Denison Mines Corp. filed today its consolidated financial statements and management’s discussion and analysis for the year ended Dec. 31, 2017. Both documents can be found on the company’s website, or on SEDAR and EDGAR. The highlights provided herein are derived from these documents and should be read in conjunction with them. All amounts in this release are in U.S. dollars unless otherwise stated.
David Cates, president and chief executive officer of Denison, commented: “Two thousand seventeen was a volatile year for the uranium market. While the spot price of uranium benefited from upward momentum on multiple occasions during the year, that momentum was not sustained long enough for a meaningful change to the low price environment that saw the market reach 12- and 13-year lows in late 2016. Despite these disappointing market trends, Denison managed to have another productive year as we continue to focus on our strategy of positioning the company for the future and a return to a much higher uranium price. Much of the work completed by our team in 2017 was in preparation for an updated resource estimate for the Wheeler River project, which we announced in early 2018, and associated advancements ahead of the planned completion of a PFS in 2018. With an 88-per-cent increase in our estimated indicated mineral resources at Wheeler River, we feel confident that the project has the ability to become the next producing uranium mine in the Athabasca basin region. We also strengthened our balance sheet in early 2017, raising $63.5-million (Canadian) in gross proceeds, with minimal dilution to our shareholders, providing us with the financial flexibility to advance Wheeler River.
“Two thousand eighteen is poised to be a very interesting year for Denison and the uranium market. Our project development team has its sights set on delivering a positive PFS [prefeasibility study] for Wheeler River, while our exploration team has changed its focus, from the last two years of delineation drilling at Wheeler River, to once again concentrate on the considerable discovery potential at Wheeler River and our high-priority pipeline projects. From an industry perspective, we will be watching to see how the market digests: (a) the significance of Cameco’s shutdown of the world’s largest and highest-grade uranium mining operation (the McArthur River mine), and (b) the potential for an extended shutdown of McArthur River in the absence of a significant increase in the long-term uranium price.”
Performance highlights:
Completed a highly successful 2017 exploration and definition drilling program at Wheeler River.
During 2017, Denison completed a total of 43,956 metres of drilling in 90 holes at Wheeler River, with work focused at or near the Gryphon deposit, during the summer and the winter drilling programs. To reduce drilling metrage, 77 of the 90 holes were completed as subsurface daughter holes, which were drilled as off-cuts from surface parent holes, and a directional drilling method was employed to ensure drilling accuracy. Highlights from the 2017 drilling program included:
Expansion of mineralization ahead of the updated Gryphon deposit mineral resource estimate.
During 2017, Gryphon mineralization was expanded in numerous areas by infill and stepout drilling on an approximate 25-by-25-metre spacing, including: (1) expansion of high-grade mineralization within the D series lenses; (2) discovery and expansion of the E series lenses both at the unconformity and within the upper basement; and (3) expansion of the A and B series lenses both updip and downdip.
Completion of the definition drilling program at the Gryphon deposit.
In the fourth quarter of 2017, the company completed the definition drilling program on the Gryphon deposit’s A, B and C series mineralized lenses, with the objective of increasing the confidence of the previously estimated mineral resources from an inferred to indicated level. The definition drilling program, which commenced in the summer of 2016, included a total of 42 infill and delineation drill holes to complete an approximate 25-by-25-metre drill spacing.
Completed an updated mineral resource estimate for Wheeler River’s Gryphon deposit.
On Jan. 31, 2018, Denison announced an updated mineral resource estimate for the Gryphon deposit, which included, above a cut-off grade of 0.2 per cent triuranium octoxide, 61.9 million pounds of U3O8 (1,643,000 tonnes at 1.71 per cent U3O8) in indicated mineral resources, plus 1.9 million pounds of U3O8 (73,000 tonnes at 1.18 per cent U3O8) in inferred mineral resources. With this update to the resources estimated for the Gryphon deposit, the combined indicated mineral resources estimated for the Wheeler River project increased by 88 per cent to 132.1 million pounds U3O8, which will be used to support the prefeasibility study, initiated for the project in July, 2016, and expected to be completed during 2018. Following the update, Wheeler River retained and improved its standing as the largest undeveloped high-grade uranium project in the infrastructure-rich eastern portion of the Athabasca basin.
Discovered the high-grade, basement-hosted, Huskie zone on the Waterbury Lake property.
