Exhibit 99.1
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
(Unaudited - Expressed in
thousands of Canadian dollars (“CAD”) except for share
amounts)
|
|
|
|
|
At March
31
2020
|
|
At December
31
2019
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash and cash
equivalents (note 4)
|
|
|
$
|
4,902
|
$
|
8,190
|
Trade and other
receivables (note 5)
|
|
|
|
3,552
|
|
4,023
|
Inventories (note
6)
|
|
|
|
2,594
|
|
3,352
|
Investments (note
7)
|
|
|
|
9,097
|
|
-
|
Prepaid expenses
and other
|
|
|
|
1,052
|
|
978
|
|
|
|
|
21,197
|
|
16,543
|
Non-Current
|
|
|
|
|
|
|
Inventories-ore
in stockpiles (note 6)
|
|
|
|
2,098
|
|
2,098
|
Investments (note
7)
|
|
|
|
57
|
|
12,104
|
Restricted cash
and investments (note 8)
|
|
|
|
12,603
|
|
11,994
|
Property, plant
and equipment (note 9)
|
|
|
|
256,349
|
|
257,259
|
Total
assets
|
|
|
$
|
292,304
|
$
|
299,998
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities
|
|
|
$
|
8,416
|
$
|
7,930
|
Current portion
of long-term liabilities:
|
|
|
|
|
|
|
Deferred revenue
(note 10)
|
|
|
|
3,410
|
|
4,580
|
Post-employment
benefits (note 11)
|
|
|
|
150
|
|
150
|
Reclamation
obligations (note 12)
|
|
|
|
910
|
|
914
|
Other liabilities
(note 13)
|
|
|
|
241
|
|
1,372
|
|
|
|
|
13,127
|
|
14,946
|
Non-Current
|
|
|
|
|
|
|
Deferred revenue
(note 10)
|
|
|
|
32,730
|
|
31,741
|
Post-employment
benefits (note 11)
|
|
|
|
2,098
|
|
2,108
|
Reclamation
obligations (note 12)
|
|
|
|
31,702
|
|
31,598
|
Other liabilities
(note 13)
|
|
|
|
494
|
|
532
|
Deferred income
tax liability
|
|
|
|
8,195
|
|
8,924
|
Total
liabilities
|
|
|
|
88,346
|
|
89,849
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
Share capital
(note 14)
|
|
|
|
1,335,498
|
|
1,335,467
|
Share purchase
warrants (note 15)
|
|
|
|
-
|
|
435
|
Contributed
surplus (note 16)
|
|
|
|
66,307
|
|
65,417
|
Deficit
|
|
|
|
(1,198,967)
|
|
(1,192,304)
|
Accumulated other
comprehensive income (note 17)
|
|
|
|
1,120
|
|
1,134
|
Total
equity
|
|
|
|
203,958
|
|
210,149
|
Total
liabilities and equity
|
|
|
$
|
292,304
|
$
|
299,998
|
|
|
|
|
|
|
|
Issued and
outstanding common shares (note 14)
|
|
|
597,229,817
|
|
597,192,153
|
Contingencies
(note 23)
Subsequent
events (note 24)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are integral to the condensed interim consolidated financial
statements
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
|
(Unaudited -
Expressed in thousands of CAD dollars except for share and per
share amounts)
|
|
|
|
|
Three
Months Ended
March
31
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES (note 19)
|
|
|
|
|
$
|
4,660
|
$
|
3,976
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
Operating
expenses (note 18, 19)
|
|
|
|
|
|
(3,320)
|
|
(3,262)
|
Exploration and
evaluation (note 19)
|
|
|
|
|
|
(3,191)
|
|
(4,229)
|
General and
administrative (note 19)
|
|
|
|
|
|
(2,188)
|
|
(2,366)
|
Other income
(expense) (note 18)
|
|
|
|
|
|
(3,192)
|
|
(353)
|
|
|
|
|
|
|
(11,891)
|
|
(10,210)
|
Loss
before finance charges, equity accounting
|
|
|
|
|
|
(7,231)
|
|
(6,234)
|
Finance expense
(note 18)
|
|
|
|
|
|
(1,063)
|
|
(1,010)
|
Equity share of
loss of associate
|
|
|
|
|
|
-
|
|
(277)
|
Loss before
taxes
|
|
|
|
|
|
(8,294)
|
|
(7,521)
|
Income tax
recovery (note 21)
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
1,631
|
|
2,186
|
Net loss for the
period
|
|
|
|
|
$
|
(6,663)
|
$
|
(5,335)
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss) (note 17):
|
|
|
|
|
|
|
|
|
Items that may be
reclassified to income (loss):
|
|
|
|
|
|
|
|
|
Foreign currency
translation change
|
|
|
|
|
|
(14)
|
|
3
|
Comprehensive
loss for the period
|
|
|
|
|
$
|
(6,677)
|
$
|
(5,332)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
net loss per share:
|
|
|
|
|
|
|
|
|
All
operations
|
|
|
|
|
$
|
(0.01)
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of shares outstanding (in thousands):
|
|
|
|
|
Basic and
diluted
|
|
|
|
|
|
597,198
|
|
589,129
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are integral to the condensed interim consolidated financial
statements
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY
|
(Unaudited -
Expressed in thousands of CAD dollars)
|
|
|
|
|
Three
Months Ended
March
31
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital (note 14)
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
$
|
1,335,467
|
$
|
1,331,214
|
Share issue
costs
|
|
|
|
|
|
3
|
|
-
|
Share units
exercised-fair value adjustment
|
|
|
|
|
|
28
|
|
-
|
Balance-end of
period
|
|
|
|
|
|
1,335,498
|
|
1,331,214
|
|
|
|
|
|
|
|
|
|
Share purchase warrants (note 15)
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
435
|
|
435
|
Warrants
expired
|
|
|
|
|
|
(435)
|
|
-
|
Balance-end of
period
|
|
|
|
|
|
-
|
|
435
|
|
|
|
|
|
|
|
|
|
Contributed surplus
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
65,417
|
|
63,634
|
Share-based
compensation expense (note 16)
|
|
|
|
|
|
483
|
|
603
|
Share units
exercised-fair value adjustment
|
|
|
|
|
|
(28)
|
|
-
|
Warrants
expired
|
|
|
|
|
|
435
|
|
-
|
Balance-end of
period
|
|
|
|
|
|
66,307
|
|
64,237
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
(1,192,304)
|
|
(1,174,163)
|
Net
loss
|
|
|
|
|
|
(6,663)
|
|
(5,335)
|
Balance-end of
period
|
|
|
|
|
|
(1,198,967)
|
|
(1,179,498)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (note 17)
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
1,134
|
|
1,127
|
Foreign currency
translation
|
|
|
|
|
|
(14)
|
|
3
|
Balance-end of
period
|
|
|
|
|
|
1,120
|
|
1,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
210,149
|
|
222,247
|
Balance-end of
period
|
|
|
|
|
$
|
203,958
|
$
|
217,518
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are integral to the condensed interim consolidated financial
statements
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW
|
(Unaudited -
Expressed in thousands of CAD dollars)
|
|
|
|
|
Three
Months Ended
March
31
|
CASH PROVIDED BY (USED IN):
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss for the
period
|
|
|
|
|
$
|
(6,663)
|
$
|
(5,335)
|
Items not
affecting cash and cash equivalents:
|
|
|
|
|
|
|
|
|
Depletion,
depreciation, amortization and accretion
|
|
|
|
|
|
2,209
|
|
2,236
|
Share-based
compensation (note 16)
|
|
|
|
|
|
483
|
|
603
|
Recognition
of deferred revenue (note 10)
|
|
|
|
|
|
(963)
|
|
(1,263)
|
Gains on
property, plant and equipment disposals (note 18)
|
|
|
|
(2)
|
|
-
|
Losses on
fair value remeasurement of investments (note 18)
|
|
|
|
2,950
|
|
238
|
Equity loss
of associate
|
|
|
|
-
|
|
275
|
Dilution loss
(gain) of associate
|
|
|
|
-
|
|
2
|
Deferred income
tax recovery
|
|
|
|
|
|
(1,631)
|
|
(2,186)
|
Post-employment
benefits (note 11)
|
|
|
|
|
|
(27)
|
|
(39)
|
Reclamation
obligations (note 12)
|
|
|
|
|
|
(238)
|
|
(181)
|
Change in
non-cash working capital items (note 18)
|
|
|
|
|
|
1,503
|
|
1,971
|
Net
cash used in operating activities
|
|
|
|
|
|
(2,379)
|
|
(3,679)
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchase of
investments
|
|
|
|
|
|
-
|
|
(115)
|
Expenditures on
property, plant and equipment (note 9)
|
|
|
|
(22)
|
|
(21)
|
Proceeds
on sale of property, plant and equipment
|
|
|
|
|
|
2
|
|
-
|
Increase
in restricted cash and investments
|
|
|
|
(609)
|
|
(297)
|
Net
cash provided by (used in) investing activities
|
|
|
|
|
|
(629)
|
|
(433)
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Repayment
of debt obligations
|
|
|
|
|
|
(283)
|
|
(68)
|
Share
issue costs
|
|
|
|
|
|
3
|
|
-
|
Net
cash used in financing activities
|
|
|
|
|
|
(280)
|
|
(68)
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
|
|
|
|
|
(3,288)
|
|
(4,180)
|
Cash
and cash equivalents, beginning of period
|
|
|
|
|
|
8,190
|
|
23,207
|
Cash
and cash equivalents, end of period
|
|
|
|
|
$
|
4,902
|
$
|
19,027
|
|
The accompanying
notes are integral to the condensed interim consolidated financial
statements
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020
|
|
(Unaudited -
Expressed in CAD dollars except for shares and per share
amounts)
|
|
Denison Mines
Corp. (“DMC”) and its subsidiary companies and joint
arrangements (collectively, “Denison” or the
“Company”) are engaged in uranium mining related
activities, which can include acquisition, exploration and
development of uranium bearing properties, extraction, processing
and selling of uranium.
The Company has a
90.0% interest in the Wheeler River Joint Venture
(“WRJV”), a 66.57% interest in the Waterbury Lake
Limited Partnership (“WLULP”), a 22.5% interest in the
McClean Lake Joint Venture (“MLJV”) (which includes the
McClean Lake mill) and a 25.17% interest in the Midwest Joint
Venture (“MWJV”), each of which are located in the
eastern portion of the Athabasca Basin region in northern
Saskatchewan, Canada. The McClean Lake mill provides toll milling
services to the Cigar Lake Joint Venture (“CLJV”) under
the terms of a toll milling agreement between the parties (see note
10). In addition, the Company has varying ownership interests in a
number of other development and exploration projects located in
Canada.
The Company
provides mine decommissioning and other services (collectively
“environmental services”) to third parties through its
Denison Closed Mines Group and is also the manager of Uranium
Participation Corporation (“UPC”), a publicly-listed
investment holding company formed to invest substantially all of
its assets in uranium oxide concentrates (“U3O8”) and
uranium hexafluoride (“UF6”). The
Company has no ownership interest in UPC but receives fees for the
various management services it provides to UPC.
DMC is
incorporated under the Business Corporations Act (Ontario) and
domiciled in Canada. The address of its registered head office is
40 University Avenue, Suite 1100, Toronto, Ontario, Canada, M5J
1T1.
Risk and
Uncertainty
The outbreak of
the novel coronavirus (“COVID-19”) has disrupted, and
is expected to continue to disrupt, the Company’s previously
disclosed business and operational plans for fiscal 2020. The
length or severity of these disruptions are unknown at this point
in time. The significant potential social and economic disruptions
that have emerged as a result of the COVID-19 pandemic include (i)
restrictions that governments impose to address the COVID-19
outbreak, (ii) restrictions that the Company and its contractors
and subcontractors impose to ensure the safety of employees and
others, (iii) shortages and / or unexpected sickness of employees,
(iv) unavailability of contractors and subcontractors, (v)
interruption of supplies from third parties upon which the Company
relies, and (vi) unusually high levels of volatility in capital
markets.
Disruptions of
this nature have necessitated a change in the Company’s
business plans for 2020 and they may have a material adverse effect
on the Company’s business, financial condition and results of
operations. Such adverse effects could be rapid and unexpected.
Management is closely monitoring the situation and is actively
adapting work plans to mitigate adverse effects where
possible.
Liquidity
There are
uncertainties related to the timing and use of the Company’s
cash resources. Due to the stage of various of its mineral property
projects, the Company does not currently generate sufficient
operating cash flow to fund obligations as they become due. As
such, these obligations require that the Corporation generate
additional liquidity through the divestiture of investments or
through the issuance of debt or equity. Based on the net proceeds
received from the Company’s USD$5,750,000 financing completed
in the subsequent events period, and the Company’s current
cash flow forecast, management anticipates that it has sufficient
cash resources on hand to fund greater than the next 12 months of
planned operations but that it may need to sell certain of its
investments to provide additional liquidity beyond that point. The
Company may experience difficulty in obtaining satisfactory
financial terms for subsequent debt or equity issuances or it may
have difficulty in liquidating its investments due to the
concentration of its investment portfolio or market conditions.
Failure to obtain adequate financing on satisfactory terms may have
a material adverse effect to the Company’s results of
operations or its financial condition. The Company has considered
the above factors, in addition to its ability to further curtail
operating expenditures if necessary, in assessing and concluding on
its ability to continue as a going concern.
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
2.
STATEMENT
OF COMPLIANCE
These condensed
interim consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting
Standards Board (“IASB”) applicable to the preparation
of interim financial statements, including IAS 34, Interim
Financial Reporting. The condensed interim consolidated financial
statements should be read in conjunction with the audited annual
consolidated financial statements for the year ended December 31,
2019. The Company’s presentation currency is Canadian
dollars.
These financial
statements were approved by the board of directors for issue on May
6, 2020.
The significant
accounting policies followed in these condensed interim
consolidated financial statements are consistent with those applied
in the Company’s audited annual consolidated financial
statements for the year ended December 31, 2019.
4.
CASH AND
CASH EQUIVALENTS
The cash and cash
equivalent balance consists of:
|
|
|
|
At March
31
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Cash
|
|
|
$
|
2,010
|
$
|
1,583
|
Cash in MLJV and
MWJV
|
|
|
|
1,071
|
|
1,397
|
Cash
equivalents
|
|
|
|
1,821
|
|
5,210
|
|
|
|
$
|
4,902
|
$
|
8,190
|
5.
