Denison Mines Corp .

 

2018 Annual Information Form

March 12, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

ABOUT THIS ANNUAL INFORMATION FORM

Caution about Forward-Looking Information

Certain information contained in this AIF and the documents incorporated by reference concerning the business, operations and financial performance and condition of Denison constitutes forward-looking information within the meaning of the United States Private Securities Litigation Reform Act of 1995 and similar Canadian legislation.

 

Generally, the use of words and phrases like "plans", "expects", "is expected", "budget", "scheduled", "estimates", “forecasts", "intends", "anticipates", or "believes", or the negatives and/or variations of such words and phrases, or statements that certain actions, events or results "may", "could", "would", "might" or "will" "be taken", "occur", "be achieved" or “has the potential to” and similar expressions are intended to identify forward-looking information.

 

Forward-looking information involves known and unknown risks, uncertainties, material assumptions and other factors that may cause actual results or events to differ materially from those expressed or implied by such forward-looking statements.

 

 

Denison believes that the expectations and assumptions reflected in this forward-looking information are reasonable, but no assurance can be given that these expectations will prove to be correct. Forward-looking information should not be unduly relied upon. This information speaks only as of the date of this AIF, and Denison will not necessarily update this information, unless required to do so by securities laws.

 

Examples of Forward-Looking Information

 

This AIF contains forward-looking information in a number of places, including statements pertaining to Denison’s:

 

 

Statements relating to "mineral resources" are deemed to be forward-looking information, as they involve the implied assessment, based on certain estimates and assumptions that the mineral resources described can be profitably produced in the future.

 

Material Risks

 

Denison's actual results could differ materially from those anticipated. Management has identified the following risk factors which could have a material impact on the Company or the trading price of its common shares (“ Shares ”):

 

 

The risk factors listed above are discussed in more detail later in this AIF (see “Risk Factors”). The risk factors discussed in this AIF are not, and should not be construed as being, exhaustive.

 

Material assumptions

 

The forward looking statements in this AIF and the documents incorporated by reference are based on material assumptions, including the following, which may prove to be incorrect:

 

 

A Note for US Investors Regarding Estimates of Measured, Indicated and Inferred Mineral Resources and Probable Mineral Reserves

This AIF uses the terms 'measured', 'indicated' and 'inferred' mineral resources. While such terms have been prepared in accordance with the definition standards on mineral reserves of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in Canadian National Instrument 43-101 Mineral Disclosure Standards ("NI 43-101") and are recognized and required by Canadian regulations, the United States Securities and Exchange Commission ("SEC") does not recognize them. 'Inferred mineral resources' have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or other economic studies.

 

 

United States investors are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be converted into mineral reserves. United States investors are also cautioned not to assume that all or any part of an inferred mineral resource exists, or is economically or legally mineable.

The estimates of mineral reserves in this AIF have been prepared in accordance with NI 43-101. The definition of probable mineral reserves used in NI 43-101 differs from the definition used by the SEC in the SEC's Industry Guide 7. Under the requirements of the SEC, mineralization may not be classified as a "reserve" unless the determination has been made, pursuant to a "final" feasibility study that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. Denison has not prepared a feasibility study for the purposes of NI 43-101 or the requirements of the SEC. Accordingly, Denison's probable mineral reserves disclosure may not be comparable to information from U.S. companies subject to the reporting and disclosure requirements of the SEC.

 

 

ABOUT DENISON

 

Denison Mines Corp. is primarily engaged in uranium exploration and development. The registered and head office of Denison is located at 1100 – 40 University Avenue, Toronto, Ontario, M5J 1T1, Canada. Denison’s website address is www.denisonmines.com

At the end of 2018, Denison had a total of 70 active employees, all of whom were employed in Canada. None of the Company’s employees are unionized.

 

The Shares are listed on the Toronto Stock Exchange (“ TSX ”) under the symbol “DML” and on the NYSE American under the symbol “DNN.” Computershare Investor Services Inc. acts as the registrar and transfer agent for the Shares. The address for Computershare Investor Services Inc. is 100 University Avenue, 8th Floor, Toronto, ON, M5J 2Y1, Canada, and the telephone number is 1-800-564-6253.

 

Denison is a reporting issuer in all of the Canadian provinces. The Shares are also registered under the United States Securities Exchange Act of 1934 , as amended, and Denison files periodic reports with the United States Securities and Exchange Commission.

 

Denison’s Structure

 

Denison conducts its business through a number of subsidiaries. The following is a diagram depicting the corporate structure of Denison and its active subsidiaries as at December 31, 2018, including the name, jurisdiction of incorporation and proportion of ownership interest in each.

 

Denison also owns a number of inactive subsidiaries which have no liabilities or assets and do not engage in any business activities.

 

 

Denison Asset Overview

 

Uranium Exploration and Development

 

 

Denison’s uranium exploration properties are principally held directly by the Company or indirectly through Denison Mines Inc. (“ DMI ”), Denison Waterbury Corp. and Denison AB Holdings Corp.

 

Services

 

The Company generates cash flow through the following areas of its business:

 

 

Pursuant to a management services agreement, DMI serves as the manager of UPC, a publicly-traded company listed on the TSX under the symbol “U”, which invests in uranium oxide in concentrates (U 3 O 8 ) and uranium hexafluoride (UF 6 ).

 

 

DES provides mine care & maintenance, decommissioning, environmental and other consulting services to third party customers.

 

Toll Milling

 

Denison is a party to a toll-milling arrangement through its 22.50% interest in the MLJV, whereby ore is processed for the Cigar Lake Joint Venture (“ CLJV ”) at the McClean Lake processing facility (the “ Cigar Toll Milling ”). In February 2017, Denison completed a financing (the “ APG Transaction ”) with Anglo Pacific Group PLC (" APG ") and its wholly owned subsidiary Centaurus Royalties Ltd. for gross proceeds to Denison of $43,500,000. The APG Transaction monetized a portion of Denison’s future share of the Cigar Toll Milling, providing Denison with the financial flexibility to advance its interests in the Athabasca Basin, including the Wheeler River project.

 

 

While the APG Transaction monetized certain future toll milling receipts from the Cigar Toll Milling, Denison retains a 22.5% strategic ownership stake in the MLJV and McClean Lake processing facility. See “Denison’s Operations – Cigar Lake Toll Milling – APG Transaction”.

 

The Formation of Denison

 

Denison was formed by articles of amalgamation as International Uranium Corporation (“ IUC ”) effective May 9, 1997 pursuant to the Business Corporations Act (Ontario) (the “ OBCA ”). On December 1, 2006, IUC combined its business and operations with DMI, by plan of arrangement under the OBCA (the “ IUC Arrangement ”). Pursuant to the IUC Arrangement, all of the issued and outstanding shares of DMI were acquired in exchange for IUC’s shares. Effective December 1, 2006, IUC’s articles were amended to change its name to “Denison Mines Corp.”

