations that are substantially the same and have the same
pattern of transfer of control to the customer. The transaction
price is estimated at contract inception and, is recognized over
the life of the contract as control is transferred to the customer.
Variable consideration, where applicable, is estimated at contract
inception using either the expected value method or the most likely
amount method. If it is highly probable that a subsequent reversal
of revenue will not occur when the uncertainty has been resolved,
the Company will recognize as revenue the estimated transaction
price, including the estimate of the variable portion, upon
transfer of control to the customer. Where it is determined that it
is highly probable that a subsequent reversal of revenue will occur
upon the resolution of the uncertainty, the variable portion of the
transaction price will be constrained, and will not be recognized
as revenue until the uncertainty has been resolved.
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|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
Revenue
from management services (i.e. UPC)
The management
services arrangement with UPC represents a series of distinct
performance obligations that are substantially the same and have
the same pattern of transfer of control to the customer. The
transaction price for the contract is estimated at contract
inception and is recognized over the life of the contract as
control is transferred to the customer as the services are
provided. The variable consideration related to the net asset value
(“NAV”) based management fee was estimated at contract
inception using the expected value method. It was determined that
it is highly probable that a subsequent reversal of revenue would
occur if the variable consideration was included in the transaction
price, and as such, the variable portion of the transaction price
will be measured and recognized when the uncertainty has been
resolved (i.e. when the actual NAV has been
calculated).
Commission
revenue earned on acquisition or sale of U
3
O
8
and
UF
6
on
behalf of UPC (or other parties where Denison acts as an agent) is
recognized when control of the related U
3
O
8
or UF
6
passes to the
customer, which is the date when title of the U
3
O
8
and
UF
6
passes.
Revenue
from spot sales of uranium
In a uranium
supply arrangement, the Company is contractually obligated to
provide uranium concentrates to the customer. Each delivery is
considered a separate performance obligation under the contract
– revenue is measured based on the transaction price
specified in the contract and the Company recognizes revenue when
control to the uranium has been transferred to the
customer.
Uranium can be
delivered either to the customer directly (physical deliveries) or
notionally under title within a uranium storage facility (notional
deliveries). For physical deliveries to customers, the terms in the
supply arrangement specify the location of delivery and revenue is
recognized when control transfers to the customer which is
generally when the uranium has been delivered and accepted by the
customer at that location. For notional deliveries at a uranium
storage facility, revenue is recognized on the date that the
Company specifies the storage facility to transfer title of a
contractually specified quantity of uranium to a customer’s
account at the storage facility.
O.
Earnings
(loss) per share
Basic earnings
(loss) per share (“EPS”) is calculated by dividing the
net income or loss for the period attributable to equity owners of
DMC by the weighted average number of common shares outstanding
during the period.
Diluted EPS is
calculated by adjusting the weighted average number of common
shares outstanding for dilutive instruments. The number of shares
included with respect to options, warrants and similar instruments
is computed using the treasury stock method.
P.
Discontinued
operations
A discontinued
operation is a component of the Company that has either been
disposed of or that is classified as held for sale. A component of
the Company is comprised of operations and cash flows that can be
clearly distinguished, operationally and for financial reporting
purposes, from the rest of the Company. Net income or loss of a
discontinued operation and any gain or loss on disposal are
combined and presented as net income or loss from discontinued
operations, net of tax, in the statement of income or
loss.
Accounting
changes for fiscal 2018
Effective January
1, 2018, the Company changed it’s presentation currency and
adopted two new accounting standards, IFRS 9 and IFRS 15. Refer to
note 5 for a summary of the impact of these changes on the
consolidated financial statements. Qualitative details of the
changes are as follows:
A.
Change in
Presentation Currency
Effective January
1, 2018, the Company changed its presentation currency to CAD from
USD. This change in presentation currency was made to better
reflect the Company’s current business activities, which are
now predominantly focused in Canada following the disposal of the
Company’s African and Asia mining segments in fiscal 2016 and
2015, respectively.
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|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
The consolidated
financial statements for all periods presented in the annual
financial statements are in CAD. The majority of the
Company’s current entities, including all of its operating
entities, have CAD as their functional currency so their functional
currency financial statement amounts have been carried forward into
the consolidated results. The financial statements of entities with
a functional currency of USD have been translated into CAD in
accordance with IAS 21, “The Effects of Changes in Foreign
Exchange Rates”, as follows:
●
Assets and liabilities
presented and previously reported in USD have been translated into
CAD using period-end exchange rates of 1.3426 (January 1, 2017) and
1.2545 (December 31, 2017);
●
Consolidated statements of
income and other comprehensive income have been translated using
average foreign exchange rates prevailing during the reporting
periods which ranged from 1.2528 to 1.3449;
●
Investment in associates and
shareholder’s equity balances have been translated using
historical foreign exchange rates in effect on the date that
transactions occurred; and
●
Resulting exchange
differences have been recorded within the foreign currency
translation reserve accounts.
B.
Adoption
of IFRS 9 Financial Instruments (“IFRS 9”)
On adoption of
IFRS 9, Denison elected not to measure any of its equity
instruments using the fair value through other comprehensive income
(“FVTOCI”) approach and instead chose to use the fair
value through profit and loss (“FVTPL”) measurement
method. Previously, under IAS 39, the Company had classified a
subset of its equity instruments as “available for
sale” and recognized unrealized gains or losses on these
investments in other comprehensive income (loss), similar to the
FVTOCI approach under IFRS 9.
The Company
adopted the provisions of IFRS 9 on January 1, 2018 and has applied
the amendment retrospectively, through an adjustment to its opening
equity as at January 1, 2017, reflecting a reclassification of the
FVTOCI amount previously included in accumulated other
comprehensive income (“AOCI”) to Deficit. Any
subsequent changes in AOCI for changes in FVTOCI during fiscal 2017
have been reversed and reflected as a component of net income
(loss) for the period.
There were no
other material amounts arising from the adoption of IFRS
9.
C.
Adoption
of IFRS 15 Revenue from Contracts with Customers (“IFRS
15”)
IFRS 15 replaced
IAS 18 “Revenue” and IAS 11 ”Construction
Contracts” and related interpretations.
The Company
reviewed its revenue recognition policies related to its UPC
management services and its DES care and maintenance services and
determined that no changes in timing or measurement of the revenue
previously recognized were required on adoption of IFRS
15.
In its review of
toll milling revenue recognition and its arrangement with Anglo
Pacific Group PLC and its subsidiaries (the “APG
Arrangement” and “APG”, respectively – see
note 12), the Company determined that the adoption of IFRS 15
required a change to the Company’s accounting policy for
deferred revenue associated with the APG Arrangement. Previously,
the Company amortized the net proceeds of the APG Arrangement into
revenue, on a pro-rata basis, based on the actual cash receipts
from toll milling received in the period as a percentage of the
total remaining undiscounted cash receipts expected to be received
over the life of the arrangement. IFRS 15 requires that the APG
deferred revenue be separated into a revenue component and a
financing component. The transaction price associated with the
revenue component is considered “variable”
consideration under the standard. The transaction price has
initially been measured at the transaction date as the aggregate of
the net proceeds from the APG Arrangement and the expected
financing charges to be incurred over the contract life, and is
subsequently remeasured as changes to the timing or volume of the
toll milling production profile occur. Revenue is recognized into
net income (loss) based on the average toll milling drawdown rate
multiplied by toll milling production during the period. The
average toll milling drawdown rate is computed based on estimates
of the transaction price over the life of the contract divided by
the estimated toll milling production to be delivered over the life
of the contract. Changes in the estimated average toll milling
drawdown rate are required to be retroactively adjusted each period
with a cumulative adjustment to revenue. The financing component,
computed annually, is based upon the discount rate applicable to
the APG Arrangement up-front fee received multiplied by the
outstanding deferred revenue liability amount.
The Company
adopted the provisions of IFRS 15 on January 1, 2018 and has
applied the provisions of IFRS 15 on a full retrospective basis.
This retrospective adoption has resulted in adjustments to increase
revenues and finance expenses associated with the APG Arrangement,
starting at the inception of the APG Arrangement in February 2017,
with the resulting net income (loss) impact being partly offset by
the recognition of additional deferred tax recoveries.
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|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
Accounting
changes for fiscal 2019
A.
IFRS 16
Leases (“IFRS 16”)
IFRS 16 requires
lessees to recognize assets and liabilities for most leases. Under
current standards, the Company expenses its lease payments.
Application of IFRS 16 is mandatory for reporting periods beginning
on or after January 1, 2019. The Company expects the adoption of
IFRS 16 to result in the following: a) increased reported assets
and liabilities; b) increased depreciation and accretion expense
and decreased lease expense within the statement of income (loss);
and c) decreased cash outflows from operations and increased cash
outflows from financing as lease payments will be recorded as
financing outflows in the cash flow statement. Assessments of the
magnitude of the above impacts of adopting the standard are
ongoing.
Comparative
numbers
Certain
classifications of the comparative figures have been changed to
conform to those used in the current period.
4.
CRITICAL
ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation
of consolidated financial statements in accordance with IFRS
requires the use of certain critical accounting estimates and
judgements that affect the amounts reported. It also requires
management to exercise judgement in applying the Company’s
accounting policies. These judgements and estimates are based on
management’s best knowledge of the relevant facts and
circumstances taking into account previous experience. Although the
Company regularly reviews the estimates and judgements made that
affect these financial statements, actual results may be materially
different.
Significant
estimates and judgements made by management relate to:
A.
Determination
of a mineral property being sufficiently advanced
The Company
follows a policy of capitalizing non-exploration related
expenditures on properties it considers to be sufficiently
advanced. Once a mineral property is determined to be sufficiently
advanced, that determination is irrevocable and the capitalization
policy continues to apply over the life of the property. In
determining whether or not a mineral property is sufficiently
advanced, management considers a number of factors, including, but
not limited to: current uranium market conditions, the quality of
resources identified, access to the resource, the suitability of
the resource to current mining methods, ease of permitting,
confidence in the jurisdiction in which the resource is located and
milling complexity.
Many of these
factors are subject to risks and uncertainties that can support a
“sufficiently advanced” determination as at one point
in time but not support it at another. The final determination
requires significant judgment on the part of the Company’s
management and directly impacts the carrying value of the
Company’s mineral properties.
B.
Mineral
property impairment reviews and impairment adjustments
Mineral
properties are tested for impairment when events or changes in
circumstances indicate that the carrying amount may not be
recoverable. When an indicator is identified, the Company
determines the recoverable amount of the property, which is the
higher of an asset’s fair value less costs of disposal or
value in use. An impairment loss is recognized if the carrying
value exceeds the recoverable amount. The recoverable amount of a
mineral property may be determined by reference to estimated future
operating results and discounted net cash flows, current market
valuations of similar properties or a combination of the above. In
undertaking this review, management of the Company is required to
make significant estimates of, amongst other things: reserve and
resource amounts, future production and sale volumes, forecast
commodity prices, future operating, capital and reclamation costs
to the end of the mine’s life and current market valuations
from observable market data which may not be directly comparable.
These estimates are subject to various risks and uncertainties,
which may ultimately have an effect on the expected recoverable
amount of a specific mineral property asset. Changes in these
estimates could have a material impact on the carrying value of the
mineral property amounts and the impairment losses
recognized.
C.
Deferred
revenue – pre-sold toll milling
In February 2017,
Denison closed an arrangement with APG. Under the arrangement,
Denison monetized its right to receive future toll milling cash
receipts from July 1, 2016 onwards from the MLJV under the current
toll milling agreement with the CLJV (see note 14) for an upfront
cash payment. The APG Arrangement consisted of a loan structure and
a stream arrangement. Significant judgement was required to
determine whether the APG Arrangement should be accounted for as a
financial obligation (i.e. debt) or deferred revenue.
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|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
Key factors that
support the deferred revenue conclusion reached by management
include, but are not limited to: a) Limited recourse loan structure
– amounts due to APG are generally repayable only to the
extent of Denison’s share of the toll milling revenues earned
by the MLJV from the processing of the first 215 million pounds of
U
3
O
8
from the Cigar
Lake mine on or after July 1, 2016, under the terms of the current
Cigar Lake toll milling agreement; and b) No warranty of the future
rate of production - no warranty is provided by Denison to APG
regarding the future rate of production at the Cigar Lake mine and
/ or the McClean Lake mill, or the amount and / or collectability
of cash receipts to be received by the MLJV in respect of toll
milling of Cigar Lake ore.
D.
Deferred
revenue – pre-sold toll milling – revenue
recognition
In February 2017,
Denison closed the APG Arrangement and effectively monetized its
right to receive specified future toll milling cash receipts from
the MLJV related to the current toll milling agreement with the
CLJV. In exchange, Denison received a net up-front payment of
$39,980,000 which has been accounted for as a deferred revenue
liability as at the transaction close date (see note
14).
Under IFRS 15,
the Company is required to recognize a revenue component and a
financing component as it draws down the deferred revenue
associated with the APG Arrangement over the life of the specified
toll milling production included in the APG Arrangement. In
estimating both of these components, the Company is required to
make assumptions relating to the future toll milling production
volume associated with Cigar Lake Phase 1 and 2 ore reserves and
resources (to end of mine life) and estimates of the annual timing
of that production. Changes in these estimates affect the
underlying production profile which in turn affects the average
toll milling drawdown rate used to recognize revenue.
When the average
toll milling drawdown rate is changed, the impact is reflected on a
life-to-date production basis with a retroactive adjustment to
revenue recorded in the current period. Going forward, each time
the Company updates its estimates of the underlying production
profile for the APG Arrangement (typically in the quarter that
information relating to Cigar Lake uranium resource updates and /
or production schedules becomes publicly available), retroactive
adjustments to revenue will be recorded in the period that the
revised estimate is determined – such adjustments, which are
non-cash in nature, could be material.
E.
Deferred
tax assets and liabilities
Deferred tax
assets and liabilities are computed in respect of taxes that are
based on taxable profit. Taxable profit will often differ from
accounting profit and management may need to exercise judgement to
determine whether some taxes are income taxes (and subject to
deferred tax accounting) or operating expenses.
