Exhibit 99.1 

 

 

Denison Mines Corp.

 

 

2019 Annual Information Form

March 13, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource”, which are Canadian mining terms as defined in and required to be disclosed in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”), which references the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) – CIM Definition Standards on Mineral Resources and Mineral Reserves (“CIM Standards”), adopted by the CIM Council, as amended. However, these terms are not defined terms under Industry Guide 7 (“Industry Guide 7”) under the United States Securities Act of 1933, as amended, and, until recently, have not been permitted to be used in reports and registration statements filed with the U.S. Securities and Exchange Commission (the “SEC” or the “Commission”).

 

The terms “mineral reserve”, “proven mineral reserve” and “probable mineral reserve” are also Canadian mining terms for the purposes of NI 43-101 and CIM Standards. These definitions differ from the definitions in Industry Guide 7. Under Industry Guide 7, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time of the reserve determination. Under Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority. Denison has not prepared a feasibility study for the purposes of NI 43-101 or the requirements of the SEC in connection with its probable mineral reserves disclosure, and therefore such mineral reserve disclosure is not comparable to information from U.S. companies subject to the reporting and disclosure requirements of the SEC. Further, until recently, the SEC has not recognized the reporting of mineral deposits which do not meet the Industry Guide 7 definition of “reserve”.

 

The SEC adopted amendments to its disclosure rules to modernize the mineral property disclosure requirements for issuers whose securities are registered with the SEC under the Exchange Act. These amendments became effective February 25, 2019 (the “SEC Modernization Rules”) with compliance required for the first fiscal year beginning on or after January 1, 2021. The SEC Modernization Rules replace the historical disclosure requirements for mining registrants that were included in SEC Industry Guide 7, which will be rescinded from and after the required compliance date of the SEC Modernization Rules. As a result of the adoption of the SEC Modernization Rules, the SEC now recognizes estimates of “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources”. In addition, the SEC has amended its definitions of “proven mineral reserves” and “probable mineral reserves” to be “substantially similar” to the corresponding definitions under the CIM Standards, as required under NI 43-101. Accordingly, during the period leading up to the compliance date of the SEC Modernization Rules, information regarding mineral resources or mineral reserves contained or referenced in this Annual Report may not be comparable to similar information made public by United States companies.

 

United States investors are cautioned that there are differences in the definitions under the SEC Modernization Rules and the CIM Standards. Accordingly, there is no assurance any mineral reserves or mineral resources that the Company may report as “proven mineral reserves”, “probable mineral reserves”, “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources” under NI 43-101 would be the same had the Company prepared the reserve or resource estimates under the standards adopted under the SEC Modernization Rules.

 

United States investors are also cautioned that while the SEC will now recognize “indicated mineral resources” and “inferred mineral resources”, investors should not assume that any part or all of the mineralization in these categories will ever be converted into a higher category of mineral resources or into mineral reserves. Mineralization described using these terms has a greater amount of uncertainty as to their existence and feasibility than mineralization that has been characterized as reserves. Accordingly, investors are cautioned not to assume that any “indicated mineral resources” or “inferred mineral resources” that the Company reports are or will be economically or legally mineable. Further, “inferred mineral resources” have a greater amount of uncertainty as to their existence and as to whether they can be mined legally or economically. Therefore, United States investors are also cautioned not to assume that all or any part of the “inferred mineral resources” exist. In accordance with Canadian securities laws, estimates of “inferred mineral resources” cannot form the basis of feasibility or other economic studies, except in limited circumstances where permitted under NI 43-101.

 

Accordingly, information contained in this AIF and the documents incorporated by reference herein containing descriptions of the Company’s mineral deposits may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.

 

 

 

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, 2019, 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

 

 

 

 

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 (U3O8) and uranium hexafluoride (UF6).

 

 

Denison provides mine care & maintenance 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. See “Legal and Regulatory Proceedings” for more information on the Mongolia Transaction.

