Denison Mines Corp 6-K, filed May 7, 2021
Denison Mines Corp. (DNN)
6-K
2021-05-07
For: 2021-03-31
View Original
Added on
April 07, 2026
About this 6-K
Denison Mines Corp filed this 6-K on May 7, 2021.
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: May 7, 2021
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): ☐
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
DENISON MINES
CORP.
|
||
|
|
|
|
||||
|
|
|
|
|
/s/ Amanda Willett
|
||
|
Date: May 7,
2021
|
|
|
|
Amanda
Willett
|
||
|
|
|
|
|
Vice
President Legal and Corporate Secretary
|
||
FORM 6-K
EXHIBIT INDEX
|
Exhibit Number
|
|
Description
|
|
|
|
|
|
99.1
|
|
|
|
99.2
|
|
|
|
99.3
|
|
|
|
99.4
|
|
|
| 99.5 |
|
|
|
Exhibit 99.1
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
(Unaudited -
Expressed in thousands of Canadian dollars (“CAD”)
except for share amounts)
|
||||||
|
|
|
|
|
At March
31
2021
|
|
At December
31
2020
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Cash and cash
equivalents (note 4)
|
|
|
$
|
172,757
|
$
|
24,992
|
|
Trade and other
receivables (note 5)
|
|
|
|
2,759
|
|
3,374
|
|
Inventories (note
6)
|
|
|
|
3,124
|
|
3,015
|
|
Investments (note
7)
|
|
|
|
16,286
|
|
16,657
|
|
Prepaid expenses
and other
|
|
|
|
758
|
|
1,373
|
|
|
|
|
|
195,684
|
|
49,411
|
|
Non-Current
|
|
|
|
|
|
|
|
Inventories-ore
in stockpiles (note 6)
|
|
|
|
2,098
|
|
2,098
|
|
Investments (note
7)
|
|
|
|
573
|
|
293
|
|
Restricted cash
and investments (note 8)
|
|
|
|
12,596
|
|
12,018
|
|
Property, plant
and equipment (note 9)
|
|
|
|
256,983
|
|
256,870
|
|
Total
assets
|
|
|
$
|
467,934
|
$
|
320,690
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities
|
|
|
$
|
10,042
|
$
|
7,178
|
|
Current portion
of long-term liabilities:
|
|
|
|
|
|
|
|
Deferred revenue
(note 10)
|
|
|
|
3,898
|
|
3,478
|
|
Post-employment
benefits (note 11)
|
|
|
|
120
|
|
120
|
|
Reclamation
obligations (note 12)
|
|
|
|
802
|
|
802
|
|
Other liabilities
(note 14)
|
|
|
|
233
|
|
262
|
|
|
|
|
|
15,095
|
|
11,840
|
|
Non-Current
|
|
|
|
|
|
|
|
Deferred revenue
(note 10)
|
|
|
|
33,336
|
|
33,139
|
|
Post-employment
benefits (note 11)
|
|
|
|
1,199
|
|
1,241
|
|
Reclamation
obligations (note 12)
|
|
|
|
37,692
|
|
37,618
|
|
Share purchase
warrants liability (note 13)
|
|
|
|
14,798
|
|
-
|
|
Other liabilities
(note 14)
|
|
|
|
335
|
|
375
|
|
Deferred income
tax liability
|
|
|
|
8,906
|
|
9,192
|
|
Total
liabilities
|
|
|
|
111,361
|
|
93,405
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
Share capital
(note 15)
|
|
|
|
1,505,937
|
|
1,366,710
|
|
Contributed
surplus (note 16)
|
|
|
|
66,329
|
|
67,387
|
|
Deficit
|
|
|
|
(1,217,471)
|
|
(1,208,587)
|
|
Accumulated other
comprehensive income (note 17)
|
|
|
|
1,778
|
|
1,775
|
|
Total
equity
|
|
|
|
356,573
|
|
227,285
|
|
Total
liabilities and equity
|
|
|
$
|
467,934
|
$
|
320,690
|
|
|
|
|
|
|
|
|
|
Issued and
outstanding common shares (note 15)
|
|
|
804,477,684
|
|
678,981,882
|
|
|
Commitments
and contingencies (note 23)
|
|
|
|
|
|
|
|
Subsequent
events (note 24)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are integral to the condensed interim consolidated financial
statements
|
||||||
1
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
|
||||||||
|
(Unaudited -
Expressed in thousands of CAD dollars except for share and per
share amounts)
|
||||||||
|
|
|
|
|
Three
Months Ended
March
31
|
||||
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES (note 19)
|
|
|
|
|
$
|
2,496
|
$
|
4,660
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
Operating
expenses (note 18, 19)
|
|
|
|
|
|
(1,888)
|
|
(3,320)
|
|
Evaluation (note
19)
|
|
|
|
|
|
(2,761)
|
|
(1,491)
|
|
Exploration (note
19)
|
|
|
|
|
|
(1,348)
|
|
(1,700)
|
|
General and
administrative (note 19)
|
|
|
|
|
|
(2,625)
|
|
(2,188)
|
|
Other expense
(note 18)
|
|
|
|
|
|
(2,041)
|
|
(3,192)
|
|
|
|
|
|
|
|
(10,663)
|
|
(11,891)
|
|
Loss
before net finance expense
|
|
|
|
|
|
(8,167)
|
|
(7,231)
|
|
Finance expense,
net (note 18)
|
|
|
|
|
|
(1,025)
|
|
(1,063)
|
|
Loss before
taxes
|
|
|
|
|
|
(9,192)
|
|
(8,294)
|
|
Income tax
recovery (note 21)
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
308
|
|
1,631
|
|
Net loss for the
period
|
|
|
|
|
$
|
(8,884)
|
$
|
(6,663)
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss) (note 17):
|
|
|
|
|
|
|
|
|
|
Items that may be
reclassified to income (loss):
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation change
|
|
|
|
|
|
3
|
|
(14)
|
|
Comprehensive
loss for the period
|
|
|
|
|
$
|
(8,881)
|
$
|
(6,677)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
net loss per share:
|
|
|
|
|
|
|
|
|
|
All
operations
|
|
|
|
|
$
|
(0.01)
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of shares outstanding (in thousands):
|
|
|
|
|
||||
|
Basic and
diluted
|
|
|
|
|
|
714,424
|
|
597,198
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are integral to the condensed interim consolidated financial
statements
|
||||||||
2
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY
|
||||||||
|
(Unaudited -
Expressed in thousands of CAD dollars)
|
||||||||
|
|
|
|
|
Three
Months Ended
March
31
|
||||
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital (note 15)
|
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
$
|
1,366,710
|
$
|
1,335,467
|
|
Shares issued for
cash, net of issue costs
|
|
|
|
|
|
134,083
|
|
3
|
|
Share options
exercised-cash
|
|
|
|
|
|
3,711
|
|
-
|
|
Share options
exercised-fair value adjustment
|
|
|
|
|
|
1,266
|
|
-
|
|
Share units
exercised-fair value adjustment
|
|
|
|
|
|
167
|
|
28
|
|
Balance-end of
period
|
|
|
|
|
|
1,505,937
|
|
1,335,498
|
|
|
|
|
|
|
|
|
|
|
|
Share purchase warrants
|
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
-
|
|
435
|
|
Warrants
expired
|
|
|
|
|
|
-
|
|
(435)
|
|
Balance-end of
period
|
|
|
|
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Contributed surplus
|
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
67,387
|
|
65,417
|
|
Share-based
compensation expense (note 16)
|
|
|
|
|
|
375
|
|
483
|
|
Share options
exercised-fair value adjustment
|
|
|
|
|
|
(1,266)
|
|
-
|
|
Share units
exercised-fair value adjustment
|
|
|
|
|
|
(167)
|
|
(28)
|
|
Warrants
expired
|
|
|
|
|
|
-
|
|
435
|
|
Balance-end of
period
|
|
|
|
|
|
66,329
|
|
66,307
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
(1,208,587)
|
|
(1,192,304)
|
|
Net
loss
|
|
|
|
|
|
(8,884)
|
|
(6,663)
|
|
Balance-end of
period
|
|
|
|
|
|
(1,217,471)
|
|
(1,198,967)
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (note 17)
|
|
|
|
|
|
|
||
|
Balance-beginning
of period
|
|
|
|
|
|
1,775
|
|
1,134
|
|
Foreign currency
translation
|
|
|
|
|
|
3
|
|
(14)
|
|
Balance-end of
period
|
|
|
|
|
|
1,778
|
|
1,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity
|
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
227,285
|
|
210,149
|
|
Balance-end of
period
|
|
|
|
|
$
|
356,573
|
$
|
203,958
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
||||||||
|
|
|
|
|
Three
Months Ended
March
31
|
||||
|
CASH PROVIDED BY (USED IN):
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net loss for the
period
|
|
|
|
|
$
|
(8,884)
|
$
|
(6,663)
|
|
Items not
affecting cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
Depletion,
depreciation, amortization and accretion
|
|
|
|
|
|
1,294
|
|
2,209
|
|
Share-based
compensation (note 16)
|
|
|
|
|
|
375
|
|
483
|
|
Recognition
of deferred revenue (note 10)
|
|
|
|
|
|
(137)
|
|
(963)
|
|
Gains on
property, plant and equipment disposals (note 18)
|
|
|
|
-
|
|
(2)
|
||
|
Losses on
investments (note 18)
|
|
|
|
91
|
|
2,950
|
||
|
Losses on share
warrant liabilities (note 18)
|
|
|
|
|
|
1,564
|
|
-
|
|
Warrant
liabilities issue costs expensed (note 15)
|
|
|
|
789
|
|
-
|
||
|
Foreign exchange
gains (note 18)
|
|
|
|
|
|
(441)
|
|
-
|
|
Deferred income
tax recovery
|
|
|
|
|
|
(308)
|
|
(1,631)
|
|
Post-employment
benefits (note 11)
|
|
|
|
|
|
(48)
|
|
(27)
|
|
Reclamation
obligations (note 12)
|
|
|
|
|
|
(262)
|
|
(238)
|
|
Change in
non-cash working capital items (note 18)
|
|
|
|
|
|
3,984
|
|
1,503
|
|
Net
cash used in operating activities
|
|
|
|
|
|
(1,983)
|
|
(2,379)
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Expenditures on
property, plant and equipment (note 9)
|
|
|
|
(293)
|
|
(22)
|
||
|
Proceeds
on sale of property, plant and equipment
|
|
|
|
|
|
-
|
|
2
|
|
Increase
in restricted cash and investments
|
|
|
|
(578)
|
|
(609)
|
||
|
Net
cash used in investing activities
|
|
|
|
|
|
(871)
|
|
(629)
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Repayment
of debt obligations (note 14)
|
|
|
|
|
|
(59)
|
|
(283)
|
|
Proceeds
from unit issues, net of issue costs (note 15)
|
|
|
|
135,660
|
|
-
|
||
|
Proceeds
from other share issues, net of issue costs (note 15)
|
|
|
|
|
|
10,868
|
|
3
|
|
Share
option exercise proceeds (note 15)
|
|
|
|
|
|
3,711
|
|
-
|
|
Net
cash provided by (used in) financing activities
|
|
|
|
|
|
150,180
|
|
(280)
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
|
|
|
|
|
147,326
|
|
(3,288)
|
|
Foreign
exchange effect on cash and cash equivalents
|
|
|
|
|
|
439
|
|
-
|
|
Cash
and cash equivalents, beginning of period
|
|
|
|
|
|
24,992
|
|
8,190
|
|
Cash
and cash equivalents, end of period
|
|
|
|
|
$
|
172,757
|
$
|
4,902
|
|
|
||||||||
|
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 THREE MONTHS ENDED MARCH 31, 2021
|
|
|
(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 uranium.
The Company has a
90.0% interest in the Wheeler River Joint Venture
(“WRJV”), a 66.90% interest in the Waterbury Lake
Limited Partnership (“WLULP”), a 22.5% interest in the
McClean Lake Joint Venture (“MLJV”) (which includes the
McClean Lake mill) and a 25.17% interest in the Midwest Joint
Venture (“MWJV”), each of which are located in the
eastern portion of the Athabasca Basin region in northern
Saskatchewan, Canada. The McClean Lake mill is contracted to
provide toll milling services to the Cigar Lake Joint Venture
(“CLJV”) under the terms of a toll milling agreement
between the parties (see note 10). In addition, the Company has
varying ownership interests in a number of other development and
exploration projects located in Canada.
The Company
provides mine decommissioning and other services (collectively
“environmental services”) to third parties through its
Closed Mines group and is also the manager of Uranium Participation
Corporation (“UPC”), a publicly-listed investment
holding company formed to invest substantially all of its assets in
uranium oxide concentrates (“U3O8”) and
uranium hexafluoride (“UF6”). The
Company has no ownership interest in UPC but receives fees for
management services it provides and commissions from the purchase
and sale of U3O8 and
UF6 by
UPC. See note 24 for an update on the Company’s management
services agreement with UPC.
DMC is
incorporated under the Business Corporations Act (Ontario) and
domiciled in Canada. The address of its registered head office is
40 University Avenue, Suite 1100, Toronto, Ontario, Canada, M5J
1T1.
2.
STATEMENT
OF COMPLIANCE
These condensed
interim consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting
Standards Board (“IASB”) applicable to the preparation
of interim financial statements, including IAS 34, Interim
Financial Reporting. The condensed interim consolidated financial
statements should be read in conjunction with the audited annual
consolidated financial statements for the year ended December 31,
2020. The Company’s presentation currency is Canadian dollars
(“CAD”).
These financial
statements were approved by the board of directors for issue on May
6, 2021.
3.
ACCOUNTING
POLICIES AND COMPARATIVE NUMBERS
Accounting
Policies
The significant
accounting policies followed in these condensed interim
consolidated financial statements are consistent with those applied
in the Company’s audited annual consolidated financial
statements for the year ended December 31, 2020.
Comparative
numbers
Certain
classifications of the comparative figures have been changed to
conform to those used in the current period.
5
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
4.
CASH AND
CASH EQUIVALENTS
The cash and cash
equivalent balance consists of:
|
|
|
|
|
At March
31
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
$
|
110,844
|
$
|
12,004
|
|
Cash in MLJV and
MWJV
|
|
|
|
1,083
|
|
540
|
|
Cash
equivalents
|
|
|
|
60,830
|
|
12,448
|
|
|
|
|
$
|
172,757
|
$
|
24,992
|
5.
TRADE AND
OTHER RECEIVABLES
The trade and
other receivables balance consists of:
|
|
|
|
|
At March
31
|
|
At December
31
|
|
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
$
|
2,508
|
$
|
2,644
|
|
|
Receivables in
MLJV and MWJV
|
|
|
|
99
|
|
394
|
|
|
Sales tax
receivables
|
|
|
|
150
|
|
154
|
|
|
Sundry
receivables
|
|
|
|
2
|
|
182
|
|
|
|
|
|
$
|
2,759
|
$
|
3,374
|
|
6.
INVENTORIES
The inventories
balance consists of:
|
|
|
|
|
At March
31
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Inventory of ore
in stockpiles
|
|
|
$
|
2,098
|
$
|
2,098
|
|
Mine and mill
supplies in MLJV
|
|
|
|
3,124
|
|
3,015
|
|
|
|
|
$
|
5,222
|
$
|
5,113
|
|
|
|
|
|
|
|
|
|
Inventories-by
balance sheet presentation:
|
|
|
|
|
|
|
|
Current
|
|
|
$
|
3,124
|
$
|
3,015
|
|
Long-term-ore in
stockpiles
|
|
|
|
2,098
|
|
2,098
|
|
|
|
|
$
|
5,222
|
$
|
5,113
|
6
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
7.
INVESTMENTS
The investments
balance consists of:
|
|
|
|
|
At March
31
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
|
Equity
instruments
|
|
|
$
|
16,859
|
$
|
16,950
|
|
|
|
|
$
|
16,859
|
$
|
16,950
|
|
|
|
|
|
|
|
|
|
Investments-by
balance sheet presentation:
|
|
|
|
|
|
|
|
Current
|
|
|
$
|
16,286
|
$
|
16,657
|
|
Long-term
|
|
|
|
573
|
|
293
|
|
|
|
|
$
|
16,859
|
$
|
16,950
|
The investments
continuity summary is as follows:
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
Investments
|
|
|
|
|
|
|
|
|
|
Balance -
December 31, 2020
|
|
|
|
|
$
|
16,950
|
|
Fair value gain
(loss) to profit and loss (note 18)
|
|
|
|
|
|
(91)
|
|
Balance - March
31, 2021
|
|
|
|
|
$
|
16,859
|
8.
