Exhibit 99.1
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
(Unaudited -
Expressed in thousands of Canadian dollars (“CAD”)
except for share amounts)
|
|
|
|
|
At June
30
2021
|
|
At December
31
2020
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash and cash
equivalents (note 4)
|
|
|
$
|
84,852
|
$
|
24,992
|
Trade and other
receivables (note 5)
|
|
|
|
4,639
|
|
3,374
|
Inventories (note
6)
|
|
|
|
3,016
|
|
3,015
|
Investments-equity
instruments (note 7)
|
|
|
|
21,847
|
|
16,657
|
Prepaid expenses
and other
|
|
|
|
786
|
|
1,373
|
|
|
|
|
115,140
|
|
49,411
|
Non-Current
|
|
|
|
|
|
|
Inventories-ore
in stockpiles (note 6)
|
|
|
|
2,098
|
|
2,098
|
Investments-equity
instruments (note 7)
|
|
|
|
245
|
|
293
|
Investments-uranium
(note 7)
|
|
|
|
91,510
|
|
-
|
Prepaid expenses
and other
|
|
|
|
312
|
|
-
|
Restricted cash
and investments (note 8)
|
|
|
|
12,336
|
|
12,018
|
Property, plant
and equipment (note 9)
|
|
|
|
256,484
|
|
256,870
|
Total
assets
|
|
|
$
|
478,125
|
$
|
320,690
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities (note 10)
|
|
|
$
|
17,069
|
$
|
7,178
|
Current portion
of long-term liabilities:
|
|
|
|
|
|
|
Deferred revenue
(note 11)
|
|
|
|
4,656
|
|
3,478
|
Post-employment
benefits (note 12)
|
|
|
|
120
|
|
120
|
Reclamation
obligations (note 13)
|
|
|
|
802
|
|
802
|
Other liabilities
(note 15)
|
|
|
|
234
|
|
262
|
|
|
|
|
22,881
|
|
11,840
|
Non-Current
|
|
|
|
|
|
|
Deferred revenue
(note 11)
|
|
|
|
32,786
|
|
33,139
|
Post-employment
benefits (note 12)
|
|
|
|
1,192
|
|
1,241
|
Reclamation
obligations (note 13)
|
|
|
|
37,870
|
|
37,618
|
Share purchase
warrants liability (note 14)
|
|
|
|
19,066
|
|
-
|
Other liabilities
(note 15)
|
|
|
|
387
|
|
375
|
Deferred income
tax liability
|
|
|
|
8,260
|
|
9,192
|
Total
liabilities
|
|
|
|
122,442
|
|
93,405
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
Share capital
(note 16)
|
|
|
|
1,506,888
|
|
1,366,710
|
Contributed
surplus (note 17)
|
|
|
|
66,843
|
|
67,387
|
Deficit
|
|
|
|
(1,219,828)
|
|
(1,208,587)
|
Accumulated other
comprehensive income (note 18)
|
|
|
|
1,780
|
|
1,775
|
Total
equity
|
|
|
|
355,683
|
|
227,285
|
Total
liabilities and equity
|
|
|
$
|
478,125
|
$
|
320,690
|
|
|
|
|
|
|
|
Issued and
outstanding common shares (in thousands) (note 16)
|
|
805,711
|
|
678,982
|
Commitments
and contingencies (note 24)
|
|
|
|
|
|
|
Subsequent
events (note 25)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are integral to the condensed interim consolidated financial
statements
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
|
(Unaudited -
Expressed in thousands of CAD dollars except for share and per
share amounts)
|
|
|
Three Month
Ended
June 30
|
|
Six Months
Ended
June 30
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES (note 20)
|
$
|
4,626
|
$
|
2,926
|
$
|
7,122
|
$
|
7,586
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
Operating
expenses (note 19, 20)
|
|
(3,691)
|
|
(2,048)
|
|
(5,579)
|
|
(5,368)
|
Evaluation (note
20)
|
|
(6,381)
|
|
(364)
|
|
(9,142)
|
|
(1,855)
|
Exploration (note
20)
|
|
(528)
|
|
(481)
|
|
(1,876)
|
|
(2,181)
|
General and
administrative (note 20)
|
|
(2,362)
|
|
(1,421)
|
|
(4,987)
|
|
(3,609)
|
Other income
(expense) (note 19)
|
|
6,348
|
|
2,163
|
|
4,307
|
|
(1,029)
|
|
|
(6,614)
|
|
(2,151)
|
|
(17,277)
|
|
(14,042)
|
Income
(loss) before net finance expense
|
|
(1,988)
|
|
775
|
|
(10,155)
|
|
(6,456)
|
Finance expense,
net (note 19)
|
|
(1,015)
|
|
(1,061)
|
|
(2,040)
|
|
(2,124)
|
Loss before
taxes
|
|
(3,003)
|
|
(286)
|
|
(12,195)
|
|
(8,580)
|
Income tax
recovery (expense) (note 22)
|
|
|
|
|
|
|
|
|
Deferred
|
|
646
|
|
(757)
|
|
954
|
|
874
|
Net loss for the
period
|
$
|
(2,357)
|
$
|
(1,043)
|
$
|
(11,241)
|
$
|
(7,706)
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss) (note 18):
|
|
|
|
|
|
|
|
|
Items that may be
reclassified to income (loss):
|
|
|
|
|
|
|
|
|
Foreign currency
translation change
|
|
2
|
|
7
|
|
5
|
|
(7)
|
Comprehensive
loss for the period
|
$
|
(2,355)
|
$
|
(1,036)
|
$
|
(11,236)
|
$
|
(7,713)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
net loss per share:
|
|
|
|
|
|
|
|
|
All
operations
|
$
|
(0.00)
|
$
|
(0.00)
|
$
|
(0.01)
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of shares outstanding (in thousands):
|
|
|
|
|
Basic and
diluted
|
|
805,061
|
|
621,233
|
|
759,743
|
|
609,216
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are integral to the condensed interim consolidated financial
statements
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
CONDENSED
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
(Unaudited -
Expressed in thousands of CAD dollars)
|
|
|
|
|
Six
Months Ended
June
30
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital (note 16)
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
$
|
1,366,710
|
$
|
1,335,467
|
Shares issued for
cash, net of issue costs
|
|
|
|
|
|
134,050
|
|
6,878
|
Share options
exercised-cash
|
|
|
|
|
|
4,289
|
|
-
|
Share options
exercised-fair value adjustment
|
|
|
|
|
|
1,473
|
|
-
|
Share units
exercised-fair value adjustment
|
|
|
|
|
|
366
|
|
80
|
Balance-end of
period
|
|
|
|
|
|
1,506,888
|
|
1,342,425
|
|
|
|
|
|
|
|
|
|
Share purchase warrants
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
-
|
|
435
|
Warrants
expired
|
|
|
|
|
|
-
|
|
(435)
|
Balance-end of
period
|
|
|
|
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
Contributed surplus
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
67,387
|
|
65,417
|
Share-based
compensation expense (note 17)
|
|
|
|
|
|
1,295
|
|
904
|
Share options
exercised-fair value adjustment
|
|
|
|
|
|
(1,473)
|
|
-
|
Share units
exercised-fair value adjustment
|
|
|
|
|
|
(366)
|
|
(80)
|
Warrants
expired
|
|
|
|
|
|
-
|
|
435
|
Balance-end of
period
|
|
|
|
|
|
66,843
|
|
66,676
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
(1,208,587)
|
|
(1,192,304)
|
Net
loss
|
|
|
|
|
|
(11,241)
|
|
(7,706)
|
Balance-end of
period
|
|
|
|
|
|
(1,219,828)
|
|
(1,200,010)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (note 18)
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
1,775
|
|
1,134
|
Foreign currency
translation
|
|
|
|
|
|
5
|
|
(7)
|
Balance-end of
period
|
|
|
|
|
|
1,780
|
|
1,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
227,285
|
|
210,149
|
Balance-end of
period
|
|
|
|
|
$
|
355,683
|
$
|
210,218
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are integral to the condensed interim consolidated financial
statements
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW
|
(Unaudited -
Expressed in thousands of CAD dollars)
|
|
|
|
|
Six
Months Ended
June
30
|
CASH PROVIDED BY (USED IN):
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss for the
period
|
|
|
|
|
$
|
(11,241)
|
$
|
(7,706)
|
Items not
affecting cash and cash equivalents:
|
|
|
|
|
|
|
|
|
Depletion,
depreciation, amortization and accretion
|
|
|
|
|
|
3,079
|
|
3,527
|
Share-based
compensation (note 17)
|
|
|
|
|
|
1,295
|
|
904
|
Recognition
of deferred revenue (note 11)
|
|
|
|
|
|
(719)
|
|
(1,115)
|
Gains on
property, plant and equipment disposals (note 19)
|
|
|
|
(2)
|
|
(407)
|
Fair value
change losses (gains):
|
|
|
|
|
|
|
Investments-equity
instruments (note 19)
|
|
|
|
(5,142)
|
|
961
|
Investments-uranium
(note 19)
|
|
|
|
(7,534)
|
|
-
|
Share warrant
liabilities (note 19)
|
|
|
|
5,832
|
|
-
|
Warrant
liabilities issue costs expensed (note 16)
|
|
|
|
791
|
|
-
|
Foreign exchange
losses (gains) (note 19)
|
|
|
|
|
|
1,618
|
|
-
|
Deferred income
tax recovery
|
|
|
|
|
|
(954)
|
|
(874)
|
Post-employment
benefit payments (note 12)
|
|
|
|
|
|
(61)
|
|
(38)
|
Reclamation
obligation expenditures ( (note 13)
|
|
|
|
|
|
(420)
|
|
(427)
|
Change in
non-cash working capital items (note 19)
|
|
|
|
|
|
618
|
|
(1,628)
|
Net
cash used in operating activities
|
|
|
|
|
|
(12,840)
|
|
(6,803)
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Sale of
investments-equity instruments (note 7)
|
|
|
|
|
|
-
|
|
108
|
Purchase of
investments-uranium (note 7)
|
|
|
|
|
|
(76,390)
|
|
-
|
Expenditures on
property, plant and equipment (note 9)
|
|
|
|
(355)
|
|
(139)
|
Proceeds
on sale of property, plant and equipment
|
|
|
|
|
|
2
|
|
137
|
Increase
in restricted cash and investments
|
|
|
|
(318)
|
|
(377)
|
Net
cash used in investing activities
|
|
|
|
|
|
(77,061)
|
|
(271)
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Issuance of debt
obligations (note 15)
|
|
|
|
|
|
34
|
|
-
|
Repayment
of debt obligations (note 15)
|
|
|
|
|
|
(124)
|
|
(345)
|
Proceeds
from unit issues, net of issue costs (note 16)
|
|
|
|
135,630
|
|
-
|
Proceeds
from other share issues, net of issue costs (note 16)
|
|
|
|
|
|
10,863
|
|
6,878
|
Share
option exercise proceeds (note 16)
|
|
|
|
|
|
4,289
|
|
-
|
Net
cash provided by financing activities
|
|
|
|
|
|
150,692
|
|
6,533
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
|
|
|
|
|
60,791
|
|
(541)
|
Foreign
exchange effect on cash and cash equivalents
|
|
|
|
|
|
(931)
|
|
-
|
Cash
and cash equivalents, beginning of period
|
|
|
|
|
|
24,992
|
|
8,190
|
Cash
and cash equivalents, end of period
|
|
|
|
|
$
|
84,852
|
$
|
7,649
|
|
The accompanying
notes are integral to the condensed interim consolidated financial
statements
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2021
|
|
(Unaudited -
Expressed in CAD dollars except for shares and per share
amounts)
|
|
Denison Mines
Corp. (“DMC”) and its subsidiary companies and joint
arrangements (collectively, “Denison” or the
“Company”) are engaged in uranium mining related
activities, which can include acquisition, exploration and
development of uranium bearing properties, extraction, processing
and selling of uranium.
The Company has a
90.0% interest in the Wheeler River Joint Venture
(“WRJV”), a 66.90% interest in the Waterbury Lake
Limited Partnership (“WLULP”), a 22.5% interest in the
McClean Lake Joint Venture (“MLJV”) (which includes the
McClean Lake mill) and a 25.17% interest in the Midwest Joint
Venture (“MWJV”), each of which are located in the
eastern portion of the Athabasca Basin region in northern
Saskatchewan, Canada. The McClean Lake mill is contracted to
provide toll milling services to the Cigar Lake Joint Venture
(“CLJV”) under the terms of a toll milling agreement
between the parties (see note 11). In addition, the Company has
varying ownership interests in a number of other development and
exploration projects located in Canada.
The Company
provides mine decommissioning and other services (collectively
“environmental services”) to third parties through its
Closed Mines group and was also the manager of Uranium
Participation Corporation (“UPC”) during the quarter, a
publicly-listed investment holding company formed to invest
substantially all of its assets in uranium oxide concentrates
(“U3O8”) and
uranium hexafluoride (“UF6”). The
Company has no ownership interest in UPC but receives fees for
management services it provides and commissions from the purchase
and sale of U3O8 and
UF6 by
UPC. See note 25 for an update on the Company’s management
services agreement with UPC.
DMC is
incorporated under the Business Corporations Act (Ontario) and
domiciled in Canada. The address of its registered head office is
40 University Avenue, Suite 1100, Toronto, Ontario, Canada, M5J
1T1.
2.
STATEMENT
OF COMPLIANCE
These condensed
interim consolidated financial statements have been prepared in
accordance with International Accounting Standards
(“IAS”) 34, Interim Financial Reporting. The condensed
interim consolidated financial statements should be read in
conjunction with the audited annual consolidated financial
statements for the year ended December 31, 2020. The
Company’s presentation currency is Canadian dollars
(“CAD”).
These financial
statements were approved by the board of directors for issue on
August 5, 2021.
3.
ACCOUNTING
POLICIES AND COMPARATIVE NUMBERS
Accounting
Policies
The significant
accounting policies followed in these condensed interim
consolidated financial statements are consistent with those applied
in the Company’s audited annual consolidated financial
statements for the year ended December 31, 2020 except as noted
below.
During the six
months ended June 30, 2021, the Company acquired physical uranium
to be held as a long-term investment. As physical uranium is not a
financial asset, the provisions of IFRS 9 “Financial
Instruments” do not apply to the Company’s investment
in uranium. The Company has added the following accounting policy
in 2021 for its uranium investments:
Investments in
uranium are initially recorded at cost, on the date that control of
the uranium passes to the Company. Cost is calculated as the
purchase price and any directly attributable expenditure.
Subsequent to initial recognition, investments in uranium are
measured at fair value at each reporting period end. Fair value is
determined based on the most recent month-end spot prices for
uranium published by UxC LLC (“UxC”) and converted to
Canadian dollars using the foreign exchange rate at the date of the
consolidated statement of financial position. Related fair value
gains and losses subsequent to initial recognition are recorded in
the consolidated statement of income (loss) as a component of
“Other Income (Expense)” in the period in which they
arise.
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
The Company is
presenting its uranium investments at fair value based on the
application of IAS 40 “Investment Property” which
allows for the use of a fair value model for assets held for
long-term capital appreciation.
Comparative
numbers
Certain
classifications of the comparative figures have been changed to
conform to those used in the current period.
4.
CASH AND
CASH EQUIVALENTS
The cash and cash
equivalent balance consists of:
|
|
|
|
At June
30
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
Cash
|
|
|
$
|
2,175
|
$
|
12,004
|
Cash in MLJV and
MWJV
|
|
|
|
1,203
|
|
540
|
Cash
equivalents
|
|
|
|
81,474
|
|
12,448
|
|
|
|
$
|
84,852
|
$
|
24,992
|
5.
TRADE AND
OTHER RECEIVABLES
The trade and
other receivables balance consists of:
|
|
|
|
At June
30
|
|
At December
31
|
(in thousands of CAD
dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
$
|
4,315
|
$
|
2,644
|
Receivables in
MLJV and MWJV
|
|
|
|
156
|
|
394
|
Sales tax
receivables
|
|
|
|
166
|
|
154
|
Sundry
receivables
|
|
|
|
2
|
|
182
|
|
|
|
$
|
4,639
|
$
|
3,374
|
The inventories
balance consists of:
|
|
|
|
At June
30
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
Inventory of ore
in stockpiles
|
|
|
$
|
2,098
|
$
|
2,098
|
Mine and mill
supplies in MLJV
|
|
|
|
3,016
|
|
3,015
|
|
|
|
$
|
5,114
|
$
|
5,113
|
|
|
|
|
|
|
|
Inventories-by
balance sheet presentation:
|
|
|
|
|
|
|
Current
|
|
|
$
|
3,016
|
$
|
3,015
|
Long-term-ore in
stockpiles
|
|
|
|
2,098
|
|
2,098
|
|
|
|
$
|
5,114
|
$
|
5,113
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
The investments
balance consists of:
|
|
|
|
At June
30
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
Equity
instruments
|
|
|
|
|
|
|
Shares
|
|
|
$
|
21,847
|
$
|
16,657
|
Warrants
|
|
|
|
245
|
|
293
|
Uranium
|
|
|
|
91,510
|
|
-
|
|
|
|
$
|
113,602
|
$
|
16,950
|
|
|
|
|
|
|
|
Investments-by
balance sheet presentation:
|
|
|
|
|
|
|
Current
|
|
|
$
|
21,847
|
$
|
16,657
|
Long-term
|
|
|
|
91,755
|
|
293
|
|
|
|
$
|
113,602
|
$
|
16,950
|
The investments
continuity summary is as follows:
(in thousands of
CAD dollars)
|
|
Equity
Instruments
|
|
Physical
Uranium
|
|
Investments
|
|
|
|
|
|
|
|
Balance -
December 31, 2020
|
$
|
16,950
|
$
|
-
|
$
|
16,950
|
Purchase of
investments
|
|
-
|
|
83,976
|
|
83,976
|
Fair value gain
to profit and loss (note 18)
|
|
5,142
|
|
7,534
|
|
12,676
|
Balance –
June 30, 2021
|
$
|
22,092
|
$
|
91,510
|
$
|
113,602
|
During the six
months ended June 30, 2021, the Company entered into purchase
agreements to acquire a total of 2,500,000 pounds of physical
uranium as U3O8 to be held as a
long-term investment. As at June 30, 2021, the Company has
purchased 2,300,000 pounds of physical uranium as U3O8 at a cost of
$83,976,000 (USD$68,030,000), including purchase commissions. At
June 30, 2021, $7,586,000 of this purchase amount is included in
the Company’s “Accounts payable and accrued
liabilities” reported balance and an adjustment has been made
to exclude this amount from the purchases reported in the
Company’s Consolidated statement of cash flows. See note 24
for additional details on the Company’s remaining purchase
commitment of physical uranium.
