Denison Mines Corp 6-K, filed Jun 26, 2023
Denison Mines Corp. (DNN)
6-K
2023-06-26
For: 2023-06-26
View Original
Added on
April 07, 2026
About this 6-K
Denison Mines Corp filed this 6-K on June 26, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE
13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Date: June 26, 2023
Commission File Number: 001-33414
Denison Mines Corp.
(Name of
registrant)
1100-40 University Avenue
Toronto Ontario
M5J 1T1 Canada
(Address of
principal executive offices)
Indicate by check mark whether the registrant files
or will file annual reports under cover Form 20-F or Form
40-F.
Form
20-F ☐ Form 40-F ☒
Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule
101(b)(1): ☐
Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule
101(b)(7): ☐
INCORPORATION BY REFERENCE
Exhibit 99.1 to
this Form 6-K of Denison Mines Corp. is hereby incorporated by
reference to its Registration Statement on Form F-10 (File No.
333-258939), as amended or
supplemented.
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
|
|
|
|
|
|
|
|
|
|
|
|
|
DENISON MINES
CORP.
|
||
|
|
|
|
||||
|
|
|
|
|
/s/ Amanda Willett
|
||
|
Date: June
26, 2023
|
|
|
|
Amanda
Willett
|
||
|
|
|
|
|
Vice
President Legal and Corporate Secretary
|
||
FORM 6-K
EXHIBIT INDEX
|
Exhibit Number
|
|
Description
|
|
|
|
|
|
99.1
|
|
Press release dated
June 26, 2023 |
|
|
||
|
|
||
|
|
||
|
|
|
|
|
|
||
Exhibit 99.1
 |
Denison Mines
Corp.
1100 – 40
University Ave
Toronto, ON M5J
1T1
www.denisonmines.com
|
PRESS
RELEASE
Denison Reports Significant Increase in Economic Results for
Wheeler River
Toronto, ON – June 26,
2023. Denison Mines Corp. (“Denison” or the
“Company”) (DML: TSX, DNN: NYSE American) is pleased to
report the results of (i) the Feasibility Study (“Phoenix
FS”) completed for In-Situ Recovery (“ISR”)
mining of the high-grade Phoenix uranium deposit
(“Phoenix”) and (ii) a cost update (“Gryphon
Update”) to the 2018 Pre-Feasibility Study (“2018
PFS”) for conventional underground mining of the
basement-hosted Gryphon uranium deposit (“Gryphon”).
With the successful completion of the Phoenix FS, Denison has
advanced the planned Phoenix ISR project through the technical
de-risking process and has already commenced the first phases of
project execution.
Phoenix
and Gryphon are part of the Wheeler River Uranium Project
(“Wheeler River” or the “Project”), which
is the largest undeveloped uranium mining project in the
infrastructure-rich eastern portion of the Athabasca Basin region
in northern Saskatchewan, Canada. Denison has an effective 95%
ownership interest in Wheeler River and is the project
operator.
David Cates, Denison’s President & CEO
commented, “The
Phoenix FS and Gryphon Update confirm the robust economics of the
two projects situated within the Company’s flagship Wheeler
River property, producing base-case after-tax net present values of
$1.6 billion and $0.9 billion, respectively.
After 4.5 years of rigorous technical de-risking and independent
third-party validation, Phoenix has cemented its position as one of
the lowest-cost uranium development projects in the world. Notably,
despite the considerable capital cost pressures experienced by the
global mining industry over the last two years, the economics of a
Phoenix ISR mining operation remain exceptionally robust –
producing an improvement in projections of NPV and IRR, when
compared to the 2018 PFS, as a result of favourable design changes
and optimizations. While most contemporary uranium development
projects have not yet been tested against current cost inflation,
the results of the Phoenix FS and Gryphon Update demonstrate that
Denison continues to be uniquely positioned to become a meaningful
uranium producer with multiple low-cost development
assets.
With the highly positive results of the Phoenix FS, our team has
already shifted focus to advancing front-end engineering and design
efforts, with a target of transitioning into detailed design before
the end of the year.”
This press release constitutes a “designated news
release” for the purposes of the Company's prospectus
supplement dated September 28, 2021 to its short form base shelf
prospectus dated September 16, 2021.
Phoenix FS Highlights:
●
Base case pre-tax Net Present Value
(“NPV”) (8%) of $2.34 billion (100% ownership-basis) is
a 150% increase in the base-case pre-tax NPV8%
for Phoenix from the 2018
PFS.
●
Very robust
base-case pre-tax Internal Rate of Return (“IRR”) of
105.9%.
●
Base-case after-tax NPV8%
of $1.56 billion (100% basis) and IRR
of 90.0% – with Denison’s effective 95% interest in the
project equating to a base-case after-tax NPV8%
of $1.48 billion.
●
Base-case
pre-tax and after-tax payback period of 10 months – equating
to a reduction of 11 months for the pre-tax payback period from the
2018 PFS.
●
Production
profile has been optimized, based on ISR mine planning efforts
evaluating production potential for individual well patterns
– resulting in an increase to the planned rate of production
by approximately 43% during the first five years of
operations.
●
Estimated
pre-production capital costs of under $420 million (100% basis),
yielding an impressive after-tax NPV to initial capital cost ratio
in excess of 3.7 to 1.
●
Robust
economics easily absorb cost-inflation and design changes impacting
both operating and capital costs, confirming Phoenix’s
position with estimated cash operating and all-in costs expected to
be amongst the lowest-cost uranium mines in the world.
●
Phoenix FS
plans are aligned and costed to meet or exceed environmental
criteria expected to be required by the ongoing regulatory approval
process.
●
Updated mineral resource estimate, reflecting
results of 70 drill holes completed in support of ISR de-risking
and resource delineation activities, has upgraded 30.9 million
pounds U3O8
into Measured mineral resources, and
increased the average grade of the Zone A high-grade domain, which
is now estimated to contain 56.3 million pounds
U3O8
in Measured and Indicated mineral
resources at an average grade of 46.0% U3O8.
●
Upgraded 3.4 million pounds U3O8
into Proven mineral reserves,
representing the equivalent of 85% of production planned during the
first calendar year of operations.
Completion of Phoenix ISR De-Risking
●
The Phoenix
FS reflects independent third-party validation of the selection of
the ISR mining method for Phoenix, and builds on the findings from
a comprehensive and rigorous multi-year technical de-risking
process highlighted by the highly successful completion of the
leaching and neutralization phases of the Phoenix Feasibility Field
Test (“FFT”) in late 2022.
●
Through the
technical de-risking process, Denison has acquired extensive
deposit-specific data and developed a robust ISR mine planning
model that involved evaluation of the production potential for
individual well patterns.
●
With
technical de-risking of the project substantially complete,
front-end engineering design (“FEED”) efforts to
support the advancement of the planned Phoenix operation are
already significantly progressed and the Company is on track to
transition into detailed design efforts, consistent with the
Company’s Outlook for 2023, before the end of the
year.
Gryphon Update Highlights:
●
Scope of
Gryphon Update was targeted at the review and update of capital and
operating costs – mining and processing plans remaining
largely unchanged from the 2018 PFS aside from minor scheduling and
construction sequencing optimizations.
●
Base case pre-tax NPV (8%) of $1.43 billion (100%
basis) is a 148% increase in the base-case pre-tax
NPV8%
for Gryphon from the 2018
PFS.
●
Strong
base-case pre-tax IRR of 41.4%.
●
Base-case after-tax NPV8%
of $864.2 million (100% basis) and IRR
of 37.6% – with Denison’s effective 95% interest in the
project equating to a base-case after-tax NPV8%
of $821.0 million.
●
Base-case
pre-tax payback period of 20 months, and base-case after-tax
payback period of 22 months – equating to a reduction of 17
months for the pre-tax payback period from the 2018
PFS.
●
Project
remains to be positioned amongst the lowest-cost uranium mines in
the world and provides Denison with an additional source of
low-cost potential production to deploy significant free cash flows
expected from Phoenix.
The
results of the Phoenix FS and Gryphon Update have been reviewed and
approved by the Technical Committee of Denison’s Board of
Directors.