TRADE AND
OTHER RECEIVABLES
The trade and
other receivables balance consists of:
|
|
|
|
At March
31
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
$
|
3,240
|
$
|
2,608
|
Receivables in
MLJV and MWJV
|
|
|
|
252
|
|
1,125
|
Sales tax
receivables
|
|
|
|
18
|
|
92
|
Sundry
receivables
|
|
|
|
42
|
|
198
|
|
|
|
$
|
3,552
|
$
|
4,023
|
The inventories
balance consists of:
|
|
|
|
At March
31
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Uranium
concentrates
|
|
|
$
|
-
|
$
|
526
|
Inventory of ore
in stockpiles
|
|
|
|
2,098
|
|
2,098
|
Mine and mill
supplies in MLJV
|
|
|
|
2,594
|
|
2,826
|
|
|
|
$
|
4,692
|
$
|
5,450
|
|
|
|
|
|
|
|
Inventories-by
balance sheet presentation:
|
|
|
|
|
|
|
Current
|
|
|
$
|
2,594
|
$
|
3,352
|
Long-term-ore in
stockpiles
|
|
|
|
2,098
|
|
2,098
|
|
|
|
$
|
4,692
|
$
|
5,450
|
During the three
months ended March 31, 2020, the Company sold all of its uranium
concentrate inventory.
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
The investments
balance consists of:
|
|
|
|
At March
31
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
Equity
instruments
|
|
|
$
|
9,154
|
$
|
12,104
|
|
|
|
$
|
9,154
|
$
|
12,104
|
|
|
|
|
|
|
|
Investments-by
balance sheet presentation:
|
|
|
|
|
|
|
Current
|
|
|
$
|
9,097
|
$
|
-
|
Long-term
|
|
|
|
57
|
|
12,104
|
|
|
|
$
|
9,154
|
$
|
12,104
|
The investments
continuity summary is as follows:
(in thousands of
CAD dollars)
|
|
|
|
|
|
Investments
|
|
|
|
|
|
|
|
Balance -
December 31, 2019
|
|
|
|
|
$
|
12,104
|
Fair value loss
to profit and loss
|
|
|
|
|
|
(2,950)
|
Balance - March
31, 2020
|
|
|
|
|
$
|
9,154
|
8.
RESTRICTED
CASH AND INVESTMENTS
The restricted
cash and investments balance consists of:
|
|
|
|
At March
31
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
|
3,468
|
$
|
2,859
|
Investments
|
|
|
|
9,135
|
|
9,135
|
|
|
|
$
|
12,603
|
$
|
11,994
|
Restricted cash
and investments-by item:
|
|
|
|
|
|
|
Elliot Lake
reclamation trust fund
|
|
|
$
|
3,468
|
$
|
2,859
|
Letters of credit
facility pledged assets
|
|
|
|
9,000
|
|
9,000
|
Letters of credit
additional collateral
|
|
|
|
135
|
|
135
|
|
|
|
$
|
12,603
|
$
|
11,994
|
At March 31,
2020, investments consist of guaranteed investment certificates
with maturities of more than 90 days.
Elliot
Lake Reclamation Trust Fund
During the three
months ended March 31, 2020, the Company deposited an additional
$803,000 into the Elliot Lake Reclamation Trust Fund and withdrew
$209,000.
Letters of
Credit Facility Pledged Assets
At March 31,
2020, the Company had on deposit $9,000,000 with the Bank of Nova
Scotia (“BNS”) as pledged restricted cash and
investments pursuant to its obligations under an amended and
extended letters of credit facility (see notes 12 and
13).
Letters of
Credit Additional Collateral
At March 31,
2020, the Company had on deposit an additional $135,000 of cash
collateral with BNS in respect of the portion of its issued
reclamation letters of credit in excess of the collateral available
under its letters of credit facility (see notes 12 and
13).
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
9.
PROPERTY,
PLANT AND EQUIPMENT
The property,
plant and equipment (“PP&E”) continuity summary is
as follows:
|
|
Plant
and Equipment
|
|
Mineral
|
|
Total
|
(in thousands of
CAD dollars)
|
|
Owned
|
|
Right-of-Use
|
|
Properties
|
|
PP&E
|
|
|
|
|
|
|
|
|
|
Cost:
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2019
|
$
|
104,587
|
$
|
906
|
$
|
179,481
|
$
|
284,974
|
Additions
|
|
15
|
|
-
|
|
7
|
|
22
|
Disposals
|
|
(60)
|
|
-
|
|
-
|
|
(60)
|
Balance
– March 31, 2020
|
$
|
104,542
|
$
|
906
|
$
|
179,488
|
$
|
284,936
|
|
|
|
|
|
|
|
|
|
Accumulated
amortization, depreciation:
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2019
|
$
|
(27,518)
|
$
|
(197)
|
$
|
-
|
$
|
(27,715)
|
Amortization
|
|
(60)
|
|
-
|
|
-
|
|
(60)
|
Depreciation
|
|
(822)
|
|
(50)
|
|
-
|
|
(872)
|
Disposals
|
|
60
|
|
-
|
|
-
|
|
60
|
Balance
– March 31, 2020
|
$
|
(28,340)
|
$
|
(247)
|
$
|
-
|
$
|
(28,587)
|
|
|
|
|
|
|
|
|
|
Carrying
value:
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2019
|
$
|
77,069
|
$
|
709
|
$
|
179,481
|
$
|
257,259
|
Balance –
March 31, 2020
|
$
|
76,202
|
$
|
659
|
$
|
179,488
|
$
|
256,349
|
Plant and
Equipment – Owned
The Company has a
22.5% interest in the McClean Lake mill through its ownership
interest in the MLJV. The carrying value of the mill, comprised of
various infrastructure, building and machinery assets, represents
$68,303,000, or 89.6%, of the March 2020 total carrying value
amount.
Plant and
Equipment – Right-of-Use
The Company has
included the cost of various right-of-use (“ROU”)
assets within its PP&E carrying value amount. These assets
consist of building, vehicle and office equipment leases. The
majority of the value is attributable to the building lease assets
which represent the Company’s office and / or warehousing
space located in Toronto and Saskatoon.
Mineral
Properties
As at March 31,
2020, the Company has various interests in development, evaluation
and exploration projects located in Canada, primarily in
Saskatchewan, which are either held directly or through option or
various contractual agreements. The properties with significant
carrying values, being Wheeler River, Waterbury Lake, Midwest, Mann
Lake, Wolly, Johnston Lake and McClean Lake, represent
$162,390,000, or 90.5%, of the March 2020 total mineral property
carrying amount. Changes and / or updates in the current period as
compared to the December 31, 2019 year-end are disclosed
below.
Hook
Carter
In November 2016,
Denison completed the purchase of an 80% interest in the
Hook-Carter property, located in the southwestern portion of the
Athabasca Basin region in northern Saskatchewan, from ALX Uranium
Corp (“ALX”), with ALX retaining a 20%
interest.
Under terms in
the agreement, Denison agreed to fund ALX’s share of the
first $12,000,000 in expenditures on the property. As at March 31,
2020, the Company has spent $6,714,000 towards ALX’s carried
interest on the project since its acquisition in November 2016
(December 31, 2019: $6,712,000).
Moon Lake
South
In January 2016,
the Company entered into an option agreement with CanAlaska Uranium
Ltd (“CanAlaska”) to earn an interest in
CanAlaska’s Moon Lake South project, located in the eastern
portion of the Athabasca Basin in Saskatchewan. Under the terms of
the option, Denison can earn an initial 51% interest in the project
by spending $200,000 by December 31, 2017 and it can increase
its interest to 75% by spending an additional $500,000 by December
31, 2020.
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
As at March 31,
2020, the Company has spent the required $700,000 under the option
and has earned a 75% interest in the project.
10. DEFERRED
REVENUE
The deferred
revenue balance consists of:
|
|
|
|
At March
31
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Deferred revenue
– pre-sold toll milling:
|
|
|
|
|
|
|
CLJV toll milling
– APG
|
|
|
$
|
36,140
|
$
|
36,321
|
|
|
|
$
|
36,140
|
$
|
36,321
|
|
|
|
|
|
|
|
Deferred
revenue-by balance sheet presentation:
|
|
|
|
|
|
|
Current
|
|
|
$
|
3,410
|
$
|
4,580
|
Non-current
|
|
|
|
32,730
|
|
31,741
|
|
|
|
$
|
36,140
|
$
|
36,321
|
The deferred
revenue liability continuity summary is as follows:
(in thousands of
CAD dollars)
|
|
|
|
|
|
Deferred
Revenue
|
|
|
|
|
|
|
|
Balance -
December 31, 2019
|
|
|
|
|
$
|
36,321
|
Accretion
|
|
|
|
|
|
782
|
Revenue
recognized during the period (note 19)
|
|
|
|
|
|
(963)
|
Balance - March
31, 2020
|
|
|
|
|
$
|
36,140
|
Arrangement
with Anglo Pacific Group (“APG”) PLC
In February 2017,
Denison closed an arrangement with APG under which Denison received
an upfront payment in exchange for its right to receive specified
future toll milling cash receipts from the MLJV under the current
toll milling agreement with the CLJV from July 1, 2016 onwards. The
APG Arrangement represents a contractual obligation of Denison to
pay onward to APG any cash proceeds of future toll milling revenue
earned by the Company related to the processing of specified Cigar
Lake ore through the McClean Lake mill.
In the three
months ended March 31, 2020, the Company has recognized $963,000 of
toll milling revenue from the draw-down of deferred revenue (March
31, 2019: $1,263,000), based on Cigar Lake toll milling production
of 4,192,000 pounds U308 on a 100% basis
(March 31, 2019: 4,863,000 pounds U308). The drawdown
for the three months includes a retroactive $96,000 decrease in
revenue (March 31, 2019: retroactive $26,000 increase in revenue)
resulting from changes in estimates to the toll milling drawdown
rate in the first quarter of 2020.
At present,
production at the Cigar Lake mine and the McClean Lake mill has
been suspended for an indefinite period of time in response to the
COVID-19 pandemic and the timing of a restart is uncertain. The
current portion of the deferred revenue liability reflects an
assumption of a three month production shut-down. This assumption
will be reassessed in the second quarter as more information
becomes available.
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
11. POST-EMPLOYMENT
BENEFITS
The
post-employment benefits balance consists of:
|
|
|
|
At March
31
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Accrued benefit
obligation
|
|
|
$
|
2,248
|
$
|
2,258
|
|
|
|
$
|
2,248
|
$
|
2,258
|
|
|
|
|
|
|
|
Post-employment
benefits-by balance sheet presentation:
|
|
|
|
|
Current
|
|
|
$
|
150
|
$
|
150
|
Non-current
|
|
|
|
2,098
|
|
2,108
|
|
|
|
$
|
2,248
|
$
|
2,258
|
The
post-employment benefits continuity summary is as
follows:
(in thousands of
CAD dollars)
|
|
|
|
|
|
Post-Employment
Benefits
|
|
|
|
|
|
|
|
Balance -
December 31, 2019
|
|
|
|
|
$
|
2,258
|
Accretion
|
|
|
|
|
|
17
|
Benefits
paid
|
|
|
|
|
|
(27)
|
Balance - March
31, 2020
|
|
|
|
|
$
|
2,248
|
12. RECLAMATION
OBLIGATIONS
The reclamation
obligations balance consists of:
|
|
|
|
At March
31
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Reclamation
obligations-by location:
|
|
|
|
|
|
|
Elliot
Lake
|
|
|
$
|
17,940
|
$
|
17,987
|
McClean and
Midwest Joint Ventures
|
|
|
|
14,650
|
|
14,503
|
Other
|
|
|
|
22
|
|
22
|
|
|
|
$
|
32,612
|
$
|
32,512
|
|
|
|
|
|
|
|
Reclamation
obligations-by balance sheet presentation:
|
|
|
|
|
Current
|
|
|
$
|
910
|
$
|
914
|
Non-current
|
|
|
|
31,702
|
|
31,598
|
|
|
|
$
|
32,612
|
$
|
32,512
|
The reclamation
obligations continuity summary is as follows:
(in thousands of
CAD dollars)
|
|
|
|
|
|
Reclamation
Obligations
|
|
|
|
|
|
|
|
Balance -
December 31, 2019
|
|
|
|
|
$
|
32,512
|
Accretion
|
|
|
|
|
|
338
|
Expenditures
incurred
|
|
|
|
|
|
(238)
|
Balance - March
31, 2020
|
|
|
|
|
$
|
32,612
|
Site
Restoration: Elliot Lake
Spending on
restoration activities at the Elliot Lake site is funded from
monies in the Elliot Lake Reclamation Trust fund (see note
8).
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
Site
Restoration: McClean Lake Joint Venture and Midwest Joint
Venture
Under the Mineral
Industry Environmental Protection Regulations (1996), the Company
is required to provide its pro-rata share of financial assurances
to the province of Saskatchewan relating to future decommissioning
and reclamation plans that have been filed and approved by the
applicable regulatory authorities. As at March 31, 2020, the
Company has provided irrevocable standby letters of credit, from a
chartered bank, in favour of the Saskatchewan Ministry of
Environment, totalling $24,135,000 which relate to the most
recently filed reclamation plan dated March 2016.
13. OTHER
LIABILITIES
The other
liabilities balance consists of:
|
|
|
|
At March
31
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Debt
obligations:
|
|
|
|
|
|
|
Lease
liabilities
|
|
|
$
|
696
|
$
|
739
|
Loan
liabilities
|
|
|
|
39
|
|
263
|
Flow-through
share premium obligation (note 16)
|
|
|
|
-
|
|
902
|
|
|
|
$
|
735
|
$
|
1,904
|
|
|
|
|
|
|
|
Other
liabilities-by balance sheet presentation:
|
|
|
|
|
Current
|
|
|
$
|
241
|
$
|
1,372
|
Non-current
|
|
|
|
494
|
|
532
|
|
|
|
$
|
735
|
$
|
1,904
|
Debt
Obligations
At March 31,
2020, the Company’s debt obligations are comprised of lease
liabilities and loan liabilities. The debt obligations continuity
summary is as follows:
|
|
|
Lease
|
|
Loan
|
|
Total
Debt
|
(in thousands of
CAD dollars)
|
|
|
|
Liabilitites
|
|
Liabilities
|
|
Obligations
|
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2019
|
|
|
$
|
739
|
$
|
263
|
$
|
1,002
|
Accretion
|
|
|
|
16
|
|
-
|
|
16
|
Repayments
|
|
|
|
(59)
|
|
(224)
|
|
(283)
|
Balance
– March 31, 2020
|
|
|
$
|
696
|
$
|
39
|
$
|
735
|
Debt
Obligations – Scheduled Maturities
The following
table outlines the Company’s scheduled maturities of its debt
obligations at March 31, 2020:
|
|
|
Lease
|
|
Loan
|
|
Total
Debt
|
(in thousands of
CAD dollars)
|
|
|
|
Liabilitites
|
|
Liabilities
|
|
Obligations
|
|
|
|
|
|
|
|
|
|
Maturity analysis
– contractual undiscounted cash flows:
|
|
|
|
|
|
|
Next 12
months
|
|
|
$
|
232
|
$
|
9
|
$
|
241
|
One to five
years
|
|
|
|
541
|
|
33
|
|
574
|
More than five
years
|
|
|
|
67
|
|
-
|
|
67
|
Total obligation
– March 31, 2020 – undiscounted
|
|
840
|
|
42
|
|
882
|
Present value
discount adjustment
|
|
|
|
(144)
|
|
(3)
|
|
(147)
|
Total
obligation – March 31, 2020 – discounted
|
|
|
$
|
696
|
$
|
39
|
$
|
735
|
Letters of
Credit Facility
In January 2020,
the Company entered into an amending agreement for its letters of
credit facility with BNS (the “2020 facility”). Under
the amendment, the maturity date of the 2020 facility has been
extended to January 31, 2021.