Deferred tax
assets and liabilities are measured using enacted or substantively
enacted tax rates expected to apply when the temporary differences
between accounting carrying values and tax basis are expected to be
recovered or settled. The determination of the ability of the
Company to utilize tax loss carry forwards to offset deferred tax
liabilities requires management to exercise judgment and make
certain assumptions about the future performance of the Company.
Management is required to assess whether it is
“probable” that the Company will benefit from these
prior losses and other deferred tax assets. Changes in economic
conditions, commodity prices and other factors could result in
revisions to the estimates of the benefits to be realized or the
timing of utilizing the losses.
F.
Reclamation
obligations
Asset retirement
obligations are recorded as a liability when the asset is initially
constructed or a constructive or legal obligation exists and
typically involve identifying costs to be incurred in the future
and discounting them to the present using an appropriate discount
rate for the liability. The determination of future costs involves
a number of estimates relating to timing, type of costs, mine
closure plans, and review of potential methods and technical
advancements. Furthermore, due to uncertainties concerning
environmental remediation, the ultimate cost of the Company’s
decommissioning liability could differ materially from amounts
provided. The estimate of the Company’s obligation is subject
to change due to amendments to applicable laws and regulations and
as new information concerning the Company’s operations
becomes available. The Company is not able to determine the impact
on its financial position, if any, of environmental laws and
regulations that may be enacted in the future.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
5.
CHANGE IN
PRESENTATION CURRENCY AND ADOPTION OF NEW STANDARDS
The impact of the
changes in presentation currency and the adoption of new accounting
pronouncements (see note 3) on the consolidated financial
statements is as follows:
Consolidated
Statement of Financial Position – As at January 1,
2017
|
|
|
Previously
|
|
|
|
|
|
|
|
|
|
Reported
|
|
Reported
|
|
IFRS
|
|
Restated
|
|
(in
thousands)
|
|
in
USD
|
|
in
CAD
|
|
Adoption
|
|
CAD
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
|
$
|
17,113
|
$
|
22,976
|
$
|
-
|
$
|
22,976
|
|
Non-Current
|
|
200,310
|
|
268,657
|
|
-
|
|
268,657
|
|
Total
assets
|
|
217,423
|
|
291,633
|
|
-
|
|
291,633
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Current
|
$
|
7,260
|
$
|
9,749
|
$
|
-
|
$
|
9,749
|
|
Non-Current
|
|
37,452
|
|
50,282
|
|
-
|
|
50,282
|
|
Total
liabilities
|
|
44,712
|
|
60,031
|
|
-
|
|
60,031
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Share
capital
|
$
|
1,140,631
|
$
|
1,295,235
|
$
|
-
|
$
|
1,295,235
|
|
Share purchase
warrants
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Contributed
surplus
|
|
54,306
|
|
60,612
|
|
-
|
|
60,612
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
Opening
|
|
(961,440)
|
|
(1,124,532)
|
|
9
(1)
|
|
(1,124,523)
|
|
Accumulated other
comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
Cumulative
foreign currency translation
|
|
(61,371)
|
|
(446)
|
|
-
|
|
(446)
|
|
Unamortized
experience gain
|
|
578
|
|
724
|
|
-
|
|
724
|
|
Unrealized gain
on investments
|
|
7
|
|
9
|
|
(9)
(1)
|
|
-
|
|
Total
equity
|
|
172,711
|
|
231,602
|
|
-
|
|
231,602
|
|
Total liabilities
and equity
|
$
|
217,423
|
$
|
291,633
|
$
|
-
|
$
|
291,633
|
(1)
Represents adjustments
related to the adoption of IFRS 9 (see note 3).
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
Consolidated
Statement of Financial Position – As at December 31,
2017
|
|
|
Previously
|
|
|
|
|
|
|
|
|
|
Reported
|
|
Reported
|
|
IFRS
|
|
Restated
|
|
(in
thousands)
|
|
in
USD
|
|
in
CAD
|
|
Adoption
|
|
CAD
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
|
$
|
40,135
|
$
|
50,352
|
$
|
-
|
$
|
50,352
|
|
Non-Current
|
|
219,933
|
|
275,948
|
|
-
|
|
275,948
|
|
Total
assets
|
|
260,068
|
|
326,300
|
|
-
|
|
326,300
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Deferred
revenue
|
$
|
2,498
|
$
|
3,134
|
$
|
1,802
(2)
|
$
|
4,936
|
|
All other current
liabilities
|
|
8,497
|
|
10,660
|
|
-
|
|
10,660
|
|
|
|
10,995
|
|
13,794
|
|
1,802
|
|
15,596
|
|
Non-Current
|
|
|
|
|
|
|
|
|
|
Deferred
revenue
|
|
27,181
|
|
34,100
|
|
(384)
(2)
|
|
33,716
|
|
Deferred income
tax liability
|
|
14,182
|
|
17,792
|
|
(370)
(3)
|
|
17,422
|
|
All other
non-current liabilities
|
|
23,758
|
|
29,805
|
|
-
|
|
29,805
|
|
|
|
65,121
|
|
81,697
|
|
(754)
|
|
80,943
|
|
Total
liabilities
|
|
76,116
|
|
95,491
|
|
1,048
|
|
96,539
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Share
capital
|
$
|
1,151,927
|
$
|
1,310,473
|
$
|
-
|
$
|
1,310,473
|
|
Share purchase
warrants
|
|
333
|
|
435
|
|
-
|
|
435
|
|
Contributed
surplus
|
|
55,165
|
|
61,799
|
|
-
|
|
61,799
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
Opening
|
|
(961,440)
|
|
(1,124,532)
|
|
9
(1)
|
|
(1,124,523)
|
|
Net income
(loss)
|
|
(14,168)
|
|
(18,520)
|
|
5
(1)
|
|
|
|
|
|
|
|
|
|
(1,418)
(2)
|
|
|
|
|
|
|
|
|
|
370
(3)
|
|
(19,563)
|
|
Accumulated other
comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
Cumulative
foreign currency translation
|
|
(48,454)
|
|
416
|
|
-
|
|
416
|
|
Unamortized
experience gain
|
|
578
|
|
724
|
|
-
|
|
724
|
|
Unrealized gain
on investments
|
|
11
|
|
14
|
|
(14)
(1)
|
|
-
|
|
Total
equity
|
|
183,952
|
|
230,809
|
|
(1,048)
|
|
229,761
|
|
Total liabilities
and equity
|
$
|
260,068
|
$
|
326,300
|
$
|
-
|
$
|
326,300
|
(1)
Represents adjustments
related to the adoption of IFRS 9 (see note 3);
(2)
Represents adjustments
related to the adoption of IFRS 15 (see note 3); and
(3)
Represents adjustments
related to the tax impact of the adoption of IFRS 15 (see note
3).
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
Consolidated
Statement of Income (Loss) and Comprehensive Income (Loss) –
year ended December 31, 2017
|
|
|
Previously
|
|
|
|
|
|
|
|
|
|
Reported
|
|
Reported
|
|
IFRS
|
|
Restated
|
|
(in
thousands)
|
|
in
USD
|
|
in
CAD
|
|
Adoption
|
|
CAD
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
11,085
|
$
|
14,370
|
$
|
1,697
(2)
|
$
|
16,067
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense)
(3)
|
|
1,599
|
|
1,990
|
|
5
(1)
|
|
1,995
|
|
Finance income
(expense)
|
|
(858)
|
|
(1,111)
|
|
(3,115)
(2)
|
|
(4,226)
|
|
Deferred income
tax recovery (expense)
|
|
3,638
|
|
4,796
|
|
370
(2)
|
|
5,166
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the
period
|
$
|
(14,168)
|
$
|
(18,520)
|
$
|
(1,043)
|
$
|
(19,563)
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
Unrealized gain
(loss) on investments
|
|
4
|
|
5
|
|
(5)
(1)
|
|
-
|
|
Foreign currency
translation change
|
|
12,917
|
|
862
|
|
-
|
|
862
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss) for the period
|
$
|
(1,247)
|
$
|
(17,653)
|
$
|
(1,048)
|
$
|
(18,701)
|
(1)
Represents adjustments
related to the adoption of IFRS 9;
(2)
Represents before tax and tax
adjustments related to the adoption of IFRS 15; and
(3)
The amount reported
separately as “Foreign exchange” has been grouped into
“Other income (expense)” to be consistent with the
presentation for fiscal 2018.
Consolidated
Statement of Cash Flow – year ended December 31,
2017
|
|
|
Previously
|
|
|
|
|
|
|
|
|
|
Reported
|
|
Reported
|
|
IFRS
|
|
Restated
|
|
(in
thousands)
|
|
in
USD
|
|
in
CAD
|
|
Adoption
|
|
CAD
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided
by operating activities
|
$
|
12,380
|
|
16,875
|
|
-
|
|
16,875
|
|
Net cash used in
investing activities
|
|
(35,502)
|
|
(47,724)
|
|
-
|
|
(47,724)
|
|
Net cash provided
by financing activities
|
|
13,743
|
|
18,591
|
|
-
|
|
18,591
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and equivalents
|
|
(9,379)
|
|
(12,258)
|
|
-
|
|
(12,258)
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
effect on cash and equivalents
|
|
439
|
|
-
|
|
-
|
|
-
|
|
Cash and
equivalents, beginning of period
|
|
11,838
|
|
15,894
|
|
-
|
|
15,894
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
equivalents, end of period
|
$
|
2,898
|
$
|
3,636
|
$
|
-
|
$
|
3,636
|
6.
DISCONTINUED
OPERATIONS
Discontinued
operation – Africa Mining Division
The 2017
discontinued operations loss of $109,000 reflects additional
transaction costs incurred by the Company for professional fees
related to the sale of the Africa Mining Division to GoviEx Uranium
Inc. (“GoviEx”) in June 2016.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
The condensed
consolidated statement of income (loss) for the Africa Mining
Division discontinued operation for 2018 and 2017 is as
follows:
|
(in
thousands)
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the
period
|
|
|
|
|
|
-
|
|
-
|
|
Loss on
disposal
|
|
|
|
|
|
-
|
|
(109)
|
|
Loss from
discontinued operations
|
|
|
|
|
$
|
-
|
$
|
(109)
|
Cash flows for
the Africa Mining Division discontinued operation for 2018 and 2017
is as follows:
|
(in
thousands)
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Cash inflow (outflow):
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
$
|
-
|
$
|
-
|
|
Investing
activities
|
|
|
|
|
|
-
|
|
(109)
|
|
Net cash outflow
for the period
|
|
|
|
|
$
|
-
|
$
|
(109)
|
The cash and cash
equivalent balance consists of:
|
|
|
At December
31
|
|
At December
31
|
|
At January
1
|
|
(in
thousands)
|
|
2018
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
Cash
|
$
|
1,152
|
$
|
2,717
|
$
|
6,927
|
|
Cash in MLJV and
MWJV
|
|
654
|
|
913
|
|
1,557
|
|
Cash
equivalents
|
|
21,401
|
|
6
|
|
7,410
|
|
|
$
|
23,207
|
$
|
3,636
|
$
|
15,894
|
Cash equivalents
consist of various investment savings account instruments and money
market funds all of which are short term in nature, highly liquid
and readily convertible into cash.
The trade and
other receivables balance consists of:
|
|
|
At December
31
|
|
At December
31
|
|
At January
1
|
|
(in
thousands)
|
|
2018
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
Trade
receivables
|
$
|
2,952
|
$
|
3,999
|
$
|
2,406
|
|
Receivables in
MLJV and MWJV
|
|
571
|
|
640
|
|
783
|
|
Sales tax
receivables
|
|
98
|
|
84
|
|
23
|
|
Sundry
receivables
|
|
201
|
|
68
|
|
14
|
|
Loan receivable
(note 25)
|
|
250
|
|
-
|
|
-
|
|
|
$
|
4,072
|
$
|
4,791
|
$
|
3,226
|
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
The inventories
balance consists of:
|
|
|
At December
31
|
|
At December
31
|
|
At January
1
|
|
(in
thousands)
|
|
2018
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
Uranium
concentrates
|
$
|
526
|
$
|
526
|
$
|
526
|
|
Inventory of ore
in stockpiles
|
|
2,098
|
|
2,098
|
|
2,098
|
|
Mine and mill
supplies in MLJV
|
|
3,058
|
|
2,928
|
|
2,670
|
|
|
$
|
5,682
|
$
|
5,552
|
$
|
5,294
|
|
|
|
|
|
|
|
|
|
Inventories-by
balance sheet presentation:
|
|
|
|
|
|
|
|
Current
|
$
|
3,584
|
$
|
3,454
|
$
|
3,196
|
|
Long term-ore in
stockpiles
|
|
2,098
|
|
2,098
|
|
2,098
|
|
|
$
|
5,682
|
$
|
5,552
|
$
|
5,294
|
Long-term ore in
stockpile inventory represents an estimate of the amount of ore on
the stockpile in excess of the next twelve months of planned mill
production.
The investments
balance consists of:
|
|
|
At December
31
|
|
At December
31
|
|
At January
1
|
|
(in
thousands)
|
|
2018
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
|
Debt
instrument
|
$
|
-
|
$
|
37,807
|
$
|
-
|
|
Equity
instruments
|
|
2,255
|
|
7,359
|
|
5,049
|
|
|
$
|
2,255
|
$
|
45,166
|
$
|
5,049
|
|
|
|
|
|
|
|
|
|
Investments-by
balance sheet presentation:
|
|
|
|
|
|
|
|
Current
|
$
|
-
|
$
|
37,807
|
$
|
-
|
|
Long-term
|
|
2,255
|
|
7,359
|
|
5,049
|
|
|
$
|
2,255
|
$
|
45,166
|
$
|
5,049
|
The
investments continuity summary is as follows:
|
(in
thousands)
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Balance-January
1
|
|
|
$
|
45,166
|
$
|
5,049
|
|
Purchases
|
|
|
|
|
|
|
|
Equity
instruments
|
|
|
|
-
|
|
200
|
|
Debt
instruments
|
|
|
|
-
|
|
40,000
|
|
Sales /
redemptions
|
|
|
|
|
|
|
|
Debt
instruments
|
|
|
|
(37,500)
|
|
(2,500)
|
|
Fair value (loss)
gain to profit and loss
|
|
|
|
(5,411)
|
|
2,417
|
|
Balance-December
31
|
|
|
$
|
2,255
|
$
|
45,166
|
Equity
instruments consists of shares and warrants in publicly-traded
companies. Debt instruments at December 31, 2017 consisted of a 5
year redeemable guaranteed investment certificate
(“GIC”) with guaranteed early redemption rates of
interest ranging between 0.25% and 1.60% per annum. The GIC was
fully redeemed in 2018.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
Investment
purchases, sales, impairments and other movements
During 2018, the
Company redeemed GIC debt instruments of $37,500,000.