All
amounts are in Canadian dollars unless indicated
otherwise.
Phoenix ISR Feasibility Study
The
Phoenix FS was completed by Wood Canada Limited
(“Wood”), WSP USA Environment and Infrastructure Inc.
(“WSP”), SRK Consulting (Canada) Inc.
(“SRK”), and Newmans Geotechnique Inc.
(“Newmans”).
The
study confirms robust economics and the technical viability of an
ISR uranium mining operation with low initial capital costs and a
high rate of return.
The
Phoenix FS reflects several design changes and the results of a
rigorous technical de-risking program completed by Denison over the
last 4.5 years following the publication of the 2018 PFS, which was
highlighted by the then-novel selection of the ISR mining method
for Phoenix.
With
the benefit of extensive metallurgical and field testing of all key
elements of the proposed ISR mining operation, and current cost
estimates reflecting recent inflationary pressures, the Phoenix FS
is expected to provide Denison with an excellent basis to advance
engineering designs in support of a future final investment
decision (“FID”).
|
Table 1 – Summary of Key Phoenix Operation Parameters (100%
Basis)
|
|
|
Mine
life
|
10 years
|
|
Proven & Probable reserves(1)
|
56.7 million lbs U3O8 (220,900
tonnes at 11.6% U3O8)
|
|
First 5 years of reserves(2)
|
41.9 million lbs
U3O8 (Average
8.4 million lbs U3O8
/ year)
|
|
Remaining
years of reserves
|
14.8 million lbs
U3O8 (Average
3.0 million lbs U3O8
/ year)
|
|
Initial capital costs(3)
|
$419.4 million
|
|
Average
cash operating costs
|
$8.51 (USD$6.28) per lb
U3O8
|
|
All-in cost(4)
|
$21.73 (USD$16.04) per lb
U3O8
|
(1)
See Table 5 below for additional information regarding Proven &
Probable reserves.
(2)
The first five years is determined by reference to the 60 month
period that commences at the start of operations, which occurs half
way through calendar year 1, and ends half way through calendar
year 6. See below for details.
(3)
Initial capital costs exclude $67.4 million in estimated
pre-construction expenditures expected to be incurred
pre-FID.
(4)
All-in cost is estimated on a pre-tax basis and includes all
project operating costs, capital costs post-FID, and
decommissioning costs divided by the estimated number of pounds
U3O8
to be produced.
|
Table 2 – Summary of Phoenix Economic Results (100%
Basis)
|
||
|
|
Base Case
|
PFS Ref. Case(1)
|
|
Uranium selling price
|
UxC Spot Price(2)
(~USD$66 to USD$70/lb U3O8)
|
USD$65/lb U3O8
(Fixed selling price)
|
|
Exchange Rate (USD$:CAD$)
|
1.35
|
1.30
|
|
Discount Rate
|
8%
|
8%
|
|
Operating profit margin(3)
|
90.9%
|
89.9%
|
|
|
|
|
|
Pre-tax NPV8%(4)
(Change from
2018 PFS)(7)
|
$2.34 billion (+150%)
|
$2.05 billion (+5%)
|
|
Pre-tax IRR(4)
|
105.9%
|
98.4%
|
|
Pre-tax payback period(6)
|
~10 months
|
~ 10 months
|
|
|
|
|
|
Post-tax NPV8%(4)(5)
|
$1.56 billion
|
$1.38 billion
|
|
Post-tax IRR(4)(5)
|
90.0%
|
83.9%
|
|
Post-tax payback period(5)(6)
|
~10 months
|
~ 11 months
|
(1)
The “PFS Reference Case” economic analysis reflects the
outcome of the current Phoenix FS based on a uranium selling price
that is the same as the “High Case” previously reported
from the 2018 PFS, which was based on a fixed uranium selling price
of USD$65 per pound U3O8
and a US to Canadian dollar exchange
rate of 1.3 to 1. This case allows for a direct comparison of the
NPV outcome from the Phoenix FS to the 2018
PFS.
(2)
Spot price forecast is based on “Composite Midpoint”
scenario from UxC’s Q2’2023 Uranium Market Outlook
(“UMO”) and is stated in constant (not-inflated)
dollars, see details below.
(3)
Operating profit margin is calculated as aggregate uranium revenue
less aggregate operating costs, divided by aggregate uranium
revenue. Operating costs exclude all royalties, surcharges and
income taxes.
(4)
NPV and IRR are calculated to the start of construction activities
for the Phoenix operation, and excludes $67.4 million in pre-FID
expenditures.
(5)
Post-tax NPV, IRR and payback period are based on the
“adjusted Post-tax” scenario, discussed below, which
includes the benefit of certain entity level tax attributes which
are expected to be available and used to reduce taxable income from
the Phoenix operation.
(6)
Payback period is stated as number of months to payback from the
start of uranium production.
(7)
Change from 2018 PFS is computed by reference to the same scenario
from the 2018 PFS, as discussed below, adjusted to incorporate
certain pre-FID costs for consistent comparability.
Mineral Resource Estimate
The Phoenix mineral resource estimate has been
updated to reflect 70 additional drill holes completed since the
previous mineral resource estimate from 2018. The additional
drilling consisted primarily of test wells installed to support ISR
de-risking activities and certain targeted resource definition
drill holes. As a result of the additional drilling, 30.9 million
pounds U3O8
have been upgraded from Indicated
mineral resources to Measured mineral resources in recognition of
the increased confidence in certain areas of Phoenix Zone
A.
The
updated Phoenix mineral resource estimate, inclusive of mineral
reserves, is summarized below. Mineral resources that are not
mineral reserves do not have demonstrated economic viability at
this time.
|
Table 3 – Estimated Phoenix Mineral Resources (100%
Basis)
|
||||||
|
Confidence Category
|
Domain
|
Volume
(m³)
|
Density
(g/cm³)
|
Tonnes
(kt)
|
Average Grade
(%U3O8)
|
Contained U3O8
(Mlbs)
|
|
Measured
|
ZoneA_HG
|
6,729
|
3.84
|
25.9
|
50.7
|
28.9
|
|
ZoneA_LG
|
16,459
|
2.33
|
38.3
|
2.3
|
2.0
|
|
|
Total
|
23,187
|
2.77
|
64.2
|
21.8
|
30.9
|
|
|
Indicated
|
ZoneA_HG
|
8,773
|
3.37
|
29.6
|
42.0
|
27.4
|
|
ZoneA_LG
|
57,858
|
2.33
|
134.8
|
2.0
|
5.8
|
|
|
ZoneB_HG
|
4,334
|
2.66
|
11.5
|
22.3
|
5.7
|
|
|
ZoneB_LG
|
17,114
|
2.34
|
40.1
|
0.9
|
0.8
|
|
|
Total
|
88,079
|
2.45
|
216.0
|
8.3
|
39.7
|
|
|
Total Measured and Indicated
|
111,266
|
2.52
|
280.2
|
11.4
|
70.5
|
|
|
Inferred
|
ZoneA_Bsmt
|
2,401
|
2.34
|
5.6
|
2.6
|
0.3
|
(1)
The effective date of the mineral resource estimate is June 23,
2023. The Qualified Person (QP) for the estimate is Mr. Cliff
Revering, P.Eng., an employee of SRK.
(2)
Mineral resource estimates are prepared in accordance with CIM
Definition Standards (CIM, 2014) and the CIM Estimation of Mineral
Resources and Mineral Reserves Best Practice Guidelines (CIM,
2019).
(3)
Mineral resources are reported at a cut-off grade of 0.1%
U3O8.
(4)
Mineral resources are reported using a uranium price of
USD$55/lb.
(5)
All figures have been rounded to reflect the relative accuracy of
the estimate and may not add due to rounding.