 

Through its 2013 acquisitions of JNR Resources Inc. (“ JNR ”), Fission Energy Corp. (“ Fission ”) and Rockgate Capital Corp. (“ Rockgate ”) and its 2014 acquisition of International Enexco Limited (“ IEC ”), Denison increased its project portfolio in Canada, primarily in the Athabasca Basin.

 

In 2015 and 2016, Denison worked to further achieve its objective of focusing on its core activities in the Athabasca Basin, completing the sale of its interest in the Gurvan Saihan Joint Venture in Mongolia to Uranium Industry a.s. (“ UI ”) in 2015 (the “ Mongolia Transaction ”) and completing a transaction with GoviEx Uranium Inc. (“ GoviEx ”) in 2016 to combine their respective African uranium mineral interests, with GoviEx acquiring Denison’s uranium mineral interests in Zambia, Mali and Namibia (the “ Africa Transaction ”). See “Legal and Regulatory Proceedings” for more information on the Mongolia Transaction.

 

DEVELOPMENTS OVER THE LAST THREE YEARS

 

2016…

 

In January, Dale Verran was appointed Vice President, Exploration with responsibility for overseeing and advancing the Company’s exploration programs. Prior to his appointment, Mr. Verran served as Technical Director, Exploration for the Company. In addition, Mr. Joo Soo Park, KEPCO’s representative on Denison’s Board, resigned and was replaced by Mr. Hyung Mun Bae.

 

Also in January, the Company amended and extended its credit facility with the Bank of Nova Scotia (the “ Credit Facility ”) to January 31, 2017.

 

In February, Amanda Willett was appointed Corporate Counsel and Corporate Secretary of Denison on a secondment basis, which appointment was made permanent effective June 2016.

 

In March, the Company announced the execution of the new three-year management services agreement (the “ MSA ”) to provide management services to UPC. The MSA took effect on April 1, 2016, at the conclusion of the three-year term of the then current management services agreement between UPC and DMI. See “Manager of UPC”.

 

In April, Denison announced the results of the preliminary economic assessment (“ PEA ”) completed on its 60% (now 90.0%, as at December 31, 2018) owned Wheeler River Project. The PEA considered the potential economic merit of co-developing the high-grade Gryphon and Phoenix deposits as a single underground mining operation, and assumed processing at Denison's 22.5% owned McClean Lake mill. The PEA considered two economic scenarios: (a) a base case scenario based on a March 2016 long-term price of uranium of US$44.00 per pound; and (b) a production case scenario based on a long-term price of uranium of US$62.60 per pound.

 

 

Economic highlights of the PEA included (a) base case: a pre-tax IRR of 20.4% and a pre-tax Net Present Value (" NPV ") of $513 million (Denison's share $308 million); and (b) production case: a pre-tax IRR of 34.1% and pre-tax NPV of $1,420 million (Denison's share $852 million). The PEA is based on the mineral resource estimates for the Gryphon deposit effective September 25, 2015 and the Phoenix deposit effective May 28, 2014, and is disclosed in the report entitled “Preliminary Economic Assessment of the Wheeler River Uranium Project, Saskatchewan, Canada” dated March 31, 2016. Following the completion of the PEA, a decision was made to advance towards the completion of a Pre-Feasibility Study (“ PFS ”) which would require additional definition drilling to be completed in order to improve the confidence in the existing mineral resources estimated for the Gryphon deposit. See “Mineral Properties – Wheeler River”.

 

Also in April, Denison completed its winter exploration drilling in the Athabasca Basin. Drilling results at Wheeler River included the discovery of the D Series of mineralized lenses, located within 200 metres north and northwest of the Gryphon deposit and continued intercepts of mineralization and/or radioactivity to the southwest of Gryphon along the K-North trend. Other notable winter results included the extension of a mineralized trend at Murphy Lake and the discovery of mineralization on the CR-3 trend at Moon Lake South. The Company reported that 31,091 metres of drilling had been completed in 55 drill holes on seven projects operated by the Company. Additionally, 8,107 metres of drilling was completed in 31 holes on projects operated by the Company’s joint venture partners.

 

In May, Denison completed a private placement offering (the " 2016 Offering ") of Shares issued on a "flow-through" basis pursuant to the Income Tax Act (Canada). Denison issued 15,127,805 Shares, at a price of $0.82 per Share, for aggregate gross proceeds to Denison of $12,405,000. The gross proceeds from the financing were intended to fund the Company’s Canadian exploration expenses through to the end of 2017.

 

In June, GoviEx and Denison completed the combination of their respective African uranium mineral interests (the “ Africa Transaction ”). Pursuant to the Africa Transaction, GoviEx acquired all of Denison’s African uranium mineral interests in Mali, Zambia and Namibia through the acquisition of Rockgate from Denison. In exchange, Denison received 56,050,450 common shares and 22,420,180 common share purchase warrants (“ Consideration Warrants ”) of GoviEx. Each Consideration Warrant is convertible into one common share of GoviEx at a price of US$0.15 per share for a period of three years. The Consideration Warrants include an acceleration clause, which provide that in the event that the closing price of GoviEx’s common shares on the TSX Venture Exchange is equal to or greater than $0.24 per share for a period of 15 consecutive trading days, GoviEx may provide holders of the Consideration Warrants with written notice that holders have 30 days to exercise the Consideration Warrants on the original terms, failing which the exercise price of the Consideration Warrants will be increased to US$0.18 per share and the term of the Consideration Warrants will be reduced by six months. Concurrently, GoviEx completed a non-brokered equity financing on a private placement basis, in which Denison provided the lead order of approximately US$500,000 for 9,093,571 common shares and common share purchase warrants (the “ Concurrent Warrants ”). Each Concurrent Warrant is convertible into one common share of GoviEx for a period of three years, at a price of US$0.12 per share until June 10, 2018 and thereafter at a price of US$0.14 per share. The Concurrent Warrants include an acceleration clause, which provide that in the event that the closing price of GoviEx’s common shares on the TSX Venture Exchange is equal to or greater than $0.20 per share for a period of 15 consecutive trading days, GoviEx may provide holders of the Concurrent Warrants with written notice that holders have 60 days to exercise the Concurrent Warrants on the original terms, failing which the Concurrent Warrants will expire unexercised. In total, as a result of the sale and the concurrent financing, Denison acquired a total of 65,144,021 common shares of GoviEx, or approximately 24.6% of GoviEx’s issued and outstanding common shares at the end of June 2016 (16.21% at December 2018, according to publicly available information as at the date of this AIF), and 31,513,751 GoviEx common share purchase warrants. GoviEx is a publicly traded company and is listed on the TSX Venture Exchange under the symbol “GXU”. For so long as Denison holds at least 5% of the issued and outstanding common shares of GoviEx, Denison will have the right to appoint one director to the GoviEx board of directors and will have the right to participate in future GoviEx equity financings in order to maintain its pro-rata ownership. Denison’s nominee director, Mr. David Cates, President and Chief Executive Officer of Denison, was appointed to the GoviEx board of directors.