8.
RESTRICTED
CASH AND INVESTMENTS
The restricted
cash and investments balance consists of:
|
|
|
|
At June
30
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
|
12,336
|
$
|
2,883
|
Investments
|
|
|
|
-
|
|
9,135
|
|
|
|
$
|
12,336
|
$
|
12,018
|
Restricted cash
and investments-by item:
|
|
|
|
|
|
|
Elliot Lake
reclamation trust fund
|
|
|
$
|
3,201
|
$
|
2,883
|
Letters of credit
facility pledged assets
|
|
|
|
9,000
|
|
9,000
|
Letters of credit
additional collateral
|
|
|
|
135
|
|
135
|
|
|
|
$
|
12,336
|
$
|
12,018
|
At June 30, 2021,
all term deposits have maturities of less than 90 days at date of
purchase.
Elliot
Lake Reclamation Trust Fund
During the six
months ended June 30, 2021, the Company deposited an additional
$793,000 into the Elliot Lake Reclamation Trust Fund and withdrew
$477,000.
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
Letters of
Credit Facility Pledged Assets
At June 30, 2021,
the Company had on deposit $9,000,000 with the Bank of Nova Scotia
(“BNS”) as pledged restricted cash and investments
pursuant to its obligations under an amended and extended letters
of credit facility (see notes 13 and 15).
Letters of
Credit Additional Collateral
At June 30, 2021,
the Company had on deposit an additional $135,000 of cash
collateral with BNS in respect of the portion of its issued
reclamation letters of credit in excess of the collateral available
under its letters of credit facility (see notes 13 and
15).
9.
PROPERTY,
PLANT AND EQUIPMENT
The property,
plant and equipment (“PP&E”) continuity summary is
as follows:
|
|
Plant
and Equipment
|
|
Mineral
|
|
Total
|
(in thousands of
CAD dollars)
|
|
Owned
|
|
Right-of-Use
|
|
Properties
|
|
PP&E
|
|
|
|
|
|
|
|
|
|
Cost:
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2020
|
$
|
106,087
|
$
|
891
|
$
|
179,743
|
$
|
286,721
|
Additions
|
|
324
|
|
83
|
|
22
|
|
429
|
Disposals
|
|
(117)
|
|
-
|
|
-
|
|
(117)
|
Recoveries
|
|
-
|
|
-
|
|
(1)
|
|
(1)
|
Balance
– June 30, 2021
|
$
|
106,294
|
$
|
974
|
$
|
179,764
|
$
|
287,032
|
|
|
|
|
|
|
|
|
|
Accumulated
amortization, depreciation:
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2020
|
$
|
(29,495)
|
$
|
(356)
|
$
|
-
|
$
|
(29,851)
|
Amortization
|
|
(140)
|
|
-
|
|
-
|
|
(140)
|
Depreciation
|
|
(574)
|
|
(100)
|
|
-
|
|
(674)
|
Disposals
|
|
117
|
|
-
|
|
-
|
|
117
|
Balance
– June 30, 2021
|
$
|
(30,092)
|
$
|
(456)
|
$
|
-
|
$
|
(30,548)
|
|
|
|
|
|
|
|
|
|
Carrying
value:
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2020
|
$
|
76,592
|
$
|
535
|
$
|
179,743
|
$
|
256,870
|
Balance –
June 30, 2021
|
$
|
76,202
|
$
|
518
|
$
|
179,764
|
$
|
256,484
|
Plant and
Equipment – Owned
The Company has a
22.5% interest in the McClean Lake mill through its ownership
interest in the MLJV. The carrying value of the mill, comprised of
various infrastructure, building and machinery assets, represents
$68,340,000, or 89.7%, of the June 2021 PP&E total carrying
value amount. See note 10 for the current operating status of the
McClean Lake mill.
Plant and
Equipment – Right-of-Use
The Company has
included the cost of various right-of-use (“ROU”)
assets within its PP&E carrying value amount. These assets
consist of building, vehicle and office equipment leases. The
majority of the value, 77.3%, is attributable to the building lease
assets for the Company’s office and warehousing spaces
located in Toronto and Saskatoon.
Mineral
Properties
As at June 30,
2021, the Company has various interests in development, evaluation
and exploration projects located in Saskatchewan, Canada, which are
either held directly or through option or various contractual
agreements. The properties with significant carrying values, being
Wheeler River, Waterbury Lake, Midwest, Mann Lake,
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
Wolly, Johnston
Lake and McClean Lake, represent $162,663,000, or 90.5%, of the
June 2021 total mineral property carrying amount.
10. ACCOUNTS
PAYABLE AND ACCRUED LIABILITIES
The accounts
payable and accrued liabilities balance consists of:
|
|
|
|
At June
30
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
Trade
payables
|
|
|
$
|
4,531
|
$
|
2,513
|
Trade payables
– uranium investments
|
|
|
|
7,586
|
|
-
|
Payables in MLJV
and MWJV
|
|
|
|
4,197
|
|
3,719
|
Other
payables
|
|
|
|
755
|
|
946
|
|
|
|
$
|
17,069
|
$
|
7,178
|
11. DEFERRED
REVENUE
The deferred
revenue balance consists of:
|
|
|
|
At June
30
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
Deferred revenue
– pre-sold toll milling:
|
|
|
|
|
|
|
CLJV toll milling
– APG
|
|
|
$
|
37,442
|
$
|
36,617
|
|
|
|
$
|
37,442
|
$
|
36,617
|
|
|
|
|
|
|
|
Deferred
revenue-by balance sheet presentation:
|
|
|
|
|
|
|
Current
|
|
|
$
|
4,656
|
$
|
3,478
|
Non-current
|
|
|
|
32,786
|
|
33,139
|
|
|
|
$
|
37,442
|
$
|
36,617
|
The deferred
revenue liability continuity summary is as follows:
(in thousands of
CAD dollars)
|
|
|
|
|
|
Deferred
Revenue
|
|
|
|
|
|
|
|
Balance -
December 31, 2020
|
|
|
|
|
$
|
36,617
|
Accretion (note
19)
|
|
|
|
|
|
1,544
|
Revenue
recognized during the period (note 20)
|
|
|
|
|
|
(719)
|
Balance –
June 30, 2021
|
|
|
|
|
$
|
37,442
|
Arrangement
with Anglo Pacific Group PLC (“APG”)
In February 2017,
Denison closed an arrangement with APG under which Denison received
an upfront payment in exchange for its right to receive specified
future toll milling cash receipts from the MLJV under the current
toll milling agreement with the CLJV from July 1, 2016 onwards. The
APG Arrangement represents a contractual obligation of Denison to
pay onward to APG any cash proceeds of future toll milling revenue
earned by the Company related to the processing of specified Cigar
Lake ore through the McClean Lake mill. The deferred revenue
balance represents a non-cash liability, which is adjusted as any
toll milling revenue received by Denison is passed through to APG
or any changes in Cigar Lake Phase 1 and Phase 2 toll milling
production estimates are recognized.
In the six months
ended June 30, 2021, the Company has recognized $719,000 of toll
milling revenue from the draw-down of deferred revenue consisting
of $658,000 based on Cigar Lake toll milling production in the
quarter (2,542,000 pounds U3O8 on a 100% basis)
and a retroactive $61,000 increase in revenue resulting from
changes in estimates to the toll milling drawdown rate in the
second quarter of 2021. For the comparative six months ended June
30, 2020, the Company recognized $1,115,000 of toll milling revenue
from the draw-down of deferred revenue
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
comprised of
$1,056,000 based on Cigar Lake toll milling production in the
quarter (4,184,000 pounds U3O8 on a 100% basis)
and a retroactive $59,000 increase in revenue resulting from
changes in estimates to the toll milling drawdown rate in the
second quarter of 2020.
Production at the
Cigar Lake mine and the McClean Lake mill, which had been
temporarily suspended since the beginning of 2021 in response to
the COVID-19 pandemic, has resumed. Cameco restarted ore production
at the Cigar Lake mine in April 2021 and toll-milling production at
McClean Lake restarted in May 2021 with packaged uranium production
occuring in early June 2021. The current portion of the deferred
revenue liability at June 2021 reflects Denison’s estimate of
Cigar Lake toll milling over the next 12 months. This assumption is
based on current mill packaged production expectations and will be
reassessed on a quarterly basis throughout fiscal
2021.
12. POST-EMPLOYMENT
BENEFITS
The
post-employment benefits balance consists of:
|
|
|
|
At June
30
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
Accrued benefit
obligation
|
|
|
$
|
1,312
|
$
|
1,361
|
|
|
|
$
|
1,312
|
$
|
1,361
|
|
|
|
|
|
|
|
Post-employment
benefits-by balance sheet presentation:
|
|
|
|
|
Current
|
|
|
$
|
120
|
$
|
120
|
Non-current
|
|
|
|
1,192
|
|
1,241
|
|
|
|
$
|
1,312
|
$
|
1,361
|
The
post-employment benefits continuity summary is as
follows:
(in thousands of
CAD dollars)
|
|
|
|
|
|
Post-Employment
Benefits
|
|
|
|
|
|
|
|
Balance -
December 31, 2020
|
|
|
|
|
$
|
1,361
|
Accretion (note
19)
|
|
|
|
|
|
12
|
Benefits
paid
|
|
|
|
|
|
(61)
|
Balance –
June 30, 2021
|
|
|
|
|
$
|
1,312
|
13. RECLAMATION
OBLIGATIONS
The reclamation
obligations balance consists of:
|
|
|
|
At June
30
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2020
|
|
|
|
|
|
|
|
Reclamation
obligations-by location:
|
|
|
|
|
|
|
Elliot
Lake
|
|
|
$
|
21,481
|
$
|
21,523
|
McClean and
Midwest Joint Ventures
|
|
|
|
17,169
|
|
16,875
|
Other
|
|
|
|
22
|
|
22
|
|
|
|
$
|
38,672
|
$
|
38,420
|
|
|
|
|
|
|
|
Reclamation
obligations-by balance sheet presentation:
|
|
|
|
|
Current
|
|
|
$
|
802
|
$
|
802
|
Non-current
|
|
|
|
37,870
|
|
37,618
|
|
|
|
$
|
38,672
|
$
|
38,420
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
The reclamation
obligations continuity summary is as follows:
(in thousands of
CAD dollars)
|
|
|
|
|
|
Reclamation
Obligations
|
|
|
|
|
|
|
|
Balance -
December 31, 2020
|
|
|
|
|
$
|
38,420
|
Accretion (note
19)
|
|
|
|
|
|
672
|
Expenditures
incurred
|
|
|
|
|
|
(420)
|
Balance –
June 30, 2021
|
|
|
|
|
$
|
38,672
|
Site
Restoration: Elliot Lake
Spending on
restoration activities at the Elliot Lake site is funded from
monies in the Elliot Lake Reclamation Trust fund (see note
8).
Site
Restoration: McClean Lake Joint Venture and Midwest Joint
Venture
Under the Mineral
Industry Environmental Protection Regulations (1996), the Company
is required to provide its pro-rata share of financial assurances
to the province of Saskatchewan relating to future decommissioning
and reclamation plans that have been filed and approved by the
applicable regulatory authorities. As at June 30, 2021, the Company
has provided irrevocable standby letters of credit, from a
chartered bank, in favour of the Saskatchewan Ministry of
Environment, totalling $24,135,000 which relate to the most
recently filed reclamation plan dated March 2016.
14. SHARE
PURCHASE WARRANTS LIABILITY
In connection
with the public offerings of units in February 2021 and March 2021
(see note 16), the Company issued 15,796,975 and 39,215,000 share
purchase warrants to unit holders, respectively. The February 2021
warrants entitle the holder to acquire one common share of the
Company at an exercise price of USD$2.00 for 24 months after
issuance. The March 2021 warrants entitle the holder to acquire one
common share of the Company at an exercise price of USD$2.25 for 24
months after issuance.
Since both of
these warrants are excercisable in U.S. dollars
(“USD”), which differs from the Company’s CAD
functional currency, they are classified as derivative liabilities
and are required to be carried as liabilities at fair value through
profit and loss. When the fair value of the warrants is revalued at
each reporting period, the change in the liability is recorded
through net profit or loss.
The fair value of
the February 2021 warrants was estimated to be $0.2215 on the date
of issue, based on a relative fair value basis approach, using a
USD to CAD foreign exchange rate of 0.7928 and incorporating the
following assumptions in the Black-Scholes option pricing model
– expected volatility of 67.3%, risk-free interest rate of
0.22%, dividend yield of 0% and an expected term of 2
years.
At June 30, 2021,
the fair value of the February 2021 warrants was estimated to be
$0.3793, using a USD to CAD foreign exchange rate of 0.8068 and
incorporating the following assumptions in the Black-Scholes option
pricing model – expected volatility of 80.1%, risk-free
interest rate of 0.44%, dividend yield of 0% and an expected term
of 1.64 years.
The fair value of
the March 2021 warrants was estimated to be $0.2482 on the date of
issue, based on a relative fair value basis approach, using a USD
to CAD foreign exchange rate of 0.7992 and incorporating the
following assumptions in the Black-Scholes option pricing model
– expected volatility of 71.54%, risk-free interest rate of
0.27%, dividend yield of 0% and an expected term of 2
years.
At June 30, 2021,
the fair value of the March 2021 warrants was estimated to be
$0.3342, using a USD to CAD foreign exchange rate of 0.8068 and
incorporating the following assumptions in the Black-Scholes option
pricing model – expected volatility of 78.0%, risk-free
interest rate of 0.44%, dividend yield of 0% and an expected term
of 1.72 years.
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
The share
purchase warrants liability continuity is as follows:
|
Number
of
|
|
Warrant
|
(in thousands of
CAD dollars except warrant amounts)
|
Warrants
|
|
Liability
|
|
|
|
|
Balance -
December 31, 2020
|
-
|
$
|
-
|
Warrants issued
on February 19, 2021
|
15,796,975
|
|
3,499
|
Warrants issued
on March 22, 2021
|
39,215,000
|
|
9,735
|
Change in fair
value estimates
|
-
|
|
5,832
|
Balance –
June 30, 2021
|
55,011,975
|
$
|
19,066
|
15. OTHER
LIABILITIES
The other
liabilities balance consists of:
|
|
|
|
At June
30
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
Debt
obligations:
|
|
|
|
|
|
|
Lease
liabilities
|
|
|
$
|
558
|
$
|
582
|
Loan
liabilities
|
|
|
|
63
|
|
33
|
Flow-through
share premium obligation (note 17)
|
|
|
|
-
|
|
22
|
|
|
|
$
|
621
|
$
|
637
|
|
|
|
|
|
|
|
Other
liabilities-by balance sheet presentation:
|
|
|
|
|
Current
|
|
|
$
|
234
|
$
|
262
|
Non-current
|
|
|
|
387
|
|
375
|
|
|
|
$
|
621
|
$
|
637
|
Debt
Obligations
At June 30, 2021,
the Company’s debt obligations are comprised of lease
liabilities and loan liabilities. The debt obligations continuity
summary is as follows:
|
|
|
Lease
|
|
Loan
|
|
Total
Debt
|
(in thousands of
CAD dollars)
|
|
|
|
Liabilitites
|
|
Liabilities
|
|
Obligations
|
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2020
|
|
|
$
|
582
|
$
|
33
|
$
|
615
|
Accretion (note
19)
|
|
|
|
24
|
|
-
|
|
24
|
Additions
|
|
|
|
72
|
|
34
|
|
106
|
Repayments
|
|
|
|
(120)
|
|
(4)
|
|
(124)
|
Balance
– June 30, 2021
|
|
|
$
|
558
|
$
|
63
|
$
|
621
|
Debt
Obligations – Scheduled Maturities
The following
table outlines the Company’s scheduled maturities of its debt
obligations at June 30, 2021:
|
|
|
Lease
|
|
Loan
|
|
Total
Debt
|
(in thousands of
CAD dollars)
|
|
|
|
Liabilitites
|
|
Liabilities
|
|
Obligations
|
|
|
|
|
|
|
|
|
|
Maturity analysis
– contractual undiscounted cash flows:
|
|
|
|
|
|
|
Next 12
months
|
|
|
$
|
217
|
$
|
17
|
$
|
234
|
One to five
years
|
|
|
|
431
|
|
52
|
|
483
|
More than five
years
|
|
|
|
-
|
|
-
|
|
-
|
Total obligation
– June 30, 2021 – undiscounted
|
|
648
|
|
69
|
|
717
|
Present value
discount adjustment
|
|
|
|
(90)
|
|
(6)
|
|
(96)
|
Total
obligation – June 30, 2021 – discounted
|
|
|
$
|
558
|
$
|
63
|
$
|
621
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
Letters of
Credit Facility
In January 2021,
the Company entered into an amending agreement for its letters of
credit facility with BNS (the “2021 Facility”). Under
the amendment, the maturity date of the 2021 Facility has been
extended to January 31, 2022. All other terms of the 2021 Facility
(tangible net worth covenant, pledged cash, investment amounts and
security for the facility) remain unchanged from the previous
facility. Accordingly, the 2021 Facility continues to provide the
Company with access to credit up to $24,000,000 (the use of which
is restricted to non-financial letters of credit in support of
reclamation obligations) subject to letter of credit fees of 2.40%
(0.40% on the $9,000,000 covered by pledged cash collateral) and
standby fees of 0.75%.
At June 30, 2021,
the Company is in compliance with its facility covenants and
$24,000,000 (December 31, 2020: $24,000,000) of the facility is
being utilized as collateral for letters of credit issued in
respect of the reclamation obligations for the MLJV and MWJV.
During the six months ended June 30, 2021, the Company incurred
letter of credit fees of $196,000 (June 30, 2020:
$198,000).