Mining Overview & Mineral Reserve Estimate
Phoenix
is planned to be the first uranium IthefSR mining operation in the
Athabasca Basin region. Comprehensive field and laboratory test
work has been completed to de-risk the use of the ISR mining method
at the Phoenix deposit – including the highly successful
completion of the leaching and neutralization phases of the FFT at
Phoenix in the fall of 2022. Over 3,300 data points have been
collected within Phoenix to advance hydrogeological evaluations,
and extensive groundwater flow modelling has been completed to
develop an advanced three-dimensional estimation of the subsurface
flows within and surrounding the Phoenix deposit. The data allowed
for modelling of complex hydrogeological and geochemical datasets,
which together with the uranium recovery curve, were used to
estimate the rate of uranium dissolution within the orebody and
facilitate the detailed wellfield design and production planning
process.
The
uranium recovery curve was obtained empirically from metallurgical
testing completed at the Saskatchewan Research Council
(“SRC”) facility under the supervision of industry
experts. Over 125 kilograms (kg) of Phoenix mineralized samples
were leached in a variety of settings, including intact cores under
ISR conditions representative of the deposit, and column leaching
and remediation tests representative of specific hydrogeological
units (“HGUs”) of the deposit. The results, including
those from (i) the FFT (which confirm the early stages of the
leaching curve), (ii) core leach test #4 (which was leached over
377 days to over 97% recovery), and (iii) core leach test #5 (which
is representative of the HGU estimated to contain the largest mass
of uranium in the deposit) were used to inform and validate the
uranium recovery curve.
Based
on the results of the mine planning process, mining activities have
been divided into five phases, with a total of 74 extraction wells,
172 injection wells, and 22 monitoring wells, as outlined
below:
|
Table 4 –Wellfield composition for Phoenix by
phase
|
|||
|
Mining Phase
|
Extraction Wells
|
Injection Wells
|
Monitoring Wells
|
|
1
|
14
|
36
|
6
|
|
2
|
12
|
30
|
4
|
|
3
|
13
|
32
|
4
|
|
4
|
23
|
44
|
4
|
|
5
|
16
|
30
|
6
|
|
Total
|
74
|
172
|
22
|
An
illustration of the mine planning process is provided in Figure 1,
which depicts the planned location of extraction, injection and
monitoring wells within the Phase 1 mining area. In general, each
extraction well is surrounded by 4 or more injection wells, the
type of which has been selected and/or located to optimize cost and
recovery.
A
unique characteristic of the planned Phoenix ISR mine is the use of
artificial ground freezing around the perimeter of the planned
Phoenix mining phases to create a vertical hydraulic barrier
surrounding the ISR mining area. The freeze perimeter is a tertiary
containment measure and is planned to consist of vertical freeze
wells constructed from surface and extending into the impermeable
lower basement rock underlying the deposit, which are designed to
reduce the temperature of and freeze the ground adjacent to the
wells to encircle the mining area with up to a 10-metre thickness
of frozen ground.
Mining
is planned to occur over a 10-year period, spanning 11 calendar
years, with partial years of production occurring in both the first
and final calendar year of the production plan. Progressive
reclamation and decommissioning is planned to commence in each
phase of the ore zone once production has ceased.
The Proven and Probable mineral reserves are
estimated to be 56.7 million pounds U3O8.
This estimate is based on the aggregate mine feed to the plant and
represents 80.6% recovery of the total available uranium
(U3O8)
in the measured and indicated mineral resources. Proven mineral
reserves are those which were subject to a recovery test during the
FFT in 2022.
|
Table 5 –Phoenix Mineral Reserves (100% Basis)
|
|||
|
Mining Phase by Confidence Category
|
Tonnes (kt)
|
Grade (% U3O8)
|
Recoverable U3O8
(Mlbs)
|
|
Proven
|
|
|
|
|
Phase
1
|
6.3
|
24.5
|
3.4
|
|
Probable
|
|
|
|
|
Phase
1
|
41.3
|
20.2
|
18.4
|
|
Phase
2
|
45.2
|
13.8
|
13.7
|
|
Phase
3
|
20.3
|
11.0
|
4.9
|
|
Phase
4
|
68.9
|
7.2
|
10.9
|
|
Phase
5
|
37.0
|
6.6
|
5.4
|
|
Total
|
219.0
|
11.7
|
56.7
|
(1)
The
effective date of the mineral reserve estimate is June 23,
2023. The QP for the estimate is Mr. Dan Johnson, P.E., an
employee of WSP.
(2)
Mineral
reserves are estimated at a cut-off grade of 0.5% U3O8 based on the ISR
mining method, using a long-term uranium price of USD$50/lb
U3O8 and a USD$/CAD$
exchange rate of 1.33. The mineral reserves are based on a
mine operating cost of $0.78/lb U3O8, process
operating cost of $5.20/lb U3O8, and process
recovery of 99%, as discussed below.
Processing Overview
Consistent
with the 2018 PFS, the Phoenix FS calls for the construction of a
processing plant on the Wheeler River site, which has been designed
to receive uranium bearing solution (“UBS”) from the
wellfield for processing to a finished yellowcake product that
meets industry standards.
An
acidic lixiviant solution is prepared in the processing plant and
transferred to an injection solution handling system for
distribution in the wellfield. The solution is injected through a
series of wells arranged in a pattern surrounding extraction /
recovery wells, which are designed to pump the UBS up to surface
once the lixiviant has travelled through the ore zone and dissolved
the uranium from the host rock.
Once the UBS is received at the processing plant,
removal of impurities such as iron (Fe) and radium (Ra) occur via
Stage 1 (Fe/Ra) precipitation. Next the purified leach solution
feeds the Stage 2 yellowcake precipitation circuit and the
yellowcake product is dried and packaged for shipment. The
processing plant has been designed based on an average uranium head
grade of the UBS recovered from the wellfield of 22 grams per litre
and is expected to recover 96.5% of the uranium feed contained in
UBS after a 6 month ramp up period of the plant (when recovery is
expected to be initially 93.4%). Taken together with planned
subsequent recoveries of uranium contained in the Stage 1 (Fe/Ra)
precipitation product, total recovered uranium of 56.2 million
pounds U3O8 is
planned to be available for sale – representing a combined
99% recovery rate.
Overall,
the processing plant flowsheet remains largely consistent with the
2018 PFS; however, additional provisions have been included for
effluent treatment via a three-stage neutralization process.
Whereas the 2018 PFS assumed a “closed loop” processing
system, the Phoenix FS design is aligned with the engineering
components and criteria included in the Environmental Assessment
(“EA”) for the project, which allow for the treatment
of process solutions and controlled release of a treated effluent
to the environment. This is an example of how the iterative nature
of the EA process has informed project designs during the Phoenix
FS process, to ensure that the plans are aligned and costed to meet
or exceed environmental criteria expected to be required by the
ongoing regulatory approval process. While this design for effluent
treatment has been adopted for the Phoenix FS, the potential
remains for ongoing FEED studies to optimize the processing plant
design.
Site Infrastructure
The
Phoenix site is compact and designed to limit environmental
disturbance. The natural terrain of the area is used where
advantageous, further reducing the impact of the project on the
environment. Based on the Phoenix FS site layout, shown in Figure
2, the primary site facilities will consist of the ISR wellfield,
ISR processing plant, freeze plant, storage pads, power substation
and distribution, process ponds, and camp accommodations for
between 100 and 150 occupants. These facilities are contained
within an area estimated to be less than one square
kilometre.
Additional
on-site infrastructure includes a seven kilometre gravel road from
Highway 914 to the site, electrical power line from the existing
SaskPower transmission line located alongside Highway 914,
airstrip, domestic and construction waste management areas, potable
water treatment facilities, sewage treatment facilities, and fuel
storage and distribution facilities.
Capital Costs
Estimated
initial direct capital costs of $273.8 million represent a 32%
increase compared to the initial direct capital costs from 2018
PFS, which have been adjusted to reflect the movement of offsite
infrastructure costs from direct costs to Other (Owner’s)
costs. The increase in initial direct capital costs reflects recent
inflationary trends in labour and materials costs and the impact of
several design changes resulting from the substantive advancement
of project designs from the 2018 PFS. Importantly, the design
changes in the Phoenix FS reflect (i) modifications necessary to
allow for production plan optimizations, leading to a 43% increase
in the rate of production during the first five years of
production, (ii) choices made as a result of the iterative EA
evaluation process, and (iii) results of the multi-year technical
de-risking program.