RESTRICTED
CASH AND INVESTMENTS
The restricted
cash and investments balance consists of:
|
|
|
|
|
At March
31
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
|
12,596
|
$
|
2,883
|
|
Investments
|
|
|
|
-
|
|
9,135
|
|
|
|
|
$
|
12,596
|
$
|
12,018
|
|
Restricted cash
and investments-by item:
|
|
|
|
|
|
|
|
Elliot Lake
reclamation trust fund
|
|
|
$
|
3,461
|
$
|
2,883
|
|
Letters of credit
facility pledged assets
|
|
|
|
9,000
|
|
9,000
|
|
Letters of credit
additional collateral
|
|
|
|
135
|
|
135
|
|
|
|
|
$
|
12,596
|
$
|
12,018
|
At March 31,
2021, all guaranteed investment certificates have maturities of
less than 90 days at date of purchase.
Elliot
Lake Reclamation Trust Fund
During the three
months ended March 31, 2021, the Company deposited an additional
$793,000 into the Elliot Lake Reclamation Trust Fund and withdrew
$216,000.
Letters of
Credit Facility Pledged Assets
At March 31,
2021, the Company had on deposit $9,000,000 with the Bank of Nova
Scotia (“BNS”) as pledged restricted cash and
investments pursuant to its obligations under an amended and
extended letters of credit facility (see notes 12 and
14).
Letters of
Credit Additional Collateral
At March 31,
2021, the Company had on deposit an additional $135,000 of cash
collateral with BNS in respect of the portion of its issued
reclamation letters of credit in excess of the collateral available
under its letters of credit facility (see notes 12 and
14).
7
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
9.
PROPERTY,
PLANT AND EQUIPMENT
The property,
plant and equipment (“PP&E”) continuity summary is
as follows:
|
|
|
Plant
and Equipment
|
|
Mineral
|
|
Total
|
||
|
(in thousands of
CAD dollars)
|
|
Owned
|
|
Right-of-Use
|
|
Properties
|
|
PP&E
|
|
|
|
|
|
|
|
|
|
|
|
Cost:
|
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2020
|
$
|
106,087
|
$
|
891
|
$
|
179,743
|
$
|
286,721
|
|
Additions
|
|
282
|
|
-
|
|
11
|
|
293
|
|
Balance
– March 31, 2021
|
$
|
106,369
|
$
|
891
|
$
|
179,754
|
$
|
287,014
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
amortization, depreciation:
|
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2020
|
$
|
(29,495)
|
$
|
(356)
|
$
|
-
|
$
|
(29,851)
|
|
Amortization
|
|
(70)
|
|
-
|
|
-
|
|
(70)
|
|
Depreciation
|
|
(62)
|
|
(48)
|
|
-
|
|
(110)
|
|
Balance
– March 31, 2021
|
$
|
(29,627)
|
$
|
(404)
|
$
|
-
|
$
|
(30,031)
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
value:
|
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2020
|
$
|
76,592
|
$
|
535
|
$
|
179,743
|
$
|
256,870
|
|
Balance –
March 31, 2021
|
$
|
76,742
|
$
|
487
|
$
|
179,754
|
$
|
256,983
|
Plant and
Equipment – Owned
The Company has a
22.5% interest in the McClean Lake mill through its ownership
interest in the MLJV. The carrying value of the mill, comprised of
various infrastructure, building and machinery assets, represents
$68,839,000, or 89.7%, of the March 2021 PP&E total carrying
value amount. See note 10 for the current operating status of the
McClean Lake mill.
Plant and
Equipment – Right-of-Use
The Company has
included the cost of various right-of-use (“ROU”)
assets within its PP&E carrying value amount. These assets
consist of building, vehicle and office equipment leases. The
majority of the value, 90.9%, is attributable to the building lease
assets for the Company’s office and warehousing space located
in Toronto and Saskatoon.
Mineral
Properties
As at March 31,
2021, the Company has various interests in development, evaluation
and exploration projects located in Saskatchewan, Canada, which are
either held directly or through option or various contractual
agreements. The properties with significant carrying values, being
Wheeler River, Waterbury Lake, Midwest, Mann Lake, Wolly, Johnston
Lake and McClean Lake, represent $162,652,000, or 90.5%, of the
March 2021 total mineral property carrying amount.
8
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
10. DEFERRED
REVENUE
The deferred
revenue balance consists of:
|
|
|
|
|
At March
31
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Deferred revenue
– pre-sold toll milling:
|
|
|
|
|
|
|
|
CLJV toll milling
– APG
|
|
|
$
|
37,234
|
$
|
36,617
|
|
|
|
|
$
|
37,234
|
$
|
36,617
|
|
|
|
|
|
|
|
|
|
Deferred
revenue-by balance sheet presentation:
|
|
|
|
|
|
|
|
Current
|
|
|
$
|
3,898
|
$
|
3,478
|
|
Non-current
|
|
|
|
33,336
|
|
33,139
|
|
|
|
|
$
|
37,234
|
$
|
36,617
|
The deferred
revenue liability continuity summary is as follows:
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
Deferred
Revenue
|
|
|
|
|
|
|
|
|
|
Balance -
December 31, 2020
|
|
|
|
|
$
|
36,617
|
|
Accretion
|
|
|
|
|
|
754
|
|
Revenue
recognized during the period (note 19)
|
|
|
|
|
|
(137)
|
|
Balance - March
31, 2021
|
|
|
|
|
$
|
37,234
|
Arrangement
with Anglo Pacific Group PLC (“APG”)
In February 2017,
Denison closed an arrangement with APG under which Denison received
an upfront payment in exchange for its right to receive specified
future toll milling cash receipts from the MLJV under the current
toll milling agreement with the CLJV from July 1, 2016 onwards. The
APG Arrangement represents a contractual obligation of Denison to
pay onward to APG any cash proceeds of future toll milling revenue
earned by the Company related to the processing of specified Cigar
Lake ore through the McClean Lake mill. The deferred revenue
balance represents a non-cash liability, which is adjusted as any
toll milling revenue received by Denison is passed through to APG
or any changes in Cigar Lake Phase 1 and Phase 2 toll milling
production estimates are recognized.
In the three
months ended March 31, 2021, the Company has recognized $137,000 of
toll milling revenue from the draw-down of deferred revenue
consisting of $Nil based on Cigar Lake toll milling production in
the quarter (Nil pounds U308 on a 100% basis)
and a retroactive $137,000 increase in revenue resulting from
changes in estimates to the toll milling drawdown rate in the first
quarter of 2021. For the comparative three months ended March 31,
2020, the Company recognized $963,000 of toll milling revenue from
the draw-down of deferred revenue comprised of $1,059,000 based on
Cigar Lake toll milling production in the quarter (4,192,000 pounds
U308 on a 100% basis)
and a retroactive $96,000 decrease in revenue resulting from
changes in estimates to the toll milling drawdown rate in the first
quarter of 2020.
Production at the
Cigar Lake mine and the McClean Lake mill has been temporarily
suspended since the beginning of 2021, in response to the COVID-19
pandemic. Cameco has restarted production at the Cigar Lake mine in
April 2021 and toll-milling production at McClean Lake is expected
to resume in May 2021. The current portion of the deferred revenue
liability at March 2021 reflects Denison’s estimate of Cigar
Lake toll milling over the next 12 months. This assumption will be
reassessed in the second quarter as more information becomes
available.
9
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
11. POST-EMPLOYMENT
BENEFITS
The
post-employment benefits balance consists of:
|
|
|
|
|
At March
31
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Accrued benefit
obligation
|
|
|
$
|
1,319
|
$
|
1,361
|
|
|
|
|
$
|
1,319
|
$
|
1,361
|
|
|
|
|
|
|
|
|
|
Post-employment
benefits-by balance sheet presentation:
|
|
|
|
|
||
|
Current
|
|
|
$
|
120
|
$
|
120
|
|
Non-current
|
|
|
|
1,199
|
|
1,241
|
|
|
|
|
$
|
1,319
|
$
|
1,361
|
The
post-employment benefits continuity summary is as
follows:
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
Post-Employment
Benefits
|
|
|
|
|
|
|
|
|
|
Balance -
December 31, 2020
|
|
|
|
|
$
|
1,361
|
|
Accretion
|
|
|
|
|
|
6
|
|
Benefits
paid
|
|
|
|
|
|
(48)
|
|
Balance - March
31, 2021
|
|
|
|
|
$
|
1,319
|
12. RECLAMATION
OBLIGATIONS
The reclamation
obligations balance consists of:
|
|
|
|
|
At March
31
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2020
|
|
|
|
|
|
|
|
|
|
Reclamation
obligations-by location:
|
|
|
|
|
|
|
|
Elliot
Lake
|
|
|
$
|
21,450
|
$
|
21,523
|
|
McClean and
Midwest Joint Ventures
|
|
|
|
17,022
|
|
16,875
|
|
Other
|
|
|
|
22
|
|
22
|
|
|
|
|
$
|
38,494
|
$
|
38,420
|
|
|
|
|
|
|
|
|
|
Reclamation
obligations-by balance sheet presentation:
|
|
|
|
|
||
|
Current
|
|
|
$
|
802
|
$
|
802
|
|
Non-current
|
|
|
|
37,692
|
|
37,618
|
|
|
|
|
$
|
38,494
|
$
|
38,420
|
The reclamation
obligations continuity summary is as follows:
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
Reclamation
Obligations
|
|
|
|
|
|
|
|
|
|
Balance -
December 31, 2020
|
|
|
|
|
$
|
38,420
|
|
Accretion
|
|
|
|
|
|
336
|
|
Expenditures
incurred
|
|
|
|
|
|
(262)
|
|
Balance - March
31, 2021
|
|
|
|
|
$
|
38,494
|
Site
Restoration: Elliot Lake
Spending on
restoration activities at the Elliot Lake site is funded from
monies in the Elliot Lake Reclamation Trust fund (see note
8).
10
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
Site
Restoration: McClean Lake Joint Venture and Midwest Joint
Venture
Under the Mineral
Industry Environmental Protection Regulations (1996), the Company
is required to provide its pro-rata share of financial assurances
to the province of Saskatchewan relating to future decommissioning
and reclamation plans that have been filed and approved by the
applicable regulatory authorities. As at March 31, 2021, the
Company has provided irrevocable standby letters of credit, from a
chartered bank, in favour of the Saskatchewan Ministry of
Environment, totalling $24,135,000 which relate to the most
recently filed reclamation plan dated March 2016.
13. SHARE
PURCHASE WARRANTS LIABILITY
In connection
with the public offerings of units in February 2021 and March 2021
(see note 15), the Company issued 15,796,975 and 39,215,000 share
purchase warrants to unit holders, respectively. The February 2021
warrants entitle the holder to acquire one common share of the
Company at an exercise price of USD$2.00 for 24 months after
issuance. The March 2021 warrants entitle the holder to acquire one
common share of the Company at an exercise price of USD$2.25 for 24
months after issuance.
Since both of
these warrants are excercisable in U.S dollars (“USD”),
which differs from the Company’s CAD functional currency,
they are classified as derivative liabilities and are required to
be carried as liabilities at fair value through profit and loss.
When the fair value of the warrants is revalued at each reporting
period, the change in the liability is recorded through net profit
or loss.
The fair value of
the February 2021 warrants was estimated to be $0.2215 on the date
of issue, based on a relative fair value basis approach, using a
USD to CAD foreign exchange rate of 0.7928 and incorporating the
following assumptions in the Black-Scholes option pricing model
– expected volatility of 67.3%, risk-free interest rate of
0.22%, dividend yield of 0% and an expected term of 2
years.
The fair value of
the March 2021 warrants was estimated to be $0.2482 on the date of
issue, based on a relative fair value basis approach, using a USD
to CAD foreign exchange rate of 0.7992 and incorporating the
following assumptions in the Black-Scholes option pricing model
– expected volatility of 71.54%, risk-free interest rate of
0.27%, dividend yield of 0% and an expected term of 2
years.
The share
purchase warrants liability continuity is as follows:
|
|
Number
of
|
|
Warrant
|
|
(in thousands of
CAD dollars except warrant amounts)
|
Warrants
|
|
Liability
|
|
|
|
|
|
|
Balance -
December 31, 2020
|
-
|
$
|
-
|
|
Warrants issued
on February 19, 2021
|
15,796,975
|
|
3,499
|
|
Warrants issued
on March 22, 2021
|
39,215,000
|
|
9,735
|
|
Change in fair
value estimates
|
-
|
|
1,564
|
|
Balance - March
31, 2021
|
55,011,975
|
$
|
14,798
|
11
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
14. OTHER
LIABILITIES
The other
liabilities balance consists of:
|
|
|
|
|
At March
31
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Debt
obligations:
|
|
|
|
|
|
|
|
Lease
liabilities
|
|
|
$
|
537
|
$
|
582
|
|
Loan
liabilities
|
|
|
|
31
|
|
33
|
|
Flow-through
share premium obligation (note 16)
|
|
|
|
-
|
|
22
|
|
|
|
|
$
|
568
|
$
|
637
|
|
|
|
|
|
|
|
|
|
Other
liabilities-by balance sheet presentation:
|
|
|
|
|
||
|
Current
|
|
|
$
|
233
|
$
|
262
|
|
Non-current
|
|
|
|
335
|
|
375
|
|
|
|
|
$
|
568
|
$
|
637
|
Debt
Obligations
At March 31,
2021, the Company’s debt obligations are comprised of lease
liabilities and loan liabilities. The debt obligations continuity
summary is as follows:
|
|
|
|
Lease
|
|
Loan
|
|
Total
Debt
|
||
|
(in thousands of
CAD dollars)
|
|
|
|
Liabilitites
|
|
Liabilities
|
|
Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2020
|
|
|
$
|
582
|
$
|
33
|
$
|
615
|
|
|
Accretion
|
|
|
|
12
|
|
-
|
|
12
|
|
|
Repayments
|
|
|
|
(57)
|
|
(2)
|
|
(59)
|
|
|
Balance
– March 31, 2021
|
|
|
$
|
537
|
$
|
31
|
$
|
568
|
|
Debt
Obligations – Scheduled Maturities
The following
table outlines the Company’s scheduled maturities of its debt
obligations at March 31, 2021:
|
|
|
|
Lease
|
|
Loan
|
|
Total
Debt
|
||
|
(in thousands of
CAD dollars)
|
|
|
|
Liabilitites
|
|
Liabilities
|
|
Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity analysis
– contractual undiscounted cash flows:
|
|
|
|
|
|
|
|||
|
Next 12
months
|
|
|
$
|
224
|
$
|
9
|
$
|
233
|
|
|
One to five
years
|
|
|
|
407
|
|
24
|
|
431
|
|
|
More than five
years
|
|
|
|
-
|
|
-
|
|
-
|
|
|
Total obligation
– March 31, 2021 – undiscounted
|
|
631
|
|
33
|
|
664
|
|||
|
Present value
discount adjustment
|
|
|
|
(94)
|
|
(2)
|
|
(96)
|
|
|
Total
obligation – March 31, 2021 – discounted
|
|
|
$
|
537
|
$
|
31
|
$
|
568
|
|
Letters of
Credit Facility
In January 2021,
the Company entered into an amending agreement for its letters of
credit facility with BNS (the “2021 Facility”). Under
the amendment, the maturity date of the 2021 Facility has been
extended to January 31, 2022. All other terms of the 2021 Facility
(tangible net worth covenant, pledged cash, investment amounts and
security for the facility) remain unchanged from the previous
facility. Accordingly, the 2021 Facility continues to provide the
Company with access to credit up to $24,000,000 (the use of which
is restricted to non-financial letters of credit in support of
reclamation obligations) subject to letter of credit fees of 2.40%
(0.40% on the $9,000,000 covered by pledged cash collateral) and
standby fees of 0.75%.
At March 31,
2021, the Company is in compliance with its facility covenants and
$24,000,000 (December 31, 2020: $24,000,000) of the facility is
being utilized as collateral for letters of credit issued in
respect of the reclamation obligations for the MLJV and MWJV.
During the three months ended March 31, 2021, the Company incurred
letter of credit fees of $98,000 (March 31, 2020:
$100,000).