In August, the Company closed an option agreement with Skyharbour Resources Ltd. (“ Skyharbour ”), which grants Skyharbour an option to acquire a 100% interest in Denison’s wholly owned Moore Lake property in exchange for cash, stock and exploration spending commitments (the “ Skyharbour Agreement ”). Under the terms of the Skyharbour Agreement, Denison received 4,500,000 common shares of Skyharbour and will receive staged cash payments of $500,000, in aggregate, over the next five years. Skyharbour must also spend $3,500,000 in exploration expenditures on the property over the same five-year period in order to complete the option. Under the terms of the Skyharbour Agreement, Denison also maintains various back-in rights on the property to re-acquire a 51% interest in the property and is entitled to nominate a member to Skyharbour’s Board of Directors as long as Denison maintains a minimum ownership position of 5%. In total, as a result of the option agreement shares and Denison's existing position, Denison held 5,000,000 common shares of Skyharbour, or approximately 11.3% of Skyharbour's issued and outstanding shares at the end of August 2016 (approximately 8.49% at December 2018, based on publicly available information as at the date of this AIF and taking into account additional shares acquired by Denison subsequent to the Skyharbour Agreement date). Denison's nominee director, Mr. David Cates, was appointed to the Skyharbour board of directors.

 

In September, the Mongolian government (through the Mineral Resource Authority of Mongolia) formally issued the mining license certificates for the Hairhan, Haraat, Gurvan Saihan and Ulzit projects. These projects had been sold to UI in connection with the Mongolia Transaction, and the issuance of the licenses triggered Denison’s right to receive certain contingent consideration from UI within 60 days of the licenses being granted, in accordance with the terms of the Amended and Restated Share Purchase Agreement between Denison and UI dated November 25, 2015 (the “ GSJV Purchase Agreement ”), which payments have not yet been made. See “Developments Over the Last Three Years – 2017…” and “Legal and Regulatory Proceedings” for further information.

 

In October, Denison announced completion of a highly successful summer 2016 drilling program on the Wheeler River project. Highlights included; (1) continued expansion of the D Series lenses along strike to a collective strike length of 330 metres, (2) new high grade drill intersections which indicated expansion of the A and B Series lenses both down-dip and up-dip on the southwestern portion of the Gryphon deposit, (3) discovery of basement-hosted mineralization on the K-West conductive trend, located approximately 500 metres west of the Gryphon deposit, and (4) completion of an initial set of five infill and delineation holes on the Gryphon deposit, which confirmed high grades. During the summer exploration program, over 32,000 metres of drilling was completed on five properties operated by Denison, with over 25,000 metres of drilling completed at Wheeler River. A further 4,857 metres of drilling was completed in 10 holes on projects operated by the Company’s joint venture partners.

 

 

In November, Denison acquired 80% ownership of the Hook-Carter property from ALX Uranium Corp. (" ALX ") in exchange for the issuance to ALX of 7,500,000 Shares of Denison. Under the terms of the agreement with ALX (the “ Hook-Carter Agreement ”), ALX retained a 20% interest in the Hook-Carter property and Denison agreed to fund ALX's share of the first $12,000,000 in expenditures. Denison is the operator of the project and has full discretion as to the nature, extent, timing and scope of all work projects, subject to a modest work commitment to spend $3,000,000 on the property over the first 3 years (which work commitment has been completed by Denison in accordance with the terms of the Hook-Carter Agreement). The parties agreed to form a joint venture thirty-six months after the effective date of the Hook-Carter Agreement, in which all material decisions shall be carried by a vote representing a 51% ownership interest.

 

Also in November, Denison acquired the Coppin Lake property (" Coppin Lake ") from Orano Canada and UEX Corporation. Coppin Lake comprises ten mineral claims covering an area of 2,768 hectares in the western portion of the Athabasca Basin region in northern Saskatchewan, contiguous with the Hook-Carter property. Pursuant to the area of interest provisions within the Hook-Carter Agreement, Coppin Lake now forms a part of the Hook-Carter property for the purposes of the Hook-Carter Agreement and the eventual joint venture between Denison and ALX with respect thereto.

 

In December, Denison was notified that the significant majority of KEPCO’s indirect ownership of Denison’s Shares had been transferred to KHNP Canada Energy Ltd., a subsidiary of KHNP (“ KHNP Canada ”). Effective in December, Hyung Mun Bae resigned as a member of the Board of Directors.

 

2017…

In January, Denison executed an agreement with the partners of the Wheeler River Joint Venture (" WRJV ") that was expected to increase Denison's ownership of the Wheeler River project to up to approximately 66% by the end of 2018. At that time, the WRJV was a joint venture between Denison as operator (60.0% interest, which is now a 90.0% interest), Cameco Corporation (" Cameco ") (30.0% interest, which is now a 0.0% interest), and JCU (Canada) Exploration Limited (" JCU ") (10.0% interest) (collectively, the " WRJV Parties "). Under the terms of the agreement, the WRJV Parties agreed to allow for a one-time election by Cameco to fund 50% of its ordinary share (30%) of joint venture expenses in 2017 and 2018. The shortfall in Cameco's contribution would be funded by Denison, in exchange for a transfer to Denison of a portion of Cameco's interest in the WRJV. Accordingly, Denison's share of joint venture expenses was to be 75% in 2017 and 2018, and Cameco and JCU's share of joint venture expenses was to be 15% and 10%, respectively. See “Mineral Properties – Wheeler River”.

 

Also in January, UI and Denison entered into an extension agreement (the “ Extension Agreement ”), pursuant to which it was agreed that the payment deadline for the contingent payments due for the Mongolia Transaction under the GSJV Purchase Agreement would be extended to July 16, 2017, provided that the outstanding amount would bear interest at a rate of 5% per annum, payable monthly in arrears. The first payment under the Extension Agreement was due on or before January 31, 2017. The required payments were not made and UI is in default of its obligations under the Extension Agreement and GSJV Purchase Agreement. For further updates, see below in this section and in “Legal and Regulatory Proceedings”.