Initial
capital costs are expected to be incurred during a 24-month
construction period that will include the establishment of site
infrastructure (discussed above), as well as the freeze wall
perimeter around the Phase 1 mining zone and initial wellfield
development within Phase 1.
|
Table 6 – Phoenix Capital Costs ($ millions)
|
|||
|
|
Initial
|
Sustaining
|
Total
|
|
Wellfield
|
63.0
|
177.1
|
240.1
|
|
ISR
processing plant
|
102.6
|
-
|
102.6
|
|
Surface
facilities
|
14.7
|
2.1
|
16.8
|
|
Utilities
|
34.8
|
-
|
34.8
|
|
Electrical
|
19.1
|
-
|
19.1
|
|
Civil
& earthworks
|
39.6
|
-
|
39.6
|
|
Decommissioning
|
-
|
88.8
|
88.8
|
|
Subtotal – Direct Costs
|
273.8
|
268.0
|
541.8
|
|
Indirect
costs
|
70.5
|
31.6
|
102.1
|
|
Other
(Owner’s) costs
|
32.7
|
-
|
32.7
|
|
Contingency
|
42.6
|
23.3
|
65.9
|
|
Total Capital Costs (100%)
|
419.4
|
322.9
|
742.3
|
(1)
Numbers may not add due to rounding.
Contingencies
reflect approximately 11% of total capital costs, which is
considered appropriate given the estimate was prepared to meet AACE
Class 3 requirements, as well as Denison’s significant
experience with key capital cost drivers through the completion of
multiple field test programs at Phoenix since the 2018
PFS.
Taken
together with estimated indirect costs, owner’s costs,
sustaining and decommissioning capital costs, contingencies, and
with the reallocation of certain costs to the pre-FID period, total
life of mine capital costs are estimated at $742.3 million. This
represents a 74% increase in life of mine capital costs compared to
the 2018 PFS.
As
is demonstrated by the project’s current NPV in the PFS
Reference Case (up 5% from the 2018 PFS), the economic outcome of
the project has not been adversely impacted by the increase in life
of mine capital costs. Significant contributors to the overall
increase in capital costs include the wellfield, ISR processing
plant, and decommissioning costs, as further described
below:
|
Wellfield
+$141.0
million
|
The
increase includes the adoption of a phased “freeze
wall” design to replace the novel “freeze dome”
concept included in 2018 PFS. The freeze dome introduced
significant technical risk to the ISR mining process and added
complexity from an environmental protection standpoint. The cost of
the freeze dome was included in initial capital costs, whereas the
cost of the freeze wall is spread over the life of mine, thus
significantly reducing the impact to the NPV from the overall
increase in capital costs.
Materials
and installation costs for the ISR injection and extraction wells
are now based on the Company’s actual experience in
installing both large and small-diameter test wells during the
de-risking process, providing a much more accurate estimate of
costs compared to the 2018 PFS.
|
|
Processing
Plant
+$47.1
million
|
The
increase reflects a variety of design adjustments to the processing
plant, including those which enable an increase in the planned
production rate by 43% during the first 5 years, which has a
positive impact on the NPV.
|
|
Decommissioning
+$60.2million
|
The
increase reflects the incorporation of costs associated with ore
zone groundwater remediation to achieve targets proposed in the EA;
more detailed management and regulatory cost requirements, improved
accuracy in well decommissioning activities, process plant
decontamination and demolition including transport and disposal of
waste materials, additional costs for decommissioning larger
industrial water treatment facilities, and environmental monitoring
labour and analytical costs. As these increased capital costs are
primarily expected to occur at the end of the mine life, the impact
to the NPV from the increased capital costs is
minimized.
|
Operating Costs
Average estimated operating costs of $8.51
(USD$6.28) per pound U3O8
produced remain highly competitive
amongst the lowest-cost uranium mining operations globally.
Operating costs during the first five years of production are
expected to be $6.64 (USD$4.90) per pound U3O8,
benefitting from increased scale of operations and higher
concentrations of uranium contained in recovered UBS. During the
remaining years of production, operating costs are expected to be
$13.69 (USD$10.10) per pound U3O8.
As
a proportion of operating costs per pound, processing costs have
increased from the 2018 PFS, now accounting for nearly 62%, as
compared to 45% in the 2018 PFS. The biggest contributors to the
increased processing costs include reagent usage, as well as
estimated costs for reagents, fuel/propane, and
labour.
Changes
to reagent usage reflect the results of the Company’s
multi-year technical de-risking process, which has provided a
robust data set of metallurgical tests on which the current
estimate of reagent usage has been based, as compared to limited
preliminary leach data used for the 2018 PFS.
The
cost of reagents, fuel/propane, and labour reflect the impact of
inflation and supply chain challenges experienced through 2022 and
into 2023. Based on the timing of this study, reagent and
fuel/propane prices used may be reflective of “peak
inflation” pricing and present a possible opportunity for
optimization in future years. These cost increases are expected to
impact uranium mining operations globally; however, few have
completed significant operating cycles and/or estimates of future
costs in the current cost environment.
|
Table 7 – Phoenix Operating Cost
per Pound U3O8
|
||
|
|
CAD$
|
USD$
|
|
Mining
/ Wellfield
|
0.79
|
0.58
|
|
Processing
|
5.25
|
3.88
|
|
Transport
to converter
|
0.24
|
0.18
|
|
Site
support and administration
|
2.23
|
1.64
|
|
Total Operating Costs per pound
U3O8
|
$8.51
|
$6.28
|
(1) Numbers may not add due to rounding.
Uranium Selling Price Assumptions
The base-case economic analysis assumes uranium
sales from Phoenix mine production will be made from time to time
throughout the production period at the forecasted annual
“Composite Midpoint” uranium spot price from the
Q2’2023 Uranium Market Outlook (“UMO”) issued by
UxC, LLC (“UxC”), which is stated annually in constant
(non-inflated) 2023 dollars and ranges from ~USD$66 to USD$70 per
pound U3O8
during the indicative production
period of the Phoenix operation. This is the same pricing
methodology applied for Phoenix as the base-case scenario in the
2018 PFS, where the “Composite Midpoint” uranium prices
during the indicative years of production then ranged from only
USD$29 to USD$45 per pound U3O8
in constant 2018 dollars. Consistent
with the 2018 PFS, the overall cost profile and construction
timeline of the planned Phoenix ISR mine is not expected to require
substantial contract base loading to justify development.
Accordingly, the spot price indicator from UxC has been used for
the Phoenix base-case economic analysis.
The PFS reference case economic analysis reflects
the outcome of the current Phoenix FS based on a uranium selling
price that is the same as the “High Case” previously
reported from the 2018 PFS, which was based on a fixed uranium
selling price of USD$65 per pound U3O8
and a US to Canadian dollar exchange
rate of 1.3 to 1. This case allows for a direct comparison of the
NPV outcome from the Phoenix FS to the 2018
PFS.
Post-Tax Economic Analysis
The
Phoenix FS considers two post-tax scenarios for the project’s
base-case economic analysis. In the “Basic” post-tax
scenario, Canadian federal income taxes plus provincial income
taxes and profit-based royalties were calculated without
incorporating the impact of the opening tax pool balances that are
available to the applicable Wheeler River Joint Venture
(“WRJV”) owners. The “Adjusted” post-tax
scenario estimates the after-tax cash flows of the project by
consolidating the expected entity-level after-tax cash flows for
each of the parties to the WRJV and includes estimates of opening
tax balances that are expected to be used to reduce taxable income.
The impact of opening tax balances is significant and thus the
“Adjusted” post-tax scenario is considered to better
represent the true after-tax economic outcome to the owners of the
project.
|
Table 8 – Phoenix Post-Tax Economic Analysis (Base
Case)
|
||
|
|
Basic
|
Adjusted
|
|
Post-Tax NPV8%
|
$1.43
billion
|
$1.56
billion
|
|
Post-Tax
IRR
|
82.3%
|
90.0%
|
|
Post-Tax
Payback Period
|
~11
months
|
~10
months
|
Environmental Studies, Permitting and Social Impacts
The
regulatory approval process and the legislation associated with the
EA does not allow for the advancement of any project component
before an EA decision is reached by the Saskatchewan Minister of
Environment and the Canadian Nuclear Safety Commission
(“CNSC”). For this reason, project advancement is gated
by regulatory approvals and, while Denison plans to move towards
construction readiness by advancing engineering design and planning
activities, a FID cannot be made until necessary regulatory
permission is granted.
