Denison Mines Corp 6-K, filed Aug 7, 2020
Denison Mines Corp. (DNN)
6-K
2020-08-07
For: 2020-06-30
View Original
Added on
April 07, 2026
About this 6-K
Denison Mines Corp filed this 6-K on August 7, 2020.
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: August 7, 2020
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.
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DENISON MINES
CORP.
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/s/ Amanda Willett
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Date: August
7, 2020
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Amanda
Willett
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Vice
President Legal and Corporate Secretary
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FORM 6-K
EXHIBIT INDEX
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Exhibit Number
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Description
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99.1
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99.2
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99.3
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99.4
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| 99.5 |
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Exhibit 99.2
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
(Unaudited -
Expressed in thousands of Canadian dollars (“CAD”)
except for share amounts)
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At June
30
2020
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At December
31
2019
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ASSETS
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Current
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Cash and cash
equivalents (note 4)
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$
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7,649
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$
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8,190
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Trade and other
receivables (note 5)
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3,133
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4,023
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Inventories (note
6)
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2,802
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3,352
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Investments (note
7)
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11,247
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-
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Prepaid expenses
and other
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564
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978
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25,395
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16,543
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Non-Current
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Inventories-ore
in stockpiles (note 6)
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2,098
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2,098
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Investments (note
7)
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58
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12,104
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Restricted cash
and investments (note 8)
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12,371
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11,994
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Property, plant
and equipment (note 9)
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256,278
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257,259
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Total
assets
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$
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296,200
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$
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299,998
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LIABILITIES
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Current
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Accounts payable
and accrued liabilities
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$
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4,585
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$
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7,930
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Current portion
of long-term liabilities:
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Deferred revenue
(note 10)
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3,447
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4,580
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Post-employment
benefits (note 11)
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150
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150
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Reclamation
obligations (note 12)
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904
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914
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Other liabilities
(note 13)
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236
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1,372
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9,322
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14,946
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Non-Current
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Deferred revenue
(note 10)
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33,296
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31,741
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Post-employment
benefits (note 11)
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2,104
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2,108
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Reclamation
obligations (note 12)
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31,857
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31,598
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Other liabilities
(note 13)
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451
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532
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Deferred income
tax liability
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8,952
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8,924
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Total
liabilities
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85,982
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89,849
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EQUITY
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Share capital
(note 14)
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1,342,425
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1,335,467
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Share purchase
warrants (note 15)
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-
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435
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Contributed
surplus (note 16)
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66,676
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65,417
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Deficit
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(1,200,010)
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(1,192,304)
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Accumulated other
comprehensive income (note 17)
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1,127
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1,134
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Total
equity
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210,218
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210,149
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Total
liabilities and equity
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$
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296,200
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$
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299,998
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Issued and
outstanding common shares (note 14)
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626,057,148
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597,192,153
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Contingencies
(note 23)
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The accompanying
notes are integral to the condensed interim consolidated financial
statements
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1
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INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
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(Unaudited -
Expressed in thousands of CAD dollars except for share and per
share amounts)
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Three
Months Ended
June
30
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Six
Months Ended
June
30
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2020
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2019
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2020
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2019
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REVENUES (note 19)
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$
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2,926
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$
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4,139
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$
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7,586
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$
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8,115
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EXPENSES
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Operating
expenses (note 18, 19)
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(2,048)
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(3,599)
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(5,368)
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(6,861)
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Exploration and
evaluation (note 19)
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(845)
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(3,026)
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(4,036)
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(7,255)
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General and
administrative (note 19)
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(1,421)
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(1,665)
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(3,609)
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(4,031)
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Other income
(expense) (note 18)
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2,163
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(175)
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(1,029)
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(528)
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(2,151)
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(8,465)
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(14,042)
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(18,675)
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Income
(loss) before finance expense and
equity
accounting
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775
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(4,326)
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(6,456)
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(10,560)
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Finance expense
(note 18)
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(1,061)
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(1,011)
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(2,124)
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(2,021)
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Equity share of
loss of associate
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-
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71
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-
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(206)
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Loss before
taxes
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(286)
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(5,266)
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(8,580)
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(12,787)
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Income tax
recovery (note 21)
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Deferred
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(757)
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382
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874
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2,568
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Net loss for the
period
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$
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(1,043)
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$
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(4,884)
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$
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(7,706)
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$
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(10,219)
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Other
comprehensive income (loss) (note 17):
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Items that may be
reclassified to income (loss):
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Foreign currency
translation change
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7
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3
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(7)
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6
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Comprehensive
loss for the period
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$
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(1,036)
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$
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(4,881)
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$
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(7,713)
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$
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(10,213)
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Basic and diluted
net loss per share:
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All
operations
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$
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(0.00)
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$
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(0.01)
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$
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(0.01)
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$
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(0.02)
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Weighted-average
number of shares outstanding (in thousands):
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Basic and
diluted
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621,233
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589,452
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609,216
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589,302
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The accompanying
notes are integral to the condensed interim consolidated financial
statements
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2
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INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY
|
||||||||
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(Unaudited -
Expressed in thousands of CAD dollars)
|
||||||||
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Six
Months Ended
June
30
|
||||
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2020
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|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Share capital (note 14)
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Balance-beginning
of period
|
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$
|
1,335,467
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$
|
1,331,214
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Shares issued for
cash, net of issue costs
|
|
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|
|
|
6,878
|
|
-
|
|
Share options
exercised-cash
|
|
|
|
|
|
-
|
|
405
|
|
Share options
exercised-fair value adjustment
|
|
|
|
|
|
-
|
|
140
|
|
Share units
exercised-fair value adjustment
|
|
|
|
|
|
80
|
|
293
|
|
Balance-end of
period
|
|
|
|
|
|
1,342,425
|
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1,332,052
|
|
|
|
|
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|
|
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|
|
Share purchase warrants (note 15)
|
|
|
|
|
|
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Balance-beginning
of period
|
|
|
|
|
|
435
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|
435
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Warrants
expired
|
|
|
|
|
|
(435)
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-
|
|
Balance-end of
period
|
|
|
|
|
|
-
|
|
435
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|
|
|
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Contributed surplus
|
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
65,417
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|
63,634
|
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Share-based
compensation expense (note 16)
|
|
|
|
|
|
904
|
|
1,307
|
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Share options
exercised-fair value adjustment
|
|
|
|
|
|
-
|
|
(140)
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Share units
exercised-fair value adjustment
|
|
|
|
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|
(80)
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|
(293)
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Warrants
expired
|
|
|
|
|
|
435
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-
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Balance-end of
period
|
|
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|
66,676
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64,508
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Deficit
|
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|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
(1,192,304)
|
|
(1,174,163)
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Net
loss
|
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(7,706)
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(10,219)
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Balance-end of
period
|
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(1,200,010)
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|
(1,184,382)
|
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|
|
|
|
|
|
|
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|
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Accumulated other comprehensive income (note 17)
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Balance-beginning
of period
|
|
|
|
|
|
1,134
|
|
1,127
|
|
Foreign currency
translation
|
|
|
|
|
|
(7)
|
|
6
|
|
Balance-end of
period
|
|
|
|
|
|
1,127
|
|
1,133
|
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|
|
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|
|
|
|
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|
|
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|
|
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Total Equity
|
|
|
|
|
|
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|
Balance-beginning
of period
|
|
|
|
|
|
210,149
|
|
222,247
|
|
Balance-end of
period
|
|
|
|
|
$
|
210,218
|
$
|
213,746
|
|
|
|
|
|
|
|
|
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|
|
The accompanying
notes are integral to the condensed interim consolidated financial
statements
|
||||||||
3
|
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INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW
|
||||||||
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(Unaudited -
Expressed in thousands of CAD dollars)
|
||||||||
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|
|
Six
Months Ended
June
30
|
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CASH PROVIDED BY (USED IN):
|
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|
2020
|
|
2019
|
|
|
|
|
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|
|
|
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OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net loss for the
period
|
|
|
|
|
$
|
(7,706)
|
$
|
(10,219)
|
|
Items not
affecting cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
Depletion,
depreciation, amortization and accretion
|
|
|
|
|
|
3,527
|
|
4,521
|
|
Share-based
compensation (note 16)
|
|
|
|
|
|
904
|
|
1,307
|
|
Recognition
of deferred revenue (note 10)
|
|
|
|
|
|
(1,115)
|
|
(2,547)
|
|
Gains on
property, plant and equipment disposals (note 18)
|
|
|
|
(407)
|
|
-
|
||
|
Losses on
fair value remeasurement of investments (note 18)
|
|
|
|
961
|
|
347
|
||
|
Equity loss
of associate
|
|
|
|
-
|
|
460
|
||
|
Dilution loss
(gain) of associate
|
|
|
|
-
|
|
(254)
|
||
|
Deferred income
tax recovery
|
|
|
|
|
|
(874)
|
|
(2,568)
|
|
Other
|
|
|
|
|
|
-
|
|
(1)
|
|
Post-employment
benefits (note 11)
|
|
|
|
|
|
(38)
|
|
(61)
|
|
Reclamation
obligations (note 12)
|
|
|
|
|
|
(427)
|
|
(437)
|
|
Change in
non-cash working capital items (note 18)
|
|
|
|
|
|
(1,628)
|
|
1,368
|
|
Net
cash used in operating activities
|
|
|
|
|
|
(6,803)
|
|
(8,084)
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Decrease in loans
receivable
|
|
|
|
|
|
-
|
|
250
|
|
Sale of
investments (note 7)
|
|
|
|
|
|
108
|
|
-
|
|
Purchase of
investments
|
|
|
|
|
|
-
|
|
(193)
|
|
Expenditures on
property, plant and equipment (note 9)
|
|
|
|
(139)
|
|
(718)
|
||
|
Proceeds
on sale of property, plant and equipment
|
|
|
|
|
|
137
|
|
-
|
|
Increase
in restricted cash and investments
|
|
|
|
(377)
|
|
(146)
|
||
|
Net
cash provided by (used in) investing activities
|
|
|
|
|
|
(271)
|
|
(807)
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Repayment
of debt obligations (note 13)
|
|
|
|
|
|
(345)
|
|
(140)
|
|
Share
issues for cash, net of issue costs (note 14)
|
|
|
|
|
|
6,878
|
|
-
|
|
Share
option exercise proceeds
|
|
|
|
|
|
-
|
|
405
|
|
Net
cash provided by financing activities
|
|
|
|
|
|
6,533
|
|
265
|
|
|
|
|
|
|
|
|
|
|
|
Decrease
in cash and cash equivalents
|
|
|
|
|
|
(541)
|
|
(8,626)
|
|
Cash
and cash equivalents, beginning of period
|
|
|
|
|
|
8,190
|
|
23,207
|
|
Cash
and cash equivalents, end of period
|
|
|
|
|
$
|
7,649
|
$
|
14,581
|
|
|
||||||||
|
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 SIX MONTHS ENDED JUNE 30, 2020
|
|
|
(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 66.71% 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
Denison 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 the
various management services it provides to 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.
Risk and
Uncertainty
The outbreak of
the novel coronavirus (“COVID-19”) has disrupted, and
may continue to disrupt, the Company’s disclosed business and
operational plans for fiscal 2020. The length or severity of these
disruptions are unknown at this point in time. The significant
potential social and economic disruptions that have emerged as a
result of the COVID-19 pandemic include (i) restrictions that
governments impose to address the COVID-19 outbreak, (ii)
restrictions that the Company and its contractors and
subcontractors impose to ensure the safety of employees and others,
(iii) shortages and / or unexpected sickness of employees, (iv)
unavailability of contractors and subcontractors, (v) interruption
of supplies from third parties upon which the Company relies, and
(vi) unusually high levels of volatility in capital
markets.
Disruptions of
this nature have necessitated a change in the Company’s
business plans for 2020 and they may have a material adverse effect
on the Company’s business, financial condition and results of
operations. Such adverse effects could be rapid and unexpected.
Management is closely monitoring the situation and is actively
adapting work plans to mitigate adverse effects where
possible.
Liquidity
There are
uncertainties related to the timing and use of the Company’s
cash resources. Due to the stage of various of its mineral property
projects, the Company does not currently generate sufficient
operating cash flow to fund obligations as they become due. As
such, these obligations require that the Corporation generate
additional liquidity through the divestiture of investments or
through the issuance of debt or equity. The Company expects that it
may need to sell certain of its investments to provide additional
liquidity to fund the expenditures for the next 12 months. The
Company may experience difficulty in obtaining satisfactory
financial terms for subsequent debt or equity issuances or it may
have difficulty in liquidating its investments due to the
concentration of its investment portfolio or market conditions.
Failure to obtain adequate financing on satisfactory terms may have
a material adverse effect to the Company’s results of
operations or its financial condition. The Company has considered
the above factors, in addition to its ability to further curtail
operating expenditures if necessary, in assessing and concluding on
its ability to continue as a going concern.
5
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
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,
2019. The Company’s presentation currency is Canadian
dollars.
These financial
statements were approved by the board of directors for issue on
August 6, 2020.
3.
ACCOUNTING
POLICIES
The significant
accounting policies followed in these condensed interim
consolidated financial statements are consistent with those applied
in the Company’s audited annual consolidated financial
statements for the year ended December 31, 2019.
4.
CASH AND
CASH EQUIVALENTS
The cash and cash
equivalent balance consists of:
|
|
|
|
|
At June
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
$
|
5,756
|
$
|
1,583
|
|
Cash in MLJV and
MWJV
|
|
|
|
669
|
|
1,397
|
|
Cash
equivalents
|
|
|
|
1,224
|
|
5,210
|
|
|
|
|
$
|
7,649
|
$
|
8,190
|
5.
