Denison Mines Corp 6-K, filed Nov 4, 2022
Denison Mines Corp. (DNN)
6-K
2022-11-04
For: 2022-11-03
View Original
Added on
April 07, 2026
About this 6-K
Denison Mines Corp filed this 6-K on November 4, 2022.
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: November 4, 2022
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
Exhibits 99.1 and
99.2 to this Form 6-K of Denison Mines Corp. are hereby
incorporated by reference to its Registration Statement on Form
F-10 (File No. 333-258939), as amended or
supplemented.
SIGNATURES
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.
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DENISON MINES
CORP.
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/s/ Amanda Willett
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Date:
November 4, 2022
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Amanda
Willett
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Vice
President Legal and Corporate Secretary
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FORM 6-K
EXHIBIT INDEX
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Exhibit Number
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Description
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99.1
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99.2
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99.3
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99.4
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99.5
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99.6
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99.7
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INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
(Unaudited -
Expressed in thousands of Canadian dollars (“CAD”)
except for share amounts)
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At September
30
2022
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At December
31
2021
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ASSETS
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Current
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Cash and cash
equivalents (note 4)
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$
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54,902
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$
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63,998
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Trade and other
receivables (note 5)
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4,881
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3,656
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Inventories (note
6)
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2,798
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3,454
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Investments-equity
instruments (note 7)
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10,235
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14,437
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Prepaid expenses
and other
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808
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1,310
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73,624
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86,855
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Non-Current
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Inventories-ore
in stockpiles (note 6)
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2,098
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2,098
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Investments-equity
instruments (note 7)
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162
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141
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Investments-uranium
(note 7)
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165,330
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133,114
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Investments-joint
venture (note 8)
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19,143
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21,392
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Prepaid expenses
and other
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55
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221
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Restricted cash
and investments (note 9)
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11,296
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12,001
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Property, plant
and equipment (note 10)
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255,706
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254,462
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Total
assets
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$
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527,414
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$
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510,284
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LIABILITIES
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Current
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Accounts payable
and accrued liabilities (note 11)
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$
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12,361
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$
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8,590
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Warrants on
investment (note 7)
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33
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1,625
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Share purchase
warrant liabilities (note 15)
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3,414
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-
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Current portion
of long-term liabilities:
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Deferred revenue
(note 12)
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4,171
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4,656
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Post-employment
benefits (note 13)
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120
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120
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Reclamation
obligations (note 14)
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2,122
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1,181
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Other liabilities
(note 16)
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189
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179
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22,410
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16,351
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Non-Current
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Deferred revenue
(note 12)
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29,285
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31,852
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Post-employment
benefits (note 13)
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1,092
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1,154
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Reclamation
obligations (note 14)
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33,312
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36,351
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Share purchase
warrant liabilities (note 15)
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-
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20,337
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Other liabilities
(note 16)
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405
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329
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Deferred income
tax liability
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5,354
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7,219
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Total
liabilities
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91,858
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113,593
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EQUITY
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Share capital
(note 17)
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1,533,545
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1,517,029
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Contributed
surplus (note 18)
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69,763
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67,496
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Deficit
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(1,169,517)
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(1,189,610)
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Accumulated other
comprehensive income (note 19)
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1,765
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1,776
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Total
equity
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435,556
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396,691
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Total
liabilities and equity
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$
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527,414
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$
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510,284
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Issued and
outstanding common shares (in thousands) (note 17)
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822,215
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812,430
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Commitments
and contingencies (note 24)
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The accompanying
notes are integral to the condensed interim consolidated financial
statements
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1
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INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
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(Unaudited -
Expressed in thousands of CAD dollars except for share and per
share amounts)
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Three
Months Ended
September
30
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Nine
Months Ended
September
30
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2022
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2021
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2022
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2021
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REVENUES (note 21)
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$
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3,043
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$
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9,541
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$
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13,968
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$
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16,663
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EXPENSES
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Operating (notes
20 and 21)
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(2,546)
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(4,319)
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(8,598)
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(9,898)
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Evaluation (note
21)
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(6,730)
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(3,839)
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(17,811)
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(12,981)
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Exploration (note
21)
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(1,549)
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(842)
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(5,175)
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(2,718)
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General and
administrative (note 21)
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(2,652)
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(2,089)
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(9,475)
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(7,076)
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Other income
(note 20)
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4,646
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34,999
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49,810
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39,306
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(8,831)
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23,910
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8,751
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6,633
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Income
(loss) before net finance expense
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(5,788)
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33,451
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22,719
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23,296
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Finance expense,
net (note 20)
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(668)
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(1,054)
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(2,242)
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(3,093)
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Equity share of
loss of joint venture (note 8)
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(945)
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(84)
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(2,249)
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(84)
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Income (loss)
before taxes
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(7,401)
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32,313
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18,228
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20,119
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Income tax
recovery - Deferred
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1,018
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553
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1,865
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1,507
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Net income (loss)
for the period
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$
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(6,383)
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$
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32,866
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$
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20,093
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$
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21,626
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Other
comprehensive income (loss) (note 19):
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Items that are or
may be subsequently reclassified to income (loss):
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Foreign currency
translation change
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(8)
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4
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(11)
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1
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Comprehensive
income (loss) for the period
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$
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(6,391)
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$
|
32,870
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$
|
20,082
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$
|
21,627
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Basic and diluted
net income (loss) per share:
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Basic
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$
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(0.01)
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$
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0.04
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$
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0.02
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$
|
0.03
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Diluted
|
$
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(0.01)
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$
|
0.04
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$
|
0.02
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$
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0.03
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|||
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Weighted-average
number of shares outstanding
(in
thousands):
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Basic
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819,228
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805,987
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817,317
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775,157
|
||||
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Diluted
|
|
819,228
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816,365
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|
827,555
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784,991
|
||||
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|
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The accompanying
notes are integral to the condensed interim consolidated financial
statements
|
||||||||||||
2
|
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INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY
|
||||||||
|
(Unaudited -
Expressed in thousands of CAD dollars)
|
||||||||
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|
Nine
Months Ended
September
30
|
||||
|
|
|
|
|
|
|
2022
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|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Share capital (note 17)
|
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|
|
|
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|
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Balance-beginning
of period
|
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|
|
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$
|
1,517,029
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$
|
1,366,710
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Shares issued for
cash, net of issue costs
|
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|
14,853
|
|
134,050
|
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Other shares
issued, net of issue costs
|
|
|
|
|
|
169
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|
-
|
|
Share options
exercised-cash
|
|
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|
827
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|
5,349
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Share options
exercised-transfer from contributed surplus
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|
316
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|
1,833
|
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Share units
exercised-transfer from contributed surplus
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351
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538
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Warrants
exercised-cash
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-
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|
1
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Balance-end of
period
|
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1,533,545
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1,508,481
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Contributed surplus
|
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|
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Balance-beginning
of period
|
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|
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|
|
67,496
|
|
67,387
|
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Share-based
compensation expense (note 18)
|
|
|
|
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2,934
|
|
1,987
|
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Share options
exercised-transfer to share capital
|
|
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|
|
|
(316)
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|
(1,833)
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Share units
exercised-transfer to share capital
|
|
|
|
|
|
(351)
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|
(538)
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Balance-end of
period
|
|
|
|
|
|
69,763
|
|
67,003
|
|
|
|
|
|
|
|
|
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|
|
Deficit
|
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
(1,189,610)
|
|
(1,208,587)
|
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Net
income
|
|
|
|
|
|
20,093
|
|
21,626
|
|
Balance-end of
period
|
|
|
|
|
|
(1,169,517)
|
|
(1,186,961)
|
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|
|
|
|
|
|
|
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|
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Accumulated other comprehensive income (note 19)
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|
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|
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Balance-beginning
of period
|
|
|
|
|
|
1,776
|
|
1,775
|
|
Foreign currency
translation
|
|
|
|
|
|
(11)
|
|
1
|
|
Balance-end of
period
|
|
|
|
|
|
1,765
|
|
1,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity
|
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
396,691
|
|
227,285
|
|
Balance-end of
period
|
|
|
|
|
$
|
435,556
|
$
|
390,299
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are integral to the condensed interim consolidated financial
statements
|
||||||||
3
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW
|
|
||||||||
|
(Unaudited -
Expressed in thousands of CAD dollars)
|
|
||||||||
|
|
|
|
|
Nine
Months Ended
September
30
|
|
||||
|
CASH PROVIDED BY (USED IN):
|
|
|
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Net income for
the period
|
|
|
|
|
$
|
20,093
|
$
|
21,626
|
|
|
Adjustments and
Items not affecting cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
Depletion,
depreciation, amortization and accretion
|
|
|
|
|
|
6,124
|
|
5,095
|
|
|
Fair value
change losses (gains):
|
|
|
|
|
|
|
|
||
|
Investments-equity
instruments (notes 7 and 20)
|
|
|
|
4,181
|
|
(9,476)
|
|
||
|
Investments-uranium
(notes 7 and 20)
|
|
|
|
(32,216)
|
|
(43,672)
|
|
||
|
Warrants on
investment (notes 7 and 20)
|
|
|
|
(1,592)
|
|
-
|
|
||
|
Share
purchase warrant liabilities (notes 15 and 20)
|
|
|
|
(16,923)
|
|
11,567
|
|
||
|
Joint venture-equity share of loss (note 8)
|
|
|
|
2,249
|
|
84
|
|
||
|
Recognition
of deferred revenue (note 12)
|
|
|
|
(4,971)
|
|
(1,756)
|
|
||
|
Loss on
property, plant and equipment disposals
|
|
|
|
28
|
|
2
|
|
||
|
Gain on lease
liability derecognition
|
|
|
|
-
|
|
(4)
|
|
||
|
Post-employment
benefit payments (note 13)
|
|
|
|
(78)
|
|
(84)
|
|
||
|
Reclamation
obligation expenditures (note 14)
|
|
|
|
(1,129)
|
|
(599)
|
|
||
|
Share-based
compensation (note 18)
|
|
|
|
2,934
|
|
1,987
|
|
||
|
Foreign exchange
(gains) losses (note 20)
|
|
|
|
|
|
(902)
|
|
1,219
|
|
|
Warrant
liabilities, issue costs expensed
|
|
|
|
|
|
-
|
|
791
|
|
|
Deferred income
tax recovery
|
|
|
|
|
|
(1,865)
|
|
(1,507)
|
|
|
Change in
non-cash working capital items (note 20)
|
|
|
|
|
|
3,806
|
|
(114)
|
|
|
Net
cash used in operating activities
|
|
|
|
|
|
(20,261)
|
|
(14,841)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Purchase of
investments-uranium (note 7)
|
|
|
|
|
|
-
|
|
(87,811)
|
|
|
Increase in term
loan receivable and investment in joint venture (note
8)
|
|
|
|
-
|
|
(40,950)
|
|
||
|
Repayment of term
loan receivable (note 8)
|
|
|
|
|
|
-
|
|
20,450
|
|
|
Transaction
costs-investment in joint venture (note 8)
|
|
|
|
|
|
-
|
|
(1,355)
|
|
|
Additions of
property, plant and equipment (note 10)
|
|
|
|
(6,093)
|
|
(446)
|
|
||
|
Proceeds on sale
of property, plant and equipment
|
|
|
|
8
|
|
2
|
|
||
|
Decrease
(increase) in restricted cash and investments
|
|
|
|
705
|
|
(319)
|
|
||
|
Net
cash used in investing activities
|
|
|
|
|
|
(5,380)
|
|
(110,429)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Issuance of debt
obligations (note 16)
|
|
|
|
|
|
141
|
|
34
|
|
|
Repayment
of debt obligations (note 16)
|
|
|
|
|
|
(154)
|
|
(189)
|
|
|
Proceeds
from unit issues, net of issue costs (note 17)
|
|
|
|
-
|
|
135,630
|
|
||
|
Proceeds
from share issues, net of issue costs (note 17)
|
|
|
|
|
|
14,803
|
|
10,863
|
|
|
Proceeds
from share options exercised (note 17)
|
|
|
|
|
|
827
|
|
5,349
|
|
|
Warrant
exercise proceeds
|
|
|
|
|
|
-
|
|
1
|
|
|
Net
cash provided by financing activities
|
|
|
|
|
|
15,617
|
|
151,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease)
increase in cash and cash equivalents
|
|
|
|
|
|
(10,024)
|
|
26,418
|
|
|
Foreign
exchange effect on cash and cash equivalents
|
|
|
|
|
|
928
|
|
(533)
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
|
|
|
63,998
|
|
24,992
|
|
|
Cash
and cash equivalents, end of period
|
|
|
|
|
$
|
54,902
|
$
|
50,877
|
|
|
|
|
||||||||
|
The accompanying
notes are integral to the condensed interim consolidated financial
statements
|
|
||||||||
|
|
|
||||||||
|
|
|
||||||||
4
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
|
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022
(Unaudited -
Expressed in CAD dollars except for shares and per share
amounts)
|
1.
NATURE OF
OPERATIONS
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, and investing in uranium.
The Company has
an effective 95.0% interest in the Wheeler River Joint Venture
(“WRJV”), a 67.01% 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 12). In addition, the Company has
varying ownership interests in several other development and
exploration projects located in Saskatchewan, Canada.
Through its 50%
ownership of JCU (Canada) Exploration Company, Limited
(“JCU”), Denison holds further indirect 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%). See note 8 for
details.
Denison is also
engaged in post-closure mine care and maintenance services through
its Closed Mines group (formerly Denison Environmental Services),
which manages Denison’s Elliot Lake reclamation projects and
provides related services to certain third-party
projects.
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, 2021. The
Company’s presentation currency is Canadian dollars
(“CAD”).
These financial
statements were approved by the board of directors for issue on
November 3, 2022.
3.
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, 2021.
The Company has
considered the amendments to IAS 16, Property Plant and Equipment, IAS 37,
Provisions, Contingent Liabilities
and Contingent Assets and IFRS 3 Business Combinations which are
effective for annual periods beginning on or after January 1, 2022
and has concluded that these amendments have no impact on the
Company’s financial statements.
5
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
4.
CASH AND
CASH EQUIVALENTS
The cash and cash
equivalent balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in
thousands)
|
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
$
|
1,785
|
$
|
2,002
|
|
Cash in MLJV and
MWJV
|
|
|
|
1,364
|
|
1,275
|
|
Cash
equivalents
|
|
|
|
51,753
|
|
60,721
|
|
|
|
|
$
|
54,902
|
$
|
63,998
|
5.
TRADE AND
OTHER RECEIVABLES
The trade and
other receivables balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
|
(in
thousands)
|
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
$
|
3,888
|
$
|
2,866
|
|
|
Receivables in
MLJV and MWJV
|
|
|
|
539
|
|
533
|
|
|
Sales tax
receivables
|
|
|
|
425
|
|
255
|
|
|
Sundry
receivables
|
|
|
|
29
|
|
2
|
|
|
|
|
|
$
|
4,881
|
$
|
3,656
|
|
6.
INVENTORIES
The inventories
balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in
thousands)
|
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Uranium
concentrates
|
|
|
$
|
-
|
$
|
451
|
|
Inventory of ore
in stockpiles
|
|
|
|
2,098
|
|
2,098
|
|
Mine and mill
supplies in MLJV
|
|
|
|
2,798
|
|
3,003
|
|
|
|
|
$
|
4,896
|
$
|
5,552
|
|
|
|
|
|
|
|
|
|
Inventories-by
balance sheet presentation:
|
|
|
|
|
|
|
|
Current
|
|
|
$
|
2,798
|
$
|
3,454
|
|
Long-term-ore in
stockpiles
|
|
|
|
2,098
|
|
2,098
|
|
|
|
|
$
|
4,896
|
$
|
5,552
|
6
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
7.
INVESTMENTS
The investments
balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in
thousands)
|
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
|
Equity
instruments
|
|
|
|
|
|
|
|
Shares
|
|
|
$
|
10,141
|
$
|
14,349
|
|
Warrants
|
|
|
|
256
|
|
229
|
|
Uranium
|
|
|
|
165,330
|
|
133,114
|
|
|
|
|
$
|
175,727
|
$
|
147,692
|
|
|
|
|
|
|
|
|
|
Investments-by
balance sheet presentation:
|
|
|
|
|
|
|
|
Current
|
|
|
$
|
10,235
|
$
|
14,437
|
|
Long-term
|
|
|
|
165,492
|
|
133,255
|
|
|
|
|
$
|
175,727
|
$
|
147,692
|
The investments
continuity summary is as follows:
|
(in
thousands)
|
|
Equity
Instruments
|
|
Physical
Uranium
|
|
Total
Investments
|
|
|
|
|
|
|
|
|
|
Balance–December 31,
2021
|
$
|
14,578
|
$
|
133,114
|
$
|
147,692
|
|
Change in fair
value to profit and (loss) (note 20)
|
|
(4,181)
|
|
32,216
|
|
28,035
|
|
Balance–September
30, 2022
|
$
|
10,397
|
$
|
165,330
|
$
|
175,727
|
At September 30,
2022, the Company holds equity instruments consisting of shares and
warrants in publicly traded companies and no debt instruments.
Long-term equity instruments consist of warrants in publicly traded
companies exercisable for a period of more than one year after the
balance sheet date.
Investment
in uranium
At September 30,
2022, the Company holds a total of 2,500,000 pounds of physical
uranium as U3O8, acquired at a
weighted average purchase price of $36.67 (USD$29.66) per pound
U3O8, including
purchase commissions, for a total cost of $91,674,000
(USD$74,140,000). The uranium is being held as a long-term
investment.
Sale
of investment and issuance of warrants on
investment
In 2021, the
Company sold by private agreement (1) 32,500,000 common shares of
GoviEx Uranium Inc. (“GoviEx”) and (2) 32,500,000
common share purchase warrants, entitling the holder to acquire one
additional common share of GoviEx owned by Denison (“GoviEx
Warrants”), for combined gross proceeds of $15,600,000. The
proceeds from this transaction were allocated between the GoviEx
common shares sold and the GoviEx Warrants issued on a relative
fair value basis. The GoviEx Warrants entitle the holder to acquire
one additional common share of GoviEx owned by the Company at an
exercise price $0.80, for 18 months after issuance (expiring in
April 2023).
The Company
continues to hold 32,644,000 common shares of GoviEx. If the GoviEx
Warrants are exercised in full, Denison will receive $26,000,000
and will transfer a further 32,500,000 GoviEx common shares to the
warrant holders.
At December 31,
2021, the fair value of the GoviEx Warrants was estimated to be
$1,625,000 ($0.05 per warrant), based on the following assumptions
in the Black-Scholes option pricing model – expected
volatility of 82%, risk-free interest rate of 0.91%, dividend yield
of 0% and an expected term of 16 months.