In February, Denison completed the APG Transaction for gross proceeds to Denison of $43,500,000. See “Denison’s Operations – Cigar Lake Toll Milling – APG Transaction”.

 

 

Co-ordinated with the closing of the APG Transaction, the maturity date under the Credit Facility was extended to January 31, 2018 and the terms of the Credit Facility were amended to reflect certain changes required to facilitate an inter-creditor agreement between BNS and the parties to the APG Transaction. Amongst those changes, BNS and DMI agreed to replace a restrictive covenant to maintain $5,000,000 on deposit with BNS with a pledge of $9,000,000 in restricted cash or GIC's as collateral. Under the amended Credit Facility, Denison will pay letter of credit fees of 0.4% on the first $9,000,000 of credit utilized under the facility (associated with the restricted cash), and 2.4% on the remaining $15,000,000 of letters of credit issued thereunder.

 

Also in February, Mr. Kwang Hee Jeong was appointed to the Board as KHNP Canada’s representative.

 

In March, Denison closed a private placement share offering, under which the Company issued, in aggregate, 18,337,000 Shares of Denison for gross proceeds of $20,000,290. The aggregate share offering was comprised of the following three elements: (a) a “Common Share” offering which consisted of 5,790,000 Shares at a price of $0.95 per Share for gross proceeds of $5,500,500; (b) a “Tranche A Flow-Through” offering which consisted of 8,482,000 Shares issued on a “flow-through” basis at a price of $1.12 per Share for gross proceeds of $9,499,840; and (c) a “Tranche B Flow-Through” offering which consisted of 4,065,000 Shares issued on a “flow-through” basis at a price of $1.23 per Share for gross proceeds of $4,999,950.

 

In April, Denison completed its winter exploration drilling in the Athabasca Basin. At Wheeler River, the winter 2017 drilling program was focused on two objectives: (1) continued infill and delineation drilling of the Gryphon deposit, in order to upgrade the estimated inferred resources to an indicated level of confidence, and (2) exploration drilling outside of the current resources estimated for the Gryphon deposit, with the aim of discovering additional resources. The winter 2017 drilling program at Wheeler River was completed with a total of 14,732 metres drilled in 26 holes. Drilling results at Wheeler River included intersections of high-grade mineralization within the D Series lenses of mineralization, located within 200 metres north and northwest of the Gryphon deposit. Other notable winter results included high grade intersections from infill drilling within the Gryphon deposit’s A, B and C series lenses, where 17 drill holes, totaling approximately 8,402 metres, were completed as part of the winter 2017 program. Winter drilling programs were also completed by the Company at Waterbury Lake (9 holes, 4,803 metres), Murphy Lake (9 holes, 3,433 metres) and Crawford Lake (1 hole, 519 metres). A further 5,029 metres of drilling was completed in 17 holes on the Wolly project by Orano Canada.

 

In July, Denison announced that DES had entered into a new two-year services agreement with Rio Algom Limited, which is a subsidiary of BHP Billiton Limited. Pursuant to the agreement, DES will be responsible for the management and operation of nine decommissioned mine sites in Ontario and two in Quebec from July 1, 2017 to June 30, 2019, including the operation of water treatment plants and tailings management facilities; environmental monitoring and compliance, data management, and regulatory reporting; maintenance of roads, dams and electrical infrastructure; site management, including health and safety, procurement, logistics, and budgeting activities; and project management and execution for various projects, including infrastructure upgrades and replacements, engineering and environmental programs, as well as water management initiatives.

 

 

In September, Denison reported the completion of the summer exploration drilling program at the Waterbury Lake project. The summer 2017 drill program at Waterbury Lake commenced in late July and was highly successful, returning several high-grade uranium intersections from a target area located approximately 1.5 kilometres to the northeast of the property’s J Zone uranium deposit. Following the discovery of uranium mineralization in the first four drill holes of the program, the scope of the program was increased in late August to allow for a total of 9 drill holes. Of the eight drill holes designed to test for basement-hosted mineralization, seven holes intersected significant mineralization, including 9.1% U 3 O 8   over 3.7 metres (drill hole WAT17-446A), 1.7% U 3 O 8   over 7.5 metres (drill hole WAT17-449) and 1.5% U 3 O 8   over 4.5 metres; (drill hole WAT17-450A).   Taken together, the summer program included a total of 3,722 metres drilled and resulted in the wide-spaced definition (approximately 50 x 50 metre drill hole spacing) of a significant zone of entirely basement-hosted mineralization with geological features consistent with basement-hosted deposits in the Athabasca Basin. This new zone of mineralization at the Waterbury Lake project became known as the “Huskie” zone.

 

Also in September, Denison and KHNP Canada entered into an amended and restated strategic relationship agreement dated September 19, 2017 (the “ KHNP SRA ”), on substantially similar terms as the prior strategic relationship agreement with KEPCO. The KHNP SRA was entered into in connection with the December 2016 transfer by KEPCO of substantially all of its indirect ownership of Denison’s Shares to KHNP Canada. See “Risk Factors – Potential Influence of KEPCO and KHNP”.

 

In November, the Company announced the completion of the summer 2017 drilling program at the Wheeler River project, including a total of 64 drill holes (totalling 29,224 metres). The drilling program was focused within, and in the immediate vicinity of, the Gryphon deposit ahead of a planned update to the mineral resource estimate for the property. Highlights from the summer drilling program included: (1) expansion of high-grade mineralization within the D series lenses; (2) discovery and expansion of the E series lenses both at the unconformity and within the upper basement; and (3) expansion of the A and B series lenses both up-dip and down dip. The Company also successfully completed the definition drilling program on the Gryphon deposit’s A, B and C series lenses, with the objective of increasing the confidence of the previously estimated mineral resources from an inferred to indicated level. A summer drilling program was also completed by the Company at Crawford Lake (4 holes, 2,068 metres) and a further 5,870 metres of drilling was completed in 20 holes on the McClean project by Orano Canada.

 

In December, the Company filed a Request for Arbitration under the Arbitration Rules of the London Court of International Arbitration against UI in connection with the continued failure of UI to pay to the Company the contingent consideration payable under the GSJV Purchase Agreement and the Extension Agreement, with respect to the Mongolia Transaction. See “Legal and Regulatory Proceedings”.

 

2018…

 

In January, the Company amended and extended its Credit Facility to January 31, 2019.