 

DEVELOPMENTS OVER THE LAST THREE YEARS

 

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 Amended and Restated Share Purchase Agreement between Denison and UI dated November 25, 2015 (the “GSJV Purchase Agreement”) would be extended from November 2016 to July 2017, provided that the outstanding amount would bear interest at a rate of 5% per annum, payable monthly in arrears. The contingent payments had become payable after 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 in September 2016. 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 with the Bank of Nova Scotia (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 Denison Environmental Services (now Denison’s Closed Mines Group) had entered into a new two-year services agreement with Rio Algom Limited (“Rio Algom”), which is a subsidiary of BHP Billiton Limited (“BHP”). Pursuant to the agreement, Denison was 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. See “Developments Over the Last Three Years – 2019…” for details of the agreement’s renewal.

 

 

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% U3O8 over 3.7 metres (drill hole WAT17-446A), 1.7% U3O8 over 7.5 metres (drill hole WAT17-449) and 1.5% U3O8 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% U3O8, 61.9 million pounds of U3O8 (1,643,000 tonnes at 1.71% U3O8) in indicated mineral resources, plus 1.9 million pounds of U3O8 (73,000 tonnes at 1.18% U3O8) 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 U3O8 above a cut-off grade of 0.2% U3O8 (834,000 tonnes at 2.3% U3O8). Together, Wheeler River is now host to 132.1 million pounds U3O8 (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 U3O8 (100% basis; above a cut-off grade of 0.1% U3O8), an increase of 13.5 million pounds of U3O8 from the prior estimate; and (b) indicated mineral resources increasing to 50.78 million pounds U3O8 (100% basis; above a cut-off grade of 0.1% U3O8), an increase of 2.08 million pounds U3O8 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% U3O8 over 5.5 metres (including 7.2% U3O8 over 1.0 metre) in drill hole WR-704, located 600 metres northeast of Gryphon; and 1.1% U3O8 over 3.0 metres (including 2.8% U3O8 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 U3O8 chemical assay results from the Company's winter 2018 diamond drilling program. The results were highlighted by the following intercepts: 4.5% U3O8 over 6.0 metres (including 5.8% U3O8 over 4.5 metres), and 0.57% U3O8 over 6.3 metres (including 1.9% U3O8 over 1.0 metre) in drill hole WAT18-452; and 0.62% U3O8 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% U3O8 over 1.0 metre (including 0.73% U3O8 over 0.5 metres) in drill hole WAT18-478 and 0.45% U3O8 over 0.5 metre as well as 0.31% U3O8 over 0.5 metre and 0.20% U3O8 over 0.5 metre in drill hole WAT18-479. The zone of mineralization was subsequently named the GB zone.

 

In September, Denison announced the results of the Pre-Feasibility Study (“PFS”) for the Wheeler River project. The PFS was 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 high-grade Phoenix deposit (“Phoenix”), with an estimated average operating cost of $4.33 (US$3.33) per pound U3O8. The PFS considers the potential economic merit of co-developing the Phoenix and Gryphon deposits. The ISR mining operation planned for Phoenix, would see 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 U3O8 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 Phoenix (from ~US$29/lb U3O8 to US$45/lb U3O8), and a fixed price for mine production from the Gryphon deposit (US$50/lb U3O8). 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 U3O8 (above a cut-off grade of 0.1% U3O8) based on 268,000 tonnes of mineralization at an average grade of 0.96% U3O8. 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% U3O8, 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 were used to fund 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.

 

2019…

 

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.

 

In March, the Company announced the execution of the new five-year management services agreement (the “MSA”) to provide management services to UPC. The MSA took effect on April 1, 2019, at the conclusion of the three-year term of the then current management services agreement between UPC and DMI. See “Manager of UPC”.

 

In May, the Company announced the discovery of unconformity-hosted uranium mineralization along the southern portion of the K West trend at the Company’s Wheeler River Project, including 0.08% eU3O8 over 1.3 metres in drill hole WR-756, accompanied by strong sulphide mineralization and other geological features commonly associated with unconformity-related uranium deposits. The Company also announced the completion of follow-up drilling at the GB Zone at Waterbury Lake, which intersected basement-hosted mineralization in multiple drill holes, including 0.15% U3O8 over 6.0 metres in drill hole WAT19-480, and 0.25% U3O8 over 2.0 metres and 0.22% U3O8 over 1.5 metres in drill hole WAT19-486.