At September 30,
2022, the fair value of the GoviEx Warrants is estimated to be
$33,000 ($0.001 per warrant), based on the following assumptions in
the Black-Scholes option pricing model – expected volatility
of 73%, risk-free interest rate of 3.76%, dividend yield of 0% and
an expected term of 7 months.
7
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
Number
of
|
|
Warrant
|
|
(in thousands
except warrant amounts)
|
Warrants
|
|
Liability
|
|
|
|
|
|
|
Balance–December 31,
2021
|
32,500,000
|
$
|
1,625
|
|
Change in fair
value to (profit) and loss (note 20)
|
-
|
|
(1,592)
|
|
Balance–September 30,
2022
|
32,500,000
|
$
|
33
|
8.
INVESTMENT
IN JOINT VENTURE
The investment in
joint venture balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in
thousands)
|
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Investment in
joint venture-by investee:
|
|
|
|
|
|
|
|
JCU
|
|
|
$
|
19,143
|
$
|
21,392
|
|
|
|
|
$
|
19,143
|
$
|
21,392
|
A summary of the
investment in JCU is as follows:
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance-December
31, 2021
|
|
|
|
|
$
|
21,392
|
|
Equity share of
loss
|
|
|
|
|
|
(2,249)
|
|
Balance-September
30, 2022
|
|
|
|
|
$
|
19,143
|
On August 3,
2021, Denison completed the acquisition of 50% of JCU from UEX
Corporation (“UEX”), for cash consideration of
$20,500,000 plus transaction costs of $1,356,000. Denison’s
acquisition of its 50% interest in JCU occurred immediately
following UEX’s acquisition of all the outstanding shares of
JCU from Overseas Uranium Resources Development Co., Limited
(“OURD”) for cash consideration of
$41,000,000.
Pursuant to
Denison's agreement with UEX, Denison provided UEX with an
interest-free 90-day term loan of $40,950,000 million (the "Term
Loan") to facilitate UEX's purchase of JCU from OURD. On the
transfer of 50% of the shares in JCU from UEX to Denison,
$20,500,000 of the amount drawn under the Term Loan was deemed
repaid by UEX. UEX repaid the remainder of the Term Loan in
September 2021.
JCU is a private
company that holds a portfolio of twelve uranium project joint
venture interests in Canada, including a 10% interest in the WRJV,
a 30.099% interest in the Millennium project (Cameco Corporation
69.901%), a 33.8118% interest in the Kiggavik project (Orano Canada
Inc. 66.1877%), and a 34.4508% interest in the Christie Lake
Project (UEX 65.5492%).
The following
tables are summaries of the consolidated financial information of
JCU on a 100% basis, taking into account adjustments made by
Denison for equity accounting purposes (including fair value
adjustments and differences in accounting policies). Denison
records its equity share of earnings (loss) in JCU one month in
arrears (due to the information not yet being available), adjusted
for any known material transactions that have occurred up to the
period end date on which Denison is reporting.
8
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in
thousands)
|
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Total current
assets(1)
|
|
|
$
|
2,032
|
$
|
4,851
|
|
Total non-current
assets
|
|
|
|
38,067
|
|
38,067
|
|
Total current
liabilities
|
|
|
|
(1,813)
|
|
(134)
|
|
Total non-current
liabilities
|
|
|
|
-
|
|
-
|
|
Total net
assets
|
|
|
$
|
38,286
|
$
|
42,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
|
|
|
|
September 30,2022(2)
|
||||
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
$
|
-
|
|
Net
loss
|
|
|
|
|
|
(4,498)
|
|
Other
comprehensive income
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
JCU net assets to Denison investment carrying value:
|
|
|
||||
|
Adjusted net assets of JCU–at December 31, 2021
|
|
|
$
|
42,784
|
||
|
Net
loss
|
|
|
|
|
|
(4,498)
|
|
Adjusted net assets of JCU–at
September 30, 2022
|
|
|
$
|
38,286
|
||
|
Denison ownership
interest
|
|
|
|
|
|
50.00%
|
|
Denison share of
adjusted net assets of JCU
|
|
|
|
|
|
19,143
|
|
Investment in
JCU
|
|
|
|
|
$
|
19,143
|
(1)
Included in current assets
are $2,032,000 in cash and cash equivalents
(2)
Represents JCU net loss for
the nine months ended August 31, 2022 (recorded one month in
arrears), adjusted for differences in fair value allocations and
accounting policies
9.
RESTRICTED
CASH AND INVESTMENTS
The restricted
cash and investments balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in
thousands)
|
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
|
3,324
|
$
|
2,866
|
|
Investments
|
|
|
|
7,972
|
|
9,135
|
|
|
|
|
$
|
11,296
|
$
|
12,001
|
|
Restricted cash
and investments-by item:
|
|
|
|
|
|
|
|
Elliot Lake
reclamation trust fund
|
|
|
$
|
3,324
|
$
|
2,866
|
|
Letters of credit
facility pledged assets
|
|
|
|
7,972
|
|
9,000
|
|
Letters of credit
additional collateral
|
|
|
|
-
|
|
135
|
|
|
|
|
$
|
11,296
|
$
|
12,001
|
At September 30,
2022, investments consist of guaranteed investment certificates
with maturities of less than 120 days.
Elliot
Lake Reclamation Trust Fund
During the nine
months ended September 30, 2022, the Company deposited an
additional $1,199,000 into the Elliot Lake Reclamation Trust Fund
and withdrew $748,000.
Letters of
Credit Facility Pledged Assets
In April 2022,
the Company entered into an amendment with respect to the letters
of credit facility.
9
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
The amendment was
related to the reduction in financial assurances required for the
McClean Lake and Midwest operations as a result of the recently
approved Preliminary Decommissioning Plan (“PDP”) for
these projects. Under the amended terms, the maximum letters of
credit available was reduced to $22,972,000. Concurrently, the
pledged assets on deposit with the Bank of Nova Scotia
(“BNS”) required to maintain the facility, was reduced
from $9,000,000 to $7,972,000, and the additional collateral of
$135,000 was released. In total, $1,163,000 in previously
restricted cash has been released back to the Company. All other
terms of the credit facility (tangible net worth covenant, and
security for the facility) remain unchanged by this further
amendment.
At September 30,
2022, the Company has $7,972,000 on deposit with BNS as pledged
restricted investments pursuant to its obligations under of the
letters of credit facility (refer to notes 14 and 16).
10.
PROPERTY,
PLANT AND EQUIPMENT
The property,
plant and equipment (“PP&E”) continuity summary is
as follows:
|
|
|
Plant
and Equipment
|
|
Mineral
|
|
Total
|
||
|
(in
thousands)
|
|
Owned
|
|
Right-of-Use
|
|
Properties
|
|
PP&E
|
|
|
|
|
|
|
|
|
|
|
|
Cost:
|
|
|
|
|
|
|
|
|
|
Balance–December 31,
2021
|
$
|
105,683
|
$
|
953
|
$
|
179,788
|
$
|
286,424
|
|
Additions
|
|
5,981
|
|
75
|
|
112
|
|
6,168
|
|
Disposal
|
|
(187)
|
|
(267)
|
|
-
|
|
(454)
|
|
Reclamation–Adjustment
(note 14)
|
|
(2,038)
|
|
-
|
|
-
|
|
(2,038)
|
|
Balance–September
30, 2022
|
$
|
109,439
|
$
|
761
|
$
|
179,900
|
$
|
290,100
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
amortization, depreciation:
|
|
|
|
|
|
|
|
|
|
Balance–December 31,
2021
|
$
|
(31,420)
|
$
|
(542)
|
$
|
-
|
$
|
(31,962)
|
|
Amortization
|
|
(139)
|
|
-
|
|
-
|
|
(139)
|
|
Depreciation
|
|
(2,599)
|
|
(111)
|
|
-
|
|
(2,710)
|
|
Disposal
|
|
150
|
|
267
|
|
-
|
|
417
|
|
Balance–September
30, 2022
|
$
|
(34,008)
|
$
|
(386)
|
$
|
-
|
$
|
(34,394)
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
value:
|
|
|
|
|
|
|
|
|
|
Balance–December 31,
2021
|
$
|
74,263
|
$
|
411
|
$
|
179,788
|
$
|
254,462
|
|
Balance–September 30,
2022
|
$
|
75,431
|
$
|
375
|
$
|
179,900
|
$
|
255,706
|
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
$59,320,000 or 79% of the owned plant and equipment carrying value
as at September 30, 2022.
The additions
during the nine months ended September 30, 2022 primarily relate to
the purchase and renovation of an office building in Saskatoon,
Saskatchewan to accommodate the Company’s growing workforce
and capital equipment to support the Feasibility Field Test
(“FFT”) and exploration programs at Wheeler
River.
Plant and
Equipment – Right-of-Use
The Company has
included the cost of various right-of-use (“ROU”)
assets within its plant and equipment carrying value amount. These
assets consist of building, vehicle and office equipment leases.
The majority of the ROU assets value is attributable to the
building lease assets for the Company’s office space in
Toronto.
Mineral
Properties
As at September
30, 2022, the Company has various interests in development,
evaluation and exploration projects located in Saskatchewan,
Canada, which are either held directly, or through contractual
arrangements. The properties with significant carrying values are
Wheeler River, Waterbury Lake, Midwest, Mann Lake, Wolly, Johnston
Lake and McClean Lake, which together represent $162,799,000, or
91%, of the total mineral property carrying value as at September
30, 2022.
10
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
11. ACCOUNTS
PAYABLE AND ACCRUED LIABILITIES
The accounts
payable and accrued liabilities balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
|
(in
thousands)
|
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
Trade
payables
|
|
|
$
|
6,517
|
$
|
3,179
|
|
|
Payables in MLJV
and MWJV
|
|
|
|
4,422
|
|
4,316
|
|
|
Other
payables
|
|
|
|
1,422
|
|
1,095
|
|
|
|
|
|
$
|
12,361
|
$
|
8,590
|
|
12. DEFERRED
REVENUE
The deferred
revenue balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in
thousands)
|
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Deferred
revenue–pre-sold toll milling:
|
|
|
|
|
|
|
|
CLJV toll
milling–Ecora
|
|
|
$
|
33,456
|
$
|
36,508
|
|
|
|
|
$
|
33,456
|
$
|
36,508
|
|
|
|
|
|
|
|
|
|
Deferred
revenue-by balance sheet presentation:
|
|
|
|
|
|
|
|
Current
|
|
|
$
|
4,171
|
$
|
4,656
|
|
Non-current
|
|
|
|
29,285
|
|
31,852
|
|
|
|
|
$
|
33,456
|
$
|
36,508
|
The deferred
revenue liability continuity summary is as follows:
|
(in
thousands)
|
|
|
|
|
|
Deferred
Revenue
|
|
|
|
|
|
|
|
|
|
Balance–December 31,
2021
|
|
|
|
|
$
|
36,508
|
|
Accretion (note
20)
|
|
|
|
|
|
1,919
|
|
Revenue
recognized during the period (note 21)
|
|
|
|
|
|
(4,971)
|
|
Balance–September
30, 2022
|
|
|
|
|
$
|
33,456
|
Arrangement
with Ecora Resources (“Ecora”) formerly named Anglo
Pacific Group PLC
In February 2017,
Denison closed an arrangement with Ecora 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 up-front payment was based upon an estimate of the
gross toll milling cash receipts to be received by
Denison.
The Ecora
Arrangement represents a contractual obligation of Denison to pay
onward to Ecora 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 Ecora
or any changes in Cigar Lake Phase 1 and Phase 2 toll milling
production estimates are recognized.
In the nine
months ended September 30, 2022, the Company has recognized
$4,971,000 of toll milling revenue from the draw-down of deferred
revenue based on Cigar Lake toll milling production in the
nine-month period (12,686,000 pounds of U3O8 on a 100% basis).
The drawdown in the nine months ending September 30, 2022 includes
a cumulative increase in revenue for prior periods of $1,444,000,
resulting from changes in estimates to the toll milling drawdown
rate in the first quarter of 2022.
11
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
The true-up
adjustment was predominantly driven by a change in the estimated
timing of the milling of the Cigar Lake ore, following an
announcement from the operators of the Cigar Lake mine that mine
production would be reduced from previous planned amounts of 18
million pounds U3O8 per year to 15
million pounds U3O8 per year in 2022
and 2023, and then to 13.5 million pounds U3O8 per year
thereafter. Under IFRS 15, Revenue from Contracts with Customers,
the change in the estimated timing of the toll milling of the CLJV
ore resulted in an increase to the implied financing component of
the toll milling transaction, increasing the total deferred revenue
to be recognized over the life of the toll milling contract, as
well as the deferred revenue drawdown rate. The updated drawdown
rate has been applied retrospectively to all pounds produced for
the CLJV since the inception of the Ecora arrangement, resulting in
the current period true-up.
Production at the
Cigar Lake mine and the McClean Lake mill, was temporarily
suspended at the beginning of 2021, owing to the shut-down of the
Cigar Lake mine in response to the COVID-19 pandemic. The CLJV
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 resuming in early June
2021.
Accordingly, for
the comparative nine months ended September 30, 2021, the Company
recognized $1,756,000 of toll milling revenue from the draw-down of
deferred revenue comprised of $1,695,000 based on Cigar Lake toll
milling production in the nine-month period (6,552,000 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 which was
also recorded in the second quarter of 2021.
The current
portion of the deferred revenue liability at September 2022
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 is reassessed on a quarterly
basis.
13. POST-EMPLOYMENT
BENEFITS
The
post-employment benefits balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in
thousands)
|
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Accrued benefit
obligation
|
|
|
$
|
1,212
|
$
|
1,274
|
|
|
|
|
$
|
1,212
|
$
|
1,274
|
|
|
|
|
|
|
|
|
|
Post-employment
benefits-by balance sheet presentation:
|
|
|
|
|
||
|
Current
|
|
|
$
|
120
|
$
|
120
|
|
Non-current
|
|
|
|
1,092
|
|
1,154
|
|
|
|
|
$
|
1,212
|
$
|
1,274
|
The
post-employment benefits continuity summary is as
follows:
|
(in
thousands)
|
|
|
|
|
|
Post-Employment
Benefits
|
|
|
|
|
|
|
|
|
|
Balance–December 31,
2021
|
|
|
|
|
$
|
1,274
|
|
Accretion (note
20)
|
|
|
|
|
|
16
|
|
Benefits
paid
|
|
|
|
|
|
(78)
|
|
Balance–September
30, 2022
|
|
|
|
|
$
|
1,212
|
12
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
14. RECLAMATION
OBLIGATIONS
The reclamation
obligations balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in
thousands)
|
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Reclamation
obligations-by location:
|
|
|
|
|
|
|
|
Elliot
Lake
|
|
|
$
|
20,755
|
$
|
20,877
|
|
McClean and
Midwest Joint Ventures
|
|
|
|
12,457
|
|
15,405
|
|
Wheeler River and
other
|
|
|
|
2,222
|
|
1,250
|
|
|
|
|
$
|
35,434
|
$
|
37,532
|
|
|
|
|
|
|
|
|
|
Reclamation
obligations-by balance sheet presentation:
|
|
|
|
|
||
|
Current
|
|
|
$
|
2,122
|
$
|
1,181
|
|
Non-current
|
|
|
|
33,312
|
|
36,351
|
|
|
|
|
$
|
35,434
|
$
|
37,532
|
The reclamation
obligations continuity summary is as follows:
|
(in
thousands)
|
|
|
|
|
|
Reclamation
Obligations
|
|
|
|
|
|
|
|
|
|
Balance–December
31, 2021
|
|
|
|
|
$
|
37,532
|
|
Accretion (note
20)
|
|
|
|
|
|
1,069
|
|
MLJV site
restoration–adjustment
|
|
|
|
|
|
(3,303)
|
|
Wheeler River and
other-addition
|
|
|
|
|
|
1,265
|
|
Expenditures
incurred
|
|
|
|
|
|
(1,129)
|
|
Balance–September
30, 2022
|
|
|
|
|
$
|
35,434
|
Site
Restoration: Elliot Lake
The Elliot Lake
uranium mine was closed in 1992 and capital works to decommission
this site were completed in 1997. The Company is responsible for
monitoring the Tailings Management Areas at the Denison and
Stanrock sites and for treatment of water discharged from these
areas.
Spending on
restoration activities at the Elliot Lake site is funded from
monies in the Elliot Lake Reclamation Trust fund (see note
9).
Site
Restoration: McClean Lake Joint Venture and Midwest Joint
Venture
In January 2022,
the CNSC approved an amendment to the operating license for the
MLJV and MWJV Operations, which allows for the expansion of the
McClean Lake Tailings Management Facility (“TMF”),
along with the associated revised PDP and cost estimate. The
updated PDP was used to update the reclamation obligation for
McClean Lake and Midwest, resulting in a reduction in the
reclamation obligation of $3,303,000. As at September 30, 2022, the
Company’s estimate of the undiscounted amount of future
reclamation costs, in current year dollars, is $22,072,000
(December 31, 2021 - $24,617,000). The majority of the reclamation
costs are expected to be incurred between 2041 and 2059. Revisions
to the reclamation liabilities for the MLJV and MWJV are recognized
on the balance sheet as adjustments to the assets associated with
the sites.
Under the
Saskatchewan 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. The updated
reclamation plan resulted in a reduction in the Company’s
pro-rata share of the required financial assurances from
$24,135,000 to $22,972,000. As at September 30, 2022, the Company
has provided irrevocable standby letters of credit, from a
chartered bank, in favour of the Saskatchewan Ministry of
Environment, totalling $22,972,000.
Refer to note 9
for details regarding a further amendment to the letters of credit
facility that occurred in April 2022.
13
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
Site
Restoration: Wheeler River and other
The
Company’s exploration and evaluation activities, including
those related to Wheeler River, are subject to environmental
regulations as set out by the government of Saskatchewan. Cost
estimates of the future decommissioning and reclamation activities
are recognized when the liability is incurred and are reduced when
expenditures are incurred.
15. SHARE
PURCHASE WARRANT LIABILITIES
In connection
with the public offerings of units in February 2021 and March 2021
(see note 17), 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 (expires February 2023). 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 (expires
March 2023).
Since these
warrants are exercisable 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
(“FVTPL”). 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 in Other Income
(expense).
February
2021 Warrants
At December 31,
2021, the fair value of each February 2021 warrant was estimated to
be $0.4032, using a USD to CAD foreign exchange rate of 0.7888 and
incorporated the following assumptions in the Black-Scholes option
pricing model – expected volatility of 84%, risk-free
interest rate of 0.91%, dividend yield of 0% and an expected term
of 1.13 years.