 

Also in January, Denison announced an 88% increase in the indicated mineral resources estimated for the Wheeler River project with the completion of an updated mineral resource estimate for the Gryphon deposit at Wheeler River. The Gryphon deposit is estimated to contain, above a cut-off grade of 0.2% U 3 O 8 , 61.9 million pounds of U 3 O 8 (1,643,000 tonnes at 1.71% U 3 O 8 ) in indicated mineral resources, plus 1.9 million pounds of U 3 O 8 (73,000 tonnes at 1.18% U 3 O 8 ) in inferred mineral resources. By comparison, the maiden mineral resource estimate, completed in September 2015, was comprised of inferred mineral resources of 43.0 million pounds of U 3 O 8 above a cut-off grade of 0.2% U 3 O 8 (834,000 tonnes at 2.3% U 3 O 8 ). Together, Wheeler River is now host to 132.1 million pounds U 3 O 8 (1,809,000 tonnes at an average grade of 3.3%) in total indicated mineral resources. Following the mineral resource update, Wheeler River retained and improved its standing as the largest undeveloped high-grade uranium project in the infrastructure rich eastern portion of the Athabasca Basin. In March, Denison filed a technical report containing the updated mineral resource estimate for the Wheeler River property. See “Mineral Properties – Wheeler River”.

 

 

In March, Denison also completed a review of an updated mineral resource estimate for the Midwest project. The review resulted in the estimation of (a) inferred mineral resources on the property increasing to 18.2 million pounds of U 3 O 8 (100% basis; above a cut-off grade of 0.1% U 3 O 8 ), an increase of 13.5 million pounds of U 3 O 8 from the prior estimate; and (b) indicated mineral resources increasing to 50.78 million pounds U 3 O 8 (100% basis; above a cut-off grade of 0.1% U 3 O 8 ), an increase of 2.08 million pounds U 3 O 8 from the prior estimate. A technical report was filed on March 27, 2018. See “Mineral Properties – Midwest”.

 

In April, Denison further amended the Credit Facility to accommodate the Company's change in financial statement presentation currency to Canadian dollars. The covenant in the Credit Facility to maintain a specified level of tangible net worth was changed to $131,000,000 (from US$150,000,000).

 

Also in April, the Company reported the completion of the winter drilling program at the Wheeler River project, including the discovery of high-grade uranium mineralization 600 metres and 1 kilometre to the northeast of the Gryphon uranium deposit. High-grade intercepts were obtained at the sub-Athabasca unconformity along the K-North trend from reconnaissance drill fences spaced 200 metres apart. The results were confirmed by chemical assays announced on June 6, 2018, which included 1.4% U 3 O 8 over 5.5 metres (including 7.2% U 3 O 8 over 1.0 metre) in drill hole WR-704, located 600 metres northeast of Gryphon; and 1.1% U 3 O 8 over 3.0 metres (including 2.8% U 3 O 8 over 1.0 metre) in drill hole WR-710D1, located 1 kilometre northeast of Gryphon. The winter drilling program at Wheeler included 21,153 metres drilled in 29 diamond drill holes, largely focused on step-out drilling along strike of the Gryphon deposit and reconnaissance level regional exploration along the K-North and K-West trend.

 

And in April, Denison reported the expansion of the Huskie zone on the Waterbury Lake project, with the receipt of U 3 O 8 chemical assay results from the Company's winter 2018 diamond drilling program. The results were highlighted by the following intercepts: 4.5% U 3 O 8 over 6.0 metres (including 5.8% U 3 O 8 over 4.5 metres), and 0.57% U 3 O 8 over 6.3 metres (including 1.9% U 3 O 8 over 1.0 metre) in drill hole WAT18-452; and 0.62% U 3 O 8 over 1.0 metre in drill hole WAT18-460A. The winter drilling program involved 9,794 metres of diamond drilling in 19 drill holes, and was focused on 50 metre step-out drilling along strike and down-dip of the Huskie zone, as well as wider-spaced reconnaissance drilling to the west along the geological trend.

 

In May, Denison announced the results of its Annual General Shareholders Meeting, which included the ratification and approval of the Company’s new Share Unit Plan and the previous grants of share units thereunder.

 

In August, changes were made to the composition of the Company’s Board of Directors, with the appointment to the Board of David Cates, the Company’s President and Chief Executive Officer, Jack Lundin, Moo Hwan Seo and Patricia Volker. At that time, the Company accepted the resignation of Kwang-Hee Jeong and Lukas Lundin. In addition, Catherine Stefan, previously serving as the Company’s independent Lead Director, was appointed Chair of the Board.

 

 

In September, Denison entered into an agreement with Cameco, pursuant to which Denison would increase its ownership interest in the Wheeler River project to 90% through the acquisition of 100% of Cameco’s minority interest in the WRJV (subject to certain rights of first refusal in favour of JCU pursuant to the WRJV joint venture agreement) in exchange for the issuance to Cameco of 24,615,000 Shares of Denison. JCU waived its rights under the WRJV joint venture agreement to acquire any of Cameco’s interest, and Denison’s acquisition of Cameco’s interest was completed effective October 26, 2018 (the “ Cameco Transaction ”). See “Mineral Properties – Wheeler River”.

 

Also in September, Denison announced the appointment of Tim Gabruch as the Corporation’s Vice President Commercial.

 

And in September, Denison reported a new discovery of uranium mineralization on the Company's Waterbury Lake project. Basement-hosted uranium mineralization was intersected in two drill holes, approximately three kilometres northeast of the project's Huskie deposit, returning mineralized assay intervals of 0.43% U 3 O 8 over 1.0 metre (including 0.73% U 3 O 8 over 0.5 metres) in drill hole WAT18-478 and 0.45% U 3 O 8 over 0.5 metre as well as 0.31% U 3 O 8 over 0.5 metre and 0.20% U 3 O 8 over 0.5 metre in drill hole WAT18-479.

 

In September, Denison announced the results of the PFS for the Wheeler River project. The PFS has been completed in accordance with NI 43-101 and is highlighted by the selection of the in-situ recovery (" ISR ") mining method for the development of the Phoenix deposit, with an estimated average operating cost of $4.33 (US$3.33) per pound U 3 O 8 . The PFS considers the potential economic merit of co-developing the Phoenix and Gryphon deposits. The high-grade Phoenix deposit is designed as an ISR mining operation, with associated processing to a finished product occurring at a plant to be built on site at Wheeler River. The Gryphon deposit is designed as an underground mining operation, utilizing a conventional long hole mining approach with processing of mine production assumed at Denison's 22.5% owned McClean Lake mill. Taken together, the project is estimated to have mine production of 109.4 million pounds U 3 O 8 over a 14-year mine life, with a base case pre-tax Net Present Value (" NPV ") of $1.31 billion (8% discount rate), Internal Rate of Return (" IRR ") of 38.7%, and initial pre-production capital expenditures of $322.5 million. The base-case economic analysis assumes uranium sales are made at UxC Consulting Company, LLC's (" UxC ") annual estimated spot price (composite mid-point scenario) for mine production from the Phoenix deposit (from ~US$29/lb U 3 O 8 to US$45/lb U 3 O 8 ), and a fixed price for mine production from the Gryphon deposit (US$50/lb U 3 O 8 ). The PFS is prepared on a project (100% ownership) and pre-tax basis, as each partner to the WRJV is subject to different tax and other obligations. The technical report in support of the PFS was filed on October 30, 2018. See “Mineral Properties – Wheeler River”.