TRADE AND
OTHER RECEIVABLES
The trade and
other receivables balance consists of:
|
|
|
|
|
At June
30
|
|
At December
31
|
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
$
|
2,879
|
$
|
2,608
|
|
|
Receivables in
MLJV and MWJV
|
|
|
|
186
|
|
1,125
|
|
|
Sales tax
receivables
|
|
|
|
(12)
|
|
92
|
|
|
Sundry
receivables
|
|
|
|
80
|
|
198
|
|
|
|
|
|
$
|
3,133
|
$
|
4,023
|
|
6.
INVENTORIES
The inventories
balance consists of:
|
|
|
|
|
At June
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Uranium
concentrates
|
|
|
$
|
-
|
$
|
526
|
|
Inventory of ore
in stockpiles
|
|
|
|
2,098
|
|
2,098
|
|
Mine and mill
supplies in MLJV
|
|
|
|
2,802
|
|
2,826
|
|
|
|
|
$
|
4,900
|
$
|
5,450
|
6
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
Inventories-by
balance sheet presentation:
|
|
|
|
|
|
|
|
Current
|
|
|
$
|
2,802
|
$
|
3,352
|
|
Long-term-ore in
stockpiles
|
|
|
|
2,098
|
|
2,098
|
|
|
|
|
$
|
4,900
|
$
|
5,450
|
During the six
months ended June 30, 2020, the Company sold all of its uranium
concentrate inventory.
7.
INVESTMENTS
The investments
balance consists of:
|
|
|
|
|
At June
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
|
Equity
instruments
|
|
|
$
|
11,305
|
$
|
12,104
|
|
|
|
|
$
|
11,305
|
$
|
12,104
|
|
|
|
|
|
|
|
|
|
Investments-by
balance sheet presentation:
|
|
|
|
|
|
|
|
Current
|
|
|
$
|
11,247
|
$
|
-
|
|
Long-term
|
|
|
|
58
|
|
12,104
|
|
|
|
|
$
|
11,305
|
$
|
12,104
|
The investments
continuity summary is as follows:
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
Investments
|
|
|
|
|
|
|
|
|
|
Balance -
December 31, 2019
|
|
|
|
|
$
|
12,104
|
|
Additions from
property disposals (note 9)
|
|
|
|
|
|
270
|
|
Sale of
investments
|
|
|
|
|
|
(108)
|
|
Fair value loss
to profit and loss
|
|
|
|
|
|
(961)
|
|
Balance –
June 30, 2020
|
|
|
|
|
$
|
11,305
|
8.
RESTRICTED
CASH AND INVESTMENTS
The restricted
cash and investments balance consists of:
|
|
|
|
|
At June
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
|
3,236
|
$
|
2,859
|
|
Investments
|
|
|
|
9,135
|
|
9,135
|
|
|
|
|
$
|
12,371
|
$
|
11,994
|
|
Restricted cash
and investments-by item:
|
|
|
|
|
|
|
|
Elliot Lake
reclamation trust fund
|
|
|
$
|
3,236
|
$
|
2,859
|
|
Letters of credit
facility pledged assets
|
|
|
|
9,000
|
|
9,000
|
|
Letters of credit
additional collateral
|
|
|
|
135
|
|
135
|
|
|
|
|
$
|
12,371
|
$
|
11,994
|
At June 30, 2020,
investments consist of guaranteed investment certificates with
maturities of more than 90 days.
Elliot
Lake Reclamation Trust Fund
During the six
months ended June 30, 2020, the Company deposited an additional
$803,000 into the Elliot Lake Reclamation Trust Fund and withdrew
$454,000.
7
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
Letters of
Credit Facility Pledged Assets
At June 30, 2020,
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 13).
Letters of
Credit Additional Collateral
At June 30, 2020,
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
13).
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, 2019
|
$
|
104,587
|
$
|
906
|
$
|
179,481
|
$
|
284,974
|
|
Additions
|
|
15
|
|
-
|
|
124
|
|
139
|
|
Disposals
|
|
(60)
|
|
-
|
|
-
|
|
(60)
|
|
Balance
– June 30, 2020
|
$
|
104,542
|
$
|
906
|
$
|
179,605
|
$
|
285,053
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
amortization, depreciation:
|
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2019
|
$
|
(27,518)
|
$
|
(197)
|
$
|
-
|
$
|
(27,715)
|
|
Amortization
|
|
(122)
|
|
-
|
|
-
|
|
(122)
|
|
Depreciation
|
|
(899)
|
|
(99)
|
|
-
|
|
(998)
|
|
Disposals
|
|
60
|
|
-
|
|
-
|
|
60
|
|
Balance
– June 30, 2020
|
$
|
(28,479)
|
$
|
(296)
|
$
|
-
|
$
|
(28,775)
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
value:
|
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2019
|
$
|
77,069
|
$
|
709
|
$
|
179,481
|
$
|
257,259
|
|
Balance –
June 30, 2020
|
$
|
76,063
|
$
|
610
|
$
|
179,605
|
$
|
256,278
|
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
$68,242,000, or 89.7%, of the June 2020 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 is attributable to the building lease assets
which represent the Company’s office and / or warehousing
space located in Toronto and Saskatoon.
Mineral
Properties
As at June 30,
2020, the Company has various interests in development, evaluation
and exploration projects located in Canada, primarily in
Saskatchewan, 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
$162,503,000, or 90.5%, of the June 2020 total mineral property
carrying amount. Changes and / or updates in the current period as
compared to the December 31, 2019 year-end are disclosed
below.
8
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
Hook
Carter
In November 2016,
Denison completed the purchase of an 80% interest in the
Hook-Carter property, located in the southwestern portion of the
Athabasca Basin region in northern Saskatchewan, from ALX Uranium
Corp (“ALX”), with ALX retaining a 20%
interest.
Under terms in
the agreement, Denison agreed to fund ALX’s share of the
first $12,000,000 in expenditures on the property. As at June 30,
2020, the Company has spent $6,715,000 on the project since its
acquisition in November 2016 (December 31, 2019:
$6,712,000).
Moon Lake
South
In January 2016,
the Company entered into an option agreement with CanAlaska Uranium
Ltd (“CanAlaska”) to earn an interest in
CanAlaska’s Moon Lake South project, located in the eastern
portion of the Athabasca Basin in Saskatchewan. Under the terms of
the option, Denison can earn an initial 51% interest in the project
by spending $200,000 by December 31, 2017 and it can increase
its interest to 75% by spending an additional $500,000 by December
31, 2020.
In March 2020,
the Company completed the requirement to spend $700,000 under the
option and earned a 75% interest in the project.
Talbot
Lake
In June 2020, the
Company closed an agreement to sell its 100% interest in the Talbot
Lake property to Argo Gold Inc (“Argo Gold”). At
closing, Denison received cash consideration of $135,000 and
1,350,000 common shares of Argo Gold that were fair valued at
$270,000. The shares are subject to a four month hold. The Company
has recognized a gain on sale of $405,000 in conjunction with the
sale.
Under the terms
of the agreement, Denison has also received a 2% net smelter
royalty on the property and it is entitled to receive an additional
milestone payment, in cash or shares, if the property produces a
resource estimate that meets certain specified amounts in the
agreement.
Waterbury
Lake
In June 2020, the
Company increased its interest in the WLULP (and the Waterbury Lake
property) from 66.57% to 66.71% under the terms of the dilution
provisions in the agreements governing the project (see note
20).
10. DEFERRED
REVENUE
The deferred
revenue balance consists of:
|
|
|
|
|
At June
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Deferred revenue
– pre-sold toll milling:
|
|
|
|
|
|
|
|
CLJV toll milling
– APG
|
|
|
$
|
36,743
|
$
|
36,321
|
|
|
|
|
$
|
36,743
|
$
|
36,321
|
|
|
|
|
|
|
|
|
|
Deferred
revenue-by balance sheet presentation:
|
|
|
|
|
|
|
|
Current
|
|
|
$
|
3,447
|
$
|
4,580
|
|
Non-current
|
|
|
|
33,296
|
|
31,741
|
|
|
|
|
$
|
36,743
|
$
|
36,321
|
9
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
The deferred
revenue liability continuity summary is as follows:
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
Deferred
Revenue
|
|
|
|
|
|
|
|
|
|
Balance -
December 31, 2019
|
|
|
|
|
$
|
36,321
|
|
Accretion
|
|
|
|
|
|
1,537
|
|
Revenue
recognized during the period (note 19)
|
|
|
|
|
|
(1,115)
|
|
Balance –
June 30, 2020
|
|
|
|
|
$
|
36,743
|
Arrangement
with Anglo Pacific Group (“APG”) PLC
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.
In the six months
ended June 30, 2020, the Company has recognized $1,115,000 of toll
milling revenue from the draw-down of deferred revenue (June 30,
2019: $2,547,000), based on Cigar Lake toll milling production of
4,184,000 pounds U308 on a 100% basis
(June 30, 2019: 9,908,000 pounds U308). The drawdown
for the six months includes a retroactive $59,000 increase in
revenue (June 30, 2019: retroactive $26,000 increase in revenue)
resulting from changes in estimates to the toll milling drawdown
rate in the first and second quarter of 2020.
At present,
production at the Cigar Lake mine and the McClean Lake mill, which
was discontinued in the last week of March 2020, continues to be
suspended for an indefinite period of time in response to the
COVID-19 pandemic with the timing of a restart uncertain. The
current portion of the deferred revenue liability at June 2020
reflects an assumption of an additional three month production
shut-down. This assumption will be reassessed in the third quarter
as more information becomes available.
11. POST-EMPLOYMENT
BENEFITS
The
post-employment benefits balance consists of:
|
|
|
|
|
At June
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Accrued benefit
obligation
|
|
|
$
|
2,254
|
$
|
2,258
|
|
|
|
|
$
|
2,254
|
$
|
2,258
|
|
|
|
|
|
|
|
|
|
Post-employment
benefits-by balance sheet presentation:
|
|
|
|
|
||
|
Current
|
|
|
$
|
150
|
$
|
150
|
|
Non-current
|
|
|
|
2,104
|
|
2,108
|
|
|
|
|
$
|
2,254
|
$
|
2,258
|
The
post-employment benefits continuity summary is as
follows:
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
Post-Employment
Benefits
|
|
|
|
|
|
|
|
|
|
Balance -
December 31, 2019
|
|
|
|
|
$
|
2,258
|
|
Accretion
|
|
|
|
|
|
34
|
|
Benefits
paid
|
|
|
|
|
|
(38)
|
|
Balance –
June 30, 2020
|
|
|
|
|
$
|
2,254
|
10
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
12. RECLAMATION
OBLIGATIONS
The reclamation
obligations balance consists of:
|
|
|
|
|
At June
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Reclamation
obligations-by location:
|
|
|
|
|
|
|
|
Elliot
Lake
|
|
|
$
|
17,944
|
$
|
17,987
|
|
McClean and
Midwest Joint Ventures
|
|
|
|
14,795
|
|
14,503
|
|
Other
|
|
|
|
22
|
|
22
|
|
|
|
|
$
|
32,761
|
$
|
32,512
|
|
|
|
|
|
|
|
|
|
Reclamation
obligations-by balance sheet presentation:
|
|
|
|
|
||
|
Current
|
|
|
$
|
904
|
$
|
914
|
|
Non-current
|
|
|
|
31,857
|
|
31,598
|
|
|
|
|
$
|
32,761
|
$
|
32,512
|
The reclamation
obligations continuity summary is as follows:
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
Reclamation
Obligations
|
|
|
|
|
|
|
|
|
|
Balance -
December 31, 2019
|
|
|
|
|
$
|
32,512
|
|
Accretion
|
|
|
|
|
|
676
|
|
Expenditures
incurred
|
|
|
|
|
|
(427)
|
|
Balance –
June 30, 2020
|
|
|
|
|
$
|
32,761
|
Site
Restoration: Elliot Lake
Spending on
restoration activities at the Elliot Lake site is funded from
monies in the Elliot Lake Reclamation Trust fund (see note
8).
Site
Restoration: McClean Lake Joint Venture and Midwest Joint
Venture
Under the Mineral
Industry Environmental Protection Regulations (1996), the Company
is required to provide its pro-rata share of financial assurances
to the province of Saskatchewan relating to future decommissioning
and reclamation plans that have been filed and approved by the
applicable regulatory authorities. As at June 30, 2020, 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. A reclamation
plan filing update is due to be submitted to the applicable
regulatory authorities in the first quarter of 2021.
11
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
13. OTHER
LIABILITIES
The other
liabilities balance consists of:
|
|
|
|
|
At June
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Debt
obligations:
|
|
|
|
|
|
|
|
Lease
liabilities
|
|
|
$
|
650
|
$
|
739
|
|
Loan
liabilities
|
|
|
|
37
|
|
263
|
|
Flow-through
share premium obligation (note 14)
|
|
|
|
-
|
|
902
|
|
|
|
|
$
|
687
|
$
|
1,904
|
|
|
|
|
|
|
|
|
|
Other
liabilities-by balance sheet presentation:
|
|
|
|
|
||
|
Current
|
|
|
$
|
236
|
$
|
1,372
|
|
Non-current
|
|
|
|
451
|
|
532
|
|
|
|
|
$
|
687
|
$
|
1,904
|
Debt
Obligations
At June 30, 2020,
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)
|
|
|
|
Liabilities
|
|
Liabilities
|
|
Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2019
|
|
|
$
|
739
|
$
|
263
|
$
|
1,002
|
|
|
Accretion
|
|
|
|
30
|
|
-
|
|
30
|
|
|
Repayments
|
|
|
|
(119)
|
|
(226)
|
|
(345)
|
|
|
Balance
– June 30, 2020
|
|
|
$
|
650
|
$
|
37
|
$
|
687
|
|
Debt
Obligations – Scheduled Maturities
The following
table outlines the Company’s scheduled maturities of its debt
obligations at June 30, 2020:
|
|
|
|
Lease
|
|
Loan
|
|
Total
Debt
|
||
|
(in thousands of
CAD dollars)
|
|
|
|
Liabilities
|
|
Liabilities
|
|
Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity analysis
– contractual undiscounted cash flows:
|
|
|
|
|
|
|
|||
|
Next 12
months
|
|
|
$
|
227
|
$
|
9
|
$
|
236
|
|
|
One to five
years
|
|
|
|
511
|
|
31
|
|
542
|
|
|
More than five
years
|
|
|
|
42
|
|
-
|
|
42
|
|
|
Total obligation
– June 30, 2020 – undiscounted
|
|
780
|
|
40
|
|
820
|
|||
|
Present value
discount adjustment
|
|
|
|
(130)
|
|
(3)
|
|
(133)
|
|
|
Total
obligation – June 30, 2020 – discounted
|
|
|
$
|
650
|
$
|
37
|
$
|
687
|
|
Letters of
Credit Facility
In January 2020,
the Company entered into an amending agreement for its letters of
credit facility with BNS (the “2020 facility”). Under
the amendment, the maturity date of the 2020 facility has been
extended to January 31, 2021. All other terms of the 2020 facility
(tangible net worth covenant, pledged cash, investment amounts and
security for the facility) remain unchanged from those of the 2019
facility. The 2020 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 and standby fees of 2.40%
(0.40% on the first $9,000,000) and 0.75%
respectively.
