Wheeler River Operating Cost Summary
Cost Area
|
Phoenix
|
Gryphon
|
Total Cost
|
$000's
|
$/lb U₃O₈
|
$000's
|
$/lb U₃O₈
|
$000's
|
Mining
|
$
44,020
|
$
0.75
|
$
266,202
|
$
5.46
|
$
310,222
|
Milling
|
$
115,577
|
$
1.97
|
$
412,621
|
$
8.45
|
$
528,198
|
Transport
to Convertor
|
$
12,341
|
$
0.21
|
$
10,252
|
$
0.21
|
$
22,593
|
Site
Support / Administration
|
$
82,264
|
$
1.40
|
$
53,346
|
$
1.09
|
$
135,610
|
Total
|
$ 254,202
|
$ 4.33
|
$ 742,421
|
$ 15.21
|
$ 996,623
|
Total US$
|
|
$ 3.33
|
|
$ 11.70
|
|
U308
Sales - lbs in
000's
|
58,767
|
48,817
|
|
The project
economics have been analyzed on a pre-tax basis (100% basis) and a
Denison specific post-tax basis (90% basis, based on
Denison’s current ownership interest and reflected as a
pro-forma analysist in the PFS). Inputs into both pre-tax and
post-tax models include:
●
Estimated metallurgical
process uranium recoveries of 98.5% and 98.2% for Phoenix and
Gryphon mill feeds, respectively.
●
Project capital and operating
cost assumptions, as further described in the PFS.
●
Project schedule assumptions
from 2019 to 2043, as further described in the PFS.
●
Mine production assumptions,
as further described in the PFS.
2020 Annual Information
Form 63
●
Uranium pricing scenarios, as
follows:
o
Base case: (a) Phoenix
– based on UxC’s Q3-2018 Uranium Market Report
Composite Midpoint spot price projection, in constant (uninflated)
2018 dollars, ranging from US$29.48 to US$45.14 per pound
U3O8 during the
Phoenix mine production period; and (b) Gryphon – based on a
fixed price of US$50.00 per pound U3O8 during the
Gryphon mine production period. US$ amounts translated to CAD using
an exchange rate of 1.30 CAD/US$.
o
High case: a fixed price of
US$65.00 per pound U3O8 for both the
Phoenix and Gryphon production.
●
Saskatchewan revenue-based
royalties and surcharges applicable to uranium revenue, as follows:
a) a basic royalty of 5.0% of uranium revenue; b) a resource credit
of 0.75% of uranium revenue (which partially offsets the basic
royalty); and c) a resource surcharge of 3.0% of the value of
uranium revenue. For the purposes of these calculations, revenue
has been computed as gross uranium revenue less transportation
costs to the convertor.
●
No inflation or escalation of
revenue or costs have been incorporated.
The Wheeler River
project pre-tax indicative economic results are illustrated
below.
Pre-tax Economic Results (100% basis)
Pre-Tax Results
|
NPV 8%
|
IRR
|
Payback
|
Base
Case
|
$1,308
million
|
38.7%
|
~ 24
Months
|
High
Case
|
$2,587
million
|
67.4%
|
~ 11
Months
|
(1)
NPV and IRR are calculated to the start of pre-production
activities for the Phoenix operation in 2021.
(2)
Payback period is stated as number of months to pay back from start
of uranium production.
A post-tax
Denison-specific economic assessment includes similar inputs as the
pre-tax assessment with the following modifications:
●
Denison’s share of
project development costs is included in the project’s
capital costs along with their impact on Denison’s estimated
tax pools.
●
The impact of the
Saskatchewan Profit Royalty as estimated for Denison is
included.
●
Denison’s expected
provincial and federal income taxes payable are
included.
●
Denison’s recovery of
toll milling fees paid to the MLJV (22.5% owned by Denison) by the
WRJV for the toll milling of Gryphon ores are
incorporated.
The Wheeler River
project post-tax Denison-specific (90% basis) indicative economic
results are further detailed in the PFS, and summarized as
follows:
Post-tax Economic Results to Denison (90% basis)
Post-Tax Results
|
NPV 8%
|
IRR
|
Payback
|
Base
Case
|
$755.9
million
|
32.7%
|
~26
months
|
High
Case
|
$1,483.8
million
|
55.7%
|
~12
months
|
(1) NPV
and IRR are calculated to the start of pre-production activities
for the Phoenix operation in 2021;
(2)
Payback period is stated as number of months to pay back from start
of uranium production
2020 Annual Information
Form 64
Waterbury Lake
The Waterbury
Lake Uranium Limited Partnership (“WLULP”) is held by Denison
(66.89%) and Korea Waterbury Uranium Limited Partnership
(“KWULP”)
(33.09%) as limited partners and Waterbury Lake Uranium Corporation
(“WLUC”)
(0.02%), as general partner, with Denison and KWULP holding limited
partnership interests of 66.90% and 33.10%, respectively. Denison
holds a 60% interest in WLUC, and in aggregate, holds a 66.90%
interest in the WLULP through its limited partner and general
partner ownership interests. Denison is operator of the
project.
This project
description is based on the project’s technical report
entitled “Preliminary Economic Assessment for the Tthe
Heldeth Túé (J Zone) Deposit, Waterbury Lake Property,
Northern Saskatchewan, Canada” effective October 30, 2020
(the “Waterbury
PEA”). The main author was Mr. Gordon Graham, P.Eng of
EngComp, who is an independent Qualified Person in accordance with
NI 43-101. A copy of the Waterbury PEA is available on the
Company’s website.
The conclusions,
projections and estimates included in this description are subject
to the qualifications, assumptions and exclusions set out in the
Waterbury PEA. We recommend you read the technical report in its
entirety to fully understand the project.
Property Description, Location and Access
The Waterbury
Lake property is located within the eastern part of the Athabasca
Basin in Northern Saskatchewan, which is within Treaty 10, in
Nuhenéné / Athabasca Denesųłiné territory,
and in Métis Northern Region 1 within the Métis
Homeland.
The Waterbury
Lake project, as of December 31, 2020, is comprised of thirteen
(13) mineral dispositions, covering 40,256 ha. The THT and Huskie
Zone deposits are located within the property near its eastern
edge. All dispositions have sufficient approved assessment credits
to maintain the ground in good standing until at least
2033.
The project
dispositions are approximately 750 km by air north of Saskatoon and
about 420 km by road north of the town of La Ronge. Points North
Landing, a privately-owned service centre with accommodations and
an airfield, is located near the eastern edge of the property.
Several uranium deposits are located nearby including the
Roughrider, McClean Lake, Midwest Main, and Midwest A
deposits.
Any uranium
produced from the Waterbury Lake property is subject to uranium
mining royalties in Saskatchewan in accordance with Part III of The
Crown Mineral Royalty Regulations. See “Government Regulation
– Canadian Royalties”. Denison has a 2% net smelter
return royalty on the portion of the project that it does not own.
There are no other contractual royalties on the
property.
There are no
known environmental liabilities associated with the Waterbury Lake
property, and there are no other significant factors and risks that
may affect access, title, or the right or ability to perform work
on the property.
2020 Annual Information
Form
65
Location of the THT (formerly J Zone) and Huskie Deposits on the
Waterbury Lake project
2020 Annual Information
Form 66
History
Uranium
exploration activities have been conducted over various portions of
the Waterbury Lake mineral claims over the past 50 years. The
current Waterbury Lake mineral claims were originally staked by
Strathmore Minerals Corp. in 2004. Strathmore subsequently spun out
its Canadian assets to Fission in 2007. On January 30, 2008, KWULP
and Fission entered into an earn-in agreement for the Waterbury
Lake property, pursuant to which Fission granted KWULP the
exclusive rights to earn up to a 50% interest in the Waterbury Lake
property by funding $14,000,000 of expenditures on or before
January 30, 2011. Additionally, Fission retained an overriding
royalty interest in the property of 2% of net smelter returns. On
April 29, 2010, KWULP had fully funded its $14 million of
expenditures and consequently earned a 50% interest in the
property. Fission and KWULP subsequently formed the WLULP in
December 2010 with each party owning an equal interest. In April
2011, Fission exercised a back-in option right and increased its
interest in the WLULP to 60%.
Effective April
26, 2013, Denison acquired Fission and all of Fission’s
rights and entitlements to the Waterbury Lake property, including
the 2% net smelter returns royalty. Denison became manager of WLULP
and operator of Waterbury Lake. KWULP has not funded spending
programs of the WLULP since January 2014 and, as a result, Denison
has increased its interest in the WLULP (now 66.90%) while KWULP
has diluted.
The Waterbury
Lake uranium project currently contains two deposits: the THT
deposit and the Huskie deposit.
The THT uranium
deposit was discovered during the winter 2010 drill program. The
second drill hole of the campaign, WAT10-063A, was an angled hole
drilled from a peninsula extending into McMahon Lake. It
intersected 10.5 metres of uranium mineralization grading 1.91%
U3O8, including 1.0
metre grading 13.87% U3O8 as well as an
additional four meters grading at 0.16% U3O8. Subsequent
drilling led Fission to focus in on a significant mineralized trend
immediately adjacent to the southeastern boundary of disposition
S-107370. The maiden mineral resource estimate for the THT was
issued by Fission in 2011.
Denison first
discovered mineralization at the Huskie zone in summer 2017 with
the intersection 9.10% U3O8 over 3.7 metres,
including 16.78% U3O8 over 2 metres,
from 306.5 to 310.2 metres depth in drill hole WAT17-466A. Further
drilling in 2017 and 2018 resulted in a maiden mineral resource
estimate in December 2018.
Geological Setting, Mineralization and Deposit Types
The Waterbury
Lake property is located near the southeastern margin of the
Athabasca Basin in the southwest part of the Churchill Structural
Province of the Canadian Shield. The Athabasca Basin is a broad,
closed, and elliptically shaped, cratonic basin with an area of 425
km east-west by 225 km north-south. The bedrock geology of the area
consists of Archean and Paleoproterozoic gneisses unconformably
overlain by flat-lying, unmetamorphosed sandstones and
conglomerates of the mid-Proterozoic Athabasca Group.
The Waterbury
Lake property is located near the transition zone between two
prominent litho-structural domains within the Precambrian basement,
the Mudjatik Domain to the west and the Wollaston Domain to the
east. The Mudjatik Domain is characterized by elliptical domes of
Archean granitoid orthogenesis separated by keels of metavolcanic
and metasedimentary rocks, whereas the Wollaston Domain is
characterized by tight to isoclinal, northeasterly trending, doubly
plunging folds developed in Paleoproterozoic metasedimentary rocks
of the Wollaston Supergroup, which overlie Archean granitoid
orthogenesis identical to those of the Mudjatik
Domain.
2020 Annual Information
Form
67
The area is cut
by a major northeast-striking fault system of Hudsonian Age. The
faults occur predominantly in the basement rocks but often extend
up into the Athabasca Group due to several periods of
post-depositional movement.
The basement
beneath the Waterbury Lake project is comprised of approximately
northeast-trending corridors of metasediments wrapping around
orthogneissic domes and locally in the Discovery Bay trend an
east-west trending corridor of metasediments bounded to the north
and south by thick zones of orthogneiss that, based on
interpretation of aeromagnetic images, may represent two large dome
structures. As discussed in the Waterbury Report, the metasediments
and the orthogneiss domes are interpreted to be Paleoproterozoic
and Archean in age, respectively.
The THT deposit
is hosted within an east-west trending faulted package of variably
graphitic and pyritic metasediments bounded by orthogneiss to both
the north and south. The pelitic metasedimentary assemblage, which
ranges in thickness from 90 to 120 metres and is moderately steep
dipping to the north includes, from north to south, a roughly 50
metre thick pelitic gneiss underlain by 20 metre thick graphitic
pelitic gneiss, underlain by a 10 to 15 metre thick quartz-feldspar
wedge underlain by 20 metre thick graphitic pelitic gneiss,
underlain by a 15 to 25 metre thick pelitic gneiss, then back into
a footwall orthogneiss. There are discontinuous offsets at the
unconformity that range from a few metres to as much as ten
metres.
It is currently
defined by 268 drill holes intersecting uranium mineralization over
a combined east-west strike length of up to 700 metres and a
maximum north-south lateral width of 70 metres. The deposit trends
roughly east-west (80°) in line with the metasedimentary
corridor and cataclastic graphitic fault zone. A 45 metre east-west
intermittently mineralized zone occurs in the target area formerly
known as Highland roughly separating the THT deposit into two
segments referred to as the eastern and western lenses which are
defined over east-west strike lengths of 260 and 318 metres,
respectively. A thin zone of unconformity uranium mineralization
occurs to the north of intermittently mineralized zone which is
interpreted to represent a mineralized block that has been
displaced northwards by faulting and is referred to as the mid
lens.
Mineralization
thickness varies widely throughout the THT deposit and can range
from tens of centimetres to over 19.5 metres in vertical thickness.
In cross section, THT mineralization is roughly trough shaped with
a relatively thick central zone that corresponds with the
interpreted location of the cataclasite and rapidly tapers out to
the north and south. Locally, a particularly high-grade (upwards of
40% U3O8) but often thin
lens of mineralization is present along the southern boundary of
the metasedimentary corridor, as seen in holes WAT10-066,
WAT10-071, WAT10-091, and WAT10-103. Ten-metre step out drill holes
to the south from these high-grade holes have failed to intersect
any mineralization, demonstrating the extremely discreet nature of
mineralization.
Uranium
mineralization is generally found within several metres of the
unconformity at depth ranges of 195 to 230m below surface at the
THT. Mineralization occurs in three distinct settings: (1) entirely
hosted within the Athabasca sediments, (2) entirely within the
metasedimentary gneisses or (3) straddling the boundary between
them. A semi-continuous, thin zone of uranium mineralization has
been intersected in occasional southern THT drill holes well below
the main mineralized zone, separated by several meters of barren
metasedimentary gneiss. This mineralized zone is informally termed
the South-Side Lens and can host grades up to 3.70% U3O8, as seen in drill
hole WAT11-142.
2020 Annual Information
Form
68
The Huskie
deposit is entirely hosted within competent basement rocks below
the sub-Athabasca unconformity primarily within a faulted,
graphite-bearing pelitic gneiss (“graphitic gneiss”)
which forms part of an east-west striking, northerly dipping
package of metasedimentary rocks flanked to the north and south by
granitic gneisses. The Athabasca Group sandstones that
unconformably overlie the basement rocks are approximately 200
metres thick.
The deposit
comprises three stacked, parallel lenses (Huskie 1, Huskie 2 and
Huskie 3), which are conformable to the dominant foliation and
fault planes within the east-west striking graphitic gneiss unit.
The drilling to date suggests the grade, thickness, and number of
lenses present is controlled by the presence of northeast striking
faults which cross-cut the graphitic gneiss unit. The northeast
striking faults identified at the Huskie deposit are interpreted to
be part of the regional Midwest structure. The deposit occurs over
a strike length of approximately 210 metres, dip length of
approximately 215 metres and has an overall true thickness of
approximately 30 metres (individual lenses vary in true thickness
of between 1 metre and 7 metres). The deposit occurs at vertical
depths ranging between 240 and 445 metres below surface and 40 to
245 metres below the sub-Athabasca unconformity. The high-grade
mineralization within the lenses is comprised of massive to
semi-massive uraninite (pitchblende) and subordinate bright yellow
secondary uranium minerals occurring along fault or fracture
planes, or as replacement along foliation planes. Disseminations of
lower grade mineralization occur within highly altered rocks
proximal to fault planes. The mineralization is intimately
associated with hematite, which both occur central to a broad and
pervasive alteration envelope of white clays, chlorite and
silicification.
Exploration
With the
exception of drilling, and related work, exploration on the
Waterbury Lake property has mostly been in the form of geophysical
surveys. Airborne magnetic surveys have been flown property wide
and have been used to identify significant basement structures and
to help map basement rock types. Airborne and ground based EM
surveys have also been carried out across the property in order to
define conductive, likely graphitic basement structures that may be
associated with uranium mineralization. Additionally, ground based
induced polarization (DC-IP) and gravity surveys have aimed to
identify zones of low resistivity and negative gravity anomalies
resulting from quartz dissolution and clay alteration.
A DCIP
resistivity survey comprising 28.8 kilometres (16 lines) was
completed during October 2018. The survey was designed to map the
possible extension of the Midwest structure on to the Waterbury
Lake property and to define possible drill targets for future
testing.
No significant
geological mapping has been conducted on the Waterbury Lake
property to date as the property is predominantly covered by a
thick layer of Quaternary sediments resulting in poor outcrop
exposure; however, several reconnaissance scale surface geochemical
surveys have been undertaken on the Waterbury Lake
property.
Drilling
The THT deposit
is extremely well defined by 268 drill holes intersecting uranium
mineralization over a combined east-west strike length of up to 700
metres and a maximum north-south lateral width of 70 metres. The
mineralization thickness varies from tens of centimetres to 19.5
metres and the mineralization is found within several metres of the
unconformity at depths of 195 to 230 metres. The THT deposit has
been drilled, on average, at 10 metre by 25 metre spacings across
the deposit and in some cases a more dense drill spacing has been
applied. The genesis and structural complexity of the deposit are
well understood. There are no outlying elements of the deposit
requiring further drill testing.
2020 Annual Information
Form
69
Most recently,
the 2019 drilling program commenced in January and was concluded in
March. Activities focused on drill testing priority target areas
associated with the regional Midwest Structure, which is
interpreted to be located along the eastern portion of the
Waterbury Lake property. Target areas tested included the GB Zone
(3,385 metres; 9 drill holes), Oban South (1,127 metres; 3 drill
holes), GB Northeast (323 metres; 1 drill hole) and the Midwest
Extension (900 metres; 2 drill holes), with highlight results
described below:
GB Zone – Nine drill holes were
completed to follow-up on basement-hosted mineralization discovered
during the summer 2018 drilling program. The winter 2019 drill
holes were oriented steeply to the northeast on an approximate 100
x 100 metre spacing to test the faulted graphitic basement sequence
which dips steeply to the southwest. Basement-hosted mineralization
was intersected in drill hole WAT19-480, highlighted by 0.15%
U3O8 over 6.0 metres,
including 0.26% U3O8 over 3.0 metres.
Additional basement-hosted mineralized intercepts were obtained
approximately 100 metres to the southeast of WAT19-480 in drill
hole WAT19-486 highlighted by 0.25% U3O8 over 2.0 metres
and 0.22% U3O8 over 1.5
metres.
Oban South – The target area at
Oban South comprises the interpreted intersection of the east-west
trending Oban South graphitic conductor and the north-northeast
trending regional Midwest structure. Three drill holes were
completed as an initial test of the geological concept. The
drilling successfully identified a faulted graphitic unit within
the basement, which was hydrothermally altered, and a broad zone of
desilicification within the lower sandstone, which included 10 ppm
uranium and over 100 ppm boron within the basal 12.5 metres of
sandstone immediately overlying the unconformity.
GB Northeast – A single
reconnaissance drill hole was completed to test a coincident
airborne electromagnetic conductor and magnetic low approximately
2.5 kilometres to the northeast of the GB Zone. The drill hole
intersected moderately to locally strong sandstone alteration and
an altered and faulted graphitic pelite unit immediately below the
unconformity. The drill hole was highlighted by a discrete spike in
basement radioactivity of 1,520 counts per second
(“cps”),
measured with an RS-125 gamma hand-held spectrometer, within the
faulted graphitic pelite unit accompanied by elevated uranium (up
to 200 ppm over 0.5 metres) and pathfinder
geochemistry.
Sampling, Analysis and Data Verification
For THT, drill
core was split once geological logging, sample mark up and
photographing were completed. All drill core samples were marked
out and split at the splitting shack by employees, put into
5-gallon sample pails and sealed and transported to Points North,
Saskatchewan only prior to shipment. The samples were then
transported directly to the Saskatchewan Research Council
Geoanalytical laboratories (the “SRC Lab”) in Saskatoon,
Saskatchewan by Marsh Expediting. All geochemical, assay and bulk
density samples were split using a manual core splitter over the
intervals noted in the sample booklet. Half of the core was placed
in a plastic sample bag with the sample tag and taped closed with
fibre tape. The other half of the core was returned to the core box
in its original orientation for future reference. All drill core
samples were evenly and symmetrically split in half in order to try
and obtain the most representative sample possible. Mineralized
core samples which occur in drill runs with less than 80% core
recovery are flagged for review prior to the resource estimation
process.
Recovery through
the mineralized zone is generally good and assay samples are
assumed to adequately represent in situ uranium content. The SRC
Lab offers an ISO/IEC 17025:2005 accredited method for the
determination of U3O8 weight % in
geological samples. Rock samples are crushed to 60 % at -2 mm and a
100-200g sub sample is split out using a riffler. The sub sample is
further crushed to 90% at -106 microns using a standard puck and
ring grinding mill.
2020 Annual Information
Form
70
An aliquot of
pulp is digested in a concentrated mixture of HNO3:HCl in a hot
water bath for an hour before being diluted by deionized water.
Samples are then analyzed by a Perkin Elmer ICP-OES instrument
(models DV4300 or DV5300).
Drill core
samples collected for bulk density measurements were first weighed
as they are received and then submerged in deionized water and
re-weighed. The samples are then dried until a constant weight is
obtained. The sample is then coated with an impermeable layer of
wax and weighed again while submersed in deionized water. Weights
are entered into a database and the bulk density of the core waxed
and un-waxed (immersion method) is calculated and recorded. Not all
density samples had both density measurements recorded. Water
temperature at the time of weighing is also recorded and used in
the bulk density calculation. The detection limit for bulk density
measurements by this method is 0.01 g/cm3.
Prior to the
summer 2010 drill program, the only QAQC procedures implemented on
drill core samples from the project were those performed internally
by the SRC Lab. The in-house SRC Lab QAQC procedures involve
inserting one to two quality control samples of known value with
each new batch of 40 geochemical samples. All of the reference
materials used by the SRC Lab on the Waterbury project are
certified and provided by CANMET Mining and Mineral Services. The
SRC Lab internal QAQC program continued through the 2013 drill
program. Starting in the summer of 2010 and continuing into the
2013 drill program (discontinued after DDH WAT13-350), an internal
QAQC program was designed by Fission to independently provide
confidence in the core sample geochemical results provided by the
SRC Lab. The internal QAQC sampling program determines analytical
precision through the insertion of sample duplicates, accuracy
through the insertion of materials of “known”
composition (reference material) and checks for contamination by
insertion of blanks. Blanks, reference standards and duplicates
were inserted into the sample sequence including field duplicates
(quarter core every 1 in 20 samples), prep and pulp duplicates
(inserted by the SRC Lab every 1 in 20 samples) and blank samples
(1 sample for every mineralized drill hole). Beginning in 2012
certified, internal reference standards were used in all holes
drilled at Waterbury Lake, replacing the re-analysed low, medium
and high grade reference samples. The results of the QAQC programs
indicate there are no issues with the drill core assay data. The
data verification programs undertaken on the data collected from
the Project support the geological interpretations, and the
analytical and database quality, and therefore the data can support
mineral resource estimation.
With respect to
its work on the Huskie deposit, Denison has developed and
documented several QA/QC procedures and protocols for all
exploration projects which include the following components: (a)
Determination of precision – achieved by regular insertion of
duplicates for each stage of the process where a sample is taken or
split; (b) Determination of accuracy – achieved by regular
insertion of standards or materials of known composition; and (c)
Checks for contamination – achieved by insertion of
blanks.
The SRC
laboratory has a quality assurance program dedicated to active
evaluation and continual improvement in the internal quality
management system. The laboratory is accredited by the Standards
Council of Canada as an ISO/IEC 17025 Laboratory for Mineral
Analysis Testing and is also accredited ISO/IEC 17025:2005 for the
analysis of U3O8. The laboratory
is licensed by the CNSC for possession, transfer, import, export,
use, and storage of designated nuclear substances by CNSC Licence
Number 01784-1-09.3. As such, the laboratory is closely monitored
and inspected by the CNSC for compliance.
2020 Annual Information
Form
71
All analyses are
conducted by SRC, which has specialized in the field of uranium
research and analysis for over 30 years. SRC is an independent
laboratory, and no associate, employee, officer, or director of
Denison is, or ever has been, involved in any aspect of sample
preparation or analysis on samples from the THT or Huskie
deposits.
The SRC uses a
laboratory management system (“LMS”) for quality
assurance. The LMS operates in accordance with ISO/IEC 17025:2005
(CAN-P-4E) “General
Requirements for the Competence of Mineral Testing and Calibration
Laboratories” and is also compliant to CAN-P-1579
“Guidelines for Mineral
Analysis Testing Laboratories”. The laboratory
continues to participate in proficiency testing programs organized
by CANMET (CCRMP/PTP-MAL).
Mineral Processing and Metallurgical Testing
A preliminary
assessment of the mineralogical and leaching characteristics of a
representative selection of drill core samples from the THT deposit
was undertaken between July and December 2011 by Mineral Services
Canada.
The study was
based on a suite of 48 samples of mineralized material collected
from thirty-two drill holes (2010 and 2011 programs). These were
chosen to provide good spatial representation of the THT
mineralization as well as representing a wide range of uranium
content. The samples were derived from the half split core
remaining after the initial geochemical / assay sampling process.
All samples were submitted to the SRC Lab for comprehensive
mineralogical analysis and preparation of thin sections for
petrographic analysis. The results of mineralogical work were used,
in conjunction with spatial considerations, to define suitable
composite samples for preliminary leaching test work undertaken by
the SRC Mining and Minerals Division.
Mineralogical
analysis, utilizing XRD, quantitative mineralogical analysis
(Q-Min), petrography and SEM-EDS analysis, determined that the most
abundant uranium-bearing minerals in the THT deposit are uraninite
and/or pitchblende, and coffinite. The gangue mineralogy is
essentially comprised of various amounts of quartz, phyllosilicates
(illite-sericite, chlorite, biotite, kaolinite) and (Fe, Ti)-oxides
(hematite, goethite and anatase). Feldspars also occur in most
samples and carbonates as well as a variety of sulphides are
locally present. Ni-arsenides are recognized throughout the samples
as well. The results of the mineralogical analyses identified five
groupings of samples with ore mineralogies typically dominated by
either uranium oxide or uranium silicate phases.
Preliminary acid
leaching tests were undertaken by SRC Mining and Minerals Division
on composite samples prepared from the sample set. Only the
leaching time and rate of acid addition were considered in the
tests while the other parameters (e.g. solid percentage in the
slurry, temperature, pressure and agitation conditions) remained
fixed. A total of five composite samples were defined based on
spatial location. Acid leaching (H2SO4) was performed on
each of the composite samples for 12 hours under atmospheric
pressure and at a temperature of 55-65°C. Agitation was used
to create adequate turbulence. Sodium Chlorate was used as the
oxidant. The tests were undertaken on the assay lab rejects from
XRD analyses that were ground to 90% passing 106 microns. The
percentage of solids in the slurry was set at 50%. The only
variables were the acid addition and leaching residence time. Two
different H2SO4 dosages were used
to create an initial leaching environment with 25 mSc/cm and 55
mSc/cm, respectively. Each composite sample was split into two
subsamples labelled A and B. The A sample was used to test high
acid addition with high initial conductivity and the B sample was
used to test low acid addition with low initial conductivity. The
preliminary acid leaching tests showed that maximum extraction
rates of 97.6 % to 98.5 % U3O8 can be obtained
(depending on the acid addition) within 4 to 8 hours of leaching
time, and that the leaching efficiency was variably affected by
acid addition and leaching time.
2020 Annual Information
Form
72
Additional test
work was undertaken in 2020.
Leaching tests to determine key ISR data such as optimum reagent
addition rates at lower leaching temperatures (10 to 20 degrees
Celsius) and expected Uranium Bearing Solution (UBS) head grade
were conducted and the outcomes were used to drive reagent
quantities.
A new composite
THT east pod metallurgical testing sample was generated from 33
individual assay reject samples stored at the Saskatchewan Research
Council (SRC) facilities in Saskatoon. The individual samples,
distributed through the deposit, allowed preparation of a deposit
representative sample. The composite sample assayed 2.72%
U3O8. Acid leaching
tests at 10 deg C, using hydrogen peroxide (H2O2) oxidant, with
varying sulphuric acid (H2SO4) concentrations
(100, 80, 60 and 40 g/L) showed that extraction rates of 90%
U3O8 can be obtained
within 2 hours of leaching time, and that the leaching efficiency
was affected by acid addition.
Mineral Resource Estimates
Tthe Heldeth Túé Deposit
The Mineral
Resources for the Waterbury Lake Project comprise the THT and the
Huskie deposits. The Mineral Resource Statement presented herein
represents the Mineral Resource evaluation prepared for the
Waterbury Lake Project in accordance with NI 43-101.
The THT deposit
is estimated to contain an indicated mineral resource, using a base
case cut-off grade of 0.10% U3O8, totaling
12,810,000 lbs based on 291,000 tonnes at an average grade of 2.00%
U3O8 (100%
basis).
For the 2013
mineral resource estimate, a 3D wireframe model was constructed
based generally on a cut-off grade of 0.03 to 0.05 % U3O8 which involved
visually interpreting mineralized zones from cross sections using
histograms of U3O8. 3D rings of
mineralized intersections were created on each cross section and
these were tied together to create a continuous wireframe solid
model in Gemcom GEMS 6.5 software. The modeling exercise provided
broad controls on the size and shape of the mineralized volume.
Inverse distance squared interpolation restricted to a mineralized
domain was used to estimate tonnes, density and U3O8 grades as well as
gold, arsenic, cobalt, copper, molybdenum and nickel grades into
the block model.
A range of
resources at various U3O8 cut-off grades
(COG) has been estimated for THT. The current indicated resource is
stated using a grade cut-off of 0.10% U3O8.
Two passes were
used to interpolate all of the blocks in the wireframe, but 99% of
the blocks were filled by the first pass. The size of the search
ellipse, in the X, Y, and Z direction, used to interpolate grade
into the resource blocks is based on 3D semi-variography analysis
(completed in GEMS) of mineralized points within the resource
model. For the first pass, the search ellipse was set at 25 x 15 x
15 metres in the X, Y, Z direction respectively. For the second
pass, the search ellipse was set at 50 x 30 x 30 metres in the X,
Y, Z direction respectively. The Principal azimuth is oriented at
75º, the Principal dip is oriented at 0° and the
Intermediate azimuth is oriented at 0°.
Huskie Deposit
The Huskie
Deposit is currently estimated to contain an inferred mineral
resource, using a base case cut-of-grade of 0.10% U3O8, totaling
5,687,000 lbs U3O8 based on 268,000
tonnes at an average grade of 0.96% U3O8 (100% basis). The
Huskie Deposit resource estimate was prepared by Denison and
independently audited and verified to confirm that the mineral
resources were estimated in accordance with the widely accepted CIM
Estimation of Mineral Resource and Mineral Reserve Best Practices
Guidelines.
2020 Annual Information
Form
73
The mineral
resources may be affected by further infill and exploration
drilling that may result in increases or decreases in subsequent
mineral resource estimates. The mineral resources may also be
affected by subsequent assessments of mining, environmental,
processing, permitting, taxation, socio-economic, and other
factors.
For the 2018
mineral resource estimate, GEOVIA GEMS™ software (version
6.8) was used to build three-dimensional mineralized wireframes for
the Huskie 1, Huskie 2 and Huskie 3 lenses based on lithological
and structural data from core logs and geochemical assay (or
radiometric probe) data collected from 28 holes totaling 12,273
metres completed by Denison. A lower cut-off of 0.05% U3O8 and a minimum
thickness of 1 metre was selected for the mineralized wireframe
model.
The mineral
resource model was constrained by the mineralization wireframes.
The assay database (% U3O8 or %
eU3O8) used for
resource modelling consists of 201 assays from the 10 mineralized
boreholes, contained within the three mineralized lenses. The 0.5
metre interval assays were composited to 1.0 metre lengths. Capping
was considered, with only assay data from Huskie 2 being capped for
% U3O8. Density values
were assigned to the database based on a regression between
U3O8 and density data
pairs using the relationship determined for Denison’s Gryphon
deposit, which is also hosted within comparable basement rocks. The
validity of the Gryphon grade:density regression for the Huskie
deposit was confirmed by plotting 12 bulk dry density samples
collected by the technical report authors from the Huskie deposit.
Variograms were modelled to determine appropriate search radii for
grade estimation.