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
All other terms
of the 2020 facility (tangible net worth covenant, pledged cash,
investment amounts and security for the facility) remain unchanged
from those of the 2019 facility. The 2020 facility continues to
provide the Company with access to credit up to $24,000,000 (the
use of which is restricted to non-financial letters of credit in
support of reclamation obligations) subject to letter of credit and
standby fees of 2.40% (0.40% on the first $9,000,000) and 0.75%
respectively.
At March 31,
2020, the Company is in compliance with its facility covenants and
$24,000,000 (December 31, 2019: $24,000,000) of the facility is
being utilized as collateral for letters of credit issued in
respect of the reclamation obligations for the MLJV and MWJV.
During the three months ended March 31, 2020, the Company incurred
letter of credit fees of $100,000 (March 31, 2019:
$98,000).
14. SHARE
CAPITAL
Denison is
authorized to issue an unlimited number of common shares without
par value. A continuity summary of the issued and outstanding
common shares and the associated dollar amounts is presented
below:
|
Number
of
|
|
|
|
Common
|
|
Share
|
(in thousands of
CAD dollars except share amounts)
|
Shares
|
|
Capital
|
|
|
|
|
Balance -
December 31, 2019
|
597,192,153
|
$
|
1,335,467
|
|
|
|
|
Share issue
costs
|
-
|
|
3
|
Share units
exercised – fair value adjustment
|
37,664
|
|
28
|
|
37,664
|
|
31
|
Balance - March
31, 2020
|
597,229,817
|
$
|
1,335,498
|
Flow-Through
Share Issues
The Company
finances a portion of its exploration programs through the use of
flow-through share issuances. Canadian income tax deductions
relating to these expenditures are claimable by the investors and
not by the Company.
As at March 31,
2020, the Company estimates that it has incurred $1,563,000 of
expenditures towards its obligation to spend $4,715,000 on eligible
exploration expenditures by the end of fiscal 2020 as a result of
the issuance of flow-through shares in December 2019. The Company
renounced the income tax benefits of this issue in February 2020,
with an effective date of renunciation to its subscribers of
December 31, 2019. In conjunction with the renunciation, the
flow-through share premium liability at December 31, 2019 has been
extinguished and a deferred tax recovery has been recognized in the
first quarter of 2020 (see notes 13 and 21).
15. SHARE
PURCHASE WARRANTS
A continuity
summary of the issued and outstanding share purchase warrants in
terms of common shares of the Company and the associated dollar
amounts is presented below:
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
Number
of
|
|
Warrants
|
|
|
|
|
Exercise
|
|
Common
|
|
Fair
|
|
|
|
|
Price
Per
|
|
Shares
|
|
Value
|
(in
thousands of CAD dollars except share amounts)
|
|
Share
(CAD)
|
|
Issuable
|
|
Amount
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2019
|
$
|
1.27
|
|
1,673,077
|
$
|
435
|
Expiries
|
|
1.27
|
|
(1,673,077)
|
|
(435)
|
Balance
– March 31, 2020
|
$
|
-
|
|
-
|
$
|
-
|
The warrants
noted above, issued in February 2017, expired on February 14,
2020.
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
16. SHARE-BASED
COMPENSATION
The
Company’s share based compensation arrangements include stock
options, restricted share units (“RSUs”) and
performance share units (“PSUs”).
A summary of
share based compensation expense recognized in the statement of
income (loss) is as follows:
|
|
|
|
Three
Months Ended
March
31
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Share based
compensation expense for:
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
|
|
$
|
(157)
|
$
|
(270)
|
RSUs
|
|
|
|
|
|
(228)
|
|
(181)
|
PSUs
|
|
|
|
|
|
(98)
|
|
(152)
|
Share
based compensation expense
|
|
|
|
|
$
|
(483)
|
$
|
(603)
|
As at March 31,
2020, an additional $2,377,000 in share-based compensation expense
remains to be recognized up until April 2023.
Stock
Options
A continuity
summary of the stock options granted under the Company’s
stock-based compensation plan is presented below:
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
|
|
Number
of
|
|
Price
per
|
|
|
|
|
|
|
|
Common
|
|
Share
|
|
|
|
|
|
|
|
Shares
|
|
(CAD)
|
|
|
|
|
|
|
|
|
|
|
Stock options
outstanding – December 31, 2019
|
|
|
|
13,827,243
|
$
|
0.75
|
Grants
|
|
|
|
|
|
|
3,523,000
|
|
0.46
|
Expiries
|
|
|
|
|
|
|
(1,104,000)
|
|
1.09
|
Forfeitures
|
|
|
|
|
|
|
(309,500)
|
|
0.72
|
Stock options
outstanding – March 31, 2020
|
|
|
|
15,936,743
|
$
|
0.66
|
Stock options
exercisable – March 31, 2020
|
|
|
|
10,834,243
|
$
|
0.73
|
A summary of the
Company’s stock options outstanding at March 31, 2020 is
presented below:
|
|
|
|
|
Weighted
|
|
|
|
Weighted-
|
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
|
|
Remaining
|
|
|
|
Exercise
|
Range of
Exercise
|
|
|
|
|
Contractual
|
|
Number
of
|
|
Price
per
|
Prices per
Share
|
|
|
|
|
Life
|
|
Common
|
|
Share
|
(CAD)
|
|
|
|
|
(Years)
|
|
Shares
|
|
(CAD)
|
|
|
|
|
|
|
|
|
|
|
Stock options
outstanding
|
|
|
|
|
|
|
$ 0.25 to $
0.49
|
|
4.94
|
|
3,523,000
|
$
|
0.46
|
$ 0.50 to $
0.74
|
|
|
|
|
2.82
|
|
7,196,143
|
|
0.63
|
$ 0.75 to $
0.99
|
|
|
|
|
1.94
|
|
5,217,600
|
|
0.85
|
Stock options
outstanding – March 31, 2020
|
|
|
3.00
|
|
15,936,743
|
$
|
0.66
|
Options
outstanding at March 31, 2020 expire between November 2020 and
March 2025.
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
The fair value of
each option granted is estimated on the date of grant using the
Black-Scholes option pricing model. The following table outlines
the assumptions used in the model to determine the fair value of
options granted:
|
|
|
|
Three Months
Ended
|
|
|
|
|
March 31,
2020
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
|
0.67%
|
Expected stock
price volatility
|
|
|
|
44.16%
|
Expected
life
|
|
|
|
3.4
years
|
Expected dividend
yield
|
|
|
|
-
|
Fair value
per share under options granted
|
|
|
CAD$0.15
|
Share
Units
The Company has a
share unit plan which provides for the granting of share unit
awards to directors, officers and employees of the Company. Under
the plan, all share unit grants, vesting periods and performance
conditions therein are approved by the Company’s board of
directors. Share unit grants are either in the form of RSUs or
PSUs. RSUs granted under the plan, to-date, vest ratably over a
period of three years. PSUs granted in 2018 vest ratably over a
period of five years, based upon the achievement of certain
non-market performance vesting conditions and PSUs granted in 2019
vest ratably over a period of four years. No PSUs had been granted
in 2020 as at March 31, 2020.
A continuity
summary of the RSUs and PSUs of the Company granted under the share
unit plan is presented below:
|
|
RSUs
|
|
PSUs
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
Number
of
|
|
Fair
Value
|
|
Number
of
|
|
Fair
Value
|
|
|
Common
|
|
Per
RSU
|
|
Common
|
|
Per
PSU
|
|
|
Shares
|
|
(CAD)
|
|
Shares
|
|
(CAD)
|
|
|
|
|
|
|
|
|
|
Units outstanding
– December 31, 2019
|
|
2,754,099
|
$
|
0.70
|
|
2,140,000
|
$
|
0.65
|
Grants
|
|
2,745,000
|
|
0.35
|
|
-
|
|
-
|
Exercises
|
|
(37,664)
|
|
0.73
|
|
-
|
|
-
|
Forfeitures
|
|
(85,667)
|
|
0.70
|
|
-
|
|
-
|
Units outstanding
– March 31, 2020
|
|
5,375,768
|
$
|
0.52
|
|
2,140,000
|
$
|
0.65
|
Units
vested – March 31, 2020
|
|
814,813
|
$
|
0.70
|
|
380,000
|
$
|
0.65
|
17. ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS)
The accumulated
other comprehensive income (loss) balance consists of:
|
|
|
|
At March
31
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Cumulative
foreign currency translation
|
|
|
$
|
396
|
$
|
410
|
Unamortized
experience gain-post employment liability
|
|
|
|
|
Gross
|
|
|
|
983
|
|
983
|
Tax
effect
|
|
|
|
(259)
|
|
(259)
|
|
|
|
$
|
1,120
|
$
|
1,134
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
18. SUPPLEMENTAL
FINANCIAL INFORMATION
The components of
operating expenses are as follows:
|
|
|
|
Three
Months Ended
March
31
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Cost of goods and
services sold:
|
|
|
|
|
|
|
|
|
Cost of goods
sold – mineral concentrates
|
|
|
|
|
$
|
(526)
|
$
|
-
|
Operating
overheads:
|
|
|
|
|
|
|
|
|
Mining, other
development expense
|
|
|
|
|
|
(213)
|
|
(308)
|
Milling,
conversion expense
|
|
|
|
|
|
(740)
|
|
(862)
|
Less
absorption:
|
|
|
|
|
|
|
|
|
-Mineral
properties
|
|
|
|
|
|
12
|
|
13
|
Cost of
services
|
|
|
|
|
|
(1,715)
|
|
(2,052)
|
Cost of goods and
services sold
|
|
|
|
|
|
(3,182)
|
|
(3,209)
|
Reclamation asset
amortization
|
|
|
|
|
|
(60)
|
|
(53)
|
Selling
expenses
|
|
|
|
|
|
(14)
|
|
-
|
Sales royalties
and non-income taxes
|
|
|
|
|
|
(64)
|
|
-
|
Operating
expenses
|
|
|
|
|
$
|
(3,320)
|
$
|
(3,262)
|
The components of
other income (expense) are as follows:
|
|
|
|
Three
Months Ended
March
31
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Gains (losses)
on:
|
|
|
|
|
|
|
|
|
Foreign
exchange
|
|
|
|
|
$
|
20
|
$
|
-
|
Disposal of
property, plant and equipment
|
|
|
|
|
|
2
|
|
-
|
Investment fair
value through profit (loss) (note 7)
|
|
|
|
(2,950)
|
|
(238)
|
Other
|
|
|
|
|
|
(264)
|
|
(115)
|
Other
income (expense)
|
|
|
|
|
$
|
(3,192)
|
$
|
(353)
|
The components of
finance income (expense) are as follows:
|
|
|
|
Three
Months Ended
March
31
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
|
|
$
|
92
|
$
|
169
|
Interest
expense
|
|
|
|
|
|
(2)
|
|
(2)
|
Accretion
expense
|
|
|
|
|
|
|
|
|
Deferred
revenue (note 10)
|
|
|
|
|
|
(782)
|
|
(800)
|
Post-employment
benefits (note 11)
|
|
|
|
|
|
(17)
|
|
(17)
|
Reclamation
obligations (note 12)
|
|
|
|
|
|
(338)
|
|
(340)
|
Debt
obligations (note 13)
|
|
|
|
|
|
(16)
|
|
(20)
|
Finance
income (expense)
|
|
|
|
|
$
|
(1,063)
|
$
|
(1,010)
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
A summary of
depreciation expense recognized in the statement of income (loss)
is as follows:
|
|
|
|
Three
Months Ended
March
31
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Mining, other
development expense
|
|
|
|
|
$
|
(1)
|
$
|
(1)
|
Milling,
conversion expense
|
|
|
|
|
|
(736)
|
|
(855)
|
Cost of
services
|
|
|
|
|
|
(53)
|
|
(60)
|
Exploration and
evaluation
|
|
|
|
|
|
(50)
|
|
(53)
|
General and
administrative
|
|
|
|
|
|
(32)
|
|
(31)
|
Depreciation
expense-gross
|
|
|
|
|
$
|
(872)
|
$
|
(1,000)
|
A summary of
employee benefits expense recognized in the statement of income
(loss) is as follows:
|
|
|
|
Three
Months Ended
March
31
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
|
|
|
|
$
|
(2,158)
|
$
|
(2,572)
|
Share-based
compensation
|
|
|
|
|
|
(483)
|
|
(603)
|
Employee
benefits expense
|
|
|
|
|
$
|
(2,641)
|
$
|
(3,175)
|
The change in
non-cash working capital items in the consolidated statements of
cash flows is as follows:
|
|
|
|
Three
Months Ended
March
31
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Change in
non-cash working capital items:
|
|
|
|
|
|
|
|
|
Trade and other
receivables
|
|
|
|
|
$
|
471
|
$
|
(85)
|
Inventories
|
|
|
|
|
|
641
|
|
64
|
Prepaid expenses
and other assets
|
|
|
|
|
|
(81)
|
|
205
|
Accounts payable
and accrued liabilities
|
|
|
|
|
|
472
|
|
1,787
|
Change
in non-cash working capital items
|
|
|
|
|
$
|
1,503
|
$
|
1,971
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
19. SEGMENTED
INFORMATION
Business
Segments
The Company
operates in three primary segments – the Mining segment, the
Closed Mine Services segment and the Corporate and Other segment.
The Mining segment includes activities related to exploration,
evaluation and development, mining, milling (including toll
milling) and the sale of mineral concentrates. The Closed Mine
Services segment includes the results of the Company’s
environmental services business which provides mine decommissioning
and other services to third parties. The Corporate and Other
segment includes management fee income earned from UPC and general
corporate expenses not allocated to the other segments. Management
fee income from UPC has been included with general corporate
expenses due to the shared infrastructure between the two
activities.