At September 30,
2022, the fair value of each February 2021 warrant is estimated to
be $0.0410, using a USD to CAD foreign exchange rate of 0.7296 and
incorporating the following assumptions in the Black-Scholes option
pricing model – expected volatility of 72%, risk-free
interest rate of 3.76%, dividend yield of 0% and an expected term
of 0.39 years.
March 2021
Warrants
At December 31,
2021, the fair value of each March 2021 warrant was estimated to be
$0.3563, using a USD to CAD foreign exchange rate of 0.7888 and
incorporated the following assumptions in the Black-Scholes option
pricing model – expected volatility of 82%, risk-free
interest rate of 0.91%, dividend yield of 0% and an expected term
of 1.22 years.
At September 30,
2022, the fair value of each March 2021 warrant is estimated to be
$0.0470, using a USD to CAD foreign exchange rate of 0.7296 and
incorporating the following assumptions in the Black-Scholes option
pricing model – expected volatility of 77%, risk-free
interest rate of 3.76%, dividend yield of 0% and an expected term
of 0.47 years.
The share
purchase warrant liabilities continuity is as follows:
|
|
Number
of
|
|
Warrant
|
|
(in thousands
except warrant amounts)
|
Warrants
|
|
Liability
|
|
|
|
|
|
|
Balance–December 31,
2021
|
55,006,475
|
$
|
20,337
|
|
Change in fair
value to (profit) and loss (note 20)
|
-
|
|
(16,923)
|
|
Balance–September 30,
2022
|
55,006,475
|
$
|
3,414
|
14
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
16. OTHER
LIABILITIES
The other
liabilities balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in
thousands)
|
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Debt
obligations:
|
|
|
|
|
|
|
|
Lease
obligations
|
|
|
$
|
401
|
$
|
452
|
|
Loan
obligations
|
|
|
|
193
|
|
56
|
|
|
|
|
$
|
594
|
$
|
508
|
|
|
|
|
|
|
|
|
|
Other
liabilities-by balance sheet presentation:
|
|
|
|
|
||
|
Current
|
|
|
$
|
189
|
$
|
179
|
|
Non-current
|
|
|
|
405
|
|
329
|
|
|
|
|
$
|
594
|
$
|
508
|
Debt
Obligations
At September 30,
2022, 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)
|
|
|
|
Liabilities
|
|
Liabilities
|
|
Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance–December
31, 2021
|
|
|
$
|
452
|
$
|
56
|
$
|
508
|
|
|
Accretion (note
20)
|
|
|
|
24
|
|
-
|
|
24
|
|
|
Additions
|
|
|
|
58
|
|
158
|
|
216
|
|
|
Repayments
|
|
|
|
(133)
|
|
(21)
|
|
(154)
|
|
|
Balance–September
30, 2022
|
|
|
$
|
401
|
$
|
193
|
$
|
594
|
|
Debt
Obligations – Scheduled Maturities
The following
table outlines the Company’s scheduled maturities of its debt
obligations at September 30, 2022:
|
|
|
|
Lease
|
|
Loan
|
|
Total
Debt
|
||
|
(in
thousands)
|
|
|
|
Liabilities
|
|
Liabilities
|
|
Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity
analysis–contractual undiscounted cash flows:
|
|
|
|
|
|
|
|||
|
Next 12
months
|
|
|
$
|
149
|
$
|
40
|
$
|
189
|
|
|
One to five
years
|
|
|
|
301
|
|
164
|
|
465
|
|
|
More than five
years
|
|
|
|
-
|
|
-
|
|
-
|
|
|
Total
obligation–September 30, 2022–undiscounted
|
|
450
|
|
204
|
|
654
|
|||
|
Present value
discount adjustment
|
|
|
|
(49)
|
|
(11)
|
|
(60)
|
|
|
Total
obligation–September 30, 2022–discounted
|
$
|
401
|
$
|
193
|
$
|
594
|
|||
Letters of
Credit Facility
In January 2022,
the Company entered into an amending agreement for its letters of
credit facility with BNS (the “2022 Facility”). Under
the amendment, the maturity date of the 2022 Facility has been
extended to January 31, 2023. All other terms of the 2022 Facility
(tangible net worth covenant, pledged cash, and security for the
facility) remain unchanged from the previous facility.
In April 2022,
the Company entered into a further amendment with respect to the
letters of credit facility. Refer to note 9 for
details.
As of September
30, 2022, the 2022 Facility provided the Company with access to
credit up to $22,972,000 (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 $7,972,000 covered by pledged cash collateral) and standby fees
of 0.75%.
15
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
At September 30,
2022, the Company is in compliance with its facility covenants and
$22,972,000 (December 31, 2021: $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 (see
note 14). During the nine months ended September 30, 2022, the
Company incurred letter of credit fees of $287,000 (September 30,
2021: $297,000).
17. 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
except share amounts)
|
Shares
|
|
Capital
|
|
|
|
|
|
|
Balance–December 31,
2021
|
812,429,995
|
$
|
1,517,029
|
|
Issued for
cash:
|
|
|
|
|
Shares issued for
cash–total
|
8,025,460
|
|
15,306
|
|
Less: share issue
costs
|
-
|
|
(453)
|
|
Other shares
issued–total
|
128,052
|
|
219
|
|
Less: other share
issue costs
|
-
|
|
(50)
|
|
Share option
exercises
|
1,115,500
|
|
827
|
|
Share option
exercises–transfer from contributed
surplus
|
-
|
|
316
|
|
Share unit
exercises–transfer from contributed
surplus
|
515,669
|
|
351
|
|
|
9,784,681
|
$
|
16,516
|
|
Balance–September 30,
2022
|
822,214,676
|
$
|
1,533,545
|
Share
Issue
On September 16,
2021, the Company filed a short form base shelf prospectus
(‘2021 Shelf Prospectus’) with the securities
regulatory authorities in each of the provinces and territories in
Canada and in the United States. Under the 2021 Shelf Prospectus,
the Company is 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 2021 Shelf Prospectus, for an
aggregate offering amount of up to $250,000,000 during the 25 month
period ending on October 16, 2023.
On September 28,
2021, Denison entered into an equity distribution agreement
providing for an ATM equity offering program qualified by a
prospectus supplement to the 2021 Shelf Prospectus (“2021 ATM
Program"). The 2021 ATM Program will 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$50,000,000.
During the nine
months ended September 30, 2022, the Company issued 8,025,460
shares under the 2021 ATM Program. The common shares were issued at
an average price of $1.91 per share for aggregate gross proceeds of
$15,306,000. The Company also recognized issue costs of $453,000
related to these ATM share issuances, which includes $306,000 of
commissions and $147,000 associated with the maintenance of the
2021 Shelf Prospectus and 2021 ATM Program. In total, the Company
has issued 11,865,760 shares under the 2021 ATM Program for
aggregate gross proceeds of $23,281,000.
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 September
30, 2022, the Company estimates that it has incurred $6,952,000 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. The Company
renounced the income tax benefits of this issue in February 2022,
with an effective date of renunciation to its subscribers of
December 31, 2021.
16
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
18. SHARE-BASED
COMPENSATION
The
Company’s share-based compensation arrangements include share
options, restricted share units (“RSUs”) and
performance share units (“PSUs”).
Share-based
compensation is recorded over the vesting period, and a summary of
share-based compensation expense recognized in the statement of
income (loss) is as follows:
|
|
|
Three
Months Ended
September
30
|
|
Nine
Months Ended
September
30
|
||||
|
(in
thousands)
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
Share based
compensation expense for:
|
|
|
|
|
|
|
|
|
|
Share
options
|
$
|
(360)
|
$
|
(368)
|
$
|
(1,119)
|
$
|
(983)
|
|
RSUs
|
|
(552)
|
|
(348)
|
|
(1,612)
|
|
(1,011)
|
|
PSUs
|
|
(70)
|
|
24
|
|
(203)
|
|
7
|
|
Share
based compensation expense
|
$
|
(982)
|
$
|
(692)
|
$
|
(2,934)
|
$
|
(1,987)
|
An additional
$3,446,000 in share-based compensation expense remains to be
recognized, up until August 2025, on outstanding share options and
share units at September 30, 2022.
Share
Options
Share options
granted in 2022 vest over a period of three years. A continuity
summary of the share options granted under the Company’s
Share Option Plan is presented below:
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
Number
of
|
|
Price
per
|
|
|
|
|
|
|
|
|
Share
|
|
Share
|
|
|
|
|
|
|
|
|
Options
|
|
(CAD)
|
|
|
|
|
|
|
|
|
|
|
|
|
Share options
outstanding–December 31, 2021
|
|
|
|
9,449,895
|
$
|
0.86
|
|||
|
Grants
|
|
|
|
|
|
|
1,671,000
|
|
1.82
|
|
Exercises(1)
|
|
|
|
|
|
|
(1,115,500)
|
|
0.74
|
|
Expiries
|
|
|
|
|
|
|
(26,000)
|
|
0.85
|
|
Forfeitures
|
|
|
|
|
|
|
(320,500)
|
|
1.13
|
|
Share options
outstanding–September 30, 2022
|
|
|
|
9,658,895
|
$
|
1.03
|
|||
|
Share options
exercisable–September 30, 2022
|
|
|
|
6,189,395
|
$
|
0.74
|
|||
(1)
The weighted average share
price at the date of exercise was $1.93.
A summary of the
Company’s share options outstanding at September 30, 2022 is
presented below:
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
|
|
|
Remaining
|
|
|
|
Exercise
|
|
Range of
Exercise
|
|
|
|
|
Contractual
|
|
Number
of
|
|
Price
per
|
|
Prices per
Share
|
|
|
|
|
Life
|
|
Share
|
|
Share
|
|
(CAD)
|
|
|
|
|
(Years)
|
|
Options
|
|
(CAD)
|
|
|
|
|
|
|
|
|
|
|
|
|
Share options
outstanding
|
|
|
|
|
|
|
|||
|
$ 0.25 to $
0.49
|
|
2.46
|
|
1,830,000
|
$
|
0.45
|
|||
|
$ 0.50 to $
0.74
|
|
|
|
|
0.94
|
|
2,916,895
|
|
0.64
|
|
$ 0.75 to $
0.99
|
|
|
|
|
-
|
|
-
|
|
-
|
|
$ 1.00 to $
1.49
|
|
|
|
|
3.47
|
|
3,153,000
|
|
1.28
|
|
$ 1.50 to $
1.99
|
|
|
|
|
4.46
|
|
1,643,000
|
|
1.82
|
|
$ 2.00 to $
2.49
|
|
|
|
|
4.16
|
|
116,000
|
|
2.27
|
|
Stock options
outstanding–September 30, 2022
|
|
2.69
|
|
9,658,895
|
$
|
1.03
|
|||
17
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
Options
outstanding at September 30, 2022 expire between March 2023 and
August 2027.
The fair value of
each share 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 share options granted during the current
period:
|
|
|
|
|
Nine Months
Ended
|
|
|
|
|
|
|
September 30,
2022
|
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
|
1.44% -
2.96%
|
|
|
Expected stock
price volatility
|
|
|
|
74.56% -
76.78%
|
|
|
Expected
life
|
|
|
|
3.38 years -
3.42 years
|
|
|
Expected dividend
yield
|
|
|
|
-
|
|
|
Fair value
per share under options granted
|
|
|
$0.82 -
$1.10
|
||
Share
Units
RSUs granted
under the Share Unit Plan in 2022 vest ratably over a period of
three years. PSUs granted under the Share Unit Plan in 2022 vest
over one year.
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
|
|
|
|
|
Share
|
|
Per
RSU
|
|
Share
|
|
Per
PSU
|
|
|
|
|
Units
|
|
(CAD)
|
|
Units
|
|
(CAD)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units
outstanding–December 31, 2021
|
|
5,801,841
|
$
|
0.80
|
|
1,530,000
|
$
|
0.62
|
|
|
Grants
|
|
1,251,000
|
|
2.08
|
|
120,000
|
|
2.08
|
|
|
Exercises
(1)
|
|
(395,669)
|
|
0.77
|
|
(120,000)
|
|
0.38
|
|
|
Forfeitures
|
|
(181,749)
|
|
1.02
|
|
-
|
|
-
|
|
|
Units
outstanding–September 30, 2022
|
|
6,475,423
|
$
|
1.05
|
|
1,530,000
|
$
|
0.75
|
|
|
Units
vested–September 30, 2022
|
|
3,322,174
|
$
|
0.67
|
|
1,080,000
|
$
|
0.65
|
|
(1)
The weighted average share
price at the date of exercise was $1.81 for RSUs and $1.58 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.
19. ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS)
The accumulated
other comprehensive income (loss) balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in
thousands)
|
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Cumulative
foreign currency translation
|
|
|
$
|
403
|
$
|
414
|
|
Experience
gain-post employment liability
|
|
|
|
|
||
|
Gross
|
|
|
|
1,847
|
|
1,847
|
|
Tax
effect
|
|
|
|
(485)
|
|
(485)
|
|
|
|
|
$
|
1,765
|
$
|
1,776
|
18
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
20. SUPPLEMENTAL
FINANCIAL INFORMATION
The components of
operating expenses are as follows:
|
|
|
Three
Months Ended
September
30
|
|
Nine
Months Ended
September
30
|
||||
|
(in
thousands)
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods and
services sold:
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold-mineral concentrates
|
$
|
-
|
$
|
-
|
$
|
(444)
|
$
|
-
|
|
Operating
overheads:
|
|
|
|
|
|
|
|
|
|
Mining, other
development expense
|
|
(215)
|
|
(1,199)
|
|
(405)
|
|
(2,254)
|
|
Milling,
conversion expense
|
|
(616)
|
|
(767)
|
|
(2,171)
|
|
(1,242)
|
|
Less
absorption:
|
|
|
|
|
|
|
|
|
|
-Mineral
properties
|
|
8
|
|
10
|
|
29
|
|
32
|
|
-Milling
|
|
-
|
|
-
|
|
(11)
|
|
-
|
|
Cost of
services-Closed Mines group
|
|
(1,662)
|
|
(2,293)
|
|
(5,193)
|
|
(6,224)
|
|
Cost of goods and
services sold
|
|
(2,485)
|
|
(4,249)
|
|
(8,195)
|
|
(9,688)
|
|
Selling
expenses
|
|
(14)
|
|
-
|
|
(48)
|
|
-
|
|
Sales
royalties
|
|
-
|
|
-
|
|
(216)
|
|
-
|
|
Reclamation asset
amortization
|
|
(47)
|
|
(70)
|
|
(139)
|
|
(210)
|
|
Operating
expenses
|
$
|
(2,546)
|
$
|
(4,319)
|
$
|
(8,598)
|
$
|
(9,898)
|
The components of
other income (expense) are as follows:
|
|
|
Three
Months Ended
September
30
|
|
Nine
Months Ended
September
30
|
|||||
|
(in
thousands)
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses)
on:
|
|
|
|
|
|
|
|
|
|
|
Foreign
exchange
|
$
|
615
|
$
|
398
|
$
|
902
|
$
|
(1,219)
|
|
|
Disposal of
property, plant and equipment
|
|
8
|
|
(4)
|
|
(28)
|
|
(2)
|
|
|
Fair value
changes:
|
|
|
|
|
|
|
|
|
|
|
Investments-equity
instruments (note 7)
|
|
805
|
|
4,334
|
|
(4,181)
|
|
9,476
|
|
|
Investments-uranium (note
7)
|
|
2,637
|
|
36,138
|
|
32,216
|
|
43,672
|
|
|
Warrants on
investment (note 7)
|
|
422
|
|
-
|
|
1,592
|
|
-
|
|
|
Share purchase
warrant liabilities (note 15)
|
|
190
|
|
(5,735)
|
|
16,923
|
|
(11,567)
|
|
|
Gain
on recognition of proceeds–UI
repayment (note 24)
|
|
131
|
|
-
|
|
2,844
|
|
-
|
|
|
Issue
costs–share purchase warrant liabilities (note
17)
|
|
-
|
|
-
|
|
-
|
|
(791)
|
|
|
Uranium
investment storage charges
|
|
(88)
|
|
(72)
|
|
(259)
|
|
(126)
|
|
|
Other
|
|
(74)
|
|
(60)
|
|
(199)
|
|
(137)
|
|
|
Other
income (expense)
|
$
|
4,646
|
$
|
34,999
|
$
|
49,810
|
$
|
39,306
|
|
The components of
finance income (expense) are as follows:
|
|
|
Three
Months Ended
September
30
|
|
Nine
Months Ended
September
30
|
||||
|
(in
thousands)
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
|
439
|
$
|
76
|
$
|
791
|
$
|
288
|
|
Interest
expense
|
|
(1)
|
|
(1)
|
|
(5)
|
|
(1)
|
|
Accretion
expense
|
|
|
|
|
|
|
|
|
|
Deferred
revenue (note 12)
|
|
(738)
|
|
(777)
|
|
(1,919)
|
|
(2,321)
|
|
Post-employment
benefits (note 13)
|
|
(5)
|
|
(6)
|
|
(16)
|
|
(17)
|
|
Reclamation
obligations (note 14)
|
|
(356)
|
|
(335)
|
|
(1,069)
|
|
(1,007)
|
|
Debt
obligations (note 16)
|
|
(7)
|
|
(11)
|
|
(24)
|
|
(35)
|
|
Finance
expense, net
|
$
|
(668)
|
$
|
(1,054)
|
$
|
(2,242)
|
$
|
(3,093)
|
19
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
A summary of
depreciation expense recognized in the statement of income (loss)
is as follows:
|
|
|
Three
Months Ended
September
30
|
|
Nine
Months Ended
September
30
|
||||
|
(in
thousands)
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
Mining, other
development expense
|
$
|
-
|
$
|
-
|
$
|
(1)
|
$
|
(1)
|
|
Milling,
conversion expense
|
|
(613)
|
|
(678)
|
|
(2,166)
|
|
(1,107)
|
|
Cost of
services-Closed Mines group
|
|
(47)
|
|
(46)
|
|
(135)
|
|
(136)
|
|
Evaluation
|
|
(67)
|
|
(9)
|
|
(130)
|
|
(27)
|
|
Exploration
|
|
(33)
|
|
(49)
|
|
(82)
|
|
(129)
|
|
General and
administrative
|
|
(78)
|
|
(30)
|
|
(196)
|
|
(85)
|
|
Depreciation
expense-gross
|
$
|
(838)
|
$
|
(812)
|
$
|
(2,710)
|
$
|
(1,485)
|
A summary of
employee benefits expense recognized in the statement of income
(loss) is as follows:
|
|
|
Three
Months Ended
September
30
|
|
Nine
Months Ended
September
30
|
||||
|
(in
thousands)
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
$
|
(2,528)
|
$
|
(2,173)
|
$
|
(8,860)
|
$
|
(7,311)
|
|
Share-based
compensation (note 18)
|
|
(983)
|
|
(692)
|
|
(2,934)
|
|
(1,987)
|
|
Termination
benefits
|
|
-
|
|
(85)
|
|
(2)
|
|
(114)
|
|
Employee
benefits expense
|
$
|
(3,511)
|
$
|
(2,950)
|
$
|
(11,796)
|
$
|
(9,412)
|
The change in
non-cash working capital items in the consolidated statements of
cash flows is as follows:
|
|
|
|
|
Nine
Months Ended
September
30
|
||||
|
(in
thousands)
|
|
|
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
Change in
non-cash working capital items:
|
|
|
|
|
|
|
|
|
|
Trade and other
receivables
|
|
|
|
|
$
|
(1,250)
|
$
|
(1,095)
|
|
Inventories
|
|
|
|
|
|
656
|
|
(104)
|
|
Prepaid expenses
and other assets
|
|
|
|
|
|
637
|
|
(70)
|
|
Accounts payable
and accrued liabilities
|
|
|
|
|
|
3,763
|
|
1,155
|
|
Change
in non-cash working capital items
|
|
|
|
|
$
|
3,806
|
$
|
(114)
|
21. 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 from mine production.