 

In June, the Canadian Nuclear Safety Commission ("CNSC") and the Saskatchewan Ministry of Environment accepted the Provincial Technical Proposal and Federal Project Description (the "Project Description") submitted by Denison for the ISR uranium mine and processing plant proposed for the Wheeler River Project. This acceptance initiated the Environmental Assessment (“EA”) process for Wheeler River in accordance with the requirements of both the Canadian Environmental Assessment Act, 2012 and the Saskatchewan Environmental Assessment Act.

 

Also in June, the Company announced that it had executed a series of Memoranda of Understanding (the "MOUs"), in support of the Wheeler River Project, with certain Indigenous communities who assert that Wheeler River falls partially or entirely within their traditional territories and where traditional land use activities are currently practiced within the local and regional area surrounding the project. These non-binding MOUs formalize the signing parties’ intent to work together in the spirit of mutual respect and cooperation, in order to collectively identify practical means by which to avoid, mitigate, or otherwise address potential impacts of the project upon the exercise of Indigenous rights, Treaty rights, and other interests, as well as to facilitate sharing in the benefits that are expected to flow from the project.

 

 

In June, the Company announced its plans to undertake an initial ISR field test program within the Phoenix orebody at Wheeler River, using water to evaluate hydrologic conditions that can be used to assess the hydraulic connections and potential mining solution flow between a series of test wells. Initial test results from Test Area 1 at Phoenix were announced in August, which confirmed hydraulic connectivity between multiple test wells, providing significant preliminary indications of the suitability of Test Area 1 for the application of ISR mining. In September, the Company reported the initial results from Test Area 2 of Phoenix, which also confirmed hydraulic connectivity within a significant portion of the ore zone tested.

 

In July, Denison’s Closed Mines group entered into a new two-year services agreement with Rio Algom, a subsidiary of BHP. Under the terms of the agreement, the Closed Mines group is responsible for carrying out the management and operation of nine of Rio Algom’s decommissioned mine sites in Ontario and Quebec from July 1, 2019 to June 30, 2021, which services include 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, following the positive initial field test results at Phoenix, Denison advanced to the second stage of ISR field testing – the installation of a large-diameter commercial scale well ("CSW") in each of Test Area 1 and Test Area 2 of Phoenix, with each well designed to meet the technical and regulatory standards expected for a commercial ISR well at Phoenix.

 

In October, David Bronkhorst was appointed Vice President Operations with responsibility for overseeing and advancing the Company’s project evaluation programs for Wheeler River.

 

Also in October, the Company successfully installed two CSWs at Phoenix – marking the completion of the first CSWs designed for ISR mining in the Athabasca Basin. The completion of each CSW included the drilling of a large-diameter vertical borehole (~12 inches in diameter), to intersect the Phoenix ore body at a depth of approximately 400 metres below surface, and the installation of well materials designed to meet expected environmental and regulatory standards for eventual ISR mining. The Company also tested down-the-hole permeability enhancement techniques within the large diameter CSWs.

 

In December, Denison completed a private placement offering (the "2019 Offering") of Shares issued on a "flow-through" basis pursuant to the Income Tax Act (Canada). Denison issued 6,934,500 flow-through shares, at a price of $0.68 per share, for aggregate gross proceeds to Denison of approximately $4.7 million, which includes the exercise, in full, of the over-allotment option of 904,500 shares. The gross proceeds from the financing will be used to fund the Company’s Canadian exploration expenses through to the end of 2020.

 

Also in December, Denison reported the completion of a highly successful ISR field test program at Phoenix. The ISR field test program was designed to validate the permeability of Phoenix, and to collect an extensive database of hydrogeological data to further evaluate the ISR mining conditions present at Phoenix. This detailed data is expected to facilitate detailed mine planning as part of the completion of a future Feasibility Study (“FS”). The ISR field test program, as described above, successfully achieved each of its planned objectives.

 

 

Denison also announced the initiation of the next phase of ISR metallurgical laboratory testing for uranium recovery, which will utilize the mineralized drill core recovered through the installation of various test wells during the 2019 ISR field test program. The metallurgical laboratory test program builds upon the laboratory tests completed for the recovery of uranium as part of the project’s PFS and is expected to further increase confidence and reduce risk associated with the application of ISR. The results are expected to facilitate detailed mine and process plant planning as part of a future FS, and will provide key inputs for the EA process. Significant components of the metallurgical laboratory test program include core leach tests, column leach tests, bench-scale tests and metallurgical modelling.