For the three
months ended March 31, 2020, reportable segment results were as
follows:
(in thousands of
CAD dollars)
|
|
|
Mining
|
Closed
Mine
Services
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
Revenues
|
|
|
1,815
|
2,028
|
817
|
4,660
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(1,605)
|
(1,715)
|
-
|
(3,320)
|
Exploration and
evaluation
|
|
|
(3,191)
|
-
|
-
|
(3,191)
|
General and
administrative
|
|
|
(14)
|
-
|
(2,174)
|
(2,188)
|
|
|
|
(4,810)
|
(1,715)
|
(2,174)
|
(8,699)
|
Segment income
(loss)
|
|
|
(2,995)
|
313
|
(1,357)
|
(4,039)
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
Uranium
concentrate sales
|
|
|
852
|
-
|
-
|
852
|
Environmental
services
|
|
|
-
|
2,028
|
-
|
2,028
|
Management
fees
|
|
|
-
|
-
|
817
|
817
|
Toll milling
services–deferred revenue (note 10)
|
|
963
|
-
|
-
|
963
|
|
|
|
1,815
|
2,028
|
817
|
4,660
|
|
|
|
|
|
|
|
Capital additions:
|
|
|
|
|
|
|
Property, plant
and equipment
|
|
|
7
|
15
|
-
|
22
|
|
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
Plant and
equipment
|
|
|
|
|
|
|
Cost
|
|
|
99,994
|
4,546
|
908
|
105,448
|
Accumulated
depreciation
|
|
|
(25,196)
|
(3,055)
|
(336)
|
(28,587)
|
Mineral
properties
|
|
|
179,488
|
-
|
-
|
179,488
|
|
|
|
254,286
|
1,491
|
572
|
256,349
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
For the three
months ended March 31, 2019, reportable segment results were as
follows:
(in thousands of
CAD dollars)
|
|
|
Mining
|
Closed
Mines
Services
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
Revenues
|
|
|
1,263
|
2,237
|
476
|
3,976
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(1,210)
|
(2,052)
|
-
|
(3,262)
|
Exploration and
evaluation
|
|
|
(4,229)
|
-
|
-
|
(4,229)
|
General and
administrative
|
|
|
-
|
-
|
(2,366)
|
(2,366)
|
|
|
|
(5,439)
|
(2,052)
|
(2,366)
|
(9,857)
|
Segment income
(loss)
|
|
|
(4,176)
|
185
|
(1,890)
|
(5,881)
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
2,237
|
-
|
2,237
|
Management
fees
|
|
|
-
|
-
|
476
|
476
|
Toll milling
services–deferred revenue (note 10)
|
|
1,263
|
-
|
-
|
1,263
|
|
|
|
1,263
|
2,237
|
476
|
3,976
|
|
|
|
|
|
|
|
Capital additions:
|
|
|
|
|
|
|
Property, plant
and equipment
|
|
|
13
|
8
|
38
|
59
|
|
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
Plant and
equipment
|
|
|
|
|
|
|
Cost
|
|
|
99,028
|
4,484
|
908
|
104,420
|
Accumulated
depreciation
|
|
|
(21,944)
|
(2,987)
|
(208)
|
(25,139)
|
Mineral
properties
|
|
|
178,960
|
-
|
-
|
178,960
|
|
|
|
256,044
|
1,497
|
700
|
258,241
|
20. RELATED
PARTY TRANSACTIONS
Uranium
Participation Corporation
The current
management services agreement (“MSA”) with UPC became
effective on April 1, 2019 and has a term of five years (the
“Term”). Under the MSA, Denison receives the following
management fees from UPC: a) a base fee of $400,000 per annum,
payable in equal quarterly installments; b) a variable fee equal to
(i) 0.3% per annum of UPC’s total assets in excess of $100
million and up to and including $500 million, and (ii) 0.2% per
annum of UPC’s total assets in excess of $500 million; c) a
fee, at the discretion of the Board, for on-going monitoring or
work associated with a transaction or arrangement (other than a
financing, or the acquisition of or sale of U3O8 or UF6); and d) a
commission of 1.0% of the gross value of any purchases or sales of
U3O8 or UF6 or gross interest
fees payable to UPC in connection with any uranium loan
arrangements.
The MSA may be
terminated during the Term by Denison upon the provision of 180
days written notice. The MSA may be terminated during the Term by
UPC (i) in the event of a material breach, (ii) within 90 days of
certain events surrounding a change of both of the individuals
serving as Chief Executive Officer and Chief Financial Officer of
UPC, and / or a change of control of Denison, or (iii) upon the
provision of 30 days written notice and, subject to certain
exceptions, a cash payment to Denison of an amount equal to the
base and variable management fees that would otherwise be payable
to Denison (calculated based on UPC’s current uranium
holdings at the time of termination) for the lesser period of a)
three years, or b) the remaining term of the MSA.
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
The following
transactions were incurred with UPC for the periods
noted:
|
|
|
|
Three
Months Ended
March
31
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Management
fees:
|
|
|
|
|
|
|
|
|
Base and variable
fees
|
|
|
|
|
$
|
463
|
$
|
474
|
Commission
fees
|
|
|
|
|
|
54
|
|
2
|
Discretionary
fees
|
|
|
|
|
|
300
|
|
-
|
|
|
|
|
|
$
|
817
|
$
|
476
|
At March 31,
2020, accounts receivable includes $605,000 (December 31, 2019:
$236,000) due from UPC with respect to the fees indicated
above.
Korea
Electric Power Corporation (“KEPCO”) and Korea Hydro
& Nuclear Power (“KHNP”)
As at March 31,
2020, KEPCO, through its subsidiaries, holds 58,284,000 shares of
Denison representing a share interest of approximately 9.76%. KHNP
Canada Energy Ltd., a subsidiary of KEPCO’s subsidiary KHNP,
is the holder of the majority of Denison’s shares and is also
the majority member of Korea Waterbury Uranium Limited Partnership
(“KWULP”). KWULP is a consortium of investors that
holds the non-Denison owned interests in Waterbury Lake Uranium
Corporation (“WLUC”) and Waterbury Lake Uranium Limited
Partnership (“WLULP”), entities whose key asset is the
Waterbury Lake property.
Other
During the three
months ended March 31, 2020, the Company incurred investor
relations, administrative service fees and certain pass-through
expenses of $21,000 (March 31, 2019: $21,000) with Namdo Management
Services Ltd, which shares a common director with Denison. These
services were incurred in the normal course of operating a public
company. At March 31, 2020, an amount of $6,000 (December 31, 2019:
$nil) was due to this company.
Compensation
of Key Management Personnel
Key management
personnel are those persons having authority and responsibility for
planning, directing and controlling the activities of the Company,
directly or indirectly. Key management personnel include the
Company’s executive officers, vice-presidents and members of
its Board of Directors.
The following
compensation was awarded to key management personnel:
|
|
|
|
Three
Months Ended
March
31
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
|
|
|
|
$
|
(584)
|
$
|
(705)
|
Share-based
compensation
|
|
|
|
|
|
(430)
|
|
(504)
|
Key
management personnel compensation
|
|
|
|
|
$
|
(1,014)
|
$
|
(1,209)
|
21. INCOME
TAXES
For the three
months ended March 31, 2020, Denison has recognized deferred tax
recoveries of $1,631,000. The deferred tax recovery includes the
recognition of previously unrecognized Canadian tax assets of
$1,252,000 relating to the February 2020 renunciation of the tax
benefits associated with the Company’s $4,715,000
flow-through share issue in December 2019.
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
22. FAIR
VALUE OF FINANCIAL INSTRUMENTS
IFRS requires
disclosures about the inputs to fair value measurements, including
their classification within a hierarchy that prioritizes the inputs
to fair value measurement. The three levels of the fair value
hierarchy are:
●
Level 1 – Unadjusted
quoted prices in active markets for identical assets or
liabilities;
●
Level 2 – Inputs other
than quoted prices that are observable for the asset or liability
either directly or indirectly; and
●
Level 3 – Inputs that
are not based on observable market data.
The fair value of
financial instruments which trade in active markets, such as share
and warrant equity instruments, is based on quoted market prices at
the balance sheet date. The quoted market price used to value
financial assets held by the Company is the current closing price.
Warrants that do not trade in active markets have been valued using
the Black-Scholes pricing model. Debt instruments have been valued
using the effective interest rate for the period that the Company
expects to hold the instrument and not the rate to
maturity.
Except as
otherwise disclosed, the fair values of cash and cash equivalents,
trade and other receivables, accounts payable and accrued
liabilities, restricted cash and cash equivalents and debt
obligations approximate their carrying values as a result of the
short-term nature of the instruments, or the variable interest rate
associated with the instruments, or the fixed interest rate of the
instruments being similar to market rates.
During the three
months ended March 31, 2020, there were no transfers between levels
1, 2 and 3 and there were no changes in valuation
techniques.
The following
table illustrates the classification of the Company’s
financial assets within the fair value hierarchy as at March 31,
2020 and December 31, 2019:
|
|
|
|
|
|
March
31
|
|
December
31,
|
|
|
Financial
|
|
Fair
|
|
2019
|
|
2019
|
|
|
Instrument
|
|
Value
|
|
Fair
|
|
Fair
|
(in thousands of
CAD dollars)
|
|
Category(1)
|
|
Hierarchy
|
|
Value
|
|
Value
|
|
|
|
|
|
|
|
|
|
Financial
Assets:
|
|
|
|
|
|
|
|
|
Cash and
equivalents
|
|
Category
B
|
|
|
$
|
4,902
|
$
|
8,190
|
Trade and other
receivables
|
|
Category
B
|
|
|
|
3,552
|
|
4,023
|
Investments
|
|
|
|
|
|
|
|
|
Equity
instruments-shares
|
|
Category
A
|
|
Level
1
|
|
9,097
|
|
11,971
|
Equity
instruments-warrants
|
|
Category
A
|
|
Level
2
|
|
57
|
|
133
|
Restricted
cash and equivalents
|
|
|
|
|
|
|
|
|
Elliot Lake
reclamation trust fund
|
|
Category
B
|
|
|
|
3,468
|
|
2,859
|
Credit
facility pledged assets
|
|
Category
B
|
|
|
|
9,000
|
|
9,000
|
Reclamation
letter of credit collateral
|
|
Category
B
|
|
|
|
135
|
|
135
|
|
|
|
|
|
$
|
30,211
|
$
|
36,311
|
|
|
|
|
|
|
|
|
|
Financial
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
Category
C
|
|
|
|
8,416
|
|
7,930
|
Debt
obligations
|
|
Category
C
|
|
|
|
735
|
|
1,002
|
|
|
|
|
|
$
|
9,151
|
$
|
8,932
|
(1)
Financial instrument
designations are as follows: Category A=Financial assets and
liabilities at fair value through profit and loss; Category
B=Financial assets at amortized cost; and Category C=Financial
liabilities at amortized cost.
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
23. CONTINGENCIES
Specific
Legal Matters
Mongolia
Mining Division Sale – Arbitration Proceedings with Uranium
Industry
In November 2015,
the Company sold all of its mining assets and operations located in
Mongolia to Uranium Industry a.s (“UI”) pursuant to an
amended and restated share purchase agreement (the “GSJV
Agreement”). The primary assets at that time were the
exploration licenses for the Hairhan, Haraat, Gurvan Saihan and
Ulzit projects. As consideration for the sale per the GSJV
Agreement, the Company received cash consideration of USD$1,250,000
prior to closing and the rights to receive additional contingent
consideration of up to USD$12,000,000.
On September 20,
2016, the Mineral Resources Authority of Mongolia
(“MRAM”) formally issued mining license certificates
for all four projects, triggering Denison’s right to receive
contingent consideration of USD$10,000,000 (collectively, the
“Mining License Receivable”). The original due date for
payment of the Mining License Receivable by UI was November 16,
2016.
Under an
extension agreement between UI and the Company, the payment due
date of the Mining License Receivable was extended from November
16, 2016 to July 16, 2017 (the “Extension Agreement”).
As consideration for the extension, UI agreed to pay interest on
the Mining License Receivable amount at a rate of 5% per year,
payable monthly up to July 16, 2017 and they also agreed to pay a
USD$100,000 instalment amount towards the balance of the Mining
License Receivable amount. The required payments were not
made.
On February 24,
2017, the Company served notice to UI that it was in default of its
obligations under the GSJV Agreement and the Extension Agreement
and that the Mining License Receivable and all interest payable
thereon are immediately due and payable. On December 12, 2017, the
Company filed a Request for Arbitration between the Company and UI
under the Arbitration Rules of the London Court of International
Arbitration in conjunction with the default of UI’s
obligations under the GSJV and Extension agreements. The three
person arbitration panel was appointed on February 28, 2018.
Hearings in front of the arbitration panel were held in December
2019, and all anticipated formal submissions to the panel have been
made by each party. The arbitration panel’s findings are
expected to be issued in 2020.
Arbitration
Proceedings with Orano Canada and OURD
Denison commenced
arbitration with Orano Canada and OURD in October 2019, with
Denison’s initial written submission made on March 9, 2020.
The arbitration relates to certain payments made under the joint
venture agreement for the MLJV. Denison claims that these payments
were required in breach of OURD and Orano’s contractual and
other obligations. Denison seeks approximately $6.5 million with
respect to these payments, an unquantified amount for further
damages and related contractual relief. The arbitral tribunal has
set hearing dates in 2020.
24. SUBSEQUENT
EVENTS
Share
Issue
On April 9, 2020,
the Company completed a public offering of 28,750,000 common shares
at a price of USD$0.20 per share for gross proceeds of $8,041,000
(USD$5,750,000). The offering included the exercise in full of an
over-allotment option of 3,750,000 common shares granted to the
underwriters. The estimated net proceeds of the offering of
$6,800,000 are anticipated to be used to fund Denison’s
business activities planned for the remainder of 2020 and into
2021, as well as for general working capital purposes.
21
Exhibit
99.2
MANAGEMENT’S DISCUSSION & ANALYSIS
FOR THE THREE MONTHS ENDED
MARCH 31, 2020
TABLE OF CONTENTS
|
|
2020 PERFORMANCE
HIGHLIGHTS
|
2
|
ABOUT
DENISON
|
2
|
RESULTS OF
OPERATIONS
|
4
|
Wheeler
River Project
|
7
|
Exploration Pipeline
Properties
|
10
|
LIQUIDITY AND CAPITAL
RESOURCES
|
11
|
OUTLOOK
FOR 2020
|
13
|
ADDITIONAL
INFORMATION
|
14
|
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
|
15
|
This
Management’s Discussion and Analysis (‘MD&A’)
of Denison Mines Corp. and its subsidiary companies and joint
arrangements (collectively, ‘Denison’ or the
‘Company’) provides a detailed analysis of the
Company’s business and compares its financial results with
those of the previous year. This MD&A is dated as of May 6,
2020 and should be read in conjunction with the Company’s
unaudited interim condensed consolidated financial statements and
related notes for the three months ended March 31, 2020. The
unaudited interim condensed consolidated financial statements are
prepared in accordance with International Financial Reporting
Standards (‘IFRS’) as issued by the International
Accounting Standards Board (‘IASB’). Readers are also
encouraged to consult the audited consolidated financial statements
and MD&A for the year ended December 31, 2019. All dollar
amounts in this MD&A are expressed in Canadian dollars, unless
otherwise noted.