An
accumulation-like approach was used, wherein “U3O8*density”
and “density” were estimated into a three-dimensional
block model, constrained by wireframes in two passes using ID2. A
%U3O8 grade was then
calculated into each block by dividing the estimated U3O8*density by the
estimated density. A block size of 10 by 5 by 5 metres was
selected. Search radii were based primarily on visual observations
and variogram analyses. The estimation of U3O8*density and
density were based on two estimation passes. The block model was
validated using nearest neighbour estimation and by visual
inspection of the block grades relative to composites and swath
plots comparing the ID2 and nearest neighbour model. All blocks
were classified as Inferred.
No
pre-feasibility or feasibility studies have been completed to allow
conversion of the mineral resources to mineral reserves.
Consequently, no mineral reserves exist for the Waterbury Lake
property at the present time.
Mining Operations
The THT deposit
is proposed to be mined using the ISR method. The indicated Mineral
Resource estimated for the Waterbury PEA mine plan includes the THT
East pod only and is estimated at 9.7 million pounds of
U3O8 with an average
grade of 2.49% over 178,000 tonnes.
A small
percentage of the THT East pod resource has not been included in
the mine plan due to sterilization by freeze methods. Due to the
geometry of the deposit and the nature of freeze technology applied
to the deposit to allow for sufficient containment of mining fluid,
the extreme western and easternmost portions of the deposit have
not been considered in the Potentially Recoverable Resource. The
collective resource attributed to sterilization is 206,180 lbs,
representing 1.7% of the THT East pod.
2020 Annual Information
Form
74
Additionally, an
85% mining recovery factor was applied to the projected resource
available for mining to account for sweep efficiencies and
metallurgical recovery envisioned and deemed appropriate for the
nature of the THT deposit. The mining recovery factor is a product
of the metallurgical recovery and sweep efficiencies based on
knowledge gained during the project development of the Phoenix
deposit utilizing the ISR method. The sweep efficiency is defined
as the percentage of mineralized rock in contact with the lixiviant
as it circulates between the injection wells and surrounding
recovery wells. The metallurgical recovery is determined by the
amount and rate at which the uranium dissolves from the rock when
in contact with the lixiviant.
Tthe
Heldeth Túé East Pod Projected Mine Production (0%
Grade cut-off (1))
Deposit Category
|
Classification
|
Percentage
|
Tonnes
|
Pounds U3O8
(100% Basis)
|
Grade
(% U3O8)
|
Tthe
Heldeth Túé East Pod: In-Situ Resource
|
Indicated
|
100%
|
211,997
|
11,633,762
|
2.49%
|
Sterilized
Resource
|
Indicated
|
100%
|
(2,980)
|
(206,180)
|
-
|
Tthe
Heldeth Túé East Pod: Mineable Resource
|
Indicated
|
100%
|
209,017
|
11,427,582
|
-
|
Mining
Recovery Factor
|
|
85%
|
|
|
|
Projected Mine Production
|
|
|
177,664
|
9,713,445
|
2.49%
|
(1) Projected Mine
Production presented at a 0% grade cut off to reflect nonselective
ISR mining method.
The foregoing is
based upon estimated indicated mineral resources. Mineral resources
that are not mineral reserves do not have demonstrated economic
viability.
A key hydrologic
property that affects ISR mining is the permeability (hydraulic
conductivity) of the ore zone and, just as importantly, the
hydraulic communication (interconnectedness of the
permeability/porosity) across the ore zone. The ability to transmit
fluids through the ore body via well injection and recovery is
fundamental to the efficacy of ISR mining.
Denison has
performed permeameter testing of exploratory boring cores that were
recovered from the ore zone and overlying and underlying strata at
the site. The permeameter testing was conducted utilizing a
portable nitrogen gas probe permeameter adapted for testing drill
core pieces. Permeameter testing measures the matrix permeability
of the core sample. Permeameter testing was performed by applying
an epoxy ring at the sample location and sealing the permeameter
probe against the ring to ensure a tight seal. Pressure is measured
upstream of the probe tip at a sampling interval of two seconds,
and the pressure decay of the nitrogen gas injection is measured to
determine permeability in the drillcore at the sample location. In
general, the gas pressure pulse applied to the drillcore is
approximately 30 to 50 psi, and test durations are less than 20
minutes per test. This methodology was applied extensively at the
Phoenix project, with testing conducted on core at approximate 10
centimeter intervals, resulting in a total of over 1,200
measurements.
Permeameter test
results were reported for 150 core sample measurements in the THT
East pod. Of the 150 measurements, 25 were from core collected
within the mineralized zone, 43 were from the overlying Athabasca
Sandstones, with the remainder from the underlying metasedimentary
basement. The samples were further grouped into lithologic
units.
The median
hydraulic conductivity value for all of the mineralized samples for
the THT is 1.1E-10 m/s with a range of 1.0E-13 to1.7E-07 m/s. The
matrix permeability test work conducted for the Phoenix deposit at
Wheeler River and outlined in Denison’s press release dated
February 24, 2020 shows hydraulic conductivity values ranging from
1.5 x 10-13 to 5.0 x 10-6 m/s for the Phoenix Deposit:
2020 Annual Information
Form
75
the permeameter
testing results from cores collected from borings at the Phoenix
project correlates reasonably well to the hydraulic conductivity
values published from the pumping and injection tests conducted at
Phoenix. The data from Phoenix suggest that permeameter data can
provide a reasonable initial estimate of hydraulic
conductivity.
Given the
positive correlation between bulk hydraulic conductivity testing
and permeameter testing of core samples in estimating hydraulic
conductivity at the Phoenix deposit at Wheeler River, it is
reasonable to assume a similar correlation for the THT deposit
based on a comparable geologic setting. The recently conducted
permeameter testing from the THT deposit should provide a
reasonable initial estimate of hydraulic conductivity, although,
the degraded state of the core most likely biased the tested
samples toward lower permeabilities. Based on the currently
available data, the hydraulic conductivity estimated from the THT
permeameter testing appears to be notably lower than what was
estimated for the Phoenix Project.
Several factors
should be considered in the evaluation of permeability and its
potential impacts to ISR mining applied to the THT deposit. First,
as previously indicated, the samples suitable for conducting the
permeameter testing are biased toward the more dense and intact
(and likely lower permeability) core material. Second, the
inter-well spacing (distance between wells within a well pattern)
planned for the project will be less than what is proposed for the
Wheeler River project at the Phoenix deposit, which will reduce the
residence time for lixiviant to move from injection well to
extraction well. Third, application of permeability enhancement
methods will be utilized to increase the near well-bore
permeability within the mineralized zone.
In conventional
ISR operations, containment of the mining solution is typically
achieved by natural impermeable bounding layers in the geological
strata and/or by creating a natural drawdown (via pumping) of the
water table towards the ore zone. At the THT deposit, there is a
natural impermeable layer below the deposit, in the form of a
competent package of basement rocks, but the deposit is otherwise
hydraulically connected to the vast regional groundwater system in
the overlying sandstone formation that defines the Athabasca
Basin.
In order to
maintain containment, the entire deposit will be isolated by use of
an artificial and impermeable freeze wall that will surround the
deposit. The freeze wall will be established by drilling a series
of cased holes from surface and along the perimeter of the deposit,
and keyed into the basement rock. The freeze wall will be comprised
of 92 holes planned at a 7 metre spacing at the target depth of 200
metres and extend 30 metres below the unconformity elevation. The
freeze wall is planned to be drilled entirely from land on the
peninsula on McMahon Lake which extends to the eastern portion of
THT. Freeze holes will be angled out to surround the mining zone
with the minimum drilling angle limited to 45º to reduce
technical risk of drilling and installing the freeze holes.
Circulation of a low temperature brine solution in the holes will
remove heat from the ground, freezing the natural groundwater, and
establishing an impermeable frozen wall around the
deposit.
The wellfield
design included in the Waterbury PEA uses 184 wells at 7 metre
spacing arranged in a 5-spot pattern, with four injection wells
around one recovery well. The wells will be drilled from surface
within the freeze wall and angled out to penetrate the mineralized
zone at depth with a roughly 7 metre spacing.
Eight monitoring
wells will be installed outside of the freeze wall to detect and
remediate any excursion of lixiviant from the mining
zone.
2020 Annual Information
Form
76
Summary THT ISR Wellfield Wells
|
|
Number of Wells
|
Drill Metres
|
Recovery
Wells
|
66
|
20,637
|
Injection
Wells
|
118
|
36,896
|
Monitoring
Wells
|
8
|
1,750
|
Total
|
192
|
59,283
|
Proposed THT Wellfield and Freeze wall configuration
2020 Annual Information
Form 77
Processing and Recovery Operations
Final mineral processing of the UBS expected to be
recovered from the THT deposit is assumed to occur at the nearby
McClean Lake mill. The mill is owned by the MLJV of which Orano
Canada holds a 77.5% interest, and Denison Mines Inc. (a
wholly-owned subsidiary of Denison) holds a
22.5% interest.
The mill is currently processing material from the Cigar Lake mine
under a toll milling agreement (up to 18 million lbs
U3O8
per year); however, it has
approximately 6 million lbs U3O8
per year in additional licenced
processing capacity, with a total licensed capacity of up to 24
million lbs U3O8
per year. The Waterbury PEA assumes a recovery rate of 98.5%
from the processing of UBS from the THT deposit at the McClean Lake
mill.
It
is assumed that the UBS will be transported to McClean Lake in
trucks utilizing specifically designed tanks for transportation.
The trucks would return with necessary lixiviant to complete ISR
mining at THT. The McClean Lake Mill is assumed to have all
necessary infrastructure to process the UBS and provide the
lixiviant except for the facilities to provide surge storage of UBS
and lixiviant at both the THT site and at McClean
Lake.
The limited metallurgical testing of the THT
deposit and a review of the Roughrider PEA indicates that a UBS
head grade of 7 g/l may be possible through enhanced permeability
techniques commercially available. The metallurgical tests
completed during the Waterbury PEA indicate that approximately
27,000 tonnes of sulphuric acid will be required to leach the
approximate 10 million lbs of U3O8 located within the THT East pod. Approximately
9,000 tonnes of hydrogen peroxide will be required. Lixiviant
concentrations of 35 g/L hydrogen peroxide and 100 g/L of sulphuric
acid have been estimated from metallurgical leach tests. Currently
available data from metallurgical leach tests indicate no iron
needs be added to the lixiviant.
Processing
THT at the McClean Lake mill would require minor mill
modifications. THT UBS, trucked to the mill, would be stored in a
tank or pond, providing surge capacity for both the mine and mill.
From the UBS storage it would be pumped into the mill leach
circuit. The McClean mill may find it advantageous to mix the UBS
into their leaching process to take advantage of the low pH,
reducing acid addition rates for their other feed streams.
Following CCD solution clarification, the solution would be
processed as per the current mill flowsheet.
Toll milling agreement terms have not been
assessed as part of this study. UBS from the THT deposit at a
production rate 2.1 million lbs of U3O8/yr will make up a small portion of the entire
McClean Lake mill feed (estimated in the range of 10 to 15%). Final
drummed “yellowcake” will be a blend of the entire feed
stream through McClean. The THT deposit is a relatively clean ore
feed source in comparison to either Cigar Lake or the Midwest
deposits both of which have contaminates of concern, that could
result in penalties at the refinery. The scope of this study has
not considered what other ores will be co-milled with the THT UBS,
and therefore the final product make-up cannot be
determined.
Infrastructure, Permitting and Compliance Activities
The
THT site infrastructure has been modelled after the Wheeler River
Phoenix infrastructure scaled appropriately for the requirements of
the THT project.
Main
land access to the site is from Saskatchewan Highway 905, via a
road developed by Rio Tinto for their Roughrider exploration
requirements. A road extension of 1.5 km will be required to access
the ISR wellfield. Additionally, the existing road has been assumed
to be upgraded from highway 905 to facilitate trucking of UBS and
lixiviant.
2020 Annual Information
Form
78
Due
to the initial capital costs required to install a standalone
processing plant at THT, processing of the THT deposit is expected
to occur at the McClean Lake mill with the UBS being transported
via trucks from the THT site to McClean Lake on the existing
provincial road (45 kilometre one way). The trucks would complete
the return trip to THT loaded with lixiviant.
Electrical
power has been chosen for the PEA to be fed from a substation
located approximately 13 km from the THT Site. Power has been
assumed to be brought to site at 25 kV. A tradeoff study was
completed as part of this study to compare line power to power
generated at site, the conclusion of which favored line power.
Additional work studying transmission and distribution options is
required should further studies be completed.
The
planned surface infrastructure at the THT site
includes:
●
ISR wellfield
and header houses
●
Special and
clean waste pads
●
UBS and
lixiviant transportation pump stations for loading and unloading
transport trucks
●
Lixiviant
solution storage pond
●
Operations
center, complete with potable water, fire suppression and
septic
2020 Annual Information
Form
79
●
Electrical
distribution
●
Wash bay,
warehouse and shop
●
Propane and
fuel storage tanks
●
Operational
waste water management pond
The
planned infrastructure at McClean Lake includes:
●
Lixiviant
transportation truck loading station
2020 Annual Information
Form
80
At
this stage, no environmental fatal flaws have been identified for
the project. Through project design and implementation of various
best management practices, project effects on the environment are
expected to be avoided or minimized while meeting all applicable
environmental guidelines and regulations. Given the proximity of
the project to a surface waterbody it is likely that the most
significant public concern will be the potential impacts to the
lake, and it will be imperative for Denison to demonstrate how the
groundwater and surface water environments will remain protected.
The project will require completion of a provincial environmental
assessment and federal licensing which includes the review of the
environmental assessment to support a licensing decision. The
approval process is anticipated to take 24 months following the
submission of the draft licensing and environmental impact
assessment documents.
Denison
recognizes the importance of early identification of Interested
Parties, and in particular, Indigenous and non-Indigenous
Communities of Interest who may have an interest in the THT project
based on historical and / or contemporary land use activities,
known and asserted traditional territories, and / or historical
precedent with the uranium industry in the eastern Athabasca Basin
region. As noted above, also of importance consideration is the
strong interest most Interested Parties hold with respect to the
protection of water, further underscoring the need for a proper and
complete engagement strategy. As part of this process, Denison has
identified a number of potential Communities of Interest for the
THT project and can begin the process of suitable and appropriate
engagement for the stage of the development of the THT project.
This will assist Denison to determine the number and scale of
Impact Benefit Agreements, which are often an important element as
part of advancing a resource extraction project through the
regulatory process in Canada.
Capital and Operating
The capital costs
for the THT project were estimated relying on available data from
the Wheeler River PFS and the 2016 NI 43-101 Cigar lake Operation
Technical Report, as well as based on quotes and first principles
estimates. The initial capital investment is estimated at $111.6
million, sustaining capital at $24.8 million and decommissioning
costs at $25.2 million. The initial CAPEX includes a 30%
contingency and excludes $20.1 million of project evaluation costs
that must be incurred prior to construction. These costs should be
considered when assessing the merit of advancing the project to a
development decision in the future. The THT capital costs are
outlined as follows:
THT Capital
Costs ($ million) (1)
|
|
Initial
|
Sustaining
|
Total
|
Wellfield
|
49.6
|
24.4
|
74.0
|
Milling
(McClean Lake modifications)
|
1.1
|
-
|
1.1
|
Surface
facilities
|
2.1
|
-
|
2.1
|
Utilities
|
0.7
|
-
|
0.7
|
Electrical
|
5.0
|
-
|
5.0
|
Civil
& earthworks
|
5.8
|
0.4
|
6.2
|
Offsite
infrastructure
|
7.5
|
-
|
7.5
|
Decommissioning
|
-
|
19.4
|
19.4
|
Construction
Indirect
|
14.0
|
-
|
14.0
|
Subtotal
|
85.8
|
44.2
|
130.0
|
Contingency
|
25.8
|
5.8
|
31.6
|
Total Capital Costs (100%)
|
111.6
|
50.0
|
161.6
|
(1)
Initial capital costs exclude $20.1 million of estimated
pre-construction project evaluation and development
costs.
2020 Annual Information
Form
81
The operating
costs for the THT project were estimated relying on available data
from the Wheeler River PFS as well as historical milling cost from
the MLJV for Toll Milling fees estimates, as well as first
principal estimates. The total operating costs are estimated at
$155.7 million ($16.27 per lb of produced U3O8).
The THT ISR
operation is estimated to produce total mine production of 9.7
million pounds U3O8 over an
approximate six year mine-life with final processing occurring at
Denison’s 22.5% owned McClean Lake mill. The Waterbury PEA
includes an indicative timeline with pre-production activities
beginning in 2025, and with first production estimated in
2028.
THT Operating Cost per Pound
U3O8
|
|
CAD$
|
US$
|
Mining
/ Wellfield
|
5.73
|
4.31
|
Milling
/ Processing
|
8.07
|
6.07
|
Transport
to converter
|
0.53
|
0.40
|
Site
support and administration
|
1.94
|
1.46
|
Total Operating Costs per pound
U3O8
|
$16.27
|
$12.23
|
Each WLULP
partner reports its share of the operations in its own tax return.
As each partner has a unique tax profile, the THT project has been
evaluated using two different cash flow model
approaches:
●
Pre-Tax Basis - A pre-tax
discounted cash flow model which shows the economics of the project
on a 100% basis. This case includes the Saskatchewan uranium
Resource Surcharge (3.0%) and the Saskatchewan Basic Royalty (4.25%
with Resource Credit) and excludes tax specific items related to
Canadian Federal and Provincial income taxes and Saskatchewan
profit-based royalties, each of which will vary depending on each
partner’s unique facts and circumstances; and
●
Post-Tax Basis - A post-tax
discounted cash flow model, specific to Denison which shows the
economics of the project based on Denison’s ownership
interest in the project. This case includes the Saskatchewan
uranium Resource Surcharge (3.0%) and the Saskatchewan Basic
Royalty (4.25% with Resource Credit) as well as tax specific items
related to Canadian Federal and Provincial income taxes and
Saskatchewan profit-based royalties and other non-tax related items
which are unique and applicable to Denison’s economic
interest in the THT project.
The calendar
years referred to in the economic model developed for the Project
are indicative only, and should not be understood as reflecting the
Company’s plans for advancing the project. Any
advancement of the Project, or the timing thereof, is subject to
various factors, some of which may be outside of the
Company’s control. The Company has advised that it will
provide additional applicable guidance on its intentions to advance
the Project in its public disclosure, as
appropriate.
Inputs and
assumptions to both the pre-tax and post-tax cash flow models
include:
●
An estimated 3-year
pre-production period from July 2025 to June 2028;
●
Life of mine production of
177,664 tonnes at an average grade of 2.49% U3O8 containing
9,713,445 lbs of U3O8;
2020 Annual Information
Form
82
●
A project mine production
period of approximately 6 years from July 2028 to March 2033, with
production beginning in mid-2028, reaching current planned capacity
of 2.1 million lbs of U3O8 in 2029,
operating at that rate for four years and declining to 0.3 million
lbs of U3O8 in 2033, the
final year;
●
Estimated metallurgical
process uranium recoveries of 98.5%;
●
A base case uranium pricing
scenario, provided by Denison, and based on UxC’s Q3-2020
Uranium Market Outlook Report Composite Midpoint spot price
projection, in constant / uninflated dollars, ranging from US$49.43
to US$57.07 per pound U3O8 during the THT
mine production period, translated to CAD using an exchange rate of
1.33 CAD/USD;
●
Project capital costs of
$161,608,000 (100% basis). This amount excludes $20,127,000 of
pre-construction project evaluation and development capital costs
(100% basis);
●
Project operating costs of
$155,693,000 (100% basis);
●
No inflation or escalation of
revenue or costs has been incorporated. Costs are expressed in 2020
Canadian dollars;
●
Adjustments for financing
(via debt or equity) and any associated carrying charges thereon
(interest, other financing charges) are not included;
●
Adjustments for working
capital (timing adjustments in cash receipts re uranium sales and /
or CAPEX, OPEX payments) are not included; and
●
The THT economic model does
not include any intellectual property charges that may be borne by
the project in the future from the use of Wheeler River ISR related
proprietary information.
The pre-tax base
case cash flow model is based on the inputs noted above and the
following additional notes:
●
The evaluation of the project
is on a 100% ownership basis;
●
No toll milling revenue or
production credits applicable to MLJV participants is
included;
●
No Saskatchewan Profit
Royalty is included;
●
No provincial / federal tax
calculations are included; and
●
Net Present Value
(“NPV”) calculations assume a discount rate of 8% (see
Section 22.5.1 of PEA for additional information) and are measured
from the start of the pre-production period (assumed July
2025).
The THT project
economic results are quite sensitive to the price of uranium. To
illustrate the impact on the project from lower and higher uranium
price assumptions than those in the pre-tax base case, the PEA
considers an additional two pricing scenarios: (1) the Low Case,
which uses an estimated fixed uranium selling price of US$35.00/lb
U3O8 for all
production; and (2) a High Case, which uses an estimated fixed
uranium selling price of US$65.00/lb U3O8 for all
production.
A summary of the
economic results of the pre-tax low, base and high case scenarios
are illustrated in the table below.
2020 Annual Information
Form
83
Pre-tax Economic Results (100% basis) Summary – Low, Base and
High Case
|
Low Case
|
Base Case
|
High Case
|
Uranium price assumption
|
US$35 per lb U3O8
|
UxC spot price (3)
|
US$65 per lb U3O8
|
Pre-tax NPV8%
(1)
|
$38,260,000
|
$177,295,000
|
$264,932,000
|
Pre-tax IRR (1)
|
17.4%
|
39.1%
|
50.0%
|
Pre-tax payback period (2)
|
~33
months
|
~22
months
|
~18
months
|
(1)
NPV and IRR are calculated to the start of pre-production
activities for the THT project.
(2)
Payback period is stated as number of months to pay-back from the
start of January 2028.
(3)
Spot price forecast is based on “Composite Midpoint”
scenario from UxC’s Q3’2020 Uranium Market Outlook
(“UMO”) for the years 2028 to 2033 and is stated in
constant (not-inflated) dollars.
The post-tax base
case cash flow model is specific to Denison’s ownership
interest in Waterbury Lake and Denison’s specific facts and
circumstances as it relates to: a) tax pools it has available to it
to reduce taxable income for Saskatchewan Profit Royalties as well
as Canadian Federal and Provincial income taxes, and b) benefits
that accrue to it from its interest in the MLJV.
Denison, through
Denison Waterbury Corp, currently has a 66.90% ownership interest
in the WLULP. The post-tax base case cash flow model is based on
the inputs noted above, Denison’s current ownership interest
in the WLULP and the following additional items:
●
Adjustments for
Denison’s share of pre-construction project evaluation and
development capital costs including contingency, and the associated
impact on Denison’s estimated tax pools;
●
The economic
benefits associated with DMI’s 22.5% share of the MLJV as it
relates to THT toll milling at McClean;
●
The impact of
the Saskatchewan Profit Royalty applicable on uranium production;
and
●
Denison’s
expected Federal and Provincial income taxes payable (refer to
section 22.6.1 of the Waterbury PEA for additional
information).
Discounting for
NPV calculations remains at 8% (refer to Section 22.5.1 of
Waterbury PEA for additional information), and the impact of
estimated net smelter royalties of $3.8 million owing to Denison on
KWULP’s share of THT production has not been included (refer
to Section 4.5 of Waterbury PEA for additional
information).
A summary of the
economic results of the post-tax low, base and high case scenarios
are illustrated in the table below.
Post tax Economic Results Summary, Low, Base and High
Case
|
Low Case
|
Base Case
|
High Case
|
Uranium price
assumption
|
US$35 per lb U3O8
|
UxC spot price (3)
|
US$65 per lb U3O8
|
Post-tax NPV8%
(1)
|
$13,564,000
|
$72,470,000
|
$109,038,000
|
Post-tax IRR (1)
|
13.5%
|
30.4%
|
38.9%
|
Post-tax payback period (2)
|
~34
months
|
~23
months
|
~19
months
|
(1)
NPV and IRR are calculated to the start of pre-production
activities for the THT project.
(2)
Payback period is stated as number of months to pay-back from the
start of January 2028.
(3)
Spot price forecast is based on “Composite Midpoint”
scenario from UxC’s Q3’2020 Uranium Market Outlook
(“UMO”) for the years 2028 to 2033 and is stated in
constant (not-inflated) dollars.
The PEA is a
preliminary analysis of the potential viability of the
project’s mineral resources, and should not be considered the
same as a Pre-Feasibility or Feasibility Study, as various factors
are preliminary in nature. There is no certainty that the results
from the PEA will be realized. Mineral resources are not mineral
reserves and do not have demonstrated economic
viability.
2020 Annual Information
Form 84
McClean Lake
The McClean Lake
projects are owned by Denison (22.5%) and Orano Canada (77.5%).
Orano Canada is the operator/manager of the projects.
Except as
otherwise noted below, the project descriptions are based on the
Company’s technical reports: (A) the “Technical Report
on the Denison Mines Inc. Uranium Properties, Saskatchewan,
Canada” dated November 21, 2005, as revised February 16, 2006
(the “McClean Technical
Report”), (B) the “Technical Report on the Sue D
Uranium Deposit Mineral Resource Estimate, Saskatchewan,
Canada” dated March 31, 2006 (the “Sue D Report”), and (C) the
"Technical Report on the Mineral Resource Estimate for the McClean
North Uranium Deposits, Saskatchewan" dated January 31, 2007 (the
“McClean North Technical
Report”), copies of which are available on the
Company’s
profile on the SEDAR website at www.sedar.com. Scott Wilson RPA
(now Roscoe Postle Associates Inc.) was engaged to prepare and
deliver the McClean Technical Report (authored by Richard E.
Routledge, M.Sc., P.Geo.), the Sue D Report and the McClean North
Technical Report (each authored by Richard E. Routledge, M.Sc.,
P.Geo. and James W. Hendry, P.Eng.). Each author was an independent
Qualified Persons for the purposes of NI 43-101. By letter dated
October 20, 2009, Orano Canada received from Scott Wilson RPA
subsequent corrections to the resource estimate in the McClean
North Technical Report, which revisions have been incorporated
herein as applicable.
The conclusions,
projections and estimates included in this description are subject
to the qualifications, assumptions and exclusions set out in the
technical reports. We recommend you read the technical reports in
their entirety to fully understand the projects.
Property Description, Location and Access
The McClean Lake
property is located within the eastern part of the Athabasca Basin
in northern Saskatchewan, approximately 26 kilometres west of the
Rabbit Lake mine and approximately 750 kilometres north of
Saskatoon. Access to the McClean Lake site is by both road and air.
Goods are transported to the site by truck over an
all–weather road connecting with the provincial highway
system. Air transportation is provided through the Points North
airstrip about 25 kilometres from the project site.
The mineral
property consists of four (4) mineral leases covering an area of
1,147 hectares and 13 mineral claims covering an area of 3,111
hectares. The right to mine the McClean Lake deposits was acquired
under these mineral leases, as renewed from time to time. Mineral
leases are for terms of 10 years with the right to renew for
successive 10-year periods provided that the leaseholders are not
in default of the terms of the lease. A mineral claim grants the
holder the right to explore for minerals within the claim lands and
the right to apply for a mineral lease. The current mineral leases
have terms that expire between November 2025 and August 2026 and
title to the mineral claims is secure until at least 2041. It is
expected that the leases will be renewed in the normal course, as
required, to enable all the McClean Lake deposits to be fully
exploited.
The right to use
and occupy the lands at McClean Lake has been granted in a surface
lease agreement with the province of Saskatchewan. The McClean
surface lease was entered into in 2002, has a term until 2035 (33
years) and covers a land area of approximately 3,677
hectares.
The uranium
produced from the McClean Lake deposits is subject to uranium
mining royalties in Saskatchewan in accordance with Part III of The
Crown Mineral Royalty Regulations. See “Government Regulation
- Canadian Royalties.” In addition, a royalty of 2% of the
spot market price on all U3O8 produced from the
Sue E deposit is payable to the previous owner of a portion of the
deposit.
2020 Annual Information
Form
85
History
Several operators
and related joint ventures have managed the McClean Lake project
from 1968 to present. Their involvement has resulted in the
discovery of several uranium deposits including McClean North,
McClean South, JEB, Sue trend (A,B,C,D,E) and Caribou. Exploration
activities over the project have involved extensive geophysical
surveys, both airborne and ground, in addition to
exploration/delineation diamond drilling.
Uranium
production from the McClean Lake deposits at the onsite McClean
mill facility to date (current to 2020) is approximately 50 million
pounds U3O8. The ore feed for
production is almost entirely sourced from mining activities of the
Sue (A, B, C, and E) and JEB deposits.
1968 – 1974 (Gulf Minerals Canada Ltd.)
From 1968 to
1974, the entire area was held under permit (Permit #8) by Gulf
Minerals Canada Ltd. During this period, Gulf flew an airborne
radiometric survey over the area and conducted reconnaissance and
ground level surveys.
1974 – 1985 (Canadian Occidental Petroleum Ltd.)
In 1974 Gulf
reduced their land holding and allowed Permit #8 to lapse. Canadian
Occidental Petroleum Ltd. (“CanOxy”) acquired the ground and
flew a reconnaissance survey over the area in July of that same
year and preceded to stake a 260 square kilometre area called then
the Wolly property (now divided into the McClean Lake and Wolly
properties). CanOxy operated the project from 1974 to 1985 at first
without partners, then in 1977, in partnership with Inco
Ltd.
Initial
exploration consisted of geochemical and ground radiometric
prospecting with follow up drilling. Several geophysical methods
were also used, but correlation with geochemical and radiometric
anomalies was generally poor. In 1977, airborne magnetic and EM
surveys were flown over the property. The results indicated
conductive trends and helped to better define the regional basement
structure and lithology. The first significant discovery came in
1978, when the Tent Lake zone was found along a major conductive
trend. Following this discovery, the emphasis was on geophysical
rather than geochemical or radiometric targets. From 1979 to 1985,
several major discoveries were made based mainly on geophysics and
improved geological interpretations. This included the McClean
North deposit in 1979, the McClean South deposit in 1980, the Candy
Lake zone in 1981 and the JEB deposit in 1982. During this period,
CanOxy completed 781 drill holes for 118,540 metres of drilling;
most of them concentrated in the area now known as the McClean Lake
property.
1985 – 1993 (Minatco / Denison Mines / OURD)
In January 1985,
Minatco entered into a joint venture agreement with CanOxy and Inco
to become the operator of the project. Geophysical and drilling
programs were conducted throughout the project area to follow up
existing mineralized areas, and explore new zones. In 1987, an
additional zone (Pod 5) was found in McClean North. Several very
significant discoveries were also made the following year, in 1988:
two new mineralized zones, Sue A and B were found in the Sue area,
which would lead to the discovery of the highly productive Sue
trend; mineralization was indicated on the McClean South conductor,
west of the McClean Southwest pod; and additional mineralization
was found in McClean North.
2020 Annual Information
Form
86
Additional work
in the Sue area over the next few years, led to the Sue C deposit
in 1989, the Sue D deposit in 1990 and the Sue E deposit in 1991.
From 1985 to 1993, Minatco completed 1,160 drill holes for a total
of 171,090 metres of drilling on the Wolly and McClean Lake
projects, most of them concentrated again in the area now known as
the McClean Lake property. In 1990, the CanOxy-Inco JV sold out to
Minatco.
In 1993, Denison
Mines Ltd. exchanged with Minatco a 70% interest in the Midwest
Lake project for a 22.5% interest in the McClean Lake project. OURD
(Canada) Co., Ltd. (“OURD”) obtained a 7.5% interest.
Orano Canada (formerly Cogema Resources Inc.) also acquired the
uranium assets of TOTAL (Minatco in Canada) and became the operator
of the McClean Lake Project.
In 1993, the
joint venture planned to proceed with mine development. The McClean
Lake property was created, and defined as a portion of the Wolly
property outlined by a surface lease (containing the JEB, Sue and
McClean deposits).
2020 (Orano Canada / Denison)
In 2020, OURD
sold its 7.5% interest in the MLJV to Orano Canada.
Geological Setting, Mineralization and Deposit Types
The McClean Lake
uranium deposits lie near the eastern margin of the Athabasca Basin
in the Churchill Structural Province of the Canadian Shield. The
bedrock geology of the area consists of Precambrian gneisses
unconformably overlain by flat lying, unmetamorphosed sandstones
and conglomerates of the Athabasca Group. The Precambrian basement
complex is composed of an overlying Aphebian aged supracrustal
metasedimentary unit infolded into the older Archean gneisses. The
younger Helikian aged, Athabasca sandstone was deposited onto this
basement complex. The basement surface is marked by a
paleoweathered zone with lateritic characteristics referred to as
regolith.
The McClean Lake
uranium deposits which include the Sue deposits (A to E), McClean
deposits (North and South), Caribou deposit and JEB deposit are
unconformity-related deposits of the unconformity-hosted
variety.