The EA for the Phoenix ISR mine and process plant
is well advanced through the Federal and Provincial approval
process as guided by the Canadian Environmental
Assessment Act 2012 and
the Saskatchewan Environmental
Assessment Act. The draft
Environmental Impact Statement (“EIS”) was submitted in
October 2022 and Denison has since received comments and
information requests from the Provincial and Federal regulatory
review teams and from Indigenous communities through the Federal
public review process. Once the regulatory reviewers are satisfied
with Denison’s responses to such comments, a final EIS will
be submitted for ultimate approval.
Additionally,
Denison will be required to make an application to the CNSC to
obtain a license to construct a uranium mine and mill and to obtain
a permit from the Saskatchewan Ministry of Environment to construct
and operate a pollutant control facility. Denison has scheduled the
submission of these applications such that the anticipated license
and permit approvals align with the timing of the EA
approval.
An
important part of the regulatory review and approval process
relates to engagement with Indigenous and non-Indigenous interested
parties. Denison has carried out several years of engagement
efforts related to the advancement of the project and in 2021
Denison’s Board of Directors adopted an Indigenous Peoples
Policy (“IPP”), which sets out the Company’s
guiding principles for and commitment to advancing reconciliation
with Indigenous People. The IPP outlines Denison’s focus on
specific efforts in relation to engagement, employment,
environment, education, and empowerment, each of which support the
advancement of sustainable mining operations.
Development Plans
The
completion of the Phoenix FS is a key milestone to support the next
phases of engineering design for the project. The FEED phase has
already commenced and is expected to be completed before the end of
the year. The objective of the FEED phase is to assess optimization
opportunities and identify key long lead procurement requirements.
Including the detailed design phase, project engineering efforts
are expected to be completed in approximately two years. Upon
engineering completion, construction is expected to last another
two years. Assuming sufficient funding is secured by the owners of
the WRJV, engineering and other pre-construction activities advance
per plan, and timely receipt of required regulatory approvals,
first production is currently anticipated to occur in 2027 or
2028.
Opportunities
Several
opportunities for optimization have been identified during the FS
completion process and are expected to be evaluated during the FEED
phase, including (i) reducing the volume of treated effluent by
increasing the recycling of solutions within the process plant;
(ii) reducing the plant footprint by improving the FS conceptual
layout and maximizing modularization of process equipment; (iii)
reducing the size of certain site processing infrastructure through
improved solids/liquid separation in the processing plant design;
and (iv) modifications to the ISR mine model to incorporate
potential operational optimization techniques to reduce the number
of wells required to mine the deposit.
Completion of Phoenix ISR De-Risking
The
Phoenix FS results reflect the culmination of a comprehensive and
rigorous multi-year technical de-risking process that focused on
assessing the key criteria necessary for the successful application
of the ISR mining method to the specific characteristics of
Phoenix.
In general, advancing ISR mining projects requires
significant time and effort due to the extensive three-dimensional
characterization and modeling required for project confidence.
Forgoing detailed characterization efforts to accelerate project
timelines or “simplify” the assessment process may
substantially endanger long-term project success. The
successful application of ISR in any geological setting largely
depends on three fundamental requirements: (i) permeability (of the
deposit), (ii) leachability (of the mineralization), and (iii)
containment (of the mining solution).
Permeability
Hydrogeological
investigations have been ongoing in the field and in laboratories
since 2014. In-ground permeability tests conducted via a series of
small-diameter test wells and large-diameter commercial scale wells
(“CSWs”) have evaluated the physical flows and
connections through the groundwater systems within the
orebody.
Pump
and injection tests have collectively demonstrated the positive
application of ISR at Phoenix. Additionally, packer, open hole, and
cross hole tests have been completed in conjunction with drilling
programs, and permeability tests have been completed on sections of
available competent core from within Phoenix. Collectively, over
250 pump and injection tests and 3,120 permeameter samples have
been collected over the deposit area.
Additional
hydrogeological characterization, including borehole geophysics in
over 43 wells, was completed to further refine the hydraulic sweep
and vertical heterogeneity of the deposit.
In
2021, Denison completed an ISR field test program which included an
ion tracer test utilizing a five-spot pattern of CSWs. The program
was successful in demonstrating production flowrates assumed in the
2018 PFS, confirming hydraulic control of injected solutions during
the ion tracer test, establishing breakthrough times between
injection and recovery wells consistent with previous ‘Proof
of Concept’ modelling, and showcasing the ability to
remediate the test pattern by completing a ‘clean up
phase’.
Leachability
Test programs
conducted since 2017 included various forms of leaching tests,
process plant circuit tests, and tests of effluent and solid waste
streams treatment steps, to define design criteria for the Phoenix
FS. Numerous column, batch, static, and core leach tests were
conducted on defined hydrogeological and metallurgical units of the
deposit to gain a comprehensive understanding of leachability and
to ultimately define a recovery curve specific to the deposit. The
collective tests have demonstrated excellent recovery of uranium
from various deposit settings.
Containment
Proven freeze
technology is planned to be used to surround the high-grade Phoenix
deposit, within which an ISR wellfield of over 250 injection and
recovery wells are planned to be installed. Permeability
enhancement techniques have been tested extensively to validate
augmentation of the natural hydrogeological flow paths to
facilitate a higher degree of hydrological control. Through robust
well design, achieved and validated through several years of
field-based refinements, combined with adequately tested injection
pressure and pumping rates, it has been collectively established
that the coordinated process of pumping and injecting solutions
into and from the wellfield serves as the primary means of
containment, and that the freeze wall provides a tertiary control,
which may provide opportunities for optimization during
operations.
Completion of ISR De-Risking
In late 2022, after several years of systematic
de-risking field and laboratory investigations, Denison completed
the FFT, which was designed primarily to assess the effectiveness
and efficiency of the leaching process in the ore zone. The first
component of the test included the controlled injection of an
acidic mining solution into the ore zone within a portion of the
CSW test pattern installed in 2021 and the recovery of the solution
back to the surface (“Leaching Phase”). The FFT was
highly successful and resulted in the recovery of approximately
14,400 pounds U3O8
over 10 days of active leaching
following completion of initial acidification of the leaching area.
Through the completion of the second phase of the test
(“Neutralization Phase”), the FFT also provided further
evidence and validation of both permeability and containment
assumptions. The completion of the leaching and neutralization
phases of the FFT represents the conclusion of the final
substantive scope of technical de-risking for the
project.
Overall,
the multi-year ISR de-risking process has supported Denison’s
acquisition of extensive deposit-specific data and the development
of a robust ISR mine planning model that involves evaluation of the
production potential for individual well patterns.
With
technical de-risking of the project substantively complete,
evaluation efforts supporting the advancement of Phoenix are
expected to focus on optimizing key areas of operations through
FEED and advancing detailed design efforts in preparation for a
future development decision.
Gryphon Underground Pre-Feasibility Study Update
The 2018 PFS and the Gryphon Update describe the
planned development of Gryphon as a conventional underground mine
with a mine life of 6.5 years and annual average mine production of
7.6 million pounds U3O8.
The Gryphon Update was prepared by Engcomp Engineering and
Computing Professionals Inc. (“Engcomp”), SLR
International Corporation (“SLR”), Stantec Consulting
Ltd. (“Stantec”), and Hatch Ltd. (“Hatch”),
and is largely based on the 2018 PFS, with efforts targeted at the
review and update of capital and operating costs, as well as
various minor scheduling and design optimizations. The study
remains at the Pre-Feasibility (“PFS”) level of
confidence.