16. SHARE
CAPITAL
Denison is
authorized to issue an unlimited number of common shares without
par value. A continuity summary of the issued and outstanding
common shares and the associated dollar amounts is presented
below:
|
Number
of
|
|
|
|
Common
|
|
Share
|
(in thousands of
CAD dollars except share amounts)
|
Shares
|
|
Capital
|
|
|
|
|
Balance -
December 31, 2020
|
678,981,882
|
$
|
1,366,710
|
Issued for
cash:
|
|
|
|
Unit issue
proceeds – total
|
110,023,950
|
|
144,214
|
Less: allocation
to share warrants liability (note 14)
|
-
|
|
(13,234)
|
Unit issue costs
- total
|
-
|
|
(8,584)
|
Less: allocation
to share warrants issue expense
|
-
|
|
791
|
Other share issue
proceeds – total
|
10,156,186
|
|
11,914
|
Less: other share
issue costs
|
-
|
|
(1,051)
|
Share option
exercises
|
5,918,248
|
|
4,289
|
Share option
exercises – fair value adjustment
|
-
|
|
1,473
|
Share units
exercises – fair value adjustment
|
630,499
|
|
366
|
|
126,728,883
|
|
140,178
|
Balance –
June 30, 2021
|
805,710,765
|
$
|
1,506,888
|
Unit and
Other Share Issues
In January and
February 2021, Denison, through its agents, issued 4,230,186 common
shares under its at-the-market (“ATM”) program at an
average price of $0.93 per share for aggregate gross proceeds of
$3,914,000. The Company also recognized issue costs of $466,000
related to its ATM share issuances which includes $78,000 of
commissions and $384,000 associated with the set-up of the ATM
program which were previously deferred on the balance sheet and
included in Prepaid expenses and other at December 31, 2020. In
connection with the public offering completed on March 22, 2021
(see below), the Company terminated its ATM program and has ceased
any distributions thereunder.
On February 19,
2021, the Company completed a public offering by way of a
prospectus supplement to the 2020 Shelf Prospectus of 31,593,950
units of the Company at USD$0.91 per unit for gross proceeds of
$36,265,000 (USD$28,750,000), including the full exercise of the
underwriters’ over-allotment option of 4,120,950 units. Each
unit consisted of one common share and one-half of one transferable
common share purchase warrant of the Company. Each full warrant is
exercisable to acquire one common share of the Company at an
exercise price of USD$2.00 for 24 months after issuance. A portion
of the gross proceeds ($3,499,000 – see note 14) has been
allocated to share warrant liabilities on a relative fair value
basis and the pro-rata share of the issue costs associated with the
offering has been expensed within Other expense (see note
19).
On March 3, 2021,
the Company completed a private placement of 5,926,000 flow-through
common shares at a price of $1.35 per share for gross proceeds of
approximately $8,000,000. The income tax benefits of this issue
will be renounced to subscribers with an effective date of December
31, 2021. The related flow-through share premium liability was
valued at $Nil as the issue price was less than the Company’s
observed share price on the date of issue.
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
On March 22,
2021, the Company completed a public offering by way of a
prospectus supplement to the 2020 Shelf Prospectus of 78,430,000
units of the Company at USD$1.10 per unit for gross proceeds of
$107,949,000 (USD$86,273,000), including the full exercise of the
underwriters’ over-allotment option of 10,230,000 units. Each
unit consisted of one common share and one-half of one transferable
common share purchase warrant of the Company. Each full warrant is
exercisable to acquire one common share of the Company at an
exercise price of USD$2.25 for 24 months after issuance. A portion
of the gross proceeds ($9,735,000 – see note 14) has been
allocated to share warrant liabilities on a relative fair value
basis and the pro-rata share of the issue costs associated with the
offering has been expensed within Other expense (see note
19).
Flow-Through
Share Issues
The Company
finances a portion of its exploration programs through the use of
flow-through share issuances. Canadian income tax deductions
relating to these expenditures are claimable by the investors and
not by the Company.
As at June 30,
2021, the Company estimates that it has satisfied its obligation to
spend $930,485 on eligible exploration expenditures in fiscal 2021
due to the issuance of flow-through shares in December 2020. The
Company renounced the income tax benefits of this issue in February
2021, with an effective date of renunciation to its subscribers of
December 31, 2020. In conjunction with the renunciation, the
flow-through share premium liability at December 31, 2020 has been
extinguished and a deferred tax recovery has been recognized in the
first quarter of 2021 (see notes 15 and 22).
As at June 30,
2021, the Company estimates that it has incurred $377,000 of
expenditures towards its obligation to spend $8,000,000 on eligible
exploration expenditures by the end of fiscal 2022 due to the
issuance of flow-through shares in March 2021.
17. SHARE-BASED
COMPENSATION
The
Company’s share based compensation arrangements include stock
options, restricted share units (“RSUs”) and
performance share units (“PSUs”).
A summary of
share based compensation expense recognized in the statement of
income (loss) is as follows:
|
|
Three
Months Ended
June
30
|
|
Six
Months Ended
June
30
|
(in thousands of
CAD dollars)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Share based
compensation expense for:
|
|
|
|
|
|
|
|
|
Stock
options
|
$
|
(420)
|
$
|
(139)
|
$
|
(615)
|
$
|
(296)
|
RSUs
|
|
(457)
|
|
(259)
|
|
(663)
|
|
(487)
|
PSUs
|
|
(43)
|
|
(23)
|
|
(17)
|
|
(121)
|
Share
based compensation expense
|
$
|
(920)
|
$
|
(421)
|
$
|
(1,295)
|
$
|
(904)
|
An additional
$4,153,000 in share-based compensation expense remains to be
recognized, up until May 2024, on outstanding options and share
units at June 30, 2021.
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
Stock
Options
Stock options
granted in 2021 vest over a period of 24 months. A continuity
summary of the stock options granted under the Company’s
stock-based compensation plan is presented below:
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
|
|
Number
of
|
|
Price
per
|
|
|
|
|
|
|
|
Common
|
|
Share
|
|
|
|
|
|
|
|
Shares
|
|
(CAD)
|
|
|
|
|
|
|
|
|
|
|
Stock options
outstanding – December 31, 2020
|
|
|
|
15,077,243
|
$
|
0.67
|
Grants
|
|
|
|
|
|
|
3,969,000
|
|
1.27
|
Exercises
(1)
|
|
|
|
|
|
|
(5,918,248)
|
|
0.72
|
Expiries
|
|
|
|
|
|
|
(15,000)
|
|
0.64
|
Forfeitures
|
|
|
|
|
|
|
(693,000)
|
|
0.69
|
Stock options
outstanding – June 30, 2021
|
|
|
|
12,419,995
|
$
|
0.83
|
Stock options
exercisable – June 30, 2021
|
|
|
|
6,863,995
|
$
|
0.68
|
(1)
The weighted average share
price at the date of exercise was $1.23.
A summary of the
Company’s stock options outstanding at June 30, 2021 is
presented below:
|
|
|
|
|
Weighted
|
|
|
|
Weighted-
|
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
|
|
Remaining
|
|
|
|
Exercise
|
Range of
Exercise
|
|
|
|
|
Contractual
|
|
Number
of
|
|
Price
per
|
Prices per
Share
|
|
|
|
|
Life
|
|
Common
|
|
Share
|
(CAD)
|
|
|
|
|
(Years)
|
|
Shares
|
|
(CAD)
|
|
|
|
|
|
|
|
|
|
|
Stock options
outstanding
|
|
|
|
|
|
|
$ 0.25 to $
0.49
|
|
3.72
|
|
2,722,000
|
$
|
0.45
|
$ 0.50 to $
0.74
|
|
|
|
|
2.28
|
|
3,503,395
|
|
0.64
|
$ 0.75 to $
0.99
|
|
|
|
|
0.69
|
|
2,383,600
|
|
0.85
|
$ 1.00 to $
1.39
|
|
|
|
|
4.69
|
|
3,508,000
|
|
1.26
|
$
1.40 to $ 1.99
|
|
|
|
|
4.86
|
|
303,000
|
|
1.43
|
Stock options
outstanding – June 30, 2021
|
|
|
3.03
|
|
12,419,995
|
$
|
0.83
|
Options
outstanding at June 30, 2021 expire between August 2021 and May
2026.
The fair value of
each option granted is estimated on the date of grant using the
Black-Scholes option pricing model. The following table outlines
the assumptions used in the model to determine the fair value of
options granted during the current period:
|
|
|
|
Six Months
Ended
|
|
|
|
|
June 30,
2021
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
|
0.70% -
0.76%
|
Expected stock
price volatility
|
|
|
|
66.11% -
68.86%
|
Expected
life
|
|
|
|
3.4
years
|
Expected dividend
yield
|
|
|
|
-
|
Fair value
per share under options granted
|
|
|
$0.59 -
$0.69
|
Share
Units
RSUs granted
under the plan in 2021 vest ratably over a period of three years.
No PSUs have been granted in 2021 as at June 30, 2021.
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
A continuity
summary of the RSUs and PSUs of the Company granted under the share
unit plan is presented below:
|
|
RSUs
|
|
PSUs
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
Number
of
|
|
Fair
Value
|
|
Number
of
|
|
Fair
Value
|
|
|
Common
|
|
Per
RSU
|
|
Common
|
|
Per
PSU
|
|
|
Shares
|
|
(CAD)
|
|
Shares
|
|
(CAD)
|
|
|
|
|
|
|
|
|
|
Units outstanding
– December 31, 2020
|
|
5,691,899
|
$
|
0.52
|
|
2,020,000
|
$
|
0.63
|
Grants
|
|
1,886,000
|
|
1.42
|
|
-
|
|
-
|
Exercises
(1)
|
|
(420,499)
|
|
0.54
|
|
(210,000)
|
|
0.66
|
Forfeitures
|
|
(767,228)
|
|
0.56
|
|
(180,000)
|
|
0.69
|
Units outstanding
– June 30, 2021
|
|
6,390,172
|
$
|
0.78
|
|
1,630,000
|
$
|
0.62
|
Units
vested – June 30, 2021
|
|
2,319,173
|
$
|
0.59
|
|
870,000
|
$
|
0.63
|
(1)
The weighted average share
price at the date of exercise was $1.35 for RSUs and $1.41 for
PSUs.
The fair value of
each RSU and PSU granted is estimated on the date of grant using
the Company’s closing share price on the day before the grant
date.
18. ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS)
The accumulated
other comprehensive income (loss) balance consists of:
|
|
|
|
At June
30
|
|
At December
31
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
Cumulative
foreign currency translation
|
|
|
$
|
418
|
$
|
413
|
Unamortized
experience gain-post employment liability
|
|
|
|
|
Gross
|
|
|
|
1,847
|
|
1,847
|
Tax
effect
|
|
|
|
(485)
|
|
(485)
|
|
|
|
$
|
1,780
|
$
|
1,775
|
19. SUPPLEMENTAL
FINANCIAL INFORMATION
The components of
operating expenses are as follows:
|
|
Three
Months Ended
June
30
|
|
Six
Months Ended
June
30
|
(in thousands of
CAD dollars)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Cost of goods and
services sold:
|
|
|
|
|
|
|
|
|
Cost of goods
sold – mineral concentrates
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
(526)
|
Operating
overheads:
|
|
|
|
|
|
|
|
|
Mining, other
development expense
|
|
(823)
|
|
(334)
|
|
(1,055)
|
|
(547)
|
Milling,
conversion expense
|
|
(471)
|
|
(6)
|
|
(475)
|
|
(746)
|
Less
absorption:
|
|
|
|
|
|
|
|
|
-Mineral
properties
|
|
11
|
|
13
|
|
22
|
|
25
|
Cost of
services
|
|
(2,338)
|
|
(1,659)
|
|
(3,931)
|
|
(3,374)
|
Cost of goods and
services sold
|
|
(3,621)
|
|
(1,986)
|
|
(5,439)
|
|
(5,168)
|
Reclamation asset
amortization
|
|
(70)
|
|
(62)
|
|
(140)
|
|
(122)
|
Selling
expenses
|
|
-
|
|
-
|
|
-
|
|
(14)
|
Sales royalties
and non-income taxes
|
|
-
|
|
-
|
|
-
|
|
(64)
|
Operating
expenses
|
$
|
(3,691)
|
$
|
(2,048)
|
$
|
(5,579)
|
$
|
(5,368)
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
The components of
other income (expense) are as follows:
|
|
Three
Months Ended
June
30
|
|
Six
Months Ended
June
30
|
(in thousands of
CAD dollars)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Gains (losses)
on:
|
|
|
|
|
|
|
|
|
Foreign
exchange
|
$
|
(2,059)
|
$
|
(98)
|
$
|
(1,618)
|
$
|
(78)
|
Disposal of
property, plant and equipment
|
|
2
|
|
405
|
|
2
|
|
407
|
Fair value
changes:
|
|
|
|
|
|
|
|
|
Investments-equity
instruments (note 7)
|
|
5,233
|
|
1,989
|
|
5,142
|
|
(961)
|
Investments-uranium (note
7)
|
|
7,534
|
|
-
|
|
7,534
|
|
-
|
Warrant
liabilities (note 14)
|
|
(4,268)
|
|
-
|
|
(5,832)
|
|
-
|
Issue
costs-warrant liabilities (note 16)
|
|
(2)
|
|
-
|
|
(791)
|
|
-
|
Uranium
investment carrying charges
|
|
(54)
|
|
-
|
|
(54)
|
|
-
|
Other
|
|
(38)
|
|
(133)
|
|
(76)
|
|
(397)
|
Other
income (expense)
|
$
|
6,348
|
$
|
2,163
|
$
|
4,307
|
$
|
(1,029)
|
The components of
finance income (expense) are as follows:
|
|
Three
Months Ended
June
30
|
|
Six
Months Ended
June
30
|
(in thousands of
CAD dollars)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
|
130
|
$
|
64
|
$
|
213
|
$
|
156
|
Interest
expense
|
|
(1)
|
|
(1)
|
|
(1)
|
|
(3)
|
Accretion
expense
|
|
|
|
|
|
|
|
|
Deferred
revenue (note 11)
|
|
(790)
|
|
(755)
|
|
(1,544)
|
|
(1,537)
|
Post-employment
benefits (note 12)
|
|
(6)
|
|
(17)
|
|
(12)
|
|
(34)
|
Reclamation
obligations (note 13)
|
|
(336)
|
|
(338)
|
|
(672)
|
|
(676)
|
Debt
obligations (note 14)
|
|
(12)
|
|
(14)
|
|
(24)
|
|
(30)
|
Finance
income (expense)
|
$
|
(1,015)
|
$
|
(1,061)
|
$
|
(2,040)
|
$
|
(2,124)
|
A summary of
depreciation expense recognized in the statement of income (loss)
is as follows:
|
|
Three
Months Ended
June
30
|
|
Six
Months Ended
June
30
|
(in thousands of
CAD dollars)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Mining, other
development expense
|
$
|
-
|
$
|
(1)
|
$
|
(1)
|
$
|
(2)
|
Milling,
conversion expense
|
|
(429)
|
|
-
|
|
(429)
|
|
(736)
|
Cost of
services
|
|
(46)
|
|
(47)
|
|
(91)
|
|
(100)
|
Evaluation
|
|
(9)
|
|
(9)
|
|
(18)
|
|
(18)
|
Exploration
|
|
(50)
|
|
(37)
|
|
(80)
|
|
(78)
|
General and
administrative
|
|
(30)
|
|
(32)
|
|
(55)
|
|
(64)
|
Depreciation
expense-gross
|
$
|
(564)
|
$
|
(126)
|
$
|
(674)
|
$
|
(998)
|
A summary of
employee benefits expense recognized in the statement of income
(loss) is as follows:
|
|
Three
Months Ended
June
30
|
|
Six
Months Ended
June
30
|
(in thousands of
CAD dollars)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
$
|
(2,104)
|
$
|
(1,545)
|
$
|
(5,138)
|
$
|
(3,703)
|
Share-based
compensation (note 17)
|
|
(920)
|
|
(421)
|
|
(1,295)
|
|
(904)
|
Termination
benefits
|
|
-
|
|
-
|
|
(29)
|
|
-
|
Employee
benefits expense
|
$
|
(3,024)
|
$
|
(1,966)
|
$
|
(6,462)
|
$
|
(4,607)
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
The change in
non-cash working capital items in the consolidated statements of
cash flows is as follows:
|
|
|
|
Six
Months Ended
June
30
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Change in
non-cash working capital items:
|
|
|
|
|
|
|
|
|
Trade and other
receivables
|
|
|
|
|
$
|
(1,265)
|
$
|
890
|
Inventories
|
|
|
|
|
|
(1)
|
|
433
|
Prepaid expenses
and other assets
|
|
|
|
|
|
262
|
|
401
|
Accounts payable
and accrued liabilities
|
|
|
|
|
|
1,622
|
|
(3,352)
|
Change
in non-cash working capital items
|
|
|
|
|
$
|
618
|
$
|
(1,628)
|
20. SEGMENTED
INFORMATION
Business
Segments
The Company
operates in three primary segments – the Mining segment, the
Closed Mine Services segment and the Corporate and Other segment.
The Mining segment includes activities related to exploration,
evaluation and development, mining, milling (including toll
milling) and the sale of mineral concentrates. The Closed Mine
Services segment includes the results of the Company’s
environmental services business which provides mine decommissioning
and other services to third parties. The Corporate and Other
segment includes management fee income earned from UPC and general
corporate expenses not allocated to the other segments. Management
fee income from UPC has been included with general corporate
expenses due to the shared infrastructure between the two
activities.