12
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
15. SHARE
CAPITAL
Denison is
authorized to issue an unlimited number of common shares without
par value. A continuity summary of the issued and outstanding
common shares and the associated dollar amounts is presented
below:
|
|
Number
of
|
|
|
|
|
Common
|
|
Share
|
|
(in thousands of
CAD dollars except share amounts)
|
Shares
|
|
Capital
|
|
|
|
|
|
|
Balance -
December 31, 2020
|
678,981,882
|
$
|
1,366,710
|
|
Issued for
cash:
|
|
|
|
|
Unit issue
proceeds – total
|
110,023,950
|
|
144,214
|
|
Less: allocation
to share warrants liability
|
-
|
|
(13,234)
|
|
Unit issue costs
- total
|
-
|
|
(8,554)
|
|
Less: allocation
to share warrants issue expense
|
-
|
|
789
|
|
Other share issue
proceeds – total
|
10,156,186
|
|
11,914
|
|
Less: other share
issue costs
|
-
|
|
(1,046)
|
|
Share option
exercises
|
5,016,000
|
|
3,711
|
|
Share option
exercises – fair value adjustment
|
-
|
|
1,266
|
|
Share units
exercises – fair value adjustment
|
299,666
|
|
167
|
|
|
125,495,802
|
|
139,227
|
|
Balance - March
31, 2021
|
804,477,684
|
$
|
1,505,937
|
Unit and
Other Share Issues
In January and
February 2021, Denison, through its agents, issued 4,230,186 common
shares under its at-the-market (“ATM”) program at an
average price of $0.93 per share for aggregate gross proceeds of
$3,914,000. The Company also recognized issue costs of $466,000
related to its ATM share issuances which includes $78,000 of
commissions and $384,000 associated with the set-up of the ATM
program which were previously deferred on the balance sheet and
included in Prepaid expenses and other at December 31, 2020. In
connection with the public offering completed on March 22, 2021
(see below), the Company terminated its ATM program and has ceased
any distributions thereunder.
On February 19,
2021, the Company completed a public offering by way of a
prospectus supplement to the 2020 Shelf Prospectus of 31,593,950
units of the Company at USD$0.91 per unit for gross proceeds of
$36,265,000 (USD$28,750,000), including the full exercise of the
underwriters’ over-allotment option of 4,120,950 units. Each
unit consisted of one common share and one-half of one transferable
common share purchase warrant of the Company. Each full warrant is
exercisable to acquire one common share of the Company at an
exercise price of USD$2.00 for 24 months after issuance. A portion
of the gross proceeds ($3,499,000 – see note 13) has been
allocated to share warrant liabilities on a relative fair value
basis and the pro-rata share of the issue costs associated with the
offering has been expensed within Other expense (see note
18).
On March 3, 2021,
the Company completed a private placement of 5,926,000 flow-through
common shares at a price of $1.35 per share for gross proceeds of
approximately $8,000,000. The income tax benefits of this issue
will be renounced to subscribers with an effective date of December
31, 2021. The related flow-through share premium liability was
valued at $ Nil as the issue price was less than the
Company’s observed share price on the date of
issue.
On March 22,
2021, the Company completed a public offering by way of a
prospectus supplement to the 2020 Shelf Prospectus of 78,430,000
units of the Company at USD$1.10 per unit for gross proceeds of
$107,949,000 (USD$86,273,000), including the full exercise of the
underwriters’ over-allotment option of 10,230,000 units. Each
unit consisted of one common share and one-half of one transferable
common share purchase warrant of the Company. Each full warrant is
exercisable to acquire one common share of the Company at an
exercise price of USD$2.25 for 24 months after issuance. A portion
of the gross proceeds ($9,735,000 – see note 13) has been
allocated to share warrant liabilities on a relative fair value
basis and the pro-rata share of the issue costs associated with the
offering has been expensed within Other expense (see note
18).
13
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
Flow-Through
Share Issues
The Company
finances a portion of its exploration programs through the use of
flow-through share issuances. Canadian income tax deductions
relating to these expenditures are claimable by the investors and
not by the Company.
As at March 31,
2021, the Company estimates that it has satisfied its obligation to
spend $930,485 on eligible exploration expenditures in fiscal 2021
due to the issuance of flow-through shares in December 2020. The
Company renounced the income tax benefits of this issue in February
2021, with an effective date of renunciation to its subscribers of
December 31, 2020. In conjunction with the renunciation, the
flow-through share premium liability at December 31, 2020 has been
extinguished and a deferred tax recovery has been recognized in the
first quarter of 2021 (see notes 14 and 21).
As at March 31,
2021, the Company estimates that it has incurred $79,000 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.
16. SHARE-BASED
COMPENSATION
The
Company’s share based compensation arrangements include stock
options, restricted share units (“RSUs”) and
performance share units (“PSUs”).
A summary of
share based compensation expense recognized in the statement of
income (loss) is as follows:
|
|
|
|
|
Three
Months Ended
March
31
|
||||
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Share based
compensation expense for:
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
|
|
$
|
(195)
|
$
|
(157)
|
|
RSUs
|
|
|
|
|
|
(206)
|
|
(228)
|
|
PSUs
|
|
|
|
|
|
26
|
|
(98)
|
|
Share
based compensation expense
|
|
|
|
|
$
|
(375)
|
$
|
(483)
|
An additional
$4,824,000 in share-based compensation expense remains to be
recognized, up until March 2024, on outstanding options and share
units at March 31, 2021.
Stock
Options
Stock options
granted in 2021 vest over a period of 24 months. A continuity
summary of the stock options granted under the Company’s
stock-based compensation plan is presented below:
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
Number
of
|
|
Price
per
|
|
|
|
|
|
|
|
|
Common
|
|
Share
|
|
|
|
|
|
|
|
|
Shares
|
|
(CAD)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
outstanding – December 31, 2020
|
|
|
|
15,077,243
|
$
|
0.67
|
|||
|
Grants
|
|
|
|
|
|
|
3,666,000
|
|
1.26
|
|
Exercises
(1)
|
|
|
|
|
|
|
(5,016,000)
|
|
0.74
|
|
Expiries
|
|
|
|
|
|
|
(15,000)
|
|
0.64
|
|
Forfeitures
|
|
|
|
|
|
|
(520,500)
|
|
0.53
|
|
Stock options
outstanding – March 31, 2021
|
|
|
|
13,191,743
|
$
|
0.81
|
|||
|
Stock options
exercisable – March 31, 2021
|
|
|
|
7,766,243
|
$
|
0.68
|
|||
(1)
The weighted average share
price at the date of exercise was $1.19.
14
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
A summary of the
Company’s stock options outstanding at March 31, 2021 is
presented below:
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
|
|
|
Remaining
|
|
|
|
Exercise
|
|
Range of
Exercise
|
|
|
|
|
Contractual
|
|
Number
of
|
|
Price
per
|
|
Prices per
Share
|
|
|
|
|
Life
|
|
Common
|
|
Share
|
|
(CAD)
|
|
|
|
|
(Years)
|
|
Shares
|
|
(CAD)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
outstanding
|
|
|
|
|
|
|
|||
|
$ 0.25 to $
0.49
|
|
3.97
|
|
2,916,000
|
$
|
0.45
|
|||
|
$ 0.50 to $
0.74
|
|
|
|
|
2.51
|
|
4,055,143
|
|
0.64
|
|
$ 0.75 to $
0.99
|
|
|
|
|
0.94
|
|
2,554,600
|
|
0.85
|
|
$ 1.00 to $
1.39
|
|
|
|
|
4.94
|
|
3,666,000
|
|
1.26
|
|
Stock options
outstanding – March 31, 2021
|
|
|
3.20
|
|
13,191,743
|
$
|
0.81
|
||
Options
outstanding at March 31, 2021 expire between August 2021 and March
2026.
The fair value of
each option granted is estimated on the date of grant using the
Black-Scholes option pricing model. The following table outlines
the assumptions used in the model to determine the fair value of
options granted during the current period:
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
|
March 31,
2021
|
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
|
0.76%
|
|
|
Expected stock
price volatility
|
|
|
|
66.11%
|
|
|
Expected
life
|
|
|
|
3.4
years
|
|
|
Expected dividend
yield
|
|
|
|
-
|
|
|
Fair value
per share under options granted
|
|
|
$0.59
|
||
Share
Units
RSUs granted
under the plan in 2021 vest ratably over a period of three years.
No PSUs have been granted in 2021 as at March 31,
2021.
A continuity
summary of the RSUs and PSUs of the Company granted under the share
unit plan is presented below:
|
|
|
RSUs
|
|
PSUs
|
||||
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
Number
of
|
|
Fair
Value
|
|
Number
of
|
|
Fair
Value
|
|
|
|
Common
|
|
Per
RSU
|
|
Common
|
|
Per
PSU
|
|
|
|
Shares
|
|
(CAD)
|
|
Shares
|
|
(CAD)
|
|
|
|
|
|
|
|
|
|
|
|
Units outstanding
– December 31, 2020
|
|
5,691,899
|
$
|
0.52
|
|
2,020,000
|
$
|
0.63
|
|
Grants
|
|
1,730,000
|
|
1.42
|
|
-
|
|
-
|
|
Exercises
(1)
|
|
(239,666)
|
|
0.52
|
|
(60,000)
|
|
0.69
|
|
Forfeitures
|
|
(649,896)
|
|
0.46
|
|
(180,000)
|
|
0.69
|
|
Units outstanding – March 31,
2021
|
|
6,532,337
|
$
|
0.76
|
|
1,780,000
|
$
|
0.62
|
|
Units
vested – March 31, 2021
|
|
2,053,672
|
$
|
0.58
|
|
640,000
|
$
|
0.65
|
(1)
The weighted average share
price at the date of exercise was $1.22 for RSUs and $0.85 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.
15
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
17. ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS)
The accumulated
other comprehensive income (loss) balance consists of:
|
|
|
|
|
At March
31
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Cumulative
foreign currency translation
|
|
|
$
|
416
|
$
|
413
|
|
Unamortized
experience gain-post employment liability
|
|
|
|
|
||
|
Gross
|
|
|
|
1,847
|
|
1,847
|
|
Tax
effect
|
|
|
|
(485)
|
|
(485)
|
|
|
|
|
$
|
1,778
|
$
|
1,775
|
18. SUPPLEMENTAL
FINANCIAL INFORMATION
The components of
operating expenses are as follows:
|
|
|
|
|
Three
Months Ended
March
31
|
||||
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods and
services sold:
|
|
|
|
|
|
|
|
|
|
Cost of goods
sold – mineral concentrates
|
|
|
|
|
$
|
-
|
$
|
(526)
|
|
Operating
overheads:
|
|
|
|
|
|
|
|
|
|
Mining, other
development expense
|
|
|
|
|
|
(232)
|
|
(213)
|
|
Milling,
conversion expense
|
|
|
|
|
|
(4)
|
|
(740)
|
|
Less
absorption:
|
|
|
|
|
|
|
|
|
|
-Mineral
properties
|
|
|
|
|
|
11
|
|
12
|
|
Cost of
services
|
|
|
|
|
|
(1,593)
|
|
(1,715)
|
|
Cost of goods and
services sold
|
|
|
|
|
|
(1,818)
|
|
(3,182)
|
|
Reclamation asset
amortization
|
|
|
|
|
|
(70)
|
|
(60)
|
|
Selling
expenses
|
|
|
|
|
|
-
|
|
(14)
|
|
Sales royalties
and non-income taxes
|
|
|
|
|
|
-
|
|
(64)
|
|
Operating
expenses
|
|
|
|
|
$
|
(1,888)
|
$
|
(3,320)
|
The components of
other income (expense) are as follows:
|
|
|
|
|
Three
Months Ended
March
31
|
||||
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses)
on:
|
|
|
|
|
|
|
|
|
|
Foreign
exchange
|
|
|
|
|
$
|
441
|
$
|
20
|
|
Disposal of
property, plant and equipment
|
|
|
|
|
|
-
|
|
2
|
|
Fair value
changes - investments (note 7)
|
|
|
|
(91)
|
|
(2,950)
|
||
|
Fair value
changes – warrant liabilities (note 13)
|
|
|
|
(1,564)
|
|
-
|
||
|
Issue costs
– warrant liabilities (note 15)
|
|
|
|
(789)
|
|
-
|
||
|
Other
|
|
|
|
|
|
(38)
|
|
(264)
|
|
Other
income (expense)
|
|
|
|
|
$
|
(2,041)
|
$
|
(3,192))
|
16
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
The components of
finance income (expense) are as follows:
|
|
|
|
|
Three
Months Ended
March
31
|
||||
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
|
|
$
|
83
|
$
|
92
|
|
Interest
expense
|
|
|
|
|
|
-
|
|
(2)
|
|
Accretion
expense
|
|
|
|
|
|
|
|
|
|
Deferred
revenue (note 10)
|
|
|
|
|
|
(754)
|
|
(782)
|
|
Post-employment
benefits (note 11)
|
|
|
|
|
|
(6)
|
|
(17)
|
|
Reclamation
obligations (note 12)
|
|
|
|
|
|
(336)
|
|
(338)
|
|
Debt
obligations (note 13)
|
|
|
|
|
|
(12)
|
|
(16)
|
|
Finance
income (expense)
|
|
|
|
|
$
|
(1,025)
|
$
|
(1,063)
|
A summary of
depreciation expense recognized in the statement of income (loss)
is as follows:
|
|
|
|
|
Three
Months Ended
March
31
|
||||
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
Mining, other
development expense
|
|
|
|
|
$
|
(1)
|
$
|
(1)
|
|
Milling,
conversion expense
|
|
|
|
|
|
-
|
|
(736)
|
|
Cost of
services
|
|
|
|
|
|
(45)
|
|
(53)
|
|
Evaluation
|
|
|
|
|
|
(9)
|
|
(9)
|
|
Exploration
|
|
|
|
|
|
(30)
|
|
(41)
|
|
General and
administrative
|
|
|
|
|
|
(25)
|
|
(32)
|
|
Depreciation
expense-gross
|
|
|
|
|
$
|
(110)
|
$
|
(872)
|
A summary of
employee benefits expense recognized in the statement of income
(loss) is as follows:
|
|
|
|
|
Three
Months Ended
March
31
|
||||
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
|
|
|
|
$
|
(3,035)
|
$
|
(2,158)
|
|
Share-based
compensation (note 16)
|
|
|
|
|
|
(375)
|
|
(483)
|
|
Termination
benefits
|
|
|
|
|
|
(28)
|
|
-
|
|
Employee
benefits expense
|
|
|
|
|
$
|
(3,438)
|
$
|
(2,641)
|
The change in
non-cash working capital items in the consolidated statements of
cash flows is as follows:
|
|
|
|
|
Three
Months Ended
March
31
|
||||
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Change in
non-cash working capital items:
|
|
|
|
|
|
|
|
|
|
Trade and other
receivables
|
|
|
|
|
$
|
615
|
$
|
471
|
|
Inventories
|
|
|
|
|
|
(109)
|
|
641
|
|
Prepaid expenses
and other assets
|
|
|
|
|
|
609
|
|
(81)
|
|
Accounts payable
and accrued liabilities
|
|
|
|
|
|
2,869
|
|
472
|
|
Change
in non-cash working capital items
|
|
|
|
|
$
|
3,984
|
$
|
1,503
|
17
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
19. SEGMENTED
INFORMATION
Business
Segments
The Company
operates in three primary segments – the Mining segment, the
Closed Mine Services segment and the Corporate and Other segment.
The Mining segment includes activities related to exploration,
evaluation and development, mining, milling (including toll
milling) and the sale of mineral concentrates. The Closed Mine
Services segment includes the results of the Company’s
environmental services business which provides mine decommissioning
and other services to third parties. The Corporate and Other
segment includes management fee income earned from UPC and general
corporate expenses not allocated to the other segments. Management
fee income from UPC has been included with general corporate
expenses due to the shared infrastructure between the two
activities.