Exploration and Drilling
Exploration
activities including ground geophysics and diamond drilling were
conducted by Orano Canada from 1994 to present. The majority of
exploration has been focused on areas of known mineralization at
McClean North/South, Sue Trend, JEB and the Tent Seal Trend. Other
target areas on the property which have also been subject to ground
geophysics and drilling include Candy Lake, Bena, Vulture and
Moffat Lake. In 2002 the discovery of Caribou, the high- grade
unconformity related uranium deposit was made approximately 2
kilometres northwest of the Sue C open pit. No other significant
discoveries have been made since 2002. During the period 1994 to
2019 Orano Canada completed 98,498 metres of drilling in 505 holes,
with no significant exploration conducted on the property in
2020.
Orano
Canada’s proposed 2021 exploration program consists of 10 to
12 hole drills for approximately 3,200 metres, which is designed to
extend the mineralization around the McClean South 8W and 8E pods
as well as test for mineralization in the surrounding
area.
Sampling, Analysis and Data Verification
The following
description applies to all exploration on the McClean Lake
property.
2020 Annual Information
Form
87
Following the
completion of a drill hole, the hole is radiometrically logged
using a downhole slim-line gamma probe. The gamma-log results
provide an immediate equivalent uranium value (eU%) for the hole,
which, except in high grade zones, is reasonably accurate. The
gamma-log results, however, have not been used for the purposes of
estimating mineral reserves or resources unless core loss is
significant. Sample intervals are generally 50 centimetres long,
except where higher or lower grade mineralization boundaries fall
within the interval. In that case, two 25 centimetre samples are
collected. Flank samples of 1.0 metre are always collected where
mineralization is located. A background geochemistry sample is
collected every 10 metres down the hole.
All sampled core
is split in half, one half retained and the other sent to an
independent laboratory. Lost core is not an issue at the McClean
project as core recovery has been good. Control samples are
routinely assayed with each batch of core samples
analyzed.
The
mineralization in the various McClean deposits is highly variable
in both mineralogy and uranium content. The principal minerals
identified in the deposits are pitchblende, uraninite and
niccolite. As a result of the highly variable uranium content, a
variable density formula was developed for the McClean deposits.
This formula was modified over the years to account for the fact
that it originally tended to underestimate U3O8 content where the
U3O8 values were
associated with high values of nickel and arsenic.
No opinion can be
given regarding security of samples in the mid to late 1970s and
the late 1980s other than to indicate that subsequent geological
work and all metallurgical and geotechnical work have confirmed the
results. All procedures reviewed follow generally accepted industry
practice. A good demonstration of the reliability is that JEB and
the Sue deposits (B and C) have been mined out and more uranium has
been recovered into stockpiles than had been estimated from surface
drilling.
Mineral Reserve and Mineral Resource Estimates
Estimation
procedures have evolved over the years. At the time of the
feasibility study in 1990, polygonal methods were used for the JEB,
the Sue A, the Sue B, the Sue C deposits and for the McClean zones.
Prior to the start of mining at the JEB deposit, the mineral
reserves were re-evaluated using computerized methods whereby block
models were constructed and geostatistical methods were
implemented. Much more recently, these mineral resource estimates
have been further refined using Whittle pit optimization software.
Appropriate tests and audits of the databases on all the McClean
deposits have been carried out by past qualified Denison personnel.
In the case of JEB, Sue C and Sue B, the amount of U3O8 recovered into
stockpiles was higher than that estimated from surface
drilling.
The Company
received the McClean Technical Report from Scott Wilson RPA (now
Roscoe Postle Associates Inc.) on its mineral reserves and mineral
resources at certain of the deposits (Sue A, B, E and McClean North
and Caribou) at McClean Lake. See “Mineral Reserves and
Mineral Resources”, above, for a summary of the mineral
resource and mineral reserve estimates remaining, after adjusting
for mining activity, as applicable.
In preparing the
McClean Technical Report, Scott Wilson RPA reviewed previous
estimates of mineral reserves and mineral resources at the
applicable properties, and examined and analyzed data supporting
the previous estimates, as well as other available data regarding
the properties, including extensive information from Orano
Canada.
2020 Annual Information
Form
88
For the Sue E
deposit, Scott Wilson RPA constructed a block model using indicator
kriging to both map out and geologically constrain mineralized
areas. A block that had at least one nearby composite within 10
metres of its centre, and that had composites from at least two
different drill holes in its search neighbourhood was classified as
part of the indicated mineral resource. The indicated mineral
resource was evaluated by Scott Wilson RPA in 2005 using Whittle
economic evaluation software showing that the Sue E pit economics
were robust and mineral reserves were estimated. Mining was
completed at the Sue E pit during 2008 recovering about 91% of the
probable mineral reserves estimated. Scott Wilson RPA classified
approximately 7.3 million of the pounds outside the current pit as
inferred mineral resources. Confirmatory drilling in 2006 by the
operator has indicated that this may be reduced to 2.0 million
pounds, but mineral resources have not been
re-estimated.
The mineral
resource estimate for the Caribou deposit is based on a block model
for which grade was interpolated using ordinary kriging. Since
there were no plans for the mining of this deposit at the date of
the McClean Technical Report, the economic potential was not
evaluated and mineral reserves were not estimated.
With respect to
the Sue D deposit, the Company received the Sue D Report in 2006,
authored by Scott Wilson RPA. Scott Wilson RPA carried out an
independent mineral resource estimate for Sue D by conventional 3-D
computer block modeling. A minimum vertical mining width of two
metres was employed with a 0.1% U3O8
cut-off.
Due to the
significant increase in the price of uranium from 2004 to 2006,
Denison engaged Scott Wilson RPA to re-evaluate the uranium
resources in the McClean North trend that are amenable to other
methods of mining. The original McClean Technical Report had only
evaluated mineral resources and mineral reserves of the high grade
portions under the assumption that they would be mined using a
blind shaft mining method. The Company received the McClean North
Technical Report on the mineral reserves and resources at the
McClean North uranium project in 2007.
The re-evaluation
of McClean North was carried out by conventional 3-D computer block
modeling. Wire frames were constructed for each of pods 1, 2 and 5.
The estimate included internal dilution, but not external dilution,
and was carried out at a 0.1% U3O8 cut-off. This
mineral resource estimate is based entirely on diamond drill
information. Block cell dimensions were selected at 8 metre model
grid east west x 5 metre model grid north south and a 2 metre bench
height or approximately 180 tonnes/block. Scott Wilson RPA
constructed a mineral resource wireframe based on kriging, and
constructed a special waste wireframe, that generally surrounds the
mineral resource wireframe, using similar kriging parameters but
with larger search distances. Subsequent to this report, the
Company and Scott Wilson RPA reviewed the block model and
estimation procedures in October 2009 and made a slight revision to
the mineral resource estimate for the McClean North
deposit.
Mining Operations
McClean Lake
consists of nine known ore deposits: JEB; Sue A, B, C, D and E;
McClean North; McClean South; and Caribou. In 1995, the development
of the McClean Lake project began. Mill construction commenced in
1995 and ore processing activities reached commercial production in
November 1999. Mining operations also commenced, and the following
deposits have been mined out to date: JEB (1996 to 1997), Sue C
(1997 to 2002), Sue A (2005 to 2006), Sue E (2005 to 2008) and Sue
B (2007 to 2008). Various test mining programs from 2006 to date
have also been conducted at McClean North.
At December 2020,
the remaining ore reserves consist of a limited quantity of
stockpiled ore from historical Sue B open pit mining operations and
test mining activities at McClean North.
2020 Annual Information
Form
89
Approximately
87,454 tonnes of Sue B ore at a grade of 0.35% U3O8 and 2,226 tonnes
of McClean Lake North ore (mined via SABRE, as defined below), at
an average grade of 0.68% U3O8, are stockpiled
on surface as at the end of 2020. Other than continued test mining
activities for SABRE, no additional mining operations are planned
at this time.
Low-grade special
waste from the mining of the JEB, Sue C, Sue A, Sue E and Sue B
deposits has been disposed of in the mined-out Sue C pit. In the
future, Cigar Lake special waste is also expected to be disposed of
in the Sue C Pit. By agreement between the CLJV and the MLJV, costs
to update the Sue Water Treatment Plan and costs to dewater the Sue
C pit for Cigar Lake special waste will be shared 50/50 between the
CLJV and MLJV.
SABRE
The MLJV is
currently assessing the Surface Access Borehole Resource Extraction
(“SABRE”) mining
method technology for extraction of the McClean North deposits. The
SABRE technology is experimental and a feasibility study has not
yet been completed. Previous field tests of the SABRE technology
have produced a small amount of ore, some of which has been
processed into U3O8 and some of which
remain in the ore stockpile at December 2020. See
“Denison’s Operations – SABRE Mining
Program” below for more information on SABRE.
Processing and Recovery Operations
Processing of the
McClean Lake ore stockpiles is anticipated to occur prior to the
end of life of the McClean Lake mill. Historical processing of the
McClean Lake orebodies through 2000 to 2010 has demonstrated strong
performance, with recoveries above 97%. The MLJV anticipates
processing of the remaining stockpiles to have similar performance
results.
Development and Production
In 2012, Orano
Canada (then AREVA) initiated an internal study evaluating the
feasibility of mining the McClean North, Caribou and Sue D deposits
via conventional underground methods. The internal study was
completed in April 2014; however, no formal technical report has
been prepared by Denison in accordance with NI 43-101 and a
production decision has been deferred indefinitely due to the low
uranium price environment.
As part of the
continuing development of the SABRE mining tool in 2021, a small
test mining program at McClean North is expected to occur with the
potential to generate some ore for future processing. See
“Denison Operations-SABRE Mining Program” for more
information on the SABRE development program and potential
processing activity for 2021.
Infrastructure, Permitting and Compliance Activities
The McClean Lake
uranium mill, one of the world’s largest uranium processing
facilities, is contracted to process ore from the Cigar Lake mine
under the Cigar Lake toll milling arrangement between the MLJV and
the CLJV. The site has been in operation since the late
1990’s and consists of the mill, a tailings management
facility, administration offices and building, camp facilities,
back-up power supply, water treatment plants and a host of other
minor facilities. The site is connected to the provincial power
grid and provincial highways. Points North Landing Airport provides
transportation to and from site for personnel on a daily
basis.
As a uranium
site, the CNSC permits the operations. On July 1, 2017 the McClean
site received a 10 year license for operations until June 30, 2027.
See “Denison’s Operations – McClean Lake Mill
License” for more details.
2020 Annual Information
Form
90
Midwest
The Midwest
project is owned by Denison (25.17%) and Orano Canada (74.83%)
pursuant to the Midwest Joint Venture Agreement. Orano Canada is
the operator of the project.
Except as
otherwise noted below, this project description is based on the
project’s technical report entitled “Technical Report
with an Updated Mineral Resource Estimate for the Midwest Property,
Northern Saskatchewan, Canada” dated March 26, 2018 (the
“Midwest Technical
Report”), a copy of which is available on the
Company’s
profile on the SEDAR website at www.sedar.com. The Midwest
Technical Report was authored by Dale Verran, MSc, P.Geo,
Pr.Sci.Nat., formerly of the Company, Chad Sorba, P.Geo, of the
Company, G. David Keller, PGeo, formerly of SRK, and Oy
Leuangthong, PEng, of SRK. G. David Keller and Oy Leuangthong were
independent qualified persons for the purposes of NI
43-101.
The conclusions,
projections and estimates included in this description are subject
to the qualifications, assumptions and exclusions set out in the
technical report. We recommend you read the technical report in its
entirety to fully understand the project.
Property Description, Location and Access
The Midwest
property is located within the eastern part of the Athabasca Basin
in northern Saskatchewan. The northern portion of the property is
located on South McMahon Lake, about one kilometre from the Points
North Landing airstrip and about 25 kilometres west by existing
roads from the McClean Lake mill on the McClean Lake property. The
site is approximately 750 km by air north of Saskatoon and about
420 km by road north of the town of La Ronge.
Access to the
Midwest property is by both road and air. Goods are transported to
the site by truck over an all-weather road connecting with the
provincial highway system. Air transportation is provided through
the Points North airstrip.
The property
consists of three (3) contiguous mineral leases, covering 1,426
hectares and contains both the Midwest Main and Midwest A deposits.
The mineral lease containing the Midwest Main deposit (ML 5115) is
556 hectares in size. Each of the mineral leases is at an annual
assessment rate of $75.00 per hectare and has sufficient approved
assessment credits to maintain the ground in good standing until
2041. There is no current production from these mineral leases.
Leases must be renewed every 10 years as part of an administrative
process.
Since the
completion of the underground test mine at the Midwest Main deposit
in 1988 and 1989, the site has been under an environmental
monitoring and site security surveillance program. At present,
there is an inactive water treatment plant, two water storage ponds
and a core storage area on the site, as well as a dam in the Mink
Arm of South McMahon Lake. All of the facilities used in the test
mine program and all of the existing surface facilities are located
on lands owned by the province of Saskatchewan. The right to use
and occupy the lands was granted in a surface lease agreement with
the province of Saskatchewan. The original surface lease agreement
of 1988 was replaced by a new agreement in 2002. This new surface
lease is valid for a period of 33 years. Obligations under the
surface lease agreement primarily relate to annual reporting
regarding the status of the environment, the land development and
progress made on northern employment and business development. The
Midwest surface lease covers an area of approximately 646
hectares.
2020 Annual Information
Form
91
Location of the Midwest Main and Midwest A deposits on the Midwest
project
Any uranium
produced from the Midwest deposits is subject to uranium mining
royalties in Saskatchewan in accordance with Part III of The Crown
Mineral Royalty Regulations. See “Government Regulation -
Canadian Royalties.” A portion of Denison's interest in the
Midwest project (i.e. 5.5% of the project reducing to 3.44% after
payout) is subject to a sliding-scale, gross overriding royalty
ranging from 2% to 4% payable to two previous owners of a portion
of the Midwest project.
2020 Annual Information
Form
92
There are no
known significant factors or risks that may affect access, title,
the right, or ability of Orano Canada to perform work at/on the
Midwest property.
History
Initial
exploration work in the vicinity of the two Midwest deposits began
in 1966. Canada Wide Mines Ltd., a subsidiary of Esso Resources
Canada Ltd., was operator of the project from 1968 to 1982. From
1968 to 1975, exploration was carried out on an exploration permit
which included the area covered by the current mineral leases. Most
of the work was concentrated on the area near South McMahon Lake
where uranium mineralized boulders were found. In 1974, the
exploration permit was changed to mineral leases.
During the winter
season of 1977, one of the holes drilled through the unconformity
encountered mineralization. In January 1978, the Midwest Main
deposit was intersected by the first drill holes. During 1978
through 1980, a further 439 holes were drilled (for a total of
about 650) to delineate the deposit and to explore the surrounding
area of the mineral leases.
In 1987, Denison
acquired a 45% interest in the Midwest project and became the
operator. An underground test mine program was completed in 1989
which confirmed the results of the surface drilling program and
identified a high grade historical mineral reserve containing 35.7
million pounds of U3O8 at an average
diluted grade of 4.5% U3O8, considered to be
mineable by underground methods. This is a historical estimate, not
being treated as current mineral reserves. During this time,
Denison also performed an EM-37 survey and geotechnical drilling
on the Midwest Main deposit. Exploration drilling was conducted to
the east (1988) and along the conductive trend to the north of
Midwest Main deposit (1989).
In 1993, the
respective owners of McClean Lake and Midwest combined their
interests to make two complementary projects with one mill at
McClean Lake. In order to accomplish this, a portion of Denison's
interest in Midwest was exchanged for an interest in McClean Lake.
This transaction, together with several related ownership changes,
resulted in Denison's ownership interest in Midwest being reduced
to 19.5% and Minatco, Orano Canada’s predecessor in title,
becoming the operator.
In 1999, Denison
increased its interest in Midwest by 5.50% through the exercise of
first refusal rights. With the uncertainty of the timing and costs
of the Midwest development and the desire to eliminate the
obligation to pay advance and future royalties on production from
Midwest, Denison decreased its interest in Midwest from 25% to
19.96% effective March 31, 2001. Orano Canada, the operator/manager
of Midwest, also reduced its interest from 70.5% to 54.84% for the
same reason.
At the end of
2004, in order to take advantage of rapidly increasing uranium
prices, Denison again increased its interest at Midwest, along with
its joint venture partners, by buying the 20.70% interest in
Midwest then held by Redstone Resources Inc. This purchase
permitted Denison to acquire a further 5.21% interest in Midwest,
bringing its interest to 25.17%. Orano Canada’s interest
increased to 69.16% and OURD’s interest increased to
5.67%.
In 2020, OURD
sold its interest in Midwest to Orano Canada.
Geological Setting, Mineralization and Deposit Types
The Midwest
deposits are classified as ‘unconformity-type’ uranium
deposits and occur approximately 200 metres below surface
straddling the unconformable contact between overlying Athabasca
Group sandstones and the underlying Paleoproterozoic and Archean
basement rocks belonging to the Wollaston-Mudjatik Transition
Zone.
2020 Annual Information
Form
93
The
north-northeast Midwest structural trend that controls the Midwest
Main and Midwest A uranium deposits follows a steeply-dipping,
graphitic pelitic gneiss, basement unit that is bounded by granitic
gneisses or granite to both the east and west. The sub-Athabasca
unconformity surface is relatively flat on a regional scale,
however there is a slight uplift along the north-northeast Midwest
trend and a generally higher elevation to the east. Fault zones in
the basement are often characterized by brecciation and strong
hydrothermal alteration with clay mineral development. These fault
zones generally extend into the overlying Athabasca Group
sandstone.
The Midwest Main
deposit is lens to cigar shaped, 600 metres long, 10 to over 100
metres wide, with thicknesses ranging from 5 metres to 10 metres.
The deposit consists of a near-massive, high-grade mineralized core
that straddles the unconformity approximately 210 metres below
surface. The high-grade core is surrounded by lower-grade, more
dispersed, fracture-controlled mineralization in both sandstone
and, in minor amounts, in basement rocks. The high-grade
mineralization forms a roughly flat-lying lensoid concentration,
with a root extending down into the basement rocks along a
steeply-dipping fault.
The Midwest A
deposit is approximately 450 metres long, 10 to 60 metres wide,
ranges up to 70 metres in thickness and occurs between 150 and 235
metres below surface. Mineralization straddles the unconformity
contact with minor amounts hosted within basement structures
immediately below the unconformity. Thicker zones of mineralization
above the unconformity are concentrated in conglomerate units at
the base of the Athabasca sandstone. Similar to Midwest Main, a
high-grade core of mineralization is surrounded by a lower-grade,
more dispersed, fracture-controlled envelope.
Exploration and Drilling
Under Orano
Canada’s operatorship, exploration activities resumed in
2004. Exploration drilling was initiated some three kilometres to
the northeast of the Midwest deposit to test ground around a
historic hole MW-338 that had returned an isolated intercept of 3.8
metres at 6.9% U3O8. Between 2005 and
2009, a further 50,831 metres of drilling was completed in 191
drill holes on the property, which discovered and delineated the
Midwest A deposit and identified and evaluated several other
mineralized areas, including the Josie Zone, lying between the
Midwest and the Midwest A deposits. 76 of these holes (20,794.9
metres) have intersected the mineralization associated with the
Midwest A deposit. Additional geophysical programs were also
conducted.
The Midwest Main
deposit was intensively drilled in the late 1970’s and 1980s.
Drill holes defining the Midwest deposit include 615 drill holes,
of which 362 are mineralized. By type, these include exploration,
shallow reconnaissance (<100 metres), and geotechnical drill
holes. Between 2004 and 2017, only 11 drill holes have been
completed on the Midwest Main deposit area under Orano
Canada’s operatorship. Four inclined geotechnical holes were
drilled in 2004 and four shallow geotechnical drill holes were
completed in 2006. Three additional exploration drill holes were
carried out within the deposit outlines in 2006 (MW-677, MW-678,
and MW-685).
No exploration
work was conducted at Midwest during the period 2010 to 2017, 2019
or 2020. The winter 2018 drill program comprised 4,709 metres in 12
completed diamond drill holes. Drilling was conducted on the Points
North conductor (6 drill holes, 2,269 metres) to test exploration
targets, and at Midwest Main (6 drill holes, 2,440 metres) to
collect additional information from the unconformity-hosted
mineralized zone and to test underlying basement targets. The
drilling validated mineralization at the Midwest Main deposit
(based on preliminary radiometric equivalent uranium results), but
did not intersect any high-grade mineralization on the Points North
conductor, or below the Midwest Main deposit within the
basement.
2020 Annual Information
Form
94
Orano
Canada’s proposed 2021 exploration activities for Midwest
include electromagnetic surveying and an exploration drill program
of approximately 8 to 11 holes for approximately 3,400
metres.
Sampling, Analysis and Data Verification
During 2017,
Orano Canada undertook a comprehensive review of the databases for
both the Midwest Main and Midwest A deposits ahead of an updated
mineral resource estimate. Concerns were identified at both
deposits that needed to be addressed to increase both the
confidence and the accuracy of the final estimate.
Given the
historic nature of the data at Midwest Main a limited amount of
data was readily available digitally: downhole gamma probe
(“probe”) data
existed only as paper logs making it previously unavailable to be
used, no comprehensive 3D geological model was available, perched
mineralization was not fully modeled, and further data QAQC was
needed. Midwest A has a much more modern data set; however, no dry
bulk density measurements were available, the latest drilling from
September 2007 to December 2009 was not taken into account in the
previous estimate, and the High Grade Zone was assigned an average
uranium grade rather than performing grade modelling. Additionally,
both deposits required new probe to chemical uranium assay grade
(“grade”)
correlations for the calculation of equivalent uranium (eU),
combination of probe and grade data based on core recovery and
probing/drilling parameters to be available for estimation, updated
lithology and structural models (geological models), and an updated
block model.
Work began with
verifying the grade data against assay certificates and a
historical nine track database from ESSO. Some discrepancies were
noted in the sample locations as well as some of the grades due to
typographical errors. When compared to the original drill logs and
the probe logs, these were able to be rectified.
The Midwest
deposits often have core loss associated with the mineralization,
due to the high amount of clay alteration and quartz dissolution
which makes core recovery while drilling difficult. This results in
gaps in the grade dataset that are typically addressed by using
probe radiometric equivalent uranium (eU) data. Digital probe data
was available for Midwest A, however for Midwest Main most of probe
data was never digitized and remained only available on paper logs.
The paper logs for 218 holes were digitized and added to the
Midwest data set. This was followed up by ensuring the probe data
was depth corrected (depth matched with grade data), as well as the
creation of new probe to grade correlations for both
deposits.
Midwest Main had
a robust density to grade correlation; however, Midwest A did not
have any dry bulk density measurements taken. The only density data
at Midwest A was in the form of specific gravity measurements which
do not take into account porosity and therefore tend to
overestimate the density. Due to the high density of uranium,
density is a vital reference for the expected tonnage of high-grade
uranium deposits, which has a direct effect on the amount of
uranium estimated. Given this uncertainty at Midwest A, previous
resource estimations were forced to use a very conservative grade
to density regression formula to avoid overestimation of resources.
During a 2017 site visit, 25 dry bulk density measurements were
taken from the remaining Midwest A drill core and sent for dry bulk
density and geochemical analyses. A new grade to density regression
formula was established showing an increase to the correlation by
approximately 10%.
2020 Annual Information
Form
95
Various chemical
assay methods have been employed at the Midwest Project prior to
Orano Canada assuming operatorship in 2004. The methods described
herein pertain to the program from 2004 onwards. Drill core with
anomalous total gamma radioactivity (>200 counts per second
utilizing a SPP2 or SPPc scintillometer) was sampled over 0.5 metre
intervals. Sampling is undertaken on site by splitting the core in
half, with one half submitted for analysis and the other half
retained in the core box for future reference. Uranium chemical
assays are performed by the SRC Lab located in Saskatoon. Sample
preparation involves crushing and pulverizing core samples to 90%
passing -106 microns. Splits of the resultant pulps are initially
submitted for multi-element ICP-MS analysis following partial
(HNO3:HCl) and total
(HF:HNO3:HClO4) digestions.
Samples with ≥ 1,000 ppm U (partial digest) are re-assayed
for U3O8 using an ISO/IEC
17025:2005 accredited method for the determination of U3O8 weight %. Pulp
splits are digested using aqua-regia and the solution analyzed for
U3O8 weight % using
ICP-OES.
For composite
exploration samples, collected over 20 metre (upper sandstone) or
10 metre intervals (lower sandstone and basement), major and trace
elements are determined using ICP-MS or ICP-OES after partial and
total digestions. Boron values are obtained through NaO2/NaCO3 fusion followed
by ICP-OES. In addition to internal checks by the SRC Lab, Orano
Canada has rigorous QAQC procedures including the insertion of
standard reference materials, blanks and field
duplicates.
For mineral
resource estimation purposes, wherever core recovery was less than
75%, the eU values derived from a calibrated downhole gamma probe
are substituted for chemical assays where possible. Core recovery
at Midwest Main is typically good with poorer recovery observed at
Midwest A. For the Midwest A and Midwest Main updated mineral
resource estimates reported herein, 64% and 16% of the assay
intervals relied on eU grades, respectively.
Orano Canada has
performed detailed QAQC and data verification, where possible, of
all datasets, which in Denison’s opinion are in accordance
with industry best practice. Denison has performed additional QAQC
and data verification of the drilling database including review of
the QAQC methods and results, verification of assay certificates
against the database assay table, review of downhole probe and eU
calculation procedures, standard database validation checks and two
site visits to the Midwest project in early 2018. Denison has
reviewed Orano Canada’s procedures and protocols and
considers them to be reasonable and acceptable for mineral resource
estimation.
Mineral Processing and Metallurgical Testing
Several programs
of metallurgical testing have been carried out on Midwest Main
mineralization. The two main studies were by Melis Engineering in
1990 and by SEPA (Service d’Études, de
Procédés et Analyses, engineering department of the Orano
Group in France) in 1998. Both studies show that good metallurgical
recovery of uranium can be achieved. The current McClean mill
milling process differs from what was planned by Melis as a
separate facility was planned in the study. The leaching tests done
by SEPA on the Midwest Main mineralization samples showed that
99.5% of uranium could be extracted using these
conditions:
● Leach
time 24 hours
● Acid
addition 120 kg/tonne
● Free acid
at end of test 25 g/l
●
Oxidation, 02 at 2 bar pressure
● Redox 470
m.v.
2020 Annual Information
Form
96
The current
process for Cigar Lake ore being processed at the McClean mill
requires an eight hour leaching time which is substantially less
than what is proposed as optimal for Midwest Main ore (24 hours).
As the mill has recently undergone upgrades, it is expected these
leaching times will be reviewed.
The test work has
demonstrated that a metallurgical recovery for uranium of 98% from
Midwest Main mineralization can be obtained.
The Midwest Main
deposit has a relatively high amount of arsenic (5-10% overall),
which could affect the water quality discharge from the mill if not
properly precipitated into the tailings. The SEPA study proposed
using ferric sulphate to precipitate the arsenic in the tailings.
Currently the mill is addressing moderate arsenic levels in the
Cigar Lake ore feeds using barium chloride and ferric sulphate to
precipitate it from solution.
Test work was
conducted by Denison in 1992 at Lakefield Research to determine if
the recovery of nickel and cobalt was feasible along with the
extraction of uranium (Lakefield Research, 1992). Test work
indicated that a precipitate with good grades of nickel and cobalt
could be produced from a raffinate solution after the arsenic and
radium are precipitated. It is estimated that an overall process
recovery of 54% for both nickel and cobalt could be
achieved.
The McClean mill
has seen many upgrades and changes since the 1992 and 1998 studies
were conducted. Review of the studies and additional metallurgical
testing will likely need to be conducted prior to assessing the
feasibility of mining of Midwest Main.
There has been no
mineral processing or metallurgical test work completed on the
Midwest A deposit.
Mineral Resource Estimates
The Company
retained SRK to independently review and audit an updated mineral
resource estimate for the Midwest project completed by Orano Canada
in November 2017. The review and audit was done in accordance with
CIM Definition Standards (2014) and NI 43-101. The Company received
a memorandum from SRK dated March 9, 2018, which was incorporated
into the Midwest Technical Report. See “Mineral Reserves and
Mineral Resources”, above, for a summary of the mineral
resource estimate for the Midwest project.
In November 2017,
Orano Canada provided Denison with a comprehensive project database
consisting of drill hole data, mineralized wireframes and block
models for both the Midwest Main and Midwest A deposits. The
Midwest database was sent to SRK to conduct review and audit of the
updated mineral resource estimate completed by Orano Canada. For
the audited mineral resource estimate, SRK used data collected from
several drilling campaigns completed between 1977 and 2009,
including a total of 156 drill holes for Midwest A and 305 drill
holes for Midwest Main. The audited mineral resource estimate
includes expanded Low Grade and High Grade zones for Midwest A and
three primary mineralized zones at Midwest Main, namely
Unconformity, Perched and Basement zones. A summary of the audited
estimation methodology and for Midwest A and Midwest Main are
described below.
The Midwest A
block model consists of two main mineralized domains, Low Grade and
High Grade zones constructed using a 0.05% U cut-off with minimum
thickness of two metres and 10.0% U cut-off with minimum thickness
of one metre, respectively. A perched zone was identified, but was
not considered for resource estimation. The Midwest A deposit
consists of data from 113 boreholes of which 69 boreholes intersect
the mineralization itself.
2020 Annual Information
Form
97
Grades are
comprised of 64% eU data, derived from a calibrated downhole gamma
probe, and 36% chemical assay data. Sample data were composited to
one metre length. An accumulation-like approach was used, wherein
GxD (where grade is in percent uranium) and density were estimated
into a three-dimensional block model, constrained by wireframes in
two passes using ordinary kriging. The grade was then calculated
into each block by dividing the estimated GxD by the estimated
density. A block size of 5 by 5 by 2 metres was selected. Search
radii were based on variogram analyses with a relatively flat
ellipsoid used aligned roughly to the unconformity
surface.
Grade capping was
not performed, however, the treatment of high grades was considered
during estimation by limiting the influence of GxD composites
greater than 20 and density composites greater than 3, to a
neighbourhood of 7.5 cubic metres within the low-grade zone.
Classification is based on drillhole spacing, with blocks
classified as Indicated only found in the sandstone and upper
basement portion of the Low Grade zone with drillhole space of 30
metres or less. The lower basement and all other sandstone blocks
are classified as inferred mineral resources.
The Midwest Main
block model considered three main mineralized domains: one
Unconformity, 19 Perched and a one Basement zone constructed using
a 0.05% U cut-off with minimum thickness of two metres. The Midwest
Main deposit consists of data from 305 boreholes that intersected
the mineralization, with new downhole gamma probe eU data for
unsampled locations or in areas of poor core recovery (less than
75% core recovery). Grades are comprised of 16% eU data, derived
from a calibrated downhole gamma probe, and 84% chemical assay
data. Sample data were
composited to one metre length.
Similar to
Midwest A, two attributes, density and GxD, were calculated into
each block using ordinary kriging, and the uranium grade was then
calculated by dividing the estimated GxD by the estimated density.
A block size of 5 by 5 by 2 metres was selected. Search radii were
based on variogram analyses with a relatively flat ellipsoid used
aligned roughly to the unconformity surface. Capping was not
performed, however, higher grade composites were limited to a
5-cubic-metre neighbourhood of influence. This was applied to all
zones, with high grade thresholds varying by zone. Classification
is based on estimation passes, with blocks classified as Indicated
only in the Unconformity zone and in regions of tight borehole
spacing up to a nominal spacing of 17.5 metres. All other blocks
are classified as inferred mineral resources.
Development and Production
In early 2007,
Orano Canada completed an internal study evaluating the feasibility
of mining the Midwest Main deposit via open pit mining methods and
processing the resulting ore at the McClean Lake mill. In November
2007, the Midwest Joint Venture partners made a formal production
decision to proceed with the development of the Midwest Main
deposit. Subsequently, in November 2008, the Midwest Joint Venture
partners announced that the development of the Midwest Main project
would be delayed for an indefinite period due to delays and
uncertainties associated with the regulatory approval process,
increasing capital and operating cost estimates and the depressed
state of the uranium market at the time. At this time, no
development or production work is planned.
Despite this
decision, the Midwest Joint Venture partners advanced the
environmental assessment process and, after several years of work,
the final version of the Midwest Project Environmental Impact
Statement (“EIS”) was submitted to provincial
and federal governments in September 2011. A Comprehensive Study
Report was drafted by the CNSC and circulated for federal,
provincial and aboriginal review, and in September 2012, the
Midwest EIS was approved.