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
For the six
months ended June 30, 2021, reportable segment results were as
follows:
(in thousands of
CAD dollars)
|
|
|
Mining
|
Closed
Mine
Services
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
Revenues
|
|
|
719
|
4,310
|
2,093
|
7,122
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(1,648)
|
(3,931)
|
-
|
(5,579)
|
Evaluation
|
|
|
(9,142)
|
-
|
-
|
(9,142)
|
Exploration
|
|
|
(1,876)
|
-
|
-
|
(1,876)
|
General and
administrative
|
|
|
(17)
|
-
|
(4,970)
|
(4,987)
|
|
|
|
(12,683)
|
(3,931)
|
(4,970)
|
(21,584)
|
Segment income
(loss)
|
|
|
(11,964)
|
379
|
(2,877)
|
(14,462)
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
4,310
|
-
|
4,310
|
Management
fees
|
|
|
-
|
-
|
2,093
|
2,093
|
Toll milling
services–deferred revenue (note 11)
|
|
719
|
-
|
-
|
719
|
|
|
|
719
|
4,310
|
2,093
|
7,122
|
|
|
|
|
|
|
|
Capital additions:
|
|
|
|
|
|
|
Property, plant
and equipment
|
|
|
310
|
36
|
83
|
429
|
|
|
|
|
|
|
|
Long-lived assets – as at June 30, 2021:
|
|
|
|
|
|
Plant and
equipment
|
|
|
|
|
|
|
Cost
|
|
|
101,829
|
4,465
|
974
|
107,268
|
Accumulated
depreciation
|
|
|
(26,910)
|
(3,167)
|
(471)
|
(30,548)
|
Mineral
properties
|
|
|
179,764
|
-
|
-
|
179,764
|
|
|
|
254,683
|
1,298
|
503
|
256,484
|
For the three
months ended June 30, 2021, reportable segment results were as
follows:
(in thousands of
CAD dollars)
|
|
|
Mining
|
Closed
Mine
Services
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
Revenues
|
|
|
582
|
2,566
|
1,478
|
4,626
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(1,353)
|
(2,338)
|
-
|
(3,691)
|
Evaluation
|
|
|
(6,381)
|
-
|
-
|
(6,381)
|
Exploration
|
|
|
(528)
|
-
|
-
|
(528)
|
General and
administrative
|
|
|
-
|
-
|
(2,362)
|
(2,362)
|
|
|
|
(8,262)
|
(2,338)
|
(2,362)
|
(12,962)
|
Segment income
(loss)
|
|
|
(7,680)
|
228
|
(884)
|
(8,336)
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
2,566
|
-
|
2,566
|
Management
fees
|
|
|
-
|
-
|
1,478
|
1,478
|
Toll milling
services–deferred revenue (note 11)
|
|
582
|
-
|
-
|
582
|
|
|
|
582
|
2,566
|
1,478
|
4,626
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
For the six
months ended June 30, 2020, reportable segment results were as
follows:
(in thousands of
CAD dollars)
|
|
|
Mining
|
Closed
Mine
Services
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
Revenues
|
|
|
1,967
|
4,132
|
1,487
|
7,586
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(1,994)
|
(3,374)
|
-
|
(5,368)
|
Evaluation
|
|
|
(1,855)
|
-
|
-
|
(1,855)
|
Exploration
|
|
|
(2,181)
|
-
|
-
|
(2,181)
|
General and
administrative
|
|
|
(19)
|
-
|
(3,590)
|
(3,609)
|
|
|
|
(6,049)
|
(3,374)
|
(3,590)
|
(13,013)
|
Segment income
(loss)
|
|
|
(4,082)
|
758
|
(2,103)
|
(5,427)
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
4,132
|
-
|
4,132
|
Management
fees
|
|
|
-
|
-
|
1,487
|
1,487
|
Uranium
concentrate sales
|
|
|
852
|
-
|
-
|
852
|
Toll milling
services–deferred revenue (note 11)
|
|
1,115
|
-
|
-
|
1,115
|
|
|
|
1,967
|
4,132
|
1,487
|
7,586
|
|
|
|
|
|
|
|
Capital additions:
|
|
|
|
|
|
|
Property, plant
and equipment
|
|
|
124
|
15
|
-
|
139
|
|
|
|
|
|
|
|
Long-lived assets – as at June 30, 2020:
|
|
|
|
|
|
Plant and
equipment
|
|
|
|
|
|
|
Cost
|
|
|
99,994
|
4,546
|
908
|
105,448
|
Accumulated
depreciation
|
|
|
(25,305)
|
(3,102)
|
(368)
|
(28,775)
|
Mineral
properties
|
|
|
179,605
|
-
|
-
|
179,605
|
|
|
|
254,294
|
1,444
|
540
|
256,278
|
For the three
months ended June 30, 2020, reportable segment results were as
follows:
(in thousands of
CAD dollars)
|
|
|
Mining
|
Closed
Mine
Services
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
Revenues
|
|
|
152
|
2,104
|
670
|
2,926
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(389)
|
(1,659)
|
-
|
(2,048)
|
Evaluation
|
|
|
(364)
|
-
|
-
|
(364)
|
Exploration
|
|
|
(481)
|
-
|
-
|
(481)
|
General and
administrative
|
|
|
(5)
|
-
|
(1,416)
|
(1,421)
|
|
|
|
(1,239)
|
(1,659)
|
(1,416)
|
(4,314)
|
Segment income
(loss)
|
|
|
(1,087)
|
445
|
(746)
|
(1,388)
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
2,104
|
-
|
2,104
|
Management
fees
|
|
|
-
|
-
|
670
|
670
|
Toll milling
services–deferred revenue (note 11)
|
|
152
|
-
|
-
|
152
|
|
|
|
152
|
2,104
|
670
|
2,926
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
21. RELATED
PARTY TRANSACTIONS
Uranium
Participation Corporation
The current
management services agreement (“MSA”) with UPC became
effective on April 1, 2019 and has a term of five years (the
“Term”). Under the MSA, Denison receives the following
management fees from UPC: a) a base fee of $400,000 per annum,
payable in equal quarterly installments; b) a variable fee equal to
(i) 0.3% per annum of UPC’s total assets in excess of $100
million and up to and including $500 million, and (ii) 0.2% per
annum of UPC’s total assets in excess of $500 million; c) a
fee, at the discretion of the Board, for on-going monitoring or
work associated with a transaction or arrangement (other than a
financing, or the acquisition of or sale of U3O8 or UF6); and d) a
commission of 1.0% of the gross value of any purchases or sales of
U3O8 or UF6 or gross interest
fees payable to UPC in connection with any uranium loan
arrangements.
The MSA may be
terminated during the Term by Denison upon the provision of 180
days written notice. The MSA may be terminated during the Term by
UPC (i) in the event of a material breach, (ii) within 90 days of
certain events surrounding a change of both of the individuals
serving as Chief Executive Officer and Chief Financial Officer of
UPC, and / or a change of control of Denison, or (iii) upon the
provision of 30 days written notice and, subject to certain
exceptions, a cash payment to Denison of an amount equal to the
base and variable management fees that would otherwise be payable
to Denison (calculated based on UPC’s current uranium
holdings at the time of termination) for the lesser period of a)
three years, or b) the remaining term of the MSA.
See note 25 for
further information regarding the UPC MSA.
The following
transactions were incurred with UPC for the periods
noted:
|
|
Three
Months Ended
June
30
|
|
Six
Months Ended
June
30
|
(in thousands of
CAD dollars)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Management
fees:
|
|
|
|
|
|
|
|
|
Base and variable
fees
|
$
|
571
|
$
|
551
|
$
|
1,046
|
$
|
1,014
|
Commission
fees
|
|
697
|
|
119
|
|
697
|
|
173
|
Discretionary
fees
|
|
210
|
|
-
|
|
350
|
|
300
|
|
$
|
1,478
|
$
|
670
|
$
|
2,093
|
$
|
1,487
|
At June 30, 2021,
accounts receivable includes $1,199,000 (December 31, 2020:
$265,000) due from UPC with respect to the fees indicated
above.
Korea
Electric Power Corporation (“KEPCO”) and Korea Hydro
& Nuclear Power (“KHNP”)
As at June 30,
2021, KEPCO, through its subsidiaries, holds 58,284,000 shares of
Denison representing a share interest of approximately 7.23%. KHNP
Canada Energy Ltd., a subsidiary of KEPCO’s subsidiary KHNP,
is the holder of the majority of Denison’s shares and is also
the majority member of Korea Waterbury Uranium Limited Partnership
(“KWULP”). KWULP is a consortium of investors that
holds the non-Denison owned interests in Waterbury Lake Uranium
Corporation (“WLUC”) and Waterbury Lake Uranium Limited
Partnership (“WLULP”), entities whose key asset is the
Waterbury Lake property.
Other
During the six
months ended June 30, 2021, the Company incurred investor
relations, administrative service fees and certain pass-through
expenses of $164,000 (June 30, 2020: $96,000) with Namdo Management
Services Ltd, a company that a former director of Denison is a
shareholder of. These services were incurred in the normal course
of operating a public company. At June 30, 2021, an amount of
$71,000 (December 31, 2020: $nil) was due to this
company.
Compensation
of Key Management Personnel
Key management
personnel are those persons having authority and responsibility for
planning, directing and controlling the activities of the Company,
directly or indirectly. Key management personnel include the
Company’s executive officers, vice-presidents and members of
its Board of Directors.
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
The following
compensation was awarded to key management personnel:
|
|
Three
Months Ended
June
30
|
|
Six
Months Ended
June
30
|
(in thousands of
CAD dollars)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
$
|
(494)
|
$
|
(371)
|
$
|
(1,537)
|
$
|
(955)
|
Share-based
compensation
|
|
(737)
|
|
(320)
|
|
(1,057)
|
|
(750)
|
Key
management personnel compensation
|
$
|
(1,231)
|
$
|
(691)
|
$
|
(2,594)
|
$
|
(1,705)
|
22. INCOME
TAXES
For the six
months ended June 30, 2021, Denison has recognized deferred tax
recoveries of $954,000. The deferred tax recovery includes the
recognition of previously unrecognized Canadian tax assets of
$247,000 relating to the February 2021 renunciation of the tax
benefits associated with the Company’s $930,485 flow-through
share issue in December 2020.
23. FAIR
VALUE OF FINANCIAL INSTRUMENTS
IFRS requires
disclosures about the inputs to fair value measurements, including
their classification within a hierarchy that prioritizes the inputs
to fair value measurement. The three levels of the fair value
hierarchy are:
●
Level 1 – Unadjusted
quoted prices in active markets for identical assets or
liabilities;
●
Level 2 – Inputs other
than quoted prices that are observable for the asset or liability
either directly or indirectly; and
●
Level 3 – Inputs that
are not based on observable market data.
The fair value of
financial instruments which trade in active markets, such as share
and warrant equity instruments, is based on quoted market prices at
the balance sheet date. The quoted market price used to value
financial assets held by the Company is the current closing price.
Warrants that do not trade in active markets have been valued using
the Black-Scholes pricing model. Debt instruments have been valued
using the effective interest rate for the period that the Company
expects to hold the instrument and not the rate to
maturity.
Except as
otherwise disclosed, the fair values of cash and cash equivalents,
trade and other receivables, accounts payable and accrued
liabilities, restricted cash and cash equivalents and debt
obligations approximate their carrying values as a result of the
short-term nature of the instruments, or the variable interest rate
associated with the instruments, or the fixed interest rate of the
instruments being similar to market rates.
During the six
months ended June 30, 2021, there were no transfers between levels
1, 2 and 3 and there were no changes in valuation
techniques.
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
The following
table illustrates the classification of the Company’s
financial assets within the fair value hierarchy as at June 30,
2021 and December 31, 2020:
|
|
|
|
|
|
June
30
|
|
December
31,
|
|
|
Financial
|
|
Fair
|
|
2021
|
|
2020
|
|
|
Instrument
|
|
Value
|
|
Fair
|
|
Fair
|
(in thousands of
CAD dollars)
|
|
Category(1)
|
|
Hierarchy
|
|
Value
|
|
Value
|
|
|
|
|
|
|
|
|
|
Financial
Assets:
|
|
|
|
|
|
|
|
|
Cash and
equivalents
|
|
Category
B
|
|
|
$
|
84,852
|
$
|
24,992
|
Trade and other
receivables
|
|
Category
B
|
|
|
|
4,639
|
|
3,374
|
Investments
|
|
|
|
|
|
|
|
|
Equity
instruments-shares
|
|
Category
A
|
|
Level
1
|
|
21,847
|
|
16,657
|
Equity
instruments-warrants
|
|
Category
A
|
|
Level
2
|
|
245
|
|
293
|
Restricted
cash and equivalents
|
|
|
|
|
|
|
|
|
Elliot Lake
reclamation trust fund
|
|
Category
B
|
|
|
|
3,201
|
|
2,883
|
Credit
facility pledged assets
|
|
Category
B
|
|
|
|
9,000
|
|
9,000
|
Reclamation
letter of credit collateral
|
|
Category
B
|
|
|
|
135
|
|
135
|
|
|
|
|
|
$
|
123,919
|
$
|
57,334
|
|
|
|
|
|
|
|
|
|
Financial
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
Category
C
|
|
|
|
17,069
|
|
7,178
|
Share
purchase warrants liabilty
|
|
Category
A
|
|
Level
2
|
|
19,066
|
|
-
|
Debt
obligations
|
|
Category
C
|
|
|
|
621
|
|
615
|
|
|
|
|
|
$
|
36,756
|
$
|
7,793
|
(1)
Financial instrument
designations are as follows: Category A=Financial assets and
liabilities at fair value through profit and loss; Category
B=Financial assets at amortized cost; and Category C=Financial
liabilities at amortized cost.
24. COMMITMENTS
AND CONTINGENCIES
Specific
Legal Matters
Mongolia
Mining Division Sale – Arbitration Proceedings with Uranium
Industry
In November 2015,
the Company sold all of its mining assets and operations located in
Mongolia to Uranium Industry a.s (“UI”) pursuant to an
amended and restated share purchase agreement (the “GSJV
Agreement”). The primary assets at that time were the
exploration licenses for the Hairhan, Haraat, Gurvan Saihan and
Ulzit projects. As consideration for the sale per the GSJV
Agreement, the Company received cash consideration of USD$1,250,000
prior to closing and the rights to receive additional contingent
consideration of up to USD$12,000,000.
On September 20,
2016, the Mineral Resources Authority of Mongolia
(“MRAM”) formally issued mining license certificates
for all four projects, triggering Denison’s right to receive
contingent consideration of USD$10,000,000 (collectively, the
“Mining License Receivable”). The original due date for
payment of the Mining License Receivable by UI was November 16,
2016.
Under an
extension agreement between UI and the Company, the payment due
date of the Mining License Receivable was extended from November
16, 2016 to July 16, 2017 (the “Extension Agreement”).
As consideration for the extension, UI agreed to pay interest on
the Mining License Receivable amount at a rate of 5% per year,
payable monthly up to July 16, 2017 and they also agreed to pay a
USD$100,000 instalment amount towards the balance of the Mining
License Receivable amount. The required payments were not
made.
On February 24,
2017, the Company served notice to UI that it was in default of its
obligations under the GSJV Agreement and the Extension Agreement
and 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 USD$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.
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
Uranium
Purchase Commitments
Denison has
entered into agreements to purchase 2,500,000 pounds of
U3O8 for delivery in
2021. As at June 30th, Denison has taken delivery of 2,300,000
pounds with the remaining 200,000 pounds to be delivered at various
times between July 1, 2021 and October 31, 2021. The purchase
commitment for the remaining deliveries is valued at USD$6,100,000
($7,560,000 using the June 30, 2021 foreign exchange rate of
1.2394).
25. SUBSEQUENT
EVENTS
Uranium
Participation Corporation
On July 19, 2021,
UPC and Sprott Asset Management LP (“Sprott”) completed
a plan of arrangement whereby UPC shareholders became unitholders
of the Sprott Physical Uranium Trust, a newly formed entity managed
by Sprott (the “UPC Transaction”). In conjunction with
the completion of the UPC Transaction, the MSA between Denison and
UPC was terminated and Denison received a termination payment from
UPC of $5,848,000.
Acquisition
of 50% of JCU (Canada) Exploration Company, Limited
(“JCU”) from UEX Corporation
(“UEX”)
On August 3,
2021, Denison acquired 50% ownership of JCU from UEX for cash
consideration of $20.5 million. JCU holds a portfolio of twelve
uranium project joint venture interests in Canada, including a 10%
interest in Wheeler River, a 30.099% interest in the Millenium
project, a 33.8123% interest in the Kiggavik project and a 34.4508%
interest in the Christie Lake project.
On August 3,
2021, UEX acquired 100% of JCU from OURD for $40.5 million, which
was funded by Denison providing UEX an interest-free term loan for
three-months in the amount of $41.0 million (“UEX Term
Loan”). Half of the amount owing from UEX to Denison was
settled on the transfer of 50% of the shares of JCU to Denison,
with UEX continuing to owe Denison $20.5 million. The UEX Term Loan
is secured by all of the shares of JCU owned by UEX. UEX may extend
the term of the loan by an additional three months, in which case
interest will be charged at a rate of 4% from the original start
date of the UEX Term Loan.
Denison and UEX
have entered into a shareholder’s agreement which governs the
operating activities of JCU, including provisions for future
funding, dilution and the resolution of management deadlock
situations.
At June 30, 2021,
Denison has capitalized $76,000 of transaction costs related to the
JCU acquisition on its statement of financial
position.
24
MANAGEMENT’S DISCUSSION & ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2021
|
|
TABLE OF
CONTENTS
|
|
2021 SECOND QUARTER PERFORMANCE
HIGHLIGHTS
|
2
|
ABOUT DENISON
|
2
|
RESULTS OF OPERATIONS
|
4
|
Wheeler River Project
|
6
|
LIQUIDITY AND CAPITAL
RESOURCES
|
13
|
OUTLOOK FOR 2021
|
17
|
ADDITIONAL INFORMATION
|
18
|
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
|
18
|
|
|
This
Management’s Discussion and Analysis (‘MD&A’)
of Denison Mines Corp. and its subsidiary companies and joint
arrangements (collectively, ‘Denison’ or the
‘Company’) provides a detailed analysis of the
Company’s business and compares its financial results with
those of the previous year. This MD&A is dated as of August 5,
2021 and should be read in conjunction with the Company’s
unaudited interim condensed consolidate0d financial statements and
related notes for the three and six months ended June 30, 2021. The
unaudited interim condensed consolidated financial statements are
prepared in accordance with International Financial Reporting
Standards (‘IFRS’) as issued by the International
Accounting Standards Board (‘IASB’). Readers are also
encouraged to consult the audited consolidated financial statements
and MD&A for the year ended December 31, 2020. All dollar
amounts in this MD&A are expressed in Canadian dollars, unless
otherwise noted.
Additional
information about Denison, including the Company’s press
releases, quarterly and annual reports, Annual Information Form and
Form 40-F is available through the Company’s filings with the
securities regulatory authorities in Canada at www.sedar.com
(‘SEDAR’) and the United States at
www.sec.gov/edgar.shtml (‘EDGAR’).
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
2021 SECOND QUARTER
PERFORMANCE HIGHLIGHTS
■
In-Situ Recovery (‘ISR’) field test activities at the
Phoenix uranium deposit (‘Phoenix’)
progress
A substantial
portion of the ISR field test program has been successfully
completed, including the installation of all five commercial-scale
wells (‘CSWs’) and nine of eleven monitoring wells
(‘MWs’) planned for the 5-spot test pattern (the
‘Test Pattern’) located in the Phase 1 area of Phoenix
on the Company’s Wheeler River Uranium Project
(‘Wheeler River’ or the ‘Project’). Based
on the progress to date, multi-day pump and injection tests and ion
tracer tests are planned to be initiated and completed on the
full-scale Test Pattern during the third quarter.
■
Discovered high-grade uranium outside of the Phoenix Zone A
high-grade domain
Drill hole
GWR-045 was completed as part of the ISR field test program to
install MWs to the northwest of the CSW Test Pattern. Based on the
mineral resources currently estimated for Phoenix, GWR-045 was
expected to intersect low grade uranium mineralization on the
northwest margin of the deposit, approximately 5 metres outside of
the boundary of the Phoenix Zone A high-grade resource domain. The
drill hole, however, intersected a thick interval of high-grade
unconformity-associated uranium mineralization with grades of 22.0%
eU3O8 over 8.6 metres.