Additional
information about Denison, including the Company’s press
releases, quarterly and annual reports, Annual Information Form and
Form 40-F is available through the Company’s filings with the
securities regulatory authorities in Canada at www.sedar.com
(‘SEDAR’) and the United States at
www.sec.gov/edgar.shtml (‘EDGAR’).
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
2020
PERFORMANCE HIGHLIGHTS
■
Temporary suspension of Wheeler River Environmental Assessment
(‘EA’) amidst COVID-19 disruptions
In March 2020, in
light of the significant social and economic disruption that has
emerged as a result of the COVID-19 pandemic and in line with the
Company's commitment to ensure employee safety, support public
health efforts to limit transmission of COVID-19, and in order to
exercise prudent financial discipline, Denison announced the
decision to suspend the EA process and certain other activities
planned at Wheeler River for 2020. The decision to temporarily
suspend the EA process is expected to impact the project
development schedule outlined in the Pre-Feasibility Study
(‘PFS’) for Wheeler River.
■
Successful completion of equity financing to provide ongoing
funding for business activities
In April 2020,
Denison successfully completed a public offering of 28,750,000
common shares at a price of USD$0.20 per common share for gross
proceeds of $8,041,000 (USD$5,750,000), which includes the full
exercise of the overallotment option of 3,750,000 common shares.
The estimated net proceeds of $6,800,000 are expected to be used to
fund the Company’s business activities for the remainder of
2020 and into 2021.
■
Uranium concentrations from initial core leach tests reported up to
four times the amount assumed in PFS for Phoenix In Situ Recovery
(‘ISR’) operation
In December 2019,
Denison announced the initiation of the next phase of ISR
metallurgical laboratory testing for uranium recovery, which will
utilize 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 the ISR mining
method at the Phoenix deposit. The results are expected to
facilitate detailed mine and process plant planning as part of a
future Feasibility Study (‘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.
In February 2020,
Denison reported that initial data from core leach tests includes
the recovery of elemental uranium concentrations, after test
startup, in the range of 13.5 grams per litre (‘g/L’)
to 39.8 g/L, with an average of 29.8 g/L over 20 days of testing
(see Denison’s press release dated February 19, 2020). This
compares favourably to the previous metallurgical test work
completed to assess the use of the ISR mining method at Phoenix
– which supported a uranium concentration of 10 g/L for the
ISR processing plant design used in the PFS.
■
Ability to achieve hydraulic conductivity values consistent with
PFS confirmed by results from 2019 ISR field test at
Phoenix
Extensive
hydrogeological data was collected during the 2019 ISR field
program to be incorporated into a hydrogeological model for
Phoenix. 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 (see Denison press release
dated February 24, 2020).
Denison Mines
Corp. was formed under the laws of Ontario and is a reporting
issuer in all Canadian provinces. Denison’s common shares are
listed on the Toronto Stock Exchange (the ‘TSX’) under
the symbol ‘DML’ and on the NYSE American exchange
under the symbol ‘DNN’.
Denison is a
uranium exploration and development company with interests focused
in the Athabasca Basin region of northern Saskatchewan, Canada. The
Company’s flagship project is the 90% owned Wheeler River
Uranium Project, which is the largest undeveloped uranium project
in the infrastructure rich eastern portion of the Athabasca Basin
region of northern Saskatchewan. A PFS was completed for Wheeler
River in late 2018, considering the potential economic merit of
developing the Phoenix deposit as an ISR operation and the Gryphon
deposit as a conventional underground mining operation. Denison's
interests in Saskatchewan also include a 22.5% ownership interest
in the McClean Lake Joint Venture (‘MLJV’), which
includes several uranium deposits and the McClean Lake uranium
mill, which is contracted to process the ore from the Cigar Lake
mine under a toll milling agreement (see RESULTS OF OPERATIONS
below for more details), plus a 25.17% interest in the Midwest
deposits and a 66.57% interest in the J Zone and Huskie deposits on
the Waterbury Lake property. The Midwest, J Zone and Huskie
deposits are located within 20 kilometres of the McClean Lake mill.
In addition, Denison has an extensive portfolio of exploration
projects in the Athabasca Basin region.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Denison is
engaged in mine decommissioning and environmental services through
its Closed Mines group (formerly Denison Environmental Services),
which manages Denison’s Elliot Lake reclamation projects and
provides post-closure mine and maintenance services to a variety of
industry and government clients.
Denison is also
the manager of Uranium Participation Corporation
(‘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’).
RISK AND UNCERTAINTY
The outbreak of
the novel coronavirus (‘COVID-19’) has disrupted and is
expected to continue to disrupt the Company’s previously
disclosed business and operational plans for fiscal 2020. The
length or severity of these disruptions are unknown at this point
in time. The significant potential social and economic disruptions
that have emerged as a result of the COVID-19 pandemic include (i)
restrictions that governments impose to address the COVID-19
outbreak, (ii) restrictions that the Company and its contractors
and subcontractors impose to ensure the safety of employees and
others, (iii) shortages and / or unexpected sickness of employees,
(iv) unavailability of contractors and subcontractors, (v)
interruption of supplies from third parties upon which the Company
relies, and (vi) unusually high levels of volatility in capital
markets and limitations on the availability of
capital.
Disruptions of
this nature have necessitated a change in the Company’s
business plans for 2020 and they may have a material adverse effect
on the Company’s business, financial condition and results of
operations. Such adverse effects could be rapid and unexpected.
Management is closely monitoring the situation and is actively
adapting work plans to mitigate adverse effects where possible. See
OUTLOOK FOR 2020 below for further details.
SELECTED ANNUAL FINANCIAL INFORMATION
(in
thousands)
|
|
As at
March 31,
2020
|
|
As at
December 31,
2019
|
|
|
|
|
|
Financial Position:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
4,902
|
$
|
8,190
|
|
|
|
|
|
Working
capital(1)
|
$
|
8,070
|
$
|
1,597
|
Property, plant
and equipment
|
$
|
256,349
|
$
|
257,259
|
Total
assets
|
$
|
292,304
|
$
|
299,998
|
Total long-term
liabilities(2)
|
$
|
75,219
|
$
|
74,903
|
(1)
At March 31, 2020, the
Company’s working capital includes $9,097,000 in portfolio
investments and a non-cash $3,410,000 deferred revenue liability
(December 31, 2019 – $nil portfolio investments and non-cash
deferred revenue of $4,580,000).
(2)
Predominantly comprised of
the non-current portion of deferred revenue, non-current
reclamation obligations, and deferred income tax
liabilities.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
SELECTED QUARTERLY FINANCIAL INFORMATION
|
|
|
|
2020
|
|
2019
|
|
2019
|
|
2019
|
(in
thousands, except for per share amounts)
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
|
4,660
|
$
|
3,956
|
$
|
3,478
|
$
|
4,139
|
Net
loss
|
$
|
(6,663)
|
$
|
(1,498)
|
$
|
(6,424)
|
$
|
(4,884)
|
Basic and diluted
loss per share
|
$
|
(0.01)
|
$
|
(0.00)
|
$
|
(0.01)
|
$
|
(0.01)
|
|
|
|
|
2019
|
|
2018
|
|
2018
|
|
2018
|
(in
thousands, except for per share amounts)
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
|
3,976
|
$
|
4,144
|
$
|
3,729
|
$
|
4,104
|
Net
loss
|
$
|
(5,335)
|
$
|
(13,642)
|
$
|
(3,884)
|
$
|
(5,583)
|
Basic and diluted
loss per share
|
$
|
(0.01)
|
$
|
(0.02)
|
$
|
(0.01)
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
|
Significant items causing variations in quarterly
results
●
The Company’s toll
milling revenues fluctuate due to the timing of uranium processing
at the McClean Lake mill as well as changes to the estimated
mineral resources of the Cigar Lake mine.
●
Revenues from the Closed
Mines group fluctuate due to the timing of projects, which vary
throughout the year in the normal course of business.
●
Operating expenses fluctuate
due to the timing of projects at both the MLJV and the Closed Mines
group, which vary throughout the year in the normal course of
business.
●
Exploration expenses are
generally largest in the first and third quarters, due to the
timing of the winter and summer exploration programs in
Saskatchewan.
●
The Company’s results
are also impacted, from time to time, by other non-recurring events
arising from its ongoing activities, as discussed below where
applicable.
REVENUES
McClean Lake Uranium Mill
McClean Lake is
located on the eastern edge of the Athabasca Basin in northern
Saskatchewan, approximately 750 kilometres north of Saskatoon.
Denison holds a 22.5% ownership interest in the MLJV and the
McClean Lake uranium mill, one of the world’s largest uranium
processing facilities, which is contracted to process ore from the
Cigar Lake mine under a toll milling agreement. The MLJV is a joint
venture between Orano Canada Inc. (‘Orano Canada’) with
a 70% interest, Denison with a 22.5% interest, and OURD (Canada)
Co. Ltd. with a 7.5% interest.
In February 2017,
Denison closed an arrangement with Anglo Pacific Group PLC
(‘APG’) and one of its wholly owned subsidiaries (the
‘APG Arrangement’) under which Denison received an
upfront payment of $43,500,000 in exchange for its right to receive
future toll milling cash receipts from the MLJV under the current
toll milling agreement with the Cigar Lake Joint Venture
(‘CLJV’) from July 1, 2016 onwards. The APG Arrangement
consists of certain contractual obligations of Denison to forward
to APG the cash proceeds of future toll milling revenue earned by
the Company related to the processing of the specified Cigar Lake
ore through the McClean Lake mill, and as such, the upfront payment
was accounted for as deferred revenue.
On March 23,
2020, in response to the COVID-19 pandemic, the operator of the
CLJV announced a decision to suspend production at the Cigar Lake
mine for a minimum of four weeks. At the same time, the operator of
the MLJV announced that the McClean Lake mill would also suspend
operations for the duration of the CLJV shutdown. In April 2020,
subsequent to quarter end, the operator of the CLJV announced that
the shut-down at the Cigar Lake mine would be extended for an
indeterminate period of time. As noted above in the discussion of
the APG Arrangement, Denison has sold the toll milling revenue to
be earned from the processing of the Cigar Lake ore to APG. While
the temporary suspension of operations at the McClean Lake mill
will result in a decrease in revenue to Denison, the impact will be
non-cash and will only impact the drawdown of the Company’s
deferred revenue balance.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
During the three
months ended March 31, 2020, the McClean Lake mill processed 4.2
million pounds U3O8 for the CLJV
(March 31, 2019 – 4.9 million pounds U3O8) and recorded
toll milling revenue of $963,000 (March 31, 2019 –
$1,263,000). The decrease in toll milling revenue in the current
quarter, as compared to the prior year, is due to several factors.
Firstly, the mill processed fewer pounds U3O8 in the first
quarter of 2020, as compared to the first quarter of 2019, due to
the shut-down of the Cigar Lake mine during March 2020. Secondly,
during the first quarter of 2020, as a result in an update to the
published Cigar Lake mineral resource estimate in the quarter, the
Company recorded a negative non-cash cumulative catch-up accounting
adjustment of $96,000, which reduced the toll milling revenue in
the quarter (March 31, 2019 - the Company recorded a nominal
$26,000 positive non-cash cumulative accounting adjustment related
to the Cigar Lake mineral resource estimate update published in the
first quarter of 2019).
During the three
months ended March 31, 2020, the Company also recorded accounting
accretion expense of $782,000 on the toll milling deferred revenue
balance (March 31, 2019 – $800,000). The annual accretion
expense will decrease over the life of the contract as the deferred
revenue liability decreases over time.
Mineral Sales
Mineral sales
revenue for the three months ended March 31, 2020 was $852,000 from
the sale of 26,004 pounds U3O8 from inventory at
an average price of $32.76 per pound (March 31, 2019 - $nil uranium
sales).
Closed Mine Services
Mine
decommissioning and environmental services are provided through
Denison’s Closed Mines group, which has provided long-term
care and maintenance for closed mine sites since 1997. With offices
in Ontario, the Yukon Territory and Quebec, the Closed Mines group
manages Denison’s Elliot Lake reclamation projects and
provides post-closure mine care and maintenance services to various
customers.
Revenue from
Closed Mines services during the three months ended March 31, 2020
was $2,028,000 (March 31, 2019 - $2,237,000). The decrease in
revenue in the first quarter of 2020, as compared to 2019, was due
to a decrease in activity at certain care and maintenance
sites.
Management Services Agreement with UPC
Denison provides
general administrative and management services to UPC. Management
fees and commissions earned by Denison provide a source of cash
flow to partly offset corporate administrative expenditures
incurred by the Company during the year.
During the three
months ended March 31, 2020, revenue from the Company’s
management contract with UPC was $817,000 (March 31, 2019 -
$476,000). The increase in revenues during the first quarter of
2020, compared to the prior year, is predominantly due to a
discretionary fee of $300,000 awarded to Denison related to
non-routine activities performed by the Company, as well as an
increase in commission-based fees. The increase in commission-based
fees was due to an increase in uranium transactions by UPC during
the current period, as compared to the prior year. Denison earns a
1% commission on the gross value of UPC’s uranium purchases
and sales. The impact of the increase in discretionary and
commission-based fees was partially offset by a decrease in
management fees earned based on UPC’s monthly net asset value
(‘NAV’). UPC’s balance sheet consists primarily
of uranium held either in the form of U3O8 or UF6, which is
accounted for at its fair value. The decrease in NAV-based
management fees was due to the decrease in the average fair value
of UPC’s uranium holdings during the three months ended March
31, 2020, compared to the prior year, resulting primarily from
lower uranium spot prices.
OPERATING EXPENSES
Mining
Operating
expenses of the mining segment include depreciation and development
costs, as well as cost of sales related to the sale of
uranium.
Operating
expenses in the three months ended March 31, 2020 were $1,605,000
(March 31, 2019 – $1,210,000). In the first quarter of 2020,
operating expenses included depreciation of the McClean Lake mill
of $736,000 (March 31, 2019 - $855,000), as a result of processing
approximately 4.2 million pounds U3O8 for the CLJV
(March 31, 2019 – 4.9 million pounds).
In the three
months ended March 31, 2020, operating expenses also included
development and other operating costs related to the MLJV of
$869,000 (March 31, 2019 – $355,000), including (i) $526,000
in cost of sales, selling expenses of $14,000, and sales royalties
and resource surcharges of $64,000 related to the sale of 26,004
pounds of U3O8, and
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
(ii) $174,000 in
costs related to the advancement of the Surface Access Borehole
Resource Extraction (‘SABRE’) mining technology, as
part of a multi-year test mining program operated by Orano Canada
within the MLJV. As a result of the COVID-19 pandemic, the operator
of the MLJV has decided to defer the remainder of the 2020 program
for SABRE to future years.