2020 Annual Information
Form
98
Other Properties, Athabasca Basin, Saskatchewan
Denison’s
other Athabasca projects range in exploration maturity and present
numerous exploration opportunities. Denison continuously reviews
its significant land package with a view to generate new
exploration targets or other value for the Company.
During the winter
of 2020, geophysical surveys were carried out at Murphy Lake, Moon
Lake, Moon Lake North and Moon Lake South.
Results from the
2020 programs at Denison’s highest priority non-material
properties are discussed below. For Sampling, Analysis and Data
Verification Procedures with respect thereto, see “Athabasca
Exploration: Sampling, Analysis and Data
Verification”.
Moon Lake
The Moon Lake
project is a joint venture between Denison (60.10%) and Uranium One
Inc. (39.9%). Denison acts as operator on behalf of the JV. The
property consists of two contiguous claims totalling 4,309
hectares. Five holes have been drilled on the property to date,
testing interpreted northeast-trending conductors associated with
magnetic lows in the central portion of the property. Each of these
holes intersected granitic gneiss or granite immediately below the
unconformity, with no significant structure/hydrothermal
alteration. The Moon Lake project has not been explored since
Denison completed a two-hole drilling program in 2013.
In 2020, a
stepwise moving loop EM (SWML) survey, designed to identify
potential conductive stratigraphy underlying the claims' western
boundary, was completed on the Moon Lake project. In total, 7.20
line-kilometres of loop line preparation work and 55.20
line-kilometres of step loop transient electromagnetic survey
coverage were completed. The results of the survey clearly identify
the edges of a strong conductive response associated with the
conductive corridor that hosts Cameco’s Millennium deposit,
located approximately 800 metres to the west of the Moon Lake
project boundary. The strength of that conductive response fades to
the east as it crosses onto the Moon Lake project
lands.
Moon Lake North
The Moon Lake
North project is wholly-owned and operated by Denison. The property
comprises ten contiguous mineral claims totalling 1,068 hectares.
Although exploration work has been conducted on and around the
current project lands since the late 1960’s, no drilling has
been completed on the Moon Lake North project lands to
date.
The 2020 Moon
Lake North geophysics program was completed as part of the combined
2020 Moon Lake South/North Geophysics program and designed to
examine the northeastern extension of the CR-3 conductor, which
hosts mineralization to the southwest on the Moon Lake South
project and on the Crawford Lake project. A total of 25.2
kilometres of stepwise moving loop electromagnetic survey on one
survey line was completed on Moon Lake North.
The 2020 survey
successfully identified anomalous conductivity. The results suggest
that the CR-3 conductor potentially extends further into the Moon
Lake North project grounds than what was previously interpreted. A
drill program to test this interpretation is currently planned for
2021.
Moon Lake South
The Moon Lake
South Property is 75%-owned, and operated, by Denison, with the
remaining 25% owned by Canalaska Uranium Ltd.
2020 Annual Information
Form
99
The property
consists of one claim for 2,716 hectares. The 2020 Moon Lake South
geophysics program was completed as part of the combined 2020 Moon
Lake South/North Geophysics program. The 2020 survey identified
some high-priority anomalies, for which a 2021 drill program is
currently planned to test these results.
Murphy Lake
The Murphy Lake
project is wholly-owned and operated by Denison, and consists of 8
mineral claims totalling 8,686 hectares. The project is divided
into two non-contiguous claim blocks: the north block and the south
block. The north block is of particular interest as it borders ISO
Energy’s Laroque East property, which hosts the Hurricane
zone.
During winter
2020, Denison carried out a ground geophysics program on the north
block of the Murphy Lake property to further refine and resolve an
east-west conductive trend which was identified in 2013. Two
discrete conductive trends were identified over a combined strike
length of approximately 9 kilometres, interpreted to represent
graphitic basement structures. There has been no drilling done in
the immediate survey area to date, and, as such, these conductive
trends present high-priority targets for future drill
programs.
Ford Lake
The Ford Lake
project is wholly-owned and operated by Denison, and consists of
9,649 hectares in five dispositions. The project is located
approximately 40 kilometres southwest of the high-grade Phoenix
deposit. The current project lands were established by Denison in
2004, although exploration on the property has only been carried
out sporadically since the 1970’s. The bulk of the historic
exploration work was completed on claims S-107133 and S-107134,
where a complex, multiple conductor trend has been tested by
approximately 60 holes, several of which intersected sub-economic
mineralization.
A step-wise
moving-loop EM survey is planned for 2021, with the intention to
identify, for future drill programs, any conductive basement
lithologies or structural zones for exploration that were not
resolved by historical surveys.
South Dufferin
The South
Dufferin project is wholly-owned and operated by Denison and
consists of 9 mineral claims totalling 12,283 hectares. The project
lands are located just outside the Athabasca Basin's southern
margin, along the Virgin River Shear Zone, which hosts
Cameco’s high-grade, unconformity-hosted Centennial
deposit.
In August of
2020, Denison conducted a soil sampling program, of approximately
3,000 samples collected and analyzed. Four areas of interest
containing anomalous concentrations of uranium pathfinder elements
were identified from the soil survey results, and additional
testing may be undertaken to try and develop future drilling
targets.
2020 Annual Information
Form 100
Other Denison Athabasca Projects
Denison’s
other Athabasca projects range in exploration maturity and present
numerous exploration opportunities. Denison continuously reviews
its significant land package with a view to generating new
exploration targets or creating spin-out opportunities. The table
below provides a list of Denison’s Athabasca projects as at
December 31, 2020.
Projects
|
Denison
Ownership
|
JV Partner
|
# Claims
|
Hectares
|
Bachman
Lake
|
100%
|
|
5
|
11,419
|
Bell
Lake
|
100%
|
|
3
|
7,767
|
Brown
Lake
|
100%
|
|
3
|
1,755
|
Candle
Lake
|
45.08%
|
Uranium
One Inc.; JCU
|
1
|
2,595
|
Crawford
Lake
|
100%
|
|
5
|
11,800
|
Darby
|
60.10%
|
Uranium
One Inc.
|
9
|
15,392
|
Epp
Lake
|
100%
|
|
2
|
865
|
Ford
Lake
|
100%
|
|
5
|
9,649
|
Hatchet
Lake
|
70.15%
|
Eros
Resources Corp.
|
9
|
10,212
|
Hook-Carter
|
80%
|
ALX Resources
Corp.
|
8
|
24,691
|
Johnston
Lake
|
100%
|
|
6
|
17,265
|
Lynx
Lake
|
60.10%
|
Uranium
One Inc.
|
1
|
1,274
|
Mann
Lake
|
30%
|
Cameco;
Orano Canada
|
2
|
3,407
|
Marten
|
100%
|
|
2
|
5,008
|
Moon
Lake
|
60.10%
|
Uranium
One Inc.
|
2
|
4,309
|
Moon
Lake North
|
100%
|
|
10
|
1,068
|
Moon
Lake South
|
75%
|
CanAlaska
Uranium Ltd.
|
1
|
2,716
|
Murphy
Lake
|
100%
|
|
8
|
8,686
|
Packrat
|
100%
|
|
1
|
1,621
|
Park
Creek
|
49%
|
Cameco
|
8
|
7,798
|
Russell
Lake
|
37.82%
|
Cameco;
Mr. W.P. Boyko
|
1
|
355
|
South
Dufferin
|
100%
|
|
9
|
12,283
|
Torwalt
Lake
|
100%
|
|
1
|
812
|
Turkey
Lake
|
100%
|
|
1
|
3,789
|
Waterfound
|
12.32%
|
Orano
Canada; JCU
|
25
|
11,670
|
Waterfound
North
|
60.10%
|
Uranium
One Inc.
|
4
|
4,124
|
Wolly
|
21.89%
|
Orano
Canada; JCU
|
17
|
23,700
|
Wolverine
|
100%
|
|
3
|
5,036
|
2020 Annual Information
Form 101
ATHABASCA EXPLORATION: SAMPLING, ANALYSIS AND DATA
VERIFICATION
Unless otherwise specifically disclosed herein,
the following describes the procedures and protocols for all
Athabasca exploration programs operated by Denison in reference to
drill hole surveying, downhole radiometric surveying, core logging,
core sampling, sample preparation methods, analytical procedures,
Quality Assurance and Quality Control (“QAQC”) and data verification. For Sampling,
Analysis and Data Verification procedures employed by other
operators, past or present, on projects in which Denison holds an
ownership interest, refer to those project sections within the AIF,
specifically for McClean Lake, Midwest and Waterbury
Lake.
Drill Hole Surveying
Drill
collars are typically sited and surveyed in the field using a
Differential Global Positioning System (“DGPS”) to
determine accurate coordinates and elevation. The drill rig azimuth
and dip are aligned using a field compass (set to the appropriate
magnetic declination) or a rig alignment tool. The trajectory of
all drill holes is determined with a Reflex survey instrument in
single point mode, which measures the dip and azimuth of the drill
hole. Measurements are collected at approximately 50 metre
intervals down the hole.
Downhole Radiometric Probe Surveying
When possible,
all drill holes are surveyed immediately after drilling with a
downhole radiometric probe to measure natural gamma radiation. Each
survey consists of either a HPL2375 single sodium iodide (NaI)
scintillation crystal tool or a 2GHF-1000 triple gamma (one sodium
iodide crystal and two ZP1320 high flux Geiger-Mueller (GM) tubes)
tool attached to a MX-Series winch with a MGX data recorder
connected to a portable computer.
Downhole logging
measurements are completed within the drill rods for both down and
up survey runs using MSLog software provided by Mt Sopris. Logging
speeds are maintained at approximately 10 metres/minute. Individual
data recordings are stored separately for each run on a portable
laptop computer.
Total count
measurements from each survey are converted to radiometric
equivalent grade U3O8 %
(“eU3O8”)
values using conversion coefficients derived from calibration
facilities at the SRC test pits located in Saskatoon, Saskatchewan.
The calibration facilities allow for regular checks on both probes
and probing equipment and to monitor or identify maintenance issues
before field operations begin. The site consists of four
mineralized holes, with isolated uranium concentrations of 1.4,
1.6, 1.6 and 0.21 metres wide with U grades varying from 0.063,
0.29, 1.25 and 4.07%, respectively. Individual probes are
calibrated using the NaI crystal measurements a minimum of two
times per year, normally before and after the winter and summer
field seasons. Survey results are also corrected for attenuation of
signal in water and for the thickness of steel pipe in the hole. GM
tubes are checked for drift at the site; however, calibration
factors for these probes were derived separately using direct
comparisons of total count values with assay core results as high
as 80% U3O8. The
“in-situ” nature of this calibration procedure allows
for a wider spectrum of predicted results than using the SRC
calibration facilities.
The Company
typically reports eU3O8, derived from a
calibrated downhole total gamma probe, as preliminary during its
exploration programs and subsequently reports definitive assay
grades following sampling and chemical analysis of the mineralized
drill core.
2020 Annual Information
Form
102
Core Logging
Denison employs
suitably qualified persons to log all drill core in detail at
dedicated, custom-built core logging facilities proximal to
drilling operations. Routine logs completed for each drill hole
include lithology, sandstone texture, paleoweathering,
mineralization, alteration, structure (interval and point),
geotechnical and gamma (handheld scintillometer). Where deemed
necessary, additional logs may be collected to assist in
constraining geophysical survey results. These logs may include
magnetic susceptibility or other physical property measurements.
For advanced projects where mining studies may be applicable
geotechnical logs are expanded and may also include point load
testing. All logging data, together with collar and survey
information and a drill hole summary, are uploaded to a DHLogger
database with central storage on Denison’s server at the
Saskatoon office. In addition, the drill core is photographed, both
wet and dry, before it is stored at project sites either in racks
or as cross-stacks. Drill core handling and sampling protocols are
in accordance with industry best practices.
Core Sampling, Sample Preparation and Assaying
Assay Samples
Denison submits
drill core samples for chemical U3O8 assay for all
mineralized intervals, where core recovery permits. Mineralized
intervals are identified by handheld scintillometer and confirmed
by downhole gamma probe logs. All mineralized core is broken into
approximately 10 centimetre pieces and measured with a handheld
scintillometer (RS-120 or RS-125) by removing each piece of drill
core from the ambient background, noting the most pertinent
reproducible result in counts per second (“cps”), and carefully returning it
to its correct place in the core box. Any core registering over 500
cps is marked for sampling, typically over 50 centimetre intervals.
A threshold of 300 cps has been used at Wheeler River’s
Gryphon deposit since the beginning of 2017. Additional
non-mineralized ‘shoulder’ samples are marked over 50
centimetre intervals to flank both ends of the mineralized
intervals. In areas of strong mineralization, more than one sample
on either end is sometimes required. All core samples are split in
half with a hand splitter according to the sample intervals marked
on the core. One-half of the core is returned to the core box for
future reference, and the other half is tagged and sealed in a
plastic bag. Bags of mineralized samples are sealed for shipping in
metal or plastic pails depending on the radioactivity
level.
Because the
mineralized drill cores are classified as hazardous materials and
are regulated under requirements governing the transport of
dangerous goods, Denison staff have been trained in the proper
handling and transport of the cores and deliver them from the core
facility directly to the laboratory without outside
contact.
All drill core
U3O8 assays are
conducted by the SRC Lab. The assay sample preparation and
analytical procedures are as follows:
●
Drill core samples are
received by the analytical laboratory from Denison in sealed
five-gallon plastic or metal pails. Each sample is contained in a
sealed plastic bag with a sample tag. A packing slip is enclosed
that contains instructions and a sample number list. Samples are
verified against the packing slip. Any extra samples or missing
samples are noted and Denison is informed.
●
Samples are sorted and
processed according to lithology (sandstone or basement) and level
of radioactivity.
●
Sample preparation includes
drying, jaw crushing to 60% passing -2 millimetres and pulverizing
to 90% passing -106 microns.
2020 Annual Information
Form
103
●
The resultant pulp is split
and digested using a two-acid partial digest (HNO3:HCl) and a
three-acid ‘total’ digest (HF: HNO3:HClO4) and the
respective solutions analyzed for multi-elements, including
uranium, using ICP-OES (SRC Lab analytical method ICP1). Boron
values are obtained through NaO2/NaCO3 fusion followed
by ICP-OES.
●
When uranium partial values,
as obtained above, are ≥1,000 ppm, sample pulps are
re-assayed for U3O8 using SRC
Lab’s ISO/IEC 17025:2005 accredited method for the
determination of U3O8 wt%. A split of
the sample pulp is digested using aqua-regia (HCl:HNO3 in the ratio
3:1), and the solution analyzed for U3O8 wt% using
ICP-OES.F
Bulk Dry Density Sampling
Samples are
routinely collected from mineralized intersections for bulk dry
density determination as required for mineral resource estimation.
Density samples are typically collected at a frequency of one
density sample per 10 assay samples (i.e. 1 sample for every 5
metre interval), also ensuring the density samples are
representative of the uranium grade range and the different domains
of the deposit. The density samples comprise half-split core over
10 centimeter intervals, and for each sample, the depth, rock type
and gamma scinitllometer reading is recorded. Density samples are
sent to the SRC Lab for analysis, along with the mineralized core
samples for assay. At the SRC Lab, the density samples are first
weighed as received and then submerged in de-ionized water and
re-weighed. The samples are then dried until a constant weight is
obtained. The sample is then coated with an impermeable layer of
wax and weighed again while submersed in de-ionized water. Weights
are entered into a database and the bulk density of each sample is
calculated. Water temperature at the time of weighing was also
recorded and used in the bulk density calculation. Following bulk
density determination, the samples are sent for uranium assay using
SRC Lab’s ISO/IEC 17025:2005 accredited method for the
determination of U3O8 wt% in order to
ensure a direct correlation can be made between density and assay
values.
Exploration Samples
Three other types
of drill core samples are collected during routine exploration, the
results of which are used to prioritize drill holes for follow-up
exploration or determine geochemical and/or alteration vectors
toward mineralization, as follows:
1.
Composite geochemical samples
are collected over approximately 10 metre intervals in the upper
Athabasca sandstone and in fresh lithologies beneath the
unconformity (basement) and over 5 metre intervals in the basal
sandstone and altered basement units. The samples consist of 1
centimetre to 2 centimetres disks of core collected at the top or
bottom of each row of core in the box over the specified interval.
Care is taken not to cross lithological contacts or stratigraphic
boundaries. These samples are submitted to the SRC Lab for sample
preparation and multi-element analysis. The same sample preparation
procedures are used as described above for U3O8 assay samples.
The pulps are analyzed using the ICPMS Exploration Package which
includes a total digest (HF:HNO3:HCIO4) and partial
digest (HNO3:HCl) followed by
ICP-MS analysis. Boron values are obtained through NaO2/NaCO3 fusion followed
by ICP-OES.
2.
Representative/systematic
core disks (one to five centimetres in width) are collected at
regular 5 metre to 10 metre intervals throughout the entire length
of core until basement lithologies become unaltered. These samples
are analyzed for clay minerals using reflectance spectroscopy.
Samples for reflectance clay analyses are analyzed by Denison using
an ArcSpectro FT-NIR ROCKET spectrometer and sent to AusSpec
International Ltd. (AusSpec) for interpretation.
2020 Annual Information
Form
104
3.
Select spot samples are
collected from significant geological features (i.e. radiometric
anomalies, structure, alteration etc.). Core disks 1 to 2
centimetres thick are collected for reflectance spectroscopy and
split core samples are collected for geochemical analysis. The same
reflectance spectrometry or geochemical procedures as described
above are used.
These sampling
types and approaches are typical of uranium exploration and
definition drilling programs in the Athabasca Basin.
Data Handling
After the
analyses are completed, analytical data are securely sent using
electronic transmission of the results, by the SRC Lab to Denison.
The electronic results are secured using WINZIP encryption and
password protection. These results are provided as a series of
Adobe PDF files containing the official analytical results
(“assay certificates”) and a Microsoft Excel
spreadsheet file containing only the analytical results. Analytical
data received from the lab is imported directly into
Denison’s DH Logger database. The data is subject to
validation using triggers built into the database to identify blank
or standard assays that fall outside the accepted limits that
require re-analysis. Field duplicates are validated using control
charts. The laboratory is notified immediately of any problematic
samples or batches and these are re-analyzed. The lab reports assay
values that fall below the method detection limit (MDL) as
‘less than’ values (<MDL). These values are
automatically replaced with a value of half the MDL by the database
during import. The database is backed up on- and off-site every
day.
QAQC
The SRC Lab has
an internal QAQC program dedicated to the active evaluation and
continual improvement in the internal quality management system.
The laboratory is accredited by the Standards Council of Canada as
an ISO/IEC 17025 Laboratory for Mineral Analysis Testing and is
also accredited ISO/IEC 17025:2005 for the analysis of
U3O8.
The laboratory is licensed by the Canadian Nuclear Safety
Commission (CNSC) for possession, transfer, import, export, use,
and storage of designated nuclear substances by CNSC Licence Number
01784-1-09.3. As such, the laboratory is closely monitored and
inspected by the CNSC for compliance. All analyses are conducted by
the SRC Lab, which has specialized in the field of uranium research
and analysis for over 30 years. The SRC Lab is an independent
laboratory, and no associate, employee, officer, or director of
Denison is, or ever has been, involved in any aspect of sample
preparation or analysis on samples. The SRC Lab uses a Laboratory
Management System (LMS) for Quality Assurance. The LMS operates in
accordance with ISO/IEC 17025:2005 (CAN-P-4E) “General
Requirements for the Competence of Mineral Testing and Calibration
Laboratories” and is also compliant with CAN-P-1579
“Guidelines for Mineral Analysis Testing Laboratories”.
The laboratory continues to participate in proficiency testing
programs organized by CANMET (CCRMP/PTP-MAL).
The SRC Lab
routinely inserts standard reference materials and blanks into
batches of the Company’s samples as an internal check on
accuracy and contamination. Quality control samples (reference
materials, blanks, and duplicates) are included with each
analytical run, based on the rack sizes associated with the method.
Before the results leave the laboratory, the standards, blanks, and
split replicates are checked for accuracy and issued, provided the
senior scientist is fully satisfied. If for any reason, there is a
failure in an analysis, the sub-group affected will be re-analyzed
and checked again. A Corrective Action Report will be issued, and
the problem is investigated fully to ensure that any measures to
prevent the re-occurrence can and will be taken. All human and
analytical errors are, where possible, eliminated. If the
laboratory suspects any bias, the samples are re-analyzed, and
corrective measures are taken.
2020 Annual Information
Form
105
Denison
has developed several QAQC procedures and protocols for all
exploration projects to independently monitor laboratory
performance, which includes the analysis of uranium standards,
blanks, field duplicates and exploration standards, as
follows:
Uranium
Standards - Due to the
radioactive nature of the standard material, insertion of the
standard materials is preferable at the SRC Lab instead of in the
field. During sample processing, the appropriate standard grade is
determined, and an aliquot of the appropriate standard is inserted
into the analytical stream for each batch of materials assayed.
Uranium standards are typically inserted at a minimum rate of 1 in
every 40 samples. For the Wheeler River project up until the end of
2018, Denison used standards provided by Joint Venture partner
Cameco for uranium assays. Six Cameco uranium assay standards were
prepared for use in monitoring the accuracy of uranium assays
received from the laboratory. For Wheeler River from 2019 and
onward, and for other Denison projects, a suitable matrix-matched
Certified Reference Material (“CRM”) is used as a
standard.
Blanks
- Denison employs a lithological blank
composed of quartzite to monitor the potential for contamination
during sampling, processing, and analysis. The selected blank
consists of a material that contains lower contents of
U3O8
than the sample material but is still
above the detection limit of the analytical process. Due to the
sorting of the samples submitted for assay by the SRC Lab based on
radioactivity, the blanks employed must be inserted by the SRC Lab
after this sorting takes place in order to ensure that these
materials are ubiquitous throughout the range of analytical grades.
In effect, if the individual geologists were to submit these
samples anonymously, they would invariably be relegated to the
minimum radioactive grade level, preventing their inclusion in the
higher radioactive grade analyses performed by the SRC Lab. Blanks
are typically inserted at a minimum rate of 1 in every 40 samples.
For the Wheeler River project up until the end of 2018, Denison
used blanks provided by Joint Venture partner Cameco. For Wheeler
River from 2019 and onward, and for other Denison projects, another
suitable blank material is used, as provided by the SRC
Lab.
Field
Duplicates - The Company
inserts duplicate samples in the sample stream as a check on the
precision of the SRC Lab. Core duplicates are prepared by
collecting a second sample of the same interval, through splitting
the original sample, or other similar technique, and are submitted
as an independent sample. Duplicates are typically submitted at a
minimum rate of one per 25 samples. The collection may be further
tailored to reflect field variation in specific rock types or
horizons.
Exploration
Standards – Denison has
prepared three in-house ‘exploration standards’ to
independently monitor laboratory performance during the processing
of routine drill core exploration samples. These standards aim to
test laboratory accuracy and precision for a variety of trace
metals at low levels, as required for Athabasca uranium
exploration.
Assay Checks
– In addition to the QAQC
described above, up until the end of 2018, Denison sent one in
every 25 U3O8
assay samples to the SRC Lab’s
Delayed Neutron Counting (DNC) laboratory, a separate umpire
facility located at the SRC Lab in Saskatoon, to compare the
uranium values using two different methods, by two separate
laboratories. All radioactive samples are monitored and recorded as
per CNSC licence 01784-1-09.0. Decommissioning of the SRC
Lab’s DNC facility is planned for early 2019. The SRC Labe is
planning to have an X-ray fluorescence (“XRF”) lab
running in the spring of 2019 for umpire analyses, which will
operate on a similar independent basis as the DNC facility.
Furthermore, downhole radiometric probe results provide equivalent
uranium data (eU3O8)
that is used internally by the Company for comparisons with the SRC
Lab U3O8
results.
2020 Annual Information
Form
106
Data Verification
Denison
engages with independent consultants for estimation of mineral
resources on its mineral properties, in accordance with CIM
Standards and NI 43-101, as well as other studies, including the
PFS and ISR field testing and engineering studies. In this regard,
the independent consultants undertake rigorous data verification,
including, but not limited to, Denison’s field procedures,
databases and assay results.
Prior to public disclosure of drilling results,
including preliminary radiometric equivalent grades
(“eU3O8”)
and chemical assay grades (“U3O8”),
the results are subject to data verification by Qualified Persons
employed by Denison. This includes checks of 10 to 20% of the
results (typically as composited intervals) against non-composited
eU3O8 determinations and laboratory assay
certificates.
DENISON’S OPERATIONS
McClean Lake Mill
The MLJV owns a
state of the art uranium processing facility located on the eastern
edge of the Athabasca Basin in northern Saskatchewan, approximately
750 kilometres north of Saskatoon. Orano Canada is the
operator/manager of the facility.
The McClean Lake
mill is specially designed and constructed to process high grade
uranium ores in a safe and environmentally responsible manner. The
mill uses sulphuric acid and hydrogen peroxide leaching and a
solvent extraction recovery process to extract and recover the
uranium product from the ore. In addition to the mill facility,
other infrastructure on the site includes a sulphuric acid plant, a
ferric sulphate plant, an oxygen plant, an electricity transmission
line tied into the provincial power grid, a 14 megawatt back-up
diesel power plant, warehouses, shops, offices and living
accommodations for site personnel.
In 2016, an
expansion of the mill was completed and an increase to the licensed
capacity of the mill was approved – resulting in an increase
to the licensed production capacity of the mill to 24 million
pounds U3O8 per year. This
increased licensed capacity allowed for the processing of 100% of
ore production from the Cigar Lake mine, expected to be 18 million
pounds U3O8 per year, and
provides the flexibility for the mill to process ore from other
sources in the future.
Operations
The McClean Lake
mill began production of uranium concentrates in 1999, with the
first ore fed to the mill on June 22, 1999 and commercial
production achieved on November 1, 1999. The mill operated until
the end of June 2010, producing approximately 50 million pounds
U3O8, when it was
placed on stand-by due to a lack of ore. In 2014, the McClean Lake
mill re-commenced operations with the delivery of ore shipments
from the Cigar Lake Mine, owned by the CLJV and operated by Cameco.
In 2014, the mill processed over 456,800 pounds of U3O8 with a 97.5%
recovery rate. Mill feed consisted of a blend of Cigar Lake ores
and stockpiled Sue B and McClean Lake North ores (mined via SABRE).
In 2015, production ramped up and the mill produced approximately
11.3 million pounds of U3O8 with a 98.9%
recovery rate.
In 2016, the mill
produced 17.3 million pounds of U3O8 with a 99%
recovery, and mill feed was all Cigar Lake ore. From 2017 to 2019,
the mill has produced just over 18.0 million pounds of
U3O8
per year, processing 100% mill feed from Cigar Lake with recoveries
at approximately 99%.
2020 Annual Information
Form
107
On March 23,
2020, in response to the onset of 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. In parallel, the
operator of the MLJV announced that the McClean Lake mill would
also suspend operations for the duration of the CLJV shutdown. Mine
and mill operations restarted in September 2020; however, in
December 2020, the CLJV announced another temporary suspension of
production at the Cigar Lake mine, and the MLJV announced that the
operations at the mill would again be temporarily suspended.
Operations remain suspended and, at this time, the duration of the
current suspension is unknown.
The table below
shows the operating statistics for McClean Lake over the last five
years.
McClean Lake Operations
|
2020
|
2019
|
2018
|
2017
|
2016
|
Ore Milled
(thousand tonnes)
|
27,773
|
45,456
|
42,624
|
36,374
|
36,682
|
Average Grade (%
U3O8)
|
17.19
|
17.89
|
19.19
|
22.78
|
21.39
|
MLJV Production
(thousand pounds U3O8)
|
-
|
-
|
-
|
-
|
-
|
Denison’s
share MLJV Production (thousand pounds U3O8)
|
-
|
-
|
-
|
-
|
-
|
Toll Mill
Production (thousand pounds U3O8)
|
10,069
|
18,012
|
18,018
|
18,015
|
17,333
|
During the fourth
quarter of 2019, the McClean Lake Union Unifor Local 48-S ratified
a new collective bargaining agreement. The new three-year agreement
includes a new two-weeks-in two-weeks-out rotation, which was
implemented in 2020.
For information
pertaining to taxes and royalties, see “Government Regulation
– Saskatchewan Royalties” and “Government
Regulation – Canadian Income and Other
Taxes.”
Mill Licence
The McClean Lake
site is operated under various permits, licences, leases and claims
granted and renewed from time to time, all of which are currently
in good standing. Several key regulatory achievements were
completed in 2017 for McClean Lake: (a) the issuance by the CNSC of
a 10 year license for operation of both McClean and Midwest
projects; (b) the receipt of renewal of provincial approvals to
operate for a 6 year term, expiring on October 31, 2023; and (c)
CNSC approval to expand the existing tailings facility up to an
elevation of 448 metres above sea level (“m ASL”). Historically CNSC issued
Mine Operating Licences were granted for a 5 year term, but in 2009
the McClean Lake operations received an 8 year term and in 2017 was
granted a further 10 year term: UMOL-MINEMILL-McLEAN.00/2017 (the
“Mine Operating
License”) which is valid for the period July 1,
2017 to June 30, 2027. In addition to renewal of all previously
licensed activities, the current licence authorizes mining of the
McClean North deposits using hydraulic borehole mining methods
(SABRE) and includes the care and maintenance activities at the
Midwest site.
Tailings Disposal
The disposal of
mill tailings in an environmentally acceptable manner has led to
advances in the design and construction of new tailings management
facilities. In the McClean tailings management facility
(“TMF”),
tailings are deposited sub-aqueously from a barge. This procedure
minimizes tailings segregation, reduces concerns of freezing and
dust generation, and controls radiation and radon emissions from
the pond. This facility has been designed to receive tailings from
processing high grade Midwest and Cigar Lake ores in addition to
tailings from the McClean Lake deposits.
2020 Annual Information
Form
108
Under the
regulatory approved “TMF
Optimization” project, the tailings capacity of the
TMF was increased in two stages during the period 2013 to 2018. The
TMF Optimization project involved the sloping of the TMF walls and
the placement of a bentonite liner to increase the TMF capacity up
to an elevation of 443 m ASL.
A second project,
called “TMF
Expansion”, entails adding additional tailings
capacity over and above that created through the TMF Optimization
project. The first phase of the project entails increasing the
consolidated tailings elevation of the TMF up to 448 m ASL. On
April 19, 2017, the MLJV received regulatory approvals for the TMF
Expansion project. Following such receipt, construction activities
were initiated in 2018 with re-sloping of the pit walls,
installation of a new tailings pipe bench, decommissioning of 12
dewatering wells and the relocation of the contaminated landfill
from the TMF to the Sue C site.
In 2019, phase
one construction activities continued and work on placing
additional bentonite liner commenced. By the end of September 2019,
the first phase of the TMF Expansion was completed with the
bentonite liner reaching a level of ~447.4 m ASL. The regulatory
costs associated with the TMF Expansion Phase 1 work was funded by
the MLJV while the CLJV funded predominantly all of the
construction costs.
In 2020, the
focus of the TMF Expansion was to advance regulatory work necessary
for the permitting associated with the TMF Expansion Project Phase
2, which envisions raising the TMF capacity to 468 m ASL, and to
complete design work on the required infrastructure. The regulatory
process has been delayed due to the impact of the COVID-19
pandemic; however, the regulatory engagement and review process is
ongoing.
Plans for 2021
include completing the regulatory work required to obtain
permitting to increase the TMF capacity to 468 m ASL.
Cigar Lake Toll Milling
In 2002, Denison
and its partners entered into an agreement with the CLJV to process
Cigar Lake ore at the McClean Lake mill. Pursuant to that
agreement, all Cigar Lake ore was to be leached at the McClean Lake
mill with the pregnant aqueous solution being divided between the
McClean Lake and Rabbit Lake facilities for processing into uranium
concentrates. In order to process this Cigar Lake ore, an expansion
of the McClean Lake mill was required. The expansion and
modifications of the McClean Lake mill to raise its capacity to
13.0 million pounds U3O8 were completed in
2008 and all costs were paid for by the CLJV.
As a result of
delays in the startup of the Cigar Lake mine and the exhaustion of
permitted ore deposits at McClean Lake, the McClean Lake mill was
placed on stand-by at the end of June of 2010. Under the Cigar Lake
toll milling agreement, the CLJV funded a considerable portion of
the McClean Lake stand-by costs, with the relative proportion of
the stand-by costs paid by each party calculated on the basis of
the percentage of mineral reserves between the McClean Lake and
Cigar Lake joint ventures.
