Denison Mines Corp 6-K, filed Nov 6, 2020
Denison Mines Corp. (DNN)
6-K
2020-11-06
For: 2020-09-30
View Original
Added on
April 07, 2026
About this 6-K
Denison Mines Corp filed this 6-K on November 6, 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: November 6, 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): ☐
INCORPORATION BY
REFERENCE
Exhibits 99.1 and
99.2 to this Form 6-K of Denison Mines Corp. are hereby
incorporated by reference as an exhibit to its Registration
Statement on Form F-10 (File No. 333-238108), as amended or
supplemented.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
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DENISON MINES
CORP.
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/s/ Amanda Willett
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Date:
November 6, 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 99.1
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
(Unaudited -
Expressed in thousands of Canadian dollars (“CAD”)
except for share amounts)
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At September
30
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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6,518
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$
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8,190
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Trade and other
receivables (note 5)
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3,010
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4,023
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Inventories (note
6)
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3,078
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3,352
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Investments (note
7)
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9,717
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-
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Prepaid expenses
and other
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807
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978
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23,130
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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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93
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12,104
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Restricted cash
and investments (note 8)
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12,190
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11,994
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Property, plant
and equipment (note 9)
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256,046
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257,259
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Total
assets
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$
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293,557
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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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6,480
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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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4,597
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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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900
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914
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Other liabilities
(note 13)
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230
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1,372
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12,357
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14,946
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Non-Current
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Deferred revenue
(note 10)
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32,823
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31,741
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Post-employment
benefits (note 11)
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2,096
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2,108
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Reclamation
obligations (note 12)
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32,020
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31,598
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Other liabilities
(note 13)
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410
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532
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Deferred income
tax liability
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8,566
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8,924
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Total
liabilities
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88,272
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89,849
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EQUITY
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Share capital
(note 14)
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1,342,611
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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
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67,036
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65,417
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Deficit
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(1,205,492)
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(1,192,304)
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Accumulated other
comprehensive income (note 17)
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1,130
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1,134
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Total
equity
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205,285
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210,149
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Total
liabilities and equity
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$
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293,557
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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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626,321,102
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597,192,153
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Contingencies
(note 23)
Subsequent
events (note 24)
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The accompanying
notes are integral to the condensed interim consolidated financial
statements
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1
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INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
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(Unaudited -
Expressed in thousands of CAD dollars except for share and per
share amounts)
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Three
Months Ended
September
30
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Nine
Months Ended
September
30
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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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2,743
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$
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3,478
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$
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10,329
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$
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11,593
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EXPENSES
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Operating
expenses (note 18, 19)
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(2,358)
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(2,877)
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(7,726)
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(9,738)
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Exploration and
evaluation (note 19)
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(1,744)
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(4,591)
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(5,780)
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(11,846)
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General and
administrative (note 19)
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(2,110)
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(1,657)
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(5,719)
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(5,688)
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Other income
(expense) (note 18)
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(1,318)
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(928)
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(2,347)
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(1,456)
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(7,530)
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(10,053)
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(21,572)
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(28,728)
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Loss
before finance expense and
equity
accounting
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(4,787)
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(6,575)
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(11,243)
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(17,135)
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Finance expense
(note 18)
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(1,081)
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(1,037)
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(3,205)
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(3,058)
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Equity share of
loss of associate
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-
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(220)
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-
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(426)
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Loss before
taxes
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(5,868)
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(7,832)
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(14,448)
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(20,619)
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Income tax
recovery (note 21)
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Deferred
|
|
386
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1,408
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1,260
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3,976
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Net loss for the
period
|
$
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(5,482)
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$
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(6,424)
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$
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(13,188)
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$
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(16,643)
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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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3
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(2)
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(4)
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4
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Comprehensive
loss for the period
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$
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(5,479)
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$
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(6,426)
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$
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(13,192)
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$
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(16,639)
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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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(0.01)
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$
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(0.01)
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$
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(0.02)
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$
|
(0.03)
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Weighted-average
number of shares outstanding (in thousands):
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Basic and
diluted
|
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626,182
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590,221
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614,871
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589,608
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|
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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
|
||||||||
|
(Unaudited -
Expressed in thousands of CAD dollars)
|
||||||||
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|
|
Nine
Months Ended
September
30
|
||||
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital (note 14)
|
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
$
|
1,335,467
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$
|
1,331,214
|
|
Shares issued for
cash, net of issue costs
|
|
|
|
|
|
6,878
|
|
-
|
|
Share options
exercised-cash
|
|
|
|
|
|
77
|
|
405
|
|
Share options
exercised-fair value adjustment
|
|
|
|
|
|
25
|
|
140
|
|
Share units
exercised-fair value adjustment
|
|
|
|
|
|
164
|
|
299
|
|
Balance-end of
period
|
|
|
|
|
|
1,342,611
|
|
1,332,058
|
|
|
|
|
|
|
|
|
|
|
|
Share purchase warrants (note 15)
|
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
435
|
|
435
|
|
Warrants
expired
|
|
|
|
|
|
(435)
|
|
-
|
|
Balance-end of
period
|
|
|
|
|
|
-
|
|
435
|
|
|
|
|
|
|
|
|
|
|
|
Contributed surplus
|
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
65,417
|
|
63,634
|
|
Share-based
compensation expense (note 16)
|
|
|
|
|
|
1,373
|
|
1,772
|
|
Share options
exercised-fair value adjustment
|
|
|
|
|
|
(25)
|
|
(140)
|
|
Share units
exercised-fair value adjustment
|
|
|
|
|
|
(164)
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|
(299)
|
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Warrants
expired
|
|
|
|
|
|
435
|
|
-
|
|
Balance-end of
period
|
|
|
|
|
|
67,036
|
|
64,967
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
(1,192,304)
|
|
(1,174,163)
|
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Net
loss
|
|
|
|
|
|
(13,188)
|
|
(16,643)
|
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Balance-end of
period
|
|
|
|
|
|
(1,205,492)
|
|
(1,190,806)
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (note 17)
|
|
|
|
|
|
|
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|
Balance-beginning
of period
|
|
|
|
|
|
1,134
|
|
1,127
|
|
Foreign currency
translation
|
|
|
|
|
|
(4)
|
|
4
|
|
Balance-end of
period
|
|
|
|
|
|
1,130
|
|
1,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Total Equity
|
|
|
|
|
|
|
|
|
|
Balance-beginning
of period
|
|
|
|
|
|
210,149
|
|
222,247
|
|
Balance-end of
period
|
|
|
|
|
$
|
205,285
|
$
|
207,785
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are integral to the condensed interim consolidated financial
statements
|
||||||||
3
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW
|
||||||||
|
(Unaudited -
Expressed in thousands of CAD dollars)
|
||||||||
|
|
|
|
|
Nine
Months Ended
September
30
|
||||
|
CASH PROVIDED BY (USED IN):
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net loss for the
period
|
|
|
|
|
$
|
(13,188)
|
$
|
(16,643)
|
|
Items not
affecting cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
Depletion,
depreciation, amortization and accretion
|
|
|
|
|
|
4,920
|
|
6,400
|
|
Share-based
compensation (note 16)
|
|
|
|
|
|
1,373
|
|
1,772
|
|
Recognition
of deferred revenue (note 10)
|
|
|
|
|
|
(1,210)
|
|
(3,243)
|
|
Gains on
property, plant and equipment disposals (note 18)
|
|
|
|
(407)
|
|
(5)
|
||
|
Losses on
fair value remeasurement of investments (note 18)
|
|
|
|
2,094
|
|
1,172
|
||
|
Equity loss
of associate
|
|
|
|
-
|
|
678
|
||
|
Dilution gain
of associate
|
|
|
|
-
|
|
(252)
|
||
|
Deferred income
tax recovery
|
|
|
|
|
|
(1,260)
|
|
(3,976)
|
|
Other
|
|
|
|
|
|
-
|
|
(1)
|
|
Post-employment
benefits (note 11)
|
|
|
|
|
|
(63)
|
|
(93)
|
|
Reclamation
obligations (note 12)
|
|
|
|
|
|
(606)
|
|
(630)
|
|
Change in
non-cash working capital items (note 18)
|
|
|
|
|
|
(133)
|
|
2,666
|
|
Net
cash used in operating activities
|
|
|
|
|
|
(8,480)
|
|
(12,155)
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Decrease in loans
receivable
|
|
|
|
|
|
-
|
|
250
|
|
Sale of
investments (note 7)
|
|
|
|
|
|
477
|
|
-
|
|
Purchase of
investments (note 7)
|
|
|
|
|
|
(7)
|
|
(371)
|
|
Expenditures on
property, plant and equipment (note 9)
|
|
|
|
(153)
|
|
(821)
|
||
|
Proceeds
on sale of property, plant and equipment
|
|
|
|
|
|
137
|
|
5
|
|
Decrease
(increase) in restricted cash and investments
|
|
|
|
(196)
|
|
78
|
||
|
Net
cash provided by (used in) investing activities
|
|
|
|
|
|
258
|
|
(859)
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Issuance of debt
obligations (note 13)
|
|
|
|
|
|
-
|
|
43
|
|
Repayment
of debt obligations (note 13)
|
|
|
|
|
|
(405)
|
|
(209)
|
|
Share
issues for cash, net of issue costs (note 14)
|
|
|
|
|
|
6,878
|
|
-
|
|
Share
option exercise proceeds (note 14)
|
|
|
|
|
|
77
|
|
405
|
|
Net
cash provided by financing activities
|
|
|
|
|
|
6,550
|
|
239
|
|
|
|
|
|
|
|
|
|
|
|
Decrease
in cash and cash equivalents
|
|
|
|
|
|
(1,672)
|
|
(12,775)
|
|
Cash
and cash equivalents, beginning of period
|
|
|
|
|
|
8,190
|
|
23,207
|
|
Cash
and cash equivalents, end of period
|
|
|
|
|
$
|
6,518
|
$
|
10,432
|
|
|
||||||||
|
The accompanying
notes are integral to the condensed interim consolidated financial
statements
|
||||||||
4
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
|
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
|
|
|
(Unaudited -
Expressed in CAD dollars unless otherwise noted)
|
|
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
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.
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
November 5, 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.
5
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
4.
CASH AND
CASH EQUIVALENTS
The cash and cash
equivalent balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
$
|
5,337
|
$
|
1,583
|
|
Cash in MLJV and
MWJV
|
|
|
|
471
|
|
1,397
|
|
Cash
equivalents
|
|
|
|
710
|
|
5,210
|
|
|
|
|
$
|
6,518
|
$
|
8,190
|
5.
TRADE AND
OTHER RECEIVABLES
The trade and
other receivables balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
$
|
2,701
|
$
|
2,608
|
|
|
Receivables in
MLJV and MWJV
|
|
|
|
197
|
|
1,125
|
|
|
Sales tax, other
receivables
|
|
|
|
112
|
|
290
|
|
|
|
|
|
$
|
3,010
|
$
|
4,023
|
|
6.