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 general corporate expenses not allocated
to the other segments. In 2021, The Corporate and Other segment
includes general corporate expenses not allocated to the other
segments as well as management fee income earned from Uranium
Participation Corporation (“UPC”) prior to July 2021
(see note 22 for further details).
20
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
For the nine
months ended September 30, 2022, reportable segment results were as
follows:
|
(in
thousands)
|
|
|
Mining
|
Closed
Mine
|
Corporate
and
Other
|
Total
|
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Statement of Operations:
|
|
|
|
|
|
|
|
|||
|
Revenues
|
|
|
7,957
|
6,011
|
-
|
13,968
|
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Expenses:
|
|
|
|
|
|
|
|
|||
|
Operating
expenses
|
|
|
(3,405)
|
(5,193)
|
-
|
(8,598)
|
|
|||
|
Evaluation
|
|
|
(17,811)
|
-
|
-
|
(17,811)
|
|
|||
|
Exploration
|
|
|
(5,175)
|
-
|
-
|
(5,175)
|
|
|||
|
General and
administrative
|
|
|
(21)
|
-
|
(9,454)
|
(9,475)
|
|
|||
|
|
|
|
(26,412)
|
(5,193)
|
(9,454)
|
(41,059)
|
|
|||
|
Segment income
(loss)
|
|
|
(18,455)
|
818
|
(9,454)
|
(27,091)
|
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Revenues–supplemental:
|
|
|
|
|
|
|
|
|||
|
Environmental
services
|
|
|
-
|
6,011
|
-
|
6,011
|
|
|||
|
Toll milling
services–deferred revenue (note 12)
|
|
4,971
|
-
|
-
|
4,971
|
|
||||
|
Uranium
concentrate sale
|
|
2,986
|
-
|
-
|
2,986
|
|
||||
|
|
|
|
7,957
|
6,011
|
-
|
13,968
|
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Capital additions:
|
|
|
|
|
|
|
|
|||
|
Property, plant
and equipment
|
|
|
1,934
|
293
|
3,941
|
6,168
|
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Long-lived assets:
|
|
|
|
|
|
|
||||
|
Plant and
equipment
|
|
|
|
|
|
|
|
|||
|
Cost
|
|
|
94,116
|
4,366
|
11,718
|
110,200
|
|
|||
|
Accumulated
depreciation
|
|
|
(28,604)
|
(2,932)
|
(2,858)
|
(34,394)
|
||||
|
Mineral
properties
|
|
|
179,900
|
-
|
-
|
179,900
|
|
|||
|
|
|
|
245,412
|
1,434
|
8,860
|
255,706
|
|
|||
For the three
months ended September 30, 2022, reportable segment results were as
follows:
|
(in
thousands)
|
|
|
Mining
|
Closed
Mine
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
|
Revenues
|
|
|
995
|
2,048
|
-
|
3,043
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(884)
|
(1,662)
|
-
|
(2,546)
|
|
Evaluation
|
|
|
(6,730)
|
-
|
-
|
(6,730)
|
|
Exploration
|
|
|
(1,549)
|
-
|
-
|
(1,549)
|
|
General and
administrative
|
|
|
(1)
|
-
|
(2,651)
|
(2,652)
|
|
|
|
|
(9,164)
|
(1,662)
|
(2,651)
|
(13,477)
|
|
Segment income
(loss)
|
|
|
(8,169)
|
386
|
(2,651)
|
(10,434)
|
|
|
|
|
|
|
|
|
|
Revenues–supplemental:
|
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
2,048
|
-
|
2,048
|
|
Toll milling
services–deferred revenue (note 12)
|
|
995
|
-
|
-
|
995
|
|
|
|
|
|
995
|
2,048
|
-
|
3,043
|
21
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
For the nine
months ended September 30, 2021, reportable segment results were as
follows:
|
(in
thousands)
|
|
|
Mining
|
Closed
Mine
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
|
Revenues
|
|
|
1,756
|
6,943
|
7,964
|
16,663
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(3,673)
|
(6,225)
|
-
|
(9,898)
|
|
Evaluation
|
|
|
(12,981)
|
-
|
-
|
(12,981)
|
|
Exploration
|
|
|
(2,718)
|
-
|
-
|
(2,718)
|
|
General and
administrative
|
|
|
(19)
|
-
|
(7,057)
|
(7,076)
|
|
|
|
|
(19,391)
|
(6,225)
|
(7,057)
|
(32,673)
|
|
Segment income
(loss)
|
|
|
(17,635)
|
718
|
907
|
(16,010)
|
|
|
|
|
|
|
|
|
|
Revenues–supplemental:
|
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
6,943
|
-
|
6,943
|
|
Contract
termination fee (note 22)
|
|
|
-
|
-
|
5,848
|
5,848
|
|
Management fees
(note 22)
|
|
|
-
|
-
|
2,116
|
2,116
|
|
Toll milling
services–deferred revenue (note 12)
|
|
1,756
|
-
|
-
|
1,756
|
|
|
|
|
|
1,756
|
6,943
|
7,964
|
16,663
|
|
|
|
|
|
|
|
|
|
Capital additions:
|
|
|
|
|
|
|
|
Property, plant
and equipment
|
|
|
372
|
48
|
99
|
519
|
|
|
|
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
Plant and
equipment
|
|
|
|
|
|
|
|
Cost
|
|
|
101,880
|
4,477 |
970
|
107,327
|
|
Accumulated
depreciation
|
|
|
(27,715)
|
(3,212) | (485) | (31,412) |
|
Mineral
properties
|
|
|
179,774
|
-
|
-
|
179,774
|
|
|
|
|
253,939
|
1,265
|
485
|
255,689
|
For the
three months ended September 30, 2021, reportable segment results
were as follows:
|
(in
thousands)
|
|
|
Mining
|
Closed
Mine
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
|
Revenues
|
|
|
1,037
|
2,633
|
5,871
|
9,541
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(2,025)
|
(2,294)
|
-
|
(4,319)
|
|
Evaluation
|
|
|
(3,839)
|
-
|
-
|
(3,839)
|
|
Exploration
|
|
|
(842)
|
-
|
-
|
(842)
|
|
General and
administrative
|
|
|
(2)
|
-
|
(2,087)
|
(2,089)
|
|
|
|
|
(6,708)
|
(2,294)
|
(2,087)
|
(11,089)
|
|
Segment income
(loss)
|
|
|
(5,671)
|
339
|
3,784
|
(1,548)
|
|
|
|
|
|
|
|
|
|
Revenues–supplemental:
|
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
2,633
|
-
|
2,633
|
|
Contract
termination fee (note 22)
|
|
|
-
|
-
|
5,848
|
5,848
|
|
Management
fees
|
|
|
-
|
-
|
23
|
23
|
|
Toll milling
services–deferred revenue (note 12)
|
|
1,037
|
-
|
-
|
1,037
|
|
|
|
|
|
1,037
|
2,633
|
5,871
|
9,541
|
22
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
22. RELATED
PARTY TRANSACTIONS
Uranium
Participation Corporation (“UPC”)
UPC was a
publicly-listed company which invested substantially all of its
assets in uranium oxide concentrates (“U3O8”) and
uranium hexafluoride (“UF6”). The
Company had no ownership interest in UPC but received fees for
management services it provided and commissions from the purchase
and sale of U3O8 and
UF6 by
UPC.
The Company
entered into a management services agreement (“MSA”)
with UPC effective on April 1, 2019 with a term of five years (the
“Term”). Under the MSA, Denison received 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.
In April 2021,
UPC and Sprott Asset Management LP (“Sprott”) reached
an agreement to convert UPC into the Sprott Physical Uranium Trust
(“the UPC Transaction”).
In July 2021, UPC
and Sprott completed the UPC Transaction and the MSA between
Denison and UPC was terminated in accordance with the termination
provisions therein. As a result, Denison received a termination
payment from UPC of $5,848,000 in July 2021. Following the
completion of the UPC Transaction, UPC was no longer considered a
related party of Denison.
The following
transactions were incurred with UPC for the periods
noted:
|
|
|
Three
Months Ended
September
30
|
|
Nine
Months Ended
September
30
|
||||
|
(in
thousands)
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
Management
fees:
|
|
|
|
|
|
|
|
|
|
Base and variable
fees
|
$
|
-
|
$
|
23
|
$
|
-
|
$
|
1,069
|
|
Commission
fees
|
|
-
|
|
-
|
|
-
|
|
697
|
|
Termination
fee
|
|
|
|
5,848
|
|
|
|
5,848
|
|
Discretionary
fees
|
|
-
|
|
-
|
|
-
|
|
350
|
|
|
$
|
-
|
|
5,871
|
$
|
-
|
$
|
7,964
|
Korea
Electric Power Corporation (“KEPCO”) and Korea Hydro
& Nuclear Power (“KHNP”)
Denison and KHNP
Canada (which is an indirect subsidiary of KEPCO through KHNP) are
parties to a strategic relationship agreement (the “KHNP
SRA”). The KHNP SRA provides for a long-term collaborative
business relationship between the parties, which includes a right
of KHNP Canada to nominate one representative to Denison’s
Board of Directors, provided that its shareholding percentage stays
about 5%.
KHNP Canada is
also the majority member of KWULP, which 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.
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.
23
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
The following
compensation was awarded to key management personnel:
|
|
|
Three
Months Ended
September
30
|
|
Nine
Months Ended
September
30
|
||||
|
(in
thousands)
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
$
|
(543)
|
$
|
(518)
|
$
|
(2,711)
|
$
|
(2,055)
|
|
Share-based
compensation
|
|
(774)
|
|
(526)
|
|
(2,422)
|
|
(1,583)
|
|
Key
management personnel compensation
|
$
|
(1,317)
|
$
|
(1,044)
|
$
|
(5,133)
|
$
|
(3,638)
|
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 nine
months ended September 30, 2022, there were no transfers between
levels 1, 2 and 3 and there were no changes in valuation
techniques.
24
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
The following
table illustrates the classification of the Company’s
financial assets within the fair value hierarchy as at September
30, 2022 and December 31, 2021:
|
|
|
|
|
|
|
September
30
|
|
December
31
|
|
|
|
Financial
|
|
Fair
|
|
2022
|
|
2021
|
|
|
|
Instrument
|
|
Value
|
|
Fair
|
|
Fair
|
|
(in
thousands)
|
|
Category(1)
|
|
Hierarchy
|
|
Value
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Assets:
|
|
|
|
|
|
|
|
|
|
Cash and
equivalents
|
|
Category
B
|
|
|
$
|
54,902
|
$
|
63,998
|
|
Trade and other
receivables
|
|
Category
B
|
|
|
|
4,881
|
|
3,656
|
|
Investments
|
|
|
|
|
|
|
|
|
|
Equity
instruments-shares
|
|
Category
A
|
|
Level
1
|
|
10,141
|
|
14,349
|
|
Equity
instruments-warrants
|
|
Category
A
|
|
Level
2
|
|
256
|
|
229
|
|
Elliot Lake
reclamation trust fund
|
|
Category
B
|
|
|
|
3,324
|
|
2,866
|
|
Credit
facility pledged assets
|
|
Category
B
|
|
|
|
7,972
|
|
9,000
|
|
Reclamation
letter of credit collateral
|
|
Category
B
|
|
|
|
-
|
|
135
|
|
|
|
|
|
|
$
|
81,476
|
$
|
94,233
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
Category
C
|
|
|
|
12,361
|
|
8,590
|
|
Debt
obligations
|
|
Category
C
|
|
|
|
594
|
|
508
|
|
Warrants on
investment
|
|
Category
A
|
|
Level
2
|
|
33
|
|
1,625
|
|
Share
purchase warrant liabilities
|
|
Category
A
|
|
Level
2
|
|
3,414
|
|
20,337
|
|
|
|
|
|
|
$
|
16,402
|
$
|
31,060
|
(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.
Investments in
uranium are categorized in Level 2. Investments in uranium are
measured at fair value at each reporting period based on the
month-end spot price for uranium published by UxC, LLC
(“UxC”) and converted to Canadian dollars during the
period-end indicative foreign exchange rate.
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.
In September
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. The required payments for the Mining License Receivable, as
amended pursuant to a subsequent extension agreement executed by UI
and the Company in 2016, were not made.
The
Company’s receivable, and the interest thereon, is fully
provided for.
The Company
commenced arbitration with respect to the unpaid amounts, and 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.
In January 2022,
the Company executed a Repayment Agreement with UI (the
“Repayment Agreement”). Under the terms of the
Repayment Agreement, UI has agreed to make scheduled payments on
account of the Arbitration Award,
25
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
plus additional
interest and fees, through a series of quarterly installments and
annual milestone payments until December 31, 2025. The total amount
due to Denison under the Repayment Agreement is approximately
USD$16,000,000 inclusive of additional interest to be earned over
the term of the agreement at a rate of 6.5% per annum. The
Repayment Agreement includes customary covenants and conditions in
favour of Denison, including certain restrictions on UI’s
ability to take on additional debt, in consideration for
Denison’s deferral of enforcement of the Arbitration Award
while UI is in compliance with its obligations under the Repayment
Agreement.
During the nine
months ended September 30, 2022, the Company received USD$2,300,000
from UI, of which a portion relates to reimbursement of legal and
other expenses incurred by Denison, resulting in the recognition of
income of $2,844,000 in the period.
26
|
|
MANAGEMENT’S DISCUSSION & ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2022
|
|
|
|
TABLE OF
CONTENTS
|
|
|
2022 THIRD QUARTER PERFORMANCE
HIGHLIGHTS
|
2 |
|
ABOUT DENISON
|
3 |
|
RESULTS OF OPERATIONS
|
4 |
|
Wheeler
River Project
|
6 |
|
LIQUIDITY AND CAPITAL
RESOURCES
|
17 |
|
OUTLOOK FOR 2022
|
21 |
|
ADDITIONAL INFORMATION
|
21 |
|
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
|
23
|
|
|
|
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 November
3, 2022 and should be read in conjunction with the Company’s
unaudited interim condensed consolidated financial statements and
related notes for the three and nine months ended September 30,
2022. 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’)
including IAS 34, Interim
Financial Reporting. Readers are also encouraged to consult
the audited consolidated financial statements and MD&A for the
year ended December 31, 2021. 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
|
■
Recovered uranium bearing solution from the Feasibility Field Test
at Phoenix
In October 2022,
the Company announced that it had successfully recovered uranium
bearing solution from the In-Situ Recovery (‘ISR’)
Feasibility Field Test (‘FFT’) for the Phoenix uranium
deposit (‘Phoenix’) at the Company's 95% owned Wheeler
River project (‘Wheeler River’ or the
‘Project’) at targeted rates and grades, indicating
that the hydrogeological system at Phoenix was responding as
expected with pH trends, flow characteristics, and uranium recovery
meeting expectations. The preliminary results received to date
demonstrated the successful acidification of the test pattern and
recovery of uranium using the ISR mining method.
The Company
previously announced, in July and August 2022, that it had received
approval to construct and operate a pollutant control facility from
the Saskatchewan Minister of Environment and a License to Possess,
Use, Store and Transfer a Nuclear Substance (‘Nuclear
Substance License’) from the Canadian Nuclear Safety
Commission (‘CNSC’). With the receipt of these
approvals, the Company was fully permitted to operate the FFT
facility and carry out the process of recovering a uranium bearing
solution from the Phoenix ore body. The Company completed the
construction and wet commissioning of the lixiviant injection
system for the FFT in September 2022 and commenced the leaching
phase of the FFT. Given the highly successful results of the FFT,
lixiviant injection has ceased, and operations at the Phoenix FFT
site have transitioned from the leaching phase of the FFT to the
neutralization phase, which is expected to be completed before the
end of the year. The final phase of the FFT, which involves
management of the recovered solution, is expected to commence in
the spring of 2023.
■
Achieved significant regulatory milestone for Wheeler River with
the submitted draft Environmental Impact Statement
In October 2022,
Denison announced a significant regulatory milestone for Wheeler
River with the submission of the draft Environmental Impact
Statement (‘EIS’) to the Saskatchewan Ministry of
Environment (‘SKMOE’) and the CNSC. The EIS submission
outlines the Company’s assessment of the potential effects,
including applicable mitigation measures, of the proposed ISR
uranium mine and processing plant planned for Wheeler River, and
reflects several years of baseline environmental data collection,
technical assessments, plus extensive engagement and consultation
with Indigenous and non-Indigenous interested parties.
■
Executed an exploration agreement with the Ya’thi
Néné Lands and Resources Office, the Athabasca Nations,
and Communities of the Nuhenéné
In October 2022,
Denison announced that it entered into an exploration agreement
with the Ya'thi Néné Lands and Resources Office
(‘YNLRO’), Hatchet Lake Denesułiné First
Nation, Black Lake Denesułiné First Nation, Fond du Lac
Denesułiné First Nation (collectively, the
’Athabasca Nations‘) and the Northern Hamlet of Stony
Rapids, the Northern Settlement of Uranium City, the Northern
Settlement of Wollaston Lake and the Northern Settlement of Camsell
Portage (collectively, the ‘Athabasca Communities’) in
respect of Denison’s exploration and evaluation activities
within the traditional territory of the Athabasca Nations (the
‘Nuhenéné’).
The exploration
agreement expresses the parties’ intention to build a
long-term relationship between Denison and the YNLRO, Athabasca
Nations, and Athabasca Communities. Denison wishes to conduct and
advance its exploration activities in a sustainable manner that
respects the Athabasca Nations’ Indigenous rights, advances
reconciliation with Indigenous peoples, and provides economic
opportunities and other benefits to the Athabasca Communities in an
authentic, cooperative and respectful way.