As at June 30,
2020, the Company is in compliance with its facility covenants and
$24,000,000 (December 31, 2019: $24,000,000) of the facility is
being utilized as collateral for letters of credit issued in
respect of the reclamation obligations for the MLJV and MWJV.
During the six months ended June 30, 2020, the Company incurred
letter of credit fees of $198,000 (June 30, 2019:
$197,000).
12
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
14. 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, 2019
|
597,192,153
|
$
|
1,335,467
|
|
|
|
|
|
|
Issued for
cash:
|
|
|
|
|
Share issue
proceeds
|
28,750,000
|
|
8,041
|
|
Share issue
costs
|
-
|
|
(1,163)
|
|
Share units
exercised – fair value adjustment
|
114,995
|
|
80
|
|
|
28,864,995
|
|
6,958
|
|
Balance –
June 30, 2020
|
626,057,148
|
$
|
1,342,425
|
Share
Issues
In April 2020,
the Company completed a public offering of 28,750,000 common shares
at a price of USD$0.20 per share for gross proceeds of $8,041,000
(USD$5,750,000). The offering included the full exercise of an
over-allotment option of 3,750,000 common shares granted to the
underwriters.
Flow-Through
Share Issues
The Company
finances a portion of its exploration programs through the use of
flow-through share issuances. Canadian income tax deductions
relating to these expenditures are claimable by the investors and
not by the Company.
As at June 30,
2020, the Company estimates that it has incurred $1,779,000 of
expenditures towards its obligation to spend $4,715,000 on eligible
exploration expenditures by the end of fiscal 2020 as a result of
the issuance of flow-through shares in December 2019. Under
proposed legislative changes drafted in response to the COVID-19
pandemic, the period of time to spend on eligible exploration
expenditures may be increased by an additional twelve months to the
end of fiscal 2021. At present, the legislative changes have not
been enacted and the Company continues to plan to complete its
flow-through spending obligation by the end of fiscal
2020.
The Company
renounced the income tax benefits of the December 2019 issue in
February 2020, with an effective date of renunciation to its
subscribers of December 31, 2019. In conjunction with the
renunciation, the flow-through share premium liability at December
31, 2019 has been extinguished and a deferred tax recovery has been
recognized in the first quarter of 2020 (see notes 13 and
21).
15. SHARE
PURCHASE WARRANTS
A continuity
summary of the issued and outstanding share purchase warrants in
terms of common shares of the Company and the associated dollar
amounts is presented below:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
Number
of
|
|
Warrants
|
|
|
|
|
|
Exercise
|
|
Common
|
|
Fair
|
|
|
|
|
|
Price
Per
|
|
Shares
|
|
Value
|
|
(in
thousands of CAD dollars except share amounts)
|
|
Share
(CAD)
|
|
Issuable
|
|
Amount
|
||
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2019
|
$
|
1.27
|
|
1,673,077
|
$
|
435
|
||
|
Expiries
|
|
1.27
|
|
(1,673,077)
|
|
(435)
|
||
|
Balance
– June 30, 2020
|
$
|
-
|
|
-
|
$
|
-
|
||
The warrants
noted above, issued in February 2017, expired on February 14,
2020.
13
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
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
June
30
|
|
Six
Months Ended
June
30
|
||||
|
(in thousands of
CAD dollars)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Share based
compensation expense for:
|
|
|
|
|
|
|
|
|
|
Stock
options
|
$
|
(139)
|
$
|
(219)
|
$
|
(296)
|
$
|
(489)
|
|
RSUs
|
|
(259)
|
|
(414)
|
|
(487)
|
|
(595)
|
|
PSUs
|
|
(23)
|
|
(71)
|
|
(121)
|
|
(223)
|
|
Share
based compensation expense
|
$
|
(421)
|
$
|
(704)
|
$
|
(904)
|
$
|
(1,307)
|
As at June 30,
2020, an additional $2,185,000 in share-based compensation expense
remains to be recognized up until May 2023.
Stock
Options
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, 2019
|
|
|
|
13,827,243
|
$
|
0.75
|
|||
|
Grants
|
|
|
|
|
|
|
3,523,000
|
|
0.46
|
|
Expiries
|
|
|
|
|
|
|
(1,104,000)
|
|
1.09
|
|
Forfeitures
|
|
|
|
|
|
|
(360,500)
|
|
0.69
|
|
Stock options
outstanding – June 30, 2020
|
|
|
|
15,885,743
|
$
|
0.67
|
|||
|
Stock options
exercisable – June 30, 2020
|
|
|
|
10,834,243
|
$
|
0.73
|
|||
A summary of the
Company’s stock options outstanding at June 30, 2020 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
|
|
4.69
|
|
3,493,000
|
$
|
0.46
|
|||
|
$ 0.50 to $
0.74
|
|
|
|
|
2.57
|
|
7,175,143
|
|
0.63
|
|
$ 0.75 to $
0.99
|
|
|
|
|
1.69
|
|
5,217,600
|
|
0.85
|
|
Stock options
outstanding – June 30, 2020
|
|
|
2.75
|
|
15,885,743
|
$
|
0.67
|
||
Options
outstanding at June 30, 2020 expire between November 2020 and March
2025.
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:
14
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
Six Months
Ended
|
|
|
|
|
|
|
June 30,
2020
|
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
|
0.67%
|
|
|
Expected stock
price volatility
|
|
|
|
44.16%
|
|
|
Expected
life
|
|
|
|
3.4
years
|
|
|
Expected dividend
yield
|
|
|
|
-
|
|
|
Fair value
per share under options granted
|
|
|
CAD$0.15
|
||
Share
Units
The Company has a
share unit plan which provides for the granting of share unit
awards to directors, officers, employees and consultants of the
Company. Under the plan, all share unit grants, vesting periods and
performance conditions therein are approved by the Company’s
board of directors. Share unit grants are either in the form of
RSUs or PSUs. RSUs granted under the plan, to-date, vest ratably
over a period of three years. PSUs granted in 2018 vest ratably
over a period of five years, based upon the achievement of certain
non-market performance vesting conditions, PSUs granted in 2019
vest ratably over a period of four years and PSUs granted in 2020
vest ratably over a period of three years.
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, 2019
|
|
2,754,099
|
$
|
0.70
|
|
2,140,000
|
$
|
0.65
|
|
Grants
|
|
3,284,750
|
|
0.39
|
|
180,000
|
|
0.38
|
|
Exercises
|
|
(114,995)
|
|
0.70
|
|
-
|
|
-
|
|
Forfeitures
|
|
(169,001)
|
|
0.59
|
|
(180,000)
|
|
0.65
|
|
Units outstanding
– June 30, 2020
|
|
5,754,853
|
$
|
0.52
|
|
2,140,000
|
$
|
0.63
|
|
Units
vested – June 30, 2020
|
|
1,090,291
|
$
|
0.69
|
|
820,000
|
$
|
0.65
|
17. ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS)
The accumulated
other comprehensive income (loss) balance consists of:
|
|
|
|
|
At June
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Cumulative
foreign currency translation
|
|
|
$
|
403
|
$
|
410
|
|
Unamortized
experience gain-post employment liability
|
|
|
|
|
||
|
Gross
|
|
|
|
983
|
|
983
|
|
Tax
effect
|
|
|
|
(259)
|
|
(259)
|
|
|
|
|
$
|
1,127
|
$
|
1,134
|
15
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
18. SUPPLEMENTAL
FINANCIAL INFORMATION
The components of
operating expenses are as follows:
|
|
|
Three
Months Ended
June
30
|
|
Six
Months Ended
June
30
|
||||
|
(in thousands of
CAD dollars)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods and
services sold:
|
|
|
|
|
|
|
|
|
|
Cost of goods
sold – mineral concentrates
|
$
|
-
|
$
|
-
|
$
|
(526)
|
$
|
-
|
|
Operating
overheads:
|
|
|
|
|
|
|
|
|
|
Mining, other
development expense
|
|
(334)
|
|
(410)
|
|
(547)
|
|
(718)
|
|
Milling,
conversion expense
|
|
(6)
|
|
(894)
|
|
(746)
|
|
(1,756)
|
|
Less
absorption:
|
|
|
|
|
|
|
|
|
|
-Mineral
properties
|
|
13
|
|
9
|
|
25
|
|
22
|
|
Cost of
services
|
|
(1,659)
|
|
(2,251)
|
|
(3,374)
|
|
(4,303)
|
|
Cost of goods and
services sold
|
|
(1,986)
|
|
(3,546)
|
|
(5,168)
|
|
(6,755)
|
|
Reclamation asset
amortization
|
|
(62)
|
|
(53)
|
|
(122)
|
|
(106)
|
|
Selling
expenses
|
|
-
|
|
-
|
|
(14)
|
|
-
|
|
Sales royalties
and non-income taxes
|
|
-
|
|
-
|
|
(64)
|
|
-
|
|
Operating
expenses
|
$
|
(2,048)
|
$
|
(3,599)
|
$
|
(5,368)
|
$
|
(6,861)
|
The components of
other income (expense) are as follows:
|
|
|
Three
Months Ended
June
30
|
|
Six
Months Ended
June
30
|
||||
|
(in thousands of
CAD dollars)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses)
on:
|
|
|
|
|
|
|
|
|
|
Foreign
exchange
|
$
|
(98)
|
$
|
1
|
$
|
(78)
|
$
|
1
|
|
Disposal of
property, plant and equipment
(note
9)
|
|
405
|
|
-
|
|
407
|
|
-
|
|
Investment fair
value through profit (loss)
(note
7)
|
|
1,989
|
|
(109)
|
|
(961)
|
|
(347)
|
|
Other
|
|
(133)
|
|
(67)
|
|
(397)
|
|
(182)
|
|
Other
income (expense)
|
$
|
2,163
|
$
|
(175)
|
$
|
(1,029)
|
$
|
(528)
|
The components of
finance income (expense) are as follows:
|
|
|
Three
Months Ended
June
30
|
|
Six
Months Ended
June
30
|
||||
|
(in thousands of
CAD dollars)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
|
64
|
$
|
169
|
$
|
156
|
$
|
338
|
|
Interest
expense
|
|
(1)
|
|
(1)
|
|
(3)
|
|
(3)
|
|
Accretion
expense
|
|
|
|
|
|
|
|
|
|
Deferred
revenue (note 10)
|
|
(755)
|
|
(801)
|
|
(1,537)
|
|
(1,601)
|
|
Post-employment
benefits (note 11)
|
|
(17)
|
|
(18)
|
|
(34)
|
|
(35)
|
|
Reclamation
obligations (note 12)
|
|
(338)
|
|
(340)
|
|
(676)
|
|
(680)
|
|
Debt
obligations (note 13)
|
|
(14)
|
|
(20)
|
|
(30)
|
|
(40)
|
|
Finance
income (expense)
|
$
|
(1,061)
|
$
|
(1,011)
|
$
|
(2,124)
|
$
|
(2,021)
|
16
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
A summary of
depreciation expense recognized in the statement of income (loss)
is as follows:
|
|
|
Three
Months Ended
June
30
|
|
Six
Months Ended
June
30
|
||||
|
(in thousands of
CAD dollars)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
Mining, other
development expense
|
$
|
(1)
|
$
|
(1)
|
$
|
(2)
|
$
|
(2)
|
|
Milling,
conversion expense
|
|
-
|
|
(886)
|
|
(736)
|
|
(1,741)
|
|
Cost of
services
|
|
(47)
|
|
(74)
|
|
(100)
|
|
(134)
|
|
Exploration and
evaluation
|
|
(46)
|
|
(53)
|
|
(96)
|
|
(106)
|
|
General and
administrative
|
|
(32)
|
|
(32)
|
|
(64)
|
|
(63)
|
|
Depreciation
expense-gross
|
$
|
(126)
|
$
|
(1,046)
|
$
|
(998)
|
$
|
(2,046)
|
A summary of
employee benefits expense recognized in the statement of income
(loss) is as follows:
|
|
|
Three
Months Ended
June
30
|
|
Six
Months Ended
June
30
|
||||
|
(in thousands of
CAD dollars)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
$
|
(1,545)
|
$
|
(1,968)
|
$
|
(3,703)
|
$
|
(4,540)
|
|
Share-based
compensation (note 16)
|
|
(421)
|
|
(704)
|
|
(904)
|
|
(1,307)
|
|
Termination
benefits
|
|
-
|
|
(483)
|
|
-
|
|
(483)
|
|
Employee
benefits expense
|
$
|
(1,966)
|
$
|
(3,155)
|
$
|
(4,607)
|
$
|
(6,330)
|
The change in
non-cash working capital items in the consolidated statements of
cash flows is as follows:
|
|
|
|
|
Six
Months Ended
June
30
|
||||
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Change in
non-cash working capital items:
|
|
|
|
|
|
|
|
|
|
Trade and other
receivables
|
|
|
|
|
$
|
890
|
$
|
(124)
|
|
Inventories
|
|
|
|
|
|
433
|
|
73
|
|
Prepaid expenses
and other assets
|
|
|
|
|
|
401
|
|
405
|
|
Accounts payable
and accrued liabilities
|
|
|
|
|
|
(3,352)
|
|
1,014
|
|
Change
in non-cash working capital items
|
|
|
|
|
$
|
(1,628)
|
$
|
1,368
|
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.