For the three
months ended March 31, 2021, reportable segment results were as
follows:
|
(in thousands of
CAD dollars)
|
|
|
Mining
|
Closed
Mine
Services
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
|
Revenues
|
|
|
137
|
1,744
|
615
|
2,496
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(295)
|
(1,593)
|
-
|
(1,888)
|
|
Evaluation
|
|
|
(2,761)
|
-
|
-
|
(2,761)
|
|
Exploration
|
|
|
(1,348)
|
-
|
-
|
(1,348)
|
|
General and
administrative
|
|
|
(17)
|
-
|
(2,608)
|
(2,625)
|
|
|
|
|
(4,421)
|
(1,593)
|
(2,608)
|
(8,622)
|
|
Segment income
(loss)
|
|
|
(4,284)
|
151
|
(1,993)
|
(6,126)
|
|
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
1,744
|
-
|
1,744
|
|
Management
fees
|
|
|
-
|
-
|
615
|
615
|
|
Toll milling
services–deferred revenue (note 10)
|
|
137
|
-
|
-
|
137
|
|
|
|
|
|
137
|
1,744
|
615
|
2,496
|
|
|
|
|
|
|
|
|
|
Capital additions:
|
|
|
|
|
|
|
|
Property, plant
and equipment
|
|
|
293
|
-
|
-
|
293
|
|
|
|
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
Plant and
equipment
|
|
|
|
|
|
|
|
Cost
|
|
|
101,823
|
4,545
|
892
|
107,260
|
|
Accumulated
depreciation
|
|
|
(26,351)
|
(3,238)
|
(442)
|
(30,031)
|
|
Mineral
properties
|
|
|
179,754
|
-
|
-
|
179,754
|
|
|
|
|
255,226
|
1,307
|
450
|
256,983
|
18
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
For the three
months ended March 31, 2020, reportable segment results were as
follows:
|
(in thousands of
CAD dollars)
|
|
|
Mining
|
Closed
Mine
Services
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
|
Revenues
|
|
|
1,815
|
2,028
|
817
|
4,660
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(1,605)
|
(1,715)
|
-
|
(3,320)
|
|
Evaluation
|
|
|
(1,491)
|
-
|
-
|
(1,491)
|
|
Exploration
|
|
|
(1,700)
|
-
|
-
|
(1,700)
|
|
General and
administrative
|
|
|
(14)
|
-
|
(2,174)
|
(2,188)
|
|
|
|
|
(4,810)
|
(1,715)
|
(2,174)
|
(8,699)
|
|
Segment income
(loss)
|
|
|
(2,995)
|
313
|
(1,357)
|
(4,039)
|
|
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
|
Uranium
concentrate sales
|
|
|
852
|
-
|
-
|
852
|
|
Environmental
services
|
|
|
-
|
2,028
|
-
|
2,028
|
|
Management
fees
|
|
|
-
|
-
|
817
|
817
|
|
Toll milling
services–deferred revenue (note 10)
|
|
963
|
-
|
-
|
963
|
|
|
|
|
|
1,815
|
2,028
|
817
|
4,660
|
|
|
|
|
|
|
|
|
|
Capital additions:
|
|
|
|
|
|
|
|
Property, plant
and equipment
|
|
|
7
|
15
|
-
|
22
|
|
|
|
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
Plant and
equipment
|
|
|
|
|
|
|
|
Cost
|
|
|
99,994
|
4,546
|
908
|
105,448
|
|
Accumulated
depreciation
|
|
|
(25,196)
|
(3,055)
|
(336)
|
(28,587)
|
|
Mineral
properties
|
|
|
179,488
|
-
|
-
|
179,488
|
|
|
|
|
254,286
|
1,491
|
572
|
256,349
|
20. RELATED
PARTY TRANSACTIONS
Uranium
Participation Corporation
The current
management services agreement (“MSA”) with UPC became
effective on April 1, 2019 and has a term of five years (the
“Term”). Under the MSA, Denison receives the following
management fees from UPC: a) a base fee of $400,000 per annum,
payable in equal quarterly installments; b) a variable fee equal to
(i) 0.3% per annum of UPC’s total assets in excess of $100
million and up to and including $500 million, and (ii) 0.2% per
annum of UPC’s total assets in excess of $500 million; c) a
fee, at the discretion of the Board, for on-going monitoring or
work associated with a transaction or arrangement (other than a
financing, or the acquisition of or sale of U3O8 or UF6); and d) a
commission of 1.0% of the gross value of any purchases or sales of
U3O8 or UF6 or gross interest
fees payable to UPC in connection with any uranium loan
arrangements.
The MSA may be
terminated during the Term by Denison upon the provision of 180
days written notice. The MSA may be terminated during the Term by
UPC (i) in the event of a material breach, (ii) within 90 days of
certain events surrounding a change of both of the individuals
serving as Chief Executive Officer and Chief Financial Officer of
UPC, and / or a change of control of Denison, or (iii) upon the
provision of 30 days written notice and, subject to certain
exceptions, a cash payment to Denison of an amount equal to the
base and variable management fees that would otherwise be payable
to Denison (calculated based on UPC’s current uranium
holdings at the time of termination) for the lesser period of a)
three years, or b) the remaining term of the MSA. See note 24 for
an update on the Company’s management services agreement with
UPC.
19
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
The following
transactions were incurred with UPC for the periods
noted:
|
|
|
|
|
Three
Months Ended
March
31
|
||||
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Management
fees:
|
|
|
|
|
|
|
|
|
|
Base and variable
fees
|
|
|
|
|
$
|
475
|
$
|
463
|
|
Commission
fees
|
|
|
|
|
|
-
|
|
54
|
|
Discretionary
fees
|
|
|
|
|
|
140
|
|
300
|
|
|
|
|
|
|
$
|
615
|
$
|
817
|
At March 31,
2021, accounts receivable includes $340,000 (December 31, 2020:
$265,000) due from UPC with respect to the fees indicated
above.
Korea
Electric Power Corporation (“KEPCO”) and Korea Hydro
& Nuclear Power (“KHNP”)
As at March 31,
2021, KEPCO, through its subsidiaries, holds 58,284,000 shares of
Denison representing a share interest of approximately 7.24%. KHNP
Canada Energy Ltd., a subsidiary of KEPCO’s subsidiary KHNP,
is the holder of the majority of Denison’s shares and is also
the majority member of Korea Waterbury Uranium Limited Partnership
(“KWULP”). KWULP is a consortium of investors that
holds the non-Denison owned interests in Waterbury Lake Uranium
Corporation (“WLUC”) and Waterbury Lake Uranium Limited
Partnership (“WLULP”), entities whose key asset is the
Waterbury Lake property.
Other
During the three
months ended March 31, 2021, the Company incurred investor
relations, administrative service fees and certain pass-through
expenses of $20,000 (March 31, 2020: $21,000) with Namdo Management
Services Ltd, which shares a common director with Denison. These
services were incurred in the normal course of operating a public
company. At March 31, 2021, an amount of $5,000 (December 31, 2020:
$nil) was due to this company.
Compensation
of Key Management Personnel
Key management
personnel are those persons having authority and responsibility for
planning, directing and controlling the activities of the Company,
directly or indirectly. Key management personnel include the
Company’s executive officers, vice-presidents and members of
its Board of Directors.
The following
compensation was awarded to key management personnel:
|
|
|
|
|
Three
Months Ended
March
31
|
||||
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
|
|
|
|
$
|
(1,043)
|
$
|
(584)
|
|
Share-based
compensation
|
|
|
|
|
|
(320)
|
|
(430)
|
|
Key
management personnel compensation
|
|
|
|
|
$
|
(1,363)
|
$
|
(1,014)
|
21. INCOME
TAXES
For the three
months ended March 31, 2021, Denison has recognized deferred tax
recoveries of $308,000. The deferred tax recovery includes the
recognition of previously unrecognized Canadian tax assets of
$247,000 relating to the February 2021 renunciation of the tax
benefits associated with the Company’s $930,485 flow-through
share issue in December 2020.
22. FAIR
VALUE OF FINANCIAL INSTRUMENTS
IFRS requires
disclosures about the inputs to fair value measurements, including
their classification within a hierarchy that prioritizes the inputs
to fair value measurement. The three levels of the fair value
hierarchy are:
20
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
●
Level 1 – Unadjusted
quoted prices in active markets for identical assets or
liabilities;
●
Level 2 – Inputs other
than quoted prices that are observable for the asset or liability
either directly or indirectly; and
●
Level 3 – Inputs that
are not based on observable market data.
The fair value of
financial instruments which trade in active markets, such as share
and warrant equity instruments, is based on quoted market prices at
the balance sheet date. The quoted market price used to value
financial assets held by the Company is the current closing price.
Warrants that do not trade in active markets have been valued using
the Black-Scholes pricing model. Debt instruments have been valued
using the effective interest rate for the period that the Company
expects to hold the instrument and not the rate to
maturity.
Except as
otherwise disclosed, the fair values of cash and cash equivalents,
trade and other receivables, accounts payable and accrued
liabilities, restricted cash and cash equivalents and debt
obligations approximate their carrying values as a result of the
short-term nature of the instruments, or the variable interest rate
associated with the instruments, or the fixed interest rate of the
instruments being similar to market rates.
During the three
months ended March 31, 2021, there were no transfers between levels
1, 2 and 3 and there were no changes in valuation
techniques.
The following
table illustrates the classification of the Company’s
financial assets within the fair value hierarchy as at March 31,
2021 and December 31, 2020:
|
|
|
|
|
|
|
March
31
|
|
December
31,
|
|
|
|
Financial
|
|
Fair
|
|
2021
|
|
2020
|
|
|
|
Instrument
|
|
Value
|
|
Fair
|
|
Fair
|
|
(in thousands of
CAD dollars)
|
|
Category(1)
|
|
Hierarchy
|
|
Value
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Assets:
|
|
|
|
|
|
|
|
|
|
Cash and
equivalents
|
|
Category
B
|
|
|
$
|
172,757
|
$
|
24,992
|
|
Trade and other
receivables
|
|
Category
B
|
|
|
|
2,759
|
|
3,374
|
|
Investments
|
|
|
|
|
|
|
|
|
|
Equity
instruments-shares
|
|
Category
A
|
|
Level 1
|
|
16,286
|
|
16,657
|
|
Equity
instruments-warrants
|
|
Category
A
|
|
Level 2
|
|
573
|
|
293
|
|
Restricted
cash and equivalents
|
|
|
|
|
|
|
|
|
|
Elliot Lake
reclamation trust fund
|
|
Category
B
|
|
|
|
3,461
|
|
2,883
|
|
Credit
facility pledged assets
|
|
Category
B
|
|
|
|
9,000
|
|
9,000
|
|
Reclamation
letter of credit collateral
|
|
Category
B
|
|
|
|
135
|
|
135
|
|
|
|
|
|
|
$
|
204,971
|
$
|
57,334
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
Category
C
|
|
|
|
10,042
|
|
7,178
|
|
Share
purchase warrants liabilty
|
|
Category
A
|
|
Level 2
|
|
14,798
|
|
-
|
|
Debt
obligations
|
|
Category
C
|
|
|
|
568
|
|
615
|
|
|
|
|
|
|
$
|
25,408
|
$
|
7,793
|
(1)
Financial instrument
designations are as follows: Category A=Financial assets and
liabilities at fair value through profit and loss; Category
B=Financial assets at amortized cost; and Category C=Financial
liabilities at amortized cost.
23. 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.
21
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
On September 20,
2016, the Mineral Resources Authority of Mongolia
(“MRAM”) formally issued mining license certificates
for all four projects, triggering Denison’s right to receive
contingent consideration of USD$10,000,000 (collectively, the
“Mining License Receivable”). The original due date for
payment of the Mining License Receivable by UI was November 16,
2016.
Under an
extension agreement between UI and the Company, the payment due
date of the Mining License Receivable was extended from November
16, 2016 to July 16, 2017 (the “Extension Agreement”).
As consideration for the extension, UI agreed to pay interest on
the Mining License Receivable amount at a rate of 5% per year,
payable monthly up to July 16, 2017 and they also agreed to pay a
USD$100,000 instalment amount towards the balance of the Mining
License Receivable amount. The required payments were not
made.
On February 24,
2017, the Company served notice to UI that it was in default of its
obligations under the GSJV Agreement and the Extension Agreement
and on December 12, 2017, the Company filed a Request for
Arbitration between the Company and UI under the Arbitration Rules
of the London Court of International Arbitration. Hearings in front
of the arbitration panel were held in December 2019. The final
award was rendered by an arbitration panel on July 27, 2020, with
the panel finding in favour of Denison and ordering UI to pay the
Company USD$10,000,000 plus interest at a rate of 5% per annum from
November 16, 2016, plus certain legal and arbitration costs.
Denison and UI have exchanged correspondence, and award recovery
options are being considered.
Uranium
Purchase Commitments
Denison has
entered into agreements to purchase 2,500,000 pounds of
U3O8, for delivery, at
various times between April 1, 2021 and October 31, 2021. The
average price per pound and total purchase commitment amounts are
shown below:
|
(in thousands of
dollars, except per pound amounts)
|
|
|
|
March
2021
|
||||
|
|
|
|
|
|
|
USD$
|
|
CAD$ (1)
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
commitment of 2,500,000 pounds:
|
|
|
|
|
|
|
|
|
|
Purchase
price
|
|
|
|
|
$
|
74,034
|
$
|
93,097
|
|
Add: purchase
commissions
|
|
|
|
|
|
106
|
|
133
|
|
Total purchase
price, including commissions
|
|
|
|
|
$
|
74,140
|
$
|
93,230
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
commitment cost per pound:
|
|
|
|
|
|
|
|
|
|
Purchase
price
|
|
|
|
|
$
|
29.61
|
$
|
37.23
|
|
Add: purchase
commissions
|
|
|
|
|
|
0.05
|
|
0.06
|
|
Total
purchase price, including commissions
|
|
|
|
|
$
|
29.66
|
$
|
37.29
|
(1)
The purchase commitment
amounts have been translated to Canadian dollars using the March
31, 2021 closing foreign exchange rate of 1.2575. The actual
Canadian dollar commitment realized will fluctuate depending upon
the foreign exchange rate in effect at the transaction
date.
24. SUBSEQUENT
EVENTS
Uranium
Participation Corporation
On April 27,
2021, UPC and Sprott Asset Management LP (“Sprott”)
reached an agreement to convert UPC into the Sprott Physical
Uranium Trust (the “Trust”) – effectively
aligning UPC’s business with the world’s leading
physical commodity investment vehicles and making it eligible to
pursue a listing in the United States (the “UPC
Transaction”). Upon completion of the UPC Transaction, Sprott
will become the manager of the Trust and the MSA will be terminated
– Denison will remain the manager of UPC until such time up
until the UPC Transaction is completed. Denison estimates the
termination payment due from UPC will be approximately $5.3
million. The actual termination payment may differ, as it will be
based on UPC’s NAV as of the month-end immediately prior to
the date of a formal notice of termination to Denison by UPC in
accordance with the MSA.
22
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
Offer to
Acquire JCU (Canada) Exploration Company, Limited
(‘JCU’)
On May 4, 2021,
Denison announced that it has delivered a binding offer to Overseas
Uranium Resources Development Co., Ltd. (‘OURD’) to
acquire 100% ownership of OURD’s wholly-owned subsidiary,
JCU. JCU holds a portfolio of uranium project joint venture
interests in Canada, including a 10% interest in Denison’s
90% owned Wheeler River project.
The offer
includes the following key features: (a) consideration including
cash payments of up to $40.5 million and the assumption of
JCU’s existing liabilities, including any outstanding
liabilities owed to Japan Atomic Energy Agency; (b) binding subject
to definitive documentation, regulatory approvals (if required) and
the termination of OURD’s existing definitive purchase
agreement with UEX Corporation in accordance with its terms; (c) no
conditions for due diligence on the assets of JCU, or obtaining the
necessary financing to fund the purchase price; and (d) a
commitment to OURD that JCU will be maintained as a corporate
subsidiary in order for JCU to meet its joint venture
commitments.
23
|
Exhibit
99.2
|
MANAGEMENT’S DISCUSSION & ANALYSIS
FOR THE THREE MONTHS ENDED
MARCH 31, 2021
TABLE OF CONTENTS
LIQUIDITY AND CAPITAL
RESOURCES
This
Management’s Discussion and Analysis (‘MD&A’)
of Denison Mines Corp. and its subsidiary companies and joint
arrangements (collectively, ‘Denison’ or the
‘Company’) provides a detailed analysis of the
Company’s business and compares its financial results with
those of the previous year. This MD&A is dated as of May 6,
2021 and should be read in conjunction with the Company’s
unaudited interim condensed consolidated financial statements and
related notes for the three months ended March 31, 2021. The
unaudited interim condensed consolidated financial statements are
prepared in accordance with International Financial Reporting
Standards (‘IFRS’) as issued by the International
Accounting Standards Board (‘IASB’). Readers are also
encouraged to consult the audited consolidated financial statements
and MD&A for the year ended December 31, 2020. All dollar
amounts in this MD&A are expressed in Canadian dollars, unless
otherwise noted.
Additional
information about Denison, including the Company’s press
releases, quarterly and annual reports, Annual Information Form and
Form 40-F is available through the Company’s filings with the
securities regulatory authorities in Canada at www.sedar.com
(‘SEDAR’) and the United States at
www.sec.gov/edgar.shtml (‘EDGAR’).
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
■
Successful completion of equity financing to fund the Environmental
Assessment (‘EA’) and Feasibility Study
(‘FS’) process for the Wheeler River Uranium project
(‘Wheeler River’ or the
‘Project’)
Denison completed
equity financings for gross proceeds of $40.2 million (including
$3.9 million from an At-the-Market (‘ATM’) offering) in
the first quarter of 2021. Subject to a decision to advance to a
formal FS for the high-grade Phoenix uranium deposit
(‘Phoenix’), the proceeds from the offerings are
expected, based on current estimates, to be sufficient to complete
such FS process and the EA process.
■
Financing completed for 2021 and 2022 high potential exploration
programs
The Company
completed a flow-through equity financing of $8.0 million in March
2021. Proceeds of the financing will be used for eligible Canadian
exploration activities in 2021 and 2022 – including the
Company’s planned follow up on the discovery of high-grade
uranium mineralization at the K-West target area, located
approximately 4 km west of Phoenix on the Wheeler River
property.