■
Expanded high-grade uranium mineralization at McClean Lake
South
In September
2022, Denison announced that assays received from exploration
drilling completed at the Company's 22.5% owned McClean Lake Joint
Venture (‘McClean Lake’ or ‘MLJV’) during
the winter of 2022 have resulted in a significant expansion of the
"new" high-grade unconformity-hosted zone of uranium mineralization
discovered in 2021 between the McClean South 8W and 8E pods (see
news release dated April 14, 2021). Ten drill holes completed
during 2022 by Orano Canada Inc. (‘Orano Canada’),
77.5% owner and operator of the MLJV, returned notable uranium
mineralization, including drill hole MCS-58, which returned 2.96%
U3O8 over 15.5 metres,
including 24.49% U3O8 over 1.5 metres,
located approximately 54 metres to the southeast of drill hole
MCS-34, which was completed in 2021 and returned a mineralized
interval of 8.67% U3O8 over 13.5 metres.
Overall, the results from 2022 have successfully expanded the
footprint of the "new" mineralized zone to approximately 180 metres
in strike length.
2
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
■
Intersected additional high-grade uranium mineralization on the
Waterfound Joint Venture
In September
2022, Denison announced that uranium mineralization was encountered
in three of the seven drill holes completed during the summer
exploration program at the Orano Canada-operated Waterfound Joint
Venture (‘Waterfound’), highlighted by drill hole
WF-74A, which intersected 4.75% eU3O8 over 13.3 metres,
including a sub-interval grading 25.23% eU3O8 over 0.5 metres.
The mineralized intersection from WF-74A represents the best
mineralized hole drilled on the Waterfound property to date, and
highlights the potential for the discovery of additional high-grade
uranium mineralization further along strike to the west of the
Alligator Zone. Denison holds an effective 24.68% ownership
interest in Waterfound through its direct interest in the joint
venture and its 50% ownership of JCU (Canada) Exploration Company
Limited (‘JCU’).
Denison Mines
Corp. was formed under the laws of Ontario and is a reporting
issuer in all Canadian provinces and territories. 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 Pre-Feasibility Study
(‘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 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 Main and Midwest A
deposits and a 67.01% 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 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 approximately 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.
SELECTED QUARTERLY FINANCIAL INFORMATION
|
(in
thousands)
|
|
As at
September 30,
2022
|
|
As at
December 31,
2021
|
|
|
|
|
|
|
|
Financial Position:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
54,902
|
$
|
63,998
|
|
Working
capital(1)
|
$
|
58,832
|
$
|
76,785
|
|
Investments in
uranium
|
$
|
165,330
|
$
|
133,114
|
|
Property, plant
and equipment
|
$
|
255,706
|
$
|
254,462
|
|
Total
assets
|
$
|
527,414
|
$
|
510,284
|
|
Total long-term
liabilities(2)
|
$
|
69,448
|
$
|
97,242
|
(1)
Working capital is a non-IFRS
financial measure and is calculated as the value of current assets
less the value of current liabilities, excluding non-cash current
liabilities (i.e., working capital at September 30, 2022 excludes
$7,618,000 in non-cash current liabilities from the current portion
of deferred revenue, warrants on investments, and share purchase
warrant liabilities). At September 30, 2022, the Company’s
working capital includes $10,235,000 in portfolio investment
(December 31, 2021 – $14,437,000 in portfolio
investments).
(2)
Predominantly comprised of
the non-current portion of deferred revenue, non-current
reclamation obligations, and deferred income tax liabilities. In
2021, long-term liabilities also included $20,337,000 in share
purchase warrant liabilities that are now classified as
current.
3
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
|
|
|
|
|
2022
|
|
2022
|
|
2022
|
|
2021
|
|
(in
thousands, except for per share amounts)
|
|
Q3
|
|
Q2
|
|
Q1
|
|
Q4
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations:
|
|
|
|
|
|
|
|
|
||
|
Total
revenues
|
$
|
3,043
|
$
|
6,800
|
$
|
4,125
|
$
|
3,337
|
||
|
Net earnings
(loss)
|
$
|
(6,383)
|
$
|
(16,147)
|
$
|
42,623
|
$
|
(2,648)
|
||
|
Basic and diluted
earnings (loss) per share
|
$
|
(0.01)
|
$
|
(0.02)
|
$
|
0.05
|
$
|
(0.01)
|
||
|
|
|
|
|
2021
|
|
2021
|
|
2021
|
|
2020
|
|
(in
thousands, except for per share amounts)
|
|
Q3
|
|
Q2
|
|
Q1
|
|
Q4
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations:
|
|
|
|
|
|
|
|
|
||
|
Total
revenues
|
$
|
9,541
|
$
|
4,626
|
$
|
2,496
|
$
|
4,094
|
||
|
Net earnings
(loss)
|
$
|
32,866
|
$
|
(2,357)
|
$
|
(8,884)
|
$
|
(3,095)
|
||
|
Basic and diluted
loss per share
|
$
|
0.04
|
$
|
(0.00)
|
$
|
(0.01)
|
$
|
(0.01)
|
||
|
|
|
|
|
|
|
|
|
|
||
Significant items causing variations in quarterly
results
●
The Company’s toll
milling revenues fluctuate due to the timing of uranium processing
at the McClean Lake mill, as well as changes to the estimated
mineral resources of the Cigar Lake mine. Toll milling at McClean
Lake was suspended during the first quarter and beginning of the
second quarter 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.
●
In the third quarter of 2021,
the Company’s management services agreement with Uranium
Participation Corp. (‘UPC’) was terminated, resulting
in a one-time termination fee payment of $5,848,000. After July 19,
2021, the Company ceased to earn management fee revenue from
UPC.
●
During the second quarter of
2022, the Company recognized non-recurring revenue from mineral
sales. See RESULTS OF OPERATIONS below for more
details.
●
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. However, the 2021 summer exploration program
commenced in mid-September and continued into the fourth quarter of
2021 due to the timing of the 2021 ISR field program.
●
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 uranium investments and
certain of its share purchase warrants are also subject to
fluctuations in the US dollar to Canadian dollar exchange rate. The
impact of fair value changes on the Company’s net earnings /
loss was particularly significant in the third quarter of 2021 and
the first and second quarters of 2022. See OTHER INCOME AND
EXPENSES below for more details.
●
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 Ecora Resources PLC
(‘Ecora’, formerly Anglo Pacific Group PLC or
APG)
4
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
and one of its
wholly owned subsidiaries (the ‘Ecora 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 Ecora Arrangement consists of certain contractual
obligations of Denison to forward to Ecora 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 Ecora Arrangement. While the temporary
suspension of operations at the McClean Lake mill resulted in a
decrease in revenue recognized by Denison, the impact was non-cash
and was limited to a reduction in the drawdown of the
Company’s deferred revenue balance.
During the three
and nine months ended September 30, 2022, the McClean Lake mill
processed 3.6 million and 12.7 million pounds U3O8 for the CLJV,
respectively (September 30, 2021 – 4.0 million and 6.5
million pounds U3O8) and recorded
toll milling revenue of $995,000 and $4,971,000, respectively
(September 30, 2021 – $1,037,000 and $1,756,000). The
decrease in toll milling revenue in the three months ended
September 30, 2022, as compared to the prior year period, is due to
a decrease in production for the CLJV. The increase in toll milling
revenue in the current nine month period, as compared to the prior
year, is predominantly due to the temporary shutdown of the mill in
early 2021 in response to the COVID-19 pandemic. Additionally, a
$1,444,000 non-cash cumulative accounting adjustment was recorded
in the first quarter of 2022, which was predominantly driven by a
change in the estimated timing of the milling of the Cigar Lake ore
following an announcement from the operator of the Cigar Lake mine
that mine production would be reduced from previous planned amounts
of 18 million pounds U3O8 per year to 15
million pounds U3O8 per year in 2022
and 2023, and then to 13.5 million pounds U3O8 per year
thereafter. Under IFRS 15, Revenue
from Contracts with Customers, the change in the estimated
timing of the toll milling of the CLJV ores resulted in an increase
to the implied financing component of the toll milling transaction,
thus increasing the total deferred revenue to be recognized over
the life of the toll milling contract as well as the deferred
revenue drawdown rate. The updated drawdown rate was applied
retrospectively to all pounds produced for the CLJV since the
inception of the Encora Arrangement in July 2016, resulting in the
true-up recorded in the first quarter of 2022.
During the three
and nine months ended September 30, 2022, the Company also recorded
accretion expense of $738,000 and $1,919,000, respectively, on the
toll milling deferred revenue balance (September 30, 2021 –
$777,000 and $2,321,000). The annual accretion expense will
decrease over the life of the agreement, as the deferred revenue
liability decreases over time.
Mineral Sales
Mineral sales
revenue for the three and nine months ended September 30, 2022 was
$nil and $2,986,000 (September 30, 2021 - $nil and $nil). Mineral
sales revenue earned in the second quarter of 2022 was from the
sale of 40,000 pounds U3O8 from inventory at
an average price of $74.65 (US$59.25) per pound. The inventory sold
in the second quarter of 2022 was from the Company’s share of
production from the SABRE test mining program completed at McClean
Lake in 2021.
Closed Mine Services
Post-closure mine
care and maintenance 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 and Quebec, the Closed Mines group manages Denison’s
Elliot Lake reclamation projects and provides related services for
certain third-party projects.
Revenue from
Closed Mines services during the three and nine months ended
September 30, 2022 was $2,048,000 and $6,011,000 (September 30,
2021 – $2,633,000 and $6,943,000). The decrease in revenue in
the three and nine months ended September 30, 2022, as compared to
the prior period, was due to the completion of one customer
contract in 2021, as well as reduced care and maintenance
activities at certain sites.
Management Services Agreement with UPC
Prior to July 19,
2021, Denison provided general administrative and management
services to UPC, for which Denison earned management fees and
commissions on the purchase and sale of uranium holdings. In April
2021, UPC announced that it had entered into an agreement with
Sprott Asset Management LP (‘Sprott’) to convert UPC
into the Sprott Physical Uranium Trust. This transaction closed on
July 19, 2021,
5
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
and the
management services agreement (‘MSA’) between Denison
and UPC was terminated. Accordingly, the Company had no revenue
from UPC during the three and nine months ended September 30, 2022
(September 30, 2021 - $5,871,000 and $7,964,000).
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 nine months ended September 30, 2022 were
$884,000 and $3,405,000, respectively (September 30, 2021 –
$2,025,000 and $3,673,000), including depreciation expense relating
to the McClean Lake mill of $612,000 and $2,165,000 (September 30,
2021 - $678,000 and $1,107,000), as a result of processing
approximately 3.6 million and 12.7 million pounds U3O8, respectively,
for the CLJV (September 30, 2021 – 4.0 million and 6.5
million pounds).
Operating
expenses during the three and nine months ended September 30, 2022
also included development and other operating costs related to the
MLJV of $240,000 and $479,000, respectively (September 30, 2021
– $1,347,000 and $2,566,000).
During the nine
months ended September 30, 2022, the Company incurred $444,000 in
cost of sales, selling expenses of $48,000, and sales royalties and
resource surcharges of $216,000 related to the sale of 40,000
pounds of U3O8.. There were no
uranium sales in 2021.
Closed Mines Services
Operating
expenses during the three and nine months ended September 30, 2022
totaled $1,662,000 and $5,193,000 respectively (September 30, 2021
- $2,294,000 and $6,225,000). The expenses relate primarily to care
and maintenance services provided to clients, and include labour
and other costs. The decrease in operating expenses in the current
periods, as compared to the prior year, is predominantly due to the
completion of one customer contract in 2021.
MINERAL PROPERTY EVALUATION
During the three
and nine months ended September 30, 2022, Denison’s share of
evaluation expenditures was $6,730,000 and $17,811,000 respectively
(September 30, 2021 - $3,839,000 and $12,981,000). The increase in
evaluation expenditures, compared to the prior period, was due to
an increase in Wheeler River evaluation activities, including the
2022 ISR field program, the advancement of the Feasibility Study
(‘FS’), the purchase of supplies and equipment to
support the FFT, and the advancement of the FFT, including site
construction, wet commissioning, and test commencement. The
following table summarizes the evaluation activities completed
through the end of October, 2022.
|
PROJECT EVALUATION ACTIVITIES
|
||||
|
Property
|
Denison’s
ownership(1)
|
Evaluation drilling(2)
|
Other activities
|
|
|
Wheeler
River
|
95%
|
4,177
metres
(9
PQ Wells)
|
ISR
Field Program,
engineering,
FS, metallurgical testing, environmental and sustainability
activities
FFT facility
permitting, construction, commissioning and operation.
EIS regulatory
submission
|
|
|
|
|
4,177 m (9 holes)
|
|
|
Notes:
(1) The
Company’s effective ownership interest, including an indirect
5% ownership interest held through JCU.
(2) Evaluation
drilling includes diamond drilling of new PQ-diameter drill holes
for the purposes of further evaluation of the ISR mining conditions
at Phoenix. Amounts include total evaluation metres drilled in
completed holes, 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.
6
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
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 experienced from the onset of the
COVID-19 pandemic in early 2020, Denison temporarily suspended
certain activities at Wheeler River, including programs on the
critical path to achieving the project development schedule
outlined in the PFS such as the Environmental Assessment
(‘EA’) program. While activities resumed in early 2021,
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.
The location of
the Wheeler River property, the Phoenix and Gryphon deposits, as
well as existing and proposed infrastructure outlined in the PFS,
is shown on the map provided below.
Evaluation Program
Denison’s
2022 evaluation plans for Wheeler River reflect an ambitious
program designed to further de-risk the technical elements of the
Phoenix ISR project ahead of the completion of the FS initiated for
the project in late 2021. Activities planned for 2022 include (1)
completing additional field programs (‘2022 ISR Field
Program’) and the FFT, as well as (2) advancing the
completion of the FS, (3) completing various environmental
assessment scopes and submitting a draft EIS to applicable
regulators, (4) initiating activities required to license and
permit construction of the proposed Phoenix ISR operation, and (5)
advancing Impact Benefit Agreement (‘IBA’) negotiations
with interested parties.
7
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
During the three
and nine months ended September 30, 2022, Denison’s share of
evaluation costs at Wheeler River was $7,213,000 and $18,741,000
(September 30, 2021 – $3,823,000 and
$13,383,000).
Engineering Activities
Field
programs conducted at Phoenix Phase 2 and Phase 3 from 2019 to 2021
assessed the permeability of the Phoenix deposit, a key indicator
of its amenability to the application of the ISR mining method. The
field programs included the installation of pump/injection wells,
observation wells, and Commercial Scale Wells (‘CSWs’).
Core leach tests, column leach tests and several downhole
geophysical assessments were also completed. The 2022 ISR Field
Program continues to build on the information obtained through
previous Phase 2 and Phase 3 programs, expanding the
Company’s knowledge of the Phoenix deposit. To date, the 2022
ISR Field Program involved the following components:
●
Successful Installation of nine PQ test wells in multiple
three-spot test-patterns:
The test
wells were successfully installed in three discrete three-spot
clusters located in planned mining Phases 1, 2 and 4 of the Phoenix
deposit. Each three-spot test pattern will be used to further
evaluate the ISR mining conditions within additional areas / phases
of the deposit that have not been previously evaluated. These
evaluations are expected to be incorporated into mine planning
efforts as part of the ongoing FS for the Project.
●
Extensive Hydrogeologic Testing:
Following the
successful installation of the nine additional PQ wells, extensive
hydrogeologic test work commenced. During the second quarter, well
development and short-term injection testing was completed on the
nine additional PQ wells, as well as the five CSWs installed in
2021 in order to facilitate further detailed test
work.
During the
third quarter, injection, pump and slug tests were completed within
Phases 2 and 4 including six slug tests, two single well injection
tests, and two single well pump tests. In addition, permeameter
analysis was completed on an additional 230 PQ drilling samples
from the 2022 drilling.
The test work
completed during 2022 further defined the hydrogeological units
within the ore zone, as well as the sweep efficiency of the deposit
areas evaluated. These tests are expected to provide a more
complete understanding of the hydrogeological characteristics
throughout Phase 1, 2 and 4 and has been used to support the design
and execution of the FFT, which is discussed in more detail
below.
●
Completion of Substantial Borehole Geophysics Program:
During the
second quarter of 2022, the Company completed detailed borehole
geophysical testing, including hydrophysics, cross-hole seismic and
standard geophysical surveys. The test work was successfully
conducted within the three-spot test patterns and the five CSWs.
The results of this test work are being evaluated to determine the
vertical and horizontal flow profile of the deposit for
incorporation into the mine planning associated with the ongoing
FS.
Metallurgical Testing
During
the third quarter of 2022, the metallurgical test program continued
at the Saskatchewan Research Council (‘SRC’)
laboratories in Saskatoon in order to further support feasibility
study advancements. The work performed to date during 2022 includes
the continuation of the lab-scale leaching of intact core samples
from the Phoenix deposit, the initiation of column leach
remediation testing, the production of a bulk effluent sample, as
well as continuing effluent optimization test work. In the third
quarter of 2022, Denison also contracted a third-party vendor to
test treatment technology for optimizing effluent quality for the
future Phoenix industrial wastewater treatment plant.
Feasibility Field Test
Early
in the third quarter of 2022, regulatory permitting activities in
support of the FFT were finalized, with the Company receiving
approval from the SKMOE to construct and operate the Phoenix FFT.
In August 2022, the Company also received a Nuclear Substance and
Radiation Device License from the CNSC, which allows it to possess,
use, store and transfer a nuclear substance (uranium bearing
solution) at the Phoenix FFT location.
The
FFT was designed to use the existing commercial-scale ISR test
pattern installed at Phoenix in 2021 in order to facilitate a
combined evaluation of the Phoenix deposit's hydraulic flow
properties, with the leaching characteristics that have been
previously assessed through the metallurgical core-leach testing
program. Overall, the FFT is intended to provide further
verification of the permeability, leachability, and containment
parameters needed for the successful application of the ISR mining
method at Phoenix and is expected to validate and inform
various FS design elements – including the
production and remediation profiles expected for the
Project.
8
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
The
operation of the FFT has been planned to occur in three phases: (1)
the leaching phase, (2) the neutralization phase, and (3) the
recovered solution management phase, with the leaching and
neutralization phases expected to span an estimated 60-day
operating time frame.
The
leaching phase was designed to assess the effectiveness and
efficiency of the leaching process in the mineralized zone, at a
depth of approximately 400 metres below the surface. The leaching
phase included the controlled injection of an acidic
solution into a portion of the existing test pattern within
the mineralized zone (the ‘Leaching Zone’) and the
recovery of the solution back to the surface using
existing test wells. Once on surface, the recovered solution (up to
a maximum of 500 cubic metres) will be stored temporarily in tanks
in accordance with approved environmental
protection containment measures.