Closed Mine Services
Operating
expenses during the three months ended March 31, 2020 totaled
$1,715,000 (March 31, 2019 - $2,052,000). The expenses relate
primarily to care and maintenance services provided to clients, and
include labour and other costs. The decrease in operating expenses
in the current period, as compared to the prior year, is
predominantly due to a reduction in the activity at certain care
and maintenance sites, as well as a decrease in salaries and other
costs associated with a reduction in headcount following a
restructuring completed during the fourth quarter of 2019, when the
Company discontinued its environmental consulting
business.
CANADIAN MINERAL PROPERTY EXPLORATION & EVALUATION
During the first
quarter of 2020, Denison’s share of exploration and
evaluation expenditures was $3,191,000 (March 31, 2019 -
$4,229,000). The decrease in exploration and evaluation
expenditures, compared to the prior period, was due to a decrease
in winter exploration activities, offset by an increase in
evaluation activities for Wheeler River compared to the prior
period.
Exploration
spending in the Athabasca Basin is generally seasonal in nature,
with spending typically higher during the winter exploration season
(January to mid-April) and summer exploration season (June to
mid-October). Field work during the winter 2020 season included the
completion of four geophysical surveys, as discussed
below.
The Company’s
land position in the Athabasca Basin, as of March 31, 2020, is
illustrated in the figure below. The Company’s Athabasca land
package decreased during the first quarter of 2020 from 279,883
hectares (214 claims) to 270,829 hectares (206 claims) primarily
due to planned lapses of claims belonging to the Bell Lake, Brown
Lake, Ford Lake, Jasper Lake and Waterbury South
properties.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Wheeler River Project
A PFS was
completed for Wheeler River in late 2018, considering the potential
economic merit of developing the Phoenix deposit as an ISR
operation and the Gryphon deposit as a conventional underground
mining operation.
Further details
regarding Wheeler River, including the estimated mineral reserves
and resources, are provided in the Technical Report for the Wheeler
River project titled ‘Pre-feasibility Study Report for the
Wheeler River Uranium Project, Saskatchewan, Canada’ prepared
by Mark Liskowich, P.Geo. of SRK Consulting (Canada) Inc. with an
effective date of September 24, 2018 (‘PFS Technical
Report’). A copy of the PFS Technical Report is available on
Denison’s website and under its profile on each of SEDAR and
EDGAR.
Given recent
social, financial and market disruptions, Denison has suspended
certain activities at Wheeler River, including the EA program,
which is on the critical path to achieving the project development
schedule outlined in the PFS. Given the uncertainty associated with
the duration of suspension, the Company is not currently able to
estimate the impact to the project development schedule outlined in
the PFS, and users are cautioned that the estimates provided
therein regarding the start of pre-production activities in 2021
and first production in 2024 should not be relied
upon.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
The location of
the Wheeler River property, as well as the Phoenix and Gryphon
deposits, and existing and proposed infrastructure, is shown on the
map provided below.
Evaluation Program
During the first
quarter of 2020, Denison’s share of evaluation costs at
Wheeler River were $1,437,000 (March 31, 2019 – $442,000),
which consisted primarily of work related to the EA process,
engineering activities in support of a FS, including metallurgical
testing, as well as design and planning activities related to a
potential 2020 ISR field test.
Environmental and Sustainability Activities
EA Activities
Following the
declaration of the global COVID-19 pandemic in early March, 2020,
Denison decided to temporarily suspend the Wheeler River EA (see
Denison Press Release dated March 20, 2020). An important element
of the EA process is the completion of extensive in-person
engagement and consultation activities with various interested
parties and community groups. The decision to suspend the EA
process and other discretionary activities is motivated by the
significant social and economic disruption that has emerged as a
result of the COVID-19 pandemic and the Company's commitment to
ensure employee safety, support public health efforts to limit
transmission of COVID-19, and exercise prudent financial
discipline.
All external
consultants, the Canadian Nuclear Safety Commission
(‘CNSC’), the Saskatchewan Ministry of the
Environmental and all interested parties were notified of the
decision to suspend the EA process prior to the end of the first
quarter of 2020. Denison staff have been retained to continue
preparations required for the future advancement of the EA,
including internal FS related work required for input into the
Company’s EA models.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Although the
temporary suspension of the EA will impact the schedule for first
production at Wheeler River, the Company is directing its interim
efforts to minimize delays to the project development schedule and
to position the Company to resume EA activities quickly when it is
determined that it is appropriate to do so.
Community Engagement Activities
Denison continues
to work towards building durable relationships with Indigenous
groups and communities in northern Saskatchewan, despite the
COVID-19 pandemic. Recognizing the necessity to help those in need
to cope with the COVID-19 pandemic, Denison has pledged financial
support, procured roughly 900 litres of hand sanitizer and worked
together with a group of local businesses in Saskatchewan to
distribute the hand sanitizer, along with cleaning products and
protective gloves, to several remote communities in northern
Saskatchewan. The remote location of communities in northern
Saskatchewan poses a unique risk for COVID-19 transmission and
treatment. Accordingly, Denison’s efforts have been focused
on supporting local community response plans designed to mitigate
the spread of COVID-19 and/or support vulnerable families with
essential food and supplies.
Engineering Activities
2019 ISR Field Test Results
Certain
quantitative analysis of the data collected during the 2019 ISR
Field Test was completed in February 2020 (see Denison Press
Release dated February 24, 2020). For ISR mining operations, the
term ‘hydraulic conductivity’ is used to describe the
ease with which a fluid can move through the pore spaces or
fractures within a host rock. Hydraulic conductivity, commonly
represented by the symbol ‘K’, is often stated as a
rate of flow (under a unit hydraulic gradient through a unit
cross-sectional area of aquifer) and is typically reported in units
of metres per second (‘m/s’) or metres per day
(‘m/d’). The results from the hydraulic conductivity
tests, performed during the 2019 field program, showed that the K
factors used in the PFS could be achieved in a commercial scale
well (CSW2) installed during the 2019 field program.
Core Leach Test Results
During the fourth quarter of 2019, Denison commenced with a new
phase of metallurgical test work, which is expected to utilize core
samples collected during the 2019 ISR field test, and includes
novel core leach tests. The core leach tests are carried out using
specialized equipment at the Saskatchewan Research Council
(‘SRC’) laboratories in Saskatoon and are designed to
provide conditions in the lab that simulate most of the field
conditions expected during actual operation. These tests allow
refinement of the optimum lixiviant mixture for injection into the
wellfield, in addition to validating the expected uranium
concentration of the Uranium Bearing Solution (UBS) assumed in the
PFS. The first test was completed in the first quarter of 2020,
with results showing uranium concentrations that exceeded the
assumptions in the PFS (see Denison Press Release dated February
19, 2020) by as much as 300%. The implications of a higher uranium
concentration coming from the ISR wellfield are potentially
significant – allowing the metallurgical team to explore
various combinations of lixiviant parameters to optimize operating
costs, and modify processing plant configurations to potentially
reduce capital costs, while maintaining the same level of annual
uranium production.
Other Engineering Activities and EA Inputs
Several
additional studies were conducted, during the first quarter, to
support the completion of a future FS and to further define EA
modeling inputs for the operational stage of the project. Work
undertaken in the quarter included the following:
●
Workforce organizational
charts and site accommodation requirements;
●
Site water balance studies
for operational and effluent treatment requirements;
●
Final site layout, including
storage ponds for potential by-product precipitates;
●
Emissions from mobile
equipment and residential waste streams; and
●
Emergency water management
plans.
The site water
balance was of interest, as it predicts that during normal
operations all effluent can be recycled, with only occasional need
to re-inject treated water into the aquifer at depth. An emergency
discharge point is also being assessed in the event the project
incurs a probable maximum precipitation (PMP) event.
The site layout
has been modified allowing the creation of Radiation Control Zones,
which will be an important part of the radiation safety and control
program to minimize worker exposures.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Exploration Program
Denison’s
share of exploration costs at Wheeler River was $206,000 during the
quarter ended March 31, 2020 (March 31, 2019 –
$1,575,000).
No field work was
conducted during the quarter ended March 31, 2020. Desktop work
included detailed planning for the exploration drilling program
tentatively scheduled for completion prior to the end of 2020. The
drilling program is expected to include an estimated 12,310 metres
in approximately 27 to 30 drill holes. The program is expected to
be focused at the Phoenix deposit, where additional exploration and
delineation drilling is warranted based on previous exploration
drilling and the positive results returned from recent ISR field
tests. The objective of the planned exploration program at Phoenix
is to increase mineral resources that may be incorporated into a
future FS. Potential to add additional mineral resources at Phoenix
exists within the boundaries of the existing design of the ISR
freeze dome, but outside of the currently defined extents of the
deposit – particularly around Zone B, where previous
mineralized results remain open on section or the interpreted
optimal exploration target remains untested, and at Zone C, which
is not currently included in the mineral resource estimate, where
similar targets exist.
Exploration
Pipeline Properties
Denison’s
share of exploration costs at its exploration pipeline properties
during the three months ended March 31, 2020 was $1,545,000 (March
31, 2019 - $2,212,000). During the first quarter of 2020, four
geophysical surveys were completed on five of the Company’s
projects. The surveys were carried out at Waterbury Lake, Murphy
Lake, Moon Lake, and Moon Lake North and South (shared survey). The
purpose of the surveys is to generate targets for future drill
testing in areas considered to have significant exploration
potential, and in certain cases to protect the associated claims
from lapsing. The planned survey for Ford Lake was not completed
due to disruptions related to COVID-19.
Additionally,
numerous desk-top reviews were completed to prioritize properties
for potential future exploration. The Company continues to review,
prioritize and rationalize its Athabasca Basin exploration
portfolio with the planned objective of continuing to explore its
highest priority projects, with the potential to deliver
significant and meaningful new discoveries.
GENERAL AND ADMINISTRATIVE EXPENSES
Total general and
administrative expenses were $2,188,000 during the three months
ended March 31, 2020 (March 31, 2019 - $2,366,000). These costs are
mainly comprised of head office salaries and benefits, office costs
in multiple regions, audit and regulatory costs, legal fees,
investor relations expenses, project costs, and all other costs
related to operating a public company with listings in Canada and
the United States. The decrease in general and administrative
expenses during the first quarter of 2020 was predominantly due to
an insurance recovery received in the quarter offset by an increase
in non-recurring legal costs.
OTHER INCOME AND EXPENSES
During the three
months ended March 31, 2020, the Company recognized a loss of
$3,192,000 in other income/expense (March 31, 2019 – loss of
$353,000). The loss in the current period is predominantly due to
losses on investments carried at fair value of $2,950,000 (March
31, 2019 – losses of $238,000). Gains and losses on
investments carried at fair value are driven by the closing share
price of the related investee at end of the quarter. The losses
recorded in both the current and prior periods were mainly due to
unfavourable mark-to-market adjustments on the Company’s
investments in other publicly traded entities.
EQUITY SHARE OF LOSS FROM ASSOCIATES
During the fourth
quarter of 2019, the Company determined that it no longer exercised
significant influence of GoviEx Uranium Inc. (‘GoviEx’)
and began accounting for its investment in the common shares of
GoviEx as a portfolio investment at fair value through profit and
loss. As a result, during the three months ended March 31, 2020,
the Company recorded $nil in equity gain or loss from associates.
During the three months ended March 31, 2019, the Company
recognized a loss of $277,000 from its equity share of GoviEx. The
loss in 2019 was due to an equity loss of $275,000, based on the
Company’s share of GoviEx’s net loss during the period,
plus a net dilution loss of $2,000 as a result of equity issuances
completed by GoviEx, which reduced the Company’s ownership
position.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash
equivalents were $4,902,000 at March 31, 2020 (December 31, 2019
– $8,190,000).
The decrease in
cash and cash equivalents of $3,288,000 was due to net cash used in
operations of $2,379,000, net cash used in investing activities of
$629,000 and net cash used in financing activities of
$280,000.
Net cash used in
operating activities of $2,379,000 was predominantly due to the net
loss for the period, adjusted for non-cash items and changes in
working capital items.
Net cash used in
investing activities of $629,000 consists primarily of an increase
in restricted cash mainly due to the Company’s funding the
Elliot Lake reclamation trust fund.
Net cash used in
financing activities of $280,000 relates to the repayment of debt
obligations during the quarter.
As at March 31,
2020, the Company has spent $1,563,000 towards its obligation to
spend $4,715,460 on eligible Canadian exploration expenditures
under the flow-through share financing completed in December
2019.
Refer to 2020
OUTLOOK below for details of the Company’s working capital
requirements for the remainder of 2020 and SUBSEQUENT EVENTS for
details of the equity financing completed by the Company in April
2020.
There are
uncertainties related to the timing and use of the Company’s
cash resources. Due to the stage of various of its mineral property
projects, the Company does not currently generate sufficient
operating cash flows to fund obligations as they become due. As
such, these obligations require that the Corporation generate
additional liquidity through the divestiture of investments or
through the issuance of debt or equity. Based on the net proceeds
received from the Company’s USD$5,750,000 financing completed
in the subsequent events period, and the Company’s current
cash flow forecast, management anticipates that is has sufficient
cash resources on hand to fund greater than 12 months of planned
operations, but that it may need to sell certain of its investments
to provide additional liquidity beyond that point. The Company may
experience difficulty in obtaining satisfactory financial terms for
subsequent debt or equity issuances or it may have difficulty in
liquidating its investments due to the concentration of its
investment portfolio or market conditions. Failure to obtain
adequate financing on satisfactory terms may have a material
adverse effect to the Company’s results of operations or its
financial condition. The Company has considered the above factors,
in addition to its ability to further curtail operating
expenditures if necessary, in assessing and concluding on its
ability to continue as a going concern.
Revolving Term Credit Facility
On January 29,
2020, the Company entered into an agreement with the Bank of Nova
Scotia (‘BNS’) to extend the maturity date of the
Company’s credit facility to January 31, 2021 (‘2020
Credit Facility’). Under the 2020 Credit Facility, the
Company continues to have access to letters of credit of up to
$24,000,000, which is fully utilized for non-financial letters of
credit in support of reclamation obligations. All other terms of
the 2020 Credit Facility (tangible net worth covenant, pledged
cash, investments amount and security for the facility) remain
unchanged by the amendment – including a requirement to
provide $9,000,000 in cash collateral on deposit with BNS to
maintain the 2020 Credit Facility.