During 2017, the
Company purchased GIC debt instruments at a cost of $40,000,000 and
it purchased additional equity instruments in Skyharbour Resources
Ltd (“Skyharbour”) at a cost of $200,000.
During 2017, the
Company redeemed GIC debt instruments of $2,500,000.
The investment in
associates balance consists of:
|
|
|
At December
31
|
|
At December
31
|
|
At January
1
|
|
(in
thousands)
|
|
2018
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
Investment in
associates-by investee:
|
|
|
|
|
|
|
|
GoviEx
|
$
|
5,582
|
$
|
5,305
|
$
|
6,011
|
|
|
$
|
5,582
|
$
|
5,305
|
$
|
6,011
|
A summary of the
investment in GoviEx is as follows:
|
(in thousands
except share amounts)
|
|
|
|
Number
of Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
Balance-January
1, 2017
|
|
|
|
65,144,021
|
$
|
6,011
|
|
Share of equity
loss
|
|
|
|
-
|
|
(1,015)
|
|
Dilution
gain
|
|
|
|
-
|
|
309
|
|
Balance-December
31, 2017
|
|
|
|
65,144,021
|
$
|
5,305
|
|
|
|
|
|
|
|
|
|
Share of equity
loss
|
|
|
|
-
|
|
(472)
|
|
Dilution
gain
|
|
|
|
-
|
|
749
|
|
Balance-December
31, 2018
|
|
|
|
65,144,021
|
$
|
5,582
|
GoviEx is a
mineral resource company focused on the exploration and development
of its uranium properties located in Africa. GoviEx maintains a
head office located in Canada and is a public company listed on the
TSX Venture Exchange. At December 31, 2018, Denison holds an
approximate 16.21% interest in GoviEx based on publicly available
information (December 31, 2017: 18.72%) and has one director
appointed to the GoviEx board of directors. Through the extent of
its share ownership interest and its seat on the board of
directors, Denison has the ability to exercise significant
influence over GoviEx and accordingly, is using the equity method
to account for this investment.
The trading price
of GoviEx on December 31, 2018 was $0.15 per share which
corresponds to a quoted market value of $9,772,000 (December 31,
2017: $17,589,000) for the Company’s investment in GoviEx
common shares.
The following
table is a summary of the consolidated financial information of
GoviEx on a 100% basis taking into account adjustments made by
Denison for equity accounting purposes for fair value adjustments
and differences in accounting policy. Denison records its equity
investment entries in GoviEx one quarter in arrears (due to the
information not yet being publicly available), adjusted for any
subsequent material publicly disclosed share issuance transactions
that have occurred. A reconciliation of GoviEx’s summarized
information to Denison’s investment carrying value is also
included.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
The Company has
certain restricted cash and investments deposited to collateralize
a portion of its reclamation obligations. The restricted cash and
investments balance consists of:
|
|
|
At December
31
|
|
At December
31
|
|
At January
1
|
|
(in
thousands)
|
|
2018
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
85
|
$
|
3,049
|
$
|
372
|
|
Investments
|
|
12,170
|
|
9,135
|
|
2,735
|
|
|
$
|
12,255
|
$
|
12,184
|
$
|
3,107
|
|
|
|
|
|
|
|
|
|
Restricted cash
and investments-by item:
|
|
|
|
|
|
|
|
Elliot Lake
reclamation trust fund
|
$
|
3,120
|
$
|
3,049
|
$
|
2,972
|
|
Letters of credit
facility pledged assets
|
|
9,000
|
|
9,000
|
|
-
|
|
Letters of credit
additional collateral
|
|
135
|
|
135
|
|
135
|
|
|
$
|
12,255
|
$
|
12,184
|
$
|
3,107
|
At December 31,
2018, investments consist of guaranteed investment certificates and
a term deposit with a maturity of more than 90 days.
Elliot
Lake reclamation trust fund
The Company has
the obligation to maintain its decommissioned Elliot Lake uranium
mine pursuant to a Reclamation Funding Agreement effective December
21, 1995 (“Agreement”) with the Governments of Canada
and Ontario. The Agreement, as further amended in February 1999,
requires the Company to maintain funds in the reclamation trust
fund equal to estimated reclamation spending for the succeeding six
calendar years, less interest expected to accrue on the funds
during the period. Withdrawals from this reclamation trust fund can
only be made with the approval of the Governments of Canada and
Ontario to fund Elliot Lake monitoring and site restoration
costs.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
In 2018, the
Company deposited an additional $670,000 into the Elliot Lake
reclamation trust fund and withdrew $633,000. In 2017, the Company
deposited an additional $917,000 into the Elliot Lake reclamation
trust fund and withdrew $873,000.
Letters of
credit facility pledged assets
At December 31,
2018, the Company had on deposit $9,000,000 with the Bank of Nova
Scotia (“BNS”) as pledged restricted cash and
investments pursuant to its obligations under an amended and
extended letters of credit facility (see notes 14, 16 and 17). The
monies were initially deposited in 2017.
Letters of
credit additional collateral
At December 31,
2018, the Company had on deposit an additional $135,000 of cash
collateral with BNS in respect of the portion of its issued
reclamation letters of credit in excess of the collateral available
under its letters of credit facility (see notes 16 and
17).
The property,
plant and equipment balance consists of:
|
|
|
At December
31
|
|
At December
31
|
|
At January
1
|
|
(in
thousands)
|
|
2018
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
Plant and
equipment:
|
|
|
|
|
|
|
|
Cost
|
$
|
97,243
|
$
|
96,762
|
$
|
97,477
|
|
Construction-in-progress
|
|
6,187
|
|
6,424
|
|
6,473
|
|
Accumulated
depreciation
|
|
(24,086)
|
|
(20,516)
|
|
(16,930)
|
|
Net book
value
|
$
|
79,344
|
$
|
82,670
|
$
|
87,020
|
|
|
|
|
|
|
|
|
|
Mineral
properties:
|
|
|
|
|
|
|
|
Cost
|
$
|
178,947
|
$
|
166,332
|
$
|
165,372
|
|
Net book
value
|
$
|
178,947
|
$
|
166,332
|
$
|
165,372
|
|
Total Net book
value
|
$
|
258,291
|
$
|
249,002
|
$
|
252,392
|
The plant and
equipment continuity summary is as follows:
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Amortization
/
|
|
Net
|
|
(in
thousands)
|
|
Cost
|
|
Depreciation
|
|
Book
Value
|
|
|
|
|
|
|
|
|
|
Plant and
equipment:
|
|
|
|
|
|
|
|
Balance-January
1, 2017
|
$
|
103,950
|
$
|
(16,930)
|
$
|
87,020
|
|
Additions
|
|
257
|
|
-
|
|
257
|
|
Amortization
|
|
-
|
|
(190)
|
|
(190)
|
|
Depreciation
(note 23)
|
|
-
|
|
(4,371)
|
|
(4,371)
|
|
Disposals
|
|
(806)
|
|
785
|
|
(21)
|
|
Reclamation
adjustment (note 16)
|
|
(215)
|
|
190
|
|
(25)
|
|
Balance-December
31, 2017
|
$
|
103,186
|
$
|
(20,516)
|
$
|
82,670
|
|
|
|
|
|
|
|
|
|
Additions
|
|
173
|
|
-
|
|
173
|
|
Amortization
|
|
-
|
|
(189)
|
|
(189)
|
|
Depreciation
(note 23)
|
|
-
|
|
(3,661)
|
|
(3,661)
|
|
Disposals
|
|
(365)
|
|
91
|
|
(274)
|
|
Reclamation
adjustment (note 16)
|
|
436
|
|
189
|
|
625
|
|
Balance-December
31, 2018
|
$
|
103,430
|
$
|
(24,086)
|
$
|
79,344
|
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
The mineral
property continuity summary is as follows:
|
|
|
|
|
Accumulated
|
|
Net
|
|
(in
thousands)
|
|
Cost
|
|
Amortization
|
|
Book
Value
|
|
|
|
|
|
|
|
|
|
Mineral
properties:
|
|
|
|
|
|
|
|
Balance-January
1, 2017
|
$
|
165,372
|
$
|
-
|
$
|
165,372
|
|
Additions
|
|
829
|
|
-
|
|
829
|
|
Impairment
reversal
|
|
331
|
|
-
|
|
331
|
|
Recoveries
|
|
(200)
|
|
-
|
|
(200)
|
|
Balance-December
31, 2017
|
$
|
166,332
|
$
|
-
|
$
|
166,332
|
|
|
|
|
|
|
|
|
|
Additions
|
|
18,923
|
|
-
|
|
18,923
|
|
Impairment
expense
|
|
(6,086)
|
|
-
|
|
(6,086)
|
|
Recoveries
|
|
(222)
|
|
-
|
|
(222)
|
|
Balance-December
31, 2018
|
$
|
178,947
|
$
|
-
|
$
|
178,947
|
Plant and
Equipment
Canada Mining Segment
The Company has a
22.5% interest in the McClean Lake mill located in the Athabasca
Basin of Saskatchewan, Canada. A toll milling agreement has been
signed with the participants in the CLJV that provides for the
processing of the future output of the Cigar Lake mine at the
McClean Lake mill, for which the owners of the McClean Lake mill
receive a toll milling fee and other benefits. In determining the
units of production amortization rate for the McClean Lake mill,
the amount of production attributable to the mill assets has been
adjusted to include Denison’s expected share of mill feed
related to the CLJV toll milling contract.
Milling
activities in 2017 and 2018 at the McClean Lake mill have been
dedicated to processing and packaging ore from the Cigar Lake
mine.
Environmental Services Segment
The environmental
services division of the Company provides mine decommissioning and
decommissioned site monitoring services for third
parties.
Mineral
Properties
The Company has
various interests in development, evaluation and exploration
projects located in Canada which are held directly or through
option or various contractual agreements.
Canada Mining Segment
As at December
31, 2018, the Company’s mineral property interests with
significant carrying values are (all of the properties below are
located in Saskatchewan):
a)
Wheeler River - the Company
has a 90% interest in the project (includes the Phoenix and Gryphon
deposits);
b)
Waterbury Lake - the Company
has a 65.92% interest in the project (includes the J Zone and
Huskie deposits) and also has a 2.0% net smelter return royalty on
the portion of the project it does not own;
c)
Midwest - the Company has a
25.17% interest in the project (includes the Midwest Main and
Midwest A deposits);
d)
Mann Lake - the Company has a
30% interest in the project;
e)
Wolly - the Company has a
21.89% interest in the project;
f)
Johnston Lake – the
Company has a 100% interest in the project; and
g)
McClean Lake - the Company
has a 22.5% interest in the project (includes the Sue D, Sue E,
Caribou, McClean North and McClean South deposits).
Wheeler
River
In January 2017,
Denison Mines Inc.(“DMI”) executed an agreement
(“2017 Agreement) with the partners of the WRJV to increase
its ownership in the WRJV from 60% up to approximately 66% by the
end of fiscal 2018. Under the terms of the 2017 Agreement, the
partners agreed to allow for a one-time election by Cameco Corp.
(“Cameco”) to fund 50% of its ordinary 30% share of the
WRJV expenses for fiscal 2017 and 2018. The shortfall in
Cameco’s contribution was funded by DMI (with DMI funding 75%
of the WRJV expenses) in exchange for a transfer of a portion of
Cameco’s interest in the WRJV. In 2017, DMI increased its
interest in the WRJV from 60% to 63.3% under the terms of the 2017
Agreement.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
In September
2018, DMC announced an agreement (“2018 Agreement”)
with Cameco to acquire Cameco’s remaining minority interest
in the WRJV. On October 26, 2018, the 2018 Agreement was completed
and DMC acquired Cameco’s then 23.92% remaining interest in
the WRJV in exchange for the issuance of 24,615,000 common shares
of DMC. The shares issued to Cameco are subject to a six month
escrow period during which time Cameco has agreed to not, directly
or indirectly, transfer any of the shares without the prior written
consent of Denison. The transfer of shares is also restricted for a
further six month period, where Denison retains the right, under
certain circumstances, to designate a purchaser upon notice from
Cameco of the intent to transfer or sell all or a portion of the
shares.
In conjunction
with the completion of the 2018 Agreement, the 2017 Agreement was
terminated. At that time, in accordance with the 2017 Agreement,
DMI’s interest in the WRJV was increased from 63.3% to
66.08%. Combined, Denison’s interest in the WRJV is
90%.
Cameco’s
WRJV minority interest acquired by DMC via the 2018 Agreement has
been accounted for as an asset acquisition with share based
consideration. DMC has recorded a total acquisition value of
$17,688,000, including transaction costs of $457,000. The total
acquisition value includes $17,529,000 of share based consideration
which has been valued using Denison’s closing share price on
October 26, 2018 of $0.70 per share.
Waterbury
Lake
In 2017, the
Company increased its interest in the Waterbury Lake property from
63.01% to 64.22% and further increased it again in 2018 to 65.92%
under the terms of the dilution provisions in the agreements
governing the project (see note 25).
Moon Lake
South
In January 2016,
the Company entered into an option agreement with CanAlaska Uranium
Ltd (“CanAlaska”) to earn an interest in
CanAlaska’s Moon Lake South project located in the Athabasca
Basin in Saskatchewan. Under the terms of the option, Denison can
earn an initial 51% interest in the project by spending $200,000 by
December 31, 2017 and it can increase its interest to 75% by
spending an additional $500,000 by December 31, 2020.