INVENTORIES
The inventories
balance consists of:
|
|
|
|
|
At September
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
|
|
|
|
3,078
|
|
2,826
|
|
|
|
|
$
|
5,176
|
$
|
5,450
|
|
|
|
|
|
|
|
|
|
Inventories-by
balance sheet presentation:
|
|
|
|
|
|
|
|
Current
|
|
|
$
|
3,078
|
$
|
3,352
|
|
Long-term-ore in
stockpiles
|
|
|
|
2,098
|
|
2,098
|
|
|
|
|
$
|
5,176
|
$
|
5,450
|
During the nine
months ended September 30, 2020, the Company sold all of its
uranium concentrate inventory.
6
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
7.
INVESTMENTS
The investments
balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
|
Equity
instruments
|
|
|
$
|
9,810
|
$
|
12,104
|
|
|
|
|
$
|
9,810
|
$
|
12,104
|
|
|
|
|
|
|
|
|
|
Investments-by
balance sheet presentation:
|
|
|
|
|
|
|
|
Current
|
|
|
$
|
9,717
|
$
|
-
|
|
Long-term
|
|
|
|
93
|
|
12,104
|
|
|
|
|
$
|
9,810
|
$
|
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
|
|
|
|
|
|
(477)
|
|
Purchase of
investments
|
|
|
|
|
|
7
|
|
Fair value loss
to profit and loss
|
|
|
|
|
|
(2,094)
|
|
Balance –
September 30, 2020
|
|
|
|
|
$
|
9,810
|
8.
RESTRICTED
CASH AND INVESTMENTS
The restricted
cash and investments balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
|
3,055
|
$
|
2,859
|
|
Investments
|
|
|
|
9,135
|
|
9,135
|
|
|
|
|
$
|
12,190
|
$
|
11,994
|
|
Restricted cash
and investments-by item:
|
|
|
|
|
|
|
|
Elliot Lake
reclamation trust fund
|
|
|
$
|
3,055
|
$
|
2,859
|
|
Letters of credit
facility pledged assets
|
|
|
|
9,000
|
|
9,000
|
|
Letters of credit
additional collateral
|
|
|
|
135
|
|
135
|
|
|
|
|
$
|
12,190
|
$
|
11,994
|
At September 30,
2020, investments consist of guaranteed investment certificates
with maturities of more than 90 days.
Elliot
Lake Reclamation Trust Fund
During the nine
months ended September 30, 2020, the Company deposited an
additional $803,000 into the Elliot Lake Reclamation Trust Fund and
withdrew $636,000.
Letters of
Credit Facility Pledged Assets
At September 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).
7
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
Letters of
Credit Additional Collateral
At September 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
|
|
-
|
|
138
|
|
153
|
|
Disposals
|
|
(60)
|
|
-
|
|
-
|
|
(60)
|
|
Balance
– September 30, 2020
|
$
|
104,542
|
$
|
906
|
$
|
179,619
|
$
|
285,067
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
amortization, depreciation:
|
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2019
|
$
|
(27,518)
|
$
|
(197)
|
$
|
-
|
$
|
(27,715)
|
|
Amortization
|
|
(182)
|
|
-
|
|
-
|
|
(182)
|
|
Depreciation
|
|
(1,036)
|
|
(148)
|
|
-
|
|
(1,184)
|
|
Disposals
|
|
60
|
|
-
|
|
-
|
|
60
|
|
Balance
– September 30, 2020
|
$
|
(28,676)
|
$
|
(345)
|
$
|
-
|
$
|
(29,021)
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
value:
|
|
|
|
|
|
|
|
|
|
Balance –
December 31, 2019
|
$
|
77,069
|
$
|
709
|
$
|
179,481
|
$
|
257,259
|
|
Balance –
September 30, 2020
|
$
|
75,866
|
$
|
561
|
$
|
179,619
|
$
|
256,046
|
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
$68,119,000, or 89.8%, of the September 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 September
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
$162,517,000, or 90.5%, of the September 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.
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 September
30, 2020, the Company has spent $6,716,000 on the project since its
acquisition in November 2016 (December 31, 2019:
$6,712,000).
8
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
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 earns an initial 51% interest in the project by
spending $200,000 by December 31, 2017 and it increases 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 September
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Deferred revenue
– pre-sold toll milling:
|
|
|
|
|
|
|
|
CLJV toll milling
– APG
|
|
|
$
|
37,420
|
$
|
36,321
|
|
|
|
|
$
|
37,420
|
$
|
36,321
|
|
|
|
|
|
|
|
|
|
Deferred
revenue-by balance sheet presentation:
|
|
|
|
|
|
|
|
Current
|
|
|
$
|
4,597
|
$
|
4,580
|
|
Non-current
|
|
|
|
32,823
|
|
31,741
|
|
|
|
|
$
|
37,420
|
$
|
36,321
|
The deferred
revenue liability continuity summary is as follows:
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
Deferred
Revenue
|
|
|
|
|
|
|
|
|
|
Balance -
December 31, 2019
|
|
|
|
|
$
|
36,321
|
|
Accretion
|
|
|
|
|
|
2,309
|
|
Revenue
recognized during the period (note 19)
|
|
|
|
|
|
(1,210)
|
|
Balance –
September 30, 2020
|
|
|
|
|
$
|
37,420
|
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.
9
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
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 nine
months ended September 30, 2020, the Company has recognized
$1,210,000 of toll milling revenue from the draw-down of deferred
revenue (September 30, 2019: $3,243,000), based on Cigar Lake toll
milling production of 4,550,000 pounds U308 on a 100% basis
(September 30, 2019: 12,645,000 pounds U308). The drawdown
for the nine months includes a retroactive $59,000 increase in
revenue (September 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.
Production of
Cigar Lake mine ore at the McClean Lake mill was temporarily
discontinued during the last week of March 2020, in response to the
COVID-19 pandemic, and resumed in September 2020. The current
portion of the deferred revenue liability at September 2020
reflects an assumption that the next 12 months of production will
be at annualized rates of 18 million pounds U3O8 on a 100%
basis.
11. POST-EMPLOYMENT
BENEFITS
The
post-employment benefits balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Accrued benefit
obligation
|
|
|
$
|
2,246
|
$
|
2,258
|
|
|
|
|
$
|
2,246
|
$
|
2,258
|
|
|
|
|
|
|
|
|
|
Post-employment
benefits-by balance sheet presentation:
|
|
|
|
|
||
|
Current
|
|
|
$
|
150
|
$
|
150
|
|
Non-current
|
|
|
|
2,096
|
|
2,108
|
|
|
|
|
$
|
2,246
|
$
|
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
|
|
|
|
|
|
51
|
|
Benefits
paid
|
|
|
|
|
|
(63)
|
|
Balance –
September 30, 2020
|
|
|
|
|
$
|
2,246
|
10
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
12. RECLAMATION
OBLIGATIONS
The reclamation
obligations balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Reclamation
obligations-by location:
|
|
|
|
|
|
|
|
Elliot
Lake
|
|
|
$
|
17,957
|
$
|
17,987
|
|
McClean and
Midwest Joint Ventures
|
|
|
|
14,941
|
|
14,503
|
|
Other
|
|
|
|
22
|
|
22
|
|
|
|
|
$
|
32,920
|
$
|
32,512
|
|
|
|
|
|
|
|
|
|
Reclamation
obligations-by balance sheet presentation:
|
|
|
|
|
||
|
Current
|
|
|
$
|
900
|
$
|
914
|
|
Non-current
|
|
|
|
32,020
|
|
31,598
|
|
|
|
|
$
|
32,920
|
$
|
32,512
|
The reclamation
obligations continuity summary is as follows:
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
Reclamation
Obligations
|
|
|
|
|
|
|
|
|
|
Balance -
December 31, 2019
|
|
|
|
|
$
|
32,512
|
|
Accretion
|
|
|
|
|
|
1,014
|
|
Expenditures
incurred
|
|
|
|
|
|
(606)
|
|
Balance –
September 30, 2020
|
|
|
|
|
$
|
32,920
|
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 September 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 September
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Debt
obligations:
|
|
|
|
|
|
|
|
Lease
liabilities
|
|
|
$
|
605
|
$
|
739
|
|
Loan
liabilities
|
|
|
|
35
|
|
263
|
|
Flow-through
share premium obligation (note 14)
|
|
|
|
-
|
|
902
|
|
|
|
|
$
|
640
|
$
|
1,904
|
|
|
|
|
|
|
|
|
|
Other
liabilities-by balance sheet presentation:
|
|
|
|
|
||
|
Current
|
|
|
$
|
230
|
$
|
1,372
|
|
Non-current
|
|
|
|
410
|
|
532
|
|
|
|
|
$
|
640
|
$
|
1,904
|
Debt
Obligations
At September 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
|
|
|
|
43
|
|
-
|
|
43
|
|
|
Repayments
|
|
|
|
(177)
|
|
(228)
|
|
(405)
|
|
|
Balance
– September 30, 2020
|
|
|
$
|
605
|
$
|
35
|
$
|
640
|
|
Debt
Obligations – Scheduled Maturities
The following
table outlines the Company’s scheduled maturities of its debt
obligations at September 30, 2020:
|
|
|
|
Lease
|
|
Loan
|
|
Total
Debt
|
||
|
(in thousands of
CAD dollars)
|
|
|
|
Liabilities
|
|
Liabilities
|
|
Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity analysis
– contractual undiscounted cash flows:
|
|
|
|
|
|
|
|||
|
Next 12
months
|
|
|
$
|
221
|
$
|
9
|
$
|
230
|
|
|
One to five
years
|
|
|
|
483
|
|
28
|
|
511
|
|
|
More than five
years
|
|
|
|
17
|
|
-
|
|
17
|
|
|
Total obligation
– September 30, 2020 – undiscounted
|
|
721
|
|
37
|
|
758
|
|||
|
Present value
discount adjustment
|
|
|
|
(116)
|
|
(2)
|
|
(118)
|
|
|
Total obligation
– September 30, 2020 – discounted
|
$
|
605
|
$
|
35
|
$
|
640
|
|||
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 September
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 nine months ended September 30, 2020, the Company
incurred letter of credit fees of $298,000 (September 30, 2019:
$297,000).
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 option
exercises
|
140,000
|
|
77
|
|
Share options
exercised – fair value adjustment
|
-
|
|
25
|
|
Share units
exercised – fair value adjustment
|
238,949
|
|
164
|
|
|
29,128,949
|
|
7,144
|
|
Balance –
September 30, 2020
|
626,321,102
|
$
|
1,342,611
|
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 September
30, 2020, the Company estimates that it has incurred $2,686,000 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 intends 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 was
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
– September 30, 2020
|
$
|
-
|
|
-
|
$
|
-
|
||
The warrants
noted above, issued in February 2017, expired on February 14, 2020
and, on expiry, the balance was reclassified to Contributed
Surplus.