In 2011, the CLJV
and the MLJV agreed to amend the toll milling agreement. Under the
new milling arrangement, the McClean Lake operation is to process
and package 100% of the uranium produced from the Cigar Lake mine.
To accommodate the annual production of 18.0 million pounds
U3O8 from the CLJV,
the mill has been further expanded to an annual licensed capacity
of 24.0 million pounds U3O8. All costs for
the expansion of the McClean Lake mill and a portion of the TMF
Optimization and TMF Expansion were paid or will be paid for by the
CLJV (see “Denison’s Operations - McClean Lake -
Tailings Disposal”).
2020 Annual Information
Form
109
As noted above,
due to the onset of the COVID-19 pandemic, both the Cigar Lake mine
and McClean Lake mill were temporarily shutdown in late March 2020.
The mine and the mill both reopened in September 2020, but were
shutdown again in late December 2020 due to the continued impact of
the pandemic. At this time, the duration of the current shutdown is
unknown.
Cigar Lake Toll Milling – APG Transaction
Pursuant to the
APG Transaction in February 2017, certain of Denison’s
interests in the Cigar Lake toll milling proceeds have been sold to
APG and its subsidiary Centaurus Royalties Ltd.
(“Centaurus”)
for aggregate gross proceeds to Denison of $43,500,000. The APG
Transaction is comprised of the following elements: (1) a 13 year
limited recourse lending arrangement involving a loan from APG to
9373721 Canada Inc. (“SPV”) (the “APG Loan”) and a further loan from
SPV to DMI (the “SPV
Loan”) each for $40,800,000 (collectively, the
“Lending
Arrangement”); and (2) $2,700,000 in proceeds from the
sale, to Centaurus, of a stream equal to Denison’s 22.5%
share of proceeds from the toll milling of Cigar Lake ore by the
McClean Lake mill for specified Cigar Lake toll milling throughput
in excess of 215 million pounds U3O8 after July 1,
2016 (the “Stream
Arrangement”).
Additional
details of the APG Transaction are as follows:
●
No Warranty of the Future
Rate of Production - No warranty is provided by Denison (including
DMI and SPV) to APG (including Centaurus), under the terms of the
Lending Arrangement or the Stream Arrangement, regarding: the
future rate of production at the Cigar Lake mine and / or the
McClean Lake mill; or the amount or collectability of proceeds to
be received by the MLJV in respect of toll milling of Cigar Lake
ore.
●
APG Loan Details - The APG
Loan will accrue interest at a rate of 10% per annum and does not
have a predetermined principal repayment schedule. The APG Loan is
secured by a first priority interest in the assets of SPV which
will essentially consist of the SPV Loan to DMI.
●
SPV Loan Details - The SPV
Loan will accrue interest at a rate of approximately 10% per annum
and does not have a predetermined principal repayment schedule. The
SPV Loan is limited in its recourse against DMI such that it is
generally repayable only to the extent of Denison’s share of
the toll milling revenues earned by the MLJV from the processing of
the first 215 million pounds of U3O8 from Cigar Lake
ore on or after July 1, 2016. Denison will guarantee the limited
recourse loan repayments and will grant a second ranking pledge of
its share of DMI to secure performance by DMI of its obligations to
pay the SPV Loan. The share pledge is second ranking to
Denison’s existing pledge of its shares of DMI to the Bank of
Nova Scotia (“BNS”) under the terms of its
Letters of Credit Facility.
As discussed
above, the McClean Lake mill has temporarily suspended operations
in connection with the COVID-19 pandemic. As a result of the APG
Transaction, Denison has sold the toll milling revenue to be earned
from the processing of the Cigar Lake ore and the suspension has no
economic impact on Denison due to the limited recourse nature of
the SPV Loan. The suspension has resulted in a non-cash decrease in
revenue recognized by Denison, limited to a reduction in the
drawdown of the Company’s deferred revenue
balance.
Surface Access Borehole Resource Extraction (SABRE) Mining
Program
The SABRE program
is focused on developing a viable alternate mining method combining
surface drilling and borehole mining technology. Benefits of the
method may include a reduced time to production, reduced or
deferred capital costs, as well as minimized safety and
environmental risks.
2020 Annual Information
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110
Hydraulic
borehole mining is a technique used to extract materials through a
small access borehole, typically less than one-half of a metre in
diameter, resulting in a very small disturbance to the surface. A
mining tool containing a high-pressure water jet nozzle is lowered
through the access borehole in the overburden and sandstone to the
mineralized horizon. The high-pressure water jet is used to cut or
erode the mineral-bearing ore and to create a cavity up to four
metres in diameter. The cuttings are transported to surface in a
slurry form and sent through a series of screens and settling ponds
to separate the ore from the jetting water. Jetting water is
filtered further and re-used in the process. Each mined out cavity
is backfilled after completion with a cemented mixture in the
mineralized horizon.
Between 2007 and
2012, approximately 2,100 tonnes of ore was recovered through
various SABRE test mining programs, a portion of which has been fed
to the mill between 2007 and 2014. After the completion of several
significant milestones in 2012 and 2013, a decision was made in
late 2013 to suspend the SABRE program in 2014 in response to the
low uranium price environment. In 2015, SABRE activities were
limited to patent applications and upgrading down-hole sonar
capabilities with the objective of improving surveying of cavity
dimensions and mining performance. In 2016, an expanded program was
evaluated for SABRE including the re-tooling of the program to
allow for larger volumes and jetting pressures designed to increase
the SABRE production rate. In addition, the purchase, installation
and testing of a new solid / liquid separation system was completed
to assess the improvement in recovery of small uranium particles
from the production slurry created during the SABRE mining
process.
In 2017 and 2018,
development of the re-tooled SABRE program continued with
engineering of larger diameter mining pipes, procurement of
high-pressure pumps and a tendering process to contract drilling
equipment and labour for a further mining test. In addition, in
2018 four access holes were drilled and cased from surface to just
above the McClean North orebody elevation. At the time, it was
expected that these access holes would be used in 2020 as part of
planned mining tests using the re-tooled equipment. In 2019,
engineering and procurement activities for the re-tooled mining
equipment continued and various equipment acceptance testing
activities were completed.
The SABRE mining
test was originally planned for 2020, but was postponed in
connection with COVID-19 pandemic related operational disruptions.
As a result, the work completed in 2020 focused on further
de-risking various elements of the SABRE equipment and the SABRE
mining process in advance of a future mining test, now scheduled
for 2021.
The plan for 2021
includes completing the four-hole test mining program planned at
McClean North, using the four-access holes drilled in
2018.
MANAGER OF UPC
DMI is the
manager of UPC. UPC is a public company with the primary investment
objective of achieving an appreciation in the value of its uranium
holdings. The Company does not, directly or indirectly, have an
ownership interest in UPC. As manager, DMI provides UPC’s
officers and manages UPC's activities, including purchasing uranium
for and on behalf of UPC as directed by the UPC board, arranging
for its storage and attending to regulatory reporting for
UPC.
The MSA is the
current management services agreement between DMI and UPC,
effective April 1, 2019 for a five year term. Under the MSA, DMI
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,
2020 Annual Information
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111
and (i) 0.2% per
annum of UPC’s total assets in excess of $500 million; c) a
fee, at the discretion of the UPC 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. During 2020, DMI earned an aggregate of $2,604,000 in
management fees from UPC.
The MSA may be
terminated by Denison upon the provision of 180 days written
notice. The MSA may be terminated 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.
DENISON CLOSED MINES GROUP
Denison formed
its Denison Environmental Services division (“DES”) in 1997 to provide mine
decommissioning and mine care and maintenance services to industry
and government, as well as to manage Denison’s post mine
closure environmental obligations on its Elliot Lake landholdings.
In late 2019, driven by a new strategic vision for Denison as a
mining company with expertise across the full mining life cycle,
Denison discontinued the use of the DES name. The team of closed
mine care & maintenance specialists and environmental
professionals previously working under DES are now part of
Denison’s integrated Closed Mines group, which is positioned
within the organization alongside each of Denison’s
exploration and project development teams.
The Closed Mines
group remains focused on post-closure mine care and maintenance
services, and its technical team is principally located in Elliot
Lake, Ontario.
The primary
activities of the Closed Mines group include: the ongoing
monitoring of Denison’s two closed Elliot Lake mine sites,
plus environmental monitoring, effluent treatment and maintenance
services for other non-Denison clients, including in
2020:
●
Certain of Rio Algom
Ltd.’s closed mine sites in Ontario and Quebec, including
Elliot Lake;
●
Yukon Government’s
closed Mt. Nansen Mine in the Yukon; and
●
Ontario Government’s
closed Lockerby Mine in northern Ontario.
ENVIRONMENTAL, HEALTH, SAFETY AND SUSTAINABILITY
MATTERS
The Company has
an Environmental, Health, Safety & Sustainability Policy (the
“EHSS Policy”)
that affirms Denison’s commitment to prioritize the safety of
its workers, its contractors, its community and the environment as
well as the principles of sustainable development. Under the EHSS
Policy, the Company has committed to run its operations in
compliance with applicable legislation, in a manner that minimizes
the impact on our ecosystem. The EHSS Policy mandates the use of
regular monitoring programs to identify risks to the environment,
to the public, Indigenous Rights holders, and to Denison’s
employees and contractors and to ensure compliance with regulatory
requirements. The EHSS Policy also sets out Denison’s
requirement to train its employees regarding environmental, health
and safety compliance and sustainability best
practices.
2020 Annual Information
Form
112
The EHSS Policy
requires regular reporting to the Board regarding the
Company’s compliance and the results of the Company’s
monitoring. To assist the Board with its responsibilities in
overseeing environmental, health and safety matters, the Board has
established the Environment, Health, Safety & Sustainability
Committee (the “EHSS
Committee”) which works with management to discuss
matters affecting the environment, health and safety and its
stakeholders and reporting and making recommendations to the
Board.
COVID-19
With the onset of
the COVID-19 pandemic and its impact on operations in Canada in
early March 2020, Denison rapidly adjusted its operations to adapt
to restrictions on the ability to conduct business “as per
usual”. Throughout the remainder of 2020, Denison staff
worked from home wherever possible and adopted COVID-19 specific
health and safety and related operating procedures across its
business, including modified work scheduling, enhanced cleaning
protocols, various physical distancing measures and special travel
protocols designed by Denison for northern Saskatchewan. Where
applicable, the Company's protocols incorporated feedback received
from potentially impacted communities in northern Saskatchewan to
minimize any health and safety risks associated with travel to and
from site.
Denison continues
to follow guidance from health officials and monitor the COVID-19
pandemic and its impact on operations across the various
jurisdictions in which it operates. There have been no reported
COVID-19 cases amongst Denison staff or immediate
family.
Evaluation and Exploration
In 2020,
Denison’s project evaluation and exploration teams (and its
contractors engaged to support those teams) had 1 modified work
injury, 5 medical incidents and 2 equipment damage incidents. There
was one minor reportable environmental incident in 2020; no
environmental impact has been detected with routine sampling
completed to-date.
Closed Mines
In 2018, the
Closed Mines group celebrated having achieved over 500,000
cumulative work hours without a lost time injury, representing
almost 10 years of continuous service without a lost time injury.
In 2019 and 2020, the team continued its excellent safety
performance and, as at December 31, 2020, the team had worked a
total of 665,801 hours without a lost time injury.
Denison’s
Closed Mines operations hold the internationally recognized ISO
9001:2015 certification, which is a certification for Quality
Management Systems. There were no issues of environmental
non-compliance by the Closed Mines group in 2020.
Elliot Lake
Denison's uranium
mine at Elliot Lake, Ontario, which started operations in 1957, was
permanently closed upon completion of deliveries of U3O8 to Ontario Hydro
in May 1992. During its 35 years of continuous operation, the
facility produced 147 million pounds of U3O8 in concentrates
from the milling of 70 million tons of ore. By 1998, all
significant capital reclamation activities at Denison's two closed
Elliot Lake mines had been completed and, for the most part,
decommissioning has progressed to the long-term monitoring phase
(see “Government Regulation – Canadian Uranium
Industry”).
During 2020, the
water treatment plants operated as planned and all environmental
targets were met. Monitoring and other remediation related expenses
were $807,000 for the year.
2020 Annual Information
Form
113
Reclamation
expenses for 2021 are budgeted to be $802,000. All expenditures are
funded from the Reclamation Trust described below. It is estimated
that sufficient funds are in the Reclamation Trust to meet all
monitoring costs through 2026.
All activities
and monitoring results are reviewed regularly by the CNSC and the
Elliot Lake Joint Regulatory Group, which consists of federal and
provincial regulators. Pursuant to a Reclamation Funding Agreement,
effective June 30, 1994, with the Governments of Canada and
Ontario, Denison has established a Reclamation Trust from which all
spending on its Elliot Lake reclamation activities is funded. When
the Reclamation Trust was first established in 1994, Denison was
required to deposit 90% of its cash receipts after deducting
permitted expenses, as defined in such agreement, into the
Reclamation Trust. In 1997, the Governments of Canada and Ontario
agreed to suspend the 90% funding requirement provided Denison
maintained four years of cash requirements in the Reclamation
Trust. Early in 1999, the Governments of Canada and Ontario agreed
to further amend the Reclamation Funding Agreement, effective when
Denison received an amended site decommissioning licence, which was
obtained on April 22, 1999. Pursuant to that amendment, Denison is
required to maintain sufficient funds in the Reclamation Trust to
meet six years of cash requirements.
McClean Lake
During 2020, a
total of 589,314 hours were worked by Orano Canada employees,
contractors and visitors. During this time, there were 3 medical
incidents, 3 modified work injuries and 2 lost time incidents.
There were 5 reportable environmental incidents. The facility has
maintained its internationally recognized ISO 14001:2004 and OHSAS
18001 certification.
The McClean Lake
and Midwest projects are combined under a single Operating License
issued by the CNSC. The combined Preliminary Closure Plan was
prepared by Orano Canada and approved by the authorities in 2016,
estimating the total decommissioning and reclamation costs for both
projects to be $107,241,000. Financial assurances are in place for
this entire amount, with Denison’s share being $24,135,000.
An updated Preliminary Closure Plan is required to be filed in
2021.
GOVERNMENT REGULATION
Saskatchewan Exploration and Land Tenure
In Canada,
natural resource exploration and land tenure activity fall under
provincial legislative jurisdiction. In Saskatchewan, the
management of mineral resources and the granting of exploration and
mining rights for mineral substances and their use are regulated by
the Crown Minerals Act
(Saskatchewan) and The Mineral
Tenure Registry Regulations, 2012, that are administered by
the Saskatchewan Ministry of Energy and Resources.
The right to
explore for minerals in Saskatchewan is acquired under a mineral
claim from the province. The initial term of a mineral claim is two
years, renewable for successive one–year periods, provided
the mineral claim is in good standing. To maintain a mineral claim
in good standing, generally, the holder of a mineral claim must
expend a prescribed amount on exploration. Excess expenditures
(also known as assessment credits) can be applied to satisfy
expenditure requirements for future claim years. Except for
exploration purposes, a mineral claim does not grant the holder the
right to mine minerals. A holder of a mineral claim in good
standing has the right to convert a mineral claim into a mineral
lease. Surface exploration work on a mineral claim requires
additional governmental approvals.
2020 Annual Information
Form
114
The right to mine
minerals in Saskatchewan is acquired under a mineral lease from the
province. A mineral lease is for a term of 10 years, with a right
to renew for successive 10-year terms in the absence of default by
the lessee. The lessee is required to spend certain amounts for
work during each year of a mineral lease. A mineral lease cannot be
terminated except in the event of default and for certain
environmental concerns, as prescribed in The Crown Minerals Act (Saskatchewan).
However, mineral leases may be amended unilaterally by the lessor
by amendment to The Crown Minerals
Act (Saskatchewan) or The
Crown Mineral Royalty Regulations, 2013
(Saskatchewan).
Mineral rights,
held through mineral claims and mineral leases, are distinct from
surface rights. The surface facilities and mine workings are
located on lands owned by the province of Saskatchewan. The right
to use and occupy lands is acquired under a surface lease from the
province of Saskatchewan. A surface lease is for a period of time,
up to a maximum of 33 years, as is necessary to allow the lessee to
operate its mine and plant and thereafter carry out the reclamation
of the lands involved. Surface leases are also used by the province
of Saskatchewan as a mechanism to achieve certain environmental and
radiation protection and socio-economic objectives, and contain
certain undertakings in this regard.
Environmental Assessments
The assessment of
a proposed uranium project in Saskatchewan involves both a
provincial and federal environmental assessment
(“EA”). In
Saskatchewan, the assessment of a project with joint federal and
provincial jurisdiction is coordinated through established
protocols in order to align with the “one project-one
assessment” model for the proponent and the public without
compromising any statutory requirements of the legislation of
either jurisdiction.
In the province
of Saskatchewan, the Environmental
Assessment Act is administered by the Ministry of
Environment (“SKMOE”). The level of assessment
for mining projects is dependent on the specific characteristics of
each individual project. A proponent is required to conduct an
environmental assessment (“EA”) for a project that is
considered to be a “development” pursuant to the
Saskatchewan Environmental
Assessment Act and subsequently prepare and submit an
environmental impact statement (“EIS”) to the SKMOE for
approval.
Federally, the
Canadian Environmental Assessment
Act, 2012 (“CEAA
2012”) includes the Regulations Designating Physical
Activities to clarify when a federal EA is required and
which federal agency will act as the “responsible
authority” for the conduct of the EA. For uranium projects,
the CNSC is designated as the “responsible authority”
under the CEAA 2012 and carries full authority to complete the
screening of the proposed project and any subsequent environmental
assessments.
The Government of
Canada implemented a new Impact
Assessment Act (the “IAA”), to replace the CEAA 2012 on
August 28, 2019. The transitional provision (section 182 of the
IAA) provide that a CNSC designated project EA, which commenced
under the CEAA 2012, is to be continued under the CEAA 2012. This
means that the Wheeler River EA will continue the assessment
process under CEAA 2012.
An EA is a
planning and decision-making tool, which involves predicting
potential environmental effects through each phase of the project
(construction, operation, decommissioning and post-decommissioning)
at the site, and within the local and regional assessment areas.
Under the CEAA 2012, an EA’s scope focuses on potential
adverse environmental effects that are within federal jurisdiction
including: (a) fish and fish habitat and other aquatic species; (b)
migratory birds; (c) federal lands; (d) effects that cross
provincial or international boundaries; (e) effects that impact on
aboriginal peoples, such as their use of lands and resources for
traditional purposes, and (f) changes to the environment that are
directly linked to or necessarily incidental to any federal
decisions about a project.
2020 Annual Information
Form
115
Wheeler River
Project Description and Environmental Assessment
In 2019, Denison
executed on its decision to advance the Wheeler River Project
through the EA regulatory process following the release of the PFS.
Activities completed in 2019 included the submission of two key
documents to provincial and federal regulators, with respect to the
proposed ISR mining operation: 1) the Saskatchewan Provincial
Technical Proposal and the Federal Project Description and 2) the
Terms of Reference. Acceptance of these documents was announced by
both the SKMOE and the CNSC on June 1, 2019. Following a public
review and comment period, final confirmation of the scope and
guidelines for the Project EA was received from the CNSC on
December 20, 2019. The Company identified the EA process as a key
element of the Project's critical path.
Shortly after the
initiation of the EA technical assessments, Denison suspended all
EA related studies in connection with the onset of the global
COVID-19 pandemic. Formal correspondence was sent to the Project
regulatory agencies (CNSC and SKMOE) as well as the local
communities and Indigenous groups to inform them of the
suspension.
In 2020, Denison
presented the CNSC and the SKMOE with the possible change in freeze
containment design for the Project. The discussion of the freeze
design was originally outlined in the Project Description and
Technical Proposal as a design feature intended to protect the
regional ground water through complete encapsulation of the mining
chamber by means of a freeze dome. Based on the results of the 2020
freeze wall trade-off study (see “Wheeler River –
Mining Evaluation and Development Operations”), Denison
identified the potential to reduce operational and environmental
risks with a freeze wall. Denison, under the direction of the CNSC,
updated the 2019 Federal Project Description and Provincial
Technical Proposal to reflect the change, which was submitted and
accepted by the regulators in December 2020.
In November 2020,
Denison announced a plan to restart the EA in early 2021. In
keeping with the requirements of the CNSC to post all EA related
documents on the federal project registry website, a formal
notification was submitted to the CNSC and the SKMOE to inform them
of the recommencement of the EA.
Environmental Baseline Data Collection
Select baseline
work continued throughout the 2020 field season, including ongoing
monitoring of several air quality parameters groundwater quality
and surface water flow. In addition, five regional sampling wells
were installed at locations identified by the EA hydrogeological
consultant. The wells were drilled at various depths, down gradient
of the Phoenix deposit and near surface water bodies. The data
collected from the wells will be used to support the EA through the
development of the conceptual site model and assessment of
potential effects from the ISR mine to the local ground and surface
waters.
2020 Annual Information
Form 116
Corporate Social Responsibility
Denison has been
focused on strengthening many long-term relationships, and building
new relationships, with Indigenous and non-Indigenous communities
who have a strong connection to the land on which the Wheeler River
Project is located. Denison supports various community initiatives
and activities, as part of its focus on community
investment.
The Company has
conducted site tours for the Indigenous and municipal leaders for
communities of interest, including two site tours in 2019. These
tours have focused on introducing the community members to the site
and an overview of the Company’s project-related activities
and offering an opportunity for collaboration regarding the
advancement of the Project.
The Company was
pleased to announce in June 2019 that it executed a series of MOUs,
in support of the advancement of Wheeler River, with certain
Indigenous communities who assert the project falls within their
traditional territories and traditional land use activities are
currently practiced within the local and regional area surrounding
the project. These non-binding MOUs formalize the signing
parties’ intent to work together in the spirit of mutual
respect and cooperation, in order to collectively identify
practical means by which to avoid, mitigate, or otherwise address
potential impacts of the project upon the exercise of Indigenous
rights, Treaty rights, and other interests, and facilitate sharing
in the benefits that will flow from the project.
Later in 2019,
the Company saw two significant leadership and relationship
changes. By elections held on October 25, 2019, a new Chief and
Council were formed for the English River First nation
(“ERFN”).
Denison has engaged with the newly elected Chief and Council, to
develop meaningful lines of communication and enhance their
understanding of the Wheeler River Project.
Denison was also
formally notified that the Métis Nation – Saskatchewan
(“MNS”) was
appointed to represent a number of Métis communities that
Denison had established and developed direct relationships with
since 2016. Denison is now engaged with the MNS, pursuant to a new
process set out by the MNS, for consultation on Denison’s
exploration and project development activities.
In 2020, Denison
continued to keep various interested parties informed about planned
field activities and changes to those plans due to the COVID-19
pandemic. Recognizing that the remote location of communities in
northern Saskatchewan pose a unique risk for COVID-19 transmission
and treatment, in early April, Denison provided financial support
and the procurement of COVID-19 safety supplies, such as hand
sanitizer and cleaning products to a number of remote communities
in northern Saskatchewan to build the necessary supplies to respond
to a COVID-19 outbreak.
In late April
2020, a number of Indigenous and non-Indigenous communities in the
north west of Saskatchewan experienced COVID-19 outbreaks. In
response, a unique collective of Indigenous and non-Indigenous
leaders came together to create the Northwest Communities Incident
Command Centre, focused on ensuring the communities responded to
COVID-19 from a regional perspective. Denison provided financial
support for this initiative, and invited other exploration
companies to do the same. Additionally, Denison worked directly
with the Command Centre to get input on the development of a travel
protocol for travel through northern Saskatchewan that would be
respectful of the deep concern for the potential transmission of
COVID19 in northern Saskatchewan through activities like
Denison’s exploration and evaluation activities.
Denison’s
travel protocol was shared with the Saskatchewan Mining Association
(“SMA”) and has
been provided as an example of best practice for other SMA members
to refer to while travelling to and from remote sites.
2020 Annual Information
Form
117
McClean and Midwest
Environmental
matters related to the McClean Lake uranium facility and the
Midwest project are regulated by the CNSC and the SKMOE. A number
of other ministries and departments of the federal and Saskatchewan
governments also regulate certain aspects of the operation. Prior
to proceeding with development of the McClean Lake uranium facility
and Midwest project, the proponents were required to submit
Environmental Impact Statements for review. After completion of
that review and receipt of recommendations, the federal and
Saskatchewan governments issued the appropriate initial
authorizations, subject to the normal licensing renewal process,
for the McClean Lake uranium facility in 1995 and for Midwest in
2012.
Licensing and Permitting
The federal
government recognizes that the uranium industry has special
importance in relation to the national interest and therefore
regulates the mining, extraction, use and export of uranium under
the Nuclear Safety and Control
Act (“NSCA”). The NSCA is administered
by the CNSC which issues licences pursuant to the regulations under
the NSCA.
In the event EA
approvals by both the provincial and federal governments are
granted, a project will be allowed to proceed to the second tier of
approvals for licenses. The federal (CNSC) licensing process
requires the submission of detailed engineering design packages as
well as detailed management plans for all facets of the operation
as part of their licensing process. The federal licenses are
typically the license (i) to prepare a site and construct, (ii)
operate, (iii) decommission, and (iv) abandon. Under provincial
jurisdiction, a number of permits and approvals are required prior
to construction. Key requirements include the execution of a
Surface Lease Agreement with the Province of Saskatchewan and an
Approval to Construct and Operate a Pollutant Control Facility as
regulated under the Saskatchewan Environmental Management and Protection
Act (2010).
Activities at
McClean Lake and Midwest are currently carried out under a single
operating license issued by the CNSC and are subject to all
applicable federal statutes and regulations and to all laws of
general application in Saskatchewan, except to the extent that such
laws conflict with the terms and conditions of the licences or
applicable federal laws.
Decommissioning
activities at Elliot Lake are currently carried out under two
decommissioning licences issued by the CNSC: for the Stanrock
tailings area and the Denison mine site and tailings areas.
Decommissioning of the facilities pursuant to the terms of the
decommissioning licences has been completed. The CNSC has initiated
the actions to combine the Stanrock and Denison sites under one
Waste Facility Operating Licence. There are no significant
differences between the different forms of licences. After a
lengthy period of care, maintenance and monitoring, Denison may
apply to the CNSC for permission to abandon the sites.
Saskatchewan Royalties
The province of
Saskatchewan imposes royalties on the sale of uranium extracted
from ore bodies in the province in accordance with Part III of The
Crown Mineral Royalty Regulations (the “Regulations”) pursuant to The
Crown Minerals Act (the “Act”). Significant revisions to
the uranium royalty regime in Saskatchewan became effective on
January 1, 2013, with the resulting regime consisting of the
following three components:
(i)
Basic Royalty: Computed as 5%
of gross revenues derived from uranium extracted from ore bodies in
the province;
2020 Annual Information
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(ii)
Saskatchewan Resource Credit:
Reduction in the basic royalty equal to 0.75% of gross revenues
derived from uranium extracted from ore bodies in the province;
and
(iii)
Profit Royalty: Two-tier rate
structure, computed as 10% or 15% of net profits derived from the
mining and processing of uranium extracted from ore bodies in the
province.
Gross revenue,
for the Basic Royalty, is determined in accordance with the
Regulations and allows for reductions based on specified
allowances. Net profit, for the Profit Royalty, is calculated based
on the recognition of the full dollar value of a royalty
payer’s exploration, capital, production, decommissioning and
reclamation costs, in most cases, incurred after January 1, 2013.
Net profits will be taxed under the profit royalty at a rate of 10%
for net profits up to and including $22.00 per kilogram ($10 per
pound) of uranium sold, and at 15% for net profits in excess of
$22.00 per kilogram. The $22.00 per kilogram threshold is
applicable for 2013 (the base year) and is indexed in subsequent
years for inflation.
Under this
system, each owner or joint venture participant in a uranium mine
is a royalty payer. Individual interests are consolidated on a
corporate basis for the computation and reporting of royalties due
to the province.
Royalty payments
are due to the province on or before the last day of the month
following the month in which the royalty payer sold, or consumed,
the uranium for the purposes of the basic royalty, and quarterly
installments are required based on estimates of net profits in
respect of the profit royalty.
Canadian Income and Other Taxes
Denison and its
Canadian subsidiaries are subject to federal and provincial income
taxes. In 2020, taxable income was subject to federal taxes at a
rate of 15%, and provincial taxes in Saskatchewan, Ontario, Quebec,
British Columbia and the Yukon Territory at rates varying between
11.5% and 12.0%. Taxable income for each entity is allocated
between provinces and territories based on a two point average of
the proportion of salaries and revenues attributable to each
province or territory. Denison expects that it will not be liable
for Canadian income taxes on a current tax basis for the financial
year ended 2020. As a resource corporation in Saskatchewan, Denison
is also subject to a resource surcharge equal to 3% of the value of
resource sales from production in Saskatchewan, if any, during the
year.
In recent years,
including 2020, Denison has issued shares eligible for treatment as
“flow through shares”, as defined in subsection 66(15)
of the Income Tax Act
(Canada). As a result, a significant portion of Denison's Canadian
Exploration Expenditures have been renounced to shareholders and
are not available to Denison as a tax deduction in the current year
or future years.
Audit / Review by Taxing Authorities
From time to
time, Denison is subject to audit / review by taxing authorities.
In certain jurisdictions, periodic reviews are carried out by
taxing authorities in the ordinary course of business. Denison
cooperates with all requests received from taxing authorities, and
is not currently engaged in a material dispute with any of the
applicable taxing authorities.
2020
Annual Information
Form 119
RISK FACTORS
Denison’s
business, the value of the Shares and management’s
expectations regarding the same 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 than anticipated.
The Board of
Directors of Denison have, as part of their mandate, responsibility
for the identification of the principal risks of the
Company’s business and ensuring the implementation of
appropriate systems to manage these risks. Where appropriate, they
have delegated responsibility for review of certain risks to the
Committees of the Board with mandates relevant to such risks, such
as the EHSS Committee (defined below) for risks related to
environment, health, safety and sustainability matters, and the
Audit Committee for risks related to financial reporting, internal
controls, ethics and information security.
The following are
those risks, uncertainties and other factors pertaining to the
outlook and conditions currently known to Denison that have been
identified by the Company as having the potential to negatively
affect Denison’s business and the value of the Shares.
Current and prospective security holders of Denison should
carefully consider these risk factors. However, these 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.
Capital Intensive Industry and Uncertainty of Funding
The exploration
and development of mineral properties and any operation of mines
and facilities requires a substantial amount of capital and the
ability of the Company to proceed with any of its plans with
respect thereto depends on its ability to obtain financing through
joint ventures, equity financing, debt financing or other means.
The Company intends to use the proceeds from its October 2020
Offering, 2020 FT Offering, February 2021 Offering, 2021 FT
Offering, March 2021 Offering and ATM issuances of its Shares as
described for each such offering; however, the Company’s
ability to achieve such plans and objectives could change as a
result of a number of internal and external factors, such as
continued or new impacts of COVID-19 on society and the
Company’s operations, unfavourable changes in the spot market
for physical uranium, and/or the impact that results from continued
exploration and evaluation activities may have on the
Company’s future evaluation and development plans and
anticipated costs and timelines. Because of the number and
variability of factors that will determine the use of such
proceeds, the Company’s ultimate use might vary substantially
from its planned use. There is no assurance that the proceeds from
such prior offerings will be sufficient to meet the stated
objectives or are not redirected to other business objectives at
the discretion of the Company’s management and the
Board.
To fund
additional activities, including future exploration, evaluation,
development and construction activities, the Company will require
additional financing. General market conditions, volatile uranium
markets, a claim against the Company, a significant disruption to
the Company’s business or operations or other factors may
make it difficult to secure financing necessary to fund the
substantial capital that is typically required in order to continue
to advance a mineral project, such as the Wheeler River project or
Waterbury Lake project, through the testing, permitting and
feasibility processes to a production decision or to place a
property, such as the Wheeler River project or Waterbury Lake
project, into commercial production. Similarly, there is no
certainty that the Company’s will be able to fund additional
exploration or development of the Company’s projects or
acquisition of new projects at any particular time.
2020 Annual Information
Form
120
There is no
assurance that the Company will be successful in obtaining required
financing as and when needed on acceptable terms, and failure to
obtain such additional financing could result in the delay or
indefinite postponement of any or all of the Company’s
exploration, development or other growth initiatives or otherwise
have a material adverse impact on the Company’s financial
condition and/or ability to continue as a going
concern.