The intersection is presently open further to the northwest and
represents an area for further exploration and potential mineral
resource expansion of Phoenix.
■
Decision to increase anticipated ISR mining head grade at Phoenix
by 50%
Positive interim
results, completed to date, from the ongoing metallurgical test
program for the planned ISR mining operation at Phoenix have
consistently supported uranium bearing solution (‘UBS’)
head-grade for Phoenix well in excess of the 10 grams / Litre
(’g/L’) used in the Pre-Feasibility Study
(“PFS”) completed for Wheeler River in 2018.
Accordingly, the Company has decided to adapt its plans for the
remaining metallurgical test work, including the bench-scale tests
of the unit operations of the proposed process plant, to reflect a
50% increase in the head-grade of UBS to be recovered from the
well-field.
■
Completed acquisition of 50% of JCU (Canada) Exploration Company,
Limited (‘JCU’) for $20.5 million
In June 2021,
Denison announced that it had entered into a binding agreement with
UEX Corporation (‘UEX’) to acquire 50% of JCU from UEX
for cash consideration of $20.5 million following UEX’s
acquisition of 100% of JCU from Overseas Uranium Resources
Development Co., Ltd. (‘OURD’) for $41 million.
Denison’s acquisition of 50% of JCU was completed on August
3, 2021. JCU holds a portfolio of 12 uranium project joint venture
interests in Canada, including a 10% interest in Wheeler River, a
30.099% interest in the Millennium project (Cameco Corporation
69.901%), a 33.8123% interest in the Kiggavik project (Orano Canada
Inc. (‘Orano Canada’) 66.1877%), and a 34.4508%
interest in the Christie Lake project (UEX 65.5492%).
■
Received $5.8 million in connection with conversion of Uranium
Participation Corporation (‘UPC’) into the Sprott
Physical Uranium Trust
In April 2021,
UPC announced that it had reached an agreement with Sprott Asset
Management LP (‘Sprott’) to convert UPC into the Sprott
Physical Uranium Trust. Upon completion of this transaction on July
19, 2021, Sprott became the manager of the Sprott Physical Uranium
Trust, and the management services agreement (‘MSA’)
between Denison and UPC was terminated. In accordance with the
terms of the MSA, Denison received a cash payment of approximately
$5.8 million in connection with the termination.
Denison Mines
Corp. was formed under the laws of Ontario and is a reporting
issuer in all Canadian provinces. Denison’s common shares are
listed on the Toronto Stock Exchange (the ‘TSX’) under
the symbol ‘DML’ and on the NYSE American exchange
under the symbol ‘DNN’.
Denison is a
uranium exploration and development company with interests focused
in the Athabasca Basin region of northern Saskatchewan, Canada. The
Company has an effective 95% interest in its flagship Wheeler River
Uranium Project, which is the largest undeveloped uranium project
in the infrastructure rich eastern portion of the Athabasca Basin
region of northern Saskatchewan. A PFS was completed for Wheeler
River in late 2018, considering the potential economic merit of
developing Phoenix as an ISR operation and the Gryphon deposit as a
conventional underground mining operation. Denison's interests in
Saskatchewan also include a 22.5% ownership interest in the McClean
Lake Joint Venture (‘MLJV’), which includes several
uranium deposits and the McClean Lake uranium mill,
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
which is
contracted to process the ore from the Cigar Lake mine under a toll
milling agreement (see RESULTS OF OPERATIONS below for more
details), plus a 25.17% interest in the Midwest deposits and a
66.90% interest in the THT (formerly J Zone) and Huskie deposits on
the Waterbury Lake property. The Midwest, THT and Huskie deposits
are located within 20 kilometres of the McClean Lake mill. In
addition, Denison has an extensive portfolio of exploration
projects in the Athabasca Basin region.
Additionally,
through its 50%
ownership of JCU, Denison also holds interests in various uranium
project joint ventures in Canada, including the Millennium project
(JCU 30.099%), the Kiggavik project (JCU 33.8123%) and Christie
Lake (JCU 34.4508%).
Denison is
engaged in mine decommissioning and environmental services through
its Closed Mines group, which manages Denison’s Elliot Lake
reclamation projects and provides post-closure mine and maintenance
services to a variety of industry and government
clients.
Up until July 19,
2021, Denison also served as the manager of UPC. UPC was a publicly
traded company listed on the TSX, which invested in uranium oxide
in concentrates (‘U3O8’) and
uranium hexafluoride (‘UF6’). In
April, 2021, UPC announced that it had entered into an agreement
with Sprott to convert UPC into the Sprott Physical Uranium Trust.
This transaction closed on July 19, 2021, and the MSA between
Denison and UPC was terminated.
SELECTED QUARTERLY FINANCIAL INFORMATION
(in
thousands)
|
|
As at
June 30,
2021
|
|
As at
December 31,
2020
|
|
|
|
|
|
Financial Position:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
84,852
|
$
|
24,992
|
Working
capital(1)
|
$
|
92,259
|
$
|
37,571
|
Property, plant
and equipment
|
$
|
256,484
|
$
|
256,870
|
Total
assets
|
$
|
478,125
|
$
|
320,690
|
Total long-term
liabilities(2)
|
$
|
99,561
|
$
|
81,565
|
(1)
At June 30, 2021, the
Company’s working capital includes $21,847,000 in portfolio
investments and a non-cash $4,656,000 deferred revenue liability
(December 31, 2020 – $16,657,000 in portfolio investments,
and $3,478,000 of non-cash deferred revenue).
(2)
Predominantly comprised of
the non-current portion of deferred revenue, non-current
reclamation obligations, share purchase warrant liabilities and
deferred income tax liabilities.
|
|
|
|
2021
|
|
2021
|
|
2020
|
|
2020
|
(in
thousands, except for per share amounts)
|
|
Q2
|
|
Q1
|
|
Q4
|
|
Q3
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations:
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
|
4,626
|
$
|
2,496
|
$
|
4,094
|
$
|
2,743
|
Net
loss
|
$
|
(2,357)
|
$
|
(8,884)
|
$
|
(3,095)
|
$
|
(5,482)
|
Basic and diluted
loss per share
|
$
|
(0.00)
|
$
|
(0.01)
|
$
|
(0.00)
|
$
|
(0.01)
|
|
|
|
|
2020
|
|
2020
|
|
2019
|
|
2019
|
(in
thousands, except for per share amounts)
|
|
Q2
|
|
Q1
|
|
Q4
|
|
Q3
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations:
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
|
2,926
|
$
|
4,660
|
$
|
3,956
|
$
|
3,478
|
Net
loss
|
$
|
(1,043)
|
$
|
(6,663)
|
$
|
(1,498)
|
$
|
(6,424)
|
Basic and diluted
loss per share
|
$
|
(0.00)
|
$
|
(0.01)
|
$
|
(0.00)
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Significant items causing variations in quarterly
results
●
The Company’s toll
milling revenues fluctuate due to the timing of uranium processing
at the McClean Lake mill, as well as changes to the estimated
mineral resources of the Cigar Lake mine. Toll milling at McClean
Lake was suspended during Q2 and Q3 of 2020 and again during Q1 and
the beginning of Q2 of 2021, due to the suspension of mining at the
Cigar Lake mine as a result of the COVID-19 pandemic
(‘COVID-19’). See RESULTS OF OPERATIONS below for
further details.
●
Revenues from the Closed
Mines group fluctuate due to the timing of projects, which vary
throughout the year in the normal course of business.
●
Operating expenses fluctuate
due to the timing of projects at both the MLJV and the Closed Mines
group, which vary throughout the year in the normal course of
business.
●
Exploration expenses are
generally largest in the first and third quarters, due to the
timing of the winter and summer exploration seasons in northern
Saskatchewan. As a result of COVID-19, the 2020 summer exploration
program was deferred to the fourth quarter of 2020.
●
Other income and expense
fluctuates due to changes in the fair value of the Company’s
portfolio investments, share purchase warrants, and uranium
investments, all of which are recorded at fair value through profit
or loss and are subject to fluctuations in the underlying share /
commodity price. The Company’s share purchase warrants and
uranium investments are also subject to fluctuations in the US
dollar to Canadian dollar exchange rate.
●
The Company’s results
are also impacted, from time to time, by other non-recurring events
arising from its ongoing activities, as discussed below where
applicable.
REVENUES
McClean Lake Uranium Mill
McClean Lake is
located on the eastern edge of the Athabasca Basin in northern
Saskatchewan, approximately 750 kilometres north of Saskatoon.
Denison holds a 22.5% ownership interest in the MLJV and its
McClean Lake uranium mill, one of the world’s largest uranium
processing facilities, which is contracted to process ore from the
Cigar Lake mine under a toll milling agreement. The MLJV is a joint
venture between Orano Canada with a 77.5% interest and Denison with
a 22.5% interest.
In February 2017,
Denison closed an arrangement with Anglo Pacific Group PLC and one
of its wholly owned subsidiaries (the ‘APG
Arrangement’) under which Denison received an upfront payment
of $43,500,000 in exchange for its right to receive future toll
milling cash receipts from the MLJV under the current toll milling
agreement with the Cigar Lake Joint Venture (‘CLJV’)
from July 1, 2016 onwards. The APG Arrangement consists of certain
contractual obligations of Denison to forward to APG the cash
proceeds of future toll milling revenue earned by the Company
related to the processing of the specified Cigar Lake ore through
the McClean Lake mill, and as such, the upfront payment was
accounted for as deferred revenue.
In response to
the COVID-19 pandemic, the CLJV temporarily suspended production at
the Cigar Lake mine from the end of March 2020 until September
2020, and then again from the end of December 2020 until April
2021. The MLJV temporarily suspended operations at the mill for the
duration of the CLJV shutdowns. As noted above, Denison sold the
toll milling revenue to be earned from the processing of the Cigar
Lake ore pursuant to the APG Arrangement. While the temporary
suspension of operations at the McClean Lake mill resulted in a
decrease in revenue recognized by Denison, the impact is non-cash
and is limited to a reduction in the drawdown of the
Company’s deferred revenue balance.
During the three
and six months ended June 30, 2021, the McClean Lake mill processed
2.5 million and 2.5 million pounds U3O8 for the CLJV,
respectively (June 30, 2020 – nil and 4.2 million pounds
U3O8) and recorded
toll milling revenue of $582,000 and $719,000, respectively (June
30, 2020 – $152,000 and $1,115,000). Toll milling revenue
reported for the six months ended June 30, 2021, includes a
$137,000 non-cash cumulative catch up adjustment recorded in the
first quarter of 2021 related to the Cigar Lake mineral resource
estimate update published in the first quarter. The increase in
toll milling revenue during the three months ended June 30, 2021,
as compared to the prior year, is predominantly due to an increase
in mill production in the current period. The McClean Lake mill
reopened following the second COVID-19-related temporary shutdown
in April 2021, while it was shut down for the entirety of the
second quarter in 2020. The impact of the increase in mill
production in the current quarter was slightly offset by a negative
non-cash cumulative catch up adjustment of $76,000, due to a change
in the estimated timing of toll milling activity driven by the
reopening of the mill in April. The decrease in toll milling
revenue during the six months ended June 30, 2021, as compared to
the prior period, was predominantly due to a reduction in mill
production in the current period.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
The mill was in
operation for approximately six weeks in the six months ended June
30, 2021, compared to approximately three months of operations in
the six months ended June 30, 2020.
During the three
and six months ended June 30, 2021, the Company also recorded
accretion expense of $790,000 and $1,544,000, respectively, on the
toll milling deferred revenue balance (June 30, 2020 –
$755,000 and $1,537,000). While the annual accretion expense will
decrease over the life of the agreement, as the deferred revenue
liability decreases over time, accretion expense increased in the
current three and six month periods due to the impact of the
McClean Lake mill shutdown. With the mill shut down, the deferred
revenue balance increased, as accretion expense exceeded the
drawdown of deferred revenue.
Closed Mine Services
Mine
decommissioning and environmental services are provided through
Denison’s Closed Mines group, which has provided long-term
care and maintenance for closed mine sites since 1997. With offices
in Ontario, the Yukon Territory and Quebec, the Closed Mines group
manages Denison’s Elliot Lake reclamation projects and
provides post-closure mine care and maintenance services to various
customers.
Revenue from
Closed Mines services during the three and six months ended June
30, 2021 was $2,566,000 and $4,310,000 (June 30, 2020 - $2,104,000
and $4,132,000). The increase in revenue in the three and six
months ended June 30, 2021, as compared to the prior period, was
due to an increase in activity at certain care and maintenance
sites, slightly offset by a decrease in revenue related to one
customer contract that was not renewed for 2021.
Management Services Agreement with UPC
As discussed in
ABOUT DENISON above, up until July 19, 2021, Denison provided
general administrative and management services to UPC, and the
Management fees and commissions earned by Denison provided a source
of cash flow to partly offset corporate administrative expenditures
incurred by the Company during the year.
During the three
and six months ended June 30, 2021, revenue from the
Company’s management contract with UPC was $1,478,000 and
$2,093,000 (June 30, 2020 - $670,000 and $1,487,000). The increase
in revenues during the three and six months ended June 30, 2021,
compared to the prior year periods, was due to an increase in
management fees earned based on UPC’s monthly net asset value
(‘NAV’), as well as an increase in both discretionary
management fees and commission-based management fees. UPC’s
balance sheet consists primarily of uranium held either in the form
of U3O8 or UF6, which is
accounted for at its fair value. The increase in NAV-based
management fees was due to the increase in the average fair value
of UPC’s uranium holdings during the three and six months
ended June 30, 2021, compared to the prior year, resulting from
higher uranium spot prices. Discretionary management fees are
awarded to Denison for non-routine activities performed by the
Company. During the three and six months ended June 30, 2021,
Denison was awarded $210,000 and $350,000 in discretionary
management fees, compared to $nil and $300,000 in the prior
periods. Denison also earned a 1% commission on the gross value of
UPC’s uranium purchases and sales. The increase in
commission-based fees in both the three and six months ended June
30, 2021, as compared to the prior year, was due to an increase in
uranium transactions completed for UPC during the current
periods.
OPERATING EXPENSES
Mining
Operating
expenses of the mining segment include depreciation and development
costs, as well as cost of sales related to the sale of
uranium.
Operating
expenses in the three and six months ended June 30, 2021 were
$1,353,000 and $1,648,000, respectively (June 30, 2020 –
$389,000 and $1,994,000), including depreciation expense relating
to the McClean Lake mill of $429,000 and $429,000 (June 30, 2020 -
$nil and $736,000), as a result of processing approximately 2.5
million and 2.5 million pounds U3O8, respectively,
for the CLJV (June 30, 2020 – nil and 4.2 million
pounds).
In the three and
six months ended June 30, 2021, operating expenses also included
development and other operating costs related to the MLJV of
$924,000 and $1,219,000 (June 30, 2020 – $389,000 and
$1,258,000). The development and other operating costs for the
three and six months ended June 30, 2021 predominantly related to
the advancement of the Surface Access Borehole Resource Extraction
(‘SABRE’) mining technology, as part of a multi-year
test mining program operated by Orano Canada within the
MLJV.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Closed Mines Services
Operating
expenses during the three and six months ended June 30, 2021
totaled $2,338,000 and $3,931,000 respectively (June 30, 2020 -
$1,659,000 and $3,374,000). The expenses relate primarily to care
and maintenance services provided to clients, and include labour
and other costs. The increase in operating expenses in the current
periods, as compared to the prior year, is predominantly due to an
increase in activity at certain care and maintenance
sites.
MINERAL PROPERTY EVALUATION
During the three
and six months ended June 30, 2021, Denison’s share of
evaluation expenditures was $6,381,000 and $9,142,000 (June 30,
2020 - $364,000 and $1,855,000). The increase in evaluation
expenditures, compared to the prior period, was due to an increase
in Wheeler River evaluation activities, including the 2021 ISR
field program. The following table summarizes the evaluation
activities completed during the first half of 2021 and up until the
middle of July 2021.
PROJECT EVALUATION ACTIVITIES
|
Property
|
Denison’s
ownership(1)
|
Evaluation drilling
|
Other activities
|
Wheeler
River
|
90%
|
2,092
metres
(5 large diameter CSWs(2))
3,431metres
(9 small diameter MWs(3))
|
ISR
field testing,
engineering,
metallurgical testing, environmental and sustainability
activities
|
|
|
|
5,523 m (14 holes)
|
|
Notes:
(1) The
Company’s ownership interest as at June 30, 2021. Effective
August 3, 2021, the Company has acquired an additional 5% ownership
interest in Wheeler River through its acquisition of 50% of JCU
(see SUBSEQEUNT EVENTS for further details).
(2) CSW drilling
relates to the drilling and installation of new CSWs from surface
for the purposes of ISR field testing at Phoenix. Figures include
total evaluation meters drilled and total number of holes
completed.
(3) Small diameter evaluation drilling
includes HQ/PQ sized diamond drilling either as the widening
(reaming) of existing exploration drill holes, or the drilling of
new holes, for the purposes of installing MWs for ISR field testing
at Phoenix. Figures include total evaluation metres drilled and
total number of holes completed.
A PFS was
completed for Wheeler River in late 2018, considering the potential
economic merit of developing the Phoenix deposit as an ISR
operation and the Gryphon deposit as a conventional underground
mining operation.
Further details
regarding Wheeler River, including the estimated mineral reserves
and resources, are provided in the Technical Report for the Wheeler
River project titled ‘Pre-feasibility Study Report for the
Wheeler River Uranium Project, Saskatchewan, Canada’ with an
effective date of September 24, 2018 (‘PFS Technical
Report’). A copy of the PFS Technical Report is available on
Denison’s website and under its profile on each of SEDAR and
EDGAR.
Given the social,
financial and market disruptions in early 2020, Denison suspended
certain activities at Wheeler River, including the Environmental
Assessment (‘EA’) program, which is on the critical
path to achieving the project development schedule outlined in the
PFS. The Company is not currently able to estimate the impact to
the project development schedule outlined in the PFS, and users are
cautioned that the estimates provided therein regarding the start
of pre-production activities in 2021 and first production in 2024
should not be relied upon.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
The location of
the Wheeler River property, as well as the Phoenix and Gryphon
deposits, and existing and proposed infrastructure, is shown on the
map provided below.
Engineering Activities
2021
Field Program:
Drill
crews were fully mobilized for the 2021 ISR Field Program in the
second quarter. Activities progressed largely on schedule during
the quarter as the Wheeler River site managed to prevent any
outbreaks or disruptions related to COVID-19 with rigorous
application of safety protocols. Interim progress highlights from
the 2021 ISR field program include the following:
●
Installation of a 5-spot Test
Pattern: The Test Pattern, located in the planned first
mining area (‘Phase 1’) of Phoenix, consists of five
new CSWs and has been designed to facilitate the further evaluation
of the ISR mining conditions at Phoenix – for incorporation
into detailed mine planning, expected to be included in a future
Feasibility Study (‘FS’) for the
Project.