As at December
31, 2018, the Company has spent $551,000 under the option and has
earned a 51% interest in the project.
Moore Lak
e
In June 2016, the
Company announced an agreement to option its 100% interest in the
Moore Lake property to Skyharbour Resources Ltd
(“Skyharbour”) in exchange for cash ($500,000 over 5
years), stock (4,500,000 common shares of Skyharbour) and
exploration spending commitments ($3,500,000 over 5 years). The
Moore Lake mineral property carrying value was impaired to its
estimated remaining recoverable amount based on a market-based fair
value less costs of disposal assessment of the share and cash
consideration to be received by the Company under the terms of the
option agreement. The option agreement was closed in August 2016
and Denison received 4,500,000 common shares of Skyharbour on
closing.
In April 2017,
Denison received $200,000 of cash consideration from Skyharbour
under the terms of the option agreement and a recovery of $200,000
was recognized as a reduction of the carrying value of the
property.
In June 2017, the
Company recognized an impairment reversal of $331,000 for Moore
Lake based on an update of the estimated recoverable amount
remaining to be received under the option agreement.
In August 2018,
Denison received the final $300,000 of cash consideration from
Skyharbour, completing all of the commitments required under the
option agreement. In conjunction with the final cash payment
received, Denison recognized a recovery of $212,000 as a reduction
of the remaining carrying value of the property, a gain on disposal
of $88,000 and transferred its 100% ownership interest in Moore
Lake to Skyharbour.
Under the terms
of the option agreement, Denison has various back-in rights to
re-acquire a 51% interest in the Moore Lake property. In August
2018, Skyharbour achieved the required $3,500,000 in expenditures
on the project to trigger the first stage buyback option, which
Denison elected not to exercise. Denison retains a second stage
buyback option on the property until a further $3,000,000 in
expenditures have been incurred on the project by
Skyharbour.
Under the terms
of the option agreement, Denison is also entitled to nominate a
member to Skyharbour’s Board of Directors for as long as
Denison maintains a minimum ownership position of 5%. As at
December 31, 2018, Denison’s ownership interest in Skyharbour
is approximately 8.49% (December 31, 2017: 9.95%).
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
Hook
Carter
In November 2016,
Denison completed the purchase of an 80% interest in the
Hook-Carter property, located in the southwestern portion of the
Athabasca Basin region in northern Saskatchewan, from ALX Uranium
Corp (“ALX”), with ALX retaining a 20%
interest.
Under terms in
the agreement, Denison agreed to fund ALX’s share of the
first $12,000,000 in expenditures on the property. Denison also
agreed to a work commitment of $3,000,000 over 3 years –
should Denison not meet this commitment, Denison’s interest
in the property would decrease from 80% to 75% and ALX’s
interest would increase from 20% to 25%.
As at December
31, 2018, the Company has spent $4,926,000 on the project since its
acquisition in November 2016 and has satisfied the terms of the
work commitment condition in the Hook Carter purchase
agreement.
Other
Properties
In December 2018,
due to the Company’s current intention to let various claims
on three of its Canadian properties lapse in the normal course, the
Company has recognized impairment charges of $6,097,000. The
impairment charge has been recognized within the Canada Mining
Segment. The remaining recoverable amount of these three properties
is estimated to be $1,208,000 which reflects the results of a
market-based fair value less costs of disposal assessment completed
using both observable and unobservable inputs, including market
valuations for recent uranium property exchanges, the
Company’s proprietary data about its properties and
management’s interpretation of that data. The Company has
classified its valuation within Level 3 of the fair value
hierarchy. A value in use calculation is not applicable as the
Company does not have any expected cash flows from using these
properties at this stage.
14.
DEFERRED
REVENUE
The deferred
revenue balance consists of:
|
|
|
At December
31
|
|
At December
31
|
|
At January
1
|
|
(in
thousands)
|
|
2018
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
Deferred revenue
– pre-sold toll milling
|
$
|
37,727
|
$
|
38,652
|
$
|
-
|
|
|
$
|
37,727
|
$
|
38,652
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Deferred
revenue-by balance sheet presentation:
|
|
|
|
|
||
|
Current
|
$
|
4,567
|
$
|
4,936
|
$
|
-
|
|
Non-current
|
|
33,160
|
|
33,716
|
|
-
|
|
|
$
|
37,727
|
$
|
38,652
|
$
|
-
|
The deferred
revenue liability continuity summary is as follows:
|
(in
thousands)
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Balance-January
1
|
|
|
$
|
38,652
|
$
|
-
|
|
Proceeds of APG
Arrangement, net
|
|
|
|
|
||
|
Upfront
proceeds
|
|
-
|
|
43,500
|
||
|
Less: toll
milling cash receipts from July 1, 2016 to January 31,
2017
|
-
|
|
(3,520)
|
|||
|
Revenue earned
during the period
|
|
|
|
(4,239)
|
|
(4,443)
|
|
Accretion
|
|
|
|
3,314
|
|
3,115
|
|
Balance-December
31
|
|
|
$
|
37,727
|
$
|
38,652
|
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
Arrangement
with Anglo Pacific Group PLC
In February 2017,
Denison closed an arrangement with APG under which Denison received
an upfront payment of $43,500,000 in exchange for its right to
receive future toll milling cash receipts from the MLJV under the
current toll milling agreement with the CLJV from July 1, 2016
onwards. The up-front payment was based upon an estimate of the
gross toll milling cash receipts to be received by Denison
discounted at a rate of 8.50%.
The APG
Arrangement represents a contractual obligation of Denison to pay
onward to APG any cash proceeds of future toll milling revenue
earned by the Company related to the processing of the specified
Cigar Lake ore through the McClean Lake mill. The Company has
reflected payments made to APG of $3,520,000, representing the
Cigar Lake toll milling cash receipts received by Denison in
respect of toll milling activity for the period from July 1, 2016
through January 31, 2017, as a reduction of the initial upfront
amount received and has reduced the initial deferred revenue
balance to $39,980,000 at the transaction date.
In connection
with the closing of the APG Arrangement, Denison reimbursed APG for
USD$100,000 in due diligence costs and granted 1,673,077 share
purchase warrants to APG in satisfaction of a $435,000 arrangement
fee payable. The fair value of the warrants was determined using
the Black-Scholes option pricing model with the following
assumptions: risk-free rate of 0.91%, expected stock price
volatility of 51.47%, expected life of 3.0 years and expected
dividend yield of nil$. The warrants have an exercise price of
$1.27 per share and will be exercisable for a period of 3 years
from the date of closing of the financing (see note 20). In
addition, the terms of the BNS Letters of Credit Facility between
BNS and Denison were amended to reflect certain changes required to
facilitate an Intercreditor Agreement between APG, BNS and Denison
(see note 17).
The
Company’s share of toll milling revenue for January 2017,
prior to the closing of the transaction with APG, of $587,000 has
been recognized as toll milling revenue in the quarter ending March
31, 2017. Following the closing of the APG Arrangement, the Company
has recognized $4,443,000 in additional toll milling revenue in
2017 from the draw-down of deferred revenue based on Cigar Lake
toll milling production of 16,200,000 pounds U
3
O
8
(100%
basis).
In 2018, the
Company has recognized $4,239,000 of toll milling revenue from the
draw-down of deferred revenue, based on Cigar Lake toll milling
production of 18,018,000 pounds U
3
O
8
(100% basis). The
drawdown in 2018 includes a cumulative decrease in revenue for
prior periods of $332,000 resulting from changes in estimates to
the toll milling drawdown rate in the first quarter of
2018.
15.
POST-EMPLOYMENT
BENEFITS
The Company
provides post-employment benefits for former Canadian employees who
retired on immediate pension prior to 1997. The post-employment
benefits provided include life insurance and medical and dental
benefits as set out in the applicable group policies. No
post-employment benefits are provided to employees outside the
employee group referenced above. The post-employment benefit plan
is not funded.
The effective
date of the most recent actuarial valuation of the accrued benefit
obligation is October 1, 2016. The amount accrued is based on
estimates provided by the plan administrator which are based on
past experience, limits on coverage as set out in the applicable
group policies and assumptions about future cost trends. The
significant assumptions used in the most recent valuation are
listed below:
●
Discount rate of
3.10%;
●
Medical cost increase trend
rates of 7.00% per year in 2017, grading down by 0.125% per year to
4.625% in 2036 and using a rate at 4.00% per year thereafter;
and
●
Dental cost increase trend
rates of 4.00% per year for ten years, followed by 3.50% for the
next ten years and 3.00% per year thereafter.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
The
post-employment benefits balance consists of:
|
|
|
At December
31
|
|
At December
31
|
|
At January
1
|
|
(in
thousands)
|
|
2018
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
Accrued benefit
obligation
|
$
|
2,295
|
$
|
2,365
|
$
|
2,459
|
|
|
$
|
2,295
|
$
|
2,365
|
$
|
2,459
|
|
|
|
|
|
|
|
|
|
Post-employment
benefits-by balance sheet presentation:
|
|
|
|
|
||
|
Current
|
$
|
150
|
$
|
250
|
$
|
250
|
|
Non-current
|
|
2,145
|
|
2,115
|
|
2,209
|
|
|
$
|
2,295
|
$
|
2,365
|
$
|
2,459
|
The
post-employment benefits continuity summary is as
follows:
|
(in
thousands)
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Balance-January
1
|
|
|
$
|
2,365
|
$
|
2,459
|
|
Accretion
|
|
|
|
72
|
|
74
|
|
Benefits
paid
|
|
|
|
(142)
|
|
(168)
|
|
Balance-December
31
|
|
|
$
|
2,295
|
$
|
2,365
|
16.
RECLAMATION
OBLIGATIONS
The reclamation
obligations balance consists of:
|
|
|
At December
31
|
|
At December
31
|
|
At January
1
|
|
(in
thousands)
|
|
2018
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
Reclamation
obligations-by item:
|
|
|
|
|
|
|
|
Elliot
Lake
|
$
|
17,205
|
$
|
16,771
|
$
|
16,742
|
|
McClean and
Midwest Joint Ventures
|
|
12,837
|
|
11,716
|
|
11,384
|
|
Other
|
|
22
|
|
22
|
|
22
|
|
|
$
|
30,064
|
$
|
28,509
|
$
|
28,148
|
|
|
|
|
|
|
|
|
|
Reclamation
obligations-by balance sheet presentation:
|
|
|
|
|
||
|
Current
|
$
|
877
|
$
|
819
|
$
|
1,088
|
|
Non-current
|
|
29,187
|
|
27,690
|
|
27,060
|
|
|
$
|
30,064
|
$
|
28,509
|
$
|
28,148
|
The reclamation
obligations continuity summary is as follows:
|
(in
thousands)
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Balance-January
1
|
|
|
$
|
28,509
|
$
|
28,148
|
|
Accretion
|
|
|
|
1,316
|
|
1,296
|
|
Expenditures
incurred
|
|
|
|
(755)
|
|
(981)
|
|
Liability
adjustments-income statement (note 23)
|
|
|
|
369
|
|
71
|
|
Liability
adjustments-balance sheet (note 13)
|
|
|
|
625
|
|
(25)
|
|
Balance-December
31
|
|
|
$
|
30,064
|
$
|
28,509
|
Site
Restoration: Elliot Lake
The Elliot Lake
uranium mine was closed in 1992 and capital works to decommission
this site were completed in 1997. The remaining provision is for
the estimated cost of monitoring the Tailings Management Areas at
the Denison and Stanrock sites and for treatment of water
discharged from these areas. The Company conducts its activities at
both sites pursuant to licenses issued by the Canadian Nuclear
Safety Commission (“CNSC”). The above accrual
represents the Company’s best estimate of the present value
of the total future reclamation cost, based on assumptions as to
what levels of treatment will be required in the future, discounted
at 4.53% (2017: 4.62%). As at December 31, 2018, the undiscounted
amount of estimated future reclamation costs, in current year
dollars, is $32,957,000 (December 31, 2017: $32,803,000). Revisions
to the reclamation liability for Elliot Lake are recognized in the
income statement as there is no net reclamation asset associated
with this site.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
Spending on
restoration activities at the Elliot Lake site is funded from
monies in the Elliot Lake Reclamation Trust fund (see note
12).
Site
Restoration: McClean Lake Joint Venture and Midwest Joint
Venture
The McClean Lake
and Midwest operations are subject to environmental regulations as
set out by the Saskatchewan government and the CNSC. Cost estimates
of the estimated future decommissioning and reclamation activities
are prepared periodically and filed with the applicable regulatory
authorities for approval. The above accrual represents the
Company’s best estimate of the present value of the future
reclamation cost contemplated in these cost estimates discounted at
4.53% (2017: 4.62%). As at December 31, 2018, the undiscounted
amount of estimated future reclamation costs, in current year
dollars, is $23,275,000 (December 31, 2017: $22,810,000). The
majority of the reclamation costs are expected to be incurred
between 2036 and 2054. Revisions to the reclamation liabilities for
McClean Lake and Midwest are recognized on the balance sheet as
adjustments to the net reclamation assets associated with the sites
.
Under the Mineral
Industry Environmental Protection Regulations (1996), the Company
is required to provide its pro-rata share of financial assurances
to the province of Saskatchewan based on periodic filings of
estimated reclamation plans and the associated undiscounted future
reclamation costs included therein. Accordingly, as at December 31,
2018, the Company has in place irrevocable standby letters of
credit, from a chartered bank, in favour of the Saskatchewan
Ministry of the Environment, totalling $24,135,000 which relate to
the most recently filed reclamation plan dated March
2016.
17.