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
September
30
|
|
Nine
Months Ended
September
30
|
||||
|
(in thousands of
CAD dollars)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Share based
compensation expense for:
|
|
|
|
|
|
|
|
|
|
Stock
options
|
$
|
(138)
|
$
|
(151)
|
$
|
(434)
|
$
|
(640)
|
|
RSUs
|
|
(273)
|
|
(224)
|
|
(760)
|
|
(819)
|
|
PSUs
|
|
(58)
|
|
(90)
|
|
(179)
|
|
(313)
|
|
Share
based compensation expense
|
$
|
(469)
|
$
|
(465)
|
$
|
(1,373)
|
$
|
(1,772)
|
As at September
30, 2020, an additional $1,731,000 in share-based compensation
expense remains to be recognized up until August 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
|
|
|
|
|
|
|
3,569,000
|
|
0.46
|
|
Exercises
(1)
|
|
|
|
|
|
|
(140,000)
|
|
0.55
|
|
Expiries
|
|
|
|
|
|
|
(1,104,000)
|
|
1.09
|
|
Forfeitures
|
|
|
|
|
|
|
(562,500)
|
|
0.69
|
|
Stock options
outstanding – September 30, 2020
|
|
|
|
15,589,743
|
$
|
0.67
|
|||
|
Stock options
exercisable – September 30, 2020
|
|
|
|
10,681,243
|
$
|
0.73
|
|||
(1)
The weighted average share
price at the date of exercise was CAD$0.69.
A summary of the
Company’s stock options outstanding at September 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
|
|
4.44
|
|
3,465,000
|
$
|
0.46
|
|||
|
$ 0.50 to $
0.74
|
|
|
|
|
2.39
|
|
6,973,143
|
|
0.64
|
|
$ 0.75 to $
0.99
|
|
|
|
|
1.44
|
|
5,151,600
|
|
0.85
|
|
Stock options
outstanding – September 30, 2020
|
|
2.53
|
|
15,589,743
|
$
|
0.67
|
|||
14
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
Options
outstanding at September 30, 2020 expire between November 2020 and
August 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:
|
|
|
|
|
Nine Months
Ended
|
|
|
|
|
|
|
September 30,
2020
|
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
|
0.27% -
0.67%
|
|
|
Expected stock
price volatility
|
|
|
|
44.16% -
52.81%
|
|
|
Expected
life
|
|
|
|
3.4
years
|
|
|
Expected dividend
yield
|
|
|
|
-
|
|
|
Fair value
per share under options granted
|
|
|
CAD$0.15
– CAD$0.25
|
||
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
|
|
3,304,750
|
|
0.39
|
|
180,000
|
|
0.38
|
|
Exercises
|
|
(238,950)
|
|
0.69
|
|
-
|
|
-
|
|
Forfeitures
|
|
(169,000)
|
|
0.59
|
|
(180,000)
|
|
0.65
|
|
Units outstanding
– September 30, 2020
|
|
5,650,899
|
$
|
0.52
|
|
2,140,000
|
$
|
0.63
|
|
Units
vested – September 30, 2020
|
|
970,670
|
$
|
0.69
|
|
820,000
|
$
|
0.65
|
17. ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS)
The accumulated
other comprehensive income (loss) balance consists of:
|
|
|
|
|
At September
30
|
|
At December
31
|
|
(in thousands of
CAD dollars)
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Cumulative
foreign currency translation
|
|
|
$
|
406
|
$
|
410
|
|
Unamortized
experience gain-post employment liability
|
|
|
|
|
||
|
Gross
|
|
|
|
983
|
|
983
|
|
Tax
effect
|
|
|
|
(259)
|
|
(259)
|
|
|
|
|
$
|
1,130
|
$
|
1,134
|
15
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
18. SUPPLEMENTAL
FINANCIAL INFORMATION
The components of
operating expenses are as follows:
|
|
|
Three
Months Ended
September
30
|
|
Nine
Months Ended
September
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
|
|
(454)
|
|
(294)
|
|
(1,001)
|
|
(1,012)
|
|
Milling,
conversion expense
|
|
(84)
|
|
(485)
|
|
(830)
|
|
(2,241)
|
|
Less
absorption:
|
|
|
|
|
|
|
|
|
|
-Mineral
properties
|
|
13
|
|
14
|
|
38
|
|
36
|
|
Cost of
services
|
|
(1,773)
|
|
(2,059)
|
|
(5,147)
|
|
(6,362)
|
|
Cost of goods and
services sold
|
|
(2,298)
|
|
(2,824)
|
|
(7,466)
|
|
(9,579)
|
|
Reclamation asset
amortization
|
|
(60)
|
|
(53)
|
|
(182)
|
|
(159)
|
|
Selling
expenses
|
|
-
|
|
-
|
|
(14)
|
|
-
|
|
Sales royalties
and non-income taxes
|
|
-
|
|
-
|
|
(64)
|
|
-
|
|
Operating
expenses
|
$
|
(2,358)
|
$
|
(2,877)
|
$
|
(7,726)
|
$
|
(9,738)
|
The components of
other income (expense) are as follows:
|
|
|
Three
Months Ended
September
30
|
|
Nine
Months Ended
September
30
|
||||
|
(in thousands of
CAD dollars)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses)
on:
|
|
|
|
|
|
|
|
|
|
Foreign
exchange
|
$
|
(81)
|
$
|
-
|
$
|
(159)
|
$
|
1
|
|
Disposal of
property, plant and equipment
(note
9)
|
|
-
|
|
5
|
|
407
|
|
5
|
|
Investment fair
value through profit (loss)
(note
7)
|
|
(1,133)
|
|
(825)
|
|
(2,094)
|
|
(1,172)
|
|
Other
|
|
(104)
|
|
(108)
|
|
(501)
|
|
(290)
|
|
Other
income (expense)
|
$
|
(1,318)
|
$
|
(928)
|
$
|
(2,347)
|
$
|
(1,456)
|
The components of
finance income (expense) are as follows:
|
|
|
Three
Months Ended
September
30
|
|
Nine
Months Ended
September
30
|
||||
|
(in thousands of
CAD dollars)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
|
60
|
$
|
141
|
$
|
216
|
$
|
479
|
|
Interest
expense
|
|
(1)
|
|
(1)
|
|
(4)
|
|
(4)
|
|
Accretion
expense
|
|
|
|
|
|
|
|
|
|
Deferred
revenue (note 10)
|
|
(772)
|
|
(801)
|
|
(2,309)
|
|
(2,402)
|
|
Post-employment
benefits (note 11)
|
|
(17)
|
|
(18)
|
|
(51)
|
|
(53)
|
|
Reclamation
obligations (note 12)
|
|
(338)
|
|
(340)
|
|
(1,014)
|
|
(1,020)
|
|
Debt
obligations (note 13)
|
|
(13)
|
|
(18)
|
|
(43)
|
|
(58)
|
|
Finance
income (expense)
|
$
|
(1,081)
|
$
|
(1,037)
|
$
|
(3,205)
|
$
|
(3,058)
|
16
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
A summary of
depreciation expense recognized in the statement of income (loss)
is as follows:
|
|
|
Three
Months Ended
September
30
|
|
Nine
Months Ended
September
30
|
||||
|
(in thousands of
CAD dollars)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
Mining, other
development expense
|
$
|
-
|
$
|
-
|
$
|
(2)
|
$
|
(2)
|
|
Milling,
conversion expense
|
|
(62)
|
|
(482)
|
|
(798)
|
|
(2,223)
|
|
Cost of
services
|
|
(47)
|
|
(72)
|
|
(147)
|
|
(206)
|
|
Exploration and
evaluation
|
|
(45)
|
|
(57)
|
|
(141)
|
|
(163)
|
|
General and
administrative
|
|
(32)
|
|
(32)
|
|
(96)
|
|
(95)
|
|
Depreciation
expense-gross
|
$
|
(186)
|
$
|
(643)
|
$
|
(1,184)
|
$
|
(2,689)
|
A summary of
employee benefits expense recognized in the statement of income
(loss) is as follows:
|
|
|
Three
Months Ended
September
30
|
|
Nine
Months Ended
September
30
|
||||
|
(in thousands of
CAD dollars)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
$
|
(1,831)
|
$
|
(1,981)
|
$
|
(5,534)
|
$
|
(6,521)
|
|
Share-based
compensation (note 16)
|
|
(469)
|
|
(465)
|
|
(1,373)
|
|
(1,772)
|
|
Termination
benefits
|
|
-
|
|
(29)
|
|
-
|
|
(512)
|
|
Employee
benefits expense
|
$
|
(2,300)
|
$
|
(2,475)
|
$
|
(6,907)
|
$
|
(8,805)
|
The change in
non-cash working capital items in the consolidated statements of
cash flows is as follows:
|
|
|
|
|
Nine
Months Ended
September
30
|
||||
|
(in thousands of
CAD dollars)
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Change in
non-cash working capital items:
|
|
|
|
|
|
|
|
|
|
Trade and other
receivables
|
|
|
|
|
$
|
1,013
|
$
|
97
|
|
Inventories
|
|
|
|
|
|
157
|
|
(36)
|
|
Prepaid expenses
and other assets
|
|
|
|
|
|
151
|
|
257
|
|
Accounts payable
and accrued liabilities
|
|
|
|
|
|
(1,454)
|
|
2,348
|
|
Change
in non-cash working capital items
|
|
|
|
|
$
|
(133)
|
$
|
2,666
|
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 nine
months ended September 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
|
|
|
2,062
|
6,197
|
2,070
|
10,329
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(2,579)
|
(5,144)
|
(3)
|
(7,726)
|
|
Exploration and
evaluation
|
|
|
(5,780)
|
-
|
-
|
(5,780)
|
|
General and
administrative
|
|
|
(19)
|
-
|
(5,700)
|
(5,719)
|
|
|
|
|
(8,378)
|
(5,144)
|
(5,703)
|
(19,225)
|
|
Segment income
(loss)
|
|
|
(6,316)
|
1,053
|
(3,633)
|
(8,896)
|
|
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
|
Uranium
concentrate sales
|
|
|
852
|
-
|
-
|
852
|
|
Environmental
services
|
|
|
-
|
6,197
|
-
|
6,197
|
|
Management fees
(note 20)
|
|
|
-
|
-
|
2,070
|
2,070
|
|
Toll milling
services–deferred revenue (note 10)
|
|
1,210
|
-
|
-
|
1,210
|
|
|
|
|
|
2,062
|
6,197
|
2,070
|
10,329
|
|
|
|
|
|
|
|
|
|
Capital additions:
|
|
|
|
|
|
|
|
Property, plant
and equipment
|
|
|
138
|
15
|
-
|
153
|
|
|
|
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
Plant and
equipment
|
|
|
|
|
|
|
|
Cost
|
|
|
99,994
|
4,546
|
908
|
105,448
|
|
Accumulated
depreciation
|
|
|
(25,473)
|
(3,148)
|
(400)
|
(29,021)
|
|
Mineral
properties
|
|
|
179,619
|
-
|
-
|
179,619
|
|
|
|
|
254,140
|
1,398
|
508
|
256,046
|
For the three
months ended September 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
|
|
|
95
|
2,065
|
583
|
2,743
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(585)
|
(1,770)
|
(3)
|
(2,358)
|
|
Exploration and
evaluation
|
|
|
(1,744)
|
-
|
-
|
(1,744)
|
|
General and
administrative
|
|
|
-
|
-
|
(2,110)
|
(2,110)
|
|
|
|
|
(2,329)