The
neutralization phase includes the recovery of the remainder of
the leached mineralized solution from the Leaching Zone and is
intended to verify the efficiency and effectiveness of the process
for returning the Leaching Zone to near
baseline conditions. During this phase, a mild alkaline
(basic) solution will be injected into the Leaching Zone to
neutralize the area and reverse the residual effects of the acidic
solution injected during the leaching phase. The recovered
solution from the neutralization phase (up to a further maximum of
500 cubic metres) will also be stored temporarily on surface
in tanks in accordance
with approved containment measures.
The recovered solution management phase involves
separating the solution recovered from both the leaching phase and
the neutralization phase into (i) mineralized precipitates and
(ii) a neutralized treated solution. The mineralized precipitate
will be temporarily stored on surface in steel tanks and
the neutralized treated solution will be re-injected into a
designated subsurface area.
During the third quarter of 2022, the construction
of the FFT facilities advanced rapidly (discussed below). The
lixiviant injection modules were installed and commissioned in
September, allowing for the initiation of the leaching phase of the
FFT. Preliminary results received to date demonstrate the
successful acidification of the test pattern and recovery of
uranium through the ISR mining method. Overall, uranium
bearing solution recovered during the FFT achieved targeted rates
and grades, indicating that the hydrogeological system at Phoenix
was responding as expected with pH trends, flow characteristics,
and uranium recovery meeting expectations.
Samples
of recovered solution have been collected during the leaching phase
and remain subject to full lab assay and analysis, which will
generate additional detailed information about the performance of
the FFT.
Given the highly
successful results of the FFT, lixiviant injection has ceased, and
operations at the Phoenix FFT site have transitioned from the
leaching phase of the FFT to the neutralization phase, which is
expected to be completed before the end of the year. The final
phase of the FFT, which involves management of the recovered
solution, is expected to commence in the spring of
2023.
FFT Facilities
The
required temporary surface facilities to complete the FFT were
installed and commissioned during the third quarter of
2022.
The
FFT site includes the following facilities and
infrastructure:
●
Tanker pad
– for storage of tanker trucks used for delivery of reagents
to site.
●
Injection
solution preparation module – a modular unit where
groundwater is mixed with reagents to prepare the injection
solution.
●
Test pattern
coverall building – a tension-fabric building covering the
test area.
●
Recovered
solution surge tank – the surge tank receives recovered
solution from the test wells.
●
Solution
storage tanks – six tanks are installed to provide a total of
1,000 cubic metres of solution storage. These tanks are designed to
receive solution pumped from the recovered solution surge tank for
temporary storage before separating the recovered solution into
mineralized precipitates and a neutralized treated solution during
the recovered solution management phase of the FFT.
●
Piping
– double-walled transfer piping runs from the recovered
solution surge tank (next to the test wells) to the solution
storage tanks.
●
Mineralized
precipitate storage tanks – during the recovered solution
management phase, the mineralized precipitate will be transferred
into fully enclosed and lockable storage tanks. The mineralized
precipitate storage tanks will be placed in a secure fenced area
for temporary storage.
●
Laboratory
– a mobile laboratory is located on site and equipped for
bench-scale testing of samples.
9
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
●
Construction
/ Operations Centre – a mobile office serves as a
construction office and operations centre as well as the main gate
entry point for the site.
●
Wash car and
change room – a mobile facility allows staff to change and
wash before and after each shift at the Phoenix site.
●
Perimeter
fence – the entire area (~8,820 square meters) is fenced and
gated to control access and minimize interactions with
wildlife.
Feasibility Study
In
the third quarter of 2021, Denison announced the decision of the
WRJV to advance the ISR mining operation proposed for Phoenix to
the FS stage and the selection of Wood PLC as independent Lead
Author.
During
the nine months ended September 30, 2022, FS efforts related to the
development of the Phoenix ISR production model and the progression
of the 3D process plant model continued. In addition, engineering
progress on major components of the proposed Phoenix ISR operation
advanced, allowing for the commencement of the estimating process
for the FS during the third quarter of 2022.
The
completion of the FS is a critical step in the progression of the
Project and is intended to advance de-risking efforts to the point
where the Company and the WRJV will be able to make a development
decision. Key objectives of the FS include:
●
Environmental Stewardship:
Extensive
planning and technical work undertaken as part of the ongoing EA,
including applicable feedback from consultation efforts with
various interested parties, is expected to be incorporated into the
FS project designs to support our aspiration of achieving a
superior standard of environmental stewardship that meets and
exceeds the anticipated environmental expectations of regulators
and aligns with the interests of local Indigenous
communities.
●
Updated Estimate of Mineral Resources:
Mineral
resources for Phoenix were last estimated in 2018. Since then,
additional drilling has been completed in and around the Phoenix
deposit as part of various ISR field tests, including drill holes
GWR-045 and GWR-049 (see press releases dated February 16, 2022 and
July 29, 2021), and exploration drilling; it is anticipated that an
updated mineral resource estimate will form the basis for mine
planning in the FS.
●
Mine Design Optimization:
FS
mine design is expected to reflect the decision to adopt a freeze
wall configuration for containment of the ISR well field (see press
release dated December 1, 2020), as well as the results from
multiple field test programs and extensive hydrogeological
modelling exercises, which have provided various opportunities to
optimize other elements of the Project – including well
pattern designs, permeability enhancement strategies, and both
construction and production schedules.
●
Processing Plant Optimization:
FS
process plant design is expected to reflect the decision to
increase the ISR mining uranium head-grade to 15 g/L (see press
release dated August 4, 2021), as well as the results from
extensive metallurgical laboratory studies designed to optimize the
mineral processing aspects of the Project.
●
Class 3 Capital Cost Estimate:
The
FS is also intended to provide the level of engineering design
necessary to support a Class 3 capital cost estimate (AACE
international standard with an accuracy of -15% /+25%), which is
expected to provide a basis to confirm the economic potential of
the Project highlighted in the PFS completed in 2018.
Environmental and Sustainability Activities
Environmental Assessment Activities
During the third
quarter of 2022, work on the draft EIS continued and in October
2022, the Company reached a significant regulatory milestone with
the submission of the draft EIS to SKMOE and the CNSC. The EIS
submission outlines the Company’s assessment of the potential
effects, including applicable mitigation measures, of the proposed
ISR uranium mine and processing plant planned for Wheeler River,
and reflects several years of baseline environmental data
collection,
10
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
technical
assessments and extensive engagement and consultation with
Indigenous and non-Indigenous interested parties.
Other regulatory
communications also continued through the third quarter of 2022.
Representatives from the SKMOE and the CNSC visited the Wheeler
River site where the management team provided a presentation on the
components of the Wheeler Project as outlined in the EIS. Denison
staff also conducted a tour of the FFT facilities to provide
insight into how the wellfield is proposed to function during ISR
mining operations.
Community Engagement Activities
During the third quarter of 2022, Denison
broadly supported and participated in numerous seasonal activities
important to Indigenous and non-Indigenous communities of interest,
such as the English River First Nation (‘ERFN’) Treaty
Days, the Canoe Healing Quest, the Tony Cote Summer Games, the Ile
a la Crosse Family Camp, and others. At the end of September,
Denison and several representatives of the SKMOE and CNSC were
invited to visit ERFN and the Kineepik Métis Local #9
(‘KML’) annual month-long culture camps.
In October 2022,
Denison signed an Exploration Agreement with the Ya’ Thi
Néné Lands and Resources Office and the Athabasca
Communities within Nuhenéné. This is the
Company’s third exploration agreement, which reflects our
intention to build a long-term relationship between Denison and
Indigenous groups by conducting our exploration and evaluation
activities in a sustainable manner that respects Indigenous rights,
advances reconciliation with Indigenous peoples, and provides
economic opportunities and other benefits to Indigenous groups in
an authentic, cooperative and respectful way.
Also in October
2022, Denison signed a Capacity Funding Agreement with the Metis
Nation – Saskatchewan Secretariat Inc. (‘MN-S’)
which formalizes mutually agreed-upon processes and associated
budget to support MN-S' participation in the environmental
assessment process for the Wheeler River Project. This will include
the MN-S led development of a Metis Knowledge Study, as well as
regular engagement between Denison and the MN-S in respect of the
Project.
During the second
quarter of 2022, Denison entered into a Participation and Funding
Agreement with KML, which builds on an existing letter agreement
between Denison and KML with respect to the support of KML's
contributions to, and participation in, the Federal and Provincial
EA process for the Wheeler River Project. Additionally, Denison and
KML entered into an Exploration Agreement in respect of Denison's
exploration and evaluation activities within KML's land and
occupancy area.
MINERAL PROPERTY EXPLORATION
During the three
and nine months ended September 30, 2022, Denison’s share of
exploration expenditures was $1,549,000 and $5,175,000
respectively, (September 30, 2021 – $842,000 and $2,718,000).
The increase in exploration expenditures in the three and nine
months ended September 30, 2022 compared to the prior year was due
to an increase in both winter and summer exploration
activities.
Exploration
spending in the Athabasca Basin is generally seasonal in nature,
resulting in increased field activity during the winter exploration
season (January to mid-April) and summer exploration season (June
to mid-October).
11
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
The following
table summarizes the exploration activities completed during the
nine months ended September 30, 2022.
|
EXPLORATION ACTIVITIES
|
|||
|
Property
|
Denison’s ownership
|
Drilling in metres
(m)(1)
|
Other activities
|
|
Candle
|
45.08%(2)
|
-
|
Geophysical
Survey
|
|
Crawford
Lake
|
100.00%
|
-
|
Geophysical
Survey
|
|
Darby
|
60.10%(3)
|
-
|
Geophysical
Survey
|
|
Ford
Lake
|
100.00%
|
3,341 (7
holes)
|
-
|
|
Johnston
Lake
|
100.00%
|
-
|
Geophysical
Survey
|
|
McClean
Lake
|
22.50%
|
5,862 (23
holes)
|
-
|
|
Midwest
|
25.17%
|
-
|
Geophysical
Survey
|
|
Moon Lake
South
|
75.00%
|
-
|
Geophysical
Survey
|
|
Waterbury
|
67.01%(4)
|
3,153 (9
holes)
|
Geophysical
Survey
|
|
Waterfound
|
24.68%(5)
|
7,078 (13
holes)
|
Geophysical
Survey
|
|
Wheeler
River
|
95.00%(6)
|
2,028 (4
holes)
|
-
|
|
Wolly
|
21.32%(7)
|
2,037 (9
holes)
|
Geophysical
Survey
|
|
|
|
|
|
|
Total
|
|
23,499 (65 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 as at December 31, 2021. Denison’s JV
partners have elected not to fund their 54.92% share of the 2022
exploration program, operated by Denison. Accordingly,
Denison’s ownership share will increase.
(3)
Represents Denison’s
ownership position as at December 31, 2021. Denison’s JV
partners have elected not to fund their 39.90% share of the 2022
exploration program, operated by Denison. Accordingly,
Denison’s ownership share will increase.
(4)
Represents Denison’s
ownership position as at May 30, 2022. Denison’s JV partners
have elected not to fund their share of the 2022 exploration
program, operated by Denison. Accordingly, Denison’s
ownership share will increase.
(5)
Denison’s effective
ownership interest as at September 30, 2022, including an indirect
12.90% ownership interest held through Denison’s 50%
ownership of JCU.
(6)
Denison’s effective
ownership interest as at December 31, 2021, including the indirect
5.0% ownership interest held through the JCU.
(7)
Represents Denison’s
ownership position at December 31, 2021. Denison has elected not to
fund its 21.32% share of the 2022 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 at
September 30, 2022, is illustrated in the figure below. The
Company’s Athabasca land package did not change during the
third quarter of 2022, remaining at 296,661 hectares (211 claims).
The land position reported by the Company excludes the land
positions held by JCU.
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Wheeler River Exploration
Denison’s
share of exploration costs at Wheeler River during the three and
nine months ended September 30, 2022 were $529,000 and $677,000
respectively (September 30, 2021 - $553,000 and
$999,000).
The 2022 Wheeler
River exploration drilling program began in early September and
focused on further evaluating the M Zone trend, where drilling in
2020 identified a broad zone of low-grade mineralization (0.08%
eU3O8 / 10.2 metres)
associated with a wide reverse fault zone in the lower sandstone,
highlighted by multiple basement wedges, and intense hydrothermal
alteration (see Denison news release from January 28, 2021). A
total of 2,028 metres has been drilled in four holes as of the end
of the third quarter of 2022. These initial drill holes
successfully identified up to 20 metres of unconformity offset
resulting from reverse movement along a graphitic semi-brittle
fault, as well as indicative alteration and elevated
radioactivity.
Exploration Pipeline Properties
During the nine
months ended September 30, 2022, exploration field programs were
carried out at eleven of Denison’s pipeline properties (seven
operated by Denison) and Denison’s share of exploration costs
for these properties for the three and nine months ended September
30, 2022 were $978,000 and $4,117,000 respectively (September 30,
2021 - $309,000 and $1,417,000).
The Company
continues to review, prioritize and rationalize its Athabasca Basin
exploration portfolio with the objective of continuing to explore
its highest priority projects, with the potential to deliver
significant and meaningful new discoveries.
Johnston Lake, Candle and Darby
Property-scale
Z-Tipper Axis Electromagnetic (‘ZTEM’) surveys were
completed at the Company’s Johnston Lake, Candle, and Darby
properties during the second quarter of 2022. The surveys were
designed to develop property-scale conductivity models that are
expected to provide valuable insight into the underlying basement
geology of each property, and support the development of future
exploration targets on each property.
13
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Initial
processing and interpretation of the raw data is ongoing. Receipt
of the final processed data for the 2022 ZTEM survey is expected in
the fourth quarter of 2022.
The ZTEM data for
Johnston Lake will be integrated with the results of a Resistivity/
Magnetotelluric (‘Res-MT’) survey, which is currently
underway.
Crawford Lake
During the first
quarter of 2022, a Small Moving Loop Electromagnetic (‘SML
EM’) survey was completed on the Company’s 100%-owned
Crawford Lake property to better define basement conductivity
associated with the F2 conductor and generate targets for future
drill testing on the project. Analysis and interpretation of the
raw data is ongoing.
Ford Lake
The Ford Lake
property is located in the southeastern part of the Athabasca
Basin, approximately 25 kilometres northwest of Cameco’s Key
Lake Operation. During the first quarter of 2022, the Company
completed an exploration drilling program, consisting of seven
holes totaling 3,341 metres, testing conductivity targets outlined
by a 2021 SML EM survey. The 2022 drilling program was highlighted
by hole FD-22-10, which encountered low-grade uranium
mineralization grading 0.08% eU3O8 over 0.4
metres.
Moon Lake South
Modelling and
interpretation of the results of a Stepwise Moving Loop EM
(‘SWML EM’) survey collected in the first quarter of
2022 was completed during the second quarter of 2022. The survey
successfully resolved the position of the CR-3 conductor between
lines 43S and 70S, where 2021 drilling identified low-grade
mineralization in holes MS-21-02 and MS-21-06, respectively. Future
drill targets were identified on each of the survey
lines.
Waterbury Lake
A SML EM survey
was completed on the Company’s Waterbury Lake property during
the first quarter of 2022 in order to evaluate the interpreted
southwest extension of the Midwest structural corridor onto claim
S-107359 at the southern end of the property.
An exploration
drilling program began in early August 2022, with drilling focused
on two target areas: GB Northeast and Hamilton Lake. A total of
3,153 metres was drilled in nine holes. Seven holes were completed
at GB Northeast, where drilling on each fence identified
structurally-controlled alteration potentially indicative of a
uranium mineralizing system. The strength of the alteration
increased as drilling advanced to the southwest, approaching an
interpreted flexure in the conductive trend. Additional geophysical
work is recommended prior to the next drilling program in the area.
Two holes were drilled at Hamilton Lake to test the edges of a
broad, N-S trending resistivity anomaly defined from DC-IP
resistivity data collected in 2016. No significant structure or
alteration was encountered in the two holes drilled at Hamilton
Lake.
McClean Lake
The McClean Lake
property is operated by Orano Canada and is host to the McClean
Lake Mill and several unmined uranium deposits, including Caribou,
Sue D, Sue E (partially mined out) and the McClean North and South
pods. A diamond drilling program consisting of 23 drill holes
totaling 5,862 metres was completed at the McClean South target
area during the first quarter of 2022.
During the third
quarter, final assay results were received from the winter drilling
program, which has resulted in a significant expansion of the "new"
high-grade unconformity-hosted zone of uranium mineralization
discovered in 2021 between the McClean South 8W and 8E
pods.
Ten of the 23
drill holes returned notable uranium mineralization, including
drill hole MCS-58, which returned 2.96% U3O8 over 15.5 metres,
including 24.49% U3O8 over 1.5 metres,
located approximately 54 metres to the southeast of drill hole
MCS-34, which was completed in 2021 and returned a mineralized
interval of 8.67% U3O8 over 13.5
metres.
Overall, the
results from 2022 have successfully expanded the footprint of the
"new" mineralized zone to approximately 180 metres in strike
length.
14
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Midwest
The Midwest
property is operated by Orano Canada and is host to the high-grade
Midwest Main and Midwest A uranium deposits which lie along strike
and within six kilometres of the THT and Huskie deposits on
Denison’s 67.01% owned Waterbury Lake project. The Midwest
and Waterbury deposits are all located in close proximity to
existing uranium mining and milling infrastructure –
including provincial highways, powerlines, and Denison’s
22.5% owned McClean Lake mill.
The 2022
exploration program consisted of 4.0 kilometres of Moving Loop
Transient Electromagnetic (‘ML-TEM’) data collected in
two survey lines. The survey results confirm the apparent dextral
offset in the Midwest conductor, which will have implications when
generating drill targets for future exploration
programs.
Waterfound River
Waterfound is
operated by Orano Canada. Denison has an effective 24.68% ownership
interest in the project, including its 11.78% direct interest and a
12.90% indirect interest from its 50% ownership of
JCU.
Multiple new
high-grade intercepts of unconformity-hosted uranium mineralization
were reported from the final three drill holes completed during the
winter 2022 exploration program. The results were highlighted by
drill hole WF-68, which returned a broad zone of uranium
mineralization, including a peak interval of 5.91% eU3O8 over 3.9 metres,
located approximately 800 metres west of the Alligator
Zone.
In response to
the high-grade mineralization that was discovered during the winter
program, the Waterfound Joint Venture approved a plan to expand the
scope of the summer exploration drilling program, which was
completed during the third quarter and consisted of seven drill
holes, totaling 3,903 metres. Three of the seven drill holes
intersected significant uranium mineralization with drill hole
WF-74A returning a highlight mineralized interval of 4.75%
eU3O8 over 13.3 metres,
including a sub-interval grading 25.23% eU3O8 over 0.5 metres.