17
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
For the six
months ended June 30, 2020, reportable segment results were as
follows:
|
(in thousands of
CAD dollars)
|
|
|
Mining
|
Closed
Mine
Services
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
|
Revenues
|
|
|
1,967
|
4,132
|
1,487
|
7,586
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(1,994)
|
(3,374)
|
-
|
(5,368)
|
|
Exploration and
evaluation
|
|
|
(4,036)
|
-
|
-
|
(4,036)
|
|
General and
administrative
|
|
|
(19)
|
-
|
(3,590)
|
(3,609)
|
|
|
|
|
(6,049)
|
(3,374)
|
(3,590)
|
(13,013)
|
|
Segment income
(loss)
|
|
|
(4,082)
|
758
|
(2,103)
|
(5,427)
|
|
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
|
Uranium
concentrate sales
|
|
|
852
|
-
|
-
|
852
|
|
Environmental
services
|
|
|
-
|
4,132
|
-
|
4,132
|
|
Management fees
(note 20)
|
|
|
-
|
-
|
1,487
|
1,487
|
|
Toll milling
services–deferred revenue (note 10)
|
|
1,115
|
-
|
-
|
1,115
|
|
|
|
|
|
1,967
|
4,132
|
1,487
|
7,586
|
|
|
|
|
|
|
|
|
|
Capital additions:
|
|
|
|
|
|
|
|
Property, plant
and equipment
|
|
|
124
|
15
|
-
|
139
|
|
|
|
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
Plant and
equipment
|
|
|
|
|
|
|
|
Cost
|
|
|
99,994
|
4,546
|
908
|
105,448
|
|
Accumulated
depreciation
|
|
|
(25,305)
|
(3,102)
|
(368)
|
(28,775)
|
|
Mineral
properties
|
|
|
179,605
|
-
|
-
|
179,605
|
|
|
|
|
254,294
|
1,444
|
540
|
256,278
|
For the three
months ended June 30, 2020, reportable segment results were as
follows:
|
(in thousands of
CAD dollars)
|
|
|
Mining
|
Closed
Mine
Services
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
|
Revenues
|
|
|
152
|
2,104
|
670
|
2,926
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(389)
|
(1,659)
|
-
|
(2,048)
|
|
Exploration and
evaluation
|
|
|
(845)
|
-
|
-
|
(845)
|
|
General and
administrative
|
|
|
(5)
|
-
|
(1,416)
|
(1,421)
|
|
|
|
|
(1,239)
|
(1,659)
|
(1,416)
|
(4,314)
|
|
Segment income
(loss)
|
|
|
(1,087)
|
445
|
(746)
|
(1,388)
|
|
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
2,104
|
-
|
2,104
|
|
Management fees
(note 20)
|
|
|
-
|
-
|
670
|
670
|
|
Toll milling
services–deferred revenue (note 10)
|
|
152
|
-
|
-
|
152
|
|
|
|
|
|
152
|
2,104
|
670
|
2,926
|
For the six
months ended June 30, 2019, reportable segment results were as
follows:
18
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
|
(in thousands of
CAD dollars)
|
|
|
Mining
|
Closed
Mines
Services
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
|
Revenues
|
|
|
2,547
|
4,644
|
924
|
8,115
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(2,558)
|
(4,303)
|
-
|
(6,861)
|
|
Exploration and
evaluation
|
|
|
(7,255)
|
-
|
-
|
(7,255)
|
|
General and
administrative
|
|
|
(15)
|
-
|
(4,016)
|
(4,031)
|
|
|
|
|
(9,828)
|
(4,303)
|
(4,016)
|
(18,147)
|
|
Segment income
(loss)
|
|
|
(7,281)
|
341
|
(3,092)
|
(10,032)
|
|
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
4,644
|
-
|
4,644
|
|
Management fees
(note 20)
|
|
|
-
|
-
|
924
|
924
|
|
Toll milling
services–deferred revenue (note 10)
|
|
2,547
|
-
|
-
|
2,547
|
|
|
|
|
|
2,547
|
4,644
|
924
|
8,115
|
|
|
|
|
|
|
|
|
|
Capital additions:
|
|
|
|
|
|
|
|
Property, plant
and equipment
|
|
|
494
|
224
|
38
|
756
|
|
|
|
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
Plant and
equipment
|
|
|
|
|
|
|
|
Cost
|
|
|
99,090
|
4,700
|
908
|
104,698
|
|
Accumulated
depreciation
|
|
|
(22,938)
|
(3,060)
|
(240)
|
(26,238)
|
|
Mineral
properties
|
|
|
179,379
|
-
|
-
|
179,379
|
|
|
|
|
255,531
|
1,640
|
668
|
257,839
|
For the three
months ended June 30, 2019, reportable segment results were as
follows:
|
(in thousands of
CAD dollars)
|
|
|
Mining
|
Closed
Mine
Services
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
|
Revenues
|
|
|
1,284
|
2,407
|
448
|
4,139
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(1,348)
|
(2,251)
|
-
|
(3,599)
|
|
Exploration and
evaluation
|
|
|
(3,026)
|
-
|
-
|
(3,026)
|
|
General and
administrative
|
|
|
(15)
|
-
|
(1,650)
|
(1,665)
|
|
|
|
|
(4,389)
|
(2,251)
|
(1,650)
|
(8,290)
|
|
Segment income
(loss)
|
|
|
(3,105)
|
156
|
(1,202)
|
(4,151)
|
|
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
2,407
|
-
|
2,407
|
|
Management fees
(note 20)
|
|
|
-
|
-
|
448
|
448
|
|
Toll milling
services–deferred revenue (note 10)
|
|
1,284
|
-
|
-
|
1,284
|
|
|
|
|
|
1,284
|
2,407
|
448
|
4,139
|
19
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
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.
The following
transactions were incurred with UPC for the periods
noted:
|
|
|
Three
Months Ended
June
30
|
|
Six
Months Ended
June
30
|
||||
|
(in thousands of
CAD dollars)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Management
fees:
|
|
|
|
|
|
|
|
|
|
Base and variable
fees
|
$
|
551
|
$
|
447
|
$
|
1,014
|
$
|
921
|
|
Commission
fees
|
|
119
|
|
1
|
|
173
|
|
3
|
|
Discretionary
fees
|
|
-
|
|
-
|
|
300
|
|
-
|
|
|
$
|
670
|
$
|
448
|
$
|
1,487
|
$
|
924
|
At June 30, 2020,
accounts receivable includes $412,000 (December 31, 2019: $236,000)
due from UPC with respect to the fees indicated above.
Korea
Electric Power Corporation (“KEPCO”)
As at June 30,
2020, KEPCO, through its subsidiaries including KHNP Canada Energy
Ltd., holds 58,284,000 shares of Denison representing a share
interest of approximately 9.31% and is also the largest member of a
consortium of investors that make up Korea Waterbury Uranium
Limited Partnership (“KWULP”). The Waterbury Lake
property is owned by Denison and KWULP through their respective
interests in Waterbury Lake Uranium Corporation
(“WLUC”) and WLULP.
In June 2020,
Denison funded a portion of the approved fiscal 2020 program for
Waterbury Lake which has had the impact of further diluting
KWULP’s interest in the WLULP. As a result, Denison earned an
additional 0.14% interest in the WLULP, increasing Denison’s
interest to 66.71% from 66.57%. The additional interest has been
accounted for using an effective date of June 30, 2020 and has
resulted in Denison recording its increased pro-rata share of the
assets and liabilities of Waterbury Lake, the majority of which
relates to an addition to mineral property assets of
$100,000.
Other
During the six
months ended June 30, 2020, the Company incurred investor
relations, administrative service fees and certain pass-through
expenses of $96,000 (June 30, 2019: $85,000) 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 June 30, 2020, an amount of $nil (December 31, 2019:
$nil) was due to this company.
20
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
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
June
30
|
|
Six
Months Ended
June
30
|
||||
|
(in thousands of
CAD dollars)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
$
|
(371)
|
$
|
(424)
|
$
|
(955)
|
$
|
(1,129)
|
|
Share-based
compensation
|
|
(320)
|
|
(611)
|
|
(750)
|
|
(1,115)
|
|
Termination
benefits
|
|
-
|
|
(481)
|
|
-
|
|
(481)
|
|
Key
management personnel compensation
|
$
|
(691)
|
$
|
(1,516)
|
$
|
(1,705)
|
$
|
(2,725)
|
21. INCOME
TAXES
For the six
months ended June 30, 2020, Denison has recognized deferred tax
recoveries of $874,000. The deferred tax recovery includes the
recognition of previously unrecognized Canadian tax assets of
$1,252,000 relating to the February 2020 renunciation of the tax
benefits associated with the Company’s $4,715,000
flow-through share issue in December 2019.
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:
●
Level 1 – Unadjusted
quoted prices in active markets for identical assets or
liabilities;
●
Level 2 – Inputs other
than quoted prices that are observable for the asset or liability
either directly or indirectly; and
●
Level 3 – Inputs that
are not based on observable market data.
The fair value of
financial instruments which trade in active markets, such as share
and warrant equity instruments, is based on quoted market prices at
the balance sheet date. The quoted market price used to value
financial assets held by the Company is the current closing price.
Warrants that do not trade in active markets have been valued using
the Black-Scholes pricing model. Debt instruments have been valued
using the effective interest rate for the period that the Company
expects to hold the instrument and not the rate to
maturity.
Except as
otherwise disclosed, the fair values of cash and cash equivalents,
trade and other receivables, accounts payable and accrued
liabilities, restricted cash and cash equivalents and debt
obligations approximate their carrying values as a result of the
short-term nature of the instruments, or the variable interest rate
associated with the instruments, or the fixed interest rate of the
instruments being similar to market rates.
During the six
months ended June 30, 2020, there were no transfers between levels
1, 2 and 3 and there were no changes in valuation
techniques.
21
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
The following
table illustrates the classification of the Company’s
financial assets within the fair value hierarchy as at June 30,
2020 and December 31, 2019:
|
|
|
|
|
|
|
June
30
|
|
December
31,
|
|
|
|
Financial
|
|
Fair
|
|
2020
|
|
2019
|
|
|
|
Instrument
|
|
Value
|
|
Fair
|
|
Fair
|
|
(in thousands of
CAD dollars)
|
|
Category(1)
|
|
Hierarchy
|
|
Value
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Assets:
|
|
|
|
|
|
|
|
|
|
Cash and
equivalents
|
|
Category
B
|
|
|
$
|
7,649
|
$
|
8,190
|
|
Trade and other
receivables
|
|
Category
B
|
|
|
|
3,133
|
|
4,023
|
|
Investments
|
|
|
|
|
|
|
|
|
|
Equity
instruments-shares
|
|
Category
A
|
|
Level
1
|
|
11,247
|
|
11,971
|
|
Equity
instruments-warrants
|
|
Category
A
|
|
Level
2
|
|
58
|
|
133
|
|
Restricted
cash and equivalents
|
|
|
|
|
|
|
|
|
|
Elliot Lake
reclamation trust fund
|
|
Category
B
|
|
|
|
3,236
|
|
2,859
|
|
Credit
facility pledged assets
|
|
Category
B
|
|
|
|
9,000
|
|
9,000
|
|
Reclamation
letter of credit collateral
|
|
Category
B
|
|
|
|
135
|
|
135
|
|
|
|
|
|
|
$
|
34,458
|
$
|
36,311
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
Category
C
|
|
|
|
4,585
|
|
7,930
|
|
Debt
obligations
|
|
Category
C
|
|
|
|
687
|
|
1,002
|
|
|
|
|
|
|
$
|
5,272
|
$
|
8,932
|
(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. CONTINGENCIES
Specific
Legal Matters
Mongolia
Mining Division Sale – Arbitration Proceedings with Uranium
Industry
In November 2015,
the Company sold all of its mining assets and operations located in
Mongolia to Uranium Industry a.s (“UI”) pursuant to an
amended and restated share purchase agreement (the “GSJV
Agreement”). The primary assets at that time were the
exploration licenses for the Hairhan, Haraat, Gurvan Saihan and
Ulzit projects. As consideration for the sale per the GSJV
Agreement, the Company received cash consideration of USD$1,250,000
prior to closing and the rights to receive additional contingent
consideration of up to USD$12,000,000.
On September 20,
2016, the Mineral Resources Authority of Mongolia
(“MRAM”) formally issued mining license certificates
for all four projects, triggering Denison’s right to receive
contingent consideration of USD$10,000,000 (collectively, the
“Mining License Receivable”). The original due date for
payment of the Mining License Receivable by UI was November 16,
2016.
Under an
extension agreement between UI and the Company, the payment due
date of the Mining License Receivable was extended from November
16, 2016 to July 16, 2017 (the “Extension Agreement”).