 

In November, Denison reported that it had completed a maiden mineral resource estimate for the Huskie basement-hosted uranium deposit in accordance with NI 43-101 and CIM Definitions (2014), which was reviewed and audited by SRK Consulting (Canada) Inc. (“ SRK ”). The result was an inferred mineral resource estimate of 5.7 million pounds of U 3 O 8 (above a cut-off grade of 0.1% U 3 O 8 ) based on 268,000 tonnes of mineralization at an average grade of 0.96% U 3 O 8 . The updated technical report for Waterbury, including the Huskie mineral resource estimate, was filed on December 21, 2018. See “Mineral Properties – Waterbury Lake”.

 

Also in November, Denison reported the discovery of unconformity uranium and base metals mineralization on the K West trend at Wheeler River. Highlights from the Company's summer 2018 diamond drilling program at Wheeler River included drill hole WR-733D1, which returned 0.30% U 3 O 8 , 4.7% Co, 3.7% Ni and 0.55% Cu at the unconformity on the K West trend, approximately 500 metres west of the parallel K North trend, which hosts the Gryphon deposit.

 

 

And in November, Denison announced the completion of a private placement offering (the " 2018 Offering ") of Shares issued on a "flow-through" basis pursuant to the Income Tax Act (Canada). The Company issued 4,950,495 Shares, at a price of $1.01 per Share, for total gross proceeds of approximately $5,000,000. The gross proceeds of the financing are intended to be used for expenses related to the Company's exploration activities in 2019.

 

In December, the Company's Board of Directors and the WRJV each approved the advancement of the Wheeler River project, following a detailed assessment of the robust economic results demonstrated in the PFS. In support of the decision to advance the Wheeler River project, the WRJV approved a $10.3 million budget for 2019 (100% basis), which is highlighted by plans to initiate the Environmental Assessment (" EA ") process, the completion of ISR wellfield testing, as well as the initiation of metallurgical pilot plant testing and other engineering studies related to ISR mining. Denison's share of the 2019 budget for Wheeler River is $9.3 million, which reflects Denison's 90% ownership interest in the project.

 

Events This Year…

 

In January, the Company amended and extended its Credit Facility to January 31, 2020.

 

In March, Mr. Moo Hwan Seo resigned from the Board. Mr. Geun Park joined the Board, filling the vacancy created by Mr. Seo’s resignation.

 

 

THE URANIUM INDUSTRY

 

The global nuclear fuel market continues to navigate through difficult times. While 2018 marked the seventh year of a prolonged downturn in the nuclear fuel business following the 2011 Fukushima Daichii nuclear incident, which led to the total shutdown of nuclear power generation in Japan by mid-2012, events throughout the year provided clear indications that positive change is beginning to happen.

 

While volatile at times, the spot price of uranium ended 2018 at US$28.50 per pound U 3 O 8 - 20% higher than where it started the year at US$23.75 per pound U 3 O 8 and 39% higher than its 2018 intra-year low of US$20.50 per pound U 3 O 8 in April 2018. Since the low reached in April 2018, market observers have noted a tangible shift in the market performance of the spot price, with the price rising steadily through the balance of the year.

 

Although the uranium spot price has demonstrated some noticeable starts and stops in its effort to recover over the past several years, there has been some stability demonstrated in the 2018 spot price increase, which has been supported, in part, by a number of events on the supply side. Most significant of these events was Cameco’s announcement that the temporary McArthur River shutdown would become indefinite, with the timing of a restart depending on future contracting and market conditions. At the same time, Cameco reiterated its commitment to meet existing customer obligations by purchasing large volumes of uranium in the spot market. In addition, the world’s largest uranium producer, National Atomic Company Kazatomprom (“ Kazatomprom ”), delivered on its previous commitments to curtail production, resulting in a 20% reduction from previously planned production levels. Kazatomprom also indicated that they will maintain this 20% reduction in production in 2019 and 2020. Further significant supply curtailments came from Paladin Energy Ltd, who placed their Langer Heinrich operation in Namibia on care and maintenance during 2018 – a clear response to the low uranium price environment and the lack of higher priced supply contracts to provide support for continued operations.

 

Although not a supply curtailment, the decision by Rio Tinto to sell its 68.2% share in the Rössing operation in Namibia to China National Uranium Corporation also represented a meaningful supply-side event in 2018. While the sale does not result in a fundamental change to supply and demand in the near term, this sale likely means that Rössing production will be destined for Chinese consumption going forward – effectively removing another decades-long source of primary production from those available to global nuclear utilities.

 

On the demand side there were fewer events of immediate impact, but still some positive news. The growth of China’s nuclear industry continues, with nuclear power generation in the country up 18.6% from 2017. The country now has 45 nuclear plants in operation, with an installed capacity of 45.9 GWh. Another 11 reactors are currently under construction, moving the country towards its goal of producing 58 GWh by 2020. In 2018, nuclear power accounted for 4.2% of China’s total electricity generation, contributing to a reduction in the country’s annual CO 2 emissions by 290 million tonnes. Adding to the positive news out of China, after a brief hiatus in the approval of new reactor projects, the Chinese government announced in early February that it had given preliminary approval for the construction of four new domestically designed HPR-1000 reactors.

 

 

 

Japan’s restart story continues to advance, albeit slowly. The country is finally beginning to make meaningful progress in bringing its nuclear fleet back online. In 2018, Japan increased its total number of nuclear reactors in operation up to 9, proving that there is a path to restart in the country. While Japan has struggled with timely restarts over the past 8 years, the global nuclear energy industry has continued to advance and has grown such that the level of global nuclear power generation in 2018 recovered to the pre-Fukushima levels reached in 2011.

 

During 2018, transactions in the uranium spot market exceeded 88 million pounds U 3 O 8 – surpassing the previously recorded high of 56 million pounds U 3 O 8 in 2011. This increase in spot-market transaction activity was a significant driver of the rising spot price in the year. While certain utility end-users looked to take advantage of low-priced uranium available in the market, the increase in transaction volume was mostly fueled by producer and trader buying, as a result of production cutbacks, as well as renewed interest from financial investors speculating in the physical market. Of note was the establishment of a new physical uranium fund – Yellow Cake PLC – traded on the London Stock Exchange AIM, which purchased more than 8 million pounds U 3 O 8 in 2018.