During the
second quarter of 2021, all five CSWs were drilled to depth and
initial hydrogeologic testing was completed. Work planned for the
third quarter includes additional permeability enhancement and well
screen installations, followed by the commencement of additional
comprehensive hydrogeologic testing, as outlined
below.
●
Installation of 11 additional
MWs: Eleven additional
small-diameter MWs are planned to be installed around the Phase 1
area and are designed to surround the Test Pattern on all sides and
above the ore zone horizon, in order to facilitate detailed
monitoring of pressure changes and observations of fluid flow
patterns during active hydrogeological tests. Certain MWs will also
allow for water quality sampling over the duration of the test
work.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
The drilling
of the MWs is underway, with the five water sampling MWs and four
of the six additional small diameter Vibrating Wire Piezometers
(‘VWP’) MWs having been completed.
In addition,
some historical exploration drill holes have been re-purposed for
monitoring fluid flows within the Test Pattern.
Refer to the
map below for the placement of the CSWs and the MWs.
●
Discovery of High-Grade
Mineralization in GWR-045: GWR-045, a MW located to the northwest of the Test
Pattern, intersected a thick interval of high-grade
unconformity-associated uranium mineralization, with grades of
22.0% eU3O8
over 8.6 metres (see Denison press
release dated July 29, 2021). Based on the mineral resources
currently estimated for Phoenix, GWR-045 was expected to intersect
low grade uranium mineralization on the northwest margin of the
deposit, approximately 5 metres outside of the boundary of the
Phoenix Zone A high-grade resource domain. The intersection is
presently open further to the northwest and represents an area for
potential resource expansion of Phoenix.
●
Extensive Hydrogeologic
Testing: Approximately
twenty-five hydrogeologic tests are planned to be completed during
the 2021 Field Program. Tests will first evaluate baseline
conditions and the effectiveness of permeability enhancement tools
deployed on an individual well basis, and are then expected to
progress to assessing the Test Pattern’s total permeability
on a full-scale basis with multi-day pump and injection tests.
Tests using ion tracers are also expected to be conducted on the
full Test Pattern to establish breakthrough times for each CSW and
confirm sub-surface pathways. These tests are expected to provide a
more complete understanding of the hydrogeologic characteristics
expected throughout Phase 1 in order to support the permitting and
design of a lixiviant test, utilizing the existing Test Pattern,
planned for 2022.
The initial
qualitative tests to evaluate baseline conditions were completed in
the second quarter.
The
full-scale hydrogeological testing is planned to commence after the
installation of all the MWs has been completed. This work is
currently scheduled to take place in the third
quarter.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
●
Permeameter Analysis:
Permeameter analysis of additional
areas within Phoenix resumed in 2021 to refine the understanding of
the mineralized hydrogeologic horizons. To date, analysis has been
completed from 16 of the planned program of 47 holes, consisting of
383 permeameter tests. The 47 holes planned for testing represents
different mineralization zones across all of Phoenix Zone
A.
Metallurgical Testing
Metallurgical
test work continued in the second quarter of 2021 with multiple
tests carried out at the SRC Laboratories in Saskatoon
(‘SRC’).
The core
leach tests are specialized leach tests involving the testing of
intact mineralized core samples, representative of the in-situ
conditions at Phoenix, designed to evaluate uranium recovery
specifically for the ISR mining method.
During the
first half of 2021, four core leach samples were tested at
SRC.
Three cores
representing the high grade/low clay characteristics of the
majority of the mineralization in the Phase 1 mining area have been
tested to date with results showing steady-state and average UBS
head grades significantly above the 10g/L level used in the
PFS.
In addition
to the high-grade/low clay characteristics of Phase 1, the Phoenix
ISR operation is also expected to encounter comparatively rare and
isolated areas with lower uranium grades and high clay content,
which is expected to result in a limited number of zones of reduced
permeability. In order to understand the ISR leach dynamics in
these areas, test work was also initiated on a sample representing
high clay characteristics (above 25% clay). Results obtained from
these tests confirm that high clay content can impact the natural
permeability of the ore body and lead to lower UBS head-grades.
Importantly, these tests also confirm that permeability enhancement
techniques have the potential to normalize these areas and
significantly improve UBS head-grade concentrations to levels that
align with core leach tests carried out using samples with higher
grades and lower clay content.
The test work
completed to date has consistently supported an ISR mining uranium
head-grade for Phoenix in excess of the 10g/L assumed in the PFS.
Accordingly, the Company has decided to adapt its plans for the
remaining metallurgical test work, including the bench-scale tests
of the unit operations for the processing plant, to reflect an
assumed UBS head-grade recovered from the wellfield of 15g/L, which
represents a 50% increase from the UBS head-grade used in the
PFS.
The primary
purpose of the column leach tests was to recover sufficient volumes
of UBS to facilitate bench-scale tests of the unit operations
outlined in the flowsheet for the Phoenix processing plant. Over
900 litres of UBS were produced from 64 Kilograms
(“kg”) of Phoenix core samples. Combined results from
the four column leach tests are highly positive, with calculated
UBS head-grade from the four columns averaging 19g/L, which further
supports the decision to increase the overall UBS head-grade
assumption for Phoenix.
While not the primary purpose of the column leach
tests, average reagent addition rates from the column leach tests
(1.3 kg acid / kg U3O8
and 1.2 kg oxidant / kg
U3O8)
have also provided useful information that is supportive of the
values published in the PFS.
Environmental and Sustainability Activities
EA Activities
Technical studies
related to the hydrogeological model continued in the second
quarter of 2021, with the Denison technical team validating the
assumptions in the model provided by the Company’s consultant
to ensure that the model is aligned with Denison’s current
mining strategy and decommissioning plans. During the second
quarter, the groundwater sampling
required to support the hydrogeological assessment was
completed.
Also
during the second quarter, the team commenced the development of a
Caribou Protection Plan with the selection of a trial location, and
progressed both terrestrial and air quality assessment
efforts.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Community Engagement Activities
At the end of the first quarter of 2021, Denison
executed two agreements with the English River First Nation
(‘ERFN’): a Participation and Funding Agreement, which
outlines a framework and funding agreement to facilitate
ERFN’s participation and engagement in the Wheeler EA
process, and an Exploration Agreement, whereby the ERFN
consents to the Company’s exploration and evaluation
activities, provided Denison meets the commitments made in the
Exploration Agreement, which include Denison providing support for
ERFN's interests in relation to community development and benefits,
environmental protection and monitoring, as well as a sustainable
and predictable consultation and engagement process.
During
the second quarter, a Letter Agreement was completed between
Denison and the Ya’thi Néné Lands and Resources
Office, allowing the parties to undertake engagement activities in
the communities in the northernmost portion of the Athabasca Basin
region (Black Lake First Nation, Fond du Lac First Nation, Hatchet
Lake First Nation, Camsell Portage, Uranium City, Stony Rapids and
Wollaston Lake) for the Project. Engagement meetings are currently
scheduled to occur in the third quarter.
MINERAL PROPERTY EXPLORATION
During the three
and six months ended June 30, 2021, Denison’s share of
exploration expenditures was $528,0000 and $1,876,000, (June 30,
2020 – $481,000 and $2,181,000). The decrease in exploration
expenditures in the six months ended June 30, 2021 compared to the
prior year was due to a decrease in winter exploration
activities.
Exploration
spending in the Athabasca Basin is generally seasonal in nature,
reflecting increased field activity during the winter exploration
season (January to mid-April) and summer exploration season (June
to mid-October).
The following
table summarize the exploration activities completed during the
first half of 2021. The exploration drilling relates to the winter
drilling programs at three of the Company’s non-operated
properties.
EXPLORATION & EVALUATION ACTIVITIES
|
Property
|
Denison’s ownership
|
Drilling in metres
(m)(1)
|
Other activities
|
Ford
Lake
|
100.00%
|
-
|
Geophysical
Survey
|
|
McClean
Lake
|
22.50%
|
4,083.0 (15
holes)
|
-
|
|
Midwest
|
25.17%
|
2,669.0 (8
holes)
|
Geophysical
Survey
|
|
Waterfound
|
12.32%(2)
|
-
|
Geophysical
Survey
|
|
Wolly
|
21.89%(3)
|
2,118.5 (11
holes)
|
-
|
|
|
|
|
|
|
Total
|
|
8,870.5 (34 holes)
|
|
(1)
The Company reports total
exploration metres drilled and the number of holes that were
successfully completed to their target depth.
(2)
Represents Denison’s
ownership position at December 31, 2020. Denison has elected not to
funds its 12.32% share of the 2021 exploration program implemented
by the operator, Orano Canada. Accordingly, Denison’s
ownership share will decrease.
(3)
Represents Denison’s
ownership position at December 31, 2020. Denison has elected not to
funds its 21.89% share of the 2021 exploration program implemented
by the operator, Orano Canada. Accordingly, Denison’s
ownership share will decrease.
The
Company’s land position in the Athabasca Basin, as of June
30, 2021, is illustrated in the figure below. The size of the
Company’s Athabasca land package did not change during the
second quarter of 2021, remaining at 280,107 hectares (207
claims).
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Wheeler River Exploration
Denison’s
share of exploration costs at Wheeler River was $186,000 and
$446,000 during the three and six months ended June 30, 2021,
respectively (June 30, 2020 – $188,000 and $394,000), which
includes a portion of camp support and stand-by costs.
During the three
and six months ended June 30, 2020, exploration work related to
Wheeler River included desktop analysis and interpretation of the
results of the 2020 exploration program and the detailed planning
for the upcoming 2021 exploration drilling program – which is
expected to begin in the third quarter of 2021 and include an
estimated 7,500 metres in approximately 12 to 15 drill
holes.
Given the recent
intersection of a thick interval of high-grade
unconformity-associated uranium mineralization in GWR-045, which
returned 22.0% eU3O8 over 8.6 metres,
the exploration team is currently carrying out further geologic
interpretation, updates to the geologic model, and planning for
follow-up drilling, which could be completed as part of the
exploration field work planned for 2021.
Regional
exploration during 2021 will be focused at the K West and M Zone
target areas, where additional exploration drilling is required to
follow up on mineralization encountered in each of these areas from
the 2020 exploration drilling program.
Exploration Pipeline Properties
Ford Lake
The final data
sets for the 2021 Ford Lake SML-EM survey were received during the
quarter. Denison’s exploration team is currently analyzing
the data to develop a conductivity model for the survey area, and
to identify targets for future drilling programs.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
McClean Lake
The McClean Lake
property is operated by Orano Canada and is host to the McClean
mill and several unmined uranium deposits. A diamond drilling
program consisting of 15 drill holes totaling 4,083 metres was
completed at McClean Lake during the first quarter, which was
highlighted by the discovery of high-grade uranium mineralization
in the McClean South target area.
Following
completion of the field programs, Orano Canada has initiated a
further review and analysis of all drilling data (historical and
recent) in the McClean South area in order to develop a
comprehensive and consistent geological interpretation reflective
of the mineralization intersected during the winter drill
program.
Assay results
from drilling at McClean South were received for the mineralized
intersections reported in Denison’s news release dated April
14, 2021. Final assays reflect a significant increase in the
U3O8 grades previously
reported for hole MCS-34, which returned 33.54% U3O8 over 3.0 metres
(as compared to previously disclosed preliminary radiometric
equivalent grades of 14.86% eU3O8 over 3.9 metres).
The following table summarizes the assay results from the
mineralized intersections for the winter 2021 McClean Lake
exploration drill program.
HIGHLIGHTS OF ASSAY RESULTS FOR MCLEAN LAKE DRILL
HOLES
|
Hole Number
|
From
(m)
|
To
(m)
|
Length
(m)
|
Grade
(% U3O8)
|
MCS-31(1)
|
224.7
|
225.2
|
0.5(3)
|
0.26
|
MCS-34(1)
|
183.1
|
196.6
|
13.5(4)
|
8.67
|
Including(2)
|
190.1
|
190.6
|
0.5(4)
|
18.5
|
Including(2)
|
193.1
|
196.1
|
3.0(4)
|
33.54
|
MCS-36(1)
|
165.7
|
168.7
|
3.0(5)
|
0.51
|
Mcs-37(1)
|
164.9
|
170.9
|
6.0(5)
|
0.64
|
Notes:
1.
Intersection interval is
composited above a cut-off grade of 0.1% U3O8.
2.
Intersection interval is
composited above a cut-off grade of 2.0% U3O8
3.
True thickness is estimated
to be approximately 65% of stated downhole length.
4.
True thickness is estimated
to be approximately 85% of stated downhole length.
5.
True thickness is estimated
to be approximately 90% of stated downhole length.
GENERAL AND ADMINISTRATIVE EXPENSES
During the three
and six months ended June 30, 2021, total general and
administrative expenses were $2,362,000 and $4,987,000,
respectively (June 30, 2020 - $1,421,000 and $3,609,000). These
costs are mainly comprised of head office salaries and benefits,
office costs in multiple regions, audit and regulatory costs, legal
fees, investor relations expenses, project costs, and all other
costs related to operating a public company with listings in Canada
and the United States. The increase in general and administrative
expenses during the three and six months ended June 30, 2021 was
predominantly due to an increase in employee costs, as well as an
increase in compliance costs driven by an increase in retail
investor trading and ownership in Denison shares and the costs
related to their participation in Denison’s annual general
meeting.
The increase in
employee costs in the three months ended June 30, 2021, was due to
an increase in the non-cash stock-based compensation expense driven
by the impact of the Company’s increased share price and
share price volatility on the valuation of stock-based compensation
awarded in late March 2021. The increase in employee costs in the
six months ended June 30, 2021, is due to an increase in
stock-based compensation expense, as well as an increase in bonus
expense. In order to preserve cash in early 2020, the Company
settled 2019 bonuses for the executive team and the majority of
staff with a grant of restricted share units (‘RSUs’).
The cost of RSUs is expensed over the three-year vesting period of
the units, whereas cash bonuses, by comparison, are fully expensed
at the time of approval. During 2021, the 2020 bonuses awarded to
staff and executives were paid in cash resulting in a change in the
timing of the recognition of the expense.
OTHER INCOME AND EXPENSES
During the three
and six months ended June 30, 2021, the Company recognized gains of
$6,348,000 and $4,307,000 in other income/expense, respectively
(June 30, 2020 – gain of $2,163,000 and a loss of
$1,029,000).
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
The main drivers
of other income/expense are as follows:
Fair value gains or losses on uranium investments
A portion of the
proceeds from the Company’s March 2021 unit offering (see
below for further details) is intended to fund the purchase of
2,500,000 pounds of U3O8 to be held as a
long-term investment to strengthen the Company’s balance
sheet and potentially enhance its ability to access future project
financing in support of the future advancement and/or construction
of Wheeler River. Given that they are held for long-term capital
appreciation, these investments are accounted for by analogy to IAS
40 investment property and are measured at fair value with changes
in fair value between reporting dates recorded through profit and
loss. During the second quarter, the Company completed the purchase
of 2,300,000 pounds U3O8 at a weighted
average cost of $36.51 (US$29.58) per pound U3O8 (including
purchase commissions of $0.05 (US$0.04) per pound U3O8). As at June 30,
2021, the spot price of U3O8 was $39.79
(US$32.10) per pound U3O8, resulting in
mark-to-market gains for the three and six months ended June 30,
2021 of $7,534,000, on these uranium investments (June 30, 2020 -
$nil).
Fair value gains or losses on share purchase warrants
In February and
March 2021, Denison completed two equity offerings involving the
issuance of units, which were comprised of one common share and one
half of a common share purchase warrant. Each full warrant entitles
the holder to acquire one common share of the Company at a
pre-determined exercise price for 24 months after issuance. The
exercise prices for the share purchase warrants are denominated in
US dollars, which differs from Company’s Canadian dollar
functional currency, and therefore the warrants are classified as a
non-cash derivative liability, rather than equity, on the
Company’s statement of financial position.
At the date of
issuance of the units, the gross proceeds of each offering were
allocated between the common shares and the common share purchase
warrants issued using the relative fair value basis approach, and
the amount related to the warrants was recorded as a non-current
derivative liability. At each period end until the common share
purchase warrants are exercised or expire, the warrants are
revalued with the revaluation gains or losses recorded in other
income and expense.
During the three
and six months ended June 30, 2021, the Company recorded fair value
losses of $4,268,000 and $5,832,000, respectively (June 30, 2020 -
$nil and $nil). Fair value gains and losses on the share purchase
warrants are predominantly driven by the Company’s share
price at period end, changes in the volatility of the
Company’s share price, and the US dollar to Canadian dollar
exchange rate.
Fair value gains or losses on portfolio investments
During the three
and six months ended June 30, 2021, the Company recognized gains on
investments carried at fair value of $5,233,000 and $5,142,000
(June 30, 2020 – a gain of $1,989,000 and a loss of
$961,000). Gains and losses on investments carried at fair value
are driven by the closing share price of the related investee at
the end of the quarter.
Foreign exchange gains or losses
During the three
and six months ended June 30, 2021, the Company recognized FX
losses of $2,059,000 and $1,618,000 respectively (June 30, 2020
– FX losses of $98,000 and $78,000). The increase in FX loss
in the current year is predominantly driven by the impact of the
decrease in the US dollar to Canadian dollar exchange rate on the
US dollar cash balances and US-dollar payables.
LIQUIDITY AND CAPITAL
RESOURCES
Cash and cash
equivalents were $84,852,000 at June 30, 2021 (December 31, 2020
– $24,992,000).
The increase in
cash and cash equivalents of $59,860,000 was predominantly due to
net cash provided by financing activities of $150,692,000, offset
by net cash used in operations of $12,840,000, and net cash used in
investing activities of $77,061,000.
Net cash used in
operating activities of $12,840,000 was predominantly due to the
net loss for the period, adjusted for non-cash items and changes in
working capital items.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Net cash used in
investing activities of $77,061,000 consists primarily of
expenditures for uranium investments, as well as expenditures for
property, plant and equipment, and an increase in restricted cash
related to the Company’s funding the Elliot Lake reclamation
trust fund.
Net cash provided
by financing activities of $150,692,000 was due to the net proceeds
from the Company’s ATM program, February 2021 unit offering,
March flow-through share offering, March 2021 unit offering, as
well as stock option exercises. See below for further details
regarding these transactions.