OTHER
LIABILITIES
The other
liabilities balance consists of:
|
|
|
At December
31
|
|
At December
31
|
|
At January
1
|
|
(in
thousands)
|
|
2018
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
Debt
obligations
|
$
|
-
|
$
|
-
|
$
|
370
|
|
Unamortized fair
value of toll milling contracts
|
|
-
|
|
-
|
|
905
|
|
Flow-through
share premium obligation (note 19)
|
|
1,337
|
|
3,835
|
|
2,420
|
|
|
$
|
1,337
|
$
|
3,835
|
$
|
3,695
|
|
|
|
|
|
|
|
|
|
Other
liabilities-by balance sheet presentation:
|
|
|
|
|
|
|
|
Current
|
$
|
1,337
|
$
|
3,835
|
$
|
2,850
|
|
Non-current
|
|
-
|
|
-
|
|
845
|
|
|
$
|
1,337
|
$
|
3,835
|
$
|
3,695
|
The debt
obligations continuity summary is as follows:
|
(in
thousands)
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Balance-January
1
|
|
|
$
|
-
|
$
|
370
|
|
Repayments
|
|
|
|
-
|
|
(370)
|
|
Balance-December
31
|
|
|
$
|
-
|
$
|
-
|
Unamortized fair
values of toll milling contracts are amortized to revenue on a
pro-rata basis over the estimated volume of the applicable
contract. In February 2017, in conjunction with the APG
Arrangement, the Company extinguished the remaining unamortized
fair value of its toll milling contract liabilities and recognized
a gain of $899,000 as a component of “Other income
(expense)” – see note 23.
Letters of
Credit Facility
In 2018, the
Company had a facility in place with BNS for credit of up to
$24,000,000 with a one year term and a maturity date of January 31,
2019 (the “2018 facility”). Use of the 2018 facility is
restricted to non-financial letters of credit in support of
reclamation obligations.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
The 2018 facility
contains a covenant to maintain a level of tangible net worth
greater than or equal to the sum of $131,000,000 and a pledge of
$9,000,000 in restricted cash and investments as collateral for the
facility (see note 12). During 2018, the maintenance level for the
tangible net worth covenant was amended from USD$150,000,000 to
accommodate the Company’s change in presentation currency
(see note 2). As additional security for the 2018 facility, DMC has
provided an unlimited full recourse guarantee and a pledge of all
of the shares of DMI. DMI has provided a first-priority security
interest in all present and future personal property and an
assignment of its rights and interests under all material
agreements relative to the McClean Lake and Midwest projects. The
2018 facility is subject to letter of credit fees of 2.40% (0.40%
on the first $9,000,000) and standby fees of 0.75%.
At December 31,
2018, the Company was in compliance with its 2018 facility
covenants and $24,000,000 of the 2018 facility was being utilized
as collateral for certain letters of credit (December 31, 2017 -
$24,000,000). During 2018 and 2017, the Company incurred letter of
credit and standby fees of $397,000 and $411,000,
respectively.
In January 2019,
the Company has entered into an agreement with BNS to amend the
terms of the 2018 facility to extend the maturity date to January
31, 2020 (see note 29).
18.
INCOME
TAXES
The income tax
recovery balance from continuing operations consists
of:
|
(in
thousands)
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Deferred income
tax:
|
|
|
|
|
|
|
|
Origination of
temporary differences
|
|
|
$
|
4,520
|
$
|
1,930
|
|
Tax
benefit-previously unrecognized tax assets
|
|
|
|
3,852
|
|
3,307
|
|
Prior year over
(under) provision
|
|
|
|
(78)
|
|
(71)
|
|
|
|
|
|
8,294
|
|
5,166
|
|
Income tax
recovery
|
|
|
$
|
8,294
|
$
|
5,166
|
The Company
operates in multiple industries and jurisdictions, and the related
income is subject to varying rates of taxation. The combined
Canadian tax rate reflects the federal and provincial tax rates in
effect in Ontario, Canada for each applicable year. A
reconciliation of the combined Canadian tax rate to the
Company’s effective rate of income tax is as
follows:
|
(in
thousands)
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Loss before taxes
from continuing operations
|
|
|
$
|
(38,371)
|
$
|
(24,620)
|
|
Combined Canadian
tax rate
|
|
|
|
26.50%
|
|
26.50%
|
|
Income tax
recovery at combined rate
|
|
|
|
10,168
|
|
6,524
|
|
|
|
|
|
|
|
|
|
Difference in tax
rates
|
|
|
|
7,573
|
|
2,096
|
|
Non-deductible
amounts
|
|
|
|
(5,996)
|
|
(2,237)
|
|
Non-taxable
amounts
|
|
|
|
1,439
|
|
1,795
|
|
Previously
unrecognized deferred tax assets
(1)
|
|
|
|
3,852
|
|
3,307
|
|
Renunciation of
tax attributes-flow through shares
|
|
|
|
(1,589)
|
|
(2,827)
|
|
Change in
deferred tax assets not recognized
|
|
|
|
(7,488)
|
|
(3,743)
|
|
Prior year over
(under) provision
|
|
|
|
(78)
|
|
(71)
|
|
Other
|
|
|
|
413
|
|
322
|
|
Income tax
recovery
|
|
|
$
|
8,294
|
$
|
5,166
|
(1)
The Company has recognized
certain previously unrecognized Canadian tax assets in 2018 and
2017 as a result of the renunciation of certain tax benefits to
subscribers pursuant to its March 2017 $14,499,790 and May 2016
$12,405,000 flow-through share offerings.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
The deferred
income tax assets (liabilities) balance reported on the balance
sheet is comprised of the temporary differences as presented
below:
|
|
|
At December
31
|
|
At December
31
|
|
At January
1
|
|
(in
thousands)
|
|
2018
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
Deferred income
tax assets:
|
|
|
|
|
|
|
|
Property, plant
and equipment, net
|
$
|
381
|
$
|
977
|
$
|
889
|
|
Post-employment
benefits
|
|
600
|
|
617
|
|
645
|
|
Reclamation
obligations
|
|
8,798
|
|
8,296
|
|
8,217
|
|
Other
liabilities
|
|
-
|
|
-
|
|
237
|
|
Tax loss carry
forwards
|
|
13,346
|
|
11,718
|
|
11,790
|
|
Other
|
|
8,164
|
|
7,522
|
|
6,081
|
|
Deferred income
tax assets-gross
|
|
31,289
|
|
29,130
|
|
27,859
|
|
Set-off against
deferred income tax liabilities
|
|
(31,289)
|
|
(29,130)
|
|
(27,859)
|
|
Deferred income
tax assets-per balance sheet
|
$
|
-
|
$
|
-
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Deferred income
tax liabilities:
|
|
|
|
|
|
|
|
Inventory
|
$
|
(742)
|
$
|
(741)
|
$
|
(744)
|
|
Investments
|
|
29
|
|
(651)
|
|
(368)
|
|
Investments in
associates
|
|
(23)
|
|
14
|
|
(80)
|
|
Property, plant
and equipment, net
|
|
(42,313)
|
|
(44,042)
|
|
(45,581)
|
|
Other
|
|
(1,203)
|
|
(1,132)
|
|
(1,254)
|
|
Deferred income
tax liabilities-gross
|
|
(44,252)
|
|
(46,552)
|
|
(48,027)
|
|
Set-off of
deferred income tax assets
|
|
31,289
|
|
29,130
|
|
27,859
|
|
Deferred income
tax liabilities-per balance sheet
|
$
|
(12,963)
|
$
|
(17,422)
|
$
|
(20,168)
|
The deferred
income tax liability continuity summary is as follows:
|
(in
thousands)
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Balance-January
1
|
|
|
$
|
(17,422)
|
$
|
(20,168)
|
|
Recognized in
income (loss)
|
|
|
|
8,294
|
|
5,166
|
|
Recognized in
other liabilities (flow-through shares)
|
|
|
|
(3,835)
|
|
(2,420)
|
|
Balance-December
31
|
|
|
$
|
(12,963)
|
$
|
(17,422)
|
Management
believes that it is not probable that sufficient taxable profit
will be available in future years to allow the benefit of the
following deferred tax assets to be utilized:
|
|
|
At
December 31
|
|
At
December 31
|
|
At
January 1
|
|
(in
thousands)
|
|
2018
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
Deferred income
tax assets not recognized
|
|
|
|
|
|
|
|
Property, plant
and equipment
|
$
|
10,439
|
$
|
8,472
|
$
|
6,678
|
|
Tax losses
– capital
|
|
66,527
|
|
66,763
|
|
36,981
|
|
Tax losses
– operating
|
|
29,220
|
|
27,530
|
|
26,628
|
|
Tax
credits
|
|
1,126
|
|
1,125
|
|
1,154
|
|
Other deductible
temporary differences
|
|
2,220
|
|
826
|
|
783
|
|
Deferred income
tax assets not recognized
|
$
|
109,532
|
$
|
104,716
|
$
|
72,224
|
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
A geographic
split of the Company’s tax losses and tax credits not
recognized and the associated expiry dates of those losses and
credits is as follows:
|
|
|
Expiry
|
|
At
December 31
|
|
At
December 31
|
|
(in
thousands)
|
|
Date
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Tax losses -
gross
|
|
|
|
|
|
|
|
Canada
|
|
2025-2038
|
$
|
158,437
|
$
|
147,046
|
|
Tax losses -
gross
|
|
|
|
158,437
|
|
147,046
|
|
Tax benefit at
tax rate of 25% - 27%
|
|
|
|
42,566
|
|
39,248
|
|
Set-off against
deferred tax liabilities
|
|
|
|
(13,346)
|
|
(11,718)
|
|
Total tax loss
assets not recognized
|
|
|
$
|
29,220
|
$
|
27,530
|
|
|
|
|
|
|
|
|
|
Tax
credits
|
|
|
|
|
|
|
|
Canada
|
|
2025-2035
|
|
1,126
|
|
1,125
|
|
Total tax credit
assets not recognized
|
|
|
$
|
1,126
|
$
|
1,125
|
19.
SHARE
CAPITAL
Denison is
authorized to issue an unlimited number of common shares without
par value. A continuity summary of the issued and outstanding
common shares and the associated dollar amounts is presented
below:
|
|
Number
of
|
|
|
|
|
Common
|
|
|
|
(in thousands
except share amounts)
|
Shares
|
|
|
|
|
|
|
|
|
Balance-January
1, 2017
|
540,722,365
|
$
|
1,295,235
|
|
Issued for
cash:
|
|
|
|
|
Share issue
proceeds
|
18,337,000
|
|
20,000
|
|
Share issue
costs
|
-
|
|
(1,129)
|
|
Share option
exercises
|
128,873
|
|
90
|
|
Share option
exercises-fair value adjustment
|
-
|
|
112
|
|
Flow-through
share premium liability (note 17)
|
-
|
|
(3,835)
|
|
Share
cancellations
|
(5,029)
|
|
-
|
|
|
18,460,844
|
|
15,238
|
|
Balance-December
31, 2017
|
559,183,209
|
$
|
1,310,473
|
|
|
|
|
|
|
Issued for
cash:
|
|
|
|
|
Share issue
proceeds
|
4,950,495
|
|
5,000
|
|
Share issue
costs
|
-
|
|
(451)
|
|
Acquisition-Wheeler River
additional interest (note 13)
|
24,615,000
|
|
17,231
|
|
Acquisition-Wheeler River
additional interest–transaction costs (note 13)
|
426,382
|
|
298
|
|
Flow-through
share premium liability (note 17)
|
-
|
|
(1,337)
|
|
|
29,991,877
|
|
20,741
|
|
Balance-December
31, 2018
|
589,175,086
|
$
|
1,331,214
|
Share
Issues
In March 2017,
Denison completed a private placement of 18,337,000 shares of
Denison for gross proceeds of $20,000,290. The aggregate share
offering was comprised of the following three elements: (1) a
“Common Share” offering which consisted of 5,790,000
common shares of Denison at a price of $0.95 per share for gross
proceeds of $5,500,500; (2) a “Tranche A Flow-Through”
offering which consisted of 8,482,000 flow-through shares at a
price of $1.12 per share for gross proceeds of $9,499,840; and (3)
a “Tranche B Flow-Through” offering which consisted of
4,065,000 flow-through shares at a price of $1.23 per share for
gross proceeds of $4,999,950. The income tax benefits of the
flow-through elements of this issue were renounced to subscribers
with an effective date of December 31, 2017. The related
flow-through share premium liabilities are included as a component
of other liabilities on the balance sheet at December 31, 2017 and
were extinguished during 2018 (see note 17).
In November 2018,
Denison completed a private placement of 4,950,495 flow-through
common shares at a price of $1.01 per share for gross proceeds of
$5,000,000. The income tax benefits of this issue were renounced to
subscribers with an effective date of December 31, 2018. The
related flow-through share premium liabilities are included as a
component of other liabilities on the balance sheet at December 31,
2018 and will be extinguished during 2019 when the tax benefit is
renounced to the shareholders (see note 17).
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
Share
Cancellations
In January 2017,
5,029 shares were cancelled in connection with the January 2014
acquisition of the minority interest of Rockgate Capital Corp
(“RCC”). RCC shareholders were entitled to exchange
their RCC shares for shares of Denison in accordance with the share
exchange ratio established for the acquisition. In January 2017,
this right expired and the un-exchanged shares for which
shareholders had not elected to exercise their exchange rights were
subsequently cancelled.
Flow-Through
Share Issues
The Company
finances a portion of its exploration programs through the use of
flow-through share issuances. Canadian income tax deductions
relating to these expenditures are claimable by the investors and
not by the Company.
As at December
31, 2018, the Company estimates that it has satisfied its
obligation to spend $14,499,790 on eligible exploration
expenditures as a result of the issuance of Tranche A and Tranche B
flow-through shares in March 2017. The Company renounced the income
tax benefits of this issue in February 2018, with an effective date
of renunciation to its subscribers of December 31, 2017. In
conjunction with the renunciation, the flow-through share premium
liability has been reversed and recognized as part of the deferred
tax recovery in 2018 (see note 18).
As at December
31, 2018, the Company estimates that it incurred $253,000 of
expenditures towards its obligation to spend $5,000,000 on eligible
exploration expenditures as a result of the issuance of
flow-through shares in November 2018.
20.