As consideration for the extension, UI agreed to pay interest on
the Mining License Receivable amount at a rate of 5% per year,
payable monthly up to July 16, 2017 and they also agreed to pay a
USD$100,000 instalment amount towards the balance of the Mining
License Receivable amount. The required payments were not
made.
On February 24,
2017, the Company served notice to UI that it was in default of its
obligations under the GSJV Agreement and the Extension Agreement
and that the Mining License Receivable and all interest payable
thereon are immediately due and payable. 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 in conjunction with the default of UI’s
obligations under the GSJV and Extension agreements. The three
person arbitration panel was appointed on February 28, 2018.
Hearings in front of the arbitration panel were held in December
2019. The arbitration panel rendered its final award 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.
22
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
Arbitration
Proceedings with Orano Canada Inc (“Orano Canada”) and
OURD (Canada) Co., Ltd. (“OURD”)
Denison commenced
arbitration with Orano Canada and OURD in October 2019, with
Denison’s initial written submission made on March 9, 2020.
The arbitration relates to certain payments made under the joint
venture agreement for the MLJV. Denison claims that these payments
were required in breach of OURD and Orano’s contractual and
other obligations. Denison seeks approximately $6.5 million with
respect to these payments, an unquantified amount for further
damages and related contractual relief. The arbitral tribunal has
set hearing dates in 2020.
23
|
Exhibit 99.2
|
MANAGEMENT’S DISCUSSION & ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2020
|
TABLE
OF CONTENTS
|
|
|
2020
SECOND QUARTER PERFORMANCE HIGHLIGHTS
|
2
|
|
ABOUT
DENISON
|
2
|
|
RESULTS OF
OPERATIONS
|
4
|
|
Wheeler River
Project
|
7
|
|
Other
Properties
|
10
|
|
LIQUIDITY AND
CAPITAL RESOURCES
|
11
|
|
OUTLOOK FOR
2020
|
13
|
|
ADDITIONAL
INFORMATION
|
14
|
|
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
|
15
|
This
Management’s Discussion and Analysis (‘MD&A’)
of Denison Mines Corp. and its subsidiary companies and joint
arrangements (collectively, ‘Denison’ or the
‘Company’) provides a detailed analysis of the
Company’s business and compares its financial results with
those of the previous year. This MD&A is dated as of August 6,
2020 and should be read in conjunction with the Company’s
unaudited interim condensed consolidated financial statements and
related notes for the three and six months ended June 30, 2020. 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, 2019. 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
|
■
Achieved independent “Proof of Concept” for application
of In-Situ Recovery (‘ISR’) mining method at the
Phoenix uranium deposit (‘Phoenix’)
In June 2020,
Denison announced that the hydrogeologic model developed by
Petrotek Corporation (‘Petrotek’), for the high-grade
Phoenix deposit, produced demonstration of “proof of
concept” for the application of the ISR mining method at
Phoenix, with respect to potential operational extraction and
injection rates (see Denison press release dated June 4, 2020). The
hydrogeologic model was developed based on the data collected from
the ISR field test completed in 2019 (‘2019 Field
Test’).
■
Resumed ISR field testing activities at Phoenix with commencement
of 2020 ISR field program
In July 2020,
Denison announced the successful resumption of ISR field testing
activities with the commencement of the Company’s 2020 ISR
field program (‘2020 Field Test’) focused on the
Phoenix deposit. The 2020 Field Test is intended to build
additional confidence in the results of the hydrogeologic model
developed for the deposit by Petrotek, and to support further field
work expected to be required for the completion of a future
Feasibility Study (’FS‘). In order to ensure the
Company’s operations comply with all applicable health and
safety guidelines associated with the COVID-19 pandemic, all
operating procedures at the Company’s Wheeler River site have
been reviewed and adapted to incorporate physical distancing and
enhanced hygiene protocols, as well as special travel protocols
designed by Denison for northern Saskatchewan.
■
Completed conceptual mining study (‘Concept Study’)
evaluating the ISR mining method for the J Zone uranium deposit
(‘J Zone’) and initiated Preliminary Economic
Assessment (‘PEA’)
In July 2020,
Denison announced the successful completion of an internal Concept
Study examining the potential future development of J Zone using
the ISR mining method. J Zone is located on the Waterbury Lake
property, which is owned by Denison (66.71%) and Korea Waterbury
Uranium Limited Partnership (‘KWULP’) (33.29%). Based
on the results from the Concept Study, the Company has decided to
initiate the preparation of a PEA, which is expected to be
completed during the second half of 2020. The cost of completing
the PEA is included in the Company’s current estimate of
exploration and evaluation expenditures in the Outlook for
2020.
■
Successfully completed $8 million equity financing to provide
funding for business activities into 2021
In April 2020,
Denison successfully completed a public offering of 28,750,000
common shares at a price of USD$0.20 per common share for gross
proceeds of $8,041,000 (USD$5,750,000) (‘2020 Equity
Financing’), which included the full exercise of the
overallotment option of 3,750,000 common shares. The estimated net
proceeds of $6,878,000 are expected to be used to fund the
Company’s business activities for the remainder of 2020 and
into 2021.
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 project is the 90% owned Wheeler River
Uranium Project (‘Wheeler River’), which is the largest
undeveloped uranium project in the infrastructure rich eastern
portion of the Athabasca Basin region of northern Saskatchewan. A
Pre-feasibility Study (‘PFS’) was completed for Wheeler
River in late 2018, considering the potential economic merit of
developing the Phoenix deposit as an ISR operation and the Gryphon
deposit as a conventional underground mining operation. Denison's
interests in Saskatchewan also include a 22.5% ownership interest
in the McClean Lake Joint Venture (‘MLJV’), which
includes several uranium deposits and the McClean Lake uranium
mill, 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 66.71% interest in the J Zone and Huskie deposits on
the Waterbury Lake property. The Midwest, J Zone 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.
2
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
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’).
RISK AND UNCERTAINTY
The outbreak of
the novel coronavirus (‘COVID-19’) has disrupted and is
expected to continue to disrupt the Company’s previously
disclosed business and operational plans for fiscal 2020. The
length or severity of these disruptions are unknown at this point
in time. The significant potential social and economic disruptions
that have emerged as a result of the COVID-19 pandemic include (i)
restrictions that governments impose to address the COVID-19
outbreak, (ii) restrictions that the Company and its contractors
and subcontractors impose to ensure the safety of employees and
others, (iii) shortages and / or unexpected sickness of employees,
(iv) unavailability of contractors and subcontractors, (v)
interruption of supplies from third parties upon which the Company
relies, and (vi) unusually high levels of volatility in capital
markets and limitations on the availability of
capital.
Disruptions of
this nature necessitated a change in the Company’s business
plans for 2020 and they may have a material adverse effect on the
Company’s business, financial condition and results of
operations. Such adverse effects could be rapid and unexpected.
Management is closely monitoring the situation and is actively
adapting work plans to mitigate adverse effects where possible. See
OUTLOOK FOR 2020 below for further details.
SELECTED QUARTERLY FINANCIAL INFORMATION
|
(in
thousands)
|
|
As at
June 30,
2020
|
|
As at
December 31,
2019
|
|
|
|
|
|
|
|
Financial Position:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
7,649
|
$
|
8,190
|
|
Working
capital(1)
|
$
|
16,073
|
$
|
1,597
|
|
Property, plant
and equipment
|
$
|
256,278
|
$
|
257,259
|
|
Total
assets
|
$
|
296,200
|
$
|
299,998
|
|
Total long-term
liabilities(2)
|
$
|
76,660
|
$
|
74,903
|
(1)
At June 30, 2020, the
Company’s working capital includes $11,247,000 in portfolio
investments and a non-cash $3,447,000 deferred revenue liability
(December 31, 2019 – $nil portfolio investments and non-cash
deferred revenue of $4,580,000).
(2)
Predominantly comprised of
the non-current portion of deferred revenue, non-current
reclamation obligations, and deferred income tax
liabilities.
|
|
|
|
|
2020
|
|
2020
|
|
2019
|
|
2019
|
|
(in
thousands, except for per share amounts)
|
|
Q2
|
|
Q1
|
|
Q4
|
|
Q3
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations:
|
|
|
|
|
|
|
|
|
||
|
Total
revenues
|
$
|
2,926
|
$
|
4,660
|
$
|
3,956
|
$
|
3,478
|
||
|
Net
loss
|
$
|
(1,043)
|
$
|
(6,663)
|
$
|
(1,498)
|
$
|
(6,424)
|
||
|
Basic and diluted
loss per share
|
$
|
(0.00)
|
$
|
(0.01)
|
$
|
(0.00)
|
$
|
(0.01)
|
||
|
|
|
|
|
2019
|
|
2019
|
|
2018
|
|
2018
|
|
(in
thousands, except for per share amounts)
|
|
Q2
|
|
Q1
|
|
Q4
|
|
Q3
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations:
|
|
|
|
|
|
|
|
|
||
|
Total
revenues
|
$
|
4,139
|
$
|
3,976
|
$
|
4,144
|
$
|
3,729
|
||
|
Net
loss
|
$
|
(4,884)
|
$
|
(5,335)
|
$
|
(13,642)
|
$
|
(3,884)
|
||
|
Basic and diluted
loss per share
|
$
|
(0.01)
|
$
|
(0.01)
|
$
|
(0.02)
|
$
|
(0.01)
|
||
|
|
|
|
|
|
|
|
|
|
||
Significant items causing variations in quarterly
results
●
The Company’s toll
milling revenues fluctuate due to the timing of uranium processing
at the McClean Lake mill as well as changes to the estimated
mineral resources of the Cigar Lake mine. See RESULTS OF OPERATIONS
below for further details.
3
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
●
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/or 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.
●
Denison temporarily suspended
activities related to the environmental assessment
(‘EA’) and other discretionary items related to the
Wheeler River project late in the first quarter of 2020 due in part
to the COVID-19 pandemic. The reduced net loss in the second
quarter of 2020 reflects a significant reduction in evaluation
expenditures resulting from the Company’s response to
COVID-19 and other fiscal prudence measures.
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 Inc. (‘Orano Canada’) with
a 70% interest, Denison with a 22.5% interest, and OURD (Canada)
Co. Ltd. with a 7.5% interest.
In February 2017,
Denison closed an arrangement with Anglo Pacific Group PLC and one
of its wholly owned subsidiaries (the ‘APG
Arrangement’) under which Denison received an upfront payment
of $43,500,000 in exchange for its right to receive future toll
milling cash receipts from the MLJV under the current toll milling
agreement with the Cigar Lake Joint Venture (‘CLJV’)
from July 1, 2016 onwards. The APG Arrangement consists of certain
contractual obligations of Denison to forward to APG the cash
proceeds of future toll milling revenue earned by the Company
related to the processing of the specified Cigar Lake ore through
the McClean Lake mill, and as such, the upfront payment was
accounted for as deferred revenue.
On March 23,
2020, in response to the COVID-19 pandemic, the operator of the
CLJV announced a decision to suspend production at the Cigar Lake
mine for a minimum of four weeks. At the same time, the operator of
the MLJV announced that the McClean Lake mill would also suspend
operations for the duration of the CLJV shutdown. In April 2020,
the operator of the CLJV announced that the shut-down at the Cigar
Lake mine would be extended for an indeterminate period of time. As
noted above, Denison has sold the toll milling revenue to be earned
from the processing of the Cigar Lake ore to APG pursuant to the
APG Arrangement. While the temporary suspension of operations at
the McClean Lake mill will result in a decrease in revenue
recognized by Denison, the impact will be non-cash and will be
limited to a reduction in the drawdown of the Company’s
deferred revenue balance.
During the three
and six months ended June 30, 2020, the McClean Lake mill processed
nil and 4.2 million pounds U3O8 for the CLJV,
respectively (June 30, 2019 – 5.0 and 9.9 million pounds
U3O8) and recorded
toll milling revenue of $152,000 and $1,115,000, respectively (June
30, 2019 – $1,284,000 and $2,547,000). The decrease in toll
milling revenue in the current three and six month periods, as
compared to the prior year, is predominantly due to the decrease in
mill production in the current periods due to the shut-down of the
Cigar Lake mine, which commenced in March 2020. The decrease in
mill production is slightly offset by an increase in toll milling
revenue recognized during the three and six months ended June 30,
2020 due to non-cash cumulative catch up accounting adjustments
recorded in the year. During the three and six months ended June
30, 2020, the Company recorded positive non-cash cumulative catch
up adjustments of $155,000 and $59,000, respectively. During the
first quarter of 2020, the Company recorded a negative non-cash
cumulative catch up adjustment of $96,000 as a result of an update
to the published Cigar Lake mineral resource released in the
quarter, and in the second quarter of 2020, the Company recorded a
positive non-cash cumulative accounting adjustment of $155,000
related to a change in the estimated timing of the toll milling
activity driven by the temporary suspension of operations at the
McClean Lake mill. During the three and six months ended June 30,
2019, the Company recorded $nil and $26,000 in positive non-cash
cumulative accounting adjustments related to the Cigar Lake mineral
resource estimate update published in the first quarter of
2019.
During the three
and six months ended June 30, 2020, the Company also recorded
accounting accretion expense of $755,000 and $1,537,000,
respectively, on the toll milling deferred revenue balance (June
30, 2019 – $801,000 and $1,601,000). The annual accretion
expense will decrease over the life of the agreement, as the
deferred revenue liability decreases over time.
4
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|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Mineral Sales
Mineral sales
revenue for the three and six months ended June 30, 2020 was $nil
and $852,000 (June 30, 2019 - $nil and $nil). Mineral sales revenue
earned in the first quarter of 2020 was 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.
Revenue from
Closed Mines services during the three and six months ended June
30, 2020 was $2,104,000 and $4,132,000 (June 30, 2019 - $2,407,000
and $4,644,000). The decrease in revenue in the three and six
months ended June 30, 2020, as compared to the prior period, was
due to a decrease in activity at certain care and maintenance
sites.