TRANSACTIONS WITH RELATED PARTIES
Uranium Participation Corporation
The
Company’s current management services agreement with UPC
(‘MSA’) has a term of five years (the
‘Term’), expiring on March 31, 2024. Under the MSA,
Denison receives the following management fees from UPC: a) a base
fee of $400,000 per annum, payable in equal quarterly installments;
b) a variable fee equal to (i) 0.3% per annum of UPC’s total
assets in excess of $100 million and up to and including $500
million, and (ii) 0.2% per annum of UPC’s total assets in
excess of $500 million; c) a fee, at the discretion of the Board,
for on-going monitoring or work associated with a transaction or
arrangement (other than a financing, or the acquisition of or sale
of U3O8 or UF6); and d) a
commission of 1.0% of the gross value of any purchases or sales of
U3O8 or UF6 or gross interest
fees payable to UPC in connection with any uranium loan
arrangements.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
The MSA may be
terminated during the Term by Denison upon the provision of 180
days written notice. The MSA may be terminated during the Term by
UPC (i) in the event of a material breach, (ii) within 90 days of
certain events surrounding a change of both of the individuals
serving as Chief Executive Officer and Chief Financial Officer of
UPC, and / or a change of control of Denison, or (iii) upon the
provision of 30 days written notice and, subject to certain
exceptions, a cash payment to Denison of an amount equal to the
base and variable management fees that would otherwise be payable
to Denison (calculated based on UPC’s current uranium
holdings at the time of termination) for the lesser period of a)
three years, or b) the remaining term of the MSA.
The following
amounts were earned from UPC for the periods ended:
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
March 31,
|
|
March 31,
|
(in
thousands)
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Management Fee
Revenue
|
|
|
|
|
|
|
|
|
Base and variable
fees
|
|
|
|
|
$
|
463
|
$
|
474
|
Commission
fees
|
|
|
|
|
|
54
|
|
2
|
Discretionary
fees
|
|
|
|
|
|
300
|
|
-
|
|
|
|
|
|
$
|
817
|
$
|
476
|
At March 31,
2020, accounts receivable includes $605,000 (December 31, 2019
– $236,000) due from UPC with respect to the fees and
transactions discussed above.
Korea Electric Power Corporation (‘KEPCO’) and Korea
Hydro & Nuclear Power (‘KHNP’)
As at March 31,
2020, KHNP, through its subsidiaries, holds 58,284,000 shares of
Denison representing a share interest of approximately 9.76%. KHNP
Canada Energy Ltd., a subsidiary of KEPCO’s subsidiary KHNP,
is the holder of the majority of Denison’s shares and is also
the majority member of KWULP. KWULP is a consortium of investors
that holds the non-Denison owned interests in Waterbury Lake
Uranium Corporation (‘WLUC’) and Waterbury Lake Uranium
Limited Partnership (‘WLULP’), entities whose key asset
is the Waterbury Lake property.
Other
All services and
transactions with the following related parties listed below were
made on terms equivalent to those that prevail with arm’s
length transactions:
●
During the three months ended
March 31, 2020, the Company incurred investor relations,
administrative service fees and certain pass-through expenses of
$21,000 (March 31, 2019 – $21,000) with Namdo Management
Services Ltd, which shares a common director with Denison. These
services were incurred in the normal course of operating a public
company. At March 31, 2020, an amount of $6,000 (December 31, 2019
– $nil) was due to this company.
COMPENSATION OF KEY MANAGEMENT PERSONNEL
Key management
personnel are those persons having authority and responsibility for
planning, directing and controlling the activities of the Company,
directly or indirectly. Key management personnel include the
Company’s executive officers, vice-presidents and members of
its Board of Directors.
The following
compensation was awarded to key management personnel:
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
March 31,
|
March 31,
|
(in
thousands)
|
|
|
|
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
|
|
|
|
$
|
(584)
|
$
|
(705)
|
Share-based
compensation
|
|
|
|
|
|
(430)
|
|
(504)
|
|
|
|
|
|
$
|
(1,014)
|
$
|
(1,209)
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
OFF-BALANCE SHEET ARRANGEMENTS
The Company does
not have any off-balance sheet arrangements.
SUBSEQUENT EVENTS
Share Issue
On April 9, 2020,
the Company closed a public offering of 28,750,000 common shares at
a price of USD$0.20 per share for gross proceeds of $8,041,000
(USD$5,750,000). The offering included the exercise in full of an
over-allotment option of 3,750,000 common shares granted to the
underwriters. The estimated net proceeds of $6,800,000 are
anticipated to be used to fund Denison’s business activities
planned for the remainder of 2020 and into 2021, as well as for
general working capital purposes.
OUTSTANDING SHARE DATA
At May 6, 2020,
there were 626,008,148 common shares issued and outstanding, stock
options outstanding for 15,936,743 Denison common shares, and
7,667,437 share units outstanding for a total of 649,612,328 common
shares on a fully-diluted basis.
Refer to the
Company’s annual MD&A for the year ended December 31,
2019 for a detailed discussion of the previously disclosed 2020
budget. In March 2020, Denison announced the decision to suspend
the EA process and certain other activities planned for Wheeler
River during 2020. The Company has made the following changes to
its outlook for 2020.
Revenue from
mineral sales has been increased to reflect the actual revenue
earned in the first quarter of 2020 from the sale of 26,004 pounds
of U3O8.
Development and
operations expenditures for 2020 have decreased due to a decision
by the operator of the MLJV to defer the SABRE test mining program
that was originally scheduled to take place in 2020. The test
mining program and related field work is now expected to occur
during the second and third quarter of 2021. The financial impact
of this deferral has not yet been estimated by the operator of the
MLJV. Accordingly, the amount reflected below is based on
Denison’s understanding of the program’s original
budget for 2020 and Denison’s best estimate of the
anticipated cost deferrals.
Mineral property
exploration and evaluation expenditures have decreased mainly due
to a reduction in regulatory fees payable to the CNSC, and other
evaluation costs that were eliminated following the decision made
in the first quarter of 2020 to temporarily suspend the EA process
and certain other activities for Wheeler River.
Additionally, as
part of the decision to suspend the EA process, Denison announced
that the discretionary work programs related to the draft
submission of the Wheeler River Environmental Impact Statement and
the completion of further ISR field testing, are no longer expected
to be undertaken during 2020.
The net inflow
from the Company’s Closed Mine Services group has increased
due to the extension of a care and maintenance contract that was
previously set to expire at the end of the first quarter of
2020.
The net inflow
from the management services agreement with UPC has increased for
several reasons: (i) an increase in the variable NAV-based fees due
to an increase in uranium prices; (ii) an increase in discretionary
fees awarded during the first quarter of 2020, related to
non-routine activities carried out by Denison during UPC’s
fiscal year ended February 29, 2020, and (iii) an increase in
commission based fees related to uranium transactions completed in
the first quarter and expected to be completed in the second
quarter of 2020.
The increase in
corporate and administrative expenditures is predominantly due to
an increase in legal expenses related to legal suits the Company is
currently involved in, slightly offset by a decrease in expected
travel and other head office costs.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
The continued
uncertainty surrounding the impact, duration and severity of the
COVID-19 pandemic may require the Company to adapt its plans
further in future periods, including further revisions to, or the
outright withdrawal of, the disclosed 2020 outlook.
(in
thousands)
|
|
2020 BUDGET
|
CURRENT 2020 OUTLOOK
|
Actual to
March 31, 2020(2)
|
Mining Segment
|
|
|
|
|
Mineral
Sales
|
|
791
|
852
|
852
|
Development &
Operations
|
|
(5,181)
|
(2,446)
|
(558)
|
Mineral Property
Exploration & Evaluation
|
|
(8,973)
|
(8,592)
|
(3,225)
|
|
|
(13,363)
|
(10,186)
|
(2,931)
|
Closed Mines Segment
|
|
|
|
|
Closed Mines
Environmental Services
|
|
1,014
|
1,353
|
367
|
|
|
1,014
|
1,353
|
367
|
Corporate and Other Segment
|
|
|
|
|
UPC Management
Services
|
|
2,009
|
2,686
|
817
|
Corporate
Administration & Other
|
|
(5,200)
|
(5,625)
|
(2,094)
|
|
|
(3,191)
|
(2,939)
|
(1,277)
|
Total(1)
|
|
$ (15,540)
|
$ (11,772)
|
$ (3,841)
|
Notes:
1.
Only material operations
shown.
2.
The budget is prepared on a
cash basis. As a result,
actual amounts represent a non-GAAP measure. Compared to segment
loss as presented in the Company’s unaudited interim
consolidated financial statements for the three months ended March
31, 2020, actual amounts reported above excludes $198,000 net
impact of non-cash items and other adjustments.
RISK FACTORS
The following
risk factors, and those set forth in Denison’s Annual
Information Form dated March 13, 2020 under the heading ‘Risk
Factors’, are risks and other factors Denison has identified
that could influence the Company’s business, operations,
financial condition and expectations as set forth in its
forward-looking statements. Such risk factors are not, and should
not be construed as being exhaustive, and other circumstances that
are currently not foreseen by management of Denison could arise to
negatively affect Denison’s business and its
shareholders.
COVID-19 Outbreaks
The outbreak of
the novel coronavirus (COVID-19) has disrupted and is expected to
continue to disrupt the Company’s business and operational
plans, including the Company’s previously disclosed business
and operational plans for fiscal 2020, which could have a material
adverse effect on the Company’s business, financial condition
and results of operations. Such adverse effects could be rapid and
unexpected.
The significant
potential social and economic disruptions that have emerged as a
result of the COVID-19 pandemic include (i) restrictions that
governments impose to address the COVID-19 outbreak, (ii)
restrictions that the Company and its contractors and
subcontractors impose to ensure the safety of employees and others,
(iii) shortages and / or unexpected sickness of employees, (iv)
unavailability of contractors and subcontractors, (v) interruption
of supplies from third parties upon which the Company relies, and
(vi) unusually high levels of volatility in capital markets and
limitations on availability of capital for the Company and its
joint venture counterparties.
These disruptions
may severely impact the Company’s ability to carry out its
business plans for 2020 and beyond. For example, On March 20, 2020
the Company announced a temporary suspension of activities related
to the EA for the Wheeler River project due to the process
requiring extensive in-person engagement and consultation with
various interested parties. The decision to suspend the EA was due
to significant social and economic disruptions that have emerged as
a result of the COVID-19 pandemic. The EA process is a key element
of the Wheeler River project’s critical path and as a result,
there is a risk that the development schedule and/or the capital
and operating cost projections and related economic indicators in
the Wheeler PFS Report may be varied significantly.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
It is presently
not possible to predict the extent or durations of any disruptions
to the Company’s current and future operations.
Denison has a history of negative operating cash flows and may
continue to experience negative operating cash flow
Denison has had
negative operating cash flows for recent past financial reporting
periods. Denison anticipates that it will continue to have negative
operating cash flows until such time, if at all, its Wheeler River
project goes into production. In order to fund operations until
such time, Denison will require substantial additional financing
which may be through the issuance of equity or debt securities.
There can be no assurance that additional capital or other types of
financing will be available when needed or that these financings
will be on terms favourable to Denison.
QUALIFIED PERSON
The disclosure of
scientific and technical information regarding Denison’s
material properties in this MD&A was prepared by, or reviewed
and approved by, Dale Verran, MSc, Pr.Sci.Nat., the Company’s
Vice President Exploration, or David Bronkhorst, P.Eng., the
Company’s Vice President Operations, each a Qualified Person
in accordance with the requirements of NI 43-101.
ASSAY PROCEDURES AND DATA VERIFICATION
The Company
reports preliminary radiometric equivalent grades
(‘eU3O8’), derived
from a calibrated down-hole total gamma probe, during or upon
completion of its exploration programs and subsequently reports
definitive U3O8 assay grades
following sampling and chemical analysis of the mineralized drill
core. Uranium assays are performed on split core samples by the
Saskatchewan Research Council (‘SRC’) Geoanalytical
Laboratories using an ISO/IEC 17025:2005 accredited method for the
determination of U3O8 weight %. Sample
preparation involves crushing and pulverizing core samples to 90%
passing -106 microns. The resultant pulp is digested using
aqua-regia and the solution analyzed for U3O8 weight % using
ICP-OES. Geochemical results from composite core samples are
reported as parts per million (‘ppm’) obtained from a
partial HNO3:HCl digest with
an ICP-MS finish. Boron values are obtained through NaO2/NaCO3 fusion followed
by an ICP-OES finish. All data are subject to verification
procedures by qualified persons employed by Denison prior to
disclosure. For further details on Denison’s sampling,
analysis, quality assurance program and quality control measures
and data verification procedures please see Denison's Annual
Information Form dated March 13, 2020 available on the
Company’s website and filed under the Company's profile on
SEDAR (www.sedar.com)
and in its Form 40-F available on EDGAR at www.sec.gov/edgar.shtml.
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
Certain
information contained in this MD&A constitutes
‘forward-looking information’, within the meaning of
the applicable United States and Canadian legislation concerning
the business, operations and financial performance and condition of
Denison.
Generally, these
forward-looking statements can be identified by the use of
forward-looking terminology such as ‘plans’,
‘expects’, ‘budget’,
‘scheduled’, ‘estimates’,
‘forecasts’, ‘intends’,
‘anticipates’, or ‘believes’, or the
negatives and/or variations of such words and phrases, or state
that certain actions, events or results ‘may’,
‘could’, ‘would’, ‘might’ or
‘will be taken’, ‘occur’, ‘be
achieved’ or ‘has the potential to’.
In particular,
this MD&A contains forward-looking information pertaining to
the following: Denison’s plans and objectives for 2020 and
beyond, including the impacts of COVID-19, temporary suspension of
the EA and other non-discretionary activities and the projections
made in the 2020 Outlook; the benefits to be derived from corporate
transactions; the estimates of Denison's mineral reserves and
mineral resources; exploration, development and expansion plans and
objectives, including the results of, and estimates and assumptions
within, the PFS, and statements regarding anticipated budgets,
fees, expenditures and timelines; expectations regarding
Denison’s joint venture ownership interests and the
continuity of its agreements with its partners; expectations
regarding adding to its mineral reserves and resources through
acquisitions or exploration; expectations regarding the toll
milling of Cigar Lake ores; expectations regarding revenues and
expenditures from its Closed Mines operations; expectations
regarding revenues from the UPC management contract; and the annual
operating budget and capital expenditure programs, estimated
exploration and development expenditures and reclamation costs and
Denison's share of same. Statements relating to ‘mineral
reserves’ or ‘mineral resources’ are deemed to be
forward-looking information, as they involve the implied
assessment, based on certain estimates and assumptions that the
mineral reserves and mineral resources described can be profitably
produced in the future.