SHARE
PURCHASE WARRANTS
A continuity
summary of the issued and outstanding share purchase warrants in
terms of common shares of the Company and the associated dollar
amounts is presented below:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
Number
of
|
|
|
|
|
|
|
|
Exercise
|
|
Common
|
|
Fair
|
|
|
|
|
|
Price
Per
|
|
Shares
|
|
Value
|
|
(in
thousands except share amounts)
|
|
Share
(CAD)
|
|
Issuable
|
|
Amount
|
||
|
|
|
|
|
|
|
|
|
|
|
Balance-January
1, 2017
|
$
|
-
|
|
-
|
$
|
-
|
||
|
|
|
|
|
|
|
|
||
|
February 2017
warrants issued
|
|
1.27
|
|
1,673,077
|
|
435
|
||
|
Balance-December
31, 2017 and 2018
|
$
|
1.27
|
|
1,673,077
|
$
|
435
|
||
The February 2017
warrants were issued in conjunction with the APG Arrangement (see
note 14) and expire on February 14, 2020.
21.
SHARE-BASED
COMPENSATION
In May 2018,
shareholders ratified and confirmed the Company’s new share
unit plan and the grant of share units thereunder (further
described below). As a result, the Company’s share based
compensation arrangements now include restricted share units
(“RSUs”) and performance share units
(“PSUs”) in addition to stock options.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
A summary of
share based compensation expense recognized in the statement of
income (loss) is as follows:
|
(in
thousands)
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Share based
compensation expense for:
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
|
|
$
|
(1,051)
|
$
|
(1,299)
|
|
RSUs
|
|
|
|
|
|
(337)
|
|
-
|
|
PSUs
|
|
|
|
|
|
(447)
|
|
-
|
|
Share
based compensation expense
|
|
|
|
|
$
|
(1,835)
|
$
|
(1,299)
|
At December 31,
2018, an additional $1,615,000 in share-based compensation expense
remains to be recognized up until April 2023.
Stock
Options
The
Company’s stock-based compensation plan (the
“Plan”) provides for the granting of stock options up
to 10% of the issued and outstanding common shares at the time of
grant, subject to a maximum of 39,670,000 common shares. As at
December 31, 2018, an aggregate of 21,274,893 options have been
granted (less cancellations) since the Plan’s inception in
1997.
Under the Plan,
all stock options are granted at the discretion of the
Company’s board of directors, including any vesting
provisions if applicable. The term of any stock option granted may
not exceed ten years and the exercise price may not be lower than
the closing price of the Company’s shares on the last trading
day immediately preceding the date of grant. In general, stock
options granted under the Plan have five year terms and vesting
periods up to 24 months.
A continuity
summary of the stock options of the Company granted under the Plan
for 2018 is presented below:
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
Number
of
|
|
Price
per
|
|
|
|
|
|
|
|
|
Common
|
|
Share
|
|
|
|
|
|
|
|
|
Shares
|
|
(CAD)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
outstanding – January 1, 2018
|
|
|
|
11,799,650
|
$
|
0.94
|
|||
|
Granted
|
|
|
|
|
|
|
3,427,543
|
|
0.61
|
|
Expiries
|
|
|
|
|
|
|
(816,000)
|
|
1.30
|
|
Forfeitures
|
|
|
|
|
|
|
(546,000)
|
|
0.90
|
|
Stock options
outstanding – December 31, 2018
|
|
|
|
13,865,193
|
$
|
0.83
|
|||
|
Stock options
exercisable – December 31, 2018
|
|
|
|
7,439,950
|
$
|
0.93
|
|||
A summary of the
Company’s stock options outstanding at December 31, 2018 is
presented below:
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
|
|
|
Remaining
|
|
|
|
Exercise
|
|
Range of
Exercise
|
|
|
|
|
Contractual
|
|
Number
of
|
|
Price
per
|
|
Prices per
Share
|
|
|
|
|
Life
|
|
Common
|
|
Share
|
|
(CAD)
|
|
|
|
|
(Years)
|
|
Shares
|
|
(CAD)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
outstanding
|
|
|
|
|
|
|
|||
|
$ 0.50 to $
0.99
|
|
3.28
|
|
11,797,193
|
$
|
0.74
|
|||
|
$ 1.00 to $
1.19
|
|
|
|
|
1.19
|
|
1,202,000
|
|
1.09
|
|
$ 1.20 to $
1.39
|
|
|
|
|
0.35
|
|
11,000
|
|
1.33
|
|
$ 1.40 to $
1.99
|
|
|
|
|
0.18
|
|
855,000
|
|
1.82
|
|
Stock options
outstanding - December 31, 2018
|
|
2.91
|
|
13,865,193
|
$
|
0.83
|
|||
Options
outstanding at December 31, 2018 expire between March 2019 and
September 2023.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
The fair value of
each option granted is estimated on the date of grant using the
Black-Scholes option pricing model. The following table outlines
the range of assumptions used in the model to determine the fair
value of options granted:
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
2.02% -
2.12%
|
|
0.11% -
1.44%
|
|
|
Expected stock
price volatility
|
|
43.17% -
48.39%
|
|
47.02% -
47.77%
|
|
|
Expected
life
|
|
3.4 to 3.5
years
|
|
3.4 to 3.5
years
|
|
|
Estimated
forfeiture rate
|
|
2.86% -
3.01%
|
|
2.94% -
4.14%
|
|
|
Expected dividend
yield
|
|
–
|
|
–
|
|
|
Fair value
per option granted
|
CAD$0.22 -
CAD$0.23
|
|
CAD$0.21 -
CAD$0.29
|
||
The fair values
of stock options with vesting provisions are amortized on a graded
method basis as stock-based compensation expense over the
applicable vesting periods.
Share
Units
The Company has a
share unit plan which provides for the granting of share unit
awards to directors, officers and employees of the Company. The
maximum number of share units that are issuable under the share
unit plan is 15,000,000. Each share unit represents the right to
receive one common share from treasury, subject to the satisfaction
of various time and / or performance conditions.
Under the plan,
all share unit grants, vesting periods and performance conditions
therein are approved by the Company’s board of directors.
Share unit grants are either in the form of RSUs or PSUs. RSUs
granted in 2018 vest ratably over a period of three years. PSUs
granted in 2018 vest ratably over a period of five years, based
upon the achievement of certain non-market performance vesting
conditions.
A continuity
summary of the RSUs of the Company granted under the share unit
plan is presented below:
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
Number
of
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
Common
|
|
Per
RSU
|
|
|
|
|
|
|
|
|
Shares
|
|
(CAD)
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs outstanding
– January 1, 2018
|
|
|
|
-
|
$
|
-
|
|||
|
Granted
|
|
|
|
|
|
|
1,299,432
|
|
0.65
|
|
Forfeitures
|
|
|
|
(99,000)
|
|
0.65
|
|||
|
RSUs outstanding
– December 31, 2018
|
|
|
|
1,200,432
|
$
|
0.65
|
|||
|
RSUs vested
– December 31, 2018
|
|
|
|
-
|
$
|
-
|
|||
A continuity
summary of the PSUs of the Company granted under the share unit
plan is presented below:
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
Number
of
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
Common
|
|
Per
PSU
|
|
|
|
|
|
|
|
|
Shares
|
|
(CAD)
|
|
|
|
|
|
|
|
|
|
|
|
|
PSUs outstanding
– January 1, 2018
|
|
|
|
-
|
$
|
-
|
|||
|
Granted
|
|
|
|
|
|
|
2,200,000
|
|
0.65
|
|
PSUs outstanding
– December 31, 2018
|
|
|
|
2,200,000
|
$
|
0.65
|
|||
|
PSUs vested
– December 31, 2018
|
|
|
|
-
|
$
|
-
|
|||
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
22.
ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS)
The accumulated
other comprehensive income balance consists of:
|
|
|
At December
31
|
|
At December
31
|
|
At January
1
|
|
(in
thousands)
|
|
2018
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
Cumulative
foreign currency translation
|
$
|
403
|
$
|
416
|
$
|
(446)
|
|
Unamortized
experience gain – post employment liability
|
|
|
|
|
||
|
Gross
|
|
983
|
|
983
|
|
983
|
|
Tax
effect
|
|
(259)
|
|
(259)
|
|
(259)
|
|
|
$
|
1,127
|
$
|
1,140
|
$
|
278
|
23.
SUPPLEMENTAL
FINANCIAL INFORMATION
The components of
operating expenses for continuing operations are as
follows:
|
(in
thousands)
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods and
services sold:
|
|
|
|
|
|
|
|
|
|
Operating
Overheads:
|
|
|
|
|
|
|
|
|
|
Mining, other
development expense
|
|
|
|
|
$
|
(3,695)
|
$
|
(1,043)
|
|
Milling,
conversion expense
|
|
|
|
|
|
(3,268)
|
|
(3,899)
|
|
Less
absorption:
|
|
|
|
|
|
|
|
|
|
-Mineral
properties
|
|
|
|
|
|
50
|
|
50
|
|
Cost of
services
|
|
|
|
|
|
(8,420)
|
|
(8,454)
|
|
Inventory-non
cash adjustments
|
|
|
|
|
|
(57)
|
|
(151)
|
|
Cost of goods and
services sold
|
|
|
|
|
|
(15,390)
|
|
(13,497)
|
|
Reclamation asset
amortization
|
|
|
|
|
|
(189)
|
|
(190)
|
|
Reclamation
liability adjustments (note 16)
|
|
|
|
|
|
(369)
|
|
(71)
|
|
Operating
expenses
|
|
|
|
|
$
|
(15,948)
|
$
|
(13,758)
|
The components of
other income (expense) for continuing operations are as
follows:
|
(in
thousands)
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses)
on:
|
|
|
|
|
|
|
|
|
|
Foreign
exchange
|
|
|
|
|
$
|
(1)
|
$
|
(853)
|
|
Disposal of
property, plant and equipment
|
|
|
|
|
|
(135)
|
|
27
|
|
Investment fair
value through profit (loss) (note 10)
|
|
|
|
(5,411)
|
|
2,417
|
||
|
Extinguishment of
toll milling contract liability (note 17)
|
|
|
|
-
|
|
899
|
||
|
Other
|
|
|
|
|
|
(318)
|
|
(495)
|
|
Other
income (expense)
|
|
|
|
|
$
|
(5,865)
|
$
|
1,995
|
The components of
finance income (expense) for continuing operations are as
follows:
|
(in
thousands)
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
|
|
$
|
1,049
|
$
|
265
|
|
Interest
expense
|
|
|
|
|
|
-
|
|
(6)
|
|
Accretion
expense-deferred revenue (note 14)
|
|
|
|
|
|
(3,314)
|
|
(3,115)
|
|
Accretion
expense-reclamation obligations (note 16)
|
|
|
|
(1,316)
|
|
(1,296)
|
||
|
Accretion
expense-post-employment benefits (note 15)
|
|
|
|
(72)
|
|
(74)
|
||
|
Finance
expense, net
|
|
|
|
|
$
|
(3,653)
|
$
|
(4,226)
|
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
A summary of
depreciation expense recognized in the statement of income (loss)
is as follows:
|
(in
thousands)
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Mining, other
development expense
|
|
|
|
|
$
|
(3)
|
$
|
(6)
|
|
Milling,
conversion expense
|
|
|
|
|
|
(3,264)
|
|
(3,895)
|
|
Cost of
services
|
|
|
|
|
|
(233)
|
|
(303)
|
|
Exploration and
evaluation
|
|
|
|
|
|
(124)
|
|
(123)
|
|
General and
administrative
|
|
|
|
|
|
(37)
|
|
(44)
|
|
Depreciation
expense-gross (note 13)
|
|
|
|
|
$
|
(3,661)
|
$
|
(4,371)
|
A summary of
employee benefits expense recognized in the statement of income
(loss) is as follows:
|
(in
thousands)
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and short-term employee benefits
|
|
|
|
|
$
|
(8,236)
|
$
|
(8,079)
|
|
Share-based
compensation (note 21)
|
|
|
|
|
|
(1,835)
|
|
(1,299)
|
|
Termination
benefits
|
|
|
|
|
|
(20)
|
|
(27)
|
|
Employee
benefits expense-gross
|
|
|
|
|
$
|
(10,091)
|
$
|
(9,405)
|
The change in
non-cash working capital items in the consolidated statements of
cash flows is as follows:
|
(in
thousands)
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Change in
non-cash working capital items:
|
|
|
|
|
|
|
|
|
|
Trade and other
receivables
|
|
|
|
|
$
|
968
|
$
|
(1,586)
|
|
Inventories
|
|
|
|
|
|
(186)
|
|
(409)
|
|
Prepaid expenses
and other assets
|
|
|
|
|
|
(213)
|
|
(99)
|
|
Accounts payable
and accrued liabilities
|
|
|
|
|
|
(214)
|
|
639
|
|
Change
in non-cash working capital items
|
|
|
|
|
$
|
355
|
$
|
(1,455)
|
The supplemental
cash flow disclosure required for the consolidated statements of
cash flows is as follows:
|
(in
thousands)
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash
flow disclosure:
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
|
|
|
$
|
-
|
$
|
(6)
|
|
Income taxes
paid
|
|
|
|
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
24.
SEGMENTED
INFORMATION
Business
Segments
The Company
operates in three primary segments – the Mining segment, the
Environmental Services segment and the Corporate and Other segment.