|
(1,770)
|
(2,113)
|
(6,212)
|
|
Segment income
(loss)
|
|
|
(2,234)
|
295
|
(1,530)
|
(3,469)
|
|
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
2,065
|
-
|
2,065
|
|
Management fees
(note 20)
|
|
|
-
|
-
|
583
|
583
|
|
Toll milling
services–deferred revenue (note 10)
|
|
95
|
-
|
-
|
95
|
|
|
|
|
|
95
|
2,065
|
583
|
2,743
|
18
|
|
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
|
For the nine
months ended September 30, 2019, reportable segment results were as
follows:
|
(in thousands of
CAD dollars)
|
|
|
Mining
|
Closed
Mines
Services
|
Corporate
and
Other
|
Total
|
|
|
|
|
|
|
|
|
|
Statement of Operations:
|
|
|
|
|
|
|
|
Revenues
|
|
|
3,243
|
6,866
|
1,484
|
11,593
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(3,376)
|
(6,362)
|
-
|
(9,738)
|
|
Exploration and
evaluation
|
|
|
(11,846)
|
-
|
-
|
(11,846)
|
|
General and
administrative
|
|
|
(17)
|
-
|
(5,671)
|
(5,688)
|
|
|
|
|
(15,239)
|
(6,362)
|
(5,671)
|
(27,272)
|
|
Segment income
(loss)
|
|
|
(11,996)
|
504
|
(4,187)
|
(15,679)
|
|
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
6,866
|
-
|
6,866
|
|
Management fees
(note 20)
|
|
|
-
|
-
|
1,484
|
1,484
|
|
Toll milling
services–deferred revenue (note 10)
|
|
3,243
|
-
|
-
|
3,243
|
|
|
|
|
|
3,243
|
6,866
|
1,484
|
11,593
|
|
|
|
|
|
|
|
|
|
Capital additions:
|
|
|
|
|
|
|
|
Property, plant
and equipment
|
|
|
549
|
272
|
38
|
859
|
|
|
|
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
Plant and
equipment
|
|
|
|
|
|
|
|
Cost
|
|
|
99,108
|
4,718
|
908
|
104,734
|
|
Accumulated
depreciation
|
|
|
(23,507)
|
(3,102)
|
(272)
|
(26,881)
|
|
Mineral
properties
|
|
|
179,393
|
-
|
-
|
179,393
|
|
|
|
|
254,994
|
1,616
|
636
|
257,246
|
For the three
months ended September 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
|
|
|
696
|
2,222
|
560
|
3,478
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
(818)
|
(2,059)
|
-
|
(2,877)
|
|
Exploration and
evaluation
|
|
|
(4,591)
|
-
|
-
|
(4,591)
|
|
General and
administrative
|
|
|
(2)
|
-
|
(1,655)
|
(1,657)
|
|
|
|
|
(5,411)
|
(2,059)
|
(1,655)
|
(9,125)
|
|
Segment income
(loss)
|
|
|
(4,715)
|
163
|
(1,095)
|
(5,647)
|
|
|
|
|
|
|
|
|
|
Revenues – supplemental:
|
|
|
|
|
|
|
|
Environmental
services
|
|
|
-
|
2,222
|
-
|
2,222
|
|
Management fees
(note 20)
|
|
|
-
|
-
|
560
|
560
|
|
Toll milling
services–deferred revenue (note 10)
|
|
696
|
-
|
-
|
696
|
|
|
|
|
|
696
|
2,222
|
560
|
3,478
|
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
September
30
|
|
Nine
Months Ended
September
30
|
||||
|
(in thousands of
CAD dollars)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Management
fees:
|
|
|
|
|
|
|
|
|
|
Base and variable
fees
|
$
|
509
|
$
|
453
|
$
|
1,523
|
$
|
1,374
|
|
Commission
fees
|
|
74
|
|
107
|
|
247
|
|
110
|
|
Discretionary
fees
|
|
-
|
|
-
|
|
300
|
|
-
|
|
|
$
|
583
|
$
|
560
|
$
|
2,070
|
$
|
1,484
|
At September 30,
2020, accounts receivable includes $350,000 (December 31, 2019:
$236,000) due from UPC with respect to the fees indicated
above.
Korea
Electric Power Corporation (“KEPCO”)
As at September
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 nine
months ended September 30, 2020, the Company incurred investor
relations, administrative service fees and certain pass-through
expenses of $191,000 (September 30, 2019: $199,000) 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 September 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
September
30
|
|
Nine
Months Ended
September
30
|
||||
|
(in thousands of
CAD dollars)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
$
|
(465)
|
$
|
(407)
|
$
|
(1,420)
|
$
|
(1,536)
|
|
Share-based
compensation
|
|
(383)
|
|
(384)
|
|
(1,133)
|
|
(1,499)
|
|
Termination
benefits
|
|
-
|
|
-
|
|
-
|
|
(481)
|
|
Key
management personnel compensation
|
$
|
(848)
|
$
|
(791)
|
$
|
(2,553)
|
$
|
(3,516)
|
21. INCOME
TAXES
For the nine
months ended September 30, 2020, Denison recognized deferred tax
recoveries of $1,260,000. 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 nine
months ended September 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 September
30, 2020 and December 31, 2019:
|
|
|
|
|
|
|
September
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
|
|
|
$
|
6,518
|
$
|
8,190
|
|
Trade and other
receivables
|
|
Category
B
|
|
|
|
3,010
|
|
4,023
|
|
Investments
|
|
|
|
|
|
|
|
|
|
Equity
instruments-shares
|
|
Category
A
|
|
Level
1
|
|
9,717
|
|
11,971
|
|
Equity
instruments-warrants
|
|
Category
A
|
|
Level
2
|
|
93
|
|
133
|
|
Restricted
cash and equivalents
|
|
|
|
|
|
|
|
|
|
Elliot Lake
reclamation trust fund
|
|
Category
B
|
|
|
|
3,055
|
|
2,859
|
|
Credit
facility pledged assets
|
|
Category
B
|
|
|
|
9,000
|
|
9,000
|
|
Reclamation
letter of credit collateral
|
|
Category
B
|
|
|
|
135
|
|
135
|
|
|
|
|
|
|
$
|
31,528
|
$
|
36,311
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
Category
C
|
|
|
|
6,480
|
|
7,930
|
|
Debt
obligations
|
|
Category
C
|
|
|
|
640
|
|
1,002
|
|
|
|
|
|
|
$
|
7,120
|
$
|
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 on December 12, 2017, the Company filed a Request for
Arbitration between the Company and UI under the Arbitration Rules
of the London Court of International Arbitration. Hearings in front
of the arbitration panel were held in December 2019. The final
award was rendered by an arbitration panel on July 27, 2020, with
the panel finding in favour of Denison and ordering UI to pay the
Company USD$10,000,000 plus interest at a rate of 5% per annum from
November 16, 2016, plus certain legal and arbitration
costs.
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. Proceedings in front of the
arbitration panel were held in October 2020, and the parties have
exchanged final written post-hearing submissions.
24. SUBSEQUENT
EVENTS
Share
Issue
On October 14,
2020, the Company completed a public offering of 51,347,321 common
shares at a price of USD$0.37 per share for gross proceeds of
approximately CAD$24,962,000 (USD$18,999,000), which included the
partial exercise by the underwriters of their over-allotment
option. The proceeds of the offering are anticipated to be used to
fund evaluation and environmental assessment activities on
Denison’s Wheeler River project, as well as for general
working capital purposes.
23
|
Exhibit 99.2
MANAGEMENT’S DISCUSSION & ANALYSIS
|
MANAGEMENT’S DISCUSSION & ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2020
TABLE OF CONTENTS
|
2020
THIRD QUARTER PERFORMANCE HIGHLIGHTS
|
2
|
|
ABOUT
DENISON
|
2
|
|
RESULTS
OF OPERATIONS
|
4
|
|
Wheeler
River Project
|
7
|
|
Other
Properties
|
11
|
|
LIQUIDITY
AND CAPITAL RESOURCES
|
12
|
|
OUTLOOK
FOR 2020
|
15
|
|
ADDITIONAL
INFORMATION
|
16
|
|
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
|
17
|
This
Management’s Discussion and Analysis (‘MD&A’)
of Denison Mines Corp. and its subsidiary companies and joint
arrangements (collectively, ‘Denison’ or the
‘Company’) provides a detailed analysis of the
Company’s business and compares its financial results with
those of the previous year. This MD&A is dated as of November
5, 2020 and should be read in conjunction with the Company’s
unaudited interim condensed consolidated financial statements and
related notes for the three and nine months ended September 30,
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’),
applicable to the preparation of the interim financial statements,
including International Accounting Standards (‘IAS’)
34, Interim Financial Reporting. Readers are also encouraged to
consult the audited consolidated financial statements and MD&A
for the year ended December 31, 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
|
■
Resumed evaluation and exploration field activities at Wheeler
River
In July 2020,
Denison announced the resumption of evaluation field activities at
the Company’s 90% owned Wheeler River Uranium Project
(‘Wheeler River’ or the ‘Project’) with the
initiation of an In-Situ Recovery (‘ISR’) field program
(‘2020 Field Program’) focused on the high-grade
Phoenix uranium deposit (‘Phoenix’). Field activities
were gradually expanded late in the third quarter to allow for the
initiation the Company’s planned exploration activities. 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 the 2020 ISR Field Program
In October 2020,
Denison announced the safe and successful completion of the 2020
Field Program, which was designed to build additional confidence in
the results of an independent hydrogeologic model developed by
Petrotek Corporation (‘Petrotek’) for Phoenix, and to
support the design and permitting of further field work expected to
be incorporated into a future Feasibility Study (‘FS’).