 

And in December, Denison received a positive scoping decision, with a Record of Decision issued by the CNSC on the scope of the factors to be taken into account for the EA for the Wheeler River project, which indicate that the EA will follow the CNSC’s generic guidelines.

 

Recent Developments…

 

In January, the Company amended and extended its Credit Facility to January 31, 2021.

 

In January, Mr. Geun Park resigned from the Board. Mr. Jun Gon Kim joined the Board effective February 17, 2020, filling the vacancy created by Mr. Park’s resignation.

 

In February, Denison reported that initial data from the Phoenix Deposit core leach tests includes elemental uranium concentrations, after test startup, in the range of 13.5 grams per litre (‘g/L’) to 39.8 g/L, and an average of 29.8 g/L over a 20-day period of testing. This compares favourably to the previous metallurgical test work completed to assess the use of the ISR mining method at Phoenix, which supported the use of an assumed uranium concentration of 10 g/L in the PFS design for the ISR processing plant.

 

Also in February 2020, Denison reported that the results from the hydrogeological test work completed to-date have confirmed the ability to achieve bulk hydraulic conductivity values (a measure of permeability) consistent with the PFS. Extensive hydrogeological data sets were collected during the 2019 ISR field program, and are being incorporated into a hydrogeological model being developed for Phoenix. The completed hydrogeological model will allow for detailed planning for further ISR field testing with the intention that it will ultimately support the completion of a future FS.

 

 

 

THE URANIUM INDUSTRY

 

Much of 2019 was defined and influenced by policy matters in the United States (“US”), which have effectively created an overhang of uncertainty throughout the uranium market. In July 2019, the US Presidential Administration completed an investigation into a trade petition, launched under Section 232 of the Trade Expansion Act of 1962 (“Section 232”), and no trade actions were implemented. The US President indicated that the Administration’s investigation did not agree with findings of the US Department of Commerce (“DOC”) that uranium imports threaten to impair US national security. This announcement was expected to provide clarity to the uranium market; however, the Administration followed the decision with an order to review the nuclear fuel supply chain in the US. Accordingly, a Nuclear Fuel Working Group (“NFWG”) was commissioned to examine the current state of domestic nuclear fuel production to reinvigorate the entire nuclear fuel supply chain, consistent with United States national security and non-proliferation goals, and to make recommendations to further enable US domestic nuclear fuel production, if needed. A report from the NFWG was submitted to the White House in late 2019. To date, no official recommendations have been made public; however, the President’s recent Budget Request for Fiscal Year 2021 included $150 million in Department of Energy budget funding to establish a uranium reserve. The budget request also set out a schedule for a similar amount to be approved in the budget in each of the next ten years.

 

Another source of uranium market uncertainty stems from policies relating to Russian deliveries of nuclear fuel into the US. Since breaking from the Joint Comprehensive Plan of Action with Iran, commonly known as the Iran Nuclear Deal, the US Administration has put in place sanctions against Iran. The US has also issued waivers to certain of Iran’s trading partners, allowing entities from particular nations, including Russia, to continue working with Iran on civilian nuclear programs. On December 15, 2019, one of those waivers, related to Iran’s Fordow Fuel Enrichment Plant, was lifted, which raised concern among market participants regarding the possibility of other waivers being revoked. The waiver causing uranium market participants particular concern relates to the Bushehr nuclear power plant, which Russia is involved in building. If this waiver is removed, there is concern that Russia could face sanctions in the US, which would halt deliveries of Russian nuclear fuel to US utilities and represent a significant supply-side development.

 

Also relevant to Russian nuclear fuel supply into the US is the Agreement Suspending the Antidumping Investigation on Uranium from the Russian Federation (also known as the Russian Suspension Agreement, or the “RSA”), which established an annual quota limiting the delivery of nuclear fuel into the US from Russia. This agreement is set to expire at the end of 2020 and is currently under review. Before the agreement expires, a decision needs to be made by the US DOC as to whether there will be an extension and, if so, whether an extension will be under existing or revised terms. If the RSA expires, Russian-origin uranium products and services could be sold into the US without any restrictions – adding further uncertainty to the uranium market.