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.
During the three
and six months ended June 30, 2020, revenue from the
Company’s management contract with UPC was $670,000 and
$1,487,000 (June 30, 2019 - $448,000 and $924,000). The increase in
revenues during the three months ended June 30, 2020, compared to
the prior year, was due to an increase in management fees earned
based on UPC’s monthly net asset value (‘NAV’),
as well as an increase in commission-based management fees. The
increase in revenues during the six months ended June 30, 2020,
compared to the prior year, was due to an increase in NAV-based
management fees, an increase in discretionary management fees due
to a $300,000 fee awarded to Denison related to non-routine
activities performed by the Company, as well as an increase in
commission-based fees. The increase in commission-based fees in
both the three and six months ended June 30, 2020, as compared to
the prior year, was due to an increase in uranium purchase or sale
transactions completed for UPC during the current periods. Denison
earns a 1% commission on the gross value of UPC’s uranium
purchases and sales. UPC’s balance sheet consists primarily
of uranium held either in the form of U3O8 or UF6, which is
accounted for at its fair value. The increase in NAV-based
management fees was due to the increase in the average fair value
of UPC’s uranium holdings during the three and six months
ended June 30, 2020, compared to the prior year, resulting from
higher uranium spot prices during the second quarter.
OPERATING EXPENSES
Canada Mining
Operating
expenses of the Canadian mining segment include depreciation and
development costs, as well as cost of sales related to the sale of
uranium.
Operating
expenses in the three and six months ended June 30, 2020 were
$389,000 and $1,994,000, respectively (June 30, 2019 –
$1,348,000 and $2,558,000), including depreciation expense relating
to the McClean Lake mill of $nil and $736,000 (June 30, 2019 -
$886,000 and $1,741,000), as a result of processing nil and
approximately 4.2 million pounds U3O8, respectively,
for the CLJV (June 30, 2019 – 5.0 and 9.9 million
pounds).
In the three and
six months ended June 30, 2020, operating expenses also included
development and other operating costs related to the MLJV of
$389,000 and $1,258,000 (June 30, 2019 – $462,000 and
$817,000). The development and other operating costs for the three
months ended June 30, 2020 predominantly related to the advancement
of the Surface Access Borehole Resource Extraction
(‘SABRE’) mining technology, as part of a multi-year
test mining program operated by Orano Canada within the MLJV. The
development and other operating costs for the six months ended June
30, 2020 included (i) $526,000 in cost of sales, selling expenses
of $14,000, and sales royalties and resource surcharges of $64,000
related to the sale of 26,004 pounds of U3O8, and (ii)
$447,000 in costs related to SABRE. As a result of the COVID-19
pandemic, the operator of the MLJV has decided to defer the
remainder of the 2020 SABRE test mining program to future
years.
5
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Closed Mines Services
Operating
expenses during the three and six months ended June 30, 2020
totaled $1,659,000 and $3,374,000 respectively (June 30, 2019 -
$2,251,000 and $4,303,000). The expenses relate primarily to care
and maintenance services provided to clients, and include labour
and other costs. The decrease in operating expenses in the current
periods, as compared to the prior year, is predominantly due to a
reduction in activity at certain care and maintenance sites, as
well as a decrease in salaries and other costs associated with a
reduction in headcount following a restructuring completed during
the fourth quarter of 2019, when the Company discontinued its
environmental consulting business.
CANADIAN MINERAL PROPERTY EXPLORATION & EVALUATION
During the three
and six months ended June 30, 2020, Denison’s share of
exploration and evaluation expenditures were $845,000 and
$4,036,000, respectively (June 30, 2019 – $3,026,000 and
$7,255,000). The decrease in exploration and evaluation
expenditures during the three and six months ended June 30, 2020,
compared to the prior period, was predominantly due to a decrease
in winter exploration activities, as well as a decrease in
evaluation expenditures due to the decision, in March 2020, to
temporarily suspend the EA program and other discretionary items at
Wheeler River due in part to the COVID-19 pandemic. See WHEELER
RIVER PROJECT below for further details.
Exploration
spending in the Athabasca Basin is generally seasonal in nature,
with spending higher during the winter exploration season (January
to mid-April) and summer exploration season (June to
mid-October).
The
Company’s land position in the Athabasca Basin, as of June
30, 2020, is illustrated in the figure below. The size of the
Company’s Athabasca land package decreased during the second
quarter of 2020 from 270,829 hectares (206 claims) to 268,725
hectares (204 claims) due to the lapsing of claims belonging to the
Wolverine, Packrat and Waterbury South properties, slightly offset
by the purchase of additional claims at Hook Carter.
6
|
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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’ prepared
by Mark Liskowich, P.Geo. of SRK Consulting (Canada) Inc. 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 recent
social, financial and market disruptions, Denison has 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. Given the uncertainty associated with
the duration of suspension, 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.
7
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|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Evaluation Program
During the three
and six months ended June 30, 2020, Denison’s share of
evaluation costs at Wheeler were $304,000 and $1,741,000
respectively (June 30, 2019 - $2,237,000 and $2,679,000). During
the second quarter of fiscal 2020, internal Denison staff continued
preparatory work for the future resumption of the EA program. In
addition, during the quarter, Denison staff undertook planning work
for the 2020 Field Test, which commenced in the third quarter of
2020, and also conducted several internal studies on some of the
risks identified in the Wheeler River PFS in preparation for the
completion of a future FS.
Engineering Activities
ISR Field Test
The hydrogeologic model for Phoenix, developed by
Petrotek, produced demonstration of "proof of concept" for the
application of ISR mining method at Phoenix, with respect to
potential operational extraction and injection rates (see Denison
press release dated June 4, 2020). The hydrogeologic model was
developed based on actual field data collected from the 2019 Field
Test (see Denison press release dated December 18, 2019).
Based on the positive results from the hydrogeologic model, the
Company developed and commenced the 2020 Field Test. The purpose of
the additional test work planned for 2020 is to further evaluate
and de-risk the ISR mining conditions present at Phoenix by
supplementing the extensive dataset acquired as part of the 2019
Field Test. Hydrogeological data collected as part of the 2020
Field Test is expected to build additional confidence in the
Company’s understanding of the fluid pathways within Test
Area 1 and Test Area 2 of the 2019 Field Test, to further validate
the Company’s hydrogeologic model for Phoenix, and to prepare
for field tests in future years, which are expected to support a
future FS.
Work
relating to the 2020 Field Test commenced in July 2020. Key
elements of the 2020 Field Test are expected to
include:
●
Additional pump/injection
tests within Test Area 1 and Test Area 2 of the Phoenix
deposit;
●
Groundwater sampling to
characterize baseline hydrogeochemistry in the deposit area to
support the planning and permitting of a potential future in-ground
lixiviant test or ISR demonstration;
●
Groundwater sampling to
support the development of reactive transport models to determine
the overall dissolution rate of the ore and flow of lixiviant
through the formation;
●
Collection and analysis of
additional matrix permeability data from drill core previously
recovered from within Test Area 1 and Test Area 2, to support
further refinement of hydrogeological models with an enhanced
understanding of both large- and small-scale fluid flow pathways;
and
●
Rock mechanics tests to
collect data to aid in evaluating the potential utility of certain
permeability enhancement techniques.
During the month
of June, the Company developed a comprehensive guide for the safe
resumption of work at the Wheeler River site. The protocols
consider the unique health and safety risks associated with
operating a remote work camp amidst the ongoing COVID-19 pandemic.
Public health guidelines and best practices have been incorporated
into the Company’s plans, which have been reviewed by the
Company’s Vice President Operations, President & CEO, and
the Environmental Health and Safety Committee of the Board of
Directors.
In addition to an
extensive review of work procedures on site, the Company has
designed special travel protocols to minimize any health and safety
risks associated with travel to and from site through various
communities in northern Saskatchewan. These protocols were
developed in consultation with community leaders so as to be
coordinated with any localized travel restrictions or roadblocks
implemented to minimize the risk of COVID-19 transmission in
northern Saskatchewan.
Environmental and Sustainability Activities
EA Process
The Company
identified the EA process as a key element of the Wheeler River
project's critical path. Accordingly, Denison plans to initiate
various studies and assessments as part of the EA process, which is
intended to culminate in the preparation of the project
Environmental Impact Statement (‘EIS’). The EA is a
planning and decision-making tool, which involves predicting
potential environmental effects throughout the project lifecycle
(construction, operation, decommissioning and post-decommissioning)
at the site, and within the local and regional assessment areas.
The EA objectives are to minimize or avoid adverse environmental
effects before they occur and incorporate environmental factors
into the decision-making processes. In addition to predictions
made, effective monitoring programs will be developed based on the
results of the assessments and implemented as part of the "plan,
do, check, act" style system for continual improvement and adaptive
management.
8
|
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MANAGEMENT’S
DISCUSSION & ANALYSIS
|
The EA work
builds upon the comprehensive environmental baseline dataset
Denison has prepared for the Wheeler River project, as well as
feedback collected from community engagement activities completed
to date.
EA Activities
Following the
declaration of the global COVID-19 pandemic in early March, 2020,
Denison decided to temporarily suspend the Wheeler River EA (see
Denison press release dated March 20, 2020). An important element
of the EA process is the completion of extensive in-person
engagement and consultation activities with various interested
parties and community groups. The decision to suspend the EA
process and other discretionary activities is motivated by the
significant social and economic disruption that has emerged as a
result of the COVID-19 pandemic and the Company's commitment to
ensure employee safety, support public health efforts to limit
transmission of COVID-19, and exercise prudent financial
discipline.
Environmental Baseline Data Collection
Baseline
environmental data collection work at the Wheeler River site
resumed in July 2020 and is expected to be completed during the
third quarter of 2020. The work planned for 2020 includes ongoing
monitoring of ambient radon and dust in the air, and groundwater
quality.
In preparation
for assessing various environmental impacts and effects, a number
of studies have been conducted by internal Denison staff during the
second quarter of 2020. The waste management plan inputs were
developed for the Wheeler site, along with estimates of the
potential radiation exposures during planned operation. In
addition, work on ground water modelling input requirements
identified the need for additional groundwater monitoring holes for
data collection in certain areas surrounding the Phoenix
deposit.
Community Engagement Activities
Despite
the temporary suspension of the Wheeler River EA, Denison continues
to keep various interested parties informed about planned field
activities and changes to those plans due to the COVID-19 pandemic.
Recognizing that the remote location of communities in northern
Saskatchewan pose a unique risk for COVID-19 transmission and
treatment, in early April, Denison provided financial support and
the procurement of COVID-19 safety supplies, such as hand sanitizer
and cleaning products to a number of remote communities in northern
Saskatchewan to build the necessary supplies to respond to a
COVID-19 outbreak. In late April 2020, a number of Indigenous and
non-Indigenous communities in the north west of Saskatchewan
experienced COVID-19 outbreaks. In response, a unique collective of
Indigenous and non-Indigenous leaders came together to create the
Northwest Communities Incident Command Centre, which was focused on
ensuring the communities responded to COVID-19 from a regional
perspective. Denison provided financial support for this
initiative, and invited other exploration companies to do the same.
Additionally, Denison worked directly with the Command Centre to
get input on the development of a Travel Protocol for travel
through northern Saskatchewan that would be respectful of the deep
concern for the potential transmission of COVID-19 in northern
Saskatchewan through activities like Denison’s exploration
and evaluation activities. Denison’s Travel Protocol was
shared with the Saskatchewan Mining Association (‘SMA’)
and has been provided as an example of best practice for other SMA
members to refer to while travelling to and from remote
sites.
Exploration Program
Denison’s
share of exploration costs at Wheeler River was $188,000 and
$394,000 during the three and six months ended June 30, 2020,
respectively (June 30, 2019 – $199,000 and
$1,774,000).
No field work was
conducted during the quarter ended June 30, 2020. Desktop work
included continued planning for the exploration drilling program
scheduled for completion prior to the end of 2020. The drilling
program is expected to include an estimated 12,310 metres in
approximately 27 to 30 drill holes. The program is expected to be
focused on the Phoenix deposit, where additional exploration and
delineation drilling is warranted, based on previous exploration
results and the positive results returned from recent ISR field
tests. The objective of the planned exploration program at Phoenix
is to increase mineral resources that may be incorporated into a
future FS. Potential to add additional mineral resources at Phoenix
exists within the boundaries of the existing design of the ISR
freeze dome, but outside of the currently defined extents of the
deposit – particularly around Zone B, where previous
mineralized results remain open on section or the interpreted
optimal exploration target remains untested, and at Zone C, which
is not currently included in the mineral resource estimate, where
similar targets exist.
9
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Exploration Program
Denison’s
share of exploration costs at its exploration pipeline properties
during the three and six months ended June 30, 2020 was $335,000
and $1,880,000, respectively (June 30, 2019 - $591,000 and
$2,803,000). During the second quarter of 2020, no field work was
undertaken, however 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 planned objective of continuing to
explore its highest priority projects, with the potential to
deliver significant and meaningful new discoveries.
Evaluation Program
Denison’s
share of evaluation costs at its exploration pipeline properties
during the three and six months ended June 30, 2020 was $18,000 and
$21,000 (June 30, 2019 - $nil and $nil). The costs relate to the
Waterbury Lake property and the Concept Study completed in July
2020 examining the potential future development of J Zone using the
ISR mining method. As a result of the preliminary findings of the
internal Concept Study the Company has initiated the preparation of
a PEA. The cost of completing the PEA is included in the
Company’s current estimate of exploration and evaluation
expenditures in the Outlook for 2020. The Concept Study was
prepared by Denison’s in-house project development team under
the oversight of David Bronkhorst, P.Eng., the Company’s Vice
President, Operations, and was reviewed and approved by the
Technical Committee of the Company’s Board of
Directors.