■
Funded a project financing initiative involving the strategic
acquisition of physical uranium
In March 2021,
Denison successfully completed a public offering for gross proceeds
of $107,949,000. The majority of the net proceeds of the offering
are anticipated to fund the strategic purchase of uranium
concentrates (‘U3O8‘) to be
held by Denison as a long-term investment, which is intended to
support the potential future financing of the advancement and/or
construction of Wheeler River. At March 31, 2021, the Company has
committed to purchase 2.5 million pounds of U3O8 at a weighted
average price of US$29.61 per pound U3O8.
■
Executed agreements with the English River First
Nation
In April 2021,
Denison announced that it has entered into a Participation and
Funding Agreement and Letter of Intent with the English River First
Nation (‘ERFN’) in connection with the advancement of
the proposed in-situ recovery (‘ISR’) operation at
Wheeler River. The Company also entered into an Exploration
Agreement in respect of Denison’s exploration and evaluation
activities within the ERFN traditional territories. These
agreements reflect Denison’s desire to operate its business
in a progressive and sustainable manner that respects ERFN rights
and advances reconciliation with Indigenous peoples. The agreements
provide ERFN with economic opportunities and other benefits, and
establish a foundation for future collaboration in an authentic,
cooperative, and respectful way.
■
Commenced the 2021 ISR field program at Wheeler River
During the first
quarter of 2021, the Company initiated the 2021 ISR Field Program
(the ‘2021 Field Program’), including the installation
of a five-spot commercial scale well (‘CSW’) ISR test
pattern (‘Test Pattern’) at Wheeler River. Mobilization
of drilling equipment necessary to complete the large diameter
drill holes was completed in early April, and all five CSWs have
been successfully drilled to target depths, cased, and cemented
into position. The installation of the Test Pattern is the first
step in the 2021 Field Program, which is designed to support the
further de-risking of the application of ISR mining at
Phoenix.
■
Discovery of new high-grade uranium mineralization at McClean Lake
South
New high-grade
unconformity-hosted uranium mineralization was discovered during
the winter 2021 exploration program completed at the
Company’s 22.5% owned McClean Lake Joint Venture
(‘McClean Lake’ or ‘MLJV’). Three of the
final four drill holes completed by Orano Canada Inc. (‘Orano
Canada’), 77.5% owner and operator of the MLJV, returned
uranium mineralization at the McClean South target area, with the
results highlighted by drill hole MCS-34, which returned 5.04%
eU3O8 over 14.0 metres
(including 14.86% eU3O8 over 3.9
metres).
Denison Mines
Corp. was formed under the laws of Ontario and is a reporting
issuer in all Canadian provinces. Denison’s common shares are
listed on the Toronto Stock Exchange (the ‘TSX’) under
the symbol ‘DML’ and on the NYSE American exchange
under the symbol ‘DNN’.
Denison is a
uranium exploration and development company with interests focused
in the Athabasca Basin region of northern Saskatchewan, Canada. The
Company’s flagship asset is a 90% interest in Wheeler River,
which is the largest undeveloped uranium project in the
infrastructure rich eastern portion of the Athabasca Basin
region.
2
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
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
deposits and a 66.90% interest in the THT (formerly J Zone) and
Huskie deposits on the Waterbury Lake property. The Midwest, THT
and Huskie deposits are located within 20 kilometres of the McClean
Lake mill. In addition, Denison has an extensive portfolio of
280,000 hectares of exploration ground in the Athabasca Basin
region.
Denison is
engaged in mine decommissioning and environmental services through
its Closed Mines group, which manages Denison’s Elliot Lake
reclamation projects and provides post-closure mine and maintenance
services to a variety of industry and government
clients.
Denison is also
the manager of Uranium Participation Corporation
(‘UPC’), a publicly traded company listed on the TSX
under the symbol ‘U’, which invests in uranium oxide in
concentrates (‘U3O8’) and
uranium hexafluoride (‘UF6’). See
SUBSEQUENT EVENTS below for further details.
SELECTED ANNUAL FINANCIAL INFORMATION
|
(in
thousands)
|
|
As at
March 31,
2021
|
|
As at
December 31,
2020
|
|
|
|
|
|
|
|
Financial Position:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
172,757
|
$
|
24,992
|
|
|
|
|
|
|
|
Working
capital(1)
|
$
|
180,589
|
$
|
37,571
|
|
Property, plant
and equipment
|
$
|
256,983
|
$
|
256,870
|
|
Total
assets
|
$
|
467,934
|
$
|
320,690
|
|
Total long-term
liabilities(2)
|
$
|
96,226
|
$
|
81,565
|
(1)
At March 31, 2021, the
Company’s working capital includes $16,286,000 in portfolio
investments and $3,898,000 in a non-cash deferred revenue liability
(December 31, 2020 – $16,657,000 in portfolio investments,
and $3,478,000 of non-cash deferred revenue).
(2)
Predominantly comprised of
the non-current portion of deferred revenue, non-current
reclamation obligations, share purchase warrant liabilities and
deferred income tax liabilities.
SELECTED QUARTERLY FINANCIAL INFORMATION
|
|
|
|
|
2021
|
|
2020
|
|
2020
|
|
2020
|
|
(in
thousands, except for per share amounts)
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
|
2,496
|
$
|
4,094
|
$
|
2,743
|
$
|
2,926
|
||
|
Net
loss
|
$
|
(8,884)
|
$
|
(3,095)
|
$
|
(5,482)
|
$
|
(1,043)
|
||
|
Basic and diluted
loss per share
|
$
|
(0.01)
|
$
|
(0.00)
|
$
|
(0.01)
|
$
|
(0.00)
|
||
|
|
|
|
|
2020
|
|
2019
|
|
2019
|
|
2019
|
|
(in
thousands, except for per share amounts)
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
|
4,660
|
$
|
3,956
|
$
|
3,478
|
$
|
4,139
|
||
|
Net
loss
|
$
|
(6,663)
|
$
|
(1,498)
|
$
|
(6,424)
|
$
|
(4,884)
|
||
|
Basic and diluted
loss per share
|
$
|
(0.01)
|
$
|
(0.00)
|
$
|
(0.01)
|
$
|
(0.01)
|
||
|
|
|
|
|
|
|
|
|
|
||
3
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Significant items causing variations in quarterly
results
●
The Company’s toll
milling revenues fluctuate due to the timing of uranium processing
at the McClean Lake mill as well as changes to the estimated
mineral resources of the Cigar Lake mine. Toll milling at McClean
Lake was suspended during Q2 and Q3 of 2020 and again during Q1 of
2021 due to the suspension of mining at the Cigar Lake mine as a
result of the COVID-19 pandemic (‘COVID-19’). See
RESULTS OF OPERATIONS below for further details.
●
Revenues from the Closed
Mines group fluctuate due to the timing of projects, which vary
throughout the year in the normal course of business.
●
Operating expenses fluctuate
due to the timing of projects at both the MLJV and the Closed Mines
group, which vary throughout the year in the normal course of
business.
●
Exploration expenses are
generally largest in the first and third quarters, due to the
timing of the winter and summer exploration programs in
Saskatchewan.
●
The Company’s results
are also impacted, from time to time, by other non-recurring events
arising from its ongoing activities, as discussed below where
applicable.
REVENUES
McClean Lake Uranium Mill
McClean Lake is
located on the eastern edge of the Athabasca Basin in northern
Saskatchewan, approximately 750 kilometres north of Saskatoon.
Denison holds a 22.5% ownership interest in the MLJV and the
McClean Lake uranium mill, one of the world’s largest uranium
processing facilities, which is contracted to process ore from the
Cigar Lake mine under a toll milling agreement. The MLJV is a joint
venture between Orano Canada with a 77.5% interest and Denison with
a 22.5% interest.
In February 2017,
Denison closed an arrangement with Anglo Pacific Group PLC
(‘APG’) and one of its wholly owned subsidiaries (the
‘APG Arrangement’) under which Denison received an
upfront payment of $43,500,000 in exchange for its right to receive
future toll milling cash receipts from the MLJV under the current
toll milling agreement with the Cigar Lake Joint Venture
(‘CLJV’) from July 1, 2016 onwards. The APG Arrangement
consists of certain contractual obligations of Denison to forward
to APG the cash proceeds of future toll milling revenue earned by
the Company related to the processing of the specified Cigar Lake
ore through the McClean Lake mill, and as such, the upfront payment
was accounted for as deferred revenue.
In response to
the COVID-19 pandemic, the CLJV temporarily suspended production at
the Cigar Lake mine from the end of March 2020 until September
2020, and then again from the end of December 2020 until April
2021. The MLJV temporarily suspended operations at the mill for the
duration of the CLJV shutdowns. As noted above, Denison sold the
toll milling revenue to be earned from the processing of the Cigar
Lake ore pursuant to the APG Arrangement. While the temporary
suspension of operations at the McClean Lake mill has resulted in a
decrease in revenue recognized by Denison, the impact is non-cash
and is limited to a reduction in the drawdown of the
Company’s deferred revenue balance.
During the three
months ended March 31, 2021, as a result of the CLJV temporary
shutdown, the McClean Lake mill processed nil pounds U3O8 for the CLJV
(March 31, 2020 – 4.2 million pounds U3O8) and recorded
toll milling revenue of $137,000 (March 31, 2020 – $963,000).
The decrease in toll milling revenue in the current quarter, as
compared to the prior year, is predominantly due to the temporary
shutdown of the mill, slightly offset by a $137,000 non-cash
cumulative accounting adjustment related to the Cigar Lake mineral
resource estimate update published in the first quarter of
2021.
During the three
months ended March 31, 2021, the Company also recorded accounting
accretion expense of $754,000 on the toll milling deferred revenue
balance (March 31, 2020 – $782,000). The annual accretion
expense will decrease over the life of the contract as the deferred
revenue liability decreases over time.
Mineral Sales
Mineral sales
revenue for the three months ended March 31, 2021 was $nil (March
31, 2020 - $852,000 from the sale of 26,004 pounds U3O8 from inventory at
an average price of $32.76 per pound).
Closed Mine Services
Mine
decommissioning and environmental services are provided through
Denison’s Closed Mines group, which has provided long-term
care and maintenance for closed mine sites since 1997. With offices
in Ontario, the Yukon Territory and Quebec, the Closed Mines group
manages Denison’s Elliot Lake reclamation projects and
provides post-closure mine care and maintenance services to various
customers.
4
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Revenue from
Closed Mines services during the three months ended March 31, 2021
was $1,744,000 (March 31, 2020 - $2,028,000). The decrease in
revenue in the first quarter of 2021, as compared to 2020, was due
to a decrease in activity at certain care and maintenance sites and
one customer contract that was not renewed for 2021.
Management Services Agreement with UPC
Denison provides
general administrative and management services to UPC. Management
fees and commissions earned by Denison provide a source of cash
flow to partly offset corporate administrative expenditures
incurred by the Company during the year. See SUBSEQUENT EVENTS for
further details.
During the three
months ended March 31, 2021, revenue from the Company’s
management contract with UPC was $615,000 (March 31, 2020 -
$817,000). The decrease in revenues during the first quarter of
2021, compared to the prior year, is predominantly due to a
decrease in discretionary fees and commission-based fees, offset by
a slight increase in management fees earned based on UPC’s
monthly net asset value (‘NAV’). Discretionary
management fees are awarded to Denison for non-routine activities
performed by the Company. During the three months ended March 31,
2021, the Company earned discretionary management fees of $140,000,
compared to a discretionary fee of $300,000 during the first
quarter of 2020. Denison earns a 1% commission on the gross value
of UPC’s uranium purchases and sales. The decrease in
commission-based management fees during the first quarter of 2021
was due to a decrease in uranium purchase and sales transactions,
as compared to the prior year.
OPERATING EXPENSES
Mining
Operating
expenses of the mining segment include depreciation and development
costs, as well as cost of sales related to the sale of
uranium.
Operating
expenses in the three months ended March 31, 2021 were $295,000
(March 31, 2020 – $1,605,000). In the first quarter of 2021,
the mill was temporarily shut and did not process any ore from the
CLJV (March 31, 2020 – 4.2 million pounds U3O8 processed for the
CLJV). Accordingly, operating expenses in the first quarter of 2021
included $nil depreciation of the McClean Lake mill (March 31, 2020
- $736,000).
In the three
months ended March 31, 2021, operating expenses also included
development and other operating costs related to the MLJV of
$295,000 (March 31, 2020 – $869,000), including $180,000 in
costs related to the advancement of the Surface Access Borehole
Resource Extraction (‘SABRE’) mining technology, as
part of a multi-year test mining program operated by Orano Canada
within the MLJV.
Closed Mine Services
Operating
expenses during the three months ended March 31, 2021 totaled
$1,593,000 (March 31, 2020 - $1,715,000). The expenses relate
primarily to care and maintenance services provided to clients, and
include labour and other costs. The decrease in operating expenses
in the current period, as compared to the prior year, is
predominantly due to a reduction in activity at certain care and
maintenance sites
MINERAL PROPERTY EVALUATION
During the first
quarter of 2021, Denison’s share of evaluation expenditures
was $2,761,000 (March 31, 2020 –$1,491,000). The increase in
evaluation expenditures, compared to the prior period, was due to
an increase in Wheeler River evaluation activities, including the
commencement of the 2021 Field Program.
The following
table summarize the evaluation activities completed during the
first quarter of 2021 and up until the end of April
2021.
|
PROJECT EVALUATION ACTIVITIES
|
||||
|
Property
|
Denison’s
ownership(1)
|
Evaluation drilling(2)
|
Other activities
|
|
|
Wheeler
River
|
90%
|
2,048.8
metres
(5
CSWs)
|
ISR
Field Testing,
Engineering,
Metallurgical testing, Environmental and Sustainability
activities
|
|
|
|
|
|
|
|
Notes:
(1) The
Company’s ownership interest as at March 31,
2021.
(2) CSW
evaluation drilling includes mud-rotary drilling of new
large-diameter holes for the purposes of further evaluation of the
ISR mining conditions at Phoenix. Amounts include total evaluation
metres drilled and total number of holes completed.
5
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
A PFS was
completed for Wheeler River in late 2018, considering the potential
economic merit of developing the Phoenix deposit as an ISR
operation and the Gryphon deposit as a conventional underground
mining operation.
Further details
regarding Wheeler River, including the estimated mineral reserves
and resources, are provided in the Technical Report for the Wheeler
River project titled ‘Pre-feasibility Study Report for the
Wheeler River Uranium Project, Saskatchewan, Canada’ with an
effective date of September 24, 2018 (‘PFS Technical
Report’). A copy of the PFS Technical Report is available on
Denison’s website and under its profile on each of SEDAR and
EDGAR.
Given the social,
financial and market disruptions in early 2020, Denison temporarily
suspended certain activities at Wheeler River, including the EA
program, which is on the critical path to achieving the project
development schedule outlined in the PFS. 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, as well as the Phoenix and Gryphon
deposits, and existing and proposed infrastructure, is shown on the
map provided below.
Evaluation Program
During the first
quarter of 2021, Denison’s share of evaluation costs at
Wheeler River was $2,678,000 (March 31, 2020 –
$1,437,000).
6
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Engineering Activities
2021
Field Program:
The
2021 ISR Field Program commenced in the first quarter and is
expected to involve the following key components:
●
Installation of a 5-spot Test
Pattern: The Test Pattern will be located in the planned
first mining area (‘Phase 1’) of the Phoenix deposit
and consists of five new CSWs. The Test Pattern has been designed
to facilitate the further evaluation of the ISR mining conditions
at Phoenix – for incorporation into detailed mine planning
expected to be included as part of the completion of a future FS
for the Project;
●
Installation of 11 additional
monitoring wells (‘MWs’): Eleven additional small-diameter MWs are planned
to be installed in the Phase 1 area and are designed to surround
the Test Pattern on all sides and above the ore zone horizon in
order to facilitate detailed monitoring of pressure changes and
observations of fluid flow patterns during active hydrogeological
tests. Certain monitoring wells will also allow for water quality
sampling over the duration of test work;
●
Extensive Hydrogeologic
Testing: Approximately
twenty-five hydrogeologic tests are planned to be completed during
the 2021 Field Program. Tests are expected to first evaluate
baseline conditions and the effectiveness of permeability
enhancement tools deployed on an individual well basis, and are
then expected to progress to assessing the Test Pattern’s
total permeability on a full-scale basis. Tracer tests are also
expected to be conducted on the full Test Pattern to establish
breakthrough times for each CSW and confirm sub-surface pathways.