The hydrogeologic model developed for Phoenix is based on actual
field data collected during an extensive field test program
completed at Phoenix in 2019 (the ‘2019 Field Test’),
with the model and associated simulations having already
demonstrated "proof-of-concept" for the application of the ISR
mining method at Phoenix, with respect to potential operational
extraction and injection rates (see press release dated June 4,
2020).
■
Capitalized the Company to fund future evaluation and environmental
assessment activities for Wheeler River
In October 2020,
Denison successfully completed a public offering of 51,347,321
common shares at a price of US$0.37 per common share for gross
proceeds of CAD$24,962,000 (US$18,999,000), which includes
4,347,321 common shares granted to the underwriters through the
exercise, in part, of an over-allotment option. The proceeds of the
offering are anticipated to be used to fund evaluation and
environmental assessment (‘EA’) activities on the
Wheeler River project, as well as for general working capital
purposes.
Denison Mines
Corp. was formed under the laws of Ontario and is a reporting
issuer in all Canadian provinces and territories. Denison’s
common shares are listed on the Toronto Stock Exchange (the
‘TSX’) under the symbol ‘DML’ and on the
NYSE American exchange under the symbol
‘DNN’.
Denison is a
uranium exploration and development company with interests focused
in the Athabasca Basin region of northern Saskatchewan, Canada. The
Company’s flagship project is the 90% owned Wheeler River
Uranium Project, which is the largest undeveloped uranium project
in the infrastructure rich eastern portion of the Athabasca Basin
region. 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 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.
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’).
2
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
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 social and economic disruptions that have
emerged, or could emerge, 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 the Company’s most updated plans
for the year.
SELECTED QUARTERLY FINANCIAL INFORMATION
|
(in
thousands)
|
|
As at
September 30,
2020
|
|
As at
December 31,
2019
|
|
|
|
|
|
|
|
Financial Position:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
6,518
|
$
|
8,190
|
|
Working
capital(1)
|
$
|
10,773
|
$
|
1,597
|
|
Property, plant
and equipment
|
$
|
256,046
|
$
|
257,259
|
|
Total
assets
|
$
|
293,557
|
$
|
299,998
|
|
Total long-term
liabilities(2)
|
$
|
75,915
|
$
|
74,903
|
(1)
At September 30, 2020, the
Company’s working capital includes $9,717,000 in portfolio
investments and a non-cash deferred revenue liability of $4,597,000
(December 31, 2019 – $nil portfolio investments and non-cash
deferred revenue liability 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
|
|
2020
|
|
2019
|
|
(in
thousands, except for per share amounts)
|
|
Q3
|
|
Q2
|
|
Q1
|
|
Q4
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations:
|
|
|
|
|
|
|
|
|
||
|
Total
revenues
|
$
|
2,743
|
$
|
2,926
|
$
|
4,660
|
$
|
3,956
|
||
|
Net
loss
|
$
|
(5,482)
|
$
|
(1,043)
|
$
|
(6,663)
|
$
|
(1,498)
|
||
|
Basic and diluted
loss per share
|
$
|
(0.01)
|
$
|
(0.00)
|
$
|
(0.01)
|
$
|
(0.00)
|
||
|
|
|
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
(in
thousands, except for per share amounts)
|
|
Q3
|
|
Q2
|
|
Q1
|
|
Q4
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations:
|
|
|
|
|
|
|
|
|
||
|
Total
revenues
|
$
|
3,478
|
$
|
4,139
|
$
|
3,976
|
$
|
4,144
|
||
|
Net
loss
|
$
|
(6,424)
|
$
|
(4,884)
|
$
|
(5,335)
|
$
|
(13,642)
|
||
|
Basic and diluted
loss per share
|
$
|
(0.01)
|
$
|
(0.01)
|
$
|
(0.01)
|
$
|
(0.02)
|
||
|
|
|
|
|
|
|
|
|
|
||
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.
●
Revenues from the Closed
Mines group fluctuate due to the timing of projects, which vary
throughout the year in the normal course of business.
3
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
●
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. Due to restrictions related to the COVID-19 pandemic,
the 2020 exploration program did not commence until late in the
third quarter and will run until December, 2020.
●
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 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 third
quarter of 2020 reflects a significant reduction in evaluation
expenditures resulting from the Company’s response to
COVID-19 and other prudent fiscal 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 currently processing 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. In
July 2020, the operators of both the CLVJ and the MLJV announced
that mining and milling operations would restart in September 2020.
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 resulted in a decrease in revenue
recognized by Denison, the impact was non-cash and was limited to a
reduction in the drawdown of the Company’s deferred revenue
balance.
During the three
and nine months ended September 30, 2020, the McClean Lake mill
processed 0.4 and 4.6 million pounds U3O8 for the CLJV,
respectively (September 30, 2019 – 2.7 and 12.6 million
pounds U3O8) and recorded
toll milling revenue of $95,000 and $1,210,000, respectively
(September 30, 2019 – $696,000 and $3,243,000). The decrease
in toll milling revenue in the current three and nine month
periods, as compared to the prior year, is predominantly due to the
decrease in mill production in the current periods resulting from
the shut-down of the Cigar Lake mine, which commenced in late March
2020 and concluded in mid-September 2020.
During the three
and nine months ended September 30, 2020, the Company also recorded
accounting accretion expense of $772,000 and $2,309,000,
respectively, on the toll milling deferred revenue balance
(September 30, 2019 – $801,000 and $2,402,000). The
annual accretion expense will decrease over the life of the
contract as the deferred revenue liability decreases over
time.
Mineral Sales
Mineral sales
revenue for the three and nine months ended September 30, 2020 was
$nil and $852,000, respectively (September 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.
4
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
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 nine months ended
September 30, 2020 was $2,065,000 and $6,197,000, respectively
(September 30, 2019 - $2,222,000 and $6,866,000). The decrease in
revenue during the three and nine months ended September 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 nine months ended September 30, 2020, revenue from the
Company’s management contract with UPC was $583,000 and
$2,070,000, respectively (September 30, 2019 - $560,000 and
$1,484,000). The increase in revenues during the nine months ended
September 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’), an increase in commission-based
management fees, as well as an increase in discretionary management
fees due to a $300,000 fee awarded to Denison related to
non-routine activities performed by the Company. The increase in
revenues during the three months ended September 30, 2020, compared
to the prior year, was due to an increase in NAV-based management
fees, slightly offset by a decrease in commission-based fees.
UPC’s balance sheet consists primarily of uranium held either
in the form of U3O8 or UF6, which is
accounted for at its fair value. The increase in NAV-based
management fees in both the three and nine months ended September
30, 2020 was due to the increase in the average fair value of
UPC’s uranium holdings during the three and nine months ended
September 30, 2020, compared to the prior year, resulting from
higher uranium spot prices during the second and third quarters of
2020. Denison earns a 1% commission on the gross value of
UPC’s uranium purchases and sales. The decrease in
commission-based management fees during the three months ended
September 30, 2020 was due to a decrease in uranium purchases and
sales by UPC during the current period, while the increase in
commission-based fees in the nine-months ended September 30, 2020,
compared to the prior year, was due to an increase in uranium
purchase and sales transactions, as compared to the prior
year.
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 nine months ended September 30, 2020 were
$585,000 and $2,579,000, respectively (September 30, 2019 –
$818,000 and $3,376,000), including depreciation expense relating
to the McClean Lake mill of $62,000 and $798,000 (September 30,
2019 - $482,000 and $2,223,000), as a result of processing
approximately 0.4 and 4.6 million pounds U3O8, respectively,
for the CLJV (September 30, 2019 – 2.7 and 12.6 million
pounds).
In the three and
nine months ended September 30, 2020, operating expenses also
included development and other operating costs related to the MLJV
of $523,000 and $1,781,000 (September 30, 2019 – $336,000 and
$1,153,000). The development and other operating costs for the
three months ended September 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 nine months ended
September 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)
$823,000 in costs related to SABRE. As a result of the COVID-19
pandemic, the operator of the MLJV has decided to defer the
completion of the SABRE mining test, originally planned for 2020,
until 2021.
Closed Mine Services
Operating
expenses during the three and nine months ended September 30, 2020
totaled $1,770,000 and $5,144,000 respectively (September 30, 2019
- $2,059,000 and $6,362,000). The expenses relate primarily to care
and maintenance services provided to clients, and include labour
and other costs.
5
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
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 nine months ended September 30, 2020, Denison’s share of
exploration and evaluation expenditures were $1,744,000 and
$5,780,000, respectively (September 30, 2019 - $4,591,000 and
$11,846,000). The decrease in exploration and evaluation
expenditures during the three and nine months ended September 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 field season (January to
mid-April) and summer field season (June to mid-October). Due to
the COVID-19 pandemic, the timing of exploration expenditures in
2020 is slightly different than in past years, with the majority of
expenditures deferred until the third and fourth
quarter.
The following
tables summarize the 2020 exploration and evaluation activities
completed through October 27, 2020. The exploration drilling
relates to the Company’s exploration program at Wheeler
River, while the evaluation drilling relates to the installation of
regional groundwater sampling holes as part of the Wheeler River
2020 Field Program. All exploration and evaluation expenditure
information in this MD&A relates to the three and nine months
ending September 30, 2020.
|
CANADIAN EXPLORATION ACTIVITIES
|
|||||
|
Property
|
Denison’s ownership
|
Exploration
drilling(6)
|
Other activities
|
||
|
Wheeler
River
|
90%(1)
|
5,460 m (12
holes)
|
-
|
|
|
|
Waterbury
Lake
|
66.71%(2)
|
-
|
Geophysical
surveys
|
|
|
|
Murphy
Lake
|
100% (3)
|
-
|
Geophysical
surveys
|
|
|
|
Moon
Lake
|
55.55%(4)
|
-
|
Geophysical
surveys
|
|
|
|
Moon Lake
North
|
100%(3)
|
-
|
Geophysical
surveys
|
|
|
|
Moon Lake
South
|
75%(5)
|
-
|
Geophysical
surveys
|
|
|
|
South
Dufferin
|
100%(3)
|
-
|
Soil
sampling
|
|
|
|
Total
|
|
5,460 m (12 holes)
|
|
||
Notes:
(1) The
Company’s ownership interest as at September 30, 2020. JCU
(Canada) Exploration Company Limited (‘JCU’) is funding
their 10% portion of exploration and evaluation expenditures during
2020 and ownership interests are unchanged for 2020.
(2) The
Company’s ownership position as at September 30, 2020. The
partner, Korea Waterbury Uranium Limited Partnership
(‘KWULP’), has elected not to fund the 2020 exploration
program and will dilute its ownership interest. As a result,
Denison’s ownership will increase.
(3) The
Company’s ownership position as at September 30,
2020.
(4) The
Company’s ownership position as at December 31, 2019. The
partner, Uranium One Inc. has elected not to fund the 2020
exploration program and will dilute its ownership interest. As a
result, Denison’s ownership interest will
increase.