 

These market dynamics contributed to a soft uranium price throughout the year. In 2019, the spot uranium price traded within a narrow band, beginning the year at USD$28.50 per pound U3O8 and ending it down over 12% at USD$25.00 per pound U3O8. Lower prices near the end of the year were attributed to limited demand in the spot market. While spot uranium volumes did not match the historic high reached in 2018 (almost 89 million pounds U3O8), 2019 spot buying remained reasonably strong at 65 million pounds U3O8. Similar to 2018, however, despite seeing fairly robust spot market volumes, long-term utility contracting remained low in 2019.

 

 

Despite the impact of these policy matters, there are several indications that uranium supply and demand fundamentals continue to improve underneath the cloud of uncertainty that has dominated the market in 2019. This was underscored in the bi-annual Nuclear Fuel Report released by the World Nuclear Association (“WNA”) at its annual symposium in September 2019. The report evaluates nuclear fuel demand and supply scenarios for the period from 2019 to 2040, using reference, low and high cases. For the first time in several years, the WNA’s outlook for global uranium demand increased for all three scenarios, which is positive for the future outlook on demand and reflects industry consensus that the demand picture has improved significantly in recent years.

 

This has been supported by many positive news stories on the demand side, including increasing public recognition of the critical role nuclear energy has to play in combatting climate change. One of the most significant acknowledgments of this was made by the European Union (“EU”), with its leaders recently agreeing that nuclear energy must be included as part of the solution required to meet the EU’s goal of becoming carbon neutral by 2050. The EU’s ‘European Green Deal’ officially acknowledged the importance of nuclear energy in meeting the region’s comprehensive climate action goals.

 

●       In the US, there were a number of positive announcements through the course of 2019. In Ohio, a long-awaited energy bill was passed supporting the continued operation of the Davis-Besse and Perry nuclear power plants. Previous attempts to secure subsidies for these plants were unsuccessful, which had led most in the industry to believe the plants would be shut down by calendar year 2021. Recognizing the long-term viability of existing nuclear power plants, the Turkey Point nuclear units 3 and 4 received approval for an additional 20 years of operating life from the US Nuclear Regulatory Commission (‘NRC’). This additional extension will take the reactors to a total of 80 years of operating life, which is the longest license ever issued by the NRC. Turkey Point 3 and 4 are now licensed to operate to 2052 and 2053, respectively. In the US Midwest, the life of the Monticello nuclear plant was extended by another decade to 2040.

 

●       In Mexico, the country’s national nuclear utility, the Federal Electricity Commission, is considering building four new nuclear reactors, to add to its existing two units at Laguna Verde. The utility shared its plans to present a feasibility study to management and the government in 2020. The study will examine a project to build 1,400 megawatts (“MWe”) reactors, with an estimated cost of US$7 billion each.

 

●      In Canada, with the longer-term future of nuclear in mind, the provincial governments of New Brunswick, Ontario and Saskatchewan demonstrated support for future nuclear new builds. The leaders of these provinces announced that they had joined efforts to collaborate on advancing small modular reactor (“SMR”) technologies. The leaders see SMR’s as a practical solution to help curb carbon emissions, move away from coal-fired power generation, and create an opportunity for new economic growth in the provinces.

 

●      In India, the government continued to demonstrate its commitment to increase its use of nuclear energy. At a recent nuclear conference, the Chairman of India’s Atomic Energy Commission and Secretary of the Department of Atomic Energy reinforced the country’s aggressive pursuit of new nuclear power plants in order to improve the reliability of the country’s power supply. The government’s Union Minister for Atomic Energy also confirmed that there are currently nine reactors under construction in India and indicated that the government had given administrative and financial support to build an additional 12 new reactors with a capacity of 9,000 MWe.

 

 

●       In the United Kingdom, a leaked government analysis stressed the need to build a fleet of new nuclear or carbon capture power plants in order to meet climate targets. The UK government believes that up to 40,000 MWe of low carbon power stations could be needed in 2050 to reduce Britain’s emissions to ‘net zero’ and currently there is just one nuclear power plant under construction – EDF Energy’s 3,200 MWe Hinkley Point C in England.

 

●       In South Korea, KHNP announced the successful start-up of its Shin Kori 4 nuclear power plant. Initial criticality was reached and the unit was connected to the grid in April 2019. The Shin Kori 4 unit is a 1,400 MWe APR-1400, which is the same design as those currently under construction in the United Arab Emirates at the Barakah nuclear power plant, which is expected to begin supplying electricity early in 2020.