These tests are expected to provide a more complete understanding
of the hydrogeologic characteristics expected throughout Phase 1 in
order to support the permitting and design of a lixiviant test,
utilizing the existing Test Pattern, planned for
2022.
During
the first quarter, 2021 Field Program activities related to site
preparation, mobilization of drill crews, the commencement of CSW
drilling, and the initiation of additional permeameter
analysis.
●
Site Preparation at Wheeler River
In early March,
Denison mobilized excavation equipment to the Wheeler River site in
order to:
o
Open the access road to the
Wheeler River camp and access to the Phoenix deposit;
o
Widen the access road where
necessary to allow the mobilization of the large-sized mud/rotary
drill;
o
Clear snow from the planned
Test Pattern and dig collection pits for cuttings; and
o
Expand certain camp
facilities to accommodate larger drill crews and support COVID-19
physical distancing and isolation protocols.
●
Mobilization of Drill Crews and Commencement of Drilling of
CSWs
Drill crews
mobilized to site in late March 2021 and made excellent progress
advancing the installation of the five-spot Test Pattern, which
continued into the start of the second quarter. Collaring of the
CSWs was completed in March and the five planned CSWs were
successfully drilled to target depths, cased and cemented into
position by the end of April. The installation of the Test Pattern
is the first step in an ambitious 2021 ISR Field Program, designed
to support the further de-risking of the application of the ISR
mining method at Phoenix.
●
Permeameter Analysis
Permeameter
analysis of additional areas within Phoenix resumed in the first
quarter of 2021 to refine the understanding of the mineralized
hydrogeologic horizons.
Metallurgical Testing
Metallurgical
test work continued in the first quarter of 2021 with SRC
Laboratories in Saskatoon (‘SRC’).
●
Column Leach Tests:
The main
purpose of the column leach tests is to produce uranium bearing
solution (‘UBS’) for bench scale tests of unit
operations simulating the plant flowsheet. A secondary purpose for
the column Leach Test is to assess sensitivity of the leaching
rate.
7
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Due to the
high-grade nature of the testing material, a special
“shielded room” was constructed at SRC to hold the
column apparatus. The Company plans to complete three column leach
tests in 2021, with the first large diameter column leach tests
commencing during the quarter.
●
Core Leach Tests:
The core
leach tests are specialized leach tests involving the testing of
intact mineralized core samples, representative of the in-situ
conditions at Phoenix, to evaluate uranium recovery specifically
for the ISR mining method.
In late 2020,
core leach testing resumed and it continued throughout the first
quarter of 2021.
Environmental and Sustainability Activities
EA Activities
Technical studies
related to the hydrogeological model continued in the first quarter
of 2021, with the Denison technical team validating the assumptions
in the model provided by the Company’s consultant to ensure
that the model is aligned with Denison’s current mining
strategy and decommissioning plans.
In addition,
progression on the EA methodology and the integration of
Indigenous Knowledge (‘IK’) within the Company’s
draft Environmental Impact Statement (‘EIS’) document
also continued in first quarter, with significant emphasis
placed on determining how IK and engagement records will be
included throughout the EIS by the various discipline leads.
This method of integration represents a uniquely progressive
approach for an EIS in relation to a Saskatchewan based uranium
mining project.
Community Engagement Activities
During the first
quarter of 2021, engagement activities related to the EA process
progressed significantly, with various groups of interested parties
– including (1) well attended
virtual meetings with several local municipalities in northern
Saskatchewan to discuss the Wheeler River project and ISR mining
and (2) the execution of agreements with the
ERFN.
ERFN is located
about 500 km north of Saskatoon in Treaty 10, with a main
settlement at Patuanak, alongside the Churchill River. ERFN has
seven different reserves: Porter Island, Cree Lake, Elak Dase, Knee
Lake, Dipper Rapids, Wapachewunak and La Plonge, and is a
multilingual community with various combinations of Dene, Cree,
Michif, English and French spoken by over 1,400
members.
Denison signed a
Participation and Funding Agreement and Letter of Intent with ERFN,
which outline a mutually agreeable framework and applicable funding
arrangement to facilitate ERFN’s participation and engagement
in the EA process for Wheeler River. Denison and ERFN also signed
an Exploration Agreement, which establishes a framework for a
cooperative and mutually beneficial relationship between Denison
and ERFN whereby the Company’s exploration and evaluation
activities are consented to by ERFN and Denison agrees to support
ERFN's interests in relation to community development and benefits,
environmental protection and monitoring, as well as sustainable and
predictable consultation and engagement processes.
MINERAL PROPERTY EXPLORATION
During the first
quarter of 2021, Denison’s share of exploration expenditures
was $1,348,000, (March 31, 2020 –$1,700,000). The decrease in
exploration expenditures compared to the prior year was due to
decrease in winter exploration activities.
Exploration
spending in the Athabasca Basin is generally seasonal in nature,
with spending typically higher during the winter exploration season
(January to mid-April) and summer exploration season (June to
mid-October).
The following
table summarize the exploration activities completed during the
first quarter of 2021. The exploration drilling relates to the
winter drilling programs at three of the Company’s
non-operated properties.
8
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
|
EXPLORATION & EVALUATION ACTIVITIES
|
|||||
|
Property
|
Denison’s ownership
|
Drilling in metres
(m)(1)
|
Other activities
|
||
|
Ford
Lake
|
100.00%
|
-
|
Geophysical
Survey
|
||
|
McClean
Lake
|
22.50%
|
4,083.0 (15
holes)
|
|
-
|
|
|
Midwest
|
25.17%
|
2,669.0 (8
holes)
|
Geophysical
Survey
|
||
|
Waterfound
|
12.32%(2)
|
-
|
Geophysical
Survey
|
||
|
Wolly
|
21.89%(3)
|
2,118.5 (11
holes)
|
|
-
|
|
|
|
|
|
|
|
|
|
Total
|
|
8,870.5 (34 holes)
|
|
||
(1)
The Company reports total
exploration metres drilled and the number of holes that were
successfully completed to their target depth.
(2)
Represents Denison’s
ownership position at December 31, 2020. Denison has elected not to
funds its 12.32% share of the 2021 exploration program implemented
by the operator, Orano Canada. Accordingly, Denison’s
ownership share will decrease.
(3)
Represents Denison’s
ownership position at December 31, 2020. Denison has elected not to
funds its 21.89% share of the 2021 exploration program implemented
by the operator, Orano Canada. Accordingly, Denison’s
ownership share will decrease.
The
Company’s land position in the Athabasca Basin, as of March
31, 2021, is illustrated in the figure below. The Company’s
Athabasca land package increased during the first quarter of 2021
from 268,725 hectares (204 claims) to 280,107 hectares (207 claims)
due to staking of three additional claims bordering the
Company’s Johnston Lake property.
Wheeler River Exploration
Denison’s
share of exploration costs at Wheeler River was $260,000 during the
quarter ended March 31, 2021 (March 31, 2020 – $206,000),
which includes a portion of camp set-up and stand-by costs incurred
in the quarter.
9
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Exploration field
work at Wheeler River is planned to begin in the third quarter of
2021. During the three months ended March 31, 2020, exploration
work related to Wheeler River included desktop analysis and
interpretation of the results of the 2020 exploration program and
the initiation of detailed planning of a 2021 exploration drilling
program. – which is expected to include an estimated 7,500
metres in approximately 12 to 15 drill holes. The program is likely
to be focused at the K West and M Zone target areas, where
additional exploration drilling is required to follow up on
mineralization encountered in each of these areas from the 2020
exploration drilling program.
Exploration Pipeline Properties
During the first
quarter, five exploration field programs were carried out at
Denison’s pipeline properties (one operated by Denison) and
Denison’s share of exploration costs for these properties was
$850,000 during the three months ended March 31, 2021 (March 31,
2020 - $1,307,000).
Additionally,
numerous desk-top reviews were completed to prioritize properties
for potential future exploration. The Company continues to review,
prioritize and rationalize its Athabasca Basin exploration
portfolio with the objective of continuing to explore its highest
priority projects, with the potential to deliver significant and
meaningful new discoveries.
Ford Lake
During the first
quarter of 2021, a Small Moving Loop EM survey was initiated on the
Company’s Ford Lake property to resolve a complex, multiple
conductor trend and to generate targets for future drill testing on
the project. The survey was in progress at the end of the first
quarter, with 5 of 6 survey lines completed, and was completed
subsequent to quarter end.
McClean Lake
The McClean Lake
property is operated by Orano Canada and is host to the McClean
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 15 drill holes
totaling 4,083 metres was recently completed at McClean
Lake.
The 2021
exploration program was designed to test for the potential
expansion of previously discovered mineralization in the McClean
South 8W and 8E pods, as well as to test for new mineralization in
the surrounding area. Three of the final four drill holes completed
by Orano Canada returned uranium mineralization at the McClean
South target area, with the results highlighted by drill hole
MCS-34, which returned 5.04% eU3O8 over 14.0 metres
(including 14.86% eU3O8 over 3.9 metres).
For more information regarding the use of radiometric equivalent
grades and sampling procedures at McClean Lake, see Denison’s
press release dated April 14, 2021. Assay results for the 2021
program are pending.
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 66.90% 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 2021 Midwest
exploration program consisted of 2,669 metres of diamond drilling
in 8 holes completed over four different target areas: The Camille
Zone (4 holes), Midwest Main (1 hole), the Dam Zone (1), and the
Points North Zone (2). Elevated radioactivity and alteration
indicative of a potentially mineralizing system were identified
from drilling in each of these areas. Assay results for the 2021
program are pending.
In addition to
the completed diamond drilling, 7.75 km of ML-TEM data was
collected from four survey lines at the Points North Zone (2
lines), the Dam Zone (1 line), and the Simon Zone (1
line).
Waterfound
The Waterfound
River project is operated by Orano Canada. A total of 30.5 km of
moving-loop transient electromagnetic (ML-TEM) data was collected
over the northeastern portion of the D-1 and E-2 conductors.
Modelling and interpretation of the 2021 ML-TEM data is expected to
be completed in the second quarter of 2021.
10
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Wolly
The Wolly project
is operated by Orano Canada. The 2021 Wolly exploration program
consisted of 2,118.5 metres of diamond drilling in 11 completed
drill holes. Drilling was focused on three areas: Top Creek,
Moonlight, and Geneva. Elevated radioactivity and alteration
indicative of a potentially mineralizing system were encountered in
all three areas. Assay results for the 2021 program are
pending.
GENERAL AND ADMINISTRATIVE EXPENSES
Total general and
administrative expenses were $2,625,000 during the three months
ended March 31, 2021 (March 31, 2020 - $2,188,000). 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 first quarter of 2021 was predominantly driven
by an increase in the expense recognized for bonuses.
In order to
preserve cash in early 2020, the Company settled 2019 bonuses for
the executive team and the majority of staff with a grant of
restricted share units (‘RSUs’). The cost of RSUs is
expensed over the three-year vesting period of the units, whereas
cash bonuses, by comparison, are fully expensed at the time of
approval. During 2021, the 2020 bonuses awarded to staff and
executives were paid in cash resulting in a change in the timing of
the recognition of the expense.
The increase in
bonus expense was partially offset by a decrease in legal costs
during the first quarter of 2021. Legal costs in 2020 were related
to arbitration proceedings between the Company and a third
party.
OTHER INCOME AND EXPENSES
During the three
months ended March 31, 2021, the Company recognized a loss of
$2,041,000 in other income/expense (March 31, 2020 – loss of
$3,192,000). The loss in the current period is predominantly due to
a fair value loss adjustment and issuance costs related to the
share purchase warrants issued by the Company during the first
quarter of 2021.
In February and
March 2021, Denison issued 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 they 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. The fair value of the warrants will fluctuate
based on changes in the valuation model inputs, including the value
of the Company’s shares and the US dollar to Canadian dollar
exchange rate.
During the
current quarter, the Company recorded a $1,564,000 fair value loss
on the share purchase warrants. As noted above, on initial
recognition, the warrants were valued using the relative fair value
basis approach, which allocates value to the issued warrants and
shares based on the relative fair value of the two instruments. On
the date of issuance the fair value of the individual instruments
exceeded the unit price of the offering, and therefore this
allocation resulted in the warrants being recognized at an amount
that was less than their actual fair value. The fair value loss of
$1,564,000 was predominantly to recognize the change from the
amount allocated using the relative fair value approach to the
actual fair value at March 31, 2021. During the quarter, the
Company also incurred share purchase warrant issue expenses of
$789,000, which represents a relative allocation of the unit issue
expenses incurred.
During the first
quarter of 2021, the Company also recognized a loss on investments
carried at fair value of $91,000. Gains and losses on investments
carried at fair value are driven by the closing share price of the
related investee at end of the quarter. During the comparative
quarter ended March 31, 2020, the loss in other expense was
predominantly due to losses on investments carried at fair value of
$2,950,000.
11
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash
equivalents were $172,757,000 at March 31, 2021 (December 31, 2020
– $24,992,000).
The increase in
cash and cash equivalents, during the first quarter of 2021, of
$147,765,000 was due to net cash provided by financing activities
of $150,180,000, slightly offset by net cash used in operations of
$1,983,000, and net cash used in investing activities of
$871,000.
Cashflow changes
Net cash used in
operating activities of $1,983,000 was predominantly due to the net
loss for the period, adjusted for non-cash items and changes in
working capital items.
Net cash used in
investing activities of $871,000 consists primarily of an increase
in restricted cash due to the Company’s funding the Elliot
Lake reclamation trust fund, as well as an increase in property
plant & equipment, mainly due to an expansion of the
accommodation facilities at the Wheeler River camp.
Net cash provided
by financing activities of $150,180,000 due to the net proceeds
from the Company’s ATM program, February 2021 unit offering,
March flow-through share offering, March 2021 unit offering, as
well as stock option exercises. See below for further details
regarding these transactions.
On June 2, 2020,
the Company filed a short form base shelf prospectus (‘2020
Shelf Prospectus’) with the securities regulatory authorities
in each of the provinces and territories in Canada and in the
United States. Under the 2020 Shelf Prospectus, the Company was
allowed to issue securities, in amounts, at prices, and on terms to
be determined based on market conditions at the time of sale and as
set forth in the 2020 Shelf Prospectus, for an aggregate offering
amount of up to $175,000,000 during the 25 month period beginning
on June 2, 2020.
In November 2020,
Denison entered into an equity distribution agreement providing for
an ATM equity offering program, qualified by a prospectus
supplement to the 2020 Shelf Prospectus. The ATM was to allow
Denison, through its agents, to, from time to time, offer and sell,
in Canada and the United States, such number of common shares as
would have an aggregate offering price of up to USD$20,000,000. In
January and February 2021, Denison issued 4,230,186 common shares
under the ATM program, at an average price of $0.93 per share, for
aggregate gross proceeds of $3,914,000, and incurred issue expenses
of $466,000, including purchase commissions of $78,000. The ATM
program was terminated in connection with the March 2021 unit
offering (described below).
In February 2021,
Denison issued 31,593,950 units, pursuant to a public offering of
units qualified by a prospectus supplement to the 2020 Base Shelf
Prospectus. The units were issued at a price of US$0.91 for gross
proceeds of $36,265,000 (US$28,750,000) and consisted of one common
share and one half warrant. Each full warrant entitles the holder
to acquire one common share of the Company at an exercise price of
US$2.00 over a 24 month period.
In March 2021,
Denison issued 78,430,000 units of the Company pursuant to a public
offering of units qualified by a prospectus supplement to the 2020
Base Shelf Prospectus. The units were issued at a price of US$1.10
for gross proceeds of $107,949,000 (US$86,273,000) and consisted of
one common share and one half warrant. Each full warrant entitles
the holder to acquire one common share of the Company at an
exercise price of US$2.25 over a 24 month period.
In March 2021,
Denison issued 5,926,000 common shares on a flow-through basis at a
price of $1.35 for gross proceeds of $8,000,000.
Also during the
first quarter of 2021, the Company received share issue proceeds of
$3,711,000 related to the issuance of 5,016,000 shares upon the
exercise of employee stock options.
Use of Proceeds
2020 Flow Through Financing
As at March 31,
2021, the Company has fulfilled its obligation to spend $930,000 on
eligible Canadian exploration expenditures as a result of the
issuance of common shares on a flow-through basis in December
2020.
October 2020 Equity Financing
As disclosed in
the Company’s Prospectus Supplement to the 2020 Base Shelf
Prospectus (‘October 2020 Prospectus Supplement’) dated
October 8, 2020, the net proceeds of the October 2020 Offering will
be utilized to fund Wheeler River evaluation and EA activities as
well as general, corporate and administrative expenses. During the
period between the close of the financing in October 2020 and March
31, 2021, the Company’s use of proceeds has been in line with
that disclosed in the October 2020 Prospectus
Supplement.