During the summer 2017 drilling program at Waterbury Lake, Denison discovered high-grade, basement-hosted mineralization located approximately 1.5 kilometres to the northeast of the property’s J zone uranium deposit. The summer program included nine drill holes totalling 3,722 metres. Of the eight drill holes designed to test for basement-hosted mineralization, seven holes intersected significant mineralization, including 9.1 per cent U3O8 over 3.7 metres (drill hole WAT17-446A), 1.7 per cent U3O8 over 7.5 metres (drill hole WAT17-449) and 1.5 per cent U3O8 over 4.5 metres (drill hole WAT17-450A). The Huskie zone has been defined over a strike length of 100 metres (the extent of the 2017 drilling) and remains open in all directions.
Increased ownership of Wheeler River project to 63.3 per cent.
In January, 2017, the company executed an agreement with the partners of the Wheeler River joint venture (WRJV) that will result in an increase in Denison’s ownership of the Wheeler River project by up to approximately 66 per cent by the end of 2018. Under this agreement, Denison is financing 50 per cent of Cameco’s ordinary share (30 per cent) of joint venture expenses in 2017 and 2018. On Jan. 31, 2018, Denison announced it had increased its interest in the Wheeler River project, based on spending on the project during 2017, from 60 per cent to 63.3 per cent in accordance with this agreement.
Closed non-dilutive financing for $43.5-million (Canadian) to finance future project development activities.
In the first quarter of 2017, Denison announced and closed a financing arrangement for gross proceeds of $43.5-million (Canadian), which has the effect of monetizing Denison’s future share of the toll milling revenue earned by the McClean Lake mill from the processing of ore from the Cigar Lake mine through the combination of a limited recourse loan and a streaming arrangement. Through this transaction, Denison retains its 22.5-per-cent ownership of the McClean Lake joint venture (MLJV), but has derisked its income from certain toll milling revenue, as the company is not providing any warranty to the future rate of production at the Cigar Lake mine or the McClean Lake mill. The proceeds from the financing are expected to finance the company’s project development costs for Wheeler River toward the completion of a feasibility study and ultimately project financing.
Obtained financing for the company’s 2018 Canadian exploration activities.
In March, 2017, the company completed a private placement of 18,337,000 common shares for gross proceeds of $14,806,000 ($20,200,290 (Canadian)). The financing included: (1) a common share offering of 5.79 million common shares of Denison at a price of 95 Canadian cents per share for gross proceeds of $5,500,500; (2) a tranche A flow-through offering of 8,482,000 flow-through shares at a price of $1.12 (Canadian) per share for gross proceeds of $9,499,840; and (3) a tranche B flow-through offering of 4,065,000 flow-through shares at a price of $1.23 (Canadian) per share for gross proceeds of $4,999,950 (Canadian). The proceeds from the flow-through tranches of the financing will be used to finance Canadian exploration activities through to the end of 2018.
Denison environmental services (DES) renewed its cornerstone environmental services contract.
In July, 2017, DES entered into a new two-year service agreement with Rio Algom Ltd., a subsidiary of BHP Billiton Ltd. for the management and operation of nine decommissioned mine sites in Ontario and Quebec.
About Denison Mines Corp.
Denison is a uranium exploration and development company with interests focused in the Athabasca basin region of Northern Saskatchewan, Canada. In addition to its 60-per-cent-owned Wheeler River project, which hosts the high-grade Phoenix and Gryphon uranium deposits, Denison’s exploration portfolio consists of numerous projects covering approximately 351,000 hectares in the Athabasca basin region. Denison’s interests in Saskatchewan also include a 22.5-per-cent ownership interest in the McClean Lake joint venture, 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-per-cent interest in the Midwest deposit and a 64.22-per-cent interest in the J zone deposit on the Waterbury Lake property.
Denison is also the manager of Uranium Participation Corp., a publicly traded company listed on the Toronto Stock Exchange under the symbol U, which invests in uranium oxide in concentrates (U3O8) and uranium hexafluoride (UF6).
SELECTED ANNUAL FINANCIAL INFORMATION
(in thousands, except for per-share amounts)
Year ended Dec. 31, 2017 Year ended Dec. 31, 2016
Results from continuing operations
Total revenues $ 11,085 $ 13,833
Exploration and evaluation $ (12,834) $ (11,196)
Impairment of property, plant and equipment $ 246 $ (2,320)
Net (loss) $ (14,087) $ (11,699)
Basic and diluted (loss) per share $ (0.03) $ (0.02)
Results from discontinued operations
Net (loss) $ (81) $ (5,644)
Basic and diluted (loss) per share $ 0.0 $ (0.01)
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Outlook for 2018
Denison’s plans for 2018 are a continuation of its strategy focused on the activities necessary to position it as the next uranium producer in Canada. Accordingly, the 2018 budget is heavily concentrated on evaluation and exploration activities designed to strategically advance the company’s 63.3-per-cent-owned flagship Wheeler River project.