Waterbury Lake is
located within the eastern portion of the Athabasca Basin in
northern Saskatchewan. A description of the property, including the
mineral resource estimate for the J Zone deposit, is described in
an independent technical report, prepared in accordance with NI
43-101, titled “Technical Report with an Updated Mineral
Resource Estimate for the Waterbury Lake Property, Northern
Saskatchewan, Canada”, dated December 21, 2018, by SRK
Consulting.
The internal
Concept Study undertaken by the Company on J Zone is preliminary in
nature and there is significant uncertainty with respect to the
potential for, and the economic and technical risks associated
with, advancing to a PEA for J Zone, and such further studies may
not be undertaken or completed if the preliminary results of
internal studies are not maintained after further testing and/or
analysis.
GENERAL AND ADMINISTRATIVE EXPENSES
During the three
and six months ended June 30, 2020, total general and
administrative expenses were $1,421,000 and $3,609,000,
respectively (June 30, 2019 - $1,665,000 and $4,031,000). 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 decrease in general and administrative
expenses during the three and six months ended June 30, 2020 was
due to a decrease in employee costs driven by a decrease in bonus
expense slightly offset by an increase in non-recurring legal
costs. The bonus expense decreased in the current year in part due
to a decrease in the overall bonus amount approved and recorded in
2020 in relation to fiscal 2019 as compared to the bonus approved
and recorded in 2019 related to fiscal 2018, as well as a change in
the timing of the recognition of the expense related to the 2019
bonus. The Company’s management team received their 2019
bonus in the form of restricted share units
(‘RSU’s’) rather than cash, and these RSUs are
being expensed over their three year vesting period. Cash bonuses,
by comparison, are fully expensed when they are
approved.
OTHER INCOME AND EXPENSES
During the three
and six months ended June 30, 2020, the Company recognized a gain
of $2,163,000 and a loss of $1,029,000 in other income/expense,
respectively (June 30, 2019 – losses of $175,000 and
$528,000). The gain for the three months ended June 30, 2020 was
predominantly due to gains in investments carried at fair value of
$1,989,000, while the loss in the six months ended June 30, 2020
was predominantly due to losses on investments carried at fair
value of $961,000. The Company’s investments consist of
investments in other publicly traded entities. Gains and losses on
investments carried at fair value are driven by the closing share
price of the related investee at the end of the quarter. The gain
recorded in the three months ended June 30, 2020 was mainly due to
favourable mark-to-market adjustments on the Company’s
investments, while the losses in the six months ended June 30,
2020, as well as the losses in the prior periods, were due to
unfavourable mark-to-market adjustments on the Company’s
investments.
10
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MANAGEMENT’S
DISCUSSION & ANALYSIS
|
EQUITY SHARE OF LOSS FROM ASSOCIATES
During the fourth
quarter of 2019, the Company determined that it no longer exercised
significant influence of GoviEx Uranium Inc. (‘GoviEx’)
and began accounting for its investment in the common shares of
GoviEx as a portfolio investment at fair value through profit and
loss. As a result, during the three and six months ended June 30,
2020, the Company recorded $nil in equity gain or loss from
associates. During the three and six months ended June 30, 2019,
the Company recognized a gain of $71,000 and a loss of $206,000,
respectively from its equity share of GoviEx. The gain in the three
months ended June 30, 2019 was due to an equity loss of $185,000
more than offset by a dilution gain of $256,000. The loss during
the six months ended June 30, 2019 was due to an equity loss of
$460,000, offset by a dilution gain of $254,000.
Cash and cash
equivalents were $7,649,000 at June 30, 2020 (December 31, 2019
– $8,190,000).
The decrease in
cash and cash equivalents of $541,000 was due to net cash used in
operations of $6,803,000, and net cash used in investing activities
of $271,000, offset by net cash provided by financing activities of
$6,533,000.
Net cash used in
operating activities of $6,803,000 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 $271,000 consists primarily of expenditures
for property, plant and equipment, and an increase in restricted
cash related to the Company’s funding the Elliot Lake
reclamation trust fund, offset by cash receipts related to the sale
of certain portfolio investments and property, plant and
equipment.
Net cash provided
by financing activities of $6,533,000 relates primarily to the net
proceeds from the 2020 Equity Financing where the Company issued of
28,750,000 common shares at a price of USD$0.20 on April 6, 2020,
for gross proceeds of $8,041,000 (USD$5,750,000), slightly offset
by cash payments related to the Company’s lease and short
term debt obligations.
On June 2, 2020,
the Company filed a short form base shelf prospectus (‘2020
Prospectus’) with the securities regulatory authorities in
each of the provinces in Canada and in the United States. The
Company may 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 Prospectus, for an aggregate offering
amount of up to $175,000,000 during the 25 month period beginning
on June 2, 2020. To date, the Company has not issued any securities
pursuant to the 2020 Prospectus.
Refer to 2020
OUTLOOK below for details of the Company’s working capital
requirements for the remainder of 2020.
There are
uncertainties related to the timing and use of the Company’s
cash resources. Due to the stage of various of its mineral property
projects, the Company does not currently generate sufficient
operating cash flows to fund obligations as they become due. As
such, these obligations require that the Corporation generate
additional liquidity through the divestiture of investments or
through the issuance of debt or equity. The Company expects that it
may need to sell certain of its investments to provide additional
liquidity to fund its expenditures for the next 12 months. The
Company may experience difficulty in obtaining satisfactory
financial terms for subsequent debt or equity issuances or it may
have difficulty in liquidating its investments due to the
concentration of its investment portfolio or market conditions.
Failure to obtain adequate financing on satisfactory terms may have
a material adverse effect to the Company’s results of
operations or its financial condition. The Company has considered
the above factors, in addition to its ability to further curtail
operating expenditures if necessary, in assessing and concluding on
its ability to continue as a going concern.
Use of Proceeds
2019 Flow Through Financing
As at June 30,
2020, the Company has spent $1,779,000 towards its obligation to
spend $4,715,460 on eligible Canadian exploration expenditures
under the terms of the flow-through share financing completed in
December 2019. Denison anticipates that it will meet its
obligations under the December 2019 flow-through share financing
during 2020.
2020 Equity Financing
As disclosed in
the Company’s Short Form Prospectus dated April 6, 2020
(‘2020 Short Form Prospectus’), the net proceeds of the
2020 Equity Financing are being utilized to supplement the
Company’s cash working capital to fund its business
operations through 2020 and into 2021.
11
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MANAGEMENT’S
DISCUSSION & ANALYSIS
|
During the period
between the close of the financing in April and June 30, 2020, the
Company’s use of proceeds has been in line with that
disclosed in the 2020 Short Form Prospectus.
Revolving Term Credit Facility
On January 29,
2020, 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, 2021 (‘2020
Credit Facility’). Under the 2020 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 2020 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 2020 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.
The following
amounts were earned from UPC for the periods ended:
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
|
|
|
|
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
|
(in
thousands)
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management Fee
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Base and variable
fees
|
|
|
|
$
|
551
|
$
|
447
|
$
|
1,014
|
$
|
921
|
|
Discretionary
fees
|
|
|
|
|
-
|
|
-
|
|
300
|
|
-
|
|
Commission
fees
|
|
|
|
|
119
|
|
1
|
|
173
|
|
3
|
|
|
|
|
|
$
|
670
|
$
|
448
|
$
|
1,487
|
$
|
924
|
At June 30, 2020,
accounts receivable includes $412,000 (December 31, 2019 –
$236,000) due from UPC with respect to the fees and transactions
discussed above.
Korea Electric Power Corporation (‘KEPCO’)
As at June 30,
2020, KEPCO, through its subsidiaries including KHNP Canada Energy
Ltd., holds 58,284,000 shares of Denison representing a share
interest of approximately 9.31% and is also the largest member of
the consortium of investors that make up KWULP. The Waterbury Lake
property is owned by Denison and KWULP through their respective
interests in Waterbury Lake Uranium Corporation
(‘WLUC’) and Waterbury Lake Uranium Limited Partnership
(‘WLULP’).
In June 2020,
Denison funded $300,000 of the approved fiscal 2020 program for
Waterbury Lake, which resulted in the further dilution of
KWULP’s interest in WLULP. As a result, Denison earned an
additional 0.14% interest in the WLULP, increasing Denison’s
interest to 66.71% from 66.57%.
12
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
The additional
interest has been accounted for using an effective date of June 30,
2020 and has resulted in Denison recording its increased pro-rata
share of the assets and liabilities of Waterbury Lake, the majority
of which relates to an addition to mineral property assets of
$100,000.
Other
All services and
transactions with the following related parties listed below were
made on terms equivalent to those that prevail with arm’s
length transactions:
●
During the three and six
months ended June 30, 2020, the Company incurred investor
relations, administrative service fees and certain pass-through
expenses of $75,000 and $96,000, respectively (June 30, 2019
– $64,000 and $85,000) 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
June 30, 2020, an amount of $nil (December 31, 2019 – $nil)
was due to this company.
COMPENSATION OF KEY MANAGEMENT PERSONNEL
Key management
personnel are those persons having authority and responsibility for
planning, directing and controlling the activities of the Company,
directly or indirectly. Key management personnel include the
Company’s executive officers, vice-presidents and members of
its Board of Directors.
The following
compensation was awarded to key management personnel:
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
|
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
|
(in
thousands)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
$
|
(371)
|
$
|
(424)
|
$
|
(955)
|
$
|
(1,129)
|
|
Share-based
compensation
|
|
(320)
|
|
(611)
|
|
(750)
|
|
(1,115)
|
|
Termination
benefits
|
|
-
|
|
(481)
|
|
-
|
|
(481)
|
|
|
$
|
(691)
|
$
|
(1,516)
|
$
|
(1,705)
|
$
|
(2,725)
|
OFF-BALANCE SHEET ARRANGEMENTS
The Company does
not have any off-balance sheet arrangements.
OUTSTANDING SHARE DATA
At August 6,
2020, there were 626,057,148 common shares issued and outstanding,
stock options outstanding for 15,785,743 Denison common shares, and
7,894,853 share units outstanding for a total of 649,737,744 common
shares on a fully-diluted basis.
The
Company’s exploration, development and operations plans for
the year remain unchanged from those disclosed in the MD&A for
the three months ended March 31, 2020. Refer to the Company’s
MD&As for the year ended December 31, 2019 and for the three
months ended March 31, 2020, for a detailed discussion of the 2020
budget and 2020 outlook.
13
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
|
(in
thousands)
|
|
CURRENT 2020
OUTLOOK
|
Actual to
June 30, 2020(2)
|
|
Mining Segment
|
|
|
|
|
Mineral
Sales
|
|
852
|
852
|
|
Development &
Operations
|
|
(2,446)
|
(1,098)
|
|
Mineral Property
Exploration & Evaluation
|
|
(8,592)
|
(4,035)
|
|
|
|
(10,186)
|
(4,281)
|
|
Closed Mines Segment
|
|
|
|
|
Closed Mines
Environmental Services
|
|
1,353
|
878
|
|
|
|
1,353
|
878
|
|
Corporate and Other Segment
|
|
|
|
|
UPC Management
Services
|
|
2,686
|
1,487
|
|
Corporate
Administration & Other
|
|
(5,625)
|
(2,828)
|
|
|
|
(2,939)
|
(1,341)
|
|
Total(1)
|
|
$ (11,772)
|
$ (4,744)
|
Notes:
1.
Only material operations
shown.
2.
The budget is prepared on a
cash basis. As a result,
actual amounts represent a non-GAAP measure. Compared to segment
loss as presented in the Company’s unaudited interim
consolidated financial statements for the six months ended June 30,
2020, actual amounts reported above includes $139,000 in capital
additions and excludes the $822,000 net impact of non-cash items
and other adjustments.
SIGNIFICANT ACCOUNTING POLICIES
RISK FACTORS
The following
risk factors, and those set forth in Denison’s Annual
Information Form dated March 13, 2020 under the heading ‘Risk
Factors’, are risks and other factors Denison has identified
that could influence the Company’s business, operations,
financial condition and expectations as set forth in its
forward-looking statements. Such risk factors are not, and should
not be construed as being exhaustive, and other circumstances that
are currently not foreseen by management of Denison could arise to
negatively affect Denison’s business and its
shareholders.
COVID-19 Outbreaks
The outbreak of
the novel coronavirus (COVID-19) has disrupted and is expected to
continue to disrupt the Company’s business and operational
plans, including the Company’s previously disclosed business
and operational plans for fiscal 2020, which could have a material
adverse effect on the Company’s business, financial condition
and results of operations. Such adverse effects could be rapid and
unexpected.
The significant
potential social and economic disruptions that have emerged as a
result of the COVID-19 pandemic include (i) restrictions that
governments impose to address the COVID-19 outbreak, (ii)
restrictions that the Company and its contractors and
subcontractors impose to ensure the safety of employees and others,
(iii) shortages and / or unexpected sickness of employees, (iv)
unavailability of contractors and subcontractors, (v) interruption
of supplies from third parties upon which the Company relies, and
(vi) unusually high levels of volatility in capital markets and
limitations on availability of capital for the Company and its
joint venture counterparties.
These disruptions
may severely impact the Company’s ability to carry out its
business plans for 2020 and beyond. For example, on March 20, 2020
the Company announced a temporary suspension of activities related
to the EA for the Wheeler River project due to the process
requiring extensive in-person engagement and consultation with
various interested parties. The decision to suspend the EA was due
in part to significant social and economic disruptions that have
emerged as a result of the COVID-19 pandemic. The EA process is a
key element of the Wheeler River project’s critical path and
as a result, there is a risk that the development schedule and/or
the capital and operating cost projections and related economic
indicators in the Wheeler PFS Report may be varied
significantly.