12
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
February 2021 Unit Financing
As disclosed in
the Company’s Prospectus Supplement to the 2020 Base Shelf
Prospectus (‘February 2021 Prospectus Supplement’)
dated February 16, 2021, the net proceeds of the February 2021
Offering will be utilized to fund Wheeler River evaluation and
detailed project engineering activities as well as general,
corporate and administrative expenses. During the period between
the close of the financing in February 2021 and March 31, 2021, the
Company’s use of proceeds has been in line with that
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 (‘March 2021 Prospectus Supplement’) dated
March 17, 2021, the majority of the net proceeds of the March 2021
Offering will be utilized to purchase physical uranium as well as
general, corporate and administrative expenses, including storage
costs for the purchased uranium. During the period between the
close of the financing in March 2021 and March 31, 2021, the
Company’s use of proceeds has been in line with that
disclosed in the March 2021 Prospectus Supplement, and as at March
31, 2021 the Company has committed to purchases of 2,500,000 pounds
of U3O8 at a weighted
average price of US$29.61.
2021 Flow Through Financing
As at March 31,
2021, the Company has spent $79,000 toward its obligation to spend
$8,000,000 on eligible Canadian exploration expenditures under the
flow-through share financing completed in March 2021. The Company
is on track to complete the required spending before December 31,
2022.
Revolving Term Credit Facility
On January 14,
2021, the Company entered into an agreement with the Bank of Nova
Scotia (‘BNS’) to extend the maturity date of the
Company’s credit facility to January 31, 2022 (‘2021
Credit Facility’). Under the 2021 Credit Facility, the
Company continues to have access to letters of credit of up to
$24,000,000, which is fully utilized for non-financial letters of
credit in support of reclamation obligations. All other terms of
the credit facility (tangible net worth covenant, pledged cash,
investments amount and security for the facility) remain unchanged
by the amendment – including a requirement to provide
$9,000,000 in cash collateral on deposit with BNS to maintain the
2021 Credit Facility.
TRANSACTIONS WITH RELATED PARTIES
Uranium Participation Corporation
The
Company’s current management services agreement with UPC
(‘MSA’) has a term of five years (the
‘Term’), expiring on March 31, 2024. Under the MSA,
Denison receives the following management fees from UPC: a) a base
fee of $400,000 per annum, payable in equal quarterly installments;
b) a variable fee equal to (i) 0.3% per annum of UPC’s total
assets in excess of $100 million and up to and including $500
million, and (ii) 0.2% per annum of UPC’s total assets in
excess of $500 million; c) a fee, at the discretion of the Board,
for on-going monitoring or work associated with a transaction or
arrangement (other than a financing, or the acquisition of or sale
of U3O8 or UF6); and d) a
commission of 1.0% of the gross value of any purchases or sales of
U3O8 or UF6 or gross interest
fees payable to UPC in connection with any uranium loan
arrangements.
The MSA may be
terminated during the Term by Denison upon the provision of 180
days written notice. The MSA may be terminated during the Term by
UPC (i) in the event of a material breach, (ii) within 90 days of
certain events surrounding a change of both of the individuals
serving as Chief Executive Officer and Chief Financial Officer of
UPC, and / or a change of control of Denison, or (iii) upon the
provision of 30 days written notice and, subject to certain
exceptions, a cash payment to Denison of an amount equal to the
base and variable management fees that would otherwise be payable
to Denison (calculated based on UPC’s current uranium
holdings at the time of termination) for the lesser period of a)
three years, or b) the remaining term of the MSA.
See SUBSEQUENT
EVENTS for further details.
13
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
The following
amounts were earned from UPC for the periods ended:
|
|
|
|
|
|
Three Months Ended
|
|||
|
|
|
|
|
|
|
March 31,
|
|
March 31,
|
|
(in
thousands)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Management Fee
Revenue
|
|
|
|
|
|
|
|
|
|
Base and variable
fees
|
|
|
|
|
$
|
475
|
$
|
463
|
|
Commission
fees
|
|
|
|
|
|
-
|
|
54
|
|
Discretionary
fees
|
|
|
|
|
|
140
|
|
300
|
|
|
|
|
|
|
$
|
615
|
$
|
817
|
At March 31,
2021, accounts receivable includes $340,000 (December 31, 2020
– $265,000) due from UPC with respect to the fees and
transactions discussed above.
Korea Electric Power Corporation (‘KEPCO’) and Korea
Hydro & Nuclear Power (‘KHNP’)
As at March 31,
2021, KHNP, through its subsidiaries, holds 58,284,000 shares of
Denison representing a share interest of approximately 7.24%. KHNP
Canada Energy Ltd., a subsidiary of KEPCO’s subsidiary KHNP,
is the holder of the majority of Denison’s shares and is also
the majority member of KWULP. KWULP is a consortium of investors
that holds the non-Denison owned interests in Waterbury Lake
Uranium Corporation (‘WLUC’) and Waterbury Lake Uranium
Limited Partnership (‘WLULP’), entities whose key asset
is the Waterbury Lake property.
Other
All services and
transactions with the related parties listed below were made on
terms equivalent to those that prevail with arm’s length
transactions:
●
During the three months ended
March 31, 2021, the Company incurred investor relations,
administrative service fees and certain pass-through expenses of
$20,000 (March 31, 2019 – $21,000) with Namdo Management
Services Ltd, which shares a common director with Denison. These
services were incurred in the normal course of operating a public
company. At March 31, 2021, an amount of $5,000 (December 31, 2020
– $nil) was due to this company.
COMPENSATION OF KEY MANAGEMENT PERSONNEL
Key management
personnel are those persons having authority and responsibility for
planning, directing and controlling the activities of the Company,
directly or indirectly. Key management personnel include the
Company’s executive officers, vice-presidents and members of
its Board of Directors.
The following
compensation was awarded to key management personnel:
|
|
|
|
|
Three Months Ended
|
|
|||||
|
|
|
|
|
|
|
March 31,
|
March
31,
|
|||
|
(in
thousands)
|
|
|
|
|
|
2021
|
2020
|
|
||
|
|
|
|
|
|
|
|
|
|
||
|
Salaries and
short-term employee benefits
|
|
|
|
|
$
|
(1,043)
|
$
|
(584)
|
||
|
Share-based
compensation
|
|
|
|
|
|
(320)
|
|
(430)
|
||
|
|
|
|
|
|
$
|
(1,363)
|
$
|
(1,014)
|
||
The increase in
the compensation awarded to key management is predominantly driven
by an increase in the expense recognized for bonuses, as discussed
in more detail in General and Administrative Expenses,
above.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does
not have any off-balance sheet arrangements.
14
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
SUBSEQUENT EVENTS
Uranium Participation Corporation
On April 27,
2021, UPC and Sprott Asset Management LP (‘Sprott’)
reached an agreement to convert UPC into the Sprott Physical
Uranium Trust (the ‘Trust’) – effectively
aligning UPC’s business with the world’s leading
physical commodity investment vehicles and making it eligible to
pursue a listing in the United States (the ‘UPC
Transaction’). Upon completion of the UPC Transaction, Sprott
will become the manager of the Trust and the MSA will be
terminated. Denison estimates the termination payment due from UPC
will be approximately $5.3 million. The actual termination payment
may differ, as it will be based on UPC’s NAV as of the
month-end immediately prior to the date of a formal notice of
termination to Denison by UPC in accordance with the
MSA.
Offer to Acquire JCU (Canada) Exploration Company, Limited
(‘JCU’)
On May 4, 2021,
Denison announced that it has delivered a binding offer to Overseas
Uranium Resources Development Co., Ltd. (‘OURD’) to
acquire 100% ownership of OURD’s wholly-owned subsidiary,
JCU. JCU holds a portfolio of uranium project joint venture
interests in Canada, including a 10% interest in Denison’s
90% owned Wheeler River project.
The offer
includes the following key features: (a) consideration including
cash payments of up to $40.5 million and the assumption of
JCU’s existing liabilities, including any outstanding
liabilities owed to Japan Atomic Energy Agency; (b) binding subject
to definitive documentation, regulatory approvals (if required) and
the termination of OURD’s existing definitive purchase
agreement with UEX Corporation in accordance with its terms; (c) no
conditions for due diligence on the assets of JCU, or obtaining the
necessary financing to fund the purchase price; and (d) a
commitment to OURD that JCU will be maintained as a corporate
subsidiary in order for JCU to meet its joint venture
commitments.
OUTSTANDING SHARE DATA
Common Shares
At May 6, 2021,
there were 804,905,431 common shares issued and outstanding and a
total of 880,976,406 common shares on a fully-diluted
basis.
Stock Options and Share Units
At May 6, 2021,
the Company had 12,816,995 stock options and 8,232,005 share units
outstanding,
Share Purchase Warrants
At May 6, 2021,
the Company had 15,796,975 share purchase warrants with a US$2.00
strike price and a February 2023 expiry, and 39,215,000 share
purchase warrants with a US$2.25 strike price and a March 2023
expiry.
Refer to the
Company’s annual MD&A for the year ended December 31,
2020 for a detailed discussion of the previously disclosed 2021
budget.
During the first
quarter of 2021, the Company increased its outlook for income from
UPC management services by $4,103,000. The increase is related to
the estimated termination payment that the Company will receive
upon the completion of the UPC Transaction (See SUBSEQUENT EVENTS
for further details) offset by a reduction in the management fees
that the Company expects to earn in the normal course in 2021 due
to the contract being terminated mid-year.
In addition,
during the first quarter of 2021 the Company increased its outlook
for corporate administration and other expenses by $1,410,000. The
increase was driven by several factors including (i) the addition
of carrying charges related to Denison’s strategic initiative
to acquire 2.5 million pounds of U3O8, (ii) an increase
in employee bonus and salary costs as discussed in GENERAL AND
ADMINISTRATIVE EXPENSES above, (iii) an increase in director
compensation; offset by (iv) an increase in interest income due to
the equity financings that took place in the quarter.
The U3O8 carrying charge
payments are currently estimated at $789,000 and include
commissions, storage costs and account fees associated with the
uranium holdings. The storage cost amounts include the prepayment
of storage costs on 2.1 million pounds U3O8 for the period up to
the end of December 2023.
15
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
|
(in
thousands)
|
|
2021 BUDGET
|
CURRENT 2021 OUTLOOK(3)
|
Actual to
March 31, 2021(2)
|
|
Mining Segment
|
|
|
|
|
|
Mineral
Sales
|
|
3,709
|
3,709
|
-
|
|
Development &
Operations
|
|
(4,972)
|
(4,972)
|
(543)
|
|
Exploration
|
|
(4,178)
|
(4,178)
|
(1,602)
|
|
Evaluation
|
|
(19,413)
|
(19,413)
|
(2,752)
|
|
|
|
(24,854)
|
(24,854)
|
(4,897)
|
|
Closed Mines Segment
|
|
|
|
|
|
Closed Mines
Environmental Services
|
|
964
|
964
|
212
|
|
|
|
964
|
964
|
212
|
|
Corporate and Other Segment
|
|
|
|
|
|
UPC Management
Services
|
|
2,536
|
6,639
|
615
|
|
Corporate
Administration & Other
|
|
(5,444)
|
(6,854)
|
(2,228)
|
|
|
|
(2,908)
|
(215)
|
(1,608)
|
|
Total(1)
|
|
$ (26,798)
|
$ (24,105)
|
$ (6,293)
|
Notes:
1.
Only material operations
shown.
2.
The budget is prepared on a
cash basis. As a result,
actual amounts represent a non-GAAP measure. Compared to segment
loss as presented in the Company’s unaudited interim
consolidated financial statements for the three months ended March
31, 2021, actual amounts reported above excludes $166,000 net
impact of non-cash items and other adjustments.
3.
Does not include the cash
outflows to purchase 2.5 million pounds of U3O8 at a weighted
average price of US$29.61.
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.
16
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
ASSAY PROCEDURES AND DATA VERIFICATION
The Company
reports preliminary radiometric equivalent grades
(‘eU3O8’), derived
from a calibrated down-hole total gamma probe, during or upon
completion of its exploration programs and subsequently reports
definitive U3O8 assay grades
following sampling and chemical analysis of the mineralized drill
core. Uranium assays are performed on split core samples by the
Saskatchewan Research Council (‘SRC’) Geoanalytical
Laboratories using an ISO/IEC 17025:2005 accredited method for the
determination of U3O8 weight %. Sample
preparation involves crushing and pulverizing core samples to 90%
passing -106 microns. The resultant pulp is digested using
aqua-regia and the solution analyzed for U3O8 weight % using
ICP-OES. Geochemical results from composite core samples are
reported as parts per million (‘ppm’) obtained from a
partial HNO3:HCl digest with
an ICP-MS finish. Boron values are obtained through NaO2/NaCO3 fusion followed
by an ICP-OES finish. All data are subject to verification
procedures by qualified persons employed by Denison prior to
disclosure. For further details on Denison’s sampling,
analysis, quality assurance program and quality control measures
and data verification procedures please see Denison's Annual
Information Form dated March 13, 2020 available on the
Company’s website and filed under the Company's profile on
SEDAR (www.sedar.com)
and in its Form 40-F available on EDGAR at www.sec.gov/edgar.shtml.
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 2021 and
beyond, including the proposed use of proceeds of recent equity
financings; the benefits to be derived from corporate transactions,
including commitments to acquire physical uranium, and estimates of
related expenditures, such as projected increases in uranium
storage costs; the estimates of Denison's mineral reserves and
mineral resources; exploration, development and expansion plans and
objectives, including Denison’s planned engineering,
environmental assessment and other evaluation programs, the results
of, and estimates and assumptions within, the PFS, and statements
regarding anticipated budgets, fees, expenditures and timelines;
expectations regarding Denison’s community engagement
activities and related agreements, including the Participation and
Funding Agreement and Exploration Agreement with ERFN and the
anticipated continuity thereof; expectations regarding
Denison’s joint venture ownership interests and the
continuity of its agreements with its partners; expectations
regarding adding to its mineral reserves and resources through
acquisitions or exploration; expectations regarding the toll
milling of Cigar Lake ores, including the impacts of COVID-19;
expectations regarding revenues and expenditures from its Closed
Mines operations; expectations regarding revenues from the UPC
management contract, the UPC Transaction and the termination of the
MSA in connection with the closing of UPC Transaction; and the
annual operating budget and capital expenditure programs, estimated
exploration and development expenditures and reclamation costs and
Denison's share of same. Statements relating to ‘mineral
reserves’ or ‘mineral resources’ are deemed to be
forward-looking information, as they involve the implied
assessment, based on certain estimates and assumptions that the
mineral reserves and mineral resources described can be profitably
produced in the future.
Forward looking
statements are based on the opinions and estimates of management as
of the date such statements are made, and they are subject to known
and unknown risks, uncertainties and other factors that may cause
the actual results, level of activity, performance or achievements
of Denison to be materially different from those expressed or
implied by such forward-looking statements. For example, the
results of the Denison’s studies, including the PFS,
trade-off study, and field work, may not be maintained after
further testing or be representative of actual mining plans for the
Phoenix deposit after further design and studies are completed. In
addition, Denison may decide or otherwise be required to
discontinue testing, evaluation and development work at Wheeler
River or other projects or its exploration plans if it is unable to
maintain or otherwise secure the necessary resources (such as
testing facilities, capital funding, regulatory approvals, etc.) or
operations are otherwise affected by COVID-19 and its potentially
far-reaching impacts. The UPC Transaction may not be completed or,
if completed, may not be on the terms described herein and/or the
termination payment may be materially different than the amount
stated herein.
Denison believes
that the expectations reflected in this forward-looking information
are reasonable but no assurance can be given that these
expectations will prove to be accurate and results may differ
materially from those anticipated in this forward-looking
information. For a discussion in respect of risks and other factors
that could influence forward-looking events, please refer to the
factors discussed in Denison’s Annual Information Form dated
March 26, 2021 under the heading ‘Risk Factors’. These
factors are not, and should not be construed as being
exhaustive.
Accordingly,
readers should not place undue reliance on forward-looking
statements. The forward-looking information contained in this
MD&A is expressly qualified by this cautionary statement. Any
forward-looking information and the assumptions made with respect
thereto speaks only as of the date of this MD&A. Denison does
not undertake any obligation to publicly update or revise any
forward-looking information after the date of this MD&A to
conform such information to actual results or to changes in
Denison's expectations except as otherwise required by applicable
legislation.