COVID-19 Outbreaks
The COVID-19
pandemic has caused, and may cause further, disruptions to the
Company’s business and operational plans. Such disruptions
may result from (i) restrictions that governments and communities
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 of employees and/or
unavailability of contractors and subcontractors, and/or (iv)
interruption of supplies from third parties upon which the Company
relies. It is presently not possible to predict the likelihood,
extent or duration of any such disruption. Any such disruption may
have a material adverse effect on the Company’s business,
financial condition and results of operations, which could be rapid
and unexpected. These disruptions may severely impact the
Company’s ability to carry out its business plans for 2021
and beyond.
Global Financial Conditions
Global financial
conditions are subject to volatility arising from international
geopolitical developments and global economic phenomenon, as well
as general financial market turbulence, including the significant
market reaction to the onset of the COVID-19 pandemic in 2020,
resulting in a significant reduction in in many major market
indices, and continuing market uncertainty and volatility. Access
to public financing and credit can be negatively impacted by the
effect of these events on Canadian and global credit markets. The
health of the global financing and credit markets may impact the
ability of Denison to obtain equity or debt financing in the future
and the terms at which financing or credit is available to Denison.
These instances of volatility and market turmoil could adversely
impact Denison's operations and the trading price of the
Shares.
Speculative Nature of Exploration and Development
Exploration for
minerals and the development of mineral properties is speculative,
and involves significant uncertainties and financial risks that
even a combination of careful evaluation, experience and technical
knowledge may not eliminate. While the discovery of an ore body may
result in substantial rewards, few properties which are explored
prove to return the discovery of a commercially mineable deposit
and/or are ultimately developed into producing mines. As at the
date hereof, many of Denison’s projects are preliminary in
nature and mineral resource estimates include inferred mineral
resources, which are considered too speculative geologically to
have the economic considerations applied that would enable them to
be categorized as mineral reserves. Mineral resources that are not
mineral reserves do not have demonstrated economic viability. Major
expenses may be required to properly evaluate the prospectivity of
an exploration property, to develop new ore bodies and to estimate
mineral resources and establish mineral reserves. There is no
assurance that the Company’s uranium deposits are
commercially mineable.
Imprecision of Mineral Reserve and Resource Estimates
Mineral reserve
and resource figures
are estimates, and no assurances can be given that the estimated
quantities of uranium are in the ground and could be produced, or
that Denison will receive the prices assumed in determining its
mineral reserves. Such estimates are expressions of judgment based
on knowledge, mining experience, analysis of drilling results and
industry best practices. Valid estimates made at a given time may
significantly change when new information becomes
available.
2020 Annual Information
Form
121
While Denison
believes that the Company’s estimates of mineral reserves and
mineral resources are well established and reflect
management’s best estimates, by their nature, mineral reserve
and resource estimates are imprecise and depend, to a certain
extent, upon statistical inferences and geological interpretations,
which may ultimately prove inaccurate. Furthermore, market price
fluctuations, as well as increased capital or production costs or
reduced recovery rates, may render mineral reserves and resources
uneconomic and may ultimately result in a restatement of mineral
reserves and resources. The evaluation of mineral reserves or
resources is always
influenced by economic and technological factors, which may change
over time.
Risks of, and Market Impacts on, Developing Mineral
Properties
Denison’s
uranium production is dependent in part on the successful
development of its known ore bodies, discovery of new ore bodies
and/or revival of previously existing mining operations. It is
impossible to ensure that Denison’s current exploration and
development programs will result in profitable commercial mining
operations. Where the Company has been able to estimate the
existence of mineral resources and mineral reserves, such as for
the Wheeler River project, substantial expenditures are still
required to establish economic feasibility for commercial
development and to obtain the required environmental approvals,
permits and assets necessary to commence commercial
operations.
Development
projects are subject to the completion of successful feasibility
studies, engineering studies and environmental assessments, the
issuance of necessary governmental permits and the availability of
adequate financing. The economic feasibility of development
projects is based upon many factors, including, among others: the
accuracy of mineral reserve and resource estimates; metallurgical
recoveries; capital and operating costs of such projects;
government regulations relating to prices, taxes, royalties,
infrastructure, land tenure, land use, importing and exporting, and
environmental protection; political and economic climate; and
uranium prices, which are historically cyclical.
Subject to the
availability of capital, if a feasibility study is completed for
the Wheeler River project, such feasibility study, and any
estimates of mineral reserves and mineral resources, development
costs, operating costs and estimates of future cash flow contained
therein, will be based on Denison’s interpretation of the
information available at that time. Development projects have no
operating history upon which to base developmental and operational
estimates. Particularly for development projects, economic analyses
and feasibility studies contain estimates based upon many factors,
including estimates of mineral reserves, the interpretation of
geologic and engineering data, anticipated tonnage and grades of
ore to be mined and processed, the configuration of the ore body,
expected recovery rates of uranium from the ore, estimated
operating costs, anticipated climatic conditions and other factors.
As a result, it is possible that actual capital and operating costs
and economic returns will differ significantly from those estimated
for a project prior to production. For example, the capital and
operating cost projections and related economic indicators in the
Wheeler PFS Report and Waterbury PEA may vary significantly from
the capital and operating costs and economic returns estimated by a
final feasibility study or actual expenditures.
The decision as
to whether a property, such as Wheeler River or Waterbury Lake,
contains a commercial mineral deposit and should be brought into
production will depend upon the results of exploration and
evaluation programs and/or feasibility studies, and the
recommendations of duly qualified engineers and/or geologists, all
of which involves significant expense and risk.
2020 Annual Information
Form
122
It is not unusual
in the mining industry for new mining operations to take longer
than originally anticipated to bring into production, and to
require more capital than anticipated. Any of the following events,
among others, could affect the profitability or economic
feasibility of a project or delay or stop its advancement:
unavailability of necessary capital, unexpected problems during the
start-up phase delaying production, unanticipated changes in grade
and tonnes of ore to be mined and processed, unanticipated adverse
geological conditions, unanticipated metallurgical recovery
problems, incorrect data on which engineering assumptions are made,
unavailability of labour, increased costs of processing and
refining facilities, unavailability of economic sources of power
and water, unanticipated transportation costs, changes in
government regulations (including regulations with respect to the
environment, prices, royalties, duties, taxes, permitting,
restrictions on production, quotas on exportation of minerals,
environmental, etc.), fluctuations in uranium prices, and
accidents, labour actions and force majeure events.
The ability to
sell and profit from the sale of any eventual mineral production
from a property will be subject to the prevailing conditions in the
applicable marketplace at the time of sale. The demand for uranium
and other minerals is subject to global economic activity and
changing attitudes of consumers and other end-users’
demand.
Many of these
factors are beyond the control of a mining company and therefore
represent a market risk which could impact the long term viability
of Denison and its operations.
Denison has a History of Negative Operating Cash Flow
Denison has a
history of negative operating cash flow for recent past financial
reporting periods. In addition, the Company has committed a portion
of its short to medium term cash flows in connection with the APG
Arrangement. Denison anticipates that it will continue to have
negative operating cash flow until such time, if at all, its
Wheeler River project goes into production. To the extent that
Denison has negative operating cash flow in future periods, Denison
may need to allocate a portion of its cash reserves or other
financial or non-financial assets to fund such negative cash flow.
Denison may also be required to raise additional funds 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.
Risks Associated with the Selection of Novel Mining
Methods
As disclosed in
the Wheeler PFS Report, Denison has selected the ISR mining method
for production at the Phoenix deposit. While test work completed to
date indicates that ground conditions and the mineral reserves
estimated to be contained within the deposit are amenable to
extraction by way of ISR, actual conditions could be materially
different from those estimated based on the Company’s
technical studies completed to-date. While industry best practices
have been utilized in the development of its estimates, actual
results may differ significantly. Denison will need to complete
substantial additional work to further advance and/or confirm its
current estimates and projections for development to the level of a
feasibility study. As a result, it is possible that actual costs
and economic returns of any mining operations may differ materially
from Denison’s best estimates.
Dependence on Obtaining Licenses, and other Regulatory and Policy
Risks
Uranium mining
and milling operations and exploration activities, as well as the
transportation and handling of the products produced, are subject
to extensive regulation by federal, provincial and state
governments, including the Saskatchewan Government and the Canadian
Nuclear Safety Commission.
2020 Annual Information
Form
123
Such regulations
relate to production, development, exploration, exports, imports,
taxes and royalties, labour standards, occupational health, waste
disposal, protection and remediation of the environment, mine
decommissioning and reclamation, mine safety, toxic substances,
transportation safety and emergency response, and other matters.
Compliance with such laws and regulations is currently, and has
historically, increased the costs of exploring, drilling,
developing, constructing, operating and closing Denison’s
mines and processing facilities. It is possible that the costs,
delays and other effects associated with such laws and regulations
may impact Denison’s decision with respect to exploration and
development properties, including whether to proceed with
exploration or development, or that such laws and regulations may
result in Denison incurring significant costs to remediate or
decommission properties that do not comply with applicable
environmental standards at such time.
The development
of mines and related facilities is contingent upon governmental
approvals that are complex and time consuming to obtain and which
involve multiple governmental agencies. Environmental and
regulatory review has become a long, complex and uncertain process
that can cause potentially significant delays. Obtaining these
government approvals includes among other things, obtaining
environmental assessments and engaging with interested parties. See
‘Engagement with Canada’s First Nations and
Métis’ for more information regarding Denison’s
community engagement. In addition, future changes in governments,
regulations and policies, such as those affecting Denison’s
mining operations, uranium transport and international trade, could
materially and adversely affect Denison’s results of
operations and financial condition in a particular period or its
long-term business prospects.
The ability of
the Company to obtain and maintain permits and approvals and to
successfully explore and evaluate properties and/or develop and
operate mines may be adversely affected by real or perceived
impacts associated with its activities that affect the environment
and human health and safety at its projects and in the surrounding
communities. The real or perceived impacts of the activities of
other mining companies, locally or globally, may also adversely
affect our ability to obtain and maintain permits and approvals.
The Company is uncertain as to whether all necessary permits will
be obtained or renewed on acceptable terms or in a timely manner.
Any significant delays in obtaining or renewing such permits or
licences in the future could have a material adverse effect on
Denison.
Denison suspended
certain activities at Wheeler River during 2020, including the EA
process, which is on the critical path to achieving the project
development schedule outlined in the PFS. An important part of the
EA process involves extensive engagement and consultation with
various interested parties. Accordingly, the decision to suspend
the EA was motivated by the significant social and economic
disruptions that emerged at the onset of the COVID-19 pandemic, and
other fiscal prudence measures. While the EA process has resumed,
the Company is not currently able to estimate the impact to the
project development schedule, cost estimates or other project
development assumptions and projections outlined in the PFS, and
users are specifically cautioned against relying on the estimates
provided therein regarding the start of pre-production activities
in 2021 and first production in 2024.
Denison expends
significant financial and managerial resources to comply with such
laws and regulations. Denison anticipates it will have to continue
to do so as the historic trend toward stricter government
regulation may continue. Because legal requirements are frequently
changing and subject to interpretation, Denison is unable to
predict the ultimate cost of compliance with these requirements or
their effect on operations. While the Company has taken great care
to ensure full compliance with its legal obligations, there can be
no assurance that the Company has been or will be in full
compliance with all of these laws and regulations, or with all
permits and approvals that it is required to have.
2020 Annual Information
Form
124
Failure to comply
with applicable laws, regulations and permitting requirements, even
inadvertently, may result in enforcement actions. These actions may
result in orders issued by regulatory or judicial authorities
causing operations to cease or be curtailed, and may include
corrective measures requiring capital expenditures, installation of
additional equipment or remedial actions, which may have a material
adverse effect on the Company. Companies engaged in uranium
exploration, evaluation, mining or milling activities may be
required to compensate others who suffer loss or damage by reason
of such activities and may have civil or criminal fines or
penalties imposed for violations of applicable laws or
regulations.
Engagement with Canada’s First Nations and
Métis
First Nations and
Métis rights, entitlements and title claims may impact
Denison’s ability and that of its joint venture partners to
pursue exploration, development and mining at its Saskatchewan
properties. Pursuant to historical treaties, First Nations in
northern Saskatchewan ceded title to most traditional lands but
continue to assert title to the minerals within the lands.
Métis people have not signed treaties; they assert Aboriginal
rights throughout Saskatchewan, including Aboriginal title over
most if not all of the Company’s project lands.
Managing
relations with the local First Nations and Métis communities
and governments is a matter of paramount importance to Denison.
Engagement with, and consideration of the rights of, potentially
affected Indigenous peoples may require accommodations, including
undertakings regarding funding, contracting, environmental
practices, employment and other matters and can be time consuming
and challenging. This may affect the timetable and costs of
exploration, evaluation and development of the Company’s
projects.
The
Company’s relationships with various interested parties are
critical to ensure the future success of its existing operations
and the construction and development of its projects. There is an
increasing level of public concern relating to the perceived effect
of mining activities on the environment and on parties impacted by
such activities. Adverse publicity relating to the mining industry
generated by non-governmental organizations and others could have
an adverse effect on the Company’s reputation or financial
condition and may impact its relationship with interested parties.
While the Company is committed to operating in a socially
responsible manner, there is no guarantee that the Company’s
efforts in this regard will be successful or mitigate this
potential risk.
The inability of
the Company to maintain positive relationships with interested
parties, including local First Nations and Métis, may result
in additional obstacles to permitting, increased legal challenges,
or other disruptions to the Company’s exploration,
development and production plans, and could have a significant
adverse impact on the Company’s share price and financial
condition.
Environmental, Health and Safety Risks
Denison has
expended significant financial and managerial resources to comply
with environmental protection laws, regulations and permitting
requirements in each jurisdiction where it operates, and
anticipates that it will be required to continue to do so in the
future as the historical trend toward stricter environmental
regulation may continue. The uranium industry is subject to the
worker health, safety and environmental risks associated with all
mining businesses, including potential liabilities to third parties
for environmental damage, and to additional risks uniquely
associated with uranium mining and processing. The possibility of
more stringent regulations exists in the areas of worker health and
safety, the disposition of wastes, the decommissioning and
reclamation of mining and processing sites, and other environmental
matters each of which could have a material adverse effect on the
costs or the viability of a particular project.
2020 Annual Information
Form
125
Denison’s
facilities operate under various operating and environmental
permits, licences and approvals that contain conditions that must
be met, and Denison’s right to pursue its development plans
is dependent upon receipt of, and compliance with, additional
permits, licences and approvals. Failure to obtain such permits,
licenses and approvals and/or meet any conditions set forth therein
could have a material adverse effect on Denison’s financial
condition or results of operations.
Although the
Company believes its operations are in compliance, in all material
respects, with all relevant permits, licences and regulations
involving worker health and safety as well as the environment,
there can be no assurance regarding continued compliance or ability
of the Company to meet stricter environmental regulation, which may
also require the expenditure of significant additional financial
and managerial resources.
Mining companies
are often targets of actions by non-governmental organizations and
environmental groups in the jurisdictions in which they operate.
Such organizations and groups may take actions in the future to
disrupt Denison's operations. They may also apply pressure to
local, regional and national government officials to take actions
which are adverse to Denison's operations. Such actions could have
an adverse effect on Denison's ability to advance its projects and,
as a result, on its financial position and results.
Acquisition of Physical Uranium
The Company plans
to use the substantial majority of the proceeds of the March 2021
Offering in order to fund the purchase of physical uranium as part
of a financing initiative in connection with the advancement of the
Company’s uranium projects. This strategy will be subject to
a number of risks and there is no assurance that the strategy will
be successful. Specific risks include the following:
● The
Company has stated its intention to purchase approximately 2.5
million pounds of U3O8 in the spot
market. This quantity was estimated based on uranium prices at the
time of pricing the March 2021 Offering. There is no assurance that
the Company will be able to purchase this quantity of U3O8 as the spot price
will be subject to fluctuations and may increase prior to the
Company accumulating the targeted position. Accordingly, increases
in the spot price may result in the Company accumulating less than
the targeted amount of physical uranium.
● The
Company intends to hold the physical uranium for long-term
investment. During this term, the value of Denison’s uranium
holdings will fluctuate and accordingly the Company will be subject
to losses should it ultimately determine to sell the uranium at
prices lower than the acquisition cost. In addition, the Company
may incur income statement losses, should uranium prices decrease
or foreign exchange rates fluctuate unfavourably in future
financial periods.
● The
Company intends to use the physical uranium, in part, to support
the potential financing of the development of the Wheeler River
project. There is no assurance that the physical uranium may be
pledged as security for any potential financing, that the full
value of the uranium held will be recognized by any party providing
financing or that the Company’s ownership of the physical
uranium will enhance the Company’s ability to access future
project financing. Further, should the purchased uranium be used as
security for a future financing, there is a risk that it would no
longer be available for sale by the Company to meet any other
objectives described for use of the proceeds of the March 2021
Offering.
2020 Annual Information
Form
126
● The
Company may be required to sell a portion or all of the physical
uranium accumulated to funds its operations should other forms of
financing not be available to fund the Company’s capital
requirements.
Global Demand and International Trade Restrictions
The international
nuclear fuel industry, including the supply of uranium
concentrates, is relatively small compared to other minerals, and
is generally highly competitive and heavily regulated. Worldwide
demand for uranium is directly tied to the demand for electricity
produced by the nuclear power industry, which is also subject to
extensive government regulation and policies. In addition, the
international marketing of uranium is subject to governmental
policies and certain trade restrictions. For example, the supply
and marketing of uranium from Russia is limited by international
trade agreements.
As an example,
over the past two years, policy related reviews in the United
States have impacted the nuclear fuel market. In 2018, certain
uranium producers filed a petition with the U.S. Department of
Commerce (‘DOC’) to investigate the import of uranium
into the U.S. under Section 232 of the 1962 Trade Expansion Act.
The Nuclear Fuels Working Group convened to review the matter
recommended that the US build a strategic uranium reserve, and in
December 2020, the US Congress passed a Bill that included funding
for the first year of the acquisitions for the strategic reserve of
uranium. This long-awaited resolution ended a period of uncertainty
and disruption in the nuclear fuel market. Similarly, a 2020
extension to the Russian Suspension Agreement ended a period of
uncertainty in the uranium market regarding potential changes to
restrictions on Russian uranium supplies entering the United
States.
The uncertainty
surrounding these trade matters are believed to have impacted the
uranium purchasing activities of nuclear utilities, especially in
the U.S., and consequently negatively impacted the market price of
uranium and the uranium industry as a whole.
In general, trade
agreements, governmental policies and/or trade restrictions are
beyond the control of Denison and may affect the supply of uranium
available for use in markets like the United States and Europe,
which are currently the largest markets for uranium in the world.
Similarly, trade restrictions or foreign policy have the potential
to impact the ability to supply uranium to developing markets, such
as China and India. If substantial changes are made to regulations
affecting the global marketing and supply of uranium, the
Company’s business, financial condition and results of
operations may be materially adversely affected.
No Public Market for Uranium
There is no
public market for the sale of uranium. The uranium futures market
on the New York Mercantile Exchange does not provide for physical
delivery of uranium, only cash on settlement, and that trading
forum does not offer a formal market but rather facilitates the
introduction of buyers to sellers. The Company may not be able to
acquire uranium or, once acquired, sell uranium at a desired price
level for a number of weeks or months. The pool of potential
purchasers and sellers is limited, and each transaction may require
the negotiation of specific provisions. Accordingly, a purchase or
sale cycle may take several weeks or months to complete. In
addition, as the supply of uranium is limited, the Company may
experience additional difficulties purchasing uranium in the event
that it is a significant buyer. If the Company determines to sell
any physical uranium that it has acquired, it may likewise
experience difficulties in finding purchasers that are able to
accept a material quantity of physical uranium. The inability to
purchase and sell on a timely basis in sufficient quantities could
have a material adverse effect on the securities of the
Company.
2020 Annual Information
Form
127
In using the
proceeds from the March 2021 Offering, the Company will enter into
commitments to purchase U3O8. Such commitments
are generally subject to conditions in favour of both the vendor
and the Company, and there is no certainty that the purchases
contemplated by such commitments will be completed.
Volatility and Sensitivity to Market Prices
The value of the
Company’s mineral resources, mineral reserves and estimates
of the viability of future production for its projects is heavily
influenced by long and short term market prices of U3O8. Historically,
these prices have seen significant fluctuations, and have been and
will continue to be affected by numerous factors beyond
Denison’s control. Such factors include, among others: demand
for nuclear power, political, economic and social conditions in
uranium producing and consuming countries, public and political
response to nuclear incidents, reprocessing of used reactor fuel
and the re-enrichment of depleted uranium tails, sales of excess
civilian and military inventories (including from the dismantling
of nuclear weapons) by governments and industry participants,
uranium supplies from other secondary sources, and production
levels and costs of production from primary uranium
suppliers.
Uranium prices
failing to reach or sustain projected levels can impact operations
by requiring a reassessment of the economic viability of the
Company’s projects, and such reassessment alone may cause
substantial delays and/or interruptions in project development,
which could have a material adverse effect on the results of
operations and financial condition of Denison.
Public Acceptance of Nuclear Energy and Competition from Other
Energy Sources
Growth of the
uranium and nuclear power industry will depend upon continued and
increased acceptance of nuclear technology as a clean means of
generating electricity. Because of unique political, technological
and environmental factors that affect the nuclear industry,
including the risk of a nuclear incident, the industry is subject
to public opinion risks that could have an adverse impact on the
demand for nuclear power and increase the regulation of the nuclear
power industry. Nuclear energy competes with other sources of
energy, including oil, natural gas, coal and hydro-electricity.
These other energy sources are, to some extent, interchangeable
with nuclear energy, particularly over the longer term. Technical
advancements in, and government subsidies for, renewable and other
alternate forms of energy, such as wind and solar power, could make
these forms of energy more commercially viable and put additional
pressure on the demand for uranium concentrates. Sustained lower
prices of alternate forms of energy may result in lower demand for
uranium concentrates.
Current estimates
project increases in the world’s nuclear power generating
capacities, primarily as a result of a significant number of
nuclear reactors that are under construction, planned, or proposed
in China, India and various other countries around the world.
Market projections for future demand for uranium are based on
various assumptions regarding the rate of construction and approval
of new nuclear power plants, as well as continued public acceptance
of nuclear energy around the world. The rationale for adopting
nuclear energy can be varied, but often includes the clean and
environmentally friendly operation of nuclear power plants, as well
as the affordability and round-the-clock reliability of nuclear
power. A change in public sentiment regarding nuclear energy could
have a material impact on the number of nuclear power plants under
construction, planned or proposed, which could have a material
impact on the market’s and the Company’s expectations
for the future demand for uranium and the future price of
uranium.
2020 Annual Information
Form
128
Market Price of Shares
The market price
of Denison’s securities may experience wide fluctuations
which may not necessarily be related to the financial condition,
operating performance, underlying asset values or prospects of the
Company. These factors include macroeconomic developments in North
America and globally, market perceptions of the attractiveness of
particular industries – including mining and nuclear energy
– and volatile trading due to unpredictable general market or
trading sentiments. The market price of the Company’s
securities may be affected by many other variables which are not
directly related to our success and are, therefore, not within our
control, including other developments that affect the market for
all resource sector securities, the breadth of the public market
for the shares and the attractiveness of alternative
investments.
The market price
of Denison’s securities are also likely to increase or
decrease in response to a number of events and factors, including:
our operating performance and the performance of competitors and
other similar companies; volatility in metal prices; the arrival or
departure of key personnel; the number of shares to be publicly
traded after an offering pursuant to any prospectus supplement; the
public’s reaction to the Company’s press releases,
material change reports, other public announcements and our filings
with the various securities regulatory authorities; changes in
earnings estimates or recommendations by research analysts who
track Denison’s shares or the shares of other companies in
the resource sector; public sentiment regarding nuclear energy or
uranium mining; changes in general economic and/or political
conditions; acquisitions, strategic alliances or joint ventures
involving us or our competitors; and the other risk factors listed
herein.
Financial markets
have recently experienced significant price and volume fluctuations
that have particularly affected the market prices of equity
securities of companies. With respect to the Company’s
shares, the trading price has recently increased significantly and
there is no assurance that this price increase will be sustained.
Accordingly, the market price of the shares may decline even if the
Company’s operating results, underlying asset values or
prospects have not changed. Additionally, these factors, as well as
other related factors, may cause decreases in asset values that are
deemed to be other than temporary, which may result in impairment
losses. There can be no assurance that continuing fluctuations in
price and volume will not occur. If such increased levels of
volatility and market turmoil continue, the Company’s
operations could be adversely impacted, and the trading price of
the shares may be materially adversely affected.
Other factors
unrelated to the performance of Denison that may have an effect on
the price of the securities of Denison include the lessening (or
increasing) in trading volume, exclusion (or inclusion) in market
indices, and general investor interest in Denison's securities.
Similarly, changes in the liquidity of Denison’s Shares may
limit the ability of some institutions to invest in (or divest of)
Denison's securities, and a substantial decline in the liquidity
and/or price of the securities of Denison that persists for a
significant period of time could cause Denison's securities to be
delisted from an exchange. If an active market for the securities
of Denison does not continue, the liquidity of an investor's
investment may be limited and the price of the securities of the
Company may decline such that investors may lose their entire
investment in the Company. As a result of any of these factors, the
market price of the securities of Denison at any given point in
time may not accurately reflect the long-term value of Denison.
Securities class-action litigation often has been brought against
companies following periods of volatility in the market price of
their securities. Denison may in the future be the target of
similar litigation. Securities litigation could result in
substantial costs and damages and divert management's attention and
resources.
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Dilution from Further Issuances
While active in
exploring for new uranium discoveries in the Athabasca Basin
region, Denison’s present focus is on advancing the Wheeler
River project to a development decision, with the potential to
become the next large scale uranium producer in Canada. Denison
will require additional funds to further such
activities.
Denison may sell
additional equity securities (including through the sale of
securities convertible into Shares) and may issue additional debt
or equity securities to finance its exploration, evaluation,
development, construction and other operations, acquisitions or
other projects. Denison is authorized to issue an unlimited number
of Shares. Denison cannot predict the size of future sales and
issuances of debt or equity securities or the effect, if any, that
future sales and issuances of debt or equity securities will have
on the market price of the Shares. Sales or issuances of a
substantial number of equity securities, or the perception that
such sales could occur, may adversely affect prevailing market
prices for the Shares. With any additional sale or issuance of
equity securities, investors may suffer dilution of their voting
power and it could reduce the value of their
investment.
Reliance on Other Operators
At some of its
properties, Denison is not the operator and therefore is not in
control of all of the activities and operations at the site. As a
result, Denison is and will be, to a certain extent, dependent on
the operators for the nature and timing of activities related to
these properties and may be unable to direct or control such
activities.
As an example,
Orano Canada is the operator and majority owner of the MLJV and
MWJV in Saskatchewan, Canada. The McClean Lake mill employs
unionized workers who work under collective agreements. Orano
Canada, as the operator, is responsible for most operational and
production decisions and all dealings with unionized employees.
Orano Canada may not be successful in its attempts to renegotiate
the collective agreements, which may impact mill and mining
operations. Similarly, Orano Canada is responsible for all
licensing and dealings with various regulatory authorities. Orano
Canada maintains the regulatory licences in order to operate the
McClean Lake mill, all of which are subject to renewal from time to
time and are required in order for the mill to operate in
compliance with applicable laws and regulations. Any lengthy work
stoppages, or disruption to the operation of the mill or mining
operations as a result of a licensing matter or regulatory
compliance, may have a material adverse impact on the
Company’s future cash flows, earnings, results of operations
and financial condition.
Reliance on Facilities
Any uranium
purchased by the Company, in particular with the proceeds of the
March 2021 Offering, will be stored at one or more licensed uranium
conversion facilities (“Facilities”) owned by different
organizations. As the number of duly licensed Facilities is
limited, there can be no assurance that storage arrangements that
are commercially beneficial to the Company will be readily
available. Failure to negotiate commercially reasonable storage
terms with the Facilities may have a material adverse effect on the
financial condition of the Company.
By holding its
investments in uranium with licensed Facilities, the Company is
exposed to the credit risks of any such Facilities and their
operators. There is no guarantee that the Company can fully recover
all of its investments in uranium held with the Facilities. Failure
to recover all uranium holdings could have a material adverse
effect on the financial condition of the Company.
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Any loss or
damage of the uranium may not be fully covered or absolved by
contractual arrangements with the Facilities or the Company’s
insurance arrangements, and the Company may be financially and
legally responsible for losses and/or damages not covered by
indemnity provisions or insurance. Such responsibility could have a
material adverse effect on the financial condition of the
Company.
Reliance on Contractors and Experts
In various
aspects of its operations, Denison relies on the services,
expertise and recommendations of its service providers and their
employees and contractors, whom often are engaged at significant
expense to the Company. For example, the decision as to whether a
property contains a commercial mineral deposit and should be
brought into production will depend in large part upon the results
of exploration programs and/or feasibility studies, and the
recommendations of duly qualified third party engineers and/or
geologists. In addition, while Denison emphasizes the importance of
conducting operations in a safe and sustainable manner, it cannot
exert absolute control over the actions of these third parties when
providing services to Denison or otherwise operating on
Denison’s properties. Any material error, omission, act of
negligence or act resulting in environmental pollution, accidents
or spills, industrial and transportation accidents, work stoppages
or other actions could adversely affect the Company’s
operations and financial condition.
Foreign Exchange Rates
The Company
maintains its accounting records and reports its financial position
and results in Canadian dollars. Fluctuations in the U.S. currency
exchange rate relative to the Canadian currency could significantly
impact the Company, including its financial results, operations or
the trading value of its securities, as a result of various factors
including: (a) the anticipated acquisition of physical uranium,
pursuant to the March 2021 Offering, will generally be made in U.S.
dollars; (b) any storage costs from the Facilities for storage of
such uranium could be payable in U.S. dollars or other non-Canadian
currency and (c) the price of uranium is quoted in U.S. dollars,
and a decrease in value of USD would result in a relative decrease
in the valuation of uranium and the associated market value from a
Canadian currency perspective. In addition, the Company’s
outstanding common share purchase warrants (issued pursuant to the
February 2021 Offering and the March 2021 Offering) have a USD
denominated exercise price, and fluctuations in relative currency
exchange rates will impact the proceeds raised from future
exercises of such warrants. Exchange rate fluctuations, and any
potential negative consequences thereof, are beyond the
Company’s control.
Benefits Not Realized From Transactions
Denison has
completed a number of transactions over the last several years,
including without limitation the acquisition of International
Enexco Ltd., the acquisition of Fission, the acquisition of JNR,
the sale of its mining assets and operations located in the United
States to Energy Fuels Inc., the Mongolia Transaction, the
optioning of the Moore Lake property to Skyharbour Resources Ltd.,
the acquisition of an 80% interest in the Hook-Carter property from
ALX, the acquisition of an interest in the Moon Lake property from
CanAlaska, entering into the APG Transaction and Cameco
Transaction. Despite Denison’s belief that these
transactions, and others which may be completed in the future, will
be in Denison’s best interest and benefit the Company and
Denison’s shareholders, Denison may not realize the
anticipated benefits of such transactions or realize the full value
of the consideration paid or received to complete the transactions.
This could result in significant
accounting impairments or write-downs of the carrying values of
mineral properties or other assets and could adversely
impact the Company and the price of its Shares.
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Inability to Exploit, Expand and Replace Mineral Reserves and
Resources
Denison’s
mineral reserves and resources at its Wheeler River, Waterbury
Lake, McClean Lake and Midwest projects are Denison’s
material future sources of possible uranium production. Unless
other mineral reserves or resources are discovered or acquired,
Denison’s sources of future production for uranium
concentrates will decrease over time if its current mineral
reserves and resources are exploited or otherwise depleted. There
can be no assurance that Denison’s future exploration,
development and acquisition efforts will be successful in
replenishing its mineral reserves and resources. In addition, while
Denison believes that many of its properties demonstrate
development potential, there can be no assurance that they can or
will be successfully developed and put into production in future
years.
Competition for Properties
Significant
competition exists for the limited supply of mineral lands
available for acquisition. Participants in the mining business
include large established companies with long operating histories.
In certain circumstances, the Company may be at a disadvantage in
acquiring new properties as competitors may have greater financial
resources and more technical staff. Accordingly, there can be no
assurance that the Company will be able to compete successfully to
acquire new properties or that any such acquired assets would yield
resources or reserves or result in commercial mining
operations.
Property Title Risk
The Company has
investigated its rights to explore and exploit all of its material
properties and, to the best of its knowledge, those rights are in
good standing. However, no assurance can be given that such rights
will not be revoked, or significantly altered, to its detriment.
There can also be no assurance that the Company’s rights will
not be challenged or impugned by third parties, including the
Canadian federal, provincial and local governments, as well as by
First Nations and Métis.