 

While spot market volumes exceeded expectations, long-term contracting in the market continued to lag. Over the past five years, less than 400 million pounds of U 3 O 8 have been placed under long-term contract, while utilities have utilized more than 800 million pounds U 3 O 8 over the same period. Unfortunately, as some of the uncertainty surrounding Fukushima started to fade and signposts emerged that many buyers were planning to begin long-term contracting, new uncertainty was introduced into the market. In January 2018, two US uranium producers, Energy Fuels Inc. and UR Energy Inc., filed a Section 232 trade petition with the US Department of Commerce (“DOC”) to investigate whether uranium imports into that country are harmful to its national security. These companies proposed a 25% domestic purchase quota for US utilities as a potential remedy. It is expected that the findings of the DOC as well as an ultimate decision on whether a remedy will be imposed and what it will look like, will be made by the US President as early as the second quarter of 2019. This new source of uncertainty has loomed over the global nuclear fuel market in 2018 and into 2019 - having a direct impact on utilities based in the US, causing them to refrain from re-entering the market until the impact of the petition is better understood. This has contributed to less purchasing in the long-term market through 2018. In their Q1 2019 Uranium Market Outlook, UxC estimates that cumulative uncovered nuclear utility requirements are now 1.6 billion pounds of U 3 O 8 through 2035.

 

Other important demand-side events in 2018 have contributed to changing market sentiment around the future of nuclear power and, in turn, the outlook for the uranium market. These included:

 

 

 

 

 

 

 

There is a sense, throughout the nuclear fuel industry, that 2018 was a year of transition, with the impacts of production shutdowns and curtailments beginning to take effect in earnest. In conjunction with increasing nuclear generation, primary production is now in a deficit in relation to annual reactor requirements, meaning that there is a real drawdown of inventories and secondary supplies taking place. As the industry gains clarity on the Section 232 trade petition under consideration in the US, increased decision-making is expected to occur regarding long-term purchase timing. Increased utility buying will need to occur in order to make up for reluctant purchasing over the last few years, and the market will likely need to respond with new or additional sources of production. Annual requirements are growing, and existing supply is falling, and this is ultimately expected to lead to questions of security of supply – a concept that is paramount in importance to global nuclear utilities. Ultimately, this shifting trend is expected to lead to a market where higher prices are required to incent producers to increase production and build new mines. The companies positioned with the lowest cost of production, and with a footprint in the most stable geopolitical regions, are likely to be the ones to benefit the greatest.

 

Uranium Demand

 

As of February 2019, the WNA reports that there are 445 nuclear reactors operable in 30 countries. These reactors can generate almost 396 gigawatts of electricity (“GWe”), which equates to approximately 10% of the world's electrical requirements (21% in Organisation for Economic Co-operation and Development (OECD) member countries). As well, there are currently 57 nuclear reactors under construction in 15 countries with the principal drivers of this expansion being China (13 reactors under construction), Russia (6), India (7), South Korea (5), UAE (4) and the United States (4). In addition, there are another 126 reactors currently planned around the world.

 

According to UxC’s Q1 2019 Uranium Market Outlook (“ Q1 2019 Outlook ”), global nuclear power capacities are projected to increase to 462 reactors, generating approximately 453 GWe in 35 countries by 2035. In the Q1 2019 Outlook, UxC estimates base case demand in 2019 to be 195 million pounds U 3 O 8 . UxC also estimates that annual uranium demand could grow to 210 million pounds U 3 O 8 under their base case, by 2035 and to more than 290 million pounds U 3 O 8 in their high case in the same period.

 

Primary Uranium Supply

 

UxC’s Q1 2019 Outlook estimates that world uranium production will be 142 million pounds U 3 O 8 in 2019, a slight increase over 2018’s production of 138 million pounds U 3 O 8 , but still down considerably from 154 million pounds in 2017. Primary production from most regions, including Canada, Australia, Africa, Russia and the United States, are anticipated to remain reasonably steady through that same period.

 

 

In Canada, Cigar Lake production is expected to remain constant at 18 million pounds U 3 O 8 per year through 2027, according to the Q1 2019 Outlook. McArthur River remains closed indefinitely with no immediate plans for future production, and a decision to restart is expected to be dependent on market conditions. Canada remains the second largest producing nation, with almost 14% of the world’s 2018 production, while Kazakhstan continued to be the world’s largest producer of uranium in 2018 by a large margin, representing approximately 42% of production.

 

UxC estimates in its Q1 2019 Outlook that existing mine production, plus new planned and potential mine production under its base case, will reach a peak of 166 million pounds U 3 O 8 by 2024, before declining to 108 million pounds U 3 O 8 by 2035. At its projected height in 2024, production levels are anticipated to include the resumption of mining at McArthur River, with UxC anticipating the mine will ramp up from 9 million pounds U 3 O 8 in 2023 to 18 million pounds U 3 O 8 by 2024. While Kazakhstan is seen to maintain relatively consistent supply in future years, it does start to drop off significantly closer to 2035. According to UxC, the main increases in mine supply from today will be the resumption of mining at McArthur River and the continued ramp up of production of the Husab mine in Namibia. In order for other projects to move forward and increase production forecasts, UxC believes uranium prices will need to increase appreciably to support higher cost production profiles and the significant capital expenditures that will be required.

 

Secondary Uranium Supply

 

In the Q1 2019 Outlook, primary mine production in 2019 is estimated to supply approximately 73% of the year’s estimated base case demand, with the balance of demand expected to be supplied from secondary sources. These sources include commercial inventories, reprocessing of spent fuel, sales by uranium enrichers and inventories held by governments, such as the U.S. Department of Energy, and the Russian government. Primary mine production’s share of annual demand remains lower than pre-2017 levels, in which primary production made up 85% or more of annual demand.

 

Secondary supplies remain a complexity of the uranium market. The Q1 2019 Outlook forecasts that 49 million pounds U 3 O 8 will enter the market from secondary supplies in 2019, leaving a shortfall of 4 million pounds U 3 O 8 to meet the base case demand scenario for 2019.

 

Though excess commercial inventories, which were one of the major sources of secondary supplies during the period from the early 1970s to the early 2000s, were largely consumed in that same period, the planned shutdown of nuclear programs in countries like Germany, and the continued struggles of the Japanese nuclear program to restart following Fukushima have contributed to commercial inventories again becoming a more significant factor. Government inventories also continue to contribute substantially to the secondary supply picture, particularly in the U.S. and Russia. The disposition of these commercial and government inventories may have a market impact in the near to medium term, although, UxC expects their role will diminish over time as these inventories continue to be depleted and the uranium and enrichment markets rebalance themselves.