The area to the west of WF-74A is sparsely drilled, leaving several
kilometres of the fertile La Rocque conductive corridor open for
follow-up.
Wolly
The Wolly project
is operated by Orano Canada. The 2022 Wolly exploration program
completed in the first quarter of 2022, consisted of 10 kilometres
of EM surveying on the West Creek grid, and 2,037 metres of diamond
drilling in nine drill holes at the Geneva and Rainbow North areas.
The highlight of the drill program was from drilling at the Geneva
area, located in the west-central portion of the property, where
drill hole GN-38 intersected a narrow vein of low-grade uranium
mineralization approximately 7 metres below the unconformity,
grading 0.08% eU3O8 over 0.2 metres.
No other significant uranium mineralization was returned from the
remaining drill holes completed in 2022.
Denison has
elected not to fund the 2022 exploration program at Wolly and as a
result the Company’s ownership interest will
decrease.
GENERAL AND ADMINISTRATIVE EXPENSES
During the three
and nine months ended September 30, 2022, total general and
administrative expenses were $2,652,000 and $9,475,000,
respectively (September 30, 2021 - $2,089,000 and $7,076,000).
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 current three and
nine month periods, compared to the prior year, was predominantly
driven by an increase in employee costs due to an increase in
headcount, an increase in non-cash share-based compensation expense
driven by the impact of the Company’s increased share price
and share price volatility on the valuation of share-based
compensation awarded in 2021 and 2022, as well as an increase in
employee cash bonus expense.
OTHER INCOME AND EXPENSES
During the three
and nine months ended September 30, 2022, the Company recognized
gains of $4,646,000 and $49,810,000 in other income and expenses,
respectively (September 30, 2021 – gains of $34,999,000 and
$39,306,000).
15
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
The main drivers
of other income/expense are as follows:
Fair value gains or losses on uranium investments
During 2021, the
Company acquired 2,500,000 pounds of U3O8 for an aggregate
purchase price of $91,674,000 (weighted average cost of $36.67
(US$29.66) per pound U3O8 including
purchase commissions of $0.05 (US$0.04) per pound 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 this material is held for long-term
capital appreciation, the Company’s holdings are measured at
fair value, with changes in fair value between reporting dates
recorded through profit and loss. During the three months ended
September 30, 2022, the spot price of U3O8 increased from
$65.08 (US$50.50) per pound U3O8 as at June 30,
2022, to $66.13 (US$48.25) per pound U3O8, at September 30,
2022, resulting in a fair value of the Company’s uranium
investments of $165,330,000 and mark-to-market gain for the three
months ended September 30, 2022 of $2,637,000 (September 30, 2021
– fair value gain of $36,138,000). During the nine months
ended September 30, 2022 the spot price of U3O8 increased from
$53.25 (US$42.00) per pound U3O8 at December 31,
2021, to $66.13 (US$48.25) per pound U3O8, at September 30,
2022, resulting in a mark-to-market gain for the nine months ended
September 30, 2022 of $32,216,000 (September 30, 2021 – fair
value gain of $43,672,000).
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 nine months ended September 30, 2022 the Company recorded fair
value gains of $190,000 and $16,923,000, respectively (September
30, 2021 – fair value losses of $5,735,000 and $11,567,000).
The fair value gains in the current three and nine month periods
was predominantly driven by the decrease in Company’s US
dollar share price during the respective periods.
Fair value gains or losses on portfolio investments
During the three
and nine months ended September 30, 2022, the Company recognized a
gain of $805,000 and a loss $4,181,000 on investments carried at
fair value, respectively (September 30, 2021 – gains of
$4,334,000 and $9,476,000). 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.
Gain on receipt of proceeds from Uranium Industry a.s
(‘UI’)
In November 2015,
the Company sold all of its mining assets and operations located in
Mongolia to UI for cash consideration of US$1,250,000 and the
rights to receive additional contingent consideration of up to
US$12,000,000. In September 2016, the Mineral Resources Authority
of Mongolia formally issued mining license certificates for the
Mongolian projects, triggering Denison’s right to receive
contingent consideration of US$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, which payment was not made. The Company’s receivable,
and the interest thereon, is fully provided for.
In December 2017,
the Company commenced arbitration proceedings and the final award
was rendered by an arbitration panel on July 27, 2020, with the
panel finding in favour of Denison and ordering UI to pay the
Company US$10,000,000 plus interest at a rate of 5% per annum from
November 16, 2016, plus certain legal and arbitration
costs.
In January 2022,
the Company executed a Repayment Agreement with UI pursuant to
which the parties negotiated the repayment of the debt owing from
UI to Denison. Under the terms of the Repayment Agreement, UI has
agreed to make scheduled payments on account of the arbitration
award, plus additional interest and fees, through a series of
quarterly installments and annual milestone payments, until
December 31, 2025.
16
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
The total amount
due to Denison under the Repayment Agreement, including amounts
received to date in 2022, is approximately US$16,000,000, inclusive
of additional interest to be earned over the term of the agreement
at a rate of 6.5% per annum. The Repayment Agreement includes
customary covenants and conditions in favour of Denison, including
certain restrictions on UI’s ability to take on additional
debt, in consideration for Denison’s deferral of enforcement
of the arbitration award while UI is in compliance with its
obligations under the Repayment Agreement.
During the three
and nine months ended September 30, 2022, the Company received
US$100,000 and US$2,300,000, respectively, from UI, of which a
portion relates to reimbursement of legal and other expenses
incurred by Denison, resulting in the recognition of a gain of
$131,000 and $2,844,000, respectively (September 30, 2021 - $nil
and $nil).
Fair value gains or losses on warrants on investments
In October 2021,
the Company sold (1) 32,500,000 common shares of GoviEx Uranium
Inc. (‘GoviEx’) and (2) 32,500,000 GoviEx Warrants
(‘GoviEx Warrants’) for combined gross proceeds of
$15,600,000. The gross proceeds were allocated to the GoviEx shares
and GoviEx Warrants based on their relative fair values at the time
of sale, resulting in allocated proceeds of $12,826,000 for the
share sale and $2,774,000 for the GoviEx Warrants. The original
cost of the shares was $2,698,000.
The GoviEx
Warrants entitle the holder to acquire from Denison one common
share of GoviEx owned by Denison for $0.80 during the 18 month life
of the warrant (until April 2023) and are accounted for as a
derivative liability. At each period end until the GoviEx Warrants
are exercised or expire the warrants are revalued and the
revaluation gains and losses are recorded in other income and
expense.
During the three
and nine months ended September 30, 2022, the Company recorded fair
value gains on the GoviEx Warrants of $422,000 and $1,592,000
(September 30, 2021 - $nil and $nil). The fair value gains in the
current periods are predominantly driven by a decrease in the share
price of GoviEx from the prior period ends.
Foreign exchange gains or losses
During the three
and nine months ended September 30, 2022, the Company recognized
foreign exchange gains of $615,000 and $902,000, respectively
(September 30, 2021 – foreign exchange gain of $398,000 and a
foreign exchange loss of $1,219,000). The increase in foreign
exchange gains in the current year is predominantly driven by the
impact of the increase in the US dollar to Canadian dollar exchange
rate on the US dollar denominated cash and payables
balances.
EQUITY SHARE OF INCOME FROM JOINT VENTURES
On August 3,
2021, Denison completed the acquisition of 50% of JCU from UEX
Corporation (‘UEX’) for cash consideration of
$20,500,000 plus transaction costs of $1,356,000 (the ‘JCU
Acquisition’).
JCU is a private
company that holds a portfolio of twelve uranium project joint
venture interests in Canada, including a 10% interest in
Denison’s 90% directly-owned Wheeler River project, a 30.099%
interest in the Millennium project (Cameco, 69.901%), a 33.8118%
interest in the Kiggavik project (Orano Canada, 66.1882%), and a
34.4508% interest in the Christie Lake Project (UEX, 65.5492%). At
September 30, 2022, Denison holds a 50% interest in JCU and shares
joint control. Accordingly, this joint venture is accounted for
using the equity method.
During the three
and nine months ended September 30, 2022, the Company recorded its
equity share of losses from JCU of $945,000 and $2,249,000
(September 30, 2021 - $84,000 and $84,000). The Company records its
share of income or loss from JCU one month in arrears, based on the
most recently available financial information, adjusted for any
subsequent material transactions that have occurred.
Cash and cash
equivalents were $54,902,000 at September 30, 2022 (December 31,
2021 – $63,998,000).
The decrease in
cash and cash equivalents of $9,096,000 was predominantly due to
net cash used for operations of $20,261,000, and net cash used in
investing activities of $5,380,000, partially offset by net cash
provided by financing activities of $15,617,000.
Net cash used in
operating activities of $20,261,000 was predominantly due to the
net loss for the period, adjusted for non-cash items and changes in
working capital items.
17
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Net cash used in
investing activities of $5,380,000 was mainly due to the
acquisition of an office building in Saskatoon, as well as
equipment purchases related to the FFT, slightly offset by a
decrease in restricted cash. The decrease in restricted cash is due
to the decrease in the pledged cash required to maintain the
Letters of Credit facility with the Bank of Nova Scotia, as well as
cash calls from the Elliot Lake reclamations trust, offset by the
Company’s annual funding of the Elliot Lake reclamation trust
fund.
Net cash provided
by financing activities of $15,617,000 was from the net proceeds
from the Company’s At-the-Market (‘ATM’) equity
program, as well as stock option exercises. See below for further
details regarding the ATM.
In September
2021, the Company filed a short form base shelf prospectus
(‘2021 Base Shelf Prospectus’) with the securities
regulatory authorities in each of the provinces and territories in
Canada and in the United States. The 2021 Base Shelf Prospectus
relates to the public offering for sale of 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 2021 Shelf Prospectus
and pursuant to a prospectus supplement, for an aggregate offering
amount of up to $250,000,000 during the 25 month period beginning
on September 16, 2021.
Also in September
2021, Denison entered into an equity distribution agreement
providing for an ATM equity offering program (‘2021 ATM
Program’), qualified by a prospectus supplement to the 2021
Base Shelf Prospectus. The 2021 ATM Program will 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
US$50,000,000.
During the three
and nine months ended September 30, 2022, the Company issued
3,786,860 and 8,025,460 shares under the 2021 ATM Program. The
common shares were issued at an average price of approximately
$1.91 per share for aggregate gross proceeds of $15,306,000. The
Company also recognized issue costs of $453,000 related to its ATM
share issuances which includes $306,000 of commissions and $147,000
in other costs. Since launching the 2021 ATM Program, the Company
has issued 11,865,760 shares under the ATM for aggregate gross
proceeds of $23,281,000.
Also during the
three and nine months ended September 30, 2022, the Company
received share issue proceeds of $20,000 and $827,000 related to
the issuance of 15,000 and 1,115,000 shares, respectively, upon the
exercise of employee stock options.
Use of Proceeds
February 2021 Unit Financing
As disclosed in
the Company’s prospectus supplement to the 2020 Base Shelf
Prospectus dated February 16, 2021 (‘February 2021 Prospectus
Supplement’), the net proceeds of the equity financing from
February 2021 were expected to be utilized to fund Wheeler River
evaluation and detailed project engineering activities as well as
general, corporate and administrative expenses. During 2021, a
portion of the proceeds of this financing was utilized to fund
Denison’s acquisition of 50% of JCU. The Company’s use
of the remainder of the net proceeds was in line with the uses
disclosed in the February 2021 Prospectus Supplement.
March 2021 Unit Financing
As disclosed in
the Company’s prospectus supplement to the 2020 Base Shelf
Prospectus dated March 17, 2021 (‘March 2021 Prospectus
Supplement’), the majority of the net proceeds of the equity
financing from March 2021 were expected to be utilized to purchase
physical uranium in the uranium spot market, with a target of
acquiring approximately 2,500,000 pounds of U3O8, as well as
general, corporate and administrative expenses, including storage
costs for the purchased uranium. During 2021, the Company acquired
2,500,000 pounds of U3O8 with a total cost
of $91,674,000. The remainder of the net proceeds of this financing
will be utilized for general, corporate, and administrative
expenses, in line with the use of proceeds disclosed in the March
2021 Prospectus Supplement.
2021 Flow Through Financing
As at September
30, 2022, the Company has spent $6,952,000 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. The remainder is expected to be completed as
part of the 2022 exploration program planned for the
Company’s Wheeler River, Johnston Lake, and Waterbury Lake
properties.
18
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
2021 ATM Program Financing
As disclosed in
the Company’s prospectus supplement to the 2021 Base Shelf
Prospectus dated September 28, 2021 (‘September 2021
Prospectus Supplement’), the net proceeds raised under the
2021 ATM Program were expected to be utilized to potentially fund
Wheeler River evaluation and detailed project engineering, long
lead project construction items, as well as general, corporate and
administrative expenses, subject to the actual amount raised.
During the period from the launch of the 2021 ATM Program in
September 2021 to September 30, 2022, the Company’s use of
proceeds from this offering was in line with that disclosed in the
September 2021 Prospectus Supplement.
Revolving Term Credit Facility
On January 21,
2022, 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 (‘2022
Credit Facility’). At that time, under the 2022 Credit
Facility, the Company continued to have access to letters of credit
of up to $24,000,000, which was fully utilized for non-financial
letters of credit in support of reclamation obligations. All other
terms of the credit facility (tangible net worth covenant, pledged
cash, investments amount and security for the facility) remained
unchanged by the amendment – including the requirement to
provide $9,000,000 in cash collateral on deposit with BNS to
maintain the 2022 Credit Facility.
In January 2022,
the CNSC approved an amendment to the operating license for the
MLJV and MWJV operations, which allows for the expansion of the
McClean Lake TMF, along with the associated revised Preliminary
Decommissioning Plan (‘PDP’) and cost estimate. Under
the updated plan, the Company’s pro rata share of the
financial assurances required to be provided to the Province of
Saskatchewan decreased from $24,135,000 to
$22,972,000.
As a result of
this decrease in the financial assurances required for the MLJV
reclamation obligation, the Company entered into a further
amendment with respect to the 2022 Credit Facility in April 2022.
This amendment reduced the maximum letters of credit available
under the 2022 Credit Facility to $22,972,000, which is fully
utilized for non-financial letters of credit in support of
reclamation obligations. Concurrently, the cash collateral on
deposit with BNS to maintain the 2022 Credit Facility was reduced
from $9,135,000 to $7,972,000, which resulted in the release of
$1,163,000 in previously restricted cash back to the Company. All
other terms of the credit facility (tangible net worth covenant,
investments amount and security for the facility) remain unchanged
by this further amendment.
TRANSACTIONS WITH RELATED PARTIES
Uranium Participation Corporation
Until July 19,
2021, Denison served as the manager of UPC, a publicly traded
company listed on the TSX that invested in U3O8 and uranium
hexafluoride (‘UF6’). The
Company had no ownership interest in UPC but received fees for
management services it provided and commissions from the purchase
and sale of U3O8 and
UF6 by
UPC.
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.
The MSA between
the Company and UPC entitled Denison 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.
As a result of
the termination of the MSA in 2021 Denison received a termination
payment from UPC of $5,848,000.
19
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
The following
amounts were earned from UPC for the periods ended:
|
|
|
Three
Months Ended
|
|
Nine
Months Ended
|
||||
|
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
(in
thousands)
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
Management Fee
Revenue
|
|
|
|
|
|
|
|
|
|
Base and variable
fees
|
$
|
-
|
$
|
23
|
$
|
-
|
$
|
1,069
|
|
Termination
fee
|
|
-
|
|
5,848
|
|
-
|
|
5,848
|
|
Commission
fees
|
|
-
|
|
-
|
|
-
|
|
697
|
|
Discretionary
fees
|
|
-
|
|
-
|
|
-
|
|
350
|
|
|
$
|
-
|
$
|
5,871
|
$
|
-
|
$
|
7,964
|
Korea Electric Power Corporation (‘KEPCO’)
Denison and Korea
Hydro Nuclear Power Canada (‘KHNP Canada’) (which is an
indirect subsidiary of KEPCO through Korea Hydro Nuclear Power
(‘KHNP’)) are parties to the KHNP Strategic
Relationship Agreement, which provides for a long-term
collaborative business relationship between the parties and
includes a right of KHNP Canada to nominate one representative to
Denison’s Board of Directors provided that its shareholding
percentage is at least 5%.
KHNP Canada 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.
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
|
|
Nine
Months Ended
|
||||
|
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
(in
thousands)
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
$
|
(543)
|
$
|
(518)
|
$
|
(2,711)
|
$
|
(2,055)
|
|
Share-based
compensation
|
|
(774)
|
|
(526)
|
|
(2,422)
|
|
(1,583)
|
|
|
$
|
(1,317)
|
$
|
(1,044)
|
$
|
(5,133)
|
$
|
(3,638)
|
The increase in
salaries and short-term employee benefits awarded to key management
is predominantly driven by an increase in bonus expense as well as
an increase in headcount.
The Company
recognizes the accounting value of share-based compensation over
the vesting period. During the first quarter of 2021, the
Company’s increased share price and share price volatility
resulted in an increased accounting valuation for the awards
granted late in the quarter ended March 31, 2021. The increase in
share-based compensation in the nine months ended September 30,
2022 is due to the fact that the current quarter includes the
recognition of a full nine months vesting expense for these awards,
while the prior period includes only seven months of the vesting
expense.
The increase in
share-based compensation in the three and nine months ended
September 30, 2022, compared to the same periods in the prior
years, was also partly driven by forfeitures of share based
compensation in the third quarter of 2021 which reduced share-based
compensation expense in that period.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does
not have any off-balance sheet arrangements.
20
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
OUTSTANDING SHARE DATA
Common Shares
At November 3, 2022, there were 822,604,676 common
shares issued and outstanding and a total of 895,275,469
common shares on a fully-diluted basis.
Stock Options and Share Units
At November 3,
2022, the Company had 9,658,895 Denison stock options and 8,005,423
share units outstanding.
Share Purchase Warrants
At November 3,
2022, there were 55,006,475 share purchase warrants outstanding,
including 15,791,475 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,
2021 and the MD&A for the three and six months ended June 30,
2022 for a detailed discussion of the previously disclosed 2022
budget and outlook.
During the third
quarter of 2022, the Company increased its outlook for exploration
expenditures by $761,000 in the third quarter as a result of a
decision to expand the scope of the 2022 Wheeler River exploration
program. In addition, the outlook for evaluation expenditures was
decreased by $935,000, predominantly due to the deferral of certain
activities into 2023, most notably the delay in the expected timing
of the FFT mineral precipitate recovery phase, as well as a
decrease in incurred costs associated with the construction of the
FFT.