18
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Cautionary Note to United States Investors
Concerning Estimates of Measured, Indicated and Inferred Mineral
Resources and Probable Mineral Reserves: This MD&A may
use the terms 'measured', 'indicated' and 'inferred' mineral
resources. United States investors are advised that while such
terms have been prepared in accordance with the definition
standards on mineral reserves of the Canadian Institute of Mining,
Metallurgy and Petroleum referred to in Canadian National
Instrument 43-101 Mineral Disclosure Standards (‘NI
43-101’) and are recognized and required by Canadian
regulations, these terms are not defined under Industry Guide 7
under the United States Securities Act and, until recently, have
not been permitted to be used in reports and registration
statements filed with the United States Securities and Exchange
Commission (‘SEC’). 'Inferred mineral resources' have a
great amount of uncertainty as to their existence, and as to their
economic and legal feasibility. It cannot be assumed that all or
any part of an inferred mineral resource will ever be upgraded to a
higher category. Under Canadian rules, estimates of inferred
mineral resources may not form the basis of feasibility or other
economic studies. United States
investors are cautioned not to assume that all or any part of
measured or indicated mineral resources will ever be converted into
mineral reserves. United States investors are also cautioned not to
assume that all or any part of an inferred mineral resource exists,
or is economically or legally mineable. In addition,
the terms “mineral reserve”, “proven mineral
reserve” and “probable mineral reserve” for the
purposes of NI 43-101 differ from the definitions and allowable
usage in Industry Guide 7.
Effective
February 2019, the SEC adopted amendments to its disclosure rules
to modernize the mineral property disclosure requirements for
issuers whose securities are registered with the SEC under the
Exchange Act and as a result, the SEC now recognizes estimates of
“measured mineral resources”, “indicated mineral
resources” and “inferred mineral resources”. In
addition, the SEC has amended its definitions of “proven
mineral reserves” and “probable mineral reserves”
to be “substantially similar” to the corresponding
definitions under the CIM Standards, as required under NI 43-101.
However, information regarding mineral resources or mineral
reserves in Denison’s disclosure may not be comparable to
similar information made public by United States
companies.
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 March 31, 2021.
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 January 1, 2021
and ended on March 31, 2021 that has materially affected, or is
reasonably likely to materially affect, the issuer's
ICFR.
Date:
May 6, 2021
(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 March 31, 2021.
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 January 1, 2021
and ended on March 31, 2021 that has materially affected, or is
reasonably likely to materially affect, the issuer's
ICFR.
Date:
May 6, 2021
(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 RESULTS FROM Q1 2021
Toronto, ON – May 6,
2021. Denison Mines Corp. (‘Denison’ or the
‘Company’) (TSX: DML, NYSE American: DNN) today filed
its Condensed Consolidated Financial Statements and
Management’s Discussion & Analysis
(‘MD&A’) for the quarter ended March 31, 2021. Both
documents can be found on the Company’s website at
www.denisonmines.com
or on SEDAR (at www.sedar.com)
and EDGAR (at www.sec.gov/edgar.shtml).
The highlights provided below are derived from these documents and
should be read in conjunction with them. All amounts in this
release are in Canadian dollars unless otherwise
stated.
David Cates, President and CEO of Denison
commented, “During
the first quarter of 2021, Denison capitalized on improved market
sentiment for the role of nuclear energy, as part of the global
clean energy transition movement, and entered into strategic
financings that have significantly de-risked the Company’s
balance sheet and provide considerable financial flexibility for
the Company. In addition to securing funding to continue to advance
our flagship Wheeler River Uranium Project (‘Wheeler
River’) through the Environmental Assessment
(‘EA’) and feasibility study (‘FS’)
processes, we were also the first to complete a novel future
project financing initiative – involving the acquisition of
2.5 million pounds of U3O8
to be held as a
long-term strategic capital asset. Excluding the cash reserved to execute
on our uranium purchase commitments, the Company’s cash and
investment holdings were reported at $96 million at the end of the
quarter.
In parallel, our Saskatoon-based technical team continues to
progress critical path projects related to the advancement of
Wheeler River – including the full resumption of the EA
process early in Q1, and the commencement of an ambitious 2021
Field Program at Phoenix. To date, we have already successfully
drilled, cased and cemented the commercial scale wells in the
5-spot In-Situ Recovery (‘ISR’) test pattern located in
Phase 1 of the Phoenix deposit. In support of our efforts at
Wheeler River and in the Athabasca Basin region, the Company also
entered into a Participation and Funding agreement and Exploration
agreement with the English River First Nation (‘ERFN’),
whose traditional territory includes the Wheeler River property, as
well as many of Denison’s other interests in the Athabasca
Basin region.
Additionally, in response to the unexpected announcement of a sale
of JCU (Canada) Exploration Company Limited (‘JCU’) by
Overseas Uranium Resources Development Co., Ltd.
(‘OURD’), Denison promptly delivered a binding offer to
purchase JCU from OURD for $40.5 million, which we believe more
appropriately reflects the underlying value of JCU’s assets
– including their 10% interest in Wheeler
River.”
HIGHLIGHTS
■
Successful
completion of equity financing to fund the Environmental Assessment
and Feasibility Study process for Wheeler River
Denison completed
equity financings for gross proceeds of $40.2 million (including
$3.9 million from an At-the-Market (‘ATM’) offering) in
the first quarter of 2021. Subject to a decision to advance to a
formal FS for the high-grade Phoenix uranium deposit
(‘Phoenix’), the proceeds from the offerings are
expected, based on current estimates, to be sufficient to complete
such FS process and the EA process.
■
Financing
completed for 2021 and 2022 high potential exploration
programs
The Company
completed a flow-through equity financing of $8.0 million in March
2021. Proceeds of the financing will be used for eligible Canadian
exploration activities in 2021 and 2022 – including the
Company’s planned follow up on the discovery of high-grade
uranium mineralization at the K-West target area, located
approximately 4 km west of Phoenix on the Wheeler River
property.
■
Funded a
project financing initiative involving the strategic acquisition of
physical uranium
In March 2021,
Denison successfully completed a public offering for gross proceeds
of $107,949,000. The majority of the net proceeds of the offering
are anticipated to fund the strategic purchase of uranium
concentrates (‘U3O8’) to be
held by Denison as a long-term investment, which is intended to
support the potential future financing of the advancement and/or
construction of Wheeler River. At March 31, 2021, the Company has
committed to purchase 2.5 million pounds of U3O8 at a weighted
average price of US$29.61 per pound U3O8.
■
Executed
agreements with the English River First Nation
In April 2021,
Denison announced that it has entered into a Participation and
Funding Agreement and Letter of Intent with the ERFN in connection
with the advancement of the proposed ISR operation at Wheeler
River. The Company also entered into an Exploration Agreement in
respect of Denison’s exploration and evaluation activities
within the ERFN traditional territories. These agreements reflect
Denison’s desire to operate its business in a progressive and
sustainable manner that respects ERFN rights and advances
reconciliation with Indigenous peoples. The agreements provide ERFN
with economic opportunities and other benefits, and establish a
foundation for future collaboration in an authentic, cooperative,
and respectful way.
■
Commenced
the 2021 ISR field program at Wheeler River
During the first
quarter of 2021, the Company initiated the 2021 ISR Field Program,
including the installation of a five-spot commercial scale well
(‘CSW’) ISR test pattern at Wheeler River. Mobilization
of drilling equipment necessary to complete the large diameter
drill holes was completed in early April, and all five CSWs have
been successfully drilled to target depths, cased, and cemented
into position. The installation of the Test Pattern is the first
step in the 2021 field program, which is designed to support the
further de-risking of the application of ISR mining at
Phoenix.
■
Discovery
of new high-grade uranium mineralization at McClean Lake
South
New high-grade
unconformity-hosted uranium mineralization was discovered during
the winter 2021 exploration program completed at the
Company’s 22.5% owned McClean Lake Joint Venture. Three of
the final four drill holes completed by Orano Canada Inc., 77.5%
owner and operator of the MLJV, returned uranium mineralization at
the McClean South target area, with the results highlighted by
drill hole MCS-34, which returned 5.04% eU3O8 over 14.0 metres
(including 14.86% eU3O8 over 3.9
metres).
About Wheeler River
Wheeler River is the largest undeveloped uranium
project in the infrastructure rich eastern portion of the Athabasca
Basin region, in northern Saskatchewan and is a joint venture
between Denison (90% and operator) and JCU (Canada) Exploration
Company Limited (10%). The project is host to the high-grade
Phoenix and Gryphon uranium deposits, discovered by Denison in 2008
and 2014, respectively, estimated to have combined Indicated
Mineral Resources of 132.1 million pounds U3O8
(1,809,000 tonnes at an average grade
of 3.3% U3O8),
plus combined Inferred Mineral Resources of 3.0 million pounds
U3O8
(82,000 tonnes at an average grade of
1.7% U3O8).
The PFS was completed in late 2018, considering
the potential economic merit of developing the Phoenix deposit as
an ISR operation and the Gryphon deposit as a conventional
underground mining operation. Taken together, the project is
estimated to have mine production of 109.4 million pounds
U3O8
over a 14-year mine life, with a base
case pre-tax net present value (‘NPV’) of $1.31 billion
(8% discount rate), Internal Rate of Return (‘IRR’) of
38.7%, and initial pre-production capital expenditures of $322.5
million. The Phoenix ISR operation is estimated to have a
stand-alone base case pre-tax NPV of $930.4 million (8% discount
rate), IRR of 43.3%, initial pre-production capital expenditures of
$322.5 million, and industry leading average operating costs of
US$3.33/lb U3O8.
The PFS was prepared on a project (100% ownership) and pre-tax
basis, as each of the partners to the Wheeler River Joint Venture
are subject to different tax and other
obligations.
Further details regarding the PFS, including
additional scientific and technical information, as well as
after-tax results attributable to Denison's ownership interest, are
described in greater detail in the NI 43-101 Technical Report
titled “Pre-feasibility Study for the Wheeler River Uranium
Project, Saskatchewan, Canada” dated October 30, 2018 with an
effective date of September 24, 2018. A copy of this report is
available on Denison's website and under its profile on SEDAR
at www.sedar.com
and on EDGAR at www.sec.gov/edgar.shtml.
Given the social,
financial and market disruptions related to COVID-19, and certain
fiscally prudent measures, Denison temporarily suspended certain
activities at Wheeler River starting in April 2020, including the
formal parts of the EA program, which is on the critical path to
achieving the project development schedule outlined in the PFS
Technical Report. While the formal EA process has resumed in early
2021, the Company is not currently able to estimate the impact to
the project development schedule, outlined in the PFS Technical
Report, and users are cautioned that certain of the estimates
provided therein, particularly regarding the start of
pre-production activities in 2021 and first production in 2024
should not be relied upon.
About Denison
Denison Mines
Corp. was formed under the laws of Ontario and is a reporting
issuer in all Canadian provinces. Denison’s common shares are
listed on the Toronto Stock Exchange (the ‘TSX’) under
the symbol ‘DML’ and on the NYSE American exchange
under the symbol ‘DNN’.
Denison is a
uranium exploration and development company with interests focused
in the Athabasca Basin region of northern Saskatchewan, Canada. In
addition to the Company’s flagship project, Wheeler River,
Denison's interests in Saskatchewan include a 22.5% ownership
interest in the MLJV, which includes several uranium deposits and
the McClean Lake uranium mill, which is currently processing ore
from the Cigar Lake mine under a toll milling agreement, plus a
25.17% interest in the Midwest Main and Midwest A deposits and a
66.90% interest in the Tthe Heldeth Túé
(‘THT’, formerly J Zone) and Huskie deposits on the
Waterbury Lake property. The Midwest, THT and Huskie deposits are
located within 20 kilometres of the McClean Lake mill. In addition,
Denison has an extensive portfolio of exploration projects in the
Athabasca Basin region.
Denison is
engaged in mine decommissioning and environmental services through
its Closed Mines group (formerly Denison Environmental Services),
which manages Denison’s Elliot Lake reclamation projects and
provides post-closure mine and maintenance services to a variety of
industry and government clients.
Denison is also
the manager of Uranium Participation Corporation
(‘UPC’), a publicly traded company listed on the TSX
under the symbol ‘U’, which invests in uranium oxide in
concentrates (‘U3O8’) and
uranium hexafluoride (‘UF6’).
Technical Disclosure and Qualified Person
The technical
information contained in this press release has been reviewed and
approved by David Bronkhorst, P.Eng, Denison's Vice President,
Operations and/or Andrew Yackulic, P. Geo, Denison's Director,
Exploration, each of whom is a Qualified Person in accordance with
the requirements of NI 43-101.
For more information, please contact
|
David Cates
|
(416) 979-1991 ext
362
|
|
President and Chief Executive
Officer
|
|
|
|
|
|
Sophia Shane
|
(604) 689-7842
|
|
Investor
Relations
|
|
|
|
|
|
Follow Denison on
Twitter
|
@DenisonMinesCo
|
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
Certain
information contained in this press release constitutes
‘forward-looking information’, within the meaning of
the applicable United States and Canadian legislation concerning
the business, operations and financial performance and condition of
Denison.
Generally, these
forward-looking statements can be identified by the use of
forward-looking terminology such as ‘plans’,
‘expects’, ‘budget’,
‘scheduled’, ‘estimates’,
‘forecasts’, ‘intends’,
‘anticipates’, or ‘believes’, or the
negatives and/or variations of such words and phrases, or state
that certain actions, events or results ‘may’,
‘could’, ‘would’, ‘might’ or
‘will be taken’, ‘occur’, ‘be
achieved’ or ‘has the potential to’.
In particular,
this press release contains forward-looking information pertaining
to the following: projections with respect to use of proceeds of
recent financings; exploration, development and expansion plans and
objectives, including the plans and objectives for Wheeler River
and the related EA and FS processes and 2021 Field Program, and
exploration objectives, including plans for follow-up work at the
K-West target area; the impact of COVID-19 on Denison’s
operations; the current objectives with respect to the strategic
acquisition of uranium; the estimates of Denison's mineral reserves
and mineral resources or results of exploration, such as the
uranium mineralization reported from the McClean Lake South
exploration drilling program; expectations regarding
Denison’s joint venture ownership interests; expectations
regarding the continuity of its agreements with third parties,
including the agreements with the ERFN and Denison’s
intentions and objectives with respect thereto; and its
interpretations of, and expectations for, nuclear energy.
Statements relating to ‘mineral reserves’ or
‘mineral resources’ are deemed to be forward-looking
information, as they involve the implied assessment, based on
certain estimates and assumptions that the mineral reserves and
mineral resources described can be profitably produced in the
future.
Forward looking
statements are based on the opinions and estimates of management as
of the date such statements are made, and they are subject to known
and unknown risks, uncertainties and other factors that may cause
the actual results, level of activity, performance or achievements
of Denison to be materially different from those expressed or
implied by such forward-looking statements. For example, the
results and underlying assumptions and interpretations of the PFS
as well as de-risking efforts such as the 2021 Field Program
discussed herein may not be maintained after further testing or be
representative of actual conditions within the applicable
deposits.
In addition,
Denison may decide or otherwise be required to extend the EA and/or
otherwise discontinue testing, evaluation and development work,
including a FS at Wheeler River, if it is unable to maintain or
otherwise secure the necessary approvals or resources (such as
testing facilities, capital funding, etc.). Denison believes that
the expectations reflected in this forward-looking information are
reasonable, but no assurance can be given that these expectations
will prove to be accurate and results may differ materially from
those anticipated in this forward-looking information. For a
discussion in respect of risks and other factors that could
influence forward-looking events, please refer to the factors
discussed in Denison’s Annual Information Form dated March
26, 2021 under the heading ‘Risk Factors’. These
factors are not, and should not be, construed as being
exhaustive.
Accordingly,
readers should not place undue reliance on forward-looking
statements. The forward-looking information contained in this press
release is expressly qualified by this cautionary statement. Any
forward-looking information and the assumptions made with respect
thereto speaks only as of the date of this press release. Denison
does not undertake any obligation to publicly update or revise any
forward-looking information after the date of this press release to
conform such information to actual results or to changes in
Denison's expectations except as otherwise required by applicable
legislation.
Cautionary Note to United States Investors
Concerning Estimates of Mineral Resources and Mineral
Reserves: This press release may use terms such as
“measured”, “indicated” and/or
“inferred” mineral resources and “proven”
or “probable” mineral reserves, which are terms defined
with reference to the guidelines set out in the Canadian Institute
of Mining, Metallurgy and Petroleum (“CIM”) CIM
Definition Standards on Mineral Resources and Mineral Reserves
(“CIM Standards”). The Company’s descriptions of
its projects using CIM Standards may not be comparable to similar
information made public by U.S. companies subject to the reporting
and disclosure requirements under the United States federal
securities laws and the rules and regulations thereunder. .
United States investors are
cautioned not to assume that all or any part of measured or
indicated mineral resources will ever be converted into mineral
reserves. United States investors are also cautioned not to assume
that all or any part of an inferred mineral resource exists, or is
economically or legally mineable.