The Mining segment has historically been further subdivided into
geographic regions, being Canada, Africa and Asia, and includes
activities related to exploration, evaluation and development,
mining, milling (including toll milling) and the sale of mineral
concentrates. The Africa and Asia Mining segments were disposed of
in 2016 and 2015 respectively. The Environmental Services segment
includes the results of the Company’s environmental services
business, DES. The Corporate and Other segment includes management
fee income earned from UPC and general corporate expenses not
allocated to the other segments. Management fee income has been
included with general corporate expenses due to the shared
infrastructure between the two activities.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
For the year
ended December 31, 2018, reportable segment results were as
follows:
|
(in
thousands)
|
|
|
Canada
Mining
|
DES
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
|
Revenues
|
|
|
4,239
|
9,298
|
2,013
|
15,550
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(7,528)
|
(8,211)
|
(209)
|
(15,948)
|
|
Exploration and
evaluation
|
|
|
(15,457)
|
-
|
-
|
(15,457)
|
|
General and
administrative
|
|
|
(17)
|
-
|
(7,172)
|
(7,189)
|
|
Impairment
expense
|
|
(6,086)
|
-
|
-
|
(6,086)
|
|
|
|
|
|
(29,088)
|
(8,211)
|
(7,381)
|
(44,680)
|
|
Segment income
(loss)
|
|
|
(24,849)
|
1,087
|
(5,368)
|
(29,130)
|
|
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
9,298
|
-
|
9,298
|
|
Management
fees
|
|
|
-
|
-
|
2,013
|
2,013
|
|
Toll milling
services–deferred revenue
|
|
|
4,239
|
-
|
-
|
4,239
|
|
|
|
|
4,239
|
9,298
|
2,013
|
15,550
|
|
|
|
|
|
|
|
|
|
Capital additions:
|
|
|
|
|
|
|
|
Property, plant
and equipment
|
|
|
19,001
|
95
|
-
|
19,096
|
|
|
|
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
Plant and
equipment
|
|
|
|
|
|
|
|
Cost
|
|
|
98,737
|
4,399
|
294
|
103,430
|
|
Accumulated
depreciation
|
|
|
(20,982)
|
(2,927)
|
(177)
|
(24,086)
|
|
Mineral
properties
|
|
|
178,947
|
-
|
-
|
178,947
|
|
|
|
|
256,702
|
1,472
|
117
|
258,291
|
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
For
the year ended December 31, 2017, reportable segment results were
as follows:
|
(in
thousands)
|
|
|
Canada
Mining
|
DES
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
|
Revenues
|
|
|
5,029
|
9,232
|
1,806
|
16,067
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(5,304)
|
(8,230)
|
(224)
|
(13,758)
|
|
Exploration and
evaluation
|
|
|
(16,643)
|
-
|
-
|
(16,643)
|
|
General and
administrative
|
|
|
(16)
|
-
|
(7,664)
|
(7,680)
|
|
Impairment
reversal
|
|
331
|
-
|
-
|
331
|
|
|
|
|
|
(21,632)
|
(8,230)
|
(7,888)
|
(37,750)
|
|
Segment income
(loss)
|
|
|
(16,603)
|
1,002
|
(6,082)
|
(21,683)
|
|
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
9,232
|
-
|
9,232
|
|
Management
fees
|
|
|
-
|
-
|
1,806
|
1,806
|
|
Toll milling
services
|
|
|
587
|
-
|
-
|
587
|
|
Toll milling
services–deferred revenue
|
|
|
4,442
|
-
|
-
|
4,442
|
|
|
|
|
5,029
|
9,232
|
1,806
|
16,067
|
|
|
|
|
|
|
|
|
|
Capital additions:
|
|
|
|
|
|
|
|
Property, plant
and equipment
|
|
|
1,035
|
51
|
-
|
1,086
|
|
|
|
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
Plant and
equipment
|
|
|
|
|
|
|
|
Cost
|
|
|
98,558
|
4,334
|
294
|
103,186
|
|
Accumulated
depreciation
|
|
|
(17,652)
|
(2,724)
|
(140)
|
(20,516)
|
|
Mineral
properties
|
|
|
166,332
|
-
|
-
|
166,332
|
|
|
|
|
247,238
|
1,610
|
154
|
249,002
|
As at January 1,
2017, reportable segment amounts for the Company’s long-lived
assets were as follows:
|
(in
thousands)
|
|
|
Canada
Mining
|
DES
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
Plant and
equipment
|
|
|
|
|
|
|
|
Cost
|
|
|
99,278
|
4,378
|
294
|
103,950
|
|
Accumulated
depreciation
|
|
|
(14,339)
|
(2,495)
|
(96)
|
(16,930)
|
|
Mineral
properties
|
|
|
165,372
|
-
|
-
|
165,372
|
|
|
|
|
250,311
|
1,883
|
198
|
252,392
|
Revenue
Concentration
The
Company’s business from continuing operations is such that,
at any given time, it sells its environmental and other services to
a relatively small number of customers. During 2018, one customer
from the corporate and other segment, three customers from the DES
segment and one customer from the mining segment accounted for
approximately 97% of total revenues consisting of 13%, 57% and 27%
respectively. During 2017, one customer from the corporate and
other segment, three customers from the DES segment and one
customer from the mining segment accounted for approximately 95% of
total revenues consisting of 11%, 53% and 31%
respectively.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
Revenue
Commitments
Denison’s
revenue portfolio consists of short and long-term sales
commitments. The following table summarizes the expected future
revenue, by segment, based on the customer contract commitments and
information that exists as at December 31, 2018:
With the
exception of the toll milling services related to the APG
Arrangement, the amounts in the table above represent the estimated
consideration that Denison will be entitled to receive when it
satisfies the remaining performance obligations in its customer
contracts. Various assumptions, consistent with past experience,
have been made where the quantity of the performance obligation may
vary.
The APG
Arrangement toll milling revenue commitment represents the
estimated non-cash amount of the revenue component of the
Company’s deferred revenue balance at December 31, 2018 (see
note 14). The difference between the total revenue commitment
amount above and the liability on the balance sheet represents the
cumulative remaining impact of discounting to the end of the APG
Arrangement contract.
25.
RELATED
PARTY TRANSACTIONS
Uranium
Participation Corporation
The Company is a
party to a management services agreement with UPC that was renewed
in 2016 with an effective start date of April 1, 2016 and a term of
three years. Under the current agreement, Denison receives the
following fees from UPC: a) a base fee of $400,000 per annum,
payable in equal quarterly installments; b) a variable fee equal to
(i) 0.3% per annum of UPC’s total assets in excess of $100
million and up to and including $500 million, and (ii) 0.2% per
annum of UPC’s total assets in excess of $500 million; c) a
fee, at the discretion of the Board, for on-going monitoring or
work associated with a transaction or arrangement (other than a
financing, or the acquisition of or sale of U
3
O
8
or UF
6
); and d) a
commission of 1.0% of the gross value of any purchases or sales of
U
3
O
8
or UF
6
or gross interest
fees payable to UPC in connection with any uranium loan
arrangements.
The following
transactions were incurred with UPC for the periods
noted:
|
(in
thousands)
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Management
fees:
|
|
|
|
|
|
|
|
|
|
Base and variable
fees
|
|
|
|
|
$
|
1,739
|
$
|
1,438
|
|
Discretionary
fees
|
|
|
|
|
|
50
|
|
-
|
|
Commission
fees
|
|
|
|
|
|
224
|
|
368
|
|
|
|
|
|
|
$
|
2,013
|
$
|
1,806
|
At December 31,
2018, accounts receivable includes $303,000 (December 31, 2017:
$481,000) due from UPC with respect to the fees and transactions
indicated above.
Korea
Electric Power Corporation (“KEPCO”) and Korea Hydro
& Nuclear Power (“KHNP”)
In connection
with KEPCO’s investment in Denison in June 2009, KEPCO and
Denison were parties to a strategic relationship agreement. In
December 2016, Denison was notified that KEPCO’s indirect
ownership of Denison’s shares had been transferred from an
affiliate of KEPCO to an affiliate of KEPCO’s wholly-owned
subsidiary, KHNP. In September 2017, Denison and KHNP’s
affiliate entered into an amended and restated strategic
relationship agreement, in large part providing KHNP’s
affiliate with the same rights as those previously given to KEPCO
under the prior agreement, including entitling KHNP’s
affiliate to: (a) subscribe for additional common shares in
Denison’s future public equity offerings; (b) a right of
first opportunity if Denison intends to sell any of its substantial
assets; (c) a right to participate in certain purchases of
substantial assets which Denison proposes to acquire; and (d) a
right to nominate one director to Denison’s board so long as
its share interest in Denison is above 5.0%.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
As at December
31, 2018, KHNP, through its subsidiaries, holds 58,284,000 shares
of Denison representing a share interest of approximately 9.89%.
KHNP Canada Energy Ltd (“KHNP Canada”), a subsidiary of
KHNP, is the holder of the majority of Denison’s
shares.
KHNP Canada is
also the majority member of the Korea Waterbury Uranium Limited
Partnership (“KWULP”). KWULP is a consortium of
investors that holds the non-Denison owned interests in Waterbury
Lake Uranium Corporation (“WLUC”) and the WLULP,
entities whose key asset is the Waterbury Lake property. At
December 31, 2018, WLUC is owned by Denison (60%) and KWULP (40%)
while the WLULP is owned by Denison (65.92% - limited partner),
KWULP (34.06% - limited partner) and WLUC (0.02% - general
partner). When a spending program is approved, each participant is
required to fund these entities based upon its respective ownership
interest or be diluted accordingly. Spending program approval
requires 75% of the limited partners’ voting
interest.
In January 2014,
Denison agreed to allow KWULP to defer a decision regarding its
funding obligation to WLUC and WLULP until September 30, 2015 and
to not be immediately diluted as per the dilution provisions in the
relevant agreements (“Dilution Agreement”). Instead,
under the Dilution Agreement, dilution would be delayed until
September 30, 2015 and then applied in each subsequent period, if
applicable, in accordance with the original agreements. In
exchange, Denison received authorization to approve spending
programs on the property, up to an aggregate $10,000,000, until
September 30, 2016 without obtaining approval from 75% of the
voting interest. Under subsequent amendments, Denison and KWULP
have agreed to extend Denison’s authorization under the
Dilution Agreement to approve program spending up to an aggregate
$15,000,000 until December 31, 2019.
In 2017, Denison
funded 100% of the approved fiscal 2017 program for Waterbury Lake
and KWULP continued to dilute its interest in the WLULP. As a
result, Denison increased its interest in the WLULP from 63.01% to
64.22%, in two steps, which has been accounted for using effective
dates of May 31, 2017 and August 31, 2017. The increased ownership
interest resulted in Denison recording its increased pro-rata share
of the net assets of Waterbury Lake, the majority of which relates
to an addition to mineral property assets of $779,000.
In 2018, Denison
funded 100% of the approved fiscal 2018 program for Waterbury Lake
and KWULP continued to dilute its interest in the WLULP. As a
result, Denison increased its interest in the WLULP from 64.22% to
65.92%, in two steps, which has been accounted for using effective
dates of May 31, 2018 and October 31, 2018. The increased ownership
interest resulted in Denison recording its increased pro-rata share
of the net assets of Waterbury Lake, the majority of which relates
to an addition to mineral property assets of
$1,141,000.
Other
On December 12,
2018, the Company lent $250,000 to GoviEx pursuant to a credit
agreement between the parties (see note 8). The loan is unsecured,
bears interest at 7.5% per annum and is payable on demand at any
time that is 60 days after the lending date.
During 2018, the
Company incurred investor relations, administrative service fees
and other expenses of $209,000 (2017: $186,000) with Namdo
Management Services Ltd, which shares a common director with
Denison. These services were incurred in the normal course of
operating a public company. At December 31, 2018, an amount of $nil
(December 31, 2017: $nil) was due to this company.
During 2018, the
Company incurred office and other expenses of $81,000 (2017:
$60,000) with Lundin S.A, a company which provided office,
administration and other services to the former executive chairman,
other directors and management of Denison. The agreement for the
office and administration services was terminated effective
September 30, 2018. At December 31, 2018, an amount of $nil
(December 31, 2017: $nil) was due to this company.
Compensation
of Key Management Personnel
Key management
personnel are those persons having authority and responsibility for
planning, directing and controlling the activities of the Company,
directly or indirectly. Key management personnel includes the
Company’s executive officers, vice-presidents and members of
its Board of Directors.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
The following
compensation was awarded to key management personnel:
|
(in
thousands)
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
|
|
|
|
$
|
(1,759)
|
$
|
(1,670)
|
|
Share-based
compensation
|
|
|
|
|
|
(1,522)
|
|
(1,104)
|
|
Key
management personnel compensation
|
|
|
|
|
$
|
(3,281)
|
$
|
(2,774)
|
26.
CAPITAL
MANAGEMENT AND FINANCIAL RISK
Capital
Management
The
Company’s capital includes cash, cash equivalents,
investments in debt instruments and debt obligations. The
Company’s primary objective with respect to its capital
management is to ensure that it has sufficient capital to maintain
its ongoing operations, to provide returns for shareholders and
benefits for other stakeholders and to pursue growth
opportunities.
Planning, annual
budgeting and controls over major investment decisions are the
primary tools used to manage the Company’s capital. The
Company’s cash is managed centrally and disbursed to the
various regions and / or business units via a system of cash call
requests which are reviewed by the key decision makers. Under the
Company’s delegation of authority guidelines, significant
debt obligations require the approval of both the CEO and the CFO
before they are entered into.
The Company
manages its capital by review of the following
measure:
|
|
|
|
|
At December
31
|
|
At December
31
|
|
(in
thousands)
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Net
cash:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
|
23,207
|
$
|
3,636
|
|
Investments in
debt instruments (note 10)
|
|
-
|
|
37,807
|
||
|
Debt
obligations-current (note 17)
|
|
|
|
-
|
|
-
|
|
Net
cash
|
|
|
$
|
23,207
|
$
|
41,443
|
Financial
Risk
The Company
examines the various financial risks to which it is exposed and
assesses the impact and likelihood of those risks. These risks may
include credit risk, liquidity risk, currency risk, interest rate
risk and price risk.
Credit risk is
the risk of loss due to a counterparty’s inability to meet
its obligations under a financial instrument that will result in a
financial loss to the Company. The Company believes that the
carrying amount of its cash and cash equivalents, trade and other
receivables, investments in debt instruments and restricted cash
and investments represents its maximum credit
exposure.