(5) In accordance
with the January 2016 letter agreement with CanAlaska Uranium Ltd,
Denison ownership interest increased to 75% in the Moon Lake South
claim in February 2020.
(6) The Company
reports total exploration metres drilled and the number of holes
that were successfully completed to their target
depth.
6
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
|
CANADIAN EVALUATION ACTIVITIES
|
||||
|
Property
|
Denison’s ownership
|
Evaluation drilling(3)
|
Other activities
|
|
|
Wheeler
River
|
90%(1)
|
705 m (5 small
diameter wells)
|
ISR Field
Testing,
Engineering,
Environmental Assessment
|
|
|
Waterbury
Lake
|
66.71%(2)
|
-
|
Concept Study,
PEA Activities
|
|
|
Total
|
|
705 m (5 holes)
|
|
|
Notes:
(1) The
Company’s ownership interest as at September 30, 2020. JCU is
funding their 10% portion of exploration and evaluation
expenditures during 2020 and ownership interests are unchanged for
2020.
(2) The
Company’s ownership position as at September 30, 2020. The
partner, KWULP, has elected not to fund the 2020 evaluation program
and will dilute its ownership interest. As a result,
Denison’s ownership will increase.
(3) Small
diameter evaluation drilling includes HQ/PQ sized diamond drilling
of new holes for the purposes of regional groundwater sampling.
Figures include total evaluation metres drilled and total number of
holes completed.
The
Company’s land position in the Athabasca Basin, as of
September 30, 2020, is illustrated in the figure below. The
Company’s Athabasca land package did not change during the
third quarter of 2020, remaining at 268,725 hectares (204
claims).
A PFS was
completed for Wheeler River in late 2018, considering the potential
economic merit of developing the Phoenix deposit as an ISR
operation and the Gryphon deposit as a conventional underground
mining operation.
Further details
regarding Wheeler River, including the estimated mineral reserves
and resources, are provided in the Technical Report for the Wheeler
River project titled ‘Pre-feasibility Study Report for the
Wheeler River Uranium Project, Saskatchewan, Canada’ with an
effective date of September 24, 2018 (‘PFS Technical
Report’). A copy of the PFS Technical Report is available on
Denison’s website and under its profile on each of SEDAR and
EDGAR.
7
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
Given recent
social, financial and market disruptions in connection with
COVID-19, and certain fiscal prudence measures, Denison suspended
certain activities at Wheeler River, including the formal parts of
the EA program, which is on the critical path to achieving the
project development schedule outlined in the PFS Technical Report.
The Company is not currently able to estimate the impact to the
project development schedule outlined in the PFS Technical Report,
and users are cautioned that certain of the estimates provided
therein, particularly regarding the start of pre-production
activities in 2021 and first production in 2024 should not be
relied upon.
The location of
the Wheeler River property, as well as the Phoenix and Gryphon
deposits, and existing and proposed infrastructure, is shown on the
map provided below.
Evaluation Program
During the three
and nine months ended September 30, 2020, Denison’s share of
evaluation costs at Wheeler River were $683,000 and $2,424,000,
respectively (September 30, 2019 - $4,062,000 and
$6,741,000).
The Denison
project team have safely and successfully completed the 2020 Field
Program largely during the third quarter, with adherence to strict
protocols for the prevention of COVID-19 in the workplace. During
the field program, hydrogeological data using the well-field that
was developed as part of the 2019 Field Test was subjected to
verification testing for comparison to previous results. In
addition, five regional wells were installed to determine
groundwater movement to support the EA, where it is expected the
Company will have to demonstrate an understanding of the existing
regional groundwater quality and the potential impact of a freeze
containment system on groundwater movement.
8
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
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 Program. The purpose
of the additional test work completed in 2020 was 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. The hydrogeological data collected as part of the 2020
Field Program 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 support
the design and permitting of field tests in future years, which are
expected to support a future FS.
Key
elements of the completed 2020 Field Program included:
●
Hydrogeological test work
17 pump and
injection tests were completed between Test Area 1 and Tests Area 2
at Phoenix Zone A. The data collected from these tests will
supplement the extensive dataset acquired as part of the 2019 Field
Test and is expected to provide additional insight into individual
well capacities and the overall hydrogeological network of the
deposit areas.
●
Permeameter Analysis
Over 1,000
additional drill core samples were collected from historic holes,
dried, and analyzed for permeability and porosity. The samples were
selected to refine our understanding of the mineralized
hydrogeologic horizons, including the low permeability basement
rocks, and the overlying sandstone.
●
Rock Mechanics
Mineralized
core samples were collected and shipped to SNC Lavalin (Saskatoon)
for rock mechanics tests including tensile strength and uniaxial
compressive strength. The samples targeted various previously
identified hydrogeologic units including the Upper Clay Zone, Lower
Clay Zone and High-Grade Friable Zone. The results from these tests
will be utilized to better define the design of certain
permeability enhancement techniques for subsequent field
programs.
●
Groundwater Sampling
Groundwater
samples were collected from eight different environmental
monitoring wells in the Phoenix deposit area. The sampling occurred
at several horizons within each well, including horizons above,
below and within the Phoenix ore zone. The samples have been sent
to the Saskatchewan Research Council (‘SRC’) for
analysis. Once received, the data from these samples will be
utilized to support the design and permitting of additional field
tests expected to be incorporated into a future FS.
●
Installation of Additional Environmental Monitoring
Wells
Five
additional monitoring wells were installed in two clusters, located
approximately 500 metres northeast of Phoenix and 750 metres
southeast of Phoenix. The additional monitoring wells will allow
for the collection of groundwater flow information at locations
further away from the Phoenix deposit than had been previously
studied, providing additional data for the site groundwater model
– which will allow for proper long-term monitoring and the
modelling of groundwater impacts through construction, operations
and decommissioning, each of which will be an important element of
the effects assessments in an Environmental Impact Statement
(‘EIS’).
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 is undertaking
various studies and assessments as part of the EA process, which
are intended to culminate in the preparation of the project
EIS.
9
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
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. 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
In preparation
for the future re-start of the formal EA process, Denison focused
its efforts in the third quarter on several areas designed to
progress the Project’s effects assessment as well as the
draft submission of the EIS. Two key components of the work
completed in the quarter are the development of an EA design basis,
as well as the installation and testing of additional regional
groundwater sampling wells to further establish baseline
conditions.
The EA design
basis is determined in order to predict, with some certainty, each
Project output that has the potential to impact the environment
from the start of construction through final decommissioning. The
EA design basis includes the following Project
outputs:
●
Air emissions from all
anticipated sources;
●
Project
footprint;
●
Water management, with intake
and effluent quality and volumes;
●
Waste management, included
contaminate estimates and volumes;
●
Truck transport, including
load details; and
●
Workforce
requirements.
Different from
the engineering design, the EA basis should provide enough
flexibility to accommodate design changes as the Project advances
through to completion of a future FS, as well as detailed design,
and operations. The outputs must be defensible to the regulators
with enough engineering design support or examples from similar
operations to ensure the predicted assessment does not overestimate
or underestimate impacts to the environment.
A major focus for
regulators and the public for an ISR mine is expected to be the
potential impacts to the groundwater and perceived impacts to
nearby lakes. Accordingly, Denison installed five additional
groundwater monitoring wells at locations selected based on
regional and local groundwater movement. Collection of data on
groundwater flow and chemistry has commenced, with well screens set
within each well at depths where there is higher sandstone
fracturing in order to provide data on potential pathways for water
movement from the deposit. The combined data will be analyzed to
develop a conceptual site model predicting the effects to the
surface environment, if any, from the proposed ISR mining
operation. Additionally, the information collected through this
process is expected to be important in the development of
monitoring and mitigation plans to support mine operations in the
future.
Environmental Baseline Data Collection
In October 2020,
Denison Mines Corp. entered into an agreement with Aquatic Life
Ltd. (‘Aquatic Life’) for use of their remote
monitoring equipment and related reporting platforms and predictive
algorithms. The monitoring equipment will provide on-demand
reporting of water flow and chemistry data at the five regional
groundwater monitoring wells. The agreement allows Denison to
utilize and evaluate the equipment at no cost, in exchange for
providing Aquatic Life with a test site for the equipment as well
as support in the development of its firmware.
Exploration Program
Denison’s
share of exploration costs at Wheeler River were $801,000 and
$1,195,000 during the three and nine months ended September 30,
2020, respectively (September 30, 2019 – $693,000 and
$2,467,000).
The 2020
exploration drilling program at Wheeler River commenced late in the
third quarter. The program is expected
to include approximately 12,000 metres of diamond drilling, planned
in 27-30 drill holes. The drill program is designed to be executed
in several phases, with an initial focus on the area proximal to
the Phoenix deposit where further exploration and delineation
drilling is warranted to identify potential additional
mineralization that could be included as part of a future FS. Of
particular focus is the area around Zone B, where previous
exploration results suggest that the potential for additional
mineralization remains outside of the current extents of the
mineral resource. The program has also been designed to test for
additional mineralization at Phoenix Zone C (where there are
previous mineralized intercepts, but where no mineral resource is
currently estimated) and to explore regional target areas elsewhere
on the property with the potential to produce a discovery that
could become a satellite deposit potentially amenable to ISR
mining.
10
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
As
of October 27, 2020, the Company has completed approximately 5,460
metres of drilling, representing roughly 44% of the planned
program. A total of 12 holes have been completed to target depth,
as well as three holes that were abandoned either due to excessive
deviation or drilling difficulties. All drill holes completed to
date have been located outside of the previously delineated
mineralized zones, with results highlighted by the following
mineralized intercepts:
●
WR-765D1 (Phoenix Zone B) intersected uranium
mineralization straddling the unconformity contact, grading 0.39%
eU3O8
over 3.8 metres (from 399.85 to 403.65
metres) – approximately 15.0 metres east of WR-333 (which
previously intersected 14.6% U3O8
over 6.0 metres);
and
●
WR-771 (Phoenix Zone C) encountered uranium
mineralization approximately 4 metres below the unconformity
contact, grading 0.86% eU3O8
over 1.2 metres (from 375.15 to 376.35
metres) – approximately 28.8 metres to the southwest of
WR-368 (which previously intersected 1.59% U3O8
over 2.0 metres).
The
remaining targets at Phoenix are continually re-prioritized by
incorporating the results of each completed hole in real-time.
Dependent on results, exploration drilling at Phoenix is expected
to be completed in early to mid-November 2020, with the expectation
that the focus of the exploration drill program will shift to
regional drill targets that have been prioritized based on their
potential to result in the discovery of satellite uranium deposits
that may be amenable to ISR mining.
Exploration Program
Denison’s
share of exploration costs at its exploration pipeline properties
during the three and nine months ended September 30, 2020 was
$308,000 and $1,830,000 respectively (September 30, 2019 –
$99,000 and $2,700,000).