There is also a
risk that Denison's title to, or interest in, its properties may be
subject to defects or challenges. If such defects or challenges
cover a material portion of Denison's property, they could have a
material adverse effect on Denison's results of operations,
financial condition, reported mineral reserves and resources and/or
long-term business prospects.
Ability to Maintain Obligations under Credit Facility and Other
Debt
The Credit
Facility has a term of one year, and will need to be renewed on or
before January 31, 2022. There is no certainty what terms of any
renewal may be, or any assurance that such renewal will be made
available to Denison.
Denison is
required to satisfy certain financial covenants in order to
maintain its good standing under the Credit Facility. Denison is
also subject to a number of restrictive covenants under the Credit
Facility and the APG Transaction, such as restrictions on
Denison’s ability to incur additional indebtedness and sell,
transfer of otherwise dispose of material assets. Denison may from
time to time enter into other arrangements to borrow money in order
to fund its operations and expansion plans, and such arrangements
may include covenants that have similar obligations or that
restrict its business in some way.
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Events may occur
in the future, including events out of Denison's control, which
could cause Denison to fail to satisfy its obligations under the
Credit Facility, APG Transaction or other debt instruments. In such
circumstances, the amounts drawn under Denison's debt agreements
may become due and payable before the agreed maturity date, and
Denison may not have the financial resources to repay such amounts
when due. The Credit Facility and APG Transaction are secured by
DMI's main properties by a pledge of the shares of DMI. If Denison
were to default on its obligations under the Credit Facility, APG
Transaction or other secured debt instruments in the future, the
lender(s) under such debt instruments could enforce their security
and seize significant portions of Denison's assets.
Change of Control Restrictions
The APG
Transaction and certain other of Denison’s agreements contain
provisions that could adversely impact Denison in the case of a
transaction that would result in a change of control of Denison or
certain of its subsidiaries. In the event that consent is required
from our counterparty and our counterparty chooses to withhold its
consent to a merger or acquisition, then such party could seek to
terminate certain agreements with Denison, including certain
agreements forming part of the APG Transaction, or require Denison
to buy the counterparty’s rights back from them, which could
adversely affect Denison’s financial resources and prospects.
If applicable, these restrictive contractual provisions could delay
or discourage a change in control of our company that could
otherwise be beneficial to Denison or its
shareholders.
Decommissioning and Reclamation
As owner of the
Elliot Lake decommissioned sites and part owner of the McClean Lake
mill, McClean Lake mines, the Midwest uranium project and certain
exploration properties, and for so long as the Company remains an
owner thereof, the Company is obligated to eventually reclaim or
participate in the reclamation of such properties. Most, but not
all, of the Company’s reclamation obligations are secured,
and cash and other assets of the Company have been reserved to
secure this obligation. Although the Company’s financial
statements record a liability for the asset retirement obligation,
and the security requirements are periodically reviewed by
applicable regulatory authorities, there can be no assurance or
guarantee that the ultimate cost of such reclamation obligations
will not exceed the estimated liability contained on the
Company’s financial statements.
As
Denison’s properties approach or go into decommissioning,
regulatory review of the Company’s decommissioning plans may
result in additional decommissioning requirements, associated costs
and the requirement to provide additional financial assurances. It
is not possible to predict what level of decommissioning and
reclamation (and financial assurances relating thereto) may be
required from Denison in the future by regulatory
authorities.
Technical Innovation and Obsolescence
Requirements for
Denison’s products and services may be affected by
technological changes in nuclear reactors, enrichment and used
uranium fuel reprocessing. These technological changes could reduce
the demand for uranium or reduce the value of Denison’s
closed mines services to potential customers. In addition,
Denison’s competitors may adopt technological advancements
that give them an advantage over Denison.
Mining and Insurance
Denison’s
business is capital intensive and subject to a number of risks and
hazards, including environmental pollution, accidents or spills,
industrial and transportation accidents, labour disputes, changes
in the regulatory environment, natural phenomena (such as inclement
weather conditions, earthquakes, pit wall failures and cave-ins)
and encountering unusual or unexpected geological
conditions.
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Many of the
foregoing risks and hazards could result in damage to, or
destruction of, Denison’s mineral properties or processing
facilities in which it has an interest; personal injury or death;
environmental damage; delays in or interruption of or cessation of
exploration, development, production or processing activities; or
costs, monetary losses and potential legal liability and adverse
governmental action. In addition, due to the radioactive nature of
the materials handled in uranium exploration, mining and
processing, as applicable, additional costs and risks are incurred
by Denison and its joint venture partners on a regular and ongoing
basis.
Although Denison
maintains insurance to cover some of these risks and hazards in
amounts it believes to be reasonable, such insurance may not
provide adequate coverage in the event of certain circumstances. No
assurance can be given that such insurance will continue to be
available, that it will be available at economically feasible
premiums, or that it will provide sufficient coverage for losses
related to these or other risks and hazards.
Denison may be
subject to liability or sustain loss for certain risks and hazards
against which it cannot insure or which it may reasonably elect not
to insure because of the cost. This lack of insurance coverage
could result in material economic harm to Denison.
Uranium Industry is Subject to Influential Political and Regulatory
Factors
The international
uranium industry, including the supply of uranium concentrates, is
relatively small, competitive and heavily regulated. Worldwide
demand for uranium is directly tied to the demand for electricity
produced by the nuclear power industry, which is also subject to
extensive government regulation and policies. In addition, the
international marketing and trade of uranium is subject to current,
and potential changes in, governmental policies, regulatory
requirements, and international trade restrictions (including trade
agreements, customs, duties and/or taxes).
International
agreements, governmental policies and trade restrictions are beyond
the control of the Company. Changes in regulatory requirements,
customs, duties or taxes may affect the supply of uranium available
in the United States and Europe, which are currently the largest
markets for uranium in the world, as well as the future of supply
to developing markets, such as China and India. If substantial
changes are made to the regulations affecting global marketing and
supply of uranium, the Company’s business, financial
condition and results of operations may be materially adversely
affected.
Anti-Bribery and Anti-Corruption Laws
The Company is
subject to anti-bribery and anti-corruption laws, including the
Corruption of Foreign Public
Officials Act (Canada) and the United States Foreign Corrupt
Practices Act of 1977, as amended. Failure to comply with these
laws could subject the Company to, among other things, reputational
damage, civil or criminal penalties, other remedial measures and
legal expenses which could adversely affect the Company’s
business, results from operations, and financial condition. It may
not be possible for the Company to ensure compliance with
anti-bribery and anti-corruption laws in every jurisdiction in
which its employees, agents, sub-contractors or joint venture
partners are located or may be located in the future.
Climate Change
Due to changes in
local and global climatic conditions, many analysts and scientists
predict an increase in the frequency of extreme weather events such
as floods, droughts, forest and brush fires and extreme
storms.
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Such events could
materially disrupt the Company’s operations, particularly if
they affect the Company’s sites, impact local infrastructure
or threaten the health and safety of the Company’s employees
and contractors. In addition, reported warming trends could result
in later freeze-ups and warmer lake temperatures, affecting the
Company’s winter exploration programs at certain of its
projects. Any such event could result in material economic harm to
Denison.
The Company is
focused on operating in a manner designed to minimize the
environmental impacts of its activities; however, environmental
impacts from mineral exploration and mining activities are
inevitable. Increased environmental regulation and/or the use of
fiscal policy by regulators in response to concerns over climate
change and other environmental impacts, such as additional taxes
levied on activities deemed harmful to the environment, could have
a material adverse effect on Denison’s financial condition or
results of operations.
Information Systems and Cyber Security
The Company's
operations depend upon the availability, capacity, reliability and
security of its information technology (“IT”)
infrastructure, and its ability to expand and update this
infrastructure as required, to conduct daily operations. Denison
relies on various IT systems in all areas of its operations,
including financial reporting, contract management, exploration and
development data analysis, human resource management, regulatory
compliance and communications with employees and third
parties.
These IT systems
could be subject to network disruptions caused by a variety of
sources, including computer viruses, security breaches and
cyber-attacks, as well as network and/or hardware disruptions
resulting from incidents such as unexpected interruptions or
failures, natural disasters, fire, power loss, vandalism and theft.
The Company's operations also depend on the timely maintenance,
upgrade and replacement of networks, equipment, IT systems and
software, as well as pre-emptive expenses to mitigate the risks of
failures.
The ability of
the IT function to support the Company’s business in the
event of any such occurrence and the ability to recover key systems
from unexpected interruptions cannot be fully tested. There is a
risk that, if such an event actually occurs, the Company’s
continuity plans may not be adequate to immediately address all
repercussions of the disaster. In the event of a disaster affecting
a data centre or key office location, key systems may be
unavailable for a number of days, leading to inability to perform
some business processes in a timely manner. As a result, the
failure of Denison’s IT systems or a component thereof could,
depending on the nature of any such failure, adversely impact the
Company's reputation and results of operations.
Although to date
the Company has not experienced any material losses relating to
cyber-attacks or other information security breaches, there can be
no assurance that the Company will not incur such losses in the
future. Unauthorized access to Denison’s IT systems by
employees or third parties could lead to corruption or exposure of
confidential, fiduciary or proprietary information, interruption to
communications or operations or disruption to the Company’s
business activities or its competitive position. Further,
disruption of critical IT services, or breaches of information
security, could have a negative effect on the Company’s
operational performance and its reputation. The Company's risk and
exposure to these matters cannot be fully mitigated because of,
among other things, the evolving nature of these threats. As a
result, cyber security and the continued development and
enhancement of controls, processes and practices designed to
protect systems, computers, software, data and networks from
attack, damage or unauthorized access remain a
priority.
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The Company
applies technical and process controls in line with
industry-accepted standards to protect information, assets and
systems; however, these controls may not adequately prevent
cyber-security breaches. There is no assurance that the Company
will not suffer losses associated with cyber-security breaches in
the future, and may be required to expend significant additional
resources to investigate, mitigate and remediate any potential
vulnerabilities. As cyber threats continue to evolve, the Company
may be required to expend additional resources to continue to
modify or enhance protective measures or to investigate and
remediate any security vulnerabilities.
Dependence on Key Personnel and Qualified and Experienced
Employees
Denison’s
success depends on the efforts and abilities of certain senior
officers and key employees. Certain of Denison’s employees
have significant experience in the uranium industry, and the number
of individuals with significant experience in this industry is
small. While Denison does not foresee any reason why such officers
and key employees will not remain with Denison, if for any reason
they do not, Denison could be adversely affected. Denison has not
purchased key man life insurance for any of these individuals.
Denison’s success also depends on the availability of and
competitiveness for qualified and experienced employees to work in
Denison’s operations and Denison’s ability to attract
and retain such employees. In addition, Denison’s ability to
keep essential operating staff in place may also be challenged as a
result of potential COVID-19 outbreaks or quarantines.
Conflicts of Interest
Some of the
directors and officers of Denison are also directors of other
companies that are similarly engaged in the business of acquiring,
exploring and developing natural resource properties. Such
associations may give rise to conflicts of interest from time to
time. In particular, one of the consequences would be that
corporate opportunities presented to a director or officer of
Denison may be offered to another company or companies with which
the director or officer is associated, and may not be presented or
made available to Denison. The directors and officers of Denison
are required by law to act honestly and in good faith with a view
to the best interests of Denison, to disclose any interest which
they may have in any project or opportunity of Denison, and, where
applicable for directors, to abstain from voting on such matter.
Conflicts of interest that arise will be subject to and governed by
the procedures prescribed in the Company’s Code of Ethics and
by the OBCA.
Disclosure and Internal Controls
Internal controls
over financial reporting are procedures designed to provide
reasonable assurance that transactions are properly authorized,
assets are safeguarded against unauthorized or improper use, and
transactions are properly recorded and reported. Disclosure
controls and procedures are designed to ensure that information
required to be disclosed by a company in reports filed with
securities regulatory agencies is recorded, processed, summarized
and reported on a timely basis and is accumulated and communicated
to the company’s management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure. A control system,
no matter how well designed and operated, can provide only
reasonable, not absolute, assurance with respect to the reliability
of reporting, including financial reporting and financial statement
preparation.
Potential Influence of KEPCO and KHNP
Effective
December 2016, KEPCO indirectly transferred the majority of its
interest in Denison to KHNP Canada.
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Denison and KHNP
Canada subsequently entered into an amended and restated strategic
relationship agreement effective September 19, 2017 (the
“KHNP SRA”) (on
substantially similar terms as the original strategic relationship
agreement between Denison and KEPCO), pursuant to which KHNP Canada
is contractually entitled to Board representation. Provided KHNP
Canada holds over 5% of the Shares, it is entitled to nominate one
director for election to the Board at any shareholder
meeting.
KHNP
Canada’s shareholding level gives it a large vote on
decisions to be made by shareholders of Denison, and its right to
nominate a director may give KHNP Canada influence on decisions
made by Denison's Board. Although KHNP Canada’s director
nominee will be subject to duties under the OBCA to act in the best
interests of Denison as a whole, such director nominee is likely to
be an employee of KHNP and he or she may give special attention to
KHNP’s or KEPCO’s interests as indirect Shareholders.
The interests of KHNP and KEPCO, as indirect Shareholders, may not
always be consistent with the interests of other
Shareholders.
The KHNP SRA also
includes provisions granting KHNP Canada a right of first offer for
certain asset sales and the right to be approached to participate
in certain potential acquisitions. The right of first offer and
participation right of KHNP Canada may negatively affect Denison's
ability or willingness to entertain certain business opportunities,
or the attractiveness of Denison as a potential party for certain
business transactions. KEPCO’s large indirect shareholding
block may also make Denison less attractive to third parties
considering an acquisition of Denison if those third parties are
not able to negotiate terms with KEPCO or KHNP Canada to support
such an acquisition.
United States investors may not be able to obtain enforcement of
civil liabilities against the Company
The enforcement
by investors of civil liabilities under the United States federal
or state securities laws may be affected adversely by the fact that
the Company is governed by the OBCA, that the majority of the
Company’s officers and directors are residents of Canada, and
that all, or a substantial portion, of their assets and the
Company’s assets are located outside the United States. It
may not be possible for investors to effect service of process
within the United States on certain of its directors and officers
or enforce judgments obtained in the United States courts against
the Company or certain of the Company’s directors and
officers based upon the civil liability provisions of United States
federal securities laws or the securities laws of any state of the
United States.
There is some
doubt as to whether a judgment of a United States court based
solely upon the civil liability provisions of United States federal
or state securities laws would be enforceable in Canada against the
Company or its directors and officers. There is also doubt as to
whether an original action could be brought in Canada against the
Company or its directors and officers to enforce liabilities based
solely upon United States federal or state securities
laws.
If the Company is characterized as a passive foreign investment
company, U.S. holders may be subject to adverse U.S. federal income
tax consequences
U.S. investors
should be aware that they could be subject to certain adverse U.S.
federal income tax consequences in the event that the Company is
classified as a ‘passive foreign investment company’
(“PFIC”) for U.S. federal income tax purposes. The
determination of whether the Company is a PFIC for a taxable year
depends, in part, on the application of complex U.S. federal income
tax rules, which are subject to differing interpretations, and the
determination will depend on the composition of the Company’s
income, expenses and assets from time to time and the nature of the
activities performed by the Company’s officers and
employees.
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The Company may
be a PFIC in one or more prior tax years, in the current tax year
and in subsequent tax years. Prospective investors should carefully
read the discussion below under the heading ‘Material United
States Federal Income Tax Considerations for U.S. Holders’
and the tax discussion in any applicable prospectus supplement for
more information and consult their own tax advisors regarding the
likelihood and consequences of the Company being treated as a PFIC
for U.S. federal income tax purposes, including the advisability of
making certain elections that may mitigate certain possible adverse
U.S. federal income tax consequences that may result in an
inclusion in gross income without receipt of such
income.
As a foreign private issuer, the Company is subject to different
U.S. securities laws and rules than a U.S. domestic issuer, which
may limit the information publicly available to U.S.
investors
The Company is a
foreign private issuer under applicable U.S. federal securities
laws and, therefore, is not required to comply with all of the
periodic disclosure and current reporting requirements of the U.S.
Exchange Act and related rules and regulations. As a result, the
Company does not file the same reports that a U.S. domestic issuer
would file with the SEC, although it will be required to file with
or furnish to the SEC the continuous disclosure documents that the
Company is required to file in Canada under Canadian securities
laws. In addition, the Company’s officers, directors and
principal shareholders are exempt from the reporting and
‘short swing’ profit recovery provisions of Section 16
of the U.S. Exchange Act. Therefore, the Company’s
securityholders may not know on as timely a basis when its
officers, directors and principal shareholders purchase or sell
securities of the Company as the reporting periods under the
corresponding Canadian insider reporting requirements are longer.
In addition, as a foreign private issuer, the Company is exempt
from the proxy rules under the U.S. Exchange Act.
The Company could lose its foreign private issuer status in the
future, which could result in significant additional costs and
expenses to the Company
In order to
maintain its current status as a foreign private issuer, 50% or
more of the Company’s Shares must be directly or indirectly
owned of record by non-residents of the United States unless the
Company also satisfies one of the additional requirements necessary
to preserve this status. The Company may in the future lose its
foreign private issuer status if a majority of the Shares are owned
of record in the United States and the Company fails to meet the
additional requirements necessary to avoid loss of foreign private
issuer status. The regulatory and compliance costs to the Company
under U.S. federal securities laws as a U.S. domestic issuer may be
significantly more than the costs the Company incurs as a Canadian
foreign private issuer eligible to use the multijurisdictional
disclosure system. If the Company is not a foreign private issuer,
it would not be eligible to use the multijurisdictional disclosure
system or other foreign issuer forms and would be required to file
periodic and current reports and registration statements on U.S.
domestic issuer forms with the SEC, which are more detailed and
extensive than the forms available to a foreign private
issuer.
2020 Annual Information
Form 138
DENISON’S SECURITIES
The Shares
The Company is
entitled to issue an unlimited number of Shares. As of December 31,
2020, Denison had an aggregate of 678,981,882 Shares issued and
outstanding, and 798,526,517 Shares issued and outstanding as at
the date hereof.
Shareholders are
entitled to receive notice of, and to one vote per share at, every
meeting of Shareholders and to share equally in the assets of
Denison remaining upon the liquidation, dissolution or winding up
of Denison after the creditors of Denison have been
satisfied.
ATM Program Activity
As at the date
hereof, Denison, through its agents, has issued 4,230,186 Shares
under the ATM, at an average price of $0.93, for aggregate gross
proceeds of $3,914,000. The Company paid total commissions of
$78,000, resulting in net proceeds after commissions of
$3,836,000.
In March 2021,
Denison terminated the EDA for the ATM under the 2020 Prospectus,
and the Company will no longer offer or sell common shares through
the facilities of the TSX and/or NYSE American pursuant to such
ATM.
Price Range and Trading Volume of Shares
The Shares trade
on the TSX under the symbol “DML” and on the NYSE
American under the symbol “DNN”. The following table
sets forth, for the periods indicated, the reported intra-day high
and low sales prices and aggregate volume of trading of the Shares
on the TSX and NYSE American during the year ended December 31,
2020.
Month
|
High (CAD$)TSX
|
Low (CAD$)TSX
|
VolumeTSX
|
High (US$)NYSE American
|
Low (US$)NYSE American
|
VolumeNYSE American
|
January
|
0.54
|
0.43
|
10.85
M
|
0.4165
|
0.321
|
1.92
M
|
February
|
0.51
|
0.415
|
6.66
M
|
0.39
|
0.31
|
2.15
M
|
March
|
0.49
|
0.235
|
12.18
M
|
0.38
|
0.19
|
3.82
M
|
April
|
0.68
|
0.335
|
19.52
M
|
0.4888
|
0.23
|
4.65
M
|
May
|
0.66
|
0.54
|
8.76
M
|
0.48
|
0.382
|
1.72
M
|
June
|
0.58
|
0.44
|
8.17
M
|
0.43
|
0.3212
|
2.15
M
|
July
|
0.66
|
0.47
|
8.95
M
|
0.496
|
0.345
|
2.61
M
|
August
|
0.70
|
0.60
|
6.56
M
|
0.54
|
0.4601
|
1.93
M
|
September
|
0.75
|
0.51
|
10.72
M
|
0.575
|
0.3824
|
2.34
M
|
October
|
0.69
|
0.41
|
14.12
M
|
0.5215
|
0.3049
|
5.20
M
|
November
|
0.52
|
0.42
|
10.16
M
|
0.3966
|
0.3277
|
2.54
M
|
December
|
0.97
|
0.47
|
25.48
M
|
0.7607
|
0.3667
|
7.84
M
|
Source:
Bloomberg
The trading of
the Shares on the TSX and the NYSE American do not represent all
trading in the Shares, and significant volumes of trading may be
facilitated through other platforms.
Prior Sales
During the year
ended December 31, 2020, the Company issued the following
securities pursuant to the Company’s Option Plan and Share
Unit Plan, as applicable:
2020 Annual Information
Form
139
Stock Options:
Date of Issuance
|
Options Issued(#)
|
Exercise Prices($)
|
March
9, 2020
|
3,523,000
|
$0.455
|
August
10, 2020
|
46,000
|
$0.66
|
November
9, 2020
|
102,000
|
$0.45
|
TOTAL
|
3,671,000
|
|
Share Units:
Date of Issuance
|
Restricted Share Units (#)
|
Performance Share Units (#)
|
March
16, 2020
|
2,745,000
|
-
|
April
2, 2020
|
-
|
180,000
|
May
27, 2020
|
539,750
|
-
|
August
10, 2019
|
20,000
|
-
|
November
9, 2020
|
41,000
|
-
|
TOTAL
|
3,345,750
|
180,000
|
Dividends
Shareholders are
entitled to receive dividends if, as and when declared by the Board
of Directors. The Company is restricted from paying dividends under
its Credit Facility, and the directors are focused on dedicating
cash flow to reinvestment in the business of the Company.
Accordingly, no dividends have been declared to date.
DENISON’S MANAGEMENT
Denison’s Directors
The following
table sets out the names and the provinces and countries of
residence of each of the directors of Denison as of the date
hereof, their respective positions and offices held with Denison
and their principal occupations during the five preceding years.
The following table also identifies the members of each committee
of the Board of Directors.
Name and Province
and
Country of
Residence
|
Principal Occupation and
Employment for
Past Five
Years
|
Director
Since(1)
|
|
|
|
David D. Cates
Ontario,
Canada
|
President and
Chief Executive Officer of the Company since 2015; prior: serving
in various roles with the Company since 2008, including Vice
President Finance, Tax & Chief Financial Officer as well as
Director, Taxation.
|
2018
|
W. Robert Dengler(5,8,10)
Ontario,
Canada
|
Corporate
Director since 2006; prior: Vice-Chairman and Director of Dynatec
Corporation; President and Chief
Executive Officer of Dynatec Corporation.
|
2006
|
Brian D.
Edgar(3,4)
British Columbia,
Canada
|
Chairman
of Silver Bull Resources, Inc., a mineral exploration company
listed on both OTCMKTS and the TSX, since 2012, and President and
Chief Executive Officer of Dome Ventures Corporation, a subsidiary
of Silver Bull Resources Inc., since 2005.
|
2005
|
2020 Annual Information
Form
140
Name and Province
and
Country of
Residence
|
Principal Occupation and
Employment for
Past Five
Years
|
Director
Since(1)
|
Ron F.
Hochstein(7,9,10)British
Columbia, Canada
|
President
and Chief Executive Officer of Lundin Gold Inc. since 2014; prior:
President and Chief Executive Officer of the Company from
2009 to 2015.
|
2000
|
Jun Gon
KimGyeongsangbuk-do, Korea
|
General Manager
of the Nuclear Fuel Supply division of KHNP; prior: has held
various positions at KHNP.
|
2020
|
Jack O.A. Lundin(9,10)
British
Columbia, Canada
|
Chief
Executive Officer of Bluestone Resources Inc.; prior: Senior Mine
Project Engineer of Lundin Gold Inc. since 2017 and analyst in the
commercial department of Lundin Norway AS.
|
2018
|
Catherine J. G. Stefan(2,5)
Ontario,
Canada
|
Chair of the
Board of the Company; prior: President, Stefan & Associates, a
consulting firm based in Ontario, from 2009-2016; prior: Managing Partner, Tivona Capital
Corporation, a private investment firm, from
1999-2008.
|
2006
|
Patricia M. Volker(3,6)
Ontario,
Canada
|
Corporate
Director since 2016; prior: over 17 years of service in various
roles at the Chartered Professional Accountants of Ontario
including Director of Standards Enforcement and Director, Public
Accounting.
|
2018
|
Notes:
(1)
The term of office of each of
the directors of Denison will expire at the Annual Meeting of the
Shareholders currently scheduled to be held on May 6,
2021.
(2)
Chair, Audit
Committee
(3)
Member, Audit
Committee
(4)
Chair, Corporate Governance
and Nominating Committee
(5)
Member, Corporate Governance
and Nominating Committee
(6)
Chair, Compensation
Committee
(7)
Member, Compensation
Committee
(8)
Chair, Environment, Health,
Safety & Sustainability Committee
(9)
Member, Environment, Health,
Safety & Sustainability Committee
(10)
Member, Technical
Committee
Denison’s Executive Officers
The following
table sets out the names and the provinces or states and countries
of residence of each of the executive officers of Denison as of the
date hereof, their respective positions and offices held with
Denison and their principal occupations during the five preceding
years.
Name and Province
and
Country of
Residence
|
Position with Denison and
Employment for Past Five Years
|
|
|
David Cates
Ontario,
Canada
|
President and
Chief Executive Officer since 2015; prior: Vice President Finance,
Tax and Chief Financial Officer from 2013.
|
Gabriel McDonald
Ontario,
Canada
|
Executive Vice
President and Chief Financial Officer, with Denison since 2015;
prior: Director of Financial Reporting at IAMGOLD Corporation from
2015, Senior Manager at PricewaterhouseCoopers LLP from
2008.
|
2020 Annual Information
Form
141
Name and Province
and
Country of
Residence
|
Position with Denison and
Employment for Past Five Years
|
David Bronkhorst
Saskatchewan,
Canada
|
Vice President
Operations since 2019; prior: Vice President, Mining, Projects and
Technology at Cameco Corporation until retirement in
2016.
|
Michael Schoonderwoerd
Ontario,
Canada
|
Vice President
Controller since 2013.
|
Amanda Willett
British Columbia,
Canada
|
Vice President
Legal since June 2020 and Corporate Secretary since June 2016;
prior: Corporate Counsel from June 2016; Senior Associate at Blake,
Cassels & Graydon LLP in Vancouver from 2011.
|
The directors and
executive officers of Denison, as a group, beneficially own, or
control or direct, directly or indirectly, 4,718,299 Shares, or
less than one percent of the Shares as of the date of this AIF. No
single director or officer beneficially owns or controls or
directs, directly or indirectly, one percent or more of the Shares
as of the date of this AIF. The information as to Shares
beneficially owned or directed by the directors and officers, not
being within the knowledge of the Company, has been furnished by
each such individual.
Cease Trade Orders, Bankruptcies, Penalties or
Sanctions
Other than as
referred to below, no director or officer of the
Company:
(a) is, as
at the date of this AIF, or has, within the previous ten year
period, been a director or executive officer of a company
(including Denison) that:
(i) was
subject to a cease trade or similar order or an order that denied
the relevant company access to any exemption under securities
legislation that was in effect for a period of more than 30
consecutive days that was issued (A) while that person was acting
in such capacity or (B) after that person ceased to act in such
capacity but which resulted from an event that accrued while that
person was acting in that capacity; or
(ii) became
bankrupt, made a proposal under any legislation relating to
bankruptcy or insolvency or was subject to or instituted any
proceedings, arrangement or compromise with creditors or had a
receiver, receiver manager or trustee appointed to hold its assets
(A) while that person was acting in such capacity or (B) within a
year of that person ceasing to act in such capacity,
or
(b) has,
within the previous ten year period, become bankrupt, made a
proposal under any legislation relating to bankruptcy or
insolvency, or become subject to or instituted any proceedings,
arrangement or compromise with creditors, or had a receiver,
receiver manager or trustee appointed to hold such person’s
assets; or
(c) is, or
has been, subject to any penalties or sanctions (i) imposed by a
court relating to securities legislation or by a securities
regulatory authority or has entered into a settlement agreement
with a securities regulatory authority, or (ii) imposed by a court
or regulatory body that would likely be considered important to a
reasonable security holder in making an investment
decision.
Ron Hochstein was
a director of Sirocco Mining Inc. (“Sirocco”). Pursuant to a plan of
arrangement completed on January 31, 2014, Canadian Lithium Corp.
amalgamated with Sirocco to form RB Energy Inc.
(“RBI”).
2020 Annual Information
Form
142
In October 2014,
RBI commenced proceedings under the Companies' Creditors
Arrangement Act (the “CCAA”). CCAA proceedings continued
in 2015 and a receiver was appointed in May 2015. The TSX de-listed
RBI’s common shares in November 24, 2014 for failure to meet
the continued listing requirements of the TSX. Ron Hochstein was a
director of RBI until October 3, 2014.
Conflicts of Interest
Some of
Denison’s directors and officers are also directors and/or
officers of other natural resource companies and, consequently,
there exists the possibility for such directors and officers to be
in a position of conflict relating to any future transactions or
relationships between the Company and such other companies or
common third parties. However, the Company is unaware of any such
pending or existing conflicts between these parties. Any decision
made by any of such directors and officers involving the Company
are made in accordance with their duties and obligations to deal
fairly and in good faith with the Company and such other companies
and their obligations to act in the best interests of
Denison’s shareholders. In addition, each of the directors of
the Company discloses and refrains from voting on any matter in
which such director may have a conflict of interest.
None of the
present directors or senior officers of the Company, and no
associate or affiliate of any of them, has any material interest in
any transaction of the Company or in any proposed transaction which
has materially affected or will materially affect the
Company.
However, investor
relations, administrative service fees and other pass-through
expenses of $206,000 were incurred during the financial year ended
December 31, 2020 with Namdo Management Services Ltd., a company
which shares a common director with Denison. These services were
incurred in the normal course of operating a public
company.
In addition, one
of Denison’s directors, Mr. Kim, is employed by KHNP, a
subsidiary of KEPCO and the parent corporation of KHNP Canada.
Through its corporate holdings, KEPCO holds approximately 7.3% of
the outstanding Shares as of the date hereof (the majority of which
are held directly by KHNP Canada). The Company and KHNP Canada are
parties to the KHNP SRA, which may present a conflict of interest
for Mr. Kim. The KHNP SRA provides KHNP Canada with a right of
first offer for certain asset sales and the right to be approached
to participate in certain potential acquisitions being considered
by Denison. While the Company is not aware of a pending or existing
conflict of interest with Mr. Kim as of the date hereof, the
interests of KEPCO, KHNP and KHNP Canada as shareholders of Denison
and their business relationships with Denison may place Mr. Kim in
a position of conflict as a director of the Company in the
future.
Interest of Management and Others in Material
Transactions
Other than as
disclosed in this AIF, no director or executive officer of Denison,
no person or company that beneficially owns, controls or directs,
indirectly or directly, more than 10% of the Shares, and no
associate or affiliate of any of them, has or has had, within the
three most recently completed financial years or during the current
financial year, any material interest, direct or indirect, in any
transaction which materially affects or is reasonably expected to
materially affect Denison.
2020 Annual Information
Form 143
Standing Committees of the Board
The Audit Committee
The audit
committee of the Company’s Board of Directors is principally
responsible for:
● recommending to
the Company’s Board of Directors the external auditor to be
nominated for election by the Company’s shareholders at each
annual general meeting and negotiating the compensation of such
external auditor;
● overseeing the
work of the external auditor;
● reviewing the
Company’s annual and interim financial statements, its
MD&A in respect thereof and press releases regarding earnings
before they are reviewed and approved by the Board of Directors and
publicly disseminated by the Company; and
● reviewing the
Company’s financial reporting procedures for the
Company’s public disclosure of financial information
extracted or derived from its financial statements.
The
Company’s Board of Directors has adopted an audit committee
mandate/terms of reference (the “Mandate”) which sets out the Audit
Committee’s mandate, organization, powers and
responsibilities. The complete Mandate is attached as Schedule A to
this AIF.
Below are the
details of each Audit Committee member, including his or her name,
whether she or he is independent and financially literate as such
terms are defined under National Instrument 52-110 - Audit Committees of the Canadian
Securities Administrators (“NI 52-110”) and his or her
education and experience as it relates to the performance of his or
her duties as an Audit Committee member. All three audit committee
members have “financial expertise” within the meaning
of the U.S. Sarbanes-Oxley
Act of 2002, as amended, and are financially literate under
NI 52-110. The qualifications and independence of each member is
discussed.