On June 2, 2020,
the Company filed a short form base shelf prospectus (‘2020
Shelf Prospectus’) with the securities regulatory authorities
in each of the provinces and territories in Canada and in the
United States. Under the 2020 Shelf Prospectus, the Company was
allowed to issue securities, in amounts, at prices, and on terms to
be determined based
on market
conditions at the time of sale and as set forth in the 2020 Shelf
Prospectus, for an aggregate offering amount of up to $175,000,000
during the 25 month period beginning on June 2, 2020.
In November 2020,
Denison entered into an equity distribution agreement providing for
an ATM equity offering program, qualified by a prospectus
supplement to the 2020 Shelf Prospectus. The ATM was to allow
Denison, through its agents, to, from time to time, offer and sell,
in Canada and the United States, such number of common shares as
would have an aggregate offering price of up to USD$20,000,000. In
January and February 2021, Denison issued 4,230,186 common shares
under the ATM program, at an average price of $0.93 per share, for
aggregate gross proceeds of $3,914,000, and incurred issue expenses
of $466,000, including commissions of $78,000. The ATM program was
terminated in connection with the March 2021 unit offering
(described below).
In February 2021,
Denison issued 31,593,950 units, pursuant to a public offering of
units qualified by a prospectus supplement to the 2020 Base Shelf
Prospectus. The units were issued at a price of US$0.91 for gross
proceeds of $36,265,000 (US$28,750,000) and consisted of one common
share and one half warrant. Each full warrant entitles the holder
to acquire one common share of the Company at an exercise price of
US$2.00 over a 24 month period.
In March 2021,
Denison issued 78,430,000 units of the Company pursuant to a public
offering of units qualified by a prospectus supplement to the 2020
Base Shelf Prospectus. The units were issued at a price of US$1.10
for gross proceeds of $107,949,000 (US$86,273,000) and consisted of
one common share and one half warrant. Each full warrant entitles
the holder to acquire one common share of the Company at an
exercise price of US$2.25 over a 24 month period.
In March 2021,
Denison issued 5,926,000 common shares on a flow-through basis at a
price of $1.35 for gross proceeds of $8,000,000.
Also during the
first half of 2021, the Company received share issue proceeds of
$4,289,000 related to the issuance of 5,918,248 shares upon the
exercise of employee stock options.
Use of Proceeds
2020 Flow Through Financing
As at June 30,
2021, the Company has fulfilled its obligation to spend $930,000 on
eligible Canadian exploration expenditures as a result of the
issuance of common shares on a flow-through basis in December
2020.
October 2020 Equity Financing
As disclosed in
the Company’s prospectus supplement to the 2020 Base Shelf
Prospectus (‘October 2020 Prospectus Supplement’) dated
October 8, 2020, the net proceeds of the October 2020 Offering will
be utilized to fund Wheeler River evaluation and EA activities as
well as general, corporate and administrative expenses. During the
period between the close of the financing in October 2020 and June
30, 2021, the Company’s use of proceeds has been in line with
that disclosed in the October 2020 Prospectus
Supplement.
February 2021 Unit Financing
As disclosed in
the Company’s prospectus supplement to the 2020 Base Shelf
Prospectus (‘February 2021 Prospectus Supplement’)
dated February 16, 2021, the net proceeds of the February 2021
Offering will be utilized to fund Wheeler River evaluation and
detailed project engineering activities as well as general,
corporate and administrative expenses. During the period between
the close of the financing in February 2021 and June 30, 2021, the
Company’s use of proceeds has been in line with that
disclosed in the February 2021 Prospectus Supplement.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Subsequent to
quarter end, a portion of the proceeds from the February 2021 unit
offering were utilized to fund the acquisition of JCU (see
SUBSEQUENT EVENTS).
March 2021 Unit Financing
As disclosed in
the Company’s prospectus supplement to the 2020 Base Shelf
Prospectus (‘March 2021 Prospectus Supplement’) dated
March 17, 2021, the majority of the net proceeds of the March 2021
Offering will be utilized to purchase physical uranium as well as
general, corporate and administrative expenses, including storage
costs for the purchased uranium. During the period between the
close of the financing in March 2021 and June 30, 2021, the
Company’s use of proceeds has been in line with that
disclosed in the March 2021 Prospectus Supplement. As at June 30.
2021, the Company has completed the purchase of 2,300,000 pounds of
U3O8 at a weighted
average price of $36.51 per pound U3O8 (US$29.58 per
pound U3O8) and has
committed to the purchase of an additional 200,000 pounds of
U3O8 at a weighted
average price of US$30.50 per pound U3O8.
2021 Flow Through Financing
As at June 30,
2021, the Company has spent $377,000 towards its obligation to
spend $8,000,000 on eligible Canadian exploration expenditures as a
result of the issuance of common shares on a flow-through basis in
March 2021.
Revolving Term Credit Facility
On January 14,
2021, the Company entered into an agreement with the Bank of Nova
Scotia (‘BNS’) to extend the maturity date of the
Company’s credit facility to January 31, 2022 (‘2021
Credit Facility’). Under the 2021 Credit Facility, the
Company continues to have access to letters of credit of up to
$24,000,000, which is fully utilized for non-financial letters of
credit in support of reclamation obligations. All other terms of
the 2021 Credit Facility (tangible net worth covenant, pledged
cash, investments amount and security for the facility) remain
unchanged by the amendment – including a requirement to
provide $9,000,000 in cash collateral on deposit with BNS to
maintain the 2021 Credit Facility.
TRANSACTIONS WITH RELATED PARTIES
Uranium Participation Corporation
The
Company’s management services agreement with UPC
(‘MSA’) included a term of five years (the
‘Term’), expiring on March 31, 2024. Under the MSA,
Denison is entitled to receive the following management fees from
UPC: a) a base fee of $400,000 per annum, payable in equal
quarterly installments; b) a variable fee equal to (i) 0.3% per
annum of UPC’s total assets in excess of $100 million and up
to and including $500 million, and (ii) 0.2% per annum of
UPC’s total assets in excess of $500 million; c) a fee, at
the discretion of the Board, for on-going monitoring or work
associated with a transaction or arrangement (other than a
financing, or the acquisition of or sale of U3O8 or UF6); and d) a
commission of 1.0% of the gross value of any purchases or sales of
U3O8 or UF6 or gross interest
fees payable to UPC in connection with any uranium loan
arrangements.
On June 3, 2021,
Denison received notice from UPC that, conditional on the
successful completion of the transaction with Sprott (see ABOUT
DENISON above for further details), the MSA would be terminated and
Denison would receive the termination amount calculated in
accordance with the agreement. See SUBSEQUENT EVENTS below for
further details.
The following
amounts were earned from UPC for the periods ended:
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
(in
thousands)
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Management Fee
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Base and variable
fees
|
|
|
|
$
|
571
|
$
|
551
|
$
|
1,046
|
$
|
1,014
|
Discretionary
fees
|
|
|
|
|
210
|
|
-
|
|
350
|
|
300
|
Commission
fees
|
|
|
|
|
697
|
|
119
|
|
697
|
|
173
|
|
|
|
|
$
|
1,478
|
$
|
670
|
$
|
2,093
|
$
|
1,487
|
At June 30, 2021,
accounts receivable includes $1,199,000 (December 31, 2020 –
$265,000) due from UPC with respect to the fees and transactions
discussed above.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Korea Electric Power Corporation (‘KEPCO’)
As at June 30,
2021, KEPCO, through its subsidiaries including KHNP Canada Energy
Ltd., holds 58,284,000 shares of Denison representing a share
interest of approximately 7.23% and is also the largest member of
the consortium of investors that make up KWULP. The Waterbury Lake
property is owned by Denison and KWULP through their respective
interests in Waterbury Lake Uranium Corporation
(‘WLUC’) and Waterbury Lake Uranium Limited Partnership
(‘WLULP’), entities whose key asset is the Waterbury
Lake Property.
Other
All services and
transactions with the following related parties listed below were
made on terms equivalent to those that prevail with arm’s
length transactions:
●
During the three and six
months ended June 30, 2021, the Company incurred investor
relations, administrative service fees and certain pass-through
expenses of $144,000 and $164,000, respectively (June 30, 2020
– $75,000 and $96,000) with Namdo Management Services Ltd, a
company of which a former director of Denison is a shareholder.
These services were incurred in the normal course of operating a
public company. At June 30, 2021, an amount of $71,000 (December
31, 2020 – $nil) was due to this company.
COMPENSATION OF KEY MANAGEMENT PERSONNEL
Key management
personnel are those persons having authority and responsibility for
planning, directing and controlling the activities of the Company,
directly or indirectly. Key management personnel include the
Company’s executive officers, vice-presidents and members of
its Board of Directors.
The following
compensation was awarded to key management personnel:
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
(in
thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
$
|
(494)
|
$
|
(371)
|
$
|
(1,537)
|
$
|
(955)
|
Share-based
compensation
|
|
(737)
|
|
(320)
|
|
(1,057)
|
|
(750)
|
|
$
|
(1,231)
|
$
|
(691)
|
$
|
(2,594)
|
$
|
(1,705)
|
OFF-BALANCE SHEET ARRANGEMENTS
The Company does
not have any off-balance sheet arrangements.
SUBSEQUENT EVENTS
Uranium Participation Corporation
On July 19, 2021,
UPC and Sprott completed a plan of arrangement whereby UPC
shareholders became unitholders of the Sprott Physical Uranium
Trust, a newly formed entity managed by Sprott (the ‘UPC
Transaction’). In conjunction with the completion of the UPC
Transaction, the MSA between Denison and UPC was terminated and
Denison received a termination payment from UPC of
$5,848,000.
Acquisition of 50% of JCU from UEX
On August 3,
2021, acquired 50% ownership of JCU from UEX for cash consideration
of $20.5 million. JCU holds a portfolio of twelve uranium project
joint venture interests in Canada, including a 10% interest in
Wheeler River, a 30.099% interest in the Millenium project, a
33.8123% interest in the Kiggavik project and a 34.4508% interest
in the Christie Lake project.
UEX acquired 100%
of JCU from OURD for $40.5 million, which was funded by Denison
providing UEX with an interest-free term loan for three months in
the amount of $41.0 million (the ‘UEX Term Loan’). Half
of the amount owing from UEX to Denison was settled by the transfer
of 50% of the shares of JCU to Denison, with UEX continuing to owe
Denison $20.5 million. The UEX Term Loan is secured by all the
shares of JCU owned by UEX.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
UEX may extend
the term of the loan by an additional three months, in which case
interest will be charged at a rate of 4% from the original start
date of the UEX Term Loan.
Denison and UEX
have entered into a shareholder’s agreement which governs the
operations of JCU, including provisions for future funding,
dilution and the resolution of management deadlock
situations.
At June 30, 2021,
Denison has capitalized $76,000 of transaction costs related to the
JCU acquisition on its statement of financial
position.
OUTSTANDING SHARE DATA
Common Shares
At August 5,
2021, there were 805,739,098 common shares issued and outstanding
and a total of 881,162,907 common shares on a fully-diluted
basis.
Stock Options and Share Units
At August 5,
2021, the Company had 12,393,995 Denison stock options, and
8,017,839 share units outstanding.
Share Purchase Warrants
At August 5,
2021, the Company had outstanding 15,796,975 share purchase
warrants with a US$2.00 strike price and a February 2023 expiry,
and 39,215,000 share purchase warrants with a US$2.25 strike price
and a March 2023 expiry.
Refer to the
Company’s annual MD&A for the year ended December 31,
2020 and the MD&A for the three months ended March 31, 2021 for
a detailed discussion of the previously disclosed 2021 budget and
outlook.
During the second
quarter of 2021, the Company increased its outlook for income from
UPC management services by $1,395,000. The increase is related to
the an increase in commission fees earned in relation to uranium
purchase transactions undertaken by Denison on behalf of UPC during
the second quarter, as well as an increase in the final termination
payment that the Company received upon the termination of the MSA
compared to the amount previously estimated (see SUBSEQUENT EVENTS
for further details).
(in
thousands)
|
|
PREVIOUS 2021 OUTLOOK
|
CURRENT 2021 OUTLOOK
|
Actual to
June 30, 2021(2)
|
Mining Segment
|
|
|
|
|
Mineral
Sales
|
|
3,709
|
3,709
|
-
|
Development &
Operations
|
|
(4,972)
|
(4,972)
|
(1,579)
|
Exploration
|
|
(4,178)
|
(4,178)
|
(2,086)
|
Evaluation
|
|
(19,413)
|
(19,413)
|
(9,124)
|
|
|
(24,854)
|
(24,854)
|
(12,789)
|
Closed Mines Segment
|
|
|
|
|
Closed Mines
Environmental Services
|
|
964
|
964
|
467
|
|
|
964
|
964
|
467
|
Corporate and Other Segment
|
|
|
|
|
UPC Management
Services
|
|
6,639
|
8,034
|
2,094
|
Corporate
Administration & Other
|
|
(6,854)
|
(6,854)
|
(4,260)
|
|
|
(215)
|
1,180
|
(2,166)
|
Total(1)
|
|
$ (24,105)
|
$ (22,710)
|
$ (14,488)
|
Notes:
1.
Only material operations
shown.
2.
The budget is prepared on a
cash basis. As a result,
actual amounts represent a non-GAAP measure. Compared to segment
loss as presented in the Company’s unaudited interim
consolidated financial statements for the six months ended June 30,
2021, actual amounts reported above excludes $26,000 net impact of
non-cash items and other adjustments.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
ADDITIONAL INFORMATION
SIGNIFICANT ACCOUNTING POLICIES
QUALIFIED PERSON
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 and/or reviewed and confirmed the
scientific and technical disclosure pertaining to the
Company’s evaluation programs.
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 and/or reviewed and confirmed the
scientific and technical disclosure pertaining to the
Company’s exploration programs.
For more
information regarding each of Denison’s material projects
discussed herein, you are encouraged to refer to the applicable
technical reports available on the Company’s website and
under the Company’s profile on SEDAR (www.sedar.com)
and EDGAR (www.sec.gov/edgar.shtml):
●
For the Wheeler River
project, the ‘Prefeasibility Study Report for the Wheeler
River Uranium Project Saskatchewan, Canada’ dated October 30,
2018;
●
For the Waterbury Lake
project, ‘Preliminary Economic Assessment for the Tthe
Heldeth Túé (J Zone) Deposit, Waterbury Lake Property,
Northern Saskatchewan, Canada’ with an effective date of
October 30, 2020;
●
For the Midwest project,
‘Technical Report with an Updated Mineral Resource Estimate
for the Midwest Property, Northern Saskatchewan, Canada’
dated March 26, 2018; and
●
For the McClean Lake project,
(A) the ‘Technical Report on the Denison Mines Inc. Uranium
Properties, Saskatchewan, Canada’ dated November 21, 2005, as
revised February 16, 2006, (B) the ‘Technical Report on the
Sue D Uranium Deposit Mineral Resource Estimate, Saskatchewan,
Canada’ dated March 31, 2006, and (C) the ‘Technical
Report on the Mineral Resource Estimate for the McClean North
Uranium Deposits, Saskatchewan’ dated January 31,
2007.
ASSAY PROCEDURES AND DATA VERIFICATION
The Company
reports preliminary radiometric equivalent grades
(‘eU3O8’), derived
from a calibrated down-hole total gamma probe, during or upon
completion of its exploration programs and subsequently reports
definitive U3O8 assay grades
following sampling and chemical analysis of the mineralized drill
core. Uranium assays are performed on split core samples by the
Saskatchewan Research Council (‘SRC’) Geoanalytical
Laboratories using an ISO/IEC 17025:2005 accredited method for the
determination of U3O8 weight %. Sample
preparation involves crushing and pulverizing core samples to 90%
passing -106 microns. The resultant pulp is digested using
aqua-regia and the solution analyzed for U3O8 weight % using
ICP-OES. Geochemical results from composite core samples are
reported as parts per million (‘ppm’) obtained from a
partial HNO3:HCl digest with
an ICP-MS finish. Boron values are obtained through NaO2/NaCO3 fusion followed
by an ICP-OES finish. All data are subject to verification
procedures by qualified persons employed by Denison prior to
disclosure. For further details on Denison’s sampling,
analysis, quality assurance program and quality control measures
and data verification procedures please see Denison's Annual
Information Form dated March 26, 2021 available on the
Company’s website and filed under the Company's profile on
SEDAR (www.sedar.com)
and in its Form 40-F available on EDGAR at www.sec.gov/edgar.shtml.
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
Certain
information contained in this MD&A constitutes
‘forward-looking information’, within the meaning of
the applicable United States and Canadian legislation concerning
the business, operations and financial performance and condition of
Denison.
Generally, these
forward-looking statements can be identified by the use of
forward-looking terminology such as ‘plans’,
‘expects’, ‘budget’,
‘scheduled’, ‘estimates’,
‘forecasts’, ‘intends’,
‘anticipates’, or ‘believes’, or the
negatives and/or variations of such words and phrases, or state
that certain actions, events or results ‘may’,
‘could’, ‘would’, ‘might’ or
‘will be taken’, ‘occur’, ‘be
achieved’ or ‘has the potential to’.
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
In particular,
this MD&A contains forward-looking information pertaining to
the following: Denison’s plans and objectives for 2021 and
beyond, including the proposed use of proceeds of recent equity
financings; the benefits to be derived from corporate transactions,
including commitments to acquire physical uranium, and estimates of
related expenditures, such as projected increases in uranium
storage costs; the estimates of Denison's mineral reserves and
mineral resources; exploration, development and expansion plans and
objectives, including Denison’s planned engineering,
environmental assessment and other evaluation programs, the results
of, and estimates and assumptions within, the PFS, and statements
regarding anticipated budgets, fees, expenditures and timelines;
expectations regarding Denison’s community engagement
activities and related agreements, including the Participation and
Funding Agreement and Exploration Agreement with ERFN and the
anticipated continuity thereof; expectations regarding
Denison’s joint venture ownership interests and the
continuity of its agreements with its partners; expectations
regarding adding to its mineral reserves and resources through
acquisitions or exploration; expectations regarding the toll
milling of Cigar Lake ores, including the impacts of COVID-19;
expectations regarding revenues and expenditures from its Closed
Mines operations; and the annual operating budget and capital
expenditure programs, estimated exploration and development
expenditures and reclamation costs and Denison's share of same.
Statements relating to ‘mineral reserves’ or
‘mineral resources’ are deemed to be forward-looking
information, as they involve the implied assessment, based on
certain estimates and assumptions that the mineral reserves and
mineral resources described can be profitably produced in the
future.