During the third
quarter of 2020, the Company completed a helicopter-supported soil
sampling program on its wholly-owned South Dufferin Project. A
total of 3,042 soil samples were collected across two sampling
grids to identify surface geochemical anomalies that may be
indicative of a uranium mineralizing system. The results of this
program will be used in conjunction with existing geophysical data
to plan future exploration activities on the South Dufferin
Project. All samples have been submitted to ALS Laboratories for
analysis. Approximately 75% of the sample results have been
received to date, with the remainder expected in early November
2020. Completed analysis and interpretation of the results of the
soil sampling program is expected to occur during the fourth
quarter.
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 nine months ended September 30, 2020 was
$90,000 and $111,000, respectively (September 30, 2019 - $nil and
$nil). The costs are predominantly related to the concept study
completed for the J Zone deposit on the Waterbury Lake property in
July 2020 (‘J Zone Concept Study’). The J Zone Concept
Study examined the potential future development of the J Zone
deposit using the ISR mining method. The J Zone 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.
The costs in the
third quarter also reflect the initiation of an independent
Preliminary Economic Analysis (‘PEA’), the results of
which are expected in the fourth quarter of 2020. The cost of
completing the PEA is included in the Company’s current
estimate of mineral property exploration and evaluation
expenditures in the OUTLOOK FOR 2020.
Waterbury Lake is
located within the north 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.
The internal J
Zone Concept Study undertaken by the Company on the J Zone deposit
is preliminary in nature, and the results may not be maintained
once through the advancement of a PEA or other subsequent
studies.
11
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
GENERAL AND ADMINISTRATIVE EXPENSES
During the three
and nine months ended September 30, 2020, total general and
administrative expenses were $2,110,000 and $5,719,000,
respectively (September 30, 2019 - $1,657,000 and $5,688,000).
These costs are mainly comprised of head office salaries and
benefits, office costs in multiple regions, audit and regulatory
costs, legal fees, investor relations expenses, project costs, and
all other costs related to operating a public company with listings
in Canada and the United States. The increase in general and
administrative expenses during the three months ended September 30,
2019, as compared to the prior period, was predominantly the result
of an increase in legal costs related to arbitration proceedings
between the Company and a third party, slightly offset by a
decrease in travel and investor relations expenses driven by
reduced investor relations opportunities due to the COVID-19
pandemic. The increase in general and administrative expense during
the nine months ended September 30, 2020 is due to the increase in
legal costs discussed above, offset by a decrease in employee costs
driven by a decrease in the cash bonus expense in the second
quarter. The cash 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 performance from 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 a grant of
restricted share units (‘RSU’s’) in 2020 rather
than cash, and these RSUs are being expensed over a three-year
vesting period. Cash bonuses, by comparison, are fully expensed
when they are approved.
OTHER INCOME AND EXPENSES
During the three
and nine months ended September 30, 2020, the Company recognized
losses of $1,318,000 and $2,347,000 in other income/expense,
respectively (September 30, 2019 – losses of $928,000 and
$1,456,000). The losses in the three and nine months ended
September 30, 2020 are predominantly due to losses of $1,133,000
and $2,094,000, respectively (September 30, 2019 – losses of
$825,000 and $1,172,000) recognized on investments carried at fair
value. 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.
EQUITY SHARE OF LOSS FROM ASSOCIATES
During the fourth
quarter of 2019, the Company determined that it no longer exercised
significant influence over 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 nine
months ended September 30, 2020, the Company recorded $nil in
equity gain or loss from associates. During the three and nine
months ended September 30, 2019, the Company recognized losses of
$220,000 and $426,000, respectively, from its equity share of
GoviEx. The loss in the three months ended September 30, 2019 was
primarily due to an equity loss of $218,000, while the loss during
the nine months ended September 30, 2019 was due to an equity loss
of $678,000, offset by a dilution gain of $252,000.
Cash and cash
equivalents were $6,518,000 at September 30, 2020 (December 31,
2019 – $8,190,000).
The decrease in
cash and cash equivalents of $1,672,000 since December 31, 2019 was
due to net cash used in operations of $8,480,000, offset by net
cash provided by investing activities of $258,000 and net cash
provided by financing activities of $6,550,000.
Net cash used in
operating activities of $8,480,000 was predominantly due to the net
loss for the period, adjusted for non-cash items and changes in
working capital items.
Net cash provided
by investing activities of $258,000 consists primarily of the
proceeds from the sale of certain portfolio investments and
property, plant and equipment, offset by a net increase in
restricted cash related to the annual funding of the Elliot Lake
reclamation trust less current year withdrawals, as well as
expenditures for property, plant and equipment.
Net cash provided
by financing activities of $6,550,000 relates primarily to the net
proceeds from its public offering of common shares pursuant to the
2020 Short Form Prospectus (defined below) pursuant to which the
Company issued 28,750,000 common shares at a price of USD$0.20 on
April 6, 2020 (‘April 2020 Offering’), 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.
12
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
On June 2, 2020,
the Company filed a short form base shelf prospectus (‘2020
Shelf Prospectus’) with the securities regulatory authorities
in each of the provinces and territories in Canada and in the
United States. 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 Shelf Prospectus, for
an aggregate offering amount of up to $175,000,000 during the 25
month period beginning on June 2, 2020. In October 2020, the
Company issued 51,347,321 common shares pursuant to a prospectus
supplement to the 2020 Shelf Prospectus. See SUBSEQUENT EVENTS for
further details.
Refer to OUTLOOK
FOR 2020 below for details of the Company’s working capital
requirements for the remainder of 2020.
Use of Proceeds
2019 Flow Through Financing
As at September
30, 2020, the Company has spent $2,686,000 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
April 2020 Offering are being utilized to supplement the
Company’s cash working capital to fund its business
operations through 2020 and into 2021. During the period between
the close of the financing in April and September 30, 2020, the
Company’s use of proceeds has been in line with that
disclosed in the 2020 Short Form Prospectus.
The use of
proceeds in the 2020 Short Form Prospectus anticipated further
curtailment to the Company’s exploration and evaluation
activity levels in early 2021 that were based on then-current
market conditions and other operational constraints arising from
the COVID-19 pandemic. As noted in the prospectus, the
Company’s use of its available funds was based on its
projections and preliminary plans and was subject to change should
there be changes in market and/or other business
conditions.
Subsequent to
quarter end, the Company closed a bought deal public offering of
51,347,321 common shares at a price of US$0.37 per share for gross
proceeds of $24,962,000 (US$18,999,000) by way of a prospectus
supplement to the 2020 Shelf Prospectus. See SUBSEQUENT EVENTS for
further details. As a result of this financing, as well as the
ability to resume certain activities under strict COVID-19 safety
protocols, it is expected that the anticipated further curtailment
of exploration and evaluation activities will no longer be
necessary; therefore, the outlook for expenditures disclosed in the
use of the proceeds from the 2020 Short Form Prospectus for the
remainder of 2020 and early 2021 is anticipated to change. See
OUTLOOK FOR 2020 for further details. Formal budgets for 2021 have
not yet been finalized and approved, so the scope of the change
cannot be fully quantified at this time and will be disclosed with
the Company’s 2021 Budget.
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.
13
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
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
|
|
Nine
Months Ended
|
||||
|
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
(in
thousands)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Management Fee
Revenue
|
|
|
|
|
|
|
|
|
|
Base and variable
fees
|
$
|
509
|
$
|
453
|
$
|
1,523
|
$
|
1,374
|
|
Commission
fees
|
|
74
|
|
107
|
|
247
|
|
110
|
|
Discretionary
fees
|
|
-
|
|
-
|
|
300
|
|
-
|
|
|
$
|
583
|
$
|
560
|
$
|
2,070
|
$
|
1,484
|
At September 30,
2020, accounts receivable includes $350,000 (December 31, 2019
– $236,000) due from UPC with respect to the fees and
transactions discussed above.
Korea Electric Power Corporation (‘KEPCO’) and Korea
Hydro & Nuclear Power (‘KHNP’)
As at September
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 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’).
KWULP has elected
not to fund their share of the 2020 spending program and will
dilute their interest in the property. 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
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 nine
months ended September 30, 2020, the Company incurred investor
relations, administrative service fees and certain pass-through
expenses of $191,000 (September 30, 2019: $199,000) 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 September 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.
14
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
The following
compensation was awarded to key management personnel:
|
|
|
Three
Months Ended
|
|
Nine
Months Ended
|
||||
|
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
(in
thousands)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and
short-term employee benefits
|
$
|
(465)
|
$
|
(407)
|
$
|
(1,420)
|
$
|
(1,536)
|
|
Share-based
compensation
|
|
(383)
|
|
(384)
|
|
(1,133)
|
|
(1,499)
|
|
Termination
benefits
|
|
-
|
|
-
|
|
-
|
|
(481)
|
|
|
$
|
(848)
|
$
|
(791)
|
$
|
(2,553)
|
$
|
(3,516)
|
The increase in
salaries and short-term employee benefits in the three months ended
September 30, 2020 was due to changes in the composition of the
Company’s key management personnel.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does
not have any off-balance sheet arrangements.
SUBSEQUENT EVENTS
On October 14,
2020, the Company completed a public offering by way of a
prospectus supplement to the 2020 Shelf Prospectus of 51,347,321
common shares at a price of US$0.37 per share for gross proceeds of
CAD$24,962,000 (US$18,999,000). The offering includes 4,347,321
shares granted to the underwriters through the exercise, in part,
of an over-allotment option. The proceeds of the offering are
anticipated to be used to fund evaluation and environmental
assessment activities on Denison’s Wheeler River project, as
well as for general working capital purposes.
OUTSTANDING SHARE DATA
At November 5,
2020, there were 677,668,423 common shares issued and outstanding,
stock options outstanding for 15,571,743 Denison common shares, and
7,790,899 share units outstanding for a total of 701,031,065 common
shares on a fully-diluted basis.
As at September
30, 2020, the Company has made the following changes to its outlook
for 2020.
Development and
operations expenditures have decreased by $282,000, predominantly
due to reductions in planned expenditures related to the SABRE
project within the MLJV.
Mineral property
exploration and evaluation expenditures have increased by $701,000
due to the ramping up of evaluation activities during the third and
fourth quarters of 2020, including the installation of additional
environmental monitoring wells and other 2020 ISR Field Program
activities (see WHEELER RIVER PROJECT above for further details).
The increase in expenditures in the 2020 outlook reflect a ramp up
of evaluation and environmental assessment related activities
designed to ensure that the EA and future FS support activities can
advance as quickly as possible following a decision to resume the
formal EA process.
The net inflow
from the Closed Mines segment has been increased by $161,000,
predominantly due to reductions in operating expenses that have
been achieved throughout the year.