Director
|
Independent(1)
|
Financially Literate(2)
|
Education & Experience Relevant to Performance of Audit
Committee Duties
|
|
|
|
|
Catherine
Stefan
Chair of the
Audit Committee
|
Yes
|
Yes
|
● Chartered Professional
Accountant, Chartered Accountant
● B.Comm
● Held position of Chief
Operating Officer, O&Y Properties Inc., President of Stefan
& Associates and Executive Vice-President of Bramalea Group,
Chair, Tax Committee of the Canadian Institute of Public Real
Estate Companies (CIPREC).
|
Brian
Edgar
|
Yes
|
Yes
|
● Law degree, with extensive
corporate finance experience
● Held positions of Chairman
(since 2011) and President and Chief Executive Officer (2005 to
2011) of a public company.
● Has served on audit
committees of a number of public companies
|
2020 Annual Information
Form 144
Director
|
Independent(1)
|
Financially Literate(2)
|
Education & Experience Relevant to Performance of Audit
Committee Duties
|
Patricia
Volker
|
Yes
|
Yes
|
● Chartered Professional
Accountant, Chartered Accountant,
Certified
Management Accountant
● B.Sc.
● Served for over 17 years in
various positions at the Chartered Professional Accountants of
Ontario during her 30+ year career in the accounting
profession.
● Serves on private and public
company audit and/or finance committees
|
Notes:
(1)
Independent within the
meaning of NI 52-110.
(2)
To be considered financially
literate, a member of the Committee must have the ability to read
and understand a set of financial statements that present a breadth
and level of complexity of accounting issues that are generally
comparable to the breadth and complexity of the issues that can
reasonably be expected to be raised by the Company’s
financial statements.
Since the
commencement of the Company’s most recently completed
financial year, there has not been a recommendation of the Audit
Committee to nominate or compensate an internal auditor which was
not adopted by the Company’s Board of Directors.
The Audit
Committee has adopted specific policies and procedures for the
engagement of non-audit services as described in Section D of the
Mandate.
Effective October
1, 2020, at the request of the Company, the Company’s prior
auditor, PricewaterhouseCoopers LLP (“PwC”), resigned
as auditors of the Company and KPMG was appointed to fill their
vacancy for the fiscal year ended December 31, 2020.
In accordance
with the requirements of National Instrument 51-102 of the Canadian
Securities Administrators (“51-102”), a notice of
change of auditors dated October 1, 2020 (the “Notice of
Change”) was sent to PwC and KPMG, each of whom has provided
a letter to the securities regulatory authorities in each of the
jurisdictions where the Company is a reporting issuer stating that
they agree with the statement made in the Notice of Change. A
“reporting package”, as in 51-102, relating to the
change (comprising the Notice of Change of Auditors from the
Corporation and confirmation letters from each of PwC and KPMG) is
available on SEDAR and EDGAR.
The following
table discloses the fees billed to the Company by its independent
auditors during the last two fiscal years.
Financial
Year
|
|
Audit-Related
|
|
Ending
|
Audit
Fees(1)
|
Fees
(2)
|
Tax Fees
(3)
|
All Other
Fees(4)
|
December 31, 2019
|
$180,775
|
$116,567
|
Nil
|
Nil
|
December 31, 2020
|
$112,837
|
$273,208(5)
|
24,015(6)
|
Nil
|
Notes:
1.
The aggregate fees billed for
audit services of the Company’s consolidated financial
statements.
2.
The aggregate fees billed for
assurance and related services that are reasonably related to the
performance of the audit or review of the Company’s financial
statements and are not disclosed in the Audit Fees column. Fees
relate to reviews of interim consolidated financial statements,
specified audit procedures not included as part of the audit of the
consolidated financial statements and consent and comfort
procedures in connection with various equity issuance
documents.
2020 Annual Information
Form 145
3.
The aggregate fees billed for
tax compliance, tax advice, and tax planning services, such as
transfer pricing and tax return preparation.
4.
The aggregate fees billed for
professional services other than those listed in the other three
columns.
5.
The increase in Audit-Related
Fees in 2020 relates to the extensive work required of the auditors
to support the Company’s 2020 equity issuances, including the
completion and filing of a short-form prospectus and a short form
base shelf prospectus.
6.
The increase in Tax Fees is a
result of the change in the Company’s auditor to KPMG LLP,
which has historically been engaged by the Company to provide it
with corporate tax advice.
7.
Fees for 2019 relate to the
Company’s former auditor; fees in 2020 include $59,337 of
audit fees and $192,959 of audit related fees for professional
services billed by our former auditor.
Other Board Committees
The Board currently has four other committees in
addition to the Audit Committee, namely the Corporate Governance
and Nominating Committee, the Compensation Committee, the
Environment, Health, Safety and Sustainability Committee and
the Technical Committee. Each standing
committee of the Board operates according to its mandate, which is
approved by the Board and sets out the committee’s duties and
responsibilities. A discussion of each committee and its
composition can be found in the most recent management information
circular prepared in connection with the Company’s
Shareholder meeting (“Circular”), and copies of the standing committee
mandates are available at www.denisonmines.com.
Corporate
Governance
As a Canadian reporting issuer with its Shares
listed on the TSX, Denison has in place a system of corporate
governance practices which is responsive to applicable Canadian
requirements, including National Policy 58-201 -
Corporate
Governance Guidelines of the
Canadian Securities Administrators (the “Guidelines”). Denison's corporate governance practices
meet or exceed the Guidelines and all other applicable Canadian
requirements. Reference is made to the Corporate Governance
Practices section of the Circular, which contains a description of
the Company’s system of corporate governance practices with
reference to the Guidelines.
Denison
is classified as a foreign private issuer under U.S. securities law
and its Shares are also listed on the NYSE American. Pursuant to
the rules of the NYSE American, a foreign private issuer is
permitted to follow home country practice except with respect to
certain rules, with which Denison complies.
LEGAL AND REGULATORY PROCEEDINGS
Except as
described below, the Company was not a party to, and none of the
Company’s property was the subject of, any material legal
proceedings in 2020, and the Company knows of no such material
legal proceedings that are contemplated. However, from time to
time, the Company may become party to litigation incidental to its
business or other litigation matters deemed by the Company to not
be material.
Uranium
Industry a.s. Arbitration
Pursuant to the
terms of the Amended and Restated Share Purchase Agreement between
Denison and UI dated November 25, 2015 (the “GSJV Purchase Agreement”) with
respect to the Mongolia Transaction, the Company had sold its
interest in the Gurvan Saihan Joint Venture (the
“GSJV”)
effective December 1, 2015 (the “Mongolia Transaction”). In
connection with the closing the Company received US$1,250,000 and
retained rights to receive additional proceeds from contingent
payments of up to US$12,000,000, for total consideration of up to
US$13,250,000.
2020 Annual Information
Form 146
The contingent
payments are payable as follows: (1) US$5,000,000 within 60 days of
the issuance of a mining licence for an area covered by any of the
four principal exploration licences held by the GSJV, being the
Hairhan, Haraat, Gurvan Saihan and Ulzit projects (the
"First Project"); (2)
US$5,000,000 within 60 days of the issuance of a mining licence for
an area covered by any of the other exploration licences held by
the GSJV (the "Second
Project"); (3) US$1,000,000 within 365 days following the
production of an aggregate of 1,000 pounds U3O8 from the
operation of the First Project; and (4) US$1,000,000 within 365
days following the production of an aggregate of 1,000 pounds
U3O8 from the
operation of the Second Project.
The issuance by
the Mongolian government of mining licence certificates for the
Hairhan, Haraat, Gurvan Saihan and Ulzit projects in 2016 triggered
an obligation for UI to make an aggregate of US$10,000,000 of
contingent payments to Denison by November 16, 2016.
Pursuant to a
January 2017 extension agreement (the “Extension Agreement”) entered into
between UI and the Company, the payment due date for the contingent
payments was extended from November 16, 2016 to July 16, 2017. As
consideration for the extension, UI agreed to pay interest on the
contingent payments at a rate of 5% per year, payable monthly up to
July 16, 2017 and agreed to pay a US$100,000 instalment amount
towards the balance of contingent payments. The first payment under
the Extension Agreement was due on or before January 31, 2017. The
required payments were not made, putting UI in breach of the GSJV
Purchase Agreement and the Extension Agreement.
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 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. Hearings in front
of the arbitration panel were held in December 2019. The final
award was rendered by an arbitration panel on July 27, 2020, with
the panel finding in favour of Denison and ordering UI to pay the
Company US$10,000,000 plus interest at a rate of 5% per annum from
November 16, 2016, plus certain legal and arbitration costs.
Denison and UI have exchanged correspondence, and award recovery
options are being considered.
Other
Arbitration
Denison commenced
arbitration with Orano Canada and OURD in October 2019, with
Denison’s initial written submission made on March 9, 2020.
Denison claimed that certain payments it was required to make
related to matters outside the scope of the joint venture agreement
for the MLJV. Proceedings in front of the arbitration panel were
held in October 2020 and the panel released its decision in
December 2020, finding in favour of Orano Canada and OURD on the
facts. A settlement of $850,000 was paid by Denison in January
2021, agreed amongst the parties as full settlement of all legal
fees and expenses incurred by Orano Canada and OURD.
MATERIAL CONTRACTS
Reference is made
to the material contracts which have been filed by Denison with the
Canadian securities regulatory authorities on the SEDAR website at
www.sedar.com.
Below are the
particulars of each contract, other than those entered into in the
ordinary course of business, that is material to Denison and that
was entered into between January 1, 2020 and the date hereof or was
entered into before that date but is still in effect:
2020 Annual Information
Form 147
1.
The following agreements
executed in connection with the APG Transaction:
a.
The loan agreement between
DMI and SPV dated January 31, 2017 with respect to the DMI
Loan;
b.
The loan agreement between
SPV and APG dated January 31, 2017 with respect to the SPV
Loan;
c.
The performance guarantee by
Denison as guarantor in favour of the SPV as beneficiary and APG as
permitted assignee, pursuant to which Denison has agreed to
guarantee the performance of DMI’s obligations to SPV under
the SPV Loan, which guarantee has been assigned by SPV in favour of
APG;
d.
The streaming agreement
between the DMI and Centaurus dated January 31, 2017 with respect
to the Stream Arrangement; and
e.
The performance guarantee by
Denison as guarantor in favour of Centaurus as beneficiary,
pursuant to which Denison has agreed to guarantee the performance
of DMI’s obligations to Centaurus under the Stream
Arrangement.
2.
The Reclamation Funding
Agreement made as of the 21st day of December
1995 among Denison Mines Limited (“DML”), Her Majesty the Queen in
Right of Canada (the “Government of Canada”) and Her
Majesty the Queen in Right of the Province of Ontario (the
“Government of
Ontario”) as amended by the Amending Agreement made as
of the 11th day of April 1997
among DML (now DMI), the Government of Canada and the Government of
Ontario and as further amended by the Amending Agreement made as of
the 25th
day of February 1999 among DML, the Government of Canada and the
Government of Ontario and further amended by an Assignment and
Novation Agreement made as of the 29th day of December,
2003 among Denison Energy, DMI, the Government of Canada and the
Government of Ontario.
According to the
Reclamation Funding Agreement, the Company is required to maintain
funds in an Environmental Trust sufficient for the succeeding six
years of the estimated reclamation and on-going care and monitoring
expenditures for the Company’s closed Elliot Lake mining
facility.
3.
The KHNP SRA dated September
19, 2017 between the Company and KHNP Canada.
The KHNP SRA
provides for a long-term collaborative business relationship
between the parties, replacing the strategic relationship agreement
made as of June 15, 2009 among the Company, KEPCO and KEPCO Canada
Uranium Investment Limited Partnership. Under the KHNP SRA, KHNP
Canada is entitled to the nomination of one Board representative,
provided that KHNP Canada’s shareholding percentage stays
above 5%.
The KHNP SRA also
provides that if Denison intends to sell an interest in certain of
its substantial assets, it will first notify KHNP Canada of each
such proposed sale and provide KHNP Canada with a 30-day right of
first offer to allow KHNP Canada to purchase the interest in the
asset that Denison proposes to sell. The KHNP SRA provides that
Denison will allow KHNP Canada to participate in potential
purchases of certain assets, including a mill facility, a producing
mine or a mineral resource for which a production feasibility study
has been completed, which Denison plans to pursue with a
co-investor. KHNP Canada’s ability to purchase will not be
available where Denison and KHNP Canada cannot agree on terms
within a reasonable time or where their involvement would adversely
affect Denison's ability to pursue an investment
opportunity.
2020 Annual Information
Form 148
The right of
first offer and co-investment rights are subject to pre-existing
contractual commitments and do not apply to certain pre-existing
transactions. KHNP Canada is also entitled to subscribe for
additional Shares in order to maintain or increase its shareholding
percentage in Denison to thresholds which are relevant to its
rights under the KHNP SRA, in circumstances where Denison completes
a public offering or broadly distributed private placement to raise
proceeds of greater than $10 million.
Denison is
entitled to terminate the KHNP SRA if KHNP Canada’s
shareholding percentage in Denison drops below 5% and stays below
5% for 60 days following delivery of a notice to that effect by
Denison to KHNP Canada or if Denison completes an Extraordinary
Transaction, as defined in the KHNP SRA.
4.
The Credit Facility dated
January 30, 2015, and all subsequent amendments including the
Seventh Amending Agreement to the Fourth Amended and Restated
Credit Facility dated January 14, 2021.
NAMES AND INTERESTS OF EXPERTS
The
Company’s Independent Registered Public Accounting Firm is
KPMG LLP, Chartered Professional Accountants, Licensed Public
Accountants, who have issued an independent auditor’s report
dated March 4, 2021 in respect of Denison’s consolidated
financial statements as at December 31, 2020 for the year
ended 2020 and the effectiveness of the Company’s internal
control over financial reporting as at December 31, 2020. KPMG has
advised that it is independent with respect to the Company within
the meaning of the Rules of Professional Conduct of the
Chartered Professional Accountants of
Ontario and Public Company Accounting Oversight Board Rule
3520 Auditor Independence.
The
Company’s former Independent Registered Public Accounting
Firm was PricewaterhouseCoopers LLP (“PwC”), Chartered
Professional Accountants, Licensed Public Accountants, which issued
a Report of Independent Registered Public Accounting Firm dated
March 5, 2020 in respect of Denison’s consolidated financial
statements as at December 31, 2019 for the year ended 2019.
PwC has advised that as of October 1, 2020 and during the period
covered by the consolidated financial statements on which PwC
reported, they were independent with respect to the Company within
the meaning of the Rules of Professional Conduct of the
Chartered Professional Accountants of
Ontario and Public Company Accounting Oversight Board Rule
3520 Auditor Independence.
David Bronkhorst,
P.Eng., Denison’s Vice President Operations, who is a
"Qualified Person" within the meaning of this term in NI 43-101,
has prepared sections of this AIF that are of a scientific or
technical nature pertaining to the Company’s mineral projects
and has verified the data disclosed therein. To the knowledge of
Denison, David Bronkhorst is the registered or beneficial owner,
directly or indirectly, of less than one percent of the outstanding
Shares.
Andy Yackulic,
P.Geo., Denison’s Director Exploration, who is a "Qualified
Person" within the meaning of this term in NI 43-101, has prepared
sections of this AIF that are of a scientific or technical nature
pertaining to the Company’s mineral projects and has verified
the data disclosed therein. To the knowledge of Denison, Andy
Yackulic is the registered or beneficial owner, directly or
indirectly, of less than one percent of the outstanding
Shares.
The principal
author of the Wheeler PFS Report dated October 30, 2018 was Mark
Liskowich, P.Geo. of SRK, who is independent in accordance with the
requirements of NI 43-101.
2020 Annual Information
Form 149
The principal
author of the Waterbury PEA Report dated October 30, 2020 was
Gordon Graham, P.Eng. of EngComp, who is independent in accordance
with the requirements of NI 43-101.
RPA, which was
retained to independently review and audit the mineral reserves and
mineral resources in accordance with the requirements of NI 43-101,
prepared the following technical reports: (a) McClean Technical
Report dated November 21, 2005 as amended on February 16, 2006 by
Richard E. Routledge, M.Sc., P.Geo. and James W. Hendry, P.Eng.;
(b) McClean North Technical Report dated January 31, 2007 by
Richard E. Routledge, M.Sc., P.Geo.; and (c) Sue D Report dated
March 31, 2006 by Richard E Routledge, M.Sc., P.Geo. and James W.
Hendry, P.Eng.
The Midwest
Technical Report dated March 26, 2018 was authored by Dale Verran,
MSc, Pr.Sci.Nat., formerly of the Company, Chad Sorba, P.Geo, of
the Company and G. David Keller, PGeo, formerly of SRK, and Oy
Leuangthong, PEng, of SRK. Each of Messrs. Keller and Leuangthong
and SRK were independent in accordance with the requirements of NI
43-101.
To the knowledge
of Denison as of the date hereof, each of SRK, EngComp, RPA,
GeoVector and SGS Geostat and each of their respective partners,
employees and consultants who participated in the preparation of
the aforementioned reports, or who were in a position to influence
the outcome of such reports, are the registered or beneficial
owner, directly or indirectly, of less than one percent of the
outstanding Shares.
ADDITIONAL INFORMATION
Additional
information regarding the Company is available on the SEDAR website
at www.sedar.com.
Further information concerning the Company, including directors'
and officers' remuneration and indebtedness, principal holders of
the Company's securities, options to purchase securities and
interests of insiders in material transactions, where applicable,
is contained in the management information circular for the
Company’s most recent meeting of shareholders. Additional
financial information is provided in the Company's audited
consolidated financial statements and MD&A for the financial
year ended December 31, 2020.
A copy of this
AIF, as well as the Circular and such other information and
documentation that the Company makes available via SEDAR, can be
found at www.sedar.com. In addition,
certain of this information is distributed to shareholders in
connection with Denison’s Annual General Meeting of
Shareholders. The Company will provide any of the foregoing
documents subject to its rights to require people who are not
security holders of the Company to pay a reasonable charge. Copies
of these documents may be obtained by writing to:
Denison Mines
Corp.
1100 – 40
University Avenue
Toronto, Ontario, M5J 1T1
Telephone: (416)
979-1991
Facsimile: (416)
979-5893
Email:
info@denisonmines.com
2020 Annual Information
Form 150
Schedule A
Audit Committee Mandate and Charter
A.
Composition
of the Committee
(1) The
Board shall appoint annually from among its members at the first
meeting of the Board following the annual meeting of the
shareholders a committee to be known as the Audit Committee (the
“Committee”) to be composed of three (3) directors or
such other number not less than three (3) as the Board may from
time to time determine.
(2) Any
member of the Committee may be removed or replaced at any time by
the Board. Any member of the Committee ceasing to be a director or
ceasing to qualify under A(3) below shall cease to be a member of
the Committee. Subject to the foregoing, each member of the
Committee shall hold office as such until the next annual
appointment of members to the Committee after his or her election.
Any vacancy occurring in the Committee shall be filled at the next
meeting of the Board.
(3) Each
member of the Committee shall:
(a) be a
member of the Board;
(b) not be
an officer or employee of the Company or any of its
affiliates;
(c) be an
unrelated director as defined in the Toronto Stock Exchange (the
“TSX”) Corporate Governance Guidelines (“TSX
Guidelines”) as the same may be amended from time to
time;
(d) satisfy
the independence requirements applicable to members of audit
committees under each of Multilateral Instrument 52-110 –
Audit Committees of the Canadian Securities Administrators
(“M1 52-110”), Rule 10A-3(b)(1)(ii) of the United
States Securities and Exchange Commission, and any other applicable
laws and regulations, as the same may be amended from time to time
(with the TSX Guidelines, “Applicable Laws”);
and
(e) satisfy
the financial literacy requirements prescribed by Applicable
Laws.
(4) A
majority of the Committee shall constitute a quorum.
(5) The
Committee shall elect annually a chairperson from among its
members.
B. Purpose
(1) The
Committee’s purpose is to assist the Board in its supervision
of the management of the business and affairs of the Company
through oversight of:
(a) the
integrity of the Company’s financial statements,
Management’s Discussion and Analysis (“MD&A”)
and other financial reporting;
(b) the
integrity of the Company’s internal control and management
information systems;
(c) the
Company’s compliance with all applicable laws, rules,
regulations, policies and other requirements of governments,
regulatory agencies and stock exchanges relating to accounting
matters and financial disclosure;
(d) the
auditor’s qualifications and activities;
(e) communication among
the auditor, management and the Board; and
(f) such
other matters as are determined by the Board from time to
time.
_____________________________________________________________________________________________
2020
Annual Information
Form A-1
C. Committee Resources
(1) The
Committee shall have direct channels of communication with the
Company’s auditor to discuss and review specific issues as
appropriate.
(2) The
Committee, or any member of the Committee with the approval of the
Committee, may retain at the expense of the Company such
independent legal, accounting (other than the auditor) or other
advisors on such terms as the Committee may consider appropriate
and shall not be required to obtain the approval of the Board in
order to retain or compensate any such advisors.
(3) The
Committee shall have unrestricted access to Company personnel and
documents and shall be provided with all necessary funding and
other resources to carry out its responsibilities.
D. Committee Responsibilities
(1) The
responsibilities of the Committee shall be to:
(a) with
respect to financial accounting matters:
(i)
review with management and
the external auditors the annual consolidated financial statements,
MD&A and press release announcing annual financial results of
operations before making recommendations to the Board relating to
approval of such documents;
(ii)
review with management and
the external auditors interim financial statements, MD&A and
press release announcing interim financial results of operations
before making recommendations to the Board relating to approval of
such documents;
(iii)
review and discuss with
management and the external auditors all public disclosure
documents containing audited or unaudited financial information
including: any Prospectus; the Annual Report; interim unaudited
reports; and any material change report pertaining to the
Company’s financial matters. The Committee will review the
consistency of the foregoing documents with facts, estimates or
judgments contained in the audited or unaudited financial
statements;
(iv)
satisfy itself that adequate
procedures are in place for the review of the Company’s
disclosure of financial information extracted or derived from the
Company’s financial statements, other than the
Company’s financial statements, MD&A and earnings press
releases, and shall periodically assess the adequacy of those
procedures;
(v)
prior to the completion of
the annual audit, and at any other time deemed advisable by the
Committee, review and discuss with management and the auditor the
quality of the Company’s accounting policies and financial
statement presentation, including, without limitation, the
following:
1. all
critical accounting policies and practices to be used, including,
without limitation, the reasons why certain estimates or policies
are or are not considered critical and how current and anticipated
future events may impact those determinations as well as an
assessment of any proposed modifications by the auditors that were
not made;
2. all
alternative accounting treatments for policies and practices that
have been discussed by management and the auditors;
and
3. other
material written communications between the auditor and management,
including, without limitation, any management letter, schedule of
unadjusted differences, the management representation letter,
report on internal controls, as well as the engagement letter and
the independence letter;
_____________________________________________________________________________________________
2020
Annual Information
Form A-2
(vi) review
annually the accounting principles and practices followed by the
Company and any changes in the same as they occur;
(vii) review
new accounting principles of the Chartered Professional Accountants
of Canada and the International Accounting Standards Board which
would have a significant impact on the Company’s financial
reporting as reported to the Committee by management;
(viii) review the
status of material contingent liabilities as reported to the
Committee by management;
(ix) review
potentially significant tax problems as reported to the Committee
by management; and
(x) review
any errors or omissions in the current or prior year’s
financial statements which appear material as reported to the
Committee by management;
(b) with
respect to the external auditors:
(i) be
directly responsible for recommending the appointment of the
auditor, the auditor’s compensation, retention and
termination and for oversight of the work of the auditor
(including, without limitation, resolution of disagreements between
management and the auditor regarding financial reporting) for the
purpose of preparing or issuing an audit report or performing other
audit, review or services for the Company;
(ii) approve, prior to
the auditor’s audit, the auditor’s audit plan
(including, without limitation, staffing), the scope of the
auditor’s review and all related fees;
(iii) satisfy itself as
to the independence of the auditor. The Committee shall pre-approve
any non-audit services (including, without limitation, fees
therefor) provided to the Company or its subsidiaries by the
auditor or any auditor of any such subsidiary and shall consider
whether these services are compatible with the auditor’s
independence, including, without limitation, the nature and scope
of the specific non-audit services to be performed and whether the
audit process would require the auditor to review any advice
rendered by the auditor in connection with the provision of
non-audit services. The Committee shall not allow the auditor to
render any non-audit services to the Company or its subsidiaries
that are prohibited by Applicable Law;
(iv) review
and approve the Company’s policies concerning the hiring of
employees and former employees of the Company’s auditor or
former auditor.
(c) with
respect to internal controls:
(i) oversee
management’s design, testing and implementation of the
Company’s internal controls and management information
systems and review the adequacy and effectiveness
thereof.
(d) with
respect to concerns and complaints:
(i) establish procedures
for:
1. the
receipt, retention and treatment of complaints received by the
Company regarding accounting, internal accounting controls or
auditing matters; and
2. the
confidential, anonymous submission by employees of the Company of
concern regarding questionable accounting or auditing
matters.
(e) The Committee shall
be responsible for oversight and enforcement of the Code of Ethics
for the Chief Executive Officer, Senior Financial Officers and
Other Officers of the Company, subject to the supervision of the
Board.
_____________________________________________________________________________________________
2020
Annual Information
Form A-3
(f) with
respect to general audit matters:
(i) inquire
of management and the external auditors as to any activities that
may or may not appear to be illegal or unethical;
(ii) review
with management, the operations analyst and the external auditors
any frauds reported to the Audit Committee;
(iii) review
with the external auditors the adequacy of staffing for accounting
and financial responsibilities; and
(iv) report
and make recommendations to the Board as the Committee considers
appropriate.
(2) In
addition, the Board may refer to the Committee such matters and
questions relating to the Company as the Board may from time to
time see fit;
(3) Any
member of the Committee may require the auditors to attend any or
every meeting of the Committee.
E. Meetings
(1) The
times of and the places where meetings of the Audit Committee shall
be held and the calling of and procedure at such meetings shall be
determined from time to time by the Committee, provided however
that the Committee shall meet at least quarterly, and the Committee
shall maintain minutes or other records of its meetings and
activities. Notice of every such meeting to be given in writing not
less than five (5) days prior to the date fixed for the meeting,
and shall be given to the auditors of the Company, that the
auditors shall be entitled to attend and be heard thereat. Meetings
shall be convened whenever requested by the auditors, the
operations analyst or any member of the Audit Committee in
accordance with the Ontario Business Corporations Act.
(2) As part
of each meeting of the Committee at which it recommends that the
Board approve the financial statements of the Company, and at such
other times as the Committee deems appropriate, the Committee shall
meet separately with the auditor to discuss and review specific
issues as appropriate.
F. Evaluation of Charter and Mandate
(1) On at
least an annual basis, the Committee shall review and assess the
adequacy of this Charter and Mandate and recommend any proposed
changes to the Board of Directors.
(2) All
prior resolutions of the Board relating to the constitution and
responsibilities of the Audit Committee are hereby
repealed.
_____________________________________________________________________________________________
2020
Annual Information
Form A-4
Schedule B
Glossary of Technical Terms
Note: The terms
related to Mineral resources and mineral reserves presented herein
are as defined in “CIM DEFINITION STANDARDS on Mineral
Resources and Mineral Reserves” prepared by the CIM Standing
Committee on Reserve Definitions, adapted by CIM Council, May 10,
2014.
eU3O8
or eU
This term refers to equivalent
U3O8
grade derived from the downhole
logging of drill holes using a calibrated total gamma
probe.
Feasibility Study
A Feasibility
Study is a comprehensive technical and economic study of the
selected development option for a mineral project that includes
appropriately detailed assessments of applicable Modifying Factors
together with any other relevant operational factors and detailed
financial analysis that are necessary to demonstrate, at the time
of reporting, that extraction is reasonably justified (economically
mineable). The results of the study may reasonably serve as the
basis for a final decision by a proponent or financial institution
to proceed with, or finance, the development of the project. The
confidence level of the study will be higher than that of a
Pre-Feasibility Study.
Historical Estimate
A historical
estimate means an estimate of the quantity, grade or metal or
mineral content of a deposit that an issuer has not verified as a
current mineral resource or mineral reserve, and which was prepared
before the issuer acquiring, or entering into an agreement to
acquire, an interest in the property that contains the
deposit.
Indicated Mineral Resource
An indicated
mineral resource is that part of a mineral resource for which
quantity, grade or quality, densities, shape and physical
characteristics, can be estimated with a level of confidence
sufficient to allow the appropriate application of technical and
economic parameters, to support mine planning and evaluation of the
economic viability of the deposit. The estimate is based on
detailed and reliable exploration and testing information gathered
through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes that are spaced closely
enough for geological and grade continuity to be reasonably
assumed.
Inferred Mineral Resource
An inferred
mineral resource is that part of a mineral resource for which
quantity and grade or quality can be estimated on the basis of
geological evidence and limited sampling and reasonably assumed,
but not verified, geological and grade continuity. The estimate is
based on limited information and sampling gathered through
appropriate techniques from locations such as outcrops, trenches,
pits, workings and drill holes
Measured Mineral Resource
A measured
mineral resource is that part of a mineral resource for which
quantity, grade or quality, densities, shape, and physical
characteristics are so well established that they can be estimated
with confidence sufficient to allow the appropriate application of
technical and economic parameters, to support production planning
and evaluation of the economic viability of the deposit. The
estimate is based on detailed and reliable exploration, sampling
and testing information gathered through appropriate techniques
from locations such as outcrops, trenches, pits, workings and drill
holes that are spaced closely enough to confirm both geological and
grade continuity.
_____________________________________________________________________________________________
2020
Annual Information
Form B-1
Mineral Reserve
A mineral reserve
is the economically mineable part of a measured or indicated
mineral resource demonstrated by at least a Preliminary Feasibility
Study. This Study must include adequate information on mining,
processing, metallurgical, economic and other relevant factors that
demonstrate, at the time of reporting, that economic extraction can
be justified. A mineral reserve includes diluting materials and
allowances for losses that may occur when the material is
mined.
Mineral Resource
A mineral
resource is a concentration or occurrence of diamonds, natural
solid inorganic material, or natural solid fossilized organic
material including base and precious metals, coal, and industrial
materials in or on the Earth’s crust in such form and
quantity and of such a grade or quality that it has reasonable
prospects for economic extraction. The location, quantity, grade,
geological characteristics and continuity of a mineral resource are
known, estimated or interpreted from specific geological evidence
and knowledge.
Modifying Factors
Modifying Factors
are considerations used to convert Mineral Resources to Mineral
Reserves. These include, but are not restricted to, mining,
processing, metallurgical, infrastructure, economic, marketing,
legal, environmental, social and governmental factors.
Preliminary Feasibility Study or Pre-Feasibility Study
A Pre-Feasibility
Study is a comprehensive study of a range of options for the
technical and economic viability of a mineral project that has
advanced to a stage where a preferred mining method, in the case of
underground mining, or the pit configuration, in the case of an
open pit, is established and an effective method of mineral
processing is determined. It includes a financial analysis based on
reasonable assumptions on the Modifying Factors and the evaluation
of any other relevant factors which are sufficient for a Qualified
Person, acting reasonably, to determine if all or part of the
Mineral Resource may be converted to a Mineral Reserve at the time
of reporting. A Pre-Feasibility Study is at a lower confidence
level than a Feasibility Study.
Probable Mineral Reserve
A ‘probable
mineral reserve’ is the economically mineable part of an
indicated, and in some circumstances, a measured mineral resource
demonstrated by at least a Preliminary Feasibility Study. This
Study must include adequate information on mining, processing,
metallurgical, economic, and other relevant factors that
demonstrate, at the time of reporting, that economic extraction can
be justified.
Proven Mineral Reserve
A ‘proven
mineral reserve’ is the economically mineable part of a
measured mineral resource demonstrated by at least a Preliminary
Feasibility Study. This Study must include adequate information on
mining, processing, metallurgical, economic, and other relevant
factors that demonstrate, at the time of reporting, that economic
extraction is justified.
Qualified Person
A
‘Qualified Person’ means an individual who is an
engineer or geoscientist with at least five years of experience in
mineral exploration, mine development or operation or mineral
project assessment, or any combination of these; has experience
relevant to the subject matter of the mineral project and the
technical report and is a member or licensee in good standing of a
professional association of geoscientists and/or engineers meeting
the criteria set out in NI 43-101.
_____________________________________________________________________________________________
2020
Annual Information
Form B-2