Overall,
the Gryphon Update demonstrates that the underground development of
Gryphon is a positive potential future use of cash flows generated
from Phoenix, as it is able to leverage existing infrastructure to
provide an additional source of low-cost production.
|
Table 9 – Summary of Key Gryphon Operation Parameters (100%
Basis)
|
|
|
Mine
life
|
6.5 years
|
|
Probable reserves(1)
|
49.7 million lbs U3O8 (1,275,000
tonnes at 1.8% U3O8)
|
|
Average
annual production
|
7.6 million lbs U3O8
|
|
Initial capital costs(2)
|
$737.4 million
|
|
Average
cash operating costs
|
$17.27 (USD$12.75) per lb
U3O8
|
|
All-in cost(3)
|
$34.50 (USD$25.47) per lb
U3O8
|
(1)
See below for additional information regarding Probable
reserves.
(2)
Initial capital costs exclude $56.5 million in pre-construction
expenditures expected to be incurred prior to making a final
investment decision (“FID”).
(3)
All-in cost is estimated on a pre-tax basis and includes all
project operating costs, capital costs post-FID, and
decommissioning costs, divided by the estimated number of pounds
U3O8
to be produced.
|
Table 10 – Summary of Gryphon Economic Results (100%
Basis)
|
||
|
|
Base Case
|
PFS Ref. Case(1)
|
|
Uranium
selling price
|
USD$75/lb U3O8(2)
(Fixed
selling price)
|
USD$65/lb U3O8
(Fixed
selling price)
|
|
Exchange
Rate (USD$:CDN$)
|
1.35
|
1.30
|
|
Discount
Rate
|
8%
|
8%
|
|
Operating profit margin(3)
|
83.0%
|
79.6%
|
|
|
|
|
|
Pre-tax NPV8%(4)
(Change from 2018
PFS)(7)
|
$1.43 billion (+148%)
|
$1.00 billion (-5%)
|
|
Pre-tax IRR(4)
|
41.4%
|
34.0%
|
|
Pre-tax payback period(6)
|
~ 20 months
|
~ 24 months
|
|
|
|
|
|
Post-tax NPV8%(4)(5)
|
$864.2 million
|
$599.9 million
|
|
Post-tax IRR(4)(5)
|
37.6%
|
30.6%
|
|
Post-tax payback period(5)(6)
|
~23 months
|
~ 26 months
|
(1)
The “PFS Reference Case” economic analysis reflects the
outcome of the current Phoenix FS based on a uranium selling price
that is the same as the “High Case” previously reported
from the 2018 PFS, which was based on a fixed uranium selling price
of USD$65 per pound U3O8
and a US to Canadian dollar exchange
rate of 1.3 to 1. This case allows for a direct comparison of the
NPV outcome from the Phoenix FS to the 2018
PFS.
(2)
Fixed selling price is based on the forecasted annual
“composite Midpoint” long-term uranium price from
UxC’s Q2’2023 UMO and is stated in constant
(not-inflated) dollars, see details below.
(3)
Operating profit margin is calculated as aggregate uranium revenue
less aggregate operating costs, divided by aggregate uranium
revenue. Operating costs exclude all royalties, surcharges and
income taxes.
(4)
NPV and IRR are calculated to the start of construction activities
for the Gryphon operation, and excludes $56.5 million in pre-FID
expenditures.
(5)
Post-tax NPV, IRR and payback period for Gryphon are the same on a
“Basic” and “Adjusted” basis, as entity
level tax attributes are assumed to have been fully depleted by the
Phoenix operation.
(6)
Payback period is stated as number of months to payback from the
start of uranium production.
(7)
Change from 2018 PFS is computed by reference to the same scenario
from the 2018 PFS, as discussed below, adjusted to incorporate
certain pre-FID costs for consistent comparability.
Mineral Resource Estimate
The mineral resource estimate for Gryphon remains
unchanged from the 2018 PFS. Using a cut-off grade of 0.2%
U3O8,
Gryphon is estimated to contain Indicated mineral resources of
1,643,000 tonnes, at a grade of 1.7% U3O8
for a total of 61.9 million pounds
U3O8,
plus Inferred mineral resources of 73,000 tonnes at a grade of 1.2%
U3O8
for a total of 1.9 million pounds
U3O8.
Mineral
resources are stated inclusive of mineral reserves. Mineral
resources that are not mineral reserves do not have demonstrated
economic viability.
Mining Overview & Mineral Reserve Estimate
The
mine development and production plan for Gryphon remains largely
the same as the 2018 PFS. Access to the deposit is planned to be
via a primary production shaft with a diameter of 6.1 metres,
installed using a blind boring method to a depth of 550 metres
below surface. A ventilation shaft with a diameter of 5.8 metres,
is also planned to be excavated via blind boring to a depth of 550
metres. Both shafts will be lined with a watertight steel/concrete
composite liner.
Access
from the shaft to the mine workings will be via a single ramp
located on the hanging wall of the deposit. Mining is planned to
consist of conventional underground longhole stoping mining
methods, and is expected to primarily utilize a longitudinal
retreat approach. Mined stopes will be backfilled using a
combination of rockfill, cemented rockfill, and hydraulic
fill.
Mining is expected to produce approximately 605
tonnes per day of ore and an average of 330 tonnes per day of waste
rock during the steady-state operating period. While the mine has
the potential to exceed this rate of production, the study
constrains mine production based on expected processing capacity of
9 million pounds U3O8
per year (as discussed
below).
The
project development and construction schedule was reviewed during
the completion of the Gryphon Update, and minor capital and
scheduling efficiencies were found to allow for the deferral of
some construction activities without an impact to the overall
project schedule. These modifications have been reflected in timing
of anticipated expenditures for Gryphon.
Overall, 49.7 million pounds U3O8
over 1,260,000 tonnes grading 1.8%
U3O8
are planned to be extracted from
Gryphon over an approximately 6.5-year mine
life.
|
Table 11 – Gryphon Mineral Reserves (100% Basis)
|
|||
|
Tonnes
|
Grade(% U3O8)
|
Million lbs U3O8
|
|
|
Probable
|
1,257,000
|
1.8
|
49.7
|
|
TOTAL
|
1,257,000
|
1.8
|
49.7
|
(1)
The
effective date of the mineral reserve estimate is Sept 1 2018. The
QP for the estimate is Mr. Mark Hatton, P.Eng., an employee of
Stantec.
(2)
The
mineral reserve estimate was prepared in accordance with the CIM
Definition Standards (CIM, 2014).
(3)
Mineral
Reserves are stated at a processing plant feed reference
point.
(4)
Mineral
Reserves for the Gryphon deposit are estimated at a cut-off grade
of 0.58% U3O8 based on longhole
mining using a long-term uranium price of USD$50/lb and a USD$/CA$
exchange rate of 0.80. The mineral reserves are based on a mine
operating cost of $150/t, mil operating cost of $275/t, G&A
cost of $99/t, transportation cost of $50/t, milling recovery of
97%, and 7.25% fee for Saskatchewan royalties. Mineral reserves
estimates account for diluting material and mining
losses.
Processing Overview
Consistent
with the 2018 PFS, production from the Gryphon operation is assumed
to be processed at the 22.5% Denison-owned McClean Lake processing
plant, which is located in the northeastern portion of the
Athabasca Basin region. The results from the 2018 PFS indicate that
the Gryphon deposit is amenable to recovery utilizing the existing
flowsheet for the McClean Lake mill with minimal required upgrades
and an estimated recovery rate of 98.2%.
The
McClean Lake mill received a 10-year operating license from the
CNSC in 2017 and is currently processing 100% of the mine
production from the Cigar Lake mine under a toll milling agreement.
Additionally, in early 2022, the McClean Lake operation was granted
the final approval needed to amend its license to allow for an
expansion of the tailings management facility on site.
Due to the volume of throughput expected from the
Gryphon operation, the McClean Lake mill will require certain
upgrades to process the mine production from Gryphon. Various other
small upgrades are also expected to be required to achieve
production at the licensed annual capacity of 24 million pounds
U3O8.
The study assumes that Cigar Lake production will decline from 18
million pounds U3O8,
at present, to approximately 15 million pounds U3O8
at the time of co-processing with ore
from the Gryphon operation. In order to assess compatibility with
Gryphon mill feed and to approximate the split of estimated mill
operating costs, various assumptions have been made in regard to
the nature and quantity of the mill feed from the Cigar Lake mine.