Development and operations
In 2018, Denison’s share of operating and capital expenditures at McClean Lake and Midwest is budgeted to be $4.3-million (Canadian). Operating expenditures at McClean include $3,965,000 (Canadian) in respect of Denison’s share of the planned 2018 budget for the advancement of the Sabre mining method.
Two thousand eighteen operating expenditures are also expected to include $751,000 (Canadian) for reclamation expenditures at Denison’s legacy Elliot Lake mine site.
Mineral property exploration and evaluation
Including the partner’s share of expenses, the projected 2018 exploration and evaluation work program is budgeted to be $21.8-million (Canadian), and is expected to include approximately 80,000 metres of drilling across six of Denison’s projects.
The budget will be mainly focused on the company’s high-priority projects, namely Wheeler River, Waterbury Lake and Hook-Carter. Consistent with past years, the majority of the exploration activity will occur during the winter and summer months, resulting in higher levels of expenditures in the first and third quarters of 2018. Evaluation activities are expected to continue at the Wheeler River project throughout the year.
Wheeler River
A $13.1-million (Canadian) budget (100-per-cent basis) has been approved for the Wheeler River project. The budget includes exploration expenditures of $9.5-million (Canadian) and evaluation expenditures of $3.6-million (Canadian).
Denison’s share of the budget is expected to be $9.8 million (Canadian), which represents 75 per cent of joint venture expenses. (See Denison’s press release dated Jan. 10, 2017.)
The 2018 exploration program is expected to include approximately 45,000 metres of diamond drilling in 60 drill holes and will be results oriented with an initial focus on stepout drilling along strike of the Gryphon deposit and drill testing of high-priority and largely untested regional targets on the property. Refer to Denison’s news release on Jan. 17, 2018, for details on the 2018 exploration and evaluation plan.
Exploration pipeline properties
Work on pipeline properties will be focused on three main Denison-operated properties:
Waterbury Lake project.
The Huskie zone was discovered during the company’s summer 2017 drilling program at Waterbury Lake. The 2018 exploration program is budgeted at $3.5-million (Canadian) (100 per cent Denison financed with KWULP continuing to dilute) and is designed with the potential to expand the Huskie zone mineralization through stepout drilling. A diamond drilling program of approximately 14,400 metres in 36 drill holes is planned for 2018 and is expected to be carried out during the winter and summer drilling seasons.
Hook-Carter project.
The Hook-Carter property consists of 45 claims covering 20,522 hectares and is located in the western portion of the Athabasca basin. A diamond drilling program is planned for the winter of 2018, consisting of approximately 10,000 metres in 17 drill holes, with a budget of $2.2-million (Canadian) (100 per cent Denison financed due to ALX’s carried interest).
South Dufferin project.
The South Dufferin project is 100 per cent Denison owned and located just off the southern margin of the Athabasca basin of Northern Saskatchewan. Priority drill targets have been developed across the property from recent ground geochemical and geophysical surveying. A diamond drilling program is planned for summer 2018 comprising approximately 2,200 metres of drilling in 16 holes with a total budget of approximately $1.0-million.
UPC management services and DES
Net management fees expected for 2018 from the management service agreement with UPC are budgeted at $1.2-million (Canadian). A portion of the management fees earned from UPC are based on UPC’s net asset value, and thus the uranium spot price. Denison’s budget for 2018 assumes a uranium spot price of $20 per pound U3O8. Each $2-per-pound-U3O8 increase is expected to translate into approximately $200,000 (Canadian) in additional management fees to Denison.
Revenue from operations at DES during 2018 is budgeted to be $9.6-million (Canadian), and operating, overhead and capital expenditures are budgeted to be $8.3-million (Canadian).
Corporate admin and other income
Corporate administration expenses are budgeted to be $4.7-million (Canadian) in 2018 and include head office salaries and benefits, office costs, audit and regulatory costs, legal fees, investor relations expenses, and all other costs related to operating a public company with listings in Canada and the United States.
Letter of credit and standby fees relating to the 2018 credit facility are expected to be approximately $400,000 (Canadian), which is expected to be largely offset by interest income on the company’s short-term investments.
Source: Denison Mines