The maximum
exposure to credit risk at the reporting dates is as
follows:
|
|
|
|
|
At
December 31
|
|
At
December 31
|
|
(in
thousands)
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
|
23,207
|
$
|
3,636
|
|
Trade and other
receivables
|
|
|
|
4,072
|
|
4,791
|
|
Investments in
debt instruments
|
|
|
|
-
|
|
37,807
|
|
Restricted cash
and investments
|
|
|
|
12,255
|
|
12,184
|
|
|
|
|
$
|
39,534
|
$
|
58,418
|
The Company
limits cash and cash equivalents, investment in debt instruments
and restricted cash and investment risk by dealing with credit
worthy financial institutions. The majority of the Company’s
normal course trade and other receivables balance relates to a
small number of customers whom have established credit worthiness
with the Company through past dealings.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
(b)
Liquidity
Risk
Liquidity risk is
the risk that the Company will encounter difficulties in meeting
obligations associated with its financial liabilities as they
become due. The Company has in place a planning and budgeting
process to help determine the funds required to support the
Company’s normal operating requirements on an ongoing basis.
The Company ensures that there is sufficient committed capital to
meet its short-term business requirements, taking into account its
anticipated cash flows from operations, its holdings of cash and
cash equivalents, its financial covenants and its access to credit
and capital markets, if required.
The maturities of
the Company’s financial liabilities at December 31, 2018 are
as follows:
|
(in
thousands)
|
|
|
|
Within
1
Year
|
|
1
to 5
Years
|
|
|
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities
|
|
|
$
|
5,554
|
$
|
-
|
|
|
|
|
$
|
5,554
|
$
|
-
|
(c)
Currency
Risk
Foreign exchange
risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in foreign
exchange rates. As at December 31, 2018, the Company predominantly
operates in Canada and incurs the majority of its operating and
capital costs in Canadian dollars. Some small foreign exchange risk
exists from assets and liabilities that are denominated in a
currency that is not the functional currency for the relevant
subsidiary company but the risk is minimal.
Currently, the
Company does not have any foreign exchange hedge programs in place
and manages its operational foreign exchange requirements through
spot purchases in the foreign exchange markets.
(d)
Interest
Rate Risk
Interest rate
risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market
interest rates. The Company is exposed to interest rate risk on its
liabilities through its outstanding borrowings, if any, and on its
assets through its investments in debt instruments. The Company
monitors its exposure to interest rates and has not entered into
any derivative contracts to manage this risk.
The Company is
exposed to equity price risk as a result of holding equity
investments in other exploration and mining companies. The Company
does not actively trade these investments. The sensitivity analysis
below has been determined based on the exposure to equity price
risk at December 31, 2018:
|
|
|
|
|
|
|
Change
in
|
|
|
|
|
|
|
|
net
income
|
|
(in
thousands)
|
|
|
|
|
|
(loss)
|
|
|
|
|
|
|
|
|
|
Equity price
risk
|
|
|
|
|
|
|
|
10% increase in
equity prices
|
|
|
|
|
$
|
368
|
|
10% decrease in
equity prices
|
|
|
|
|
|
(305)
|
|
|
|
|
|
|
|
|
Fair Value
of Financial Instruments
IFRS requires
disclosures about the inputs to fair value measurements, including
their classification within a hierarchy that prioritizes the inputs
to fair value measurement. The three levels of the fair value
hierarchy are:
●
Level 1 - Unadjusted quoted
prices in active markets for identical assets or
liabilities;
●
Level 2 - Inputs other than
quoted prices that are observable for the asset or liability either
directly or indirectly; and
●
Level 3 - Inputs that are not
based on observable market data.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
The fair value of
financial instruments which trade in active markets, such as share
and warrant equity instruments, is based on quoted market prices at
the balance sheet date. The quoted market price used to value
financial assets held by the Company is the current closing price.
Warrants that do not trade in active markets have been valued using
the Black-Scholes pricing model. Debt instruments have been valued
using the effective interest rate for the period that the Company
expects to hold the instrument and not the rate to
maturity.
Except as
otherwise disclosed, the fair values of cash and cash equivalents,
trade and other receivables, accounts payable and accrued
liabilities, restricted cash and cash equivalents and debt
obligations approximate their carrying values as a result of the
short-term nature of the instruments, the variable interest rate
associated with the instruments or the fixed interest rate of the
instruments being similar to market rates.
During 2018,
there were no transfers between levels 1, 2 and 3 and there were no
changes in valuation techniques.
The following
table illustrates the classification of the Company’s
financial assets within the fair value hierarchy as at December 31,
2018 and December 31, 2017:
|
|
|
Financial
|
|
Fair
|
|
December
31,
|
|
December
31,
|
|
|
|
Instrument
|
|
Value
|
|
2018
|
|
2017
|
|
(in
thousands)
|
|
Category
(1)
|
|
Hierarchy
|
|
Fair
Value
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Assets:
|
|
|
|
|
|
|
|
|
|
Cash and
equivalents
|
|
Category
B
|
|
|
$
|
23,207
|
$
|
3,636
|
|
Trade and other
receivables
|
|
Category
B
|
|
|
|
4,072
|
|
4,791
|
|
Investments
|
|
|
|
|
|
|
|
|
|
Debt
instruments-GICs
|
|
Category
A
|
|
Level 2
|
|
-
|
|
37,807
|
|
Equity
instruments-shares
|
|
Category
A
|
|
Level 1
|
|
2,007
|
|
2,833
|
|
Equity
instruments-warrants
|
|
Category
A
|
|
Level 2
|
|
248
|
|
4,526
|
|
Restricted
cash and equivalents
|
|
|
|
|
|
|
|
|
|
Elliot Lake
reclamation trust fund
|
|
Category
B
|
|
|
|
3,120
|
|
3,049
|
|
Credit
facility pledged assets
|
|
Category
B
|
|
|
|
9,000
|
|
9,000
|
|
Reclamation
letter of credit collateral
|
|
Category
B
|
|
|
|
135
|
|
135
|
|
|
|
|
|
|
$
|
41,789
|
$
|
65,777
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Liabilities:
|
|
|
|
|
|
|
|
|
|
Account
payable and accrued liabilities
|
|
Category
C
|
|
|
|
5,554
|
|
5,756
|
|
Debt
obligations
|
|
Category
C
|
|
|
|
-
|
|
-
|
|
|
|
|
|
|
$
|
5,554
|
$
|
5,756
|
(1)
Financial instrument
designations are as follows: Category A=Financial assets and
liabilities at fair value through profit and loss; Category
B=Financial assets at amortized cost; and Category C=Financial
liabilities at amortized cost.
27.
COMMITMENTS
AND CONTINGENCIES
General
Legal Matters
The Company is
involved, from time to time, in various legal actions and claims in
the ordinary course of business. In the opinion of management, the
aggregate amount of any potential liability is not expected to have
a material adverse effect on the Company’s financial position
or results.
Specific
Legal Matters
Mongolia
Mining Division Sale – Arbitration Proceedings with Uranium
Industry a.s
In November 2015,
the Company sold all of its mining assets and operations located in
Mongolia to Uranium Industry a.s (“UI”) pursuant to an
amended and restated share purchase agreement (the “GSJV
Agreement”). The primary assets at that time were the
exploration licenses for the Hairhan, Haraat, Gurvan Saihan and
Ulzit projects. As consideration for the sale per the GSJV
Agreement, the Company received cash consideration of USD$1,250,000
prior to closing and the rights to receive additional contingent
consideration of up to USD$12,000,000.
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
On September 20,
2016, the Mineral Resources Authority of Mongolia
(“MRAM”) formally issued mining license certificates
for all four projects, triggering Denison’s right to receive
contingent consideration of USD$10,000,000 (collectively, the
“Mining License Receivable”). The original due date for
payment of the Mining License Receivable by UI was November 16,
2016.
Under an
extension agreement between UI and the Company, the payment due
date of the Mining License Receivable was extended from November
16, 2016 to July 16, 2017 (the “Extension Agreement”).
As consideration for the extension, UI agreed to pay interest on
the Mining License Receivable amount at a rate of 5% per year,
payable monthly up to July 16, 2017 and they also agreed to pay a
USD$100,000 instalment amount towards the balance of the Mining
License Receivable amount. The required payments were not
made.
On February 24,
2017, the Company served notice to UI that it was in default of its
obligations under the GSJV Agreement and the Extension Agreement
and that the Mining License Receivable and all interest payable
thereon are immediately due and payable.
On December 12,
2017, the Company filed a Request for Arbitration between the
Company and UI under the Arbitration Rules of the London Court of
International Arbitration in conjunction with the default of
UI’s obligations under the GSJV and Extension agreements. The
three person arbitration panel was appointed on February 28, 2018,
and UI submitted a formal response and counterclaim on October 19,
2018. As of the date hereof, arbitration proceedings are
continuing, including further submissions of documentation to the
arbitration panel by the Company and UI.
Performance
Bonds and Letters of Credit
In conjunction
with various contracts, reclamation and other performance
obligations, the Company may be required to issue performance bonds
and letters of credit as security to creditors to guarantee the
Company’s performance. Any potential payments which might
become due under these items would be related to the
Company’s non-performance under the applicable contract. As
at December 31, 2018, the Company had: (a) outstanding letters of
credit of $24,135,000 for reclamation obligations of which
$24,000,000 is collateralized by the Company’s 2018 credit
facility (see note 17) and the remainder is collateralized by cash
(see note 12); and (b) outstanding performance bonds of $790,000 as
security for various contractual performance
obligations.
Others
The Company has
committed to payments under various operating leases and other
commitments. Excluding spending amounts which may be required to
maintain the Company’s mineral properties in good standing,
the future minimum payments are as follows
:
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
$
|
(319)
|
|
2020
|
|
|
|
|
|
(291)
|
|
2021
|
|
|
|
|
|
(226)
|
|
2022
|
|
|
|
|
|
(126)
|
|
2023
|
|
|
|
|
|
(103)
|
|
Thereafter
|
|
|
|
|
|
(194)
|
|
|
|
|
|
|
$
|
(1,259)
|
|
|
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
|
28.
INTEREST
IN OTHER ENTITIES
The significant
subsidiaries, associates and joint operations of the Company at
December 31, 2018 are listed below.
|
|
|
|
|
December
|
Fiscal
|
|
|
|
|
Place
|
|
31,
2018
|
2018
|
|
|
|
|
Of
|
Entity
|
Ownership
|
Participating
|
Accounting
|
|
|
|
Business
|
Type
(1)
|
Interest
(2)
|
Interest
(3)
|
Method
(4)
|
|
Subsidiaries
|
|
|
|
|
|
|
|
Denison Mines
Inc.
|
|
Canada
|
|
100.00%
|
N/A
|
Consolidation
|
|
Denison AB
Holdings Corp.
|
|
Canada
|
|
100.00%
|
N/A
|
Consolidation
|
|
Denison
Waterbury Corp
|
|
Canada
|
|
100.00%
|
N/A
|
Consolidation
|
|
9373721
Canada Inc.
|
|
Canada
|
|
100.00%
|
N/A
|
Consolidation
|
|
Denison Mines
(Bermuda) I Ltd
|
|
Bermuda
|
|
100.00%
|
N/A
|
Consolidation
|
|
|
|
|
|
|
|
|
|
Associates
|
|
|
|
|
|
|
|
GoviEx
Uranium Inc.
|
|
Africa
|
|
16.21%
|
N/A
|
Equity
Method
|
|
|
|
|
|
|
|
|
|
Joint Operations
|
|
|
|
|
|
|
|
Waterbury Lake
Uranium Corp
|
|
Canada
|
JO-1
|
60.00%
|
100%
|
Voting
Share
|
|
Waterbury Lake
Uranium LP
|
|
Canada
|
JO-1
|
65.92%
|
100%
|
Voting
Share
|
|
McClean Joint
Venture Agreement
|
|
Canada
|
JO-2
|
22.50%
|
22.50%
|
Proportionate
Share
|
|
Midwest Joint
Venture Agreement
|
|
Canada
|
JO-2
|
25.17%
|
25.17%
|
Proportionate
Share
|
|
Wheeler
River
|
|
Canada
|
JO-2
|
90.00%
|
75.85%
|
Proportionate
Share
|
|
Mann
Lake
|
|
Canada
|
JO-2
|
30.00%
|
30.00%
|
Proportionate
Share
|
|
Wolly
|
|
Canada
|
JO-2
|
21.89%
|
Nil%
|
Proportionate
Share
|
|
|
|
|
|
|
|
|
(1)
Joint operations are further
subdivided into the following two entity types: JO-1=Joint
Operations having joint control as defined by IFRS 11; and
JO-2=Joint Operations not having joint control and beyond the scope
of IFRS 11;
(2)
Ownership Interest represents
Denison’s percentage ownership / voting interest in the
entity or contractual arrangement;
(3)
Participating interest
represents Denison’s percentage funding contribution to the
particular joint operation arrangement. This percentage can differ
from voting interest in instances where other parties to the
arrangement have carried interests in the arrangement and / or are
earning-in or diluting their voting interest in the arrangement;
and
(4)
Voting share or proportionate
share is where Denison accounts for its share of assets,
liabilities, revenues and expenses of the arrangement in relation
to its ownership interest or participating interest,
respectively.
WLUC and WLULP
were acquired by Denison as part of the Fission Energy Corp
acquisition in April 2013. Denison uses its voting interest to
account for its share of assets, liabilities, revenues and expenses
for these joint operations. In 2018, Denison funded 100% of the
activities in these joint operations pursuant to the terms of an
agreement that allows it to approve spending for the WLULP without
having the required 75% of the voting interest (see note
25).
29.
SUBSEQUENT
EVENTS
Bank of
Nova Scotia Credit Facility Renewal
On January 29,
2019, the Company entered into an amending agreement with BNS to
extend the maturity date of the 2018 facility (see note 17). Under
the 2019 facility amendment, the maturity date has been extended to
January 31, 2020. All other terms of the 2019 facility (tangible
net worth covenant, pledged cash, investments amounts and security
for the facility) remain unchanged from those of the 2018 facility,
and the Company continues to have access to credit up to
$24,000,000 the use of which is restricted to non-financial letters
of credit in support of reclamation obligations.
The 2019 facility
remains subject to letter of credit and standby fees of 2.40%
(0.40% on the first $9,000,000) and 0.75%
respectively.