 

●      In Taiwan, sentiment has shifted away from a previous policy to eliminate nuclear power from the Taiwan energy mix. In May 2019, the country passed an amendment to eliminate the ‘Nuclear Free Homeland 2025’ mandate that was imposed by the anti-nuclear Democratic Progressive Party in early 2017. This amendment has opened the door for future pro-nuclear decisions to be made regarding extending the lives of existing nuclear power plants in the country, as well as the possible completion of the Lungmen nuclear power plant, where construction was halted in 2014.

 

●       In Germany, positive sentiment towards nuclear also appears to be growing. In 2019 the government received escalating calls from several of the country’s most prominent businesses to delay the country’s plans to implement a full-scale nuclear phase-out by the end of 2022. Some of these businesses emphasized the importance of nuclear power, highlighting that Germany needs to run its nuclear power plants longer if climate protection really matters to the country.

 

Though much of the nuclear news out of Asia was positive, news emerged from Japan early in 2019 that the requirements set out by the country’s Nuclear Regulation Authority (“NRA”) for utilities to complete anti-terrorism protection work on each reactor’s emergency facilities were unlikely to be met on schedule. All three utilities currently operating units in Japan have said they require between one and two and a half additional years to complete the required work. The NRA has indicated, however, that it will not extend the deadline. Due to this, it was recently announced that reactors 3 and 4 at the Takahama nuclear power plant will stop operating by the summer of 2020, with work aimed at meeting the NRA commitment about one year behind schedule

 

Overall, uranium demand has grown in recent years, having now exceeded the annual levels that existed prior to Japan shutting all of its nuclear units following the 2011 Fukushima Daichii nuclear incident.

 

The supply side of the uranium market has also been progressing in the right direction. This has resulted in a growing gap between annual utility requirements and primary production, which continues to be filled by drawing down on inventories and other secondary sources of supply. Some of these positive supply indicators include:

 

●       The world’s largest and lowest cost uranium producer, National Atomic Company Kazatomprom, announced in August 2019 that it was reaffirming its commitment to reach and maintain a more commercial balance between supply and demand by extending its 20% production curtailment through to 2021.

 

 

●       Other important supply side changes included Rio Tinto finalizing the sale of its Rössing operation in Namibia to China’s China National Uranium Corporation. Taken together with the slow wind down of Rio Tinto’s Ranger operation in Australia, we expect to see Rio Tinto, one of the world’s largest mining companies and a long-term major producer in the uranium industry, completely exit the market.

 

●       In Niger, it was announced that the Cominak mine will cease operation in March 2021, due to depletion of ore. The operation has been a source of supply to the industry since 1978.

 

With a significant shortfall having developed between annual nuclear utility requirements and primary production, inventories and other secondary sources of supply are being drawn down to meet utility needs. This process of inventory drawdowns suggests that we are nearing an inflection point - where end-users of uranium begin to question where long-term uranium supplies will come from and how secure that supply will be over the long lives of their nuclear reactors. There is already a growing sense that market participants are beginning to look beyond near-term market conditions in an attempt to understand what the supply environment will look like in the mid-2020s and beyond. With a renewed focus on nuclear energy as a critical element in battling climate change, it is expected that global utilities will be looking to source future supply from operations that are not only low-cost, reliable, and situated in stable jurisdictions (the typical criteria for a good supplier), but also those which are flexible and environmentally responsible.

 

Uranium Demand

 

As of February 2020, the WNA reports that there are 442 nuclear reactors operable in 30 countries. These reactors can generate more than 392 gigawatts of electricity (“GWe”), which equates to approximately 10% of the world's electrical requirements, with twelve countries producing 25% or more of their country’s electricity from nuclear. As well, there are currently 54 nuclear reactors under construction in 18 countries with the principal drivers of this expansion being China (12 reactors under construction), Russia (4), India (7), South Korea (4), UAE (4) and the United States (4). In addition, there are another 109 reactors currently planned around the world.