Denison's interest in the McClean Lake Joint Venture ("MLJV") does
not entitle the Company or the WRJV to process its mine production
at the facility in the absence of a toll milling agreement.
Accordingly, certain further assumptions have been made regarding
the likelihood and terms of a toll milling agreement with the MLJV.
The estimated cost of production for Gryphon could be materially
different should processing not be available at an existing local
facility.
To
facilitate access to the McClean Lake mill from the Wheeler River
site, the Gryphon Update carries certain costs of building an
extension to Highway 914 to connect the McArthur River and Cigar
Lake operations and to allow for the transport of Gryphon mine
production over an approximately 160 kilometre route.
Site Infrastructure
Due
to its proximity to Phoenix, the Gryphon operation is expected to
benefit from site infrastructure that is planned to be established
in support of the Phoenix ISR mine (e.g., airstrip, camp, access
road, power distribution). Additional site infrastructure for
Gryphon is generally limited to items directly related to the
underground mining operation, including incremental power
distribution requirements, ore and waste rock handling, as well as
mine water handling and treatment.
Capital Costs
Estimated
direct initial capital costs of $487.6 million represent a 48%
increase compared to the 2018 PFS. The increase in direct initial
capital costs reflect recent inflationary trends in labour and
materials costed using the Chemical Engineering Plant Cost Index.
Initial capital costs are expected to be incurred during a 42-month
construction period that will include approximately 24 months for
the completion of the production shaft and vent raise. Surface
facilities, underground excavation, haulage road, and McClean Lake
mill upgrades are expected to take approximately 18 months. Initial
ore recovery occurs prior to the completion of construction and
ramps up for the mine to achieve full production by year
3.
|
Table 12 – Gryphon Capital Costs ($ millions)
|
|||
|
|
Initial
|
Sustaining
|
Total
|
|
Shafts
|
222.4
|
-
|
222.4
|
|
Surface
facilities
|
63.0
|
7.5
|
70.5
|
|
Underground
|
63.9
|
86.2
|
150.1
|
|
Utilities
|
5.3
|
-
|
5.3
|
|
Electrical
|
5.4
|
-
|
5.4
|
|
Civil
& earthworks
|
16.0
|
-
|
16.0
|
|
McClean
Lake mill upgrades
|
67.9
|
-
|
67.9
|
|
Offsite
infrastructure
|
43.7
|
-
|
43.7
|
|
Decommissioning
|
-
|
5.0
|
5.0
|
|
Subtotal – Direct Costs
|
487.6
|
98.7
|
586.3
|
|
Indirect
costs
|
76.5
|
5.0
|
81.5
|
|
Other
(Owner’s) costs
|
25.6
|
-
|
25.6
|
|
Contingency
|
147.7
|
-
|
147.7
|
|
Total Capital Costs (100%)
|
737.4
|
103.7
|
841.1
|
(1) Numbers may not add due to rounding.
Contingencies
reflect approximately 25% of total capital costs, which is
considered appropriate given the estimate was prepared to meet AACE
Class 4 requirements in alignment with the stage of engineering and
design efforts for the project.
Taken
together with estimated indirect costs, sustaining and
decommissioning capital costs, and the reallocation of certain
costs to the pre-FID period, total life of mine capital costs are
estimated at $841.1 million. This represents a 19% increase in life
of mine capital costs compared to the 2018 PFS. Due to construction
schedule optimization, the impact of increased capital costs to the
NPV has been minimized.
Operating Costs
Estimated operating costs of $17.27 (USD$12.75)
per pound U3O8
produced have increased by
approximately 14% from the 2018 PFS, and remain highly competitive
amongst the lowest-cost uranium mining operations globally.
Operating costs have increased as a result of recent inflationary
trends in labour and materials, partially offset by favourable
updates to certain milling assumptions.
|
Table 13 – Gryphon Operating
Cost per Pound U3O8
|
||
|
|
CAD$
|
USD$
|
|
Mining
|
6.85
|
5.05
|
|
Milling
|
8.76
|
6.47
|
|
Transport
to Converter
|
0.27
|
0.20
|
|
Site
support and administration
|
1.40
|
1.03
|
|
Total Operating Costs per pound
U3O8
|
$17.27
|
$12.75
|
(1) Numbers may not add due to rounding.
Uranium Selling Price Assumptions
The base-case economic analysis assumes uranium
sales from Gryphon mine production will be made throughout the mine
life at a fixed price of USD$75 per pound U3O8,
which is based on the average of the forecasted annual
“Composite Midpoint” long-term uranium price from
UxC’s Q2’2023 UMO, which is stated in constant
(non-inflated) 2023 dollars, during the indicative production
period of Gryphon to the nearest USD$5 per pound
U3O8.
This is the same pricing methodology applied for Gryphon as the
base-case scenario in the 2018 PFS, where the “composite
Midpoint” long-term uranium price during the indicative years
of production averaged ~USD$50 per pound U3O8
in then constant 2018 dollars.
Consistent with the 2018 PFS, the overall cost profile and
construction timeline of the planned Gryphon underground mine is
considered to be more amenable to fixed (base escalated) price
contracts with nuclear energy utilities to reduce risk and justify
a development decision. Accordingly, the long-term price indicator
from UxC has been used for the Gryphon base-case economic
analysis.
The PFS reference case economic analysis reflects
the outcome of the current Gryphon Update based on a uranium
selling price that is the same as the “High Case”
previously reported from the 2018 PFS, which was based on a fixed
uranium selling price of USD$65 per pound U3O8
and a US to Canadian dollar exchange
rate of 1.3 to 1. This case allows for a direct comparison of the
NPV outcome from the Gryphon Update to the 2018
PFS.
Post-Tax Economic Analysis
The
Gryphon Update only considers one post-tax scenario for the
project’s base-case economic analysis, as there is no basis
for an “adjusted” case, given that the entity level tax
attributes of the WRJV owners are assumed to have been fully
depleted by the Phoenix operation. In calculating the profit
royalties and Canadian federal and provincial taxes payable for the
Gryphon Update, it has been assumed that the Gryphon construction
period will occur at a time when it will be allowable to deduct the
pre-production expenditures against income from Phoenix that is not
otherwise sheltered, thus the cash flow benefit of those deductions
have been reflected prior to first production from
Gryphon.
Permitting and Development Plans
At this time, Denison has not made a decision to
advance Gryphon. While the project may benefit from certain
infrastructure associated with the development of Phoenix, Gryphon
is currently considered a stand-alone project. Gryphon is not
expected to be subject to a Federal EA, as it would not meet the
criteria of a designated activity as contemplated by the Physical
Activities Regulations under the Impact Assessment Act
(“IAA”), which replaced
CEAA 2012 for projects commencing the regulatory review process
after August 28, 2019. If advanced into the permitting process,
Gryphon will, however, remain subject to the requirement to
complete an EA under the Saskatchewan Environmental
Assessment Act, and will
require (i) licensing by the CNSC and (ii) permitting by the
Saskatchewan Ministry of Environment. The required licenses and
permits cannot be issued until a decision on the Provincial EA has
been made.
Opportunities
The
Gryphon Update remains at the PFS level of confidence, and
opportunities remain to complete additional studies to further
advance confidence in the project plans. There are notable
opportunities for optimization of the Gryphon mine design,
including: (i) additional exploration drilling may increase
estimated mineral resources, which with further studies could
increase available probable reserves to support an extended mine
life; (ii) increasing the shaft depth could improve the ramp up
schedule of the mine and allow for earlier production; (iii)
selecting a conventional method of shaft sinking by reusing ground
freezing equipment potentially available from the Phoenix operation
could improve schedule and reduce risks associated with blind
boring; (iv) radiometric ore sorting underground could
significantly reduce the quantity of ore to be transported to the
mill for processing and could result in material reductions in
transportation costs, milling costs, and (v) the addition of a
grinding and leaching circuit at Gryphon to produce UBS to feed the
processing plant proposed for the Phoenix operation, potentially
reducing offsite infrastructure operating and capital costs
associated with the upgrades needed for the McClean lake mill and
the extension of Highway 914.