The net inflow
from UPC management services has been reduced by $110,000 due to a
reduction in the NAV-based fees estimated for the year, due to a
decrease in uranium prices from the time the previous outlook was
prepared.
Corporate
administration and other expenditures have decreased by $44,000 due
to further reductions in travel and other investor relations
expenditures resulting from the COVID-19 pandemic.
15
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
|
(in
thousands)
|
|
PREVIOUS 2020 OUTLOOK(1)
|
CURRENT 2020 OUTLOOK
|
Actual to
September 30, 2020(3)
|
|
Canada Mining Segment
|
|
|
|
|
|
Mineral
Sales
|
|
852
|
852
|
852
|
|
Development &
Operations
|
|
(2,446)
|
(2,164)
|
(1,777)
|
|
Mineral Property
Exploration & Evaluation
|
|
(8,592)
|
(9,293)
|
(5,786)
|
|
|
|
(10,186)
|
(10,605)
|
(6,711)
|
|
Closed Mines Segment
|
|
|
|
|
|
Closed Mines
Environmental Services
|
|
1,353
|
1,514
|
1,237
|
|
|
|
1,353
|
1,514
|
1,237
|
|
Corporate and Other Segment
|
|
|
|
|
|
UPC Management
Services
|
|
2,686
|
2,576
|
2,067
|
|
Corporate
Administration & Other
|
|
(5,625)
|
(5,581)
|
(4,552)
|
|
|
|
(2,939)
|
(3,005)
|
(2,485)
|
|
Total(2)
|
|
$ (11,772)
|
$ (12,096)
|
$ (7,959)
|
Notes:
1.
Previous Outlook as reported
in the Company’s June 30, 2020 MD&A
2.
Only material operations
shown.
3.
The budget is prepared on a
cash basis. As a result,
actual amounts represent a non-GAAP measure. Compared to segment
loss as presented in the Company’s unaudited interim
consolidated financial statements for the nine months ended
September 30, 2020, actual amounts reported above includes $153,000
in capital additions and excludes the $1,090,000 net impact of
non-cash items and other adjustments.
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
social and economic disruptions that have emerged, or may still
emerge, 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.
16
|
|
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 technical
information contained in this MD&A related to the 2020 ISR
Field Program and the Wheeler River PFS has been reviewed and
approved by David Bronkhorst, P.Eng, Denison's Vice President,
Operations, who is a Qualified Person in accordance with the
requirements of NI 43-101.
The technical
information contained in this MD&A related to the Exploration
Drilling Program has been reviewed and approved by Andrew Yackulic,
P. Geo, Denison's Director, Exploration, who is 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 13, 2020 available on the
Company’s website and filed under the Company's profile on
SEDAR (www.sedar.com)
and in its Form 40-F available on EDGAR at www.sec.gov/edgar.shtml.
Certain
information contained in this MD&A constitutes
‘forward-looking information’, within the meaning of
the applicable United States and Canadian legislation concerning
the business, operations and financial performance and condition of
Denison.
Generally, these
forward-looking statements can be identified by the use of
forward-looking terminology such as ‘plans’,
‘expects’, ‘budget’,
‘scheduled’, ‘estimates’,
‘forecasts’, ‘intends’,
‘anticipates’, or ‘believes’, or the
negatives and/or variations of such words and phrases, or state
that certain actions, events or results ‘may’,
‘could’, ‘would’, ‘might’ or
‘will be taken’, ‘occur’, ‘be
achieved’ or ‘has the potential to’.
In particular,
this MD&A contains forward-looking information pertaining to
the following: Denison’s plans and objectives for 2020 and
beyond, including resumption of ISR field testing and exploration
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.
17
|
|
MANAGEMENT’S
DISCUSSION & ANALYSIS
|
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, 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.
18
Exhibit
99.3
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
I,
David D. Cates, President and Chief Executive Officer of Denison
Mines Corp., certify the following:
1.
Review: I have
reviewed the interim financial report and interim MD&A
(together, the "interim filings") of Denison Mines Corp. (the
"issuer") for the interim period ended September 30,
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 July 1, 2020 and
ended on September 30, 2020 that has materially affected, or is
reasonably likely to materially affect, the issuer's
ICFR.
Date:
November 5, 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 September 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 July 1, 2020 and
ended on September 30, 2020 that has materially affected, or is
reasonably likely to materially affect, the issuer's
ICFR.
Date:
November 5, 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 Q3 2020
Toronto, ON – November 5,
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 September 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, “Our
third quarter highlights illustrate the recent effort made by
Denison to ensure the Company remains on track for the future
development of the Phoenix In-Situ Recovery (‘ISR’)
operation, which has the potential to become one of the lowest cost
uranium mining operation in the world. Our team developed
responsible return to work protocols and resumed field activity at
the Wheeler River site – including the completion of an ISR
field program designed to build confidence in the ‘Proof of
Concept’ hydrogeologic model, which was announced in June and
represents a significant project de-risking milestone. The
2020 ISR field program also included the completion of
environmental field work necessary to support the design and
permitting of further ISR test work. On the financial front, the
Company successfully completed a well-supported and significantly
up-sized public offering in early October – raising gross
proceeds of approximately US$19 million. At the end of
October, the Company is estimated to have over CAD$29 million in
cash and remains debt free. Taken together, our operations
and balance sheet are poised to support the future advancement of
the Environmental Assessment and Feasibility Study for Wheeler
River through 2021 and beyond, as we move towards a definitive
development decision.
The uranium market has steadied through the balance of the third
quarter, following the announcement of the restart of the Cigar
Lake mine and Denison’s 22.5% owned McClean Lake uranium
mill. The spot price has support around US$30/lb
U3O8
– roughly 60% above the lows the commodity reached in late
2016 – and is set to benefit from a resumption of nuclear
utility purchasing activity as COVID-19 related protocols have been
developed and deployed throughout the sector over the last several
months. Nuclear energy has answered the call to provide
reliable and cost competitive energy during this time and is well
positioned to participate in green energy initiatives being
considered around the world to create economic stimulus and
accelerate global plans to decarbonize the energy
mix.
With this positive outlook for the nuclear energy sector, Denison
is pleased to be nearing completion of its Preliminary Economic
Assessment for the J Zone uranium deposit on the Company’s
Waterbury Lake property, assessing the applicability of the ISR
mining method to potentially mine the deposit. If results are
positive and applicable approvals obtained, J Zone could become the
Company’s second ISR development-stage project.”
HIGHLIGHTS
■
Resumed evaluation and exploration field activities at Wheeler
River
In July 2020,
Denison announced the resumption of evaluation field activities at
the Company’s 90% owned Wheeler River Uranium Project
(‘Wheeler River’ or the ‘Project’) with the
initiation of an In-Situ Recovery (‘ISR’) field program
(‘2020 Field Program’) focused on the high-grade
Phoenix uranium deposit (‘Phoenix’). Field activities
were gradually expanded late in the third quarter to allow for the
initiation the Company’s planned exploration activities. 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 the 2020 ISR Field Program
In October
2020, Denison announced the safe and successful completion of the
2020 Field Program, which was designed to build additional
confidence in the results of an independent hydrogeologic model
developed by Petrotek Corporation (‘Petrotek’) for
Phoenix, and to support the design and permitting of further field
work expected to be incorporated into a future Feasibility Study
(‘FS’). The hydrogeologic model developed for Phoenix
is based on actual field data collected during an extensive field
test program completed at Phoenix in 2019 (the ‘2019 Field
Test’), with the model and associated simulations having
already demonstrated "proof-of-concept" for the application of the
ISR mining method at Phoenix, with respect to potential operational
extraction and injection rates (see press release dated June 4,
2020).
■
Capitalized the Company to fund future evaluation and environmental
assessment activities for Wheeler River
In October
2020, Denison successfully completed a public offering of
51,347,321 common shares at a price of US$0.37 per common share for
gross proceeds of CAD$24,962,000 (US$18,999,000), which includes
4,347,321 common shares granted to the underwriters through the
exercise, in part, of an over-allotment option. The proceeds of the
offering are anticipated to be used to fund evaluation and
environmental assessment (‘EA’) activities on the
Wheeler River project, as well as for general working capital
purposes.
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. In
addition to the Company’s flagship project, Wheeler River,
Denison's interests in Saskatchewan include a 22.5% ownership
interest in the McClean Lake Joint Venture (‘MLJV’),
which includes several uranium deposits and the McClean Lake
uranium mill, which is 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 technical
information contained in this press release related to the 2019
Field Test, 2020 ISR Field Program and the Wheeler River PFS has
been reviewed and approved by David Bronkhorst, P.Eng, Denison's
Vice President, Operations, who is a Qualified Person in accordance
with the requirements of NI 43-101.
Mineral resource
information contained in this press release has been reviewed and
approved by Andrew Yackulic, P. Geo, Denison's Director,
Exploration, who is a Qualified Person in accordance with the
requirements of NI 43-101.
For more information, please contact
|
David
Cates
|
(416) 979-1991
ext 362
|
|
President and
Chief Executive Officer
|
|
|
|
|
|
Sophia
Shane
|
(604)
689-7842
|
|
Investor
Relations
|
|
|
|
|
|
Follow Denison on
Twitter
|
@DenisonMinesCo
|
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
Certain
information contained in this press release constitutes
‘forward-looking information’, within the meaning of
the applicable United States and Canadian legislation concerning
the business, operations and financial performance and condition of
Denison.
Generally, these
forward-looking statements can be identified by the use of
forward-looking terminology such as ‘plans’,
‘expects’, ‘budget’,
‘scheduled’, ‘estimates’,
‘forecasts’, ‘intends’,
‘anticipates’, or ‘believes’, or the
negatives and/or variations of such words and phrases, or state
that certain actions, events or results ‘may’,
‘could’, ‘would’, ‘might’ or
‘will be taken’, ‘occur’, ‘be
achieved’ or ‘has the potential to’.
In particular,
this press release contains forward-looking information pertaining
to the following: 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; expectations, plans and
objectives of a future FS for Wheeler and any work to be undertaken
in respect thereto; the suspension of EA activities and anticipated
results of such suspension; the impact of COVID-19 on
Denison’s operations; evaluation activities and plans for a
PEA for the J Zone deposit and projections with respect thereto;
projections with respect to use of proceeds of recent financings;
the estimates of Denison's mineral reserves and mineral resources;
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 press
release is expressly qualified by this cautionary statement. Any
forward-looking information and the assumptions made with respect
thereto speaks only as of the date of this press release. Denison
does not undertake any obligation to publicly update or revise any
forward-looking information after the date of this press release to
conform such information to actual results or to changes in
Denison's expectations except as otherwise required by applicable
legislation.
Cautionary Note to United States Investors
Concerning Estimates of Measured, Indicated and Inferred Mineral
Resources and Probable Mineral Reserves: This press release
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.