Forward looking
statements are based on the opinions and estimates of management as
of the date such statements are made, and they are subject to known
and unknown risks, uncertainties and other factors that may cause
the actual results, level of activity, performance or achievements
of Denison to be materially different from those expressed or
implied by such forward-looking statements. For example, the
results of the Denison’s studies, including the PFS,
trade-off study, and field work, may not be maintained after
further testing or be representative of actual mining plans for the
Phoenix deposit after further design and studies are completed. In
addition, Denison may decide or otherwise be required to
discontinue testing, evaluation and development work at Wheeler
River or other projects or its exploration plans if it is unable to
maintain or otherwise secure the necessary resources (such as
testing facilities, capital funding, regulatory approvals, etc.) or
operations are otherwise affected by COVID-19 and its potentially
far-reaching impacts. The UPC Transaction may not be completed or,
if completed, may not be on the terms described herein and/or the
termination payment may be materially different than the amount
stated herein.
Denison believes
that the expectations reflected in this forward-looking information
are reasonable but no assurance can be given that these
expectations will prove to be accurate and results may differ
materially from those anticipated in this forward-looking
information. For a discussion in respect of risks and other factors
that could influence forward-looking events, please refer to the
factors discussed in Denison’s Annual Information Form dated
March 26, 2021 under the heading ‘Risk Factors’. These
factors are not, and should not be construed as being
exhaustive.
Accordingly,
readers should not place undue reliance on forward-looking
statements. The forward-looking information contained in this
MD&A is expressly qualified by this cautionary statement. Any
forward-looking information and the assumptions made with respect
thereto speaks only as of the date of this MD&A. Denison does
not undertake any obligation to publicly update or revise any
forward-looking information after the date of this MD&A to
conform such information to actual results or to changes in
Denison's expectations except as otherwise required by applicable
legislation.
Cautionary Note to United States Investors
Concerning Estimates of Measured, Indicated and Inferred Mineral
Resources and Probable Mineral Reserves: This MD&A may
use the terms 'measured', 'indicated' and 'inferred' mineral
resources. United States investors are advised that while such
terms have been prepared in accordance with the definition
standards on mineral reserves of the Canadian Institute of Mining,
Metallurgy and Petroleum referred to in Canadian National
Instrument 43-101 Mineral Disclosure Standards (‘NI
43-101’) and are recognized and required by Canadian
regulations, these terms are not defined under Industry Guide 7
under the United States Securities Act and, until recently, have
not been permitted to be used in reports and registration
statements filed with the United States Securities and Exchange
Commission (‘SEC’). 'Inferred mineral resources' have a
great amount of uncertainty as to their existence, and as to their
economic and legal feasibility. It cannot be assumed that all or
any part of an inferred mineral resource will ever be upgraded to a
higher category. Under Canadian rules, estimates of inferred
mineral resources may not form the basis of feasibility or other
economic studies. United States
investors are cautioned not to assume that all or any part of
measured or indicated mineral resources will ever be converted into
mineral reserves. United States investors are also cautioned not to
assume that all or any part of an inferred mineral resource exists,
or is economically or legally mineable. In addition,
the terms “mineral reserve”, “proven mineral
reserve” and “probable mineral reserve” for the
purposes of NI 43-101 differ from the definitions and allowable
usage in Industry Guide 7.
Effective
February 2019, the SEC adopted amendments to its disclosure rules
to modernize the mineral property disclosure requirements for
issuers whose securities are registered with the SEC under the
Exchange Act and as a result, the SEC now recognizes estimates of
“measured mineral resources”, “indicated mineral
resources” and “inferred mineral resources”. In
addition, the SEC has amended its definitions of “proven
mineral reserves” and “probable mineral reserves”
to be “substantially similar” to the corresponding
definitions under the CIM Standards, as required under NI 43-101.
However, information regarding mineral resources or mineral
reserves in Denison’s disclosure may not be comparable to
similar information made public by United States
companies.
19
Exhibit 99.5
|
Denison Mines
Corp.
1100 – 40
University Ave
Toronto, ON M5J
1T1
www.denisonmines.com
|
PRESS
RELEASE
DENISON REPORTS RESULTS FROM Q2 2021
Toronto, ON – August 5,
2021. Denison Mines Corp. (‘Denison’ or the
‘Company’) (TSX: DML, NYSE American: DNN) today filed
its Condensed Consolidated Financial Statements and
Management’s Discussion & Analysis
(‘MD&A’) for the quarter ended June 30, 2021. Both
documents will be available on the Company’s website
at www.denisonmines.com
or on SEDAR (at www.sedar.com)
and EDGAR (at www.sec.gov/edgar.shtml).
The highlights provided below are derived from these documents and
should be read in conjunction with them. All amounts in this
release are in Canadian dollars unless otherwise
stated.
David Cates, President and CEO of Denison
commented, “The
Company continues to successfully advance on its ambition of
developing the high-grade Phoenix deposit, as potentially one of
the lowest cost uranium mines in the world, at a time when the
uranium market is showing signs
of a sustained recovery and the beginnings of a new contracting
cycle.
Thus far in 2021, our corporate team has bolstered our balance
sheet with our recent financings and uranium purchases,
consolidated a further 5% ownership in our flagship Wheeler River
project through our acquisition of 50% of JCU, and completed the
transition of Uranium Participation Corp. to the Sprott Physical
Uranium Trust. On the technical side, in relation to our progress
at Phoenix, we have reported several positive updates on ISR field
testing activities, metallurgical studies in support of the ISR
mining method, and the discovery of additional high-grade uranium
in the area of our expected first mining phase. Taken together, we
believe that Denison is well positioned to continue de-risking the
use of the ISR mining method at Phoenix and ultimately compete with
the incumbent uranium producers in the coming years when the market
needs additional sources of production.
Our focus for the remainder of 2021 is expected to be in the field,
where we plan to be active on both the evaluation and exploration
front. Our evaluation team is preparing for full-scale pump and
injection tests as well as ion tracer tests at Phoenix, making use
of the commercial-scale 5-spot test pattern installed earlier this
year. Our exploration team is also readying to resume drill testing
of various target areas at Wheeler River and nearby properties that
are prospective for the discovery of additional potentially ISR
amenable uranium resources. With results from these programs
expected through the third and fourth quarter, it is an exciting
time for investors to follow both the uranium market and
Denison’s company-specific activities
closely.”
HIGHLIGHTS
■
In-Situ Recovery (‘ISR’) field test activities at the
Phoenix uranium deposit (‘Phoenix’)
progress
A
substantial portion of the ISR field test program has been
successfully completed, including the installation of all five
commercial-scale wells (‘CSWs’) and nine of eleven
monitoring wells (‘MWs’) planned for the 5-spot test
pattern (the ‘Test Pattern’) located in the Phase 1
area of Phoenix on the Company’s Wheeler River Uranium
Project (‘Wheeler River’ or the ‘Project’).
Based on the progress to date, multi-day pump and injection tests
and ion tracer tests are planned to be initiated and completed on
the full-scale Test Pattern during the third quarter.
■
Discovered high-grade uranium outside of the Phoenix Zone A
high-grade domain
Drill hole GWR-045 was completed as part of the
ISR field test program to install MWs to the northwest of the CSW
Test Pattern. Based on the mineral resources currently estimated
for Phoenix, GWR-045 was expected to intersect low grade uranium
mineralization on the northwest margin of the deposit,
approximately 5 metres outside of the boundary of the Phoenix Zone
A high-grade resource domain. The drill hole, however, intersected
a thick interval of high-grade unconformity-associated uranium
mineralization with grades of 22.0% eU3O8
over 8.6 metres.
The intersection is presently open further to the
northwest and represents an area for further exploration and
potential mineral resource expansion of
Phoenix.
■
Decision to increase anticipated ISR mining head grade at Phoenix
by 50%
Positive
interim results, completed to date, from the ongoing metallurgical
test program for the planned ISR mining operation at Phoenix have
consistently supported uranium bearing solution (‘UBS’)
head-grade for Phoenix well in excess of the 10 grams / Litre used
in the Pre-Feasibility Study (“PFS”) completed for
Wheeler River in 2018. Accordingly, the Company has decided to
adapt its plans for the remaining metallurgical test work,
including the bench-scale tests of the unit operations of the
proposed process plant, to reflect a 50% increase in the head-grade
of UBS to be recovered from the well-field.
■
Completed acquisition of 50% of JCU (Canada) Exploration Company,
Limited (‘JCU’) for $20.5 million
In June 2021,
Denison announced that it had entered into a binding agreement with
UEX Corporation (‘UEX’) to acquire 50% of JCU from UEX
for cash consideration of $20.5 million following UEX’s
acquisition of 100% of JCU from Overseas Uranium Resources
Development Co., Ltd. for $41 million. Denison’s acquisition
of 50% of JCU was completed on August 3, 2021. JCU holds a
portfolio of 12 uranium project joint venture interests in Canada,
including a 10% interest in Wheeler River, a 30.099% interest in
the Millennium project (Cameco Corporation 69.901%), a 33.8123%
interest in the Kiggavik project (Orano Canada Inc. (‘Orano
Canada’) 66.1877%), and a 34.4508% interest in the Christie
Lake project (UEX 65.5492%).
■
Received $5.8 million in connection with conversion of Uranium
Participation Corporation (‘UPC’) into the Sprott
Physical Uranium Trust
In April
2021, UPC announced that it had reached an agreement with Sprott
Asset Management LP (‘Sprott’) to convert UPC into the
Sprott Physical Uranium Trust. Upon completion of this transaction
on July 19, 2021, Sprott became the manager of the Sprott Physical
Uranium Trust, and the management services agreement
(‘MSA’) between Denison and UPC was terminated. In
accordance with the terms of the MSA, Denison received a cash
payment of approximately $5.8 million in connection with the
termination.
About Wheeler River
Wheeler River is the largest undeveloped uranium
project in the infrastructure rich eastern portion of the Athabasca
Basin region, in northern Saskatchewan and is a joint venture
between Denison and Denison’s 50%-owned JCU (Canada)
Exploration Company Limited. Denison is the operator of the project
and holds an effective 95% ownership interest. The project is host
to the high-grade Phoenix and Gryphon uranium deposits, discovered
by Denison in 2008 and 2014, respectively, estimated to have
combined Indicated Mineral Resources of 132.1 million pounds
U3O8
(1,809,000 tonnes at an average grade
of 3.3% U3O8),
plus combined Inferred Mineral Resources of 3.0 million pounds
U3O8
(82,000 tonnes at an average grade of
1.7% U3O8).
The PFS was completed in late 2018, considering
the potential economic merit of developing the Phoenix deposit as
an ISR operation and the Gryphon deposit as a conventional
underground mining operation. Taken together, the project is
estimated to have mine production of 109.4 million pounds
U3O8
over a 14-year mine life, with a base
case pre-tax net present value (‘NPV’) of $1.31 billion
(8% discount rate), Internal Rate of Return (‘IRR’) of
38.7%, and initial pre-production capital expenditures of $322.5
million. The Phoenix ISR operation is estimated to have a
stand-alone base case pre-tax NPV of $930.4 million (8% discount
rate), IRR of 43.3%, initial pre-production capital expenditures of
$322.5 million, and industry leading average operating costs of
US$3.33/lb U3O8.
The PFS was prepared on a project (100% ownership) and pre-tax
basis, as each of the partners to the Wheeler River Joint Venture
are subject to different tax and other
obligations.
Further details regarding the PFS, including
additional scientific and technical information, as well as
after-tax results attributable to Denison's ownership interest, are
described in greater detail in the NI 43-101 Technical Report
titled “Pre-feasibility Study for the Wheeler River Uranium
Project, Saskatchewan, Canada” dated October 30, 2018 with an
effective date of September 24, 2018. A copy of this report is
available on Denison's website and under its profile on SEDAR
at www.sedar.com
and on EDGAR at www.sec.gov/edgar.shtml.
Given the social,
financial and market disruptions related to COVID-19, and certain
fiscally prudent measures, Denison temporarily suspended certain
activities at Wheeler River starting in April 2020, including the
formal parts of the EA program, which is on the critical path to
achieving the project development schedule outlined in the PFS
Technical Report. While the formal EA process has resumed in early
2021, the Company is not currently able to estimate the impact to
the project development schedule, outlined in the PFS Technical
Report, and users are cautioned that certain of the estimates
provided therein, particularly regarding the start of
pre-production activities in 2021 and first production in 2024
should not be relied upon.
About Denison
Denison Mines
Corp. was formed under the laws of Ontario and is a reporting
issuer in all Canadian provinces. Denison’s common shares are
listed on the Toronto Stock Exchange (the ‘TSX’) under
the symbol ‘DML’ and on the NYSE American exchange
under the symbol ‘DNN’.
Denison is a
uranium exploration and development company with interests focused
in the Athabasca Basin region of northern Saskatchewan, Canada. In
addition to its flagship Wheeler River uranium project, Denison's
interests in Saskatchewan include a 22.5% ownership interest in the
McClean Lake Joint Venture (‘MLJV’), which includes
several uranium deposits and the McClean Lake uranium mill, which
is contracted to process the ore from the Cigar Lake mine under a
toll milling agreement (see RESULTS OF OPERATIONS below for more
details), plus a 25.17% interest in the Midwest deposits and a
66.90% interest in the Tthe Heldeth Túé
(‘THT’, formerly J Zone) and Huskie deposits on the
Waterbury Lake property. The Midwest, THT and Huskie deposits are
located within 20 kilometres of the McClean Lake mill. In addition,
Denison has an extensive portfolio of exploration projects in the
Athabasca Basin region.
Through its
50% ownership of JCU, Denison also holds interests in various
uranium project joint ventures in Canada, including the Millennium
project (JCU 30.099%), the Kiggavik project (JCU 33.8123%) and
Christie Lake (JCU 34.4508%).
Denison is
engaged in mine decommissioning and environmental services through
its Closed Mines group, which manages Denison’s Elliot Lake
reclamation projects and provides post-closure mine and maintenance
services to a variety of industry and government
clients.
Up until July 19,
2021, Denison also served as the manager of UPC. UPC was a publicly
traded company listed on the TSX, which invested in uranium oxide
in concentrates (‘U3O8’) and
uranium hexafluoride (‘UF6’). In
April, 2021, UPC announced that it had entered into an agreement
with Sprott to convert UPC into the Sprott Physical Uranium Trust.
This transaction closed on July 19, 2021, and the MSA between
Denison and UPC was terminated.
Technical Disclosure and Qualified Person
The technical
information contained in this press release has been reviewed and
approved by David Bronkhorst, P.Eng, Denison's Vice President,
Operations and/or Andrew Yackulic, P. Geo, Denison's Director,
Exploration, each of whom is a Qualified Person in accordance with
the requirements of NI 43-101.
For more information, please contact
David Cates
|
(416) 979-1991 ext
362
|
President and Chief Executive
Officer
|
|
|
|
Sophia Shane
|
(604) 689-7842
|
Investor
Relations
|
|
|
|
Follow Denison on
Twitter
|
@DenisonMinesCo
|
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
Certain
information contained in this press release constitutes
‘forward-looking information’, within the meaning of
the applicable United States and Canadian legislation concerning
the business, operations and financial performance and condition of
Denison.
Generally, these
forward-looking statements can be identified by the use of
forward-looking terminology such as ‘plans’,
‘expects’, ‘budget’,
‘scheduled’, ‘estimates’,
‘forecasts’, ‘intends’,
‘anticipates’, or ‘believes’, or the
negatives and/or variations of such words and phrases, or state
that certain actions, events or results ‘may’,
‘could’, ‘would’, ‘might’ or
‘will be taken’, ‘occur’, ‘be
achieved’ or ‘has the potential to’.
In particular,
this press release contains forward-looking information pertaining
to the following: projections with respect to use of proceeds of
recent financings; exploration, development and expansion plans and
objectives, including the plans and objectives for Wheeler River
and the related evaluation field program activities and exploration
objectives; the plans for metallurgical test work; the impact of
COVID-19 on Denison’s operations; the estimates of Denison's
mineral reserves and mineral resources or results of exploration;
expectations regarding Denison’s joint venture ownership
interests; expectations regarding the continuity of its agreements
with third parties; and its interpretations of, and expectations
for, nuclear energy and uranium demand. Statements relating to
‘mineral reserves’ or ‘mineral resources’
are deemed to be forward-looking information, as they involve the
implied assessment, based on certain estimates and assumptions that
the mineral reserves and mineral resources described can be
profitably produced in the future.
Forward looking
statements are based on the opinions and estimates of management as
of the date such statements are made, and they are subject to known
and unknown risks, uncertainties and other factors that may cause
the actual results, level of activity, performance or achievements
of Denison to be materially different from those expressed or
implied by such forward-looking statements. For example, the
results and underlying assumptions and interpretations of the PFS
as well as de-risking efforts such as the 2021 Field Program
discussed herein may not be maintained after further testing or be
representative of actual conditions within the applicable deposits.
In addition, Denison may decide or otherwise be required to extend
the EA and/or otherwise discontinue testing, evaluation and
development work if it is unable to maintain or otherwise secure
the necessary approvals or resources (such as testing facilities,
capital funding, etc.). Denison believes that the expectations
reflected in this forward-looking information are reasonable, but
no assurance can be given that these expectations will prove to be
accurate and results may differ materially from those anticipated
in this forward-looking information. For a discussion in respect of
risks and other factors that could influence forward-looking
events, please refer to the factors discussed in Denison’s
Annual Information Form dated March 26, 2021 under the heading
‘Risk Factors’. These factors are not, and should not
be, construed as being exhaustive.
Accordingly,
readers should not place undue reliance on forward-looking
statements. The forward-looking information contained in this press
release is expressly qualified by this cautionary statement. Any
forward-looking information and the assumptions made with respect
thereto speaks only as of the date of this press release. Denison
does not undertake any obligation to publicly update or revise any
forward-looking information after the date of this press release to
conform such information to actual results or to changes in
Denison's expectations except as otherwise required by applicable
legislation.
Cautionary Note to United States Investors
Concerning Estimates of Mineral Resources and Mineral
Reserves: This press release may use terms such as
“measured”, “indicated” and/or
“inferred” mineral resources and “proven”
or “probable” mineral reserves, which are terms defined
with reference to the guidelines set out in the Canadian Institute
of Mining, Metallurgy and Petroleum (“CIM”) CIM
Definition Standards on Mineral Resources and Mineral Reserves
(“CIM Standards”). The Company’s descriptions of
its projects using CIM Standards may not be comparable to similar
information made public by U.S. companies subject to the reporting
and disclosure requirements under the United States federal
securities laws and the rules and regulations thereunder. .
United States investors are
cautioned not to assume that all or any part of measured or
indicated mineral resources will ever be converted into mineral
reserves. United States investors are also cautioned not to assume
that all or any part of an inferred mineral resource exists, or is
economically or legally mineable.