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. The Project is situated in proximity to
important regional infrastructure, including the Provincial
electrical transmission grid and an all-season Provincial highway.
The Project is comprised of 19 contiguous mineral claims covering
11,720 ha and is host to the high-grade Phoenix and Gryphon uranium
deposits, discovered by Denison in 2008 and 2014, respectively. The
WRJV is a joint venture between Denison (operator) and JCU (Canada)
Exploration Company Limited (“JCU”). Denison has an
effective 95% ownership interest in Wheeler River (90% directly,
and 5% indirectly through a 50% ownership in JCU).
About Denison
Denison is a uranium exploration and development company with
interests focused in the Athabasca Basin region of northern
Saskatchewan, Canada. In addition to its effective 95% interest in
the Wheeler River project, Denison's interests in the Athabasca
Basin include a 22.5% ownership interest in the MLJV, which
includes several uranium deposits and the McClean Lake uranium mill
that is contracted to process the ore from the Cigar Lake mine
under a toll milling agreement, plus a 25.17% interest in the
Midwest Main and Midwest A deposits, and a 67.41% interest in the
Tthe Heldeth Túé (“THT,” formerly J Zone) and
Huskie deposits on the Waterbury Lake property. The Midwest Main,
Midwest A, THT and Huskie deposits are each located within 20
kilometres of the McClean Lake mill.
Through its 50% ownership of JCU, Denison holds additional
interests in various uranium project joint ventures in Canada,
including the Millennium project (JCU 30.099%), the Kiggavik
project (JCU 33.8118%) and Christie Lake (JCU 34.4508%). Denison's
exploration portfolio includes further interests in properties
covering ~300,000 hectares in the Athabasca Basin
region.
Denison is also engaged in post-closure mine care and maintenance
services through its Closed Mines group, which manages Denison's
reclaimed mine sites in the Elliot Lake region and provides related
services to certain third-party projects.
For more information, please contact
|
David Cates
|
(416) 979-1991 ext
362
|
|
President and Chief Executive
Officer
|
|
|
|
|
|
Mac McDonald
|
(416) 979-1991 ext
242
|
|
Exec. Vice President &
Chief Financial Officer
|
|
|
|
|
|
Follow Denison on
Twitter
|
@DenisonMinesCo
|
Qualified Persons
The technical information contained in this release has been
reviewed and approved by Mr. Chad Sorba, P.Geo, Denison’s
Director, Technical Services, and Mr. Andrew Yackulic, P. Geo.,
Denison's Director, Exploration, each of whom is a Qualified Person
in accordance with the requirements of NI 43-101.
Technical Information
The Phoenix FS and Gryphon Update have been completed in accordance
with NI 43-101, Canadian Institute of Mining, Metallurgy and
Petroleum (CIM) standards, and best practices, as well as other
standards such as the AACE Cost Estimation Standards. Other than as
discussed herein and the risks identified in the Company’s
Annual Information Form dated March 27, 2023 (the
“AIF”) or subsequent quarterly financial reports filed
under the Company’s profile on SEDAR and EDGAR, there are no
known legal, political, environmental or other risks that could
materially affect the potential development of the mineral
resources.
The qualified persons involved in the preparation of the Phoenix FS
and Gryphon Update summarized in this press release, and the
related technical report, have followed industry accepted practices
for verifying that the data used in the study is suitable for the
purposes used. Data verification undertaken by Qualified Persons
included review of drill core, review of quality assurance program
and quality control measures and data, re-sampling and sample
analysis programs, and database verification, as applicable.
Validation checks were also performed on data. The independent
Qualified Persons for the Phoenix FS, led by Wood’s David
Myers P.Eng., have prepared the scientific and technical
information on the Phoenix FS and reviewed the information that is
summarized in this press release. Site visits by four of the
Qualified Persons (Lorne Schwartz and David Myers from Wood, Cliff
Revering from SRK and Dan Johnson from WSP, who each attended at
Phoenix) was one element of such data verification procedures for
the Phoenix FS. The independent Qualified Persons for the Gryphon
Update, led by Engcomp’s Gord Graham P.Eng., have prepared
the scientific and technical information on the Gryphon Update and
reviewed the information that is summarized in this press release.
Site visits by two of the qualified persons (Mark Mathieson from
SLR at Gryphon and Will McCombe from Hatch at McClean Lake) was one
element of the data verification procedures for the Gryphon
Update.
The NI 43-101 technical report, supporting the results of the
Phoenix FS and Gryphon Update included in this release, is in the
process of being finalized for review and approval of the WRJV
partners and is expected to be filed under Denison's profile on
SEDAR within 45 days of this release. A more detailed description
of data verification undertaken by the qualified persons will be
included in the relevant sections of the technical
report.
Once filed, such technical report will
supercede and replace any other technical report for the Project.
Further details of the 2018 PFS are provided 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 which is available under Denison’s profile on SEDAR
at www.sedar.com and on EDGAR at
www.sec.gov/edgar.shtml.
Non-GAAP Financial Measures
This news release includes certain terms or performance measures
commonly used in the mining industry that are not defined under
International Financial Reporting Standards ("IFRS"). Such non-GAAP
performance measures, including operating costs, sustaining costs,
and all-in costs, are included because the Company understands that
investors use this information to determine the Company's ability
to generate earnings and cash flows. The Company believes that
conventional measures of performance prepared in accordance with
IFRS do not fully illustrate the ability of mines to generate cash
flows. Non-GAAP financial measures should not be considered in
isolation as a substitute for measures of performance prepared in
accordance with IFRS and are not necessarily indicative of
operating costs, operating profit or cash flows presented under
IFRS.
Cautionary Statement Regarding Forward-Looking
Statements
Certain information contained in this news release constitutes
‘forward-looking information’, within the meaning of
the applicable United States and Canadian legislation, concerning
the business, operations and financial performance and condition of
Denison.
Generally, these forward-looking statements can be identified by
the use of forward-looking terminology such as ‘plans’,
‘expects’, ‘budget’,
‘scheduled’, ‘estimates’,
‘forecasts’, ‘intends’,
‘anticipates’, or ‘believes’, or the
negatives and/or variations of such words and phrases, or state
that certain actions, events or results ‘may’,
‘could,’, ‘would’, ‘might’ or
‘will be taken’, ‘occur’, ‘be
achieved’ or ‘has the potential to’.
In particular, this news release contains forward-looking
information pertaining to the following: the interpretation of the
Phoenix FS and Gryphon Update and expectations with respect
thereto, including estimates of mine production, NPV, capital
costs, operating costs and estimated uranium revenue; expectations
with respect to pre- and post-FID costs; expectations with respect
to taxes and royalties; assumptions with respect to the industry
and uranium prices, anticipated impacts of inflation; expectations
with respect to project development and permitting, construction
and operational processes; infrastructure and the availability of
services to be provided by third parties; expectations with respect
to project remediation and decommissioning; the results and
interpretations of the FFT; plans for FEED and detailed design for
Phoenix; comparisons of the Phoenix FS and Gryphon Update to the
estimates in the 2018 PFS; future development methods and plans;
assumptions regarding Denison's ability to obtain all necessary
regulatory approvals to commence development; and joint venture
ownership interests and the continuity of its agreements with its
joint venture partners.
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 modelling and assumptions upon which the
interpretation of results are based may not be maintained after
further testing or be representative of actual conditions. 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 AIF or subsequent quarterly
financial reports under the heading ‘Risk Factors’.
These factors are not, and should not be construed as being
exhaustive.
Accordingly, readers should not place undue reliance on
forward-looking statements. The forward-looking information
contained in this news release is expressly qualified by this
cautionary statement. Any forward-looking information and the
assumptions made with respect thereto speaks only as of the date of
this news release. Denison does not undertake any obligation to
publicly update or revise any forward-looking information after the
date of this news release to conform such information to actual
results or to changes in Denison's expectations except as otherwise
required by applicable legislation.
Figure 1 – Proposed ISR Wellfield Layout for Mining Phase
1
Figure 2 – Proposed Phoenix ISR Operation Site
Layout