The Company also
made minor changes to its outlook for income from mineral sales to
reflect the actual net proceeds received from the Company’s
sale of its share of production from the 2021 SABRE test mining
program at McClean Lake.
|
|
PREVIOUS 2022 OUTLOOK
|
CURRENT 2022 OUTLOOK
|
Actual to
September, 2022(2)
|
|
|
Mining Segment
|
|
|
|
|
|
Mineral
Sales
|
|
2,736
|
2,722
|
2,722
|
|
Development &
Operations
|
|
(1,704)
|
(1,704)
|
(1,250)
|
|
Exploration
|
|
(7,503)
|
(8,264)
|
(5,899)
|
|
Evaluation
|
|
(25,820)
|
(24,885)
|
(19,573)
|
|
JCU Cash
Contributions
|
|
(964)
|
(964)
|
-
|
|
|
|
(33,255)
|
(33,095)
|
(24,000)
|
|
Closed Mines Segment
|
|
|
|
|
|
Closed Mines
Environmental Services
|
|
1,185
|
1,185
|
723
|
|
|
|
1,185
|
1,185
|
723
|
|
Corporate and Other Segment
|
|
|
|
|
|
Corporate
Administration & Other
|
|
(9,032)
|
(9,032)
|
(6,896)
|
|
|
|
(9,032)
|
(9,032)
|
(6,896)
|
|
Total(1)
|
|
$ (41,102)
|
$ (40,942)
|
$ (30,173)
|
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 nine months ended
September 30, 2022, actual amounts reported above includes capital
additions of $6,168,000, $2,844,000 in repayments from UI, and
excludes $242,000 net impact of non-cash items and other
adjustments.
21
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
ADDITIONAL INFORMATION
CONTROLS AND PROCEDURES
During the three
months ended September 30, 2022, the Company completed the
implementation of an enterprise resource planning
(‘ERP’) software. The process of implementing the ERP
software represented a material change in the Company’s
internal control over financial reporting. Pre-implementation
testing and post-implementation reviews were conducted by
management to ensure that internal controls surrounding the system
implementation process, the applications and the closing process
were properly designed and implemented, to ensure continuity in the
Company’s system of internal controls. There were no other
changes in the Company’s internal control over financial
reporting during the three and nine months ended September 30, 2022
that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over
financial reporting.
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 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 25, 2022 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.
22
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
Certain
information contained in this MD&A constitutes
‘forward-looking information’, within the meaning of
the applicable United States and Canadian legislation concerning
the business, operations and financial performance and condition of
Denison.
Generally, these
forward-looking statements can be identified by the use of
forward-looking terminology such as ‘plans’,
‘expects’, ‘budget’,
‘scheduled’, ‘estimates’,
‘forecasts’, ‘intends’,
‘anticipates’, or ‘believes’, or the
negatives and/or variations of such words and phrases, or state
that certain actions, events or results ‘may’,
‘could’, ‘would’, ‘might’ or
‘will be taken’, ‘occur’, ‘be
achieved’ or ‘has the potential to’.
In particular,
this MD&A contains forward-looking information pertaining to
the following: Denison’s plans and objectives for 2022 and
beyond, including the proposed use of proceeds of equity
financings; 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 and the anticipated continuity
thereof; expectations regarding Denison’s joint venture
ownership interests and the continuity of its agreements with its
partners; expectations regarding the toll milling of Cigar Lake
ores; 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, FFT and other 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 impacted by global and local supply
disruptions.
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 25, 2022 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.
23
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
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.
24
Exhibit
99.3
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
I,
David D. Cates, President and Chief Executive Officer of Denison
Mines Corp., certify the following:
1.
Review: I have
reviewed the interim financial report and interim MD&A
(together, the "interim filings") of Denison Mines Corp. (the
"issuer") for the interim period ended September 30,
2022.
2.
No
misrepresentations: Based on my knowledge, having exercised
reasonable diligence, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated or that is necessary to make a statement not
misleading in light of the circumstances under which it was made,
with respect to the period covered by the interim
filings.
3.
Fair presentation:
Based on my knowledge, having exercised reasonable diligence, the
interim financial report together with the other financial
information included in the interim filings fairly present in all
material respects the financial condition, financial performance
and cash flows of the issuer, as of the date of and for the periods
presented in the interim filings.
4.
Responsibility: The
issuer's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures
(DC&P) and internal control over financial reporting (ICFR), as
those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual
and Interim Filings, for the issuer.
5.
Design: Subject to
the limitations, if any, described in paragraphs 5.2 and 5.3, the
issuer's other certifying officer(s) and I have, as at the end of
the period covered by the interim filings
(a)
designed DC&P, or caused
it to be designed under our supervision, to provide reasonable
assurance that
(i)
material information relating
to the issuer is made known to us by others, particularly during
the period in which the interim filings are being prepared;
and
(ii)
information required to be
disclosed by the issuer in its annual filings, interim filings or
other reports filed or submitted by it under securities legislation
is recorded, processed, summarized and reported within the time
periods specified in securities legislation; and
(b)
designed ICFR, or caused it
to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with the issuer's GAAP.
5.1
Control framework:
The control framework the issuer's other certifying officer(s) and
I used to design the issuer's ICFR is Internal Control – Integrated
Framework (COSO Framework) published by The Committee of
Sponsoring Organizations of the Treadway Commission
(COSO).
5.2
ICFR: Not
applicable.
5.3
Limitation on scope of
design: Not applicable.
6.
Reporting changes in ICFR: The issuer
has disclosed in its interim MD&A any change in the issuer's
ICFR that occurred during the period beginning on July 1, 2022 and
ended on September 30, 2022 that has materially affected, or is
reasonably likely to materially affect, the issuer's
ICFR.
Date:
November 3, 2022
(signed)
"David Cates"
Name:
David D.
Cates
Title:
President and
Chief Executive Officer
Exhibit 99.4
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
I,
Gabriel (Mac) McDonald, Executive Vice President and Chief
Financial Officer of Denison Mines Corp., certify the
following:
1.
Review: I have
reviewed the interim financial report and interim MD&A
(together, the "interim filings") of Denison Mines Corp. (the
"issuer") for the interim period ended September 30,
2022.
2.
No
misrepresentations: Based on my knowledge, having exercised
reasonable diligence, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated or that is necessary to make a statement not
misleading in light of the circumstances under which it was made,
with respect to the period covered by the interim
filings.
3.
Fair presentation:
Based on my knowledge, having exercised reasonable diligence, the
interim financial report together with the other financial
information included in the interim filings fairly present in all
material respects the financial condition, financial performance
and cash flows of the issuer, as of the date of and for the periods
presented in the interim filings.
4.
Responsibility: The
issuer's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures
(DC&P) and internal control over financial reporting (ICFR), as
those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual
and Interim Filings, for the issuer.
5.
Design: Subject to
the limitations, if any, described in paragraphs 5.2 and 5.3, the
issuer's other certifying officer(s) and I have, as at the end of
the period covered by the interim filings
(a)
designed DC&P, or caused
it to be designed under our supervision, to provide reasonable
assurance that
(i)
material information relating
to the issuer is made known to us by others, particularly during
the period in which the interim filings are being prepared;
and
(ii)
information required to be
disclosed by the issuer in its annual filings, interim filings or
other reports filed or submitted by it under securities legislation
is recorded, processed, summarized and reported within the time
periods specified in securities legislation; and
(b)
designed ICFR, or caused it
to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with the issuer's GAAP.
5.1
Control framework:
The control framework the issuer's other certifying officer(s) and
I used to design the issuer's ICFR is Internal Control – Integrated
Framework (COSO Framework) published by The Committee of
Sponsoring Organizations of the Treadway Commission
(COSO).
5.2
ICFR: Not
applicable.
5.3
Limitation on scope of
design: Not applicable.
6.
Reporting changes in ICFR: The issuer
has disclosed in its interim MD&A any change in the issuer's
ICFR that occurred during the period beginning on July 1, 2022 and
ended on September 30, 2022 that has materially affected, or is
reasonably likely to materially affect, the issuer's
ICFR.
Date:
November 3, 2022
(signed)
"Gabriel McDonald"
Name:
Gabriel (Mac)
McDonald
Title:
Executive
Vice President and Chief Financial Officer
Exhibit 99.5
 |
Denison Mines Corp.
1100 – 40
University Ave
Toronto, ON M5J
1T1
www.denisonmines.com
|
PRESS
RELEASE
Denison Reports Financial and Operational Results for Q3 2022,
Including
Significant De-Risking and Regulatory Milestones
Toronto, ON – November 3,
2022. 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 September 30, 2022.
Both documents will be available on the Company’s website
at www.denisonmines.com,
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, “It is an incredibly
exciting time to be a Denison shareholder. Our company is
delivering on our plans to systematically advance the development
of Canada’s first In-Situ Recovery (‘ISR’)
uranium mine – having recently completed significant
de-risking and regulatory milestones. This is occurring at the same
time as interest in nuclear energy projects continues to increase
as a result of the growing realization that nuclear power must play
a critical role in our global battle against climate
change.
During the third quarter, Denison was successful in obtaining
regulatory approvals to construct and operate the Phoenix ISR
Feasibility Field Test (‘FFT’) facility and completed
the construction and commissioning of the lixiviant injection
modules necessary to launch the leaching phase of the FFT. Shortly
thereafter, in October, the Company announced the history-making
recovery of uranium bearing solution from the FFT following the
successful acidification of the ISR test pattern. This result
reflects the tireless effort of our Saskatoon-based technical team
to de-risk and validate the 2018 selection of the ISR mining method
for the Phoenix uranium deposit (‘Phoenix’). We have
now demonstrated that Athabasca Basin uranium can be recovered by
the ISR mining method.
In parallel, our regulatory team successfully advanced our
assessment of the potential environmental impacts of the ISR
uranium mine and processing plant proposed for Wheeler River, to
the point of completing and submitting the draft Environmental
Impact Statement (‘EIS’) for the project. Through this
extensive process, it became apparent that the project has the
potential to achieve a superior standard of environmental
sustainability, with fewer residual effects remaining after
mitigation when compared to conventional uranium mining and milling
operations.
Taken together, these milestones have notably advanced the prospect
of using the ISR mining method at Phoenix and bringing Denison back
to the ranks of meaningful Canadian uranium producers during the
second half of this decade. This timing is projected to be aligned
with accelerating global demand for uranium following a wave of
continuing and new investments into nuclear energy projects
including recently announced (i) new builds of conventional nuclear
power plants in Poland, South Korea, China, and the United Kingdom,
(ii) reactor restarts and life extensions in the United States and
Japan, and (iii) advancements in small-modular reactor
(‘SMR’) projects like in Ontario, where Canada is
positioning to be the first nation in the G7 to commercially deploy
an SMR.”
Highlights
■
Recovered uranium bearing solution from the Feasibility Field Test
at Phoenix
In October
2022, the Company announced that it had successfully recovered
uranium bearing solution from the ISR FFT for Phoenix, at the
Company's 95% owned Wheeler River project (‘Wheeler
River’ or the ‘Project’) at targeted rates and
grades, indicating that the hydrogeological system at Phoenix was
responding as expected with pH trends, flow characteristics, and
uranium recovery meeting expectations. The preliminary results
received to date demonstrated the successful acidification of the
test pattern and recovery of uranium using the ISR mining
method.
The Company
previously announced, in July and August 2022, that it had received
approval to construct and operate a pollutant control facility from
the Saskatchewan Minister of Environment (‘SKMOE’) and
a License to Possess, Use, Store and Transfer a Nuclear Substance
from the Canadian Nuclear Safety Commission (‘CNSC’).
With the receipt of these approvals, the Company was fully
permitted to operate the FFT facility and carry out the process of
recovering a uranium bearing solution from the Phoenix ore body.
The Company completed the construction and wet commissioning of the
lixiviant injection system for the FFT in September 2022 and
commenced the leaching phase of the FFT. Given the highly
successful results of the FFT, lixiviant injection has ceased, and
operations at the Phoenix FFT site have transitioned from the
leaching phase of the FFT to the neutralization phase, which is
expected to be completed before the end of the year.
The final
phase of the FFT, which involves management of the recovered
solution, is expected to commence in the spring of
2023.
■
Achieved significant regulatory milestone for Wheeler River with
the submitted draft Environmental Impact Statement
In October
2022, Denison announced a significant regulatory milestone for
Wheeler River with the submission of the draft EIS to the SKMOE and
the CNSC. The EIS submission outlines the Company’s
assessment of the potential effects, including applicable
mitigation measures, of the proposed ISR uranium mine and
processing plant planned for Wheeler River, and reflects several
years of baseline environmental data collection, technical
assessments, plus extensive engagement and consultation with
Indigenous and non-Indigenous interested parties.
■
Executed an exploration agreement with the Ya’thi
Néné Lands and Resources Office, the Athabasca Nations,
and Communities of the Nuhenéné
In October
2022, Denison announced that it entered into an exploration
agreement with the Ya'thi Néné Lands and Resources Office
(‘YNLRO’), Hatchet Lake Denesułiné First
Nation, Black Lake Denesułiné First Nation, Fond du Lac
Denesułiné First Nation (collectively, the
’Athabasca Nations‘) and the Northern Hamlet of Stony
Rapids, the Northern Settlement of Uranium City, the Northern
Settlement of Wollaston Lake and the Northern Settlement of Camsell
Portage (collectively, the ‘Athabasca Communities’) in
respect of Denison’s exploration and evaluation activities
within the traditional territory of the Athabasca Nations (the
‘Nuhenéné’).
The
exploration agreement expresses the parties’ intention to
build a long-term relationship between Denison and the YNLR,
Athabasca Nations, and Athabasca Communities. Denison wishes to
conduct and advance its exploration activities in a sustainable
manner that respects the Athabasca Nations’ Indigenous
rights, advances reconciliation with Indigenous peoples, and
provides economic opportunities and other benefits to the Athabasca
Communities in an authentic, cooperative and respectful
way.
■
Expanded high-grade uranium mineralization at McClean Lake
South
In September 2022, Denison announced that assays
received from exploration drilling completed at the Company's 22.5%
owned McClean Lake Joint Venture (‘McClean Lake’ or
‘MLJV’) during the winter of 2022 have resulted in a
significant expansion of the "new" high-grade unconformity-hosted
zone of uranium mineralization discovered in 2021 between the
McClean South 8W and 8E pods (see news release dated April 14,
2021). Ten drill holes completed during 2022 by Orano Canada Inc.
(‘Orano Canada’), 77.5% owner and operator of the MLJV,
returned notable uranium mineralization, including drill hole
MCS-58, which returned 2.96% U3O8
over 15.5 metres, including 24.49%
U3O8
over 1.5 metres, located approximately
54 metres to the southeast of drill hole MCS-34, which was
completed in 2021 and returned a mineralized interval of 8.67%
U3O8
over 13.5 metres. Overall, the results
from 2022 have successfully expanded the footprint of the "new"
mineralized zone to approximately 180 metres in strike
length.
■
Intersected additional high-grade uranium mineralization on the
Waterfound Joint Venture
In September 2022, Denison announced that uranium
mineralization was encountered in three of the seven drill holes
completed during the summer exploration program at the Orano
Canada-operated Waterfound Joint Venture
(‘Waterfound’), highlighted by drill hole WF-74A, which
intersected 4.75% eU3O8
over 13.3 metres, including a
sub-interval grading 25.23% eU3O8
over 0.5 metres. The mineralized
intersection from WF-74A represents the best mineralized hole
drilled on the Waterfound property to date, and highlights the
potential for the discovery of additional high-grade uranium
mineralization further along strike to the west of the Alligator
Zone. Denison holds an effective 24.68% ownership interest in
Waterfound through its direct interest in the joint venture and its
50% ownership of JCU (Canada) Exploration Company Limited
(‘JCU’).
About Denison
Denison Mines
Corp. was formed under the laws of Ontario and is a reporting
issuer in all Canadian provinces and territories. Denison’s
common shares are listed on the Toronto Stock Exchange 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 Pre-Feasibility Study
(‘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 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, plus a 25.17% interest in the Midwest Main
and Midwest A deposits and a 67.01% 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 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 approximately 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.
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 Andy Yackulic, P.Geo., Denison’s Director
Exploration who are Qualified Persons in accordance with the
requirements of NI 43-101.
For more information, please contact
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David Cates
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(416) 979-1991 ext.
362
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President and Chief Executive
Officer
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Mac McDonald
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(416) 979-1991 ext.
242
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Exec. Vice President &
Chief Financial Officer
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Follow Denison on
Twitter
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@DenisonMinesCo
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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 exploration,
development and expansion plans and objectives, including the
scope, objectives and interpretations of the Feasibility Study
process for the proposed ISR operation for the Phoenix deposit,
including the FFT and metallurgical testing programs described
herein and the interpretation of the results therefrom;
expectations regarding regulatory applications and approvals and
the elements thereof, including the EIS; expectations regarding
Denison’s joint venture ownership interests; and expectations
regarding the continuity of its agreements with third parties.
Statements relating to ‘mineral reserves’ or
‘mineral resources’ are deemed to be forward-looking
information, as they involve the implied assessment, based on
certain estimates and assumptions that the mineral reserves and
mineral resources described can be profitably produced in the
future.
Forward looking
statements are based on the opinions and estimates of management as
of the date such statements are made, and they are subject to known
and unknown risks, uncertainties and other factors that may cause
the actual results, level of activity, performance or achievements
of Denison to be materially different from those expressed or
implied by such forward-looking statements. For example, the
results and underlying assumptions and interpretations of the PFS
as well as de-risking efforts such as the ISR field programs
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
its evaluation activities and/or the FS 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 25, 2022 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.
Exhibit 99.6
Ladies and
Gentlemen:
The undersigned
hereby consents to (1) the references to the undersigned’s
name included or incorporated by reference in the Registration
Statement on Form F-10 of Denison Mines Corp. (File No. 333-258939)
in connection with the review and approval of the scientific and
technical disclosure contained in the Management’s Discussion
and Analysis of the Financial Position and Results of Operations of
the Company for the three and nine months ended September 30, 2022,
and (2) all other references to the undersigned included or
incorporated by reference in the Registration
Statement.
Dated: November
3, 2022
/s/ David Bronkhorst_____
David Bronkhorst,
P.Eng.
Denison Mines
Corp.
Exhibit 99.7
Ladies and
Gentlemen:
The undersigned
hereby consents to (1) the references to the undersigned’s
name included or incorporated by reference in the Registration
Statement on Form F-10 of Denison Mines Corp. (File No. 333-258939)
in connection with the review and approval of the scientific and
technical disclosure contained in the Management’s Discussion
and Analysis of the Financial Position and Results of Operations of
the Company for the three and nine months ended September 30, 2022,
and (2) all other references to the undersigned included or
incorporated by reference in the Registration
Statement.
Dated: November
3, 2022
/s/ Andrew Yackulic _________
Andrew Yackulic,
P.Geo.
Denison Mines
Corp.