 

In general, UxC expects that secondary sources of supply will fall significantly from estimated 2019 levels of 49 million pounds U 3 O 8 to roughly 17 million pounds U 3 O 8 per year by 2035.

 

 

Uranium Prices

 

Imbalances between supply and demand of uranium significantly influence uranium spot prices. According to the Q1 2019 Outlook, it is projected that primary production and secondary supply will be sufficient to meet base case demand for U 3 O 8 through the mid 2020’s, with significant supply deficits emerging later in the decade, contributing to upward price momentum.

 

With respect to long-term prices, utility uncovered requirements and long-term demand are significant influencers. Historically, nuclear utilities have purchased uranium primarily through long-term contracts. These contracts usually provide for deliveries to begin two to four years after they are signed with delivery typically extending anywhere from three or four years to ten years or more. In awarding medium and long-term contracts, electric utilities consider the producer’s uranium reserves, record of performance and production cost profile, in addition to the commercial terms offered. Prices are established by a number of methods, including base prices adjusted by inflation indices, reference prices (generally spot price indicators, but also long-term reference prices) and annual price negotiations. Contracts may also contain annual volume flexibility, floor prices, ceiling prices and other negotiated provisions. Under these contracts, the actual price mechanisms are usually confidential.

 

The long-term uranium demand that actually enters the market is affected in a large part by utilities’ uncovered requirements. This is the amount of uranium required by utilities to operate their fleet that is not yet covered by purchase contracts with suppliers. UxC estimates, in the Q1 2019 Outlook, that uncovered demand remaining for 2019 is just under 5 million pounds U 3 O 8 . Of course, this uncovered demand increases over time and is projected by UxC to increase significantly over the next decade. While almost 14 million pounds U 3 O 8 remain uncovered in 2020, this number grows to almost 125 million pounds U 3 O 8 in 2030. By 2035, over 158 pounds U 3 O 8 remain uncovered, or roughly 75% of total expected base case demand in that year. In total just over 1.6 billion pounds U 3 O 8 remain uncovered between 2019 and 2035.

 

At 158 million pounds U 3 O 8 , uncovered demand in 2035 is approximately 51 million pounds U 3 O 8 more than total production expected from existing uranium mines for the same year, which UxC estimates at 108 million pounds U 3 O 8 . Uncovered demand also exceeds the combined supply available from primary production and secondary sources by approximately 25 million pounds U 3 O 8 . In order to address the rising portion of demand that is uncovered, utilities will have to return to the market and enter into long-term contracts. From 2006 to 2010, on average, 39 million pounds U 3 O 8 equivalent were purchased on the spot market per year and roughly 200 million pounds U 3 O 8 equivalent were contracted in the long-term market each year. In contrast, in 2018, 88.7 million pounds U 3 O 8 equivalent were purchased on the spot market, and approximately 91 million pounds U 3 O 8 equivalent contracted in the long-term market. Considering contract volumes in the past year are only starting to pick up, as well as the increase in uncovered requirements, we expect that long-term contracting activity will continue to increase in the near future as utilities look to secure supply and move U 3 O 8 through the nuclear fuel cycle in order to fuel the world’s growing fleet of nuclear reactors.

 

The long-term price is published on a monthly basis and began the year at US$31.00 per pound U 3 O 8 , and increased to US$32.00 per pound U 3 O 8 by the end of 2018. Nuclear utilities procure their remaining uranium requirements through spot and near-term purchases from uranium producers, traders and other suppliers. Historically, spot prices are more volatile than long-term prices. The spot price began the year at US$23.75 per pound U 3 O 8 and although experiencing a dip mid-year, ended 2018 at US$28.50 per pound U 3 O 8 .

 

 

Competition

 

The uranium industry is small compared to other commodity industries, and other energy commodity industries in particular. Uranium demand is international in scope, but supply is characterized by a relatively small number of companies operating in only a few countries. Primary uranium production is concentrated amongst a limited number of producers and is also geographically concentrated with almost 76% of the world’s production in 2018 coming from only four countries: Kazakhstan, Canada, Australia and Namibia.

 

Competition is somewhat different amongst exploration & development companies focused on the discovery or development of a uranium deposit. Exploration for uranium is being carried out on various continents, but in recent years development activities by public companies have been generally concentrated in Canada, Africa and Australia. In Canada, exploration has focused on the Athabasca Basin region in northern Saskatchewan. Explorers have been drawn to this area by the high-grade uranium deposits that have produced some of the most successful uranium mines operating in the world today. Within the Athabasca Basin region, exploration is generally divided between activity that is occurring in the eastern portion of the Basin and the western portion of the Basin. The eastern Basin is a district that is defined by rich infrastructure associated with the existence of operating uranium mines and uranium processing facilities. Infrastructure includes access to the provincial power grid and a network of provincial all weather highways. By comparison, in the western Basin, there are no operating uranium mines or processing facilities and access to the provincial power grid is not currently available. Several uranium discoveries have been made in the Athabasca Basin region in recent years, and competition for capital can be intense.

 

 

 

MINERAL RESERVES AND MINERAL RESOURCES

 

Dale Verran, MSc, P.Geo, Pr.Sci.Nat., Denison's Vice President Exploration, who is a “Qualified Person” in accordance with the requirements of NI 43-101, is responsible for the mineral resource estimates for the Company’s properties and all disclosure of scientific or technical information concerning mineral resources in this AIF, except as otherwise provided herein.

 

Peter Longo, P. Eng, MBA, PMP, Denison's Vice-President, Project Development, who is a “Qualified Person” in accordance with the requirements of NI 43-101, is responsible for the mineral reserve estimates for the Company’s properties and all disclosure of scientific or technical information concerning mineral reserves in this AIF, except as otherwise provided herein.

 

Summary of Mineral Reserves and Mineral Resources

 

NI 43-101 requires mining companies to disclose mineral reserve and resource estimates using the subcategories of proven mineral reserves, probable mineral reserves, measured mineral resources, indicated mineral resources and inferred mineral resources.

 

The following tables show the Company's estimates of mineral reserves and mineral resources as at December 31, 2018. The estimates are reported in the applicable technical reports prepared in accordance with NI 43-101, adjusted for mining activity where applicable. The summary information below on Denison’s proven mineral reserve estimates was prepared from the year-end stockpile survey reported by Orano Canada, the operator of the McClean Lake joint venture.

 

For full details, reference should be made to the applicable technical reports for the properties.

 

See “Mineral Properties” for more information.

 

Proven Mineral Reserve Estimates (1,10)