14
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
It is presently
not possible to predict the extent or durations of any disruptions
to the Company’s current and future operations.
Denison has a history of negative operating cash flows and may
continue to experience negative operating cash flow
Denison has had
negative operating cash flows for recent past financial reporting
periods. Denison anticipates that it will continue to have negative
operating cash flows until such time, if at all, its Wheeler River
project goes into production. In order to fund operations until
such time, Denison will require substantial additional financing
which may be through the issuance of equity or debt securities.
There can be no assurance that additional capital or other types of
financing will be available when needed or that these financings
will be on terms favourable to Denison.
QUALIFIED PERSON
The disclosure of
scientific and technical information regarding Denison’s
material properties in this MD&A was prepared by, or reviewed
and approved by David Bronkhorst, P.Eng., the Company’s Vice
President Operations, a Qualified Person in accordance with the
requirements of NI 43-101.
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 12, 2019 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 2020 and
beyond, including resumption of ISR field testing activities at
Phoenix, the impacts of COVID-19, temporary suspension of the EA
and other non-discretionary activities and the projections made in
the 2020 Outlook; hydrogeologic modelling for the Phoenix deposit
and demonstration of “proof of concept”, and estimates
and assumptions within such; the benefits to be derived from
corporate transactions; the estimates of Denison's mineral reserves
and mineral resources; exploration, development and expansion plans
and objectives, including the results of, and estimates and
assumptions within, the PFS, and statements regarding anticipated
budgets, fees, expenditures and timelines; assumptions regarding
the potential for completion of a FS for Wheeler River, and work to
be completed in connection therewith; results of, and estimates and
assumptions within, the Concept Study for J Zone and plans for a
PEA with respect thereto; 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;
expectations regarding revenues and expenditures from its Closed
Mines operations; expectations regarding revenues from the UPC
management contract; 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.
15
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
For example, if
market conditions remain volatile and/or COVID-19 mitigation
measures result in more social and economic disruptions, Denison
may need to further re-assess its discretionary and
non-discretionary expenditures and programs for 2020 and beyond,
which could have significant impacts on Denison and/or the
advancement of its projects. 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 13, 2020 under the heading
‘Risk Factors’ and under the heading ‘Risk
Factors’ above. These factors are not, and should not be
construed as being exhaustive.
Accordingly,
readers should not place undue reliance on forward-looking
statements. The forward-looking information contained in this
MD&A is expressly qualified by this cautionary statement. Any
forward-looking information and the assumptions made with respect
thereto speaks only as of the date of this MD&A. Denison does
not undertake any obligation to publicly update or revise any
forward-looking information after the date of this MD&A to
conform such information to actual results or to changes in
Denison's expectations except as otherwise required by applicable
legislation.
Cautionary Note to United States Investors
Concerning Estimates of Measured, Indicated and Inferred Mineral
Resources and Probable Mineral Reserves: This MD&A may
use the terms 'measured', 'indicated' and 'inferred' mineral
resources. United States investors are advised that while such
terms have been prepared in accordance with the definition
standards on mineral reserves of the Canadian Institute of Mining,
Metallurgy and Petroleum referred to in Canadian National
Instrument 43-101 Mineral Disclosure Standards (‘NI
43-101’) and are recognized and required by Canadian
regulations, these terms are not defined under Industry Guide 7
under the United States Securities Act and, until recently, have
not been permitted to be used in reports and registration
statements filed with the United States Securities and Exchange
Commission (‘SEC’). 'Inferred mineral resources' have a
great amount of uncertainty as to their existence, and as to their
economic and legal feasibility. It cannot be assumed that all or
any part of an inferred mineral resource will ever be upgraded to a
higher category. Under Canadian rules, estimates of inferred
mineral resources may not form the basis of feasibility or other
economic studies. United States
investors are cautioned not to assume that all or any part of
measured or indicated mineral resources will ever be converted into
mineral reserves. United States investors are also cautioned not to
assume that all or any part of an inferred mineral resource exists,
or is economically or legally mineable. In addition,
the terms “mineral reserve”, “proven mineral
reserve” and “probable mineral reserve” for the
purposes of NI 43-101 differ from the definitions and allowable
usage in Industry Guide 7.
Effective
February 2019, the SEC adopted amendments to its disclosure rules
to modernize the mineral property disclosure requirements for
issuers whose securities are registered with the SEC under the
Exchange Act and as a result, the SEC now recognizes estimates of
“measured mineral resources”, “indicated mineral
resources” and “inferred mineral resources”. In
addition, the SEC has amended its definitions of “proven
mineral reserves” and “probable mineral reserves”
to be “substantially similar” to the corresponding
definitions under the CIM Standards, as required under NI 43-101.
However, information regarding mineral resources or mineral
reserves in Denison’s disclosure may not be comparable to
similar information made public by United States
companies.
16
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 June 30, 2020.
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 April 1, 2020 and
ended on June 30, 2020 that has materially affected, or is
reasonably likely to materially affect, the issuer's
ICFR.
Date:
August 6, 2020
(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 June 30, 2020.
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 April 1, 2020 and
ended on June 30, 2020 that has materially affected, or is
reasonably likely to materially affect, the issuer's
ICFR.
Date:
August 6, 2020
(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 Q2 2020
Toronto, ON – August 6,
2020. Denison Mines Corp. (“Denison” or the
“Company”) (DML: TSX, DNN: NYSE MKT) today filed its
Condensed Consolidated Financial Statements and Management’s
Discussion & Analysis (“MD&A”) for the quarter
ended June 30, 2020. 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, “We’ve
seen several positive trends develop in the uranium sector over the
last several months. Demand has remained relatively stable with
nuclear power plants answering the call to provide reliable and
competitive base-load energy during the pandemic. At the same time,
COVID-19 related supply curtailments and associated producer spot
market buying has put upward pressure on the uranium spot price
– to the point where the current spot price is approximately
10% higher than the base-case selling price assumed in the
Pre-Feasibility Study for first production from Denison’s
proposed Phoenix In-Situ Recovery (‘ISR’) operation.
While announcements have been made regarding the resumption of
certain curtailed uranium mines, this was always expected by market
participants. Regardless of the timing of these restarts, we should
not lose sight of how impactful even temporary curtailments can be
in a market that is actively drawing down inventories and other
secondary supplies as part of a cyclical commodity correction
– resulting in a permanent acceleration towards sustained
improvements to supply-demand fundamentals.
From a Denison perspective, our recent results illustrate our
commitment to become the first company to bring the low-cost ISR
uranium mining method to the high-grade uranium deposits of the
Athabasca Basin region. In June 2020, we reported a significant
milestone in the de-risking of the ISR mining method at Phoenix
– announcing that an independent specialist firm concluded
that a hydrogeologic model, developed based on actual field tests
carried out at Phoenix in 2019, had produced ‘proof of
concept’ for the application of the ISR mining method at
Phoenix. With this validation in-hand, and with a series of new
health and safety protocols in place to ensure a safe work
environment amidst the pandemic, we were pleased to also announce
the resumption of ISR field testing activities at Phoenix. The 2020
ISR field program is designed to minimize the disruption created by
the pandemic to the overall project schedule by collecting
additional information necessary to support the completion of a
future Feasibility Study.
Additionally, the Company announced the successful completion of an
$8 million equity financing and encouraging results from an
internal Concept Study evaluating the use of the ISR mining method
at the Company’s J Zone deposit. Taken together, the second
half of 2020 promises to be very active for Denison, with several
catalysts on the horizon – including the completion of ISR
field testing at Phoenix, an exploration program designed to
delineate additional uranium resources at Phoenix, and a
Preliminary Economic Assessment for the J Zone deposit, all of
which are planned and funded as part of the Company’s current
Outlook for 2020.”
HIGHLIGHTS
■
Achieved
independent “Proof of Concept” for application of
In-Situ Recovery (‘ISR’) mining method at the Phoenix
uranium deposit (‘Phoenix’)
In June 2020,
Denison announced that the hydrogeologic model developed by
Petrotek Corporation (‘Petrotek’), for the high-grade
Phoenix deposit, produced demonstration of “proof of
concept” for the application of the ISR mining method at
Phoenix, with respect to potential operational extraction and
injection rates (see Denison press release dated June 4, 2020). The
hydrogeologic model was developed based on the data collected from
the ISR field test completed in 2019.
■
Resumed
ISR field testing activities at Phoenix with commencement of 2020
ISR field program
In July 2020,
Denison announced the successful resumption of ISR field testing
activities with the commencement of the Company’s 2020 ISR
field program (‘2020 Field Test’) focused on the
Phoenix deposit. The 2020 Field Test is intended to build
additional confidence in the results of the hydrogeologic model
developed for the deposit by Petrotek, and to support further field
work expected to be required for the completion of a future
Feasibility Study (’FS‘). In order to ensure the
Company’s operations comply with all applicable health and
safety guidelines associated with the COVID-19 pandemic, all
operating procedures at the Company’s Wheeler River site have
been reviewed and adapted to incorporate physical distancing and
enhanced hygiene protocols, as well as special travel protocols
designed by Denison for northern Saskatchewan.
■
Completed
conceptual mining study (‘Concept Study’) evaluating
the ISR mining method for the J Zone uranium deposit (‘J
Zone’) and initiated Preliminary Economic Assessment
(‘PEA’)
In July 2020,
Denison announced the successful completion of an internal Concept
Study examining the potential future development of J Zone using
the ISR mining method. J Zone is located on the Waterbury Lake
property, which is owned by Denison (66.71%) and Korea Waterbury
Uranium Limited Partnership (33.29%). Based on the results from the
Concept Study, the Company has decided to initiate the preparation
of a PEA, which is expected to be completed during the second half
of 2020. The cost of completing the
PEA is included in the Company’s current estimate of
exploration and evaluation expenditures in the Outlook for
2020.
■
Successfully
completed $8 million equity financing to provide funding for
business activities into 2021
In April 2020,
Denison successfully completed a public offering of 28,750,000
common shares at a price of USD$0.20 per common share for gross
proceeds of $8,041,000 (USD$5,750,000), which included the full
exercise of the overallotment option of 3,750,000 common shares.
The estimated net proceeds of $6,878,000 are expected to be used to
fund the Company’s business activities for the remainder of
2020 and into 2021.
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).
A pre-feasibility study (‘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
recent social, financial and market disruptions, Denison has
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. Given the uncertainty
associated with the duration of suspension, the Company is not
currently able to estimate the impact to the project development
schedule outlined in the PFS, and users are cautioned against
relying on the estimates provided therein regarding the start of
pre-production activities in 2021 and first production in
2024.
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. The
Company’s flagship project is the 90% owned Wheeler River
Uranium Project. Denison's interests in Saskatchewan also include a
22.5% ownership interest in the McClean Lake Joint Venture
(‘MLJV’), which includes several uranium deposits and
the McClean Lake uranium mill, which is currently processing ore
from the Cigar Lake mine under a toll milling agreement, plus a
25.17% interest in the Midwest deposits and a 66.71% interest in
the J Zone and Huskie deposits on the Waterbury Lake property. The
Midwest, J Zone 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 disclosure of
scientific and technical information regarding Denison’s
material properties in the MD&A was prepared by, or reviewed
and approved by David Bronkhorst, P.Eng., the Company’s Vice
President Operations, a Qualified Person in accordance with the
requirements of NI 43-101.
For more information, please contact
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David Cates
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(416) 979-1991 ext
362
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President and Chief Executive
Officer
|
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|
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Sophia Shane
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(604) 689-7842
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Investor
Relations
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Follow Denison on
Twitter
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@DenisonMinesCo
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
Certain
information contained in this news release constitutes
‘forward-looking information’, within the meaning of
the applicable United States and Canadian legislation concerning
the business, operations and financial performance and condition of
Denison.
Generally, these
forward-looking statements can be identified by the use of
forward-looking terminology such as ‘plans’,
‘expects’, ‘budget’,
‘scheduled’, ‘estimates’,
‘forecasts’, ‘intends’,
‘anticipates’, or ‘believes’, or the
negatives and/or variations of such words and phrases, or state
that certain actions, events or results ‘may’,
‘could’, ‘would’, ‘might’ or
‘will be taken’, ‘occur’, ‘be
achieved’ or ‘has the potential to’.
In particular,
this news release contains forward-looking information pertaining
to the following: exploration, development and expansion plans and
objectives, including the results of, and estimates and assumptions
within, the PFS, the plans and objectives for ISR and the related
field and hydrogeological testing results, models, “proof of
concept”, plans and objectives; evaluation activities and
plans for a PEA for the J Zone deposit; the suspension of EA
activities and anticipated results of such suspension; the impact
of COVID-19 on Denison’s operations; the estimates of
Denison's mineral reserves and mineral resources; plans for any FS,
and any work to be undertaken in respect thereto; expectations
regarding Denison’s joint venture ownership interests;
expectations regarding the continuity of its agreements with third
parties; and its interpretations of, and expectations for, nuclear
power and uranium supply, demand and related market factors.
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 the ISR field test and hydrogeological test programs
discussed herein may not be maintained after further testing or be
representative of actual conditions within the applicable deposits.
In addition, Denison may decide or otherwise be required to extend
the EA and/or otherwise discontinue testing, evaluation and
development work, including a FS at Wheeler River or PEA for J Zone
at Waterbury Lake, 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 13, 2020 under the heading
‘Risk Factors’. These factors are not, and should not
be construed as being exhaustive.
Accordingly,
readers should not place undue reliance on forward-looking
statements. The forward-looking information contained in this news
release is expressly qualified by this cautionary statement. Any
forward-looking information and the assumptions made with respect
thereto speaks only as of the date of this news release. Denison
does not undertake any obligation to publicly update or revise any
forward-looking information after the date of this news release to
conform such information to actual results or to changes in
Denison's expectations except as otherwise required by applicable
legislation.
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.