 

According to UxC’s Q1 2020 Uranium Market Outlook (“Q1 2020 Outlook”), global nuclear power capacities are projected to increase to 449 reactors in 32 countries in 2020, generating approximately 399 GWe as new plants come on line. By 2035, that is expected to be 470 reactors, generating approximately 459 GWe in 36 countries. In the Q1 2020 Outlook, UxC estimates base case demand will be 182 million pounds U3O8 in 2020. UxC also estimates that annual uranium demand could grow to 226 million pounds U3O8 under their base case, by 2035 and to almost 304 million pounds U3O8 in their high case in the same period.

 

Primary Uranium Supply

 

UxC’s Q1 2020 Outlook estimates that world uranium production for 2020 is expected to be approximately 142 million pounds U3O8, a slight increase over 2019’s production of 140 million pounds U3O8.

 

In Canada, Cigar Lake production is expected to remain constant at 18 million pounds U3O8 per year through 2028, according to the Q1 2020 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 13% of the world’s expected 2020 production, while Kazakhstan is expected to continue to be the world’s largest producer of uranium in 2020 by a large margin, representing almost 42% of production.

 

 

UxC estimates in its Q1 2020 Outlook that existing mine production, plus new planned and potential mine production under its base case, will reach a peak of 159 million pounds U3O8 by 2028, before declining back down to 97 million pounds U3O8 by 2035. At its projected height in 2028, production levels are anticipated to include the resumption of mining at McArthur River, with UxC anticipating the mine will ramp up from 4 million pounds U3O8 in 2027 to 18 million pounds U3O8 by 2028. While Kazakhstan is seen to maintain relatively consistent supply in future years, it does start to drop off significantly closer to 2035. 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 2020 Outlook, primary mine production in 2020 is estimated to supply approximately 78% 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 2020 Outlook forecasts that 49 million pounds U3O8 will enter the market from secondary supplies in 2020, leaving a surplus of 9 million pounds U3O8, if the base case demand scenario for 2020 is met.

 

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 2020 levels of 49 million pounds U3O8 to roughly 17 million pounds U3O8 per year by 2035.

 

Uranium Prices

 

Imbalances between supply and demand of uranium significantly influence uranium spot prices. According to the Q1 2020 Outlook, it is projected that primary production and secondary supply will be sufficient to meet base case demand for U3O8 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 beginning 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 2020 Outlook, that uncovered demand for 2020 was just under 7 million pounds U3O8. Of course, this uncovered demand increases over time and is projected by UxC to increase significantly over the next decade. While almost 70 million pounds U3O8 are projected to remain uncovered in 2025, this number grows to just over 120 million pounds U3O8 in 2030. In 2035, this number grows to 168 million pounds U3O8 of uncovered demand, or roughly 74% of total expected base case demand in that year. In total just over 1.5 billion pounds U3O8 remain uncovered between 2020 and 2035.

 

At 168 million pounds U3O8, uncovered demand in 2035 is approximately 71 million pounds U3O8 more than total production expected from existing uranium mines for the same year, which UxC estimates at 97 million pounds U3O8. Uncovered demand in 2035 also exceeds the combined supply available from primary production and secondary sources by approximately 54 million pounds U3O8. 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 U3O8 equivalent were purchased on the spot market per year and roughly 200 million pounds U3O8 equivalent were contracted in the long-term market each year. In contrast, in 2019, 64.3 million pounds U3O8 equivalent were purchased on the spot market, and 95.8 million pounds U3O8 equivalent contracted in the long-term market. Considering contract volumes over the past year remain well below annual requirements, and uncovered requirements are increasing out in time, we expect that long-term contracting activity will continue to increase in the near future as utilities look to secure future supply in order to fuel the world’s growing fleet of nuclear reactors.

 

The long-term price is published on a monthly basis and stayed stagnant the whole year at US$32.00 per pound U3O8. 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$28.90 per pound U3O8, dipping by the end of the year to US$25.00 per pound U3O8.

 

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 more than 77% of the world’s production in 2020 projected to be 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

 

Each of Dale Verran, MSc, P.Geo, Pr.Sci.Nat., Denison's Vice President Exploration, and David Bronkhorst, P.Eng, Denison's Vice-President Operations, is a “Qualified Person” in accordance with the requirements of NI 43-101, and has reviewed and approved all disclosure of scientific or technical information in this AIF.

 

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, 2019. 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)