Forward looking
statements are based on the opinions and estimates of management as
of the date such statements are made, and they are subject to known
and unknown risks, uncertainties and other factors that may cause
the actual results, level of activity, performance or achievements
of Denison to be materially different from those expressed or
implied by such forward-looking statements. Denison believes that
the expectations reflected in this forward-looking information are
reasonable but no assurance can be given that these expectations
will prove to be accurate and results may differ materially from
those anticipated in this forward-looking information.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
For a discussion
in respect of risks and other factors that could influence
forward-looking events, please refer to the factors discussed in
Denison’s Annual Information Form dated March 13, 2020 under
the heading ‘Risk Factors’ and under the heading
‘Risk Factors’ above. These factors are not, and should
not be construed as being exhaustive.
Accordingly,
readers should not place undue reliance on forward-looking
statements. The forward-looking information contained in this
MD&A is expressly qualified by this cautionary statement. Any
forward-looking information and the assumptions made with respect
thereto speaks only as of the date of this MD&A. Denison does
not undertake any obligation to publicly update or revise any
forward-looking information after the date of this MD&A to
conform such information to actual results or to changes in
Denison's expectations except as otherwise required by applicable
legislation.
Cautionary Note to United States Investors
Concerning Estimates of Measured, Indicated and Inferred Mineral
Resources and Probable Mineral Reserves: This MD&A may
use the terms 'measured', 'indicated' and 'inferred' mineral
resources. United States investors are advised that 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, these terms are not defined under Industry Guide 7
under the United States Securities Act and, until recently, have
not been permitted to be used in reports and registration
statements filed with the United States Securities and Exchange
Commission (‘SEC’). '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. In addition,
the terms “mineral reserve”, “proven mineral
reserve” and “probable mineral reserve” for the
purposes of NI 43-101 differ from the definitions and allowable
usage in Industry Guide 7.
Effective
February 2019, 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 and as a result, 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.
However, information regarding mineral resources or mineral
reserves in Denison’s disclosure may not be comparable to
similar information made public by United States
companies.
16
Exhibit 99.5
|
Denison Mines
Corp.
1100 – 40
University Ave
Toronto, ON M5J
1T1
www.denisonmines.com
|
PRESS
RELEASE
DENISON REPORTS RESULTS FROM Q1 2020
Toronto, ON – May 6,
2020. Denison Mines Corp. (“Denison” or the
“Company”) (DML: TSX, DNN: NYSE MKT) today filed its
Consolidated Financial Statements and Management’s Discussion
& Analysis (“MD&A”) for the quarter ended March
31, 2020. Both documents can be found on the Company’s
website at www.denisonmines.com or on SEDAR (at www.sedar.com)
and EDGAR (at www.sec.gov/edgar.shtml).
The highlights provided below are derived from these documents and
should be read in conjunction with them. All amounts in this
release are in Canadian dollars unless otherwise
stated.
David Cates, President and CEO of Denison
commented, “During the first
quarter of 2020, Denison announced several positive developments
related to the application of the In-Situ Recovery
(‘ISR’) mining method at the Company’s 90% owned
Wheeler River uranium project. These results have increased our
technical confidence in advancing the Phoenix deposit as the
Athabasca Basin’s first ISR uranium development project.
Unfortunately, also during the first quarter, the significant
social and economic disruptions created by the COVID-19 pandemic
necessitated that Denison suspend the Wheeler River Environmental
Assessment (‘EA’) and certain other activities planned
for Wheeler River in 2020. While we are disappointed to pause the
EA process, we our proud of our swift action to ensure employee
safety, support public health efforts to limit transmission of
COVID-19, and exercise prudent financial
discipline.
An important element of our approach to the temporary suspension is
the retention of all senior technical and supporting staff involved
in the advancement of Wheeler River. With our project development
team in-tact during this time, we have developed work plans that
are financially prudent and designed to make the most of this
interim opportunity to organize our efforts so that we can quickly
resume activity in support of the advancement of Phoenix, once
determined appropriate.
In recent days we have learned more
about the troubling out-break of COVID-19 in northern Saskatchewan.
Denison was a first mover in supporting several communities in
northern Saskatchewan – with both financial support and the
procurement and distribution of critical preventative health
supplies, including nearly 1,000 litres of hand sanitizer, soap,
and other essential hygiene supplies. Northern Saskatchewan
communities are resilient, and we are continuing to actively
support community-led COVID-19 response initiatives that are
foundational to achieving success against these outbreaks and
ensure the protection of Northern Saskatchewan
citizens.”
HIGHLIGHTS
■
Temporary suspension of Wheeler River Environmental Assessment
(‘EA’) amidst COVID-19 disruptions
In March 2020, in light of the significant social
and economic disruption that has emerged as a result of the
COVID-19 pandemic and in line with the Company's
commitment to ensure employee safety,
support public health efforts to limit transmission of COVID-19,
and in order to exercise prudent financial discipline, Denison
announced the decision to suspend the EA process and certain other
activities planned at Wheeler River for 2020. The decision to
temporarily suspend the EA process is expected to impact the
project development schedule outlined in the Pre-Feasibility Study
(‘PFS’) for Wheeler River, though the extent of any
such impact is currently unknown.
■
Successful completion of equity financing to provide ongoing
funding for business activities
In April
2020, Denison successfully completed a public offering of
28,750,000 common shares at a price of USD$0.20 per common share
for gross proceeds of $8,041,000 (USD$5,750,000), which includes
the full exercise of the overallotment option of 3,750,000 common
shares. The estimated net proceeds of $6,800,000 are expected to be
used to fund the Company’s business activities for the
remainder of 2020 and into 2021.
■
Uranium concentrations from initial core leach tests reported up to
four times the amount assumed in PFS for Phoenix In-Situ Recovery
(‘ISR’) operation
In December
2019, Denison announced the initiation of the next phase of ISR
metallurgical laboratory testing for uranium recovery, which will
utilize 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 the ISR mining
method at the Phoenix deposit.
The results
are expected to facilitate detailed mine and process plant planning
as part of a future Feasibility Study (‘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.
In February
2020, Denison reported that initial data from core leach tests
includes the recovery of elemental uranium concentrations, after
test startup, in the range of 13.5 grams per litre
(‘g/L’) to 39.8 g/L, with an average of 29.8 g/L over
20 days of testing (see Denison’s press release dated
February 19, 2020). This compares favourably to the previous
metallurgical test work completed to assess the use of the ISR
mining method at Phoenix – which supported a uranium
concentration of 10 g/L for the ISR processing plant design used in
the PFS.
■
Ability to achieve hydraulic conductivity values consistent with
PFS confirmed by results from 2019 ISR field test at
Phoenix
Extensive
hydrogeological data was collected during the 2019 ISR field
program to be incorporated into a hydrogeological model for
Phoenix. 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 (see Denison press release
dated February 24, 2020).
About Wheeler River
Wheeler River is the largest undeveloped uranium
project in the infrastructure rich eastern portion of
the Athabasca Basin region, in northern Saskatchewan
and is a joint venture between Denison (90% and operator) and JCU
(Canada) Exploration Company Limited (10%). The project is
host to the high-grade Phoenix and Gryphon uranium
deposits, discovered by Denison in 2008 and 2014, respectively,
estimated to have combined Indicated Mineral Resources of 132.1
million pounds U3O8 (1,809,000
tonnes at an average grade of 3.3% U3O8),
plus combined Inferred Mineral Resources of 3.0 million pounds
U3O8 (82,000
tonnes at an average grade of 1.7% U3O8).
A pre-feasibility study (‘PFS’) was
completed in late 2018, considering the potential economic merit of
developing the Phoenix deposit as an ISR operation and
the Gryphon deposit as a conventional underground mining
operation. 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
Phoenix ISR operation is estimated to have a stand-alone base case
pre-tax NPV of $930.4 million (8% discount rate),
internal rate of return (‘IRR’) of 43.3%, initial
pre-production capital expenditures of $322.5 million, and
industry leading average operating costs of US$3.33/lb
U3O8.
The PFS was prepared on a project (100% ownership) and pre-tax
basis, as each of the partners to the Wheeler River Joint Venture
are subject to different tax and other
obligations.
Further details regarding the PFS, including
additional scientific and technical information, as well as
after-tax results attributable to Denison's ownership interest, are
described in greater detail in the NI 43-101 Technical Report
titled "Pre-feasibility Study for the Wheeler River Uranium
Project, Saskatchewan, Canada" dated October 30,
2018 with an effective date of September 24, 2018.
A copy of this report is available on Denison's website and under
its profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar.shtml.
Given
recent social, financial and market disruptions, Denison has
suspended certain activities at Wheeler River, including the EA
program, which is on the critical path to achieving the project
development schedule outlined in the PFS. Given the uncertainty
associated with the duration of suspension, the Company is not
currently able to estimate the impact to the project development
schedule outlined in the PFS, and users are cautioned against
relying on the estimates provided therein regarding the start of
pre-production activities in 2021 and first production in
2024.
About Denison
Denison Mines
Corp. was formed under the laws of Ontario and is a reporting
issuer in all Canadian provinces. Denison’s common shares are
listed on the Toronto Stock Exchange (the ‘TSX’) under
the symbol ‘DML’ and on the NYSE American exchange
under the symbol ‘DNN’.
Denison is a
uranium exploration and development company with interests focused
in the Athabasca Basin region of northern Saskatchewan, Canada. The
Company’s flagship project is the 90% owned Wheeler River
Uranium Project. Denison's interests in Saskatchewan also include a
22.5% ownership interest in the McClean Lake Joint Venture
(‘MLJV’), which includes several uranium deposits and
the McClean Lake uranium mill, which is currently processing ore
from the Cigar Lake mine under a toll milling agreement, plus a
25.17% interest in the Midwest deposits and a 66.57% interest in
the J Zone and Huskie deposits on the Waterbury Lake property. The
Midwest, J Zone and Huskie deposits are located within 20
kilometres of the McClean Lake mill. In addition, Denison has an
extensive portfolio of exploration projects in the Athabasca Basin
region.
Denison is
engaged in mine decommissioning and environmental services through
its Closed Mines group (formerly Denison Environmental Services),
which manages Denison’s Elliot Lake reclamation projects and
provides post-closure mine and maintenance services to a variety of
industry and government clients.
Denison is also
the manager of Uranium Participation Corporation
(‘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’).
Technical Disclosure and Qualified Person
The disclosure of
scientific and technical information regarding Denison’s
material properties in this MD&A was prepared by, or reviewed
and approved by, Dale Verran, MSc, Pr.Sci.Nat., the Company’s
Vice President Exploration, or David Bronkhorst, P.Eng., the
Company’s Vice President Operations, each a Qualified Person
in accordance with the requirements of NI 43-101.
For more information, please contact
David Cates
|
(416) 979-1991 ext
362
|
President and Chief Executive
Officer
|
|
|
|
Sophia Shane
|
(604) 689-7842
|
Investor
Relations
|
|
|
|
Follow Denison on
Twitter
|
@DenisonMinesCo
|
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
Certain
information contained in this news release constitutes
‘forward-looking information’, within the meaning of
the applicable United States and Canadian legislation concerning
the business, operations and financial performance and condition of
Denison.
Generally, these
forward-looking statements can be identified by the use of
forward-looking terminology such as ‘plans’,
‘expects’, ‘budget’,
‘scheduled’, ‘estimates’,
‘forecasts’, ‘intends’,
‘anticipates’, or ‘believes’, or the
negatives and/or variations of such words and phrases, or state
that certain actions, events or results ‘may’,
‘could’, ‘would’, ‘might’ or
‘will be taken’, ‘occur’, ‘be
achieved’ or ‘has the potential to’.
In particular,
this news release contains forward-looking information pertaining
to the following: exploration, development and expansion plans and
objectives, including the results of, and estimates and assumptions
within, the PFS, the plans and objectives for ISR and the related
field and hydrogeological testing results, plans and objectives;
the suspension of EA activities and anticipated results of such
suspension; the impact of COVID-19 on Denison’s operations;
expectations regarding environmental and regulatory standards and
permitting processes; the estimates of Denison's mineral reserves
and mineral resources; plans for any FS, and any work to be
undertaken in respect thereto; expectations regarding
Denison’s joint venture ownership interests; and expectations
regarding the continuity of its agreements with third parties.
Statements relating to ‘mineral reserves’ or
‘mineral resources’ are deemed to be forward-looking
information, as they involve the implied assessment, based on
certain estimates and assumptions that the mineral reserves and
mineral resources described can be profitably produced in the
future.
Forward looking
statements are based on the opinions and estimates of management as
of the date such statements are made, and they are subject to known
and unknown risks, uncertainties and other factors that may cause
the actual results, level of activity, performance or achievements
of Denison to be materially different from those expressed or
implied by such forward-looking statements. For example, the
results and underlying assumptions and interpretations of the PFS
as well as the ISR field test and hydrogeological test programs
discussed herein may not be maintained after further testing or be
representative of actual conditions within the Phoenix deposit. In
addition, Denison may decide or otherwise be required to extend the
EA and/or otherwise discontinue testing, evaluation and development
work at Wheeler River, and may not complete a FS, if it is unable
to maintain or otherwise secure the necessary approvals or
resources (such as testing facilities, capital funding, etc).
Denison believes that the expectations reflected in this
forward-looking information are reasonable, but no assurance can be
given that these expectations will prove to be accurate and results
may differ materially from those anticipated in this
forward-looking information. For a discussion in respect of risks
and other factors that could influence forward-looking events,
please refer to the factors discussed in Denison’s Annual
Information Form dated March 13, 2020 under the heading ‘Risk
Factors’. These factors are not, and should not be construed
as being exhaustive.
Accordingly,
readers should not place undue reliance on forward-looking
statements. The forward-looking information contained in this news
release is expressly qualified by this cautionary statement. Any
forward-looking information and the assumptions made with respect
thereto speaks only as of the date of this news release. Denison
does not undertake any obligation to publicly update or revise any
forward-looking information after the date of this news release to
conform such information to actual results or to changes in
Denison's expectations except as otherwise required by applicable
legislation.
Cautionary Note to United States Investors
Concerning Estimates of Measured, Indicated and Inferred Mineral
Resources and Probable Mineral Reserves: This MD&A may
use the terms 'measured', 'indicated' and 'inferred' mineral
resources. United States investors are advised that 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, these terms are not defined under Industry Guide 7
under the United States Securities Act and, until recently, have
not been permitted to be used in reports and registration
statements filed with the United States Securities and Exchange
Commission (‘SEC’).
'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. In addition, the terms “mineral
reserve”, “proven mineral reserve” and
“probable mineral reserve” for the purposes of NI
43-101 differ from the definitions and allowable usage in Industry
Guide 7. Effective February 2019, 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 and as a result, 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. However, information
regarding mineral resources or mineral reserves in Denison’s
disclosure may not be comparable to similar information made public
by United States companies.
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