Denison Mines (DML) - "Phoenix Opens Door to Other Low Cost Assets"

Denison Mines is a TSX and NYSE- listed uranium exploration and development company focused on the advancement of its projects located in the Athabasca Basin region of Northern Saskatchewan, Canada. 

Matt Gordon caught up with David Cates, President and CEO of Denison Mines (TSX: DML, NYSE: DNN).

Company overview

The company’s flagship project, the Wheeler River uranium project is the largest undeveloped uranium project in the Eastern part of the Athabasca Basin. The company also has a 22.5% ownership interest in the McClean Lake joint venture with Orano Canada, which comprises several uranium deposits and the McClean Lake uranium mill. The McClean Lake uranium mill is contracted to process the ore from the Cigar Lake mine which is majority-owned by Cameco Corporation, under a toll milling agreement.  

The Wheeler River uranium project of the company is a joint venture between Denison Mines, which owns 90% of the project and JCU Exploration Company Limited, which owns 10% of the project. Denison Mines acquired 50% of JCU Exploration Limited in August 2021, increasing its effective interest in the Wheeler River uranium project to 95%. The company also holds interests in various joint venture uranium projects throughout Canada, through its 50% ownership of JCU Exploration Company Limited. The joint venture projects include the Millennium project, the Kiggavik project and the Christie Lake project.

The company also holds physical uranium with the intention of it serving as future project financing through its potential collateralization or to provide the Denison Mines with increased flexibility to negotiate long-term uranium supply arrangements with future customers.  

Management

Denison Mines is led by. David D. Cates, who serves as president and chief executive officer (CEO). Cates holds a master’s degree in accounting and a bachelor’s degree in arts from the University of Waterloo. Cates is a chartered professional accountant and has extensive experience in the Canadian and international uranium mining space. Cates has been an integral part of Denison Mines for over a decade and served as the company’s vice president (VP) of finance and tax as well as chief financial officer (CFO) between 2008 and 2015. Cates also serves as a director of the Canadian Nuclear Association (CAN).

Mac McDonald is executive vice president & chief financial officer (CFO). McDonald has more than 15 years of progressive experience in extractive industries and is also a chartered professional accountant. McDonald served as the director of financial reporting for IAMGOLD Corporation as well as advisor for PWC Canada before joining Denison Mines. McDonald has extensive experience in - and knowledge of financial reporting in accordance with International Financial Reporting Standards (IFRS), risk and quality management and SOX and internal controls. McDonald also brings with him experience in public and private debt and equity offerings in both Canada and the United States of America.

David Bronkhorst is the vice president of operations and brings with him more than 35 years of experience in base metals, gold, and uranium mining. Bronkhorst served as vice president of mining, projects and technology at Cameco Corporation before his tenure at Denison Mines. Bronkhorst was responsible for both conventional mining operations in the Athabasca Basin as well as In-Situ Recovery (ISR) mining operations in the USA for Cameco Corporation. 

Kevin Himbeault fulfils the role of vice president of plant operations and regulatory affairs. Himbeault has over 25 years of operational and regulatory experience he contributes to the team. Himbeault has conducted processing facility as well as mine optimisation projects ensuring operation sustainability. He has also successfully facilitated environmental assessments in both the uranium and diamond mining sectors.

Amanda Willett is vice president of legal as well as corporate secretary. Willett joined Denison Mines in 2016 as corporate counsel and corporate secretary after close to a decade in corporate and securities law. She has been involved in a broad range of transactional and corporate governance work for TSX and TSX-V listed companies, with an emphasis on advising companies in the mining industry.

Elizabeth Sidle rounds out the management team as vice president of finance. Sidle became a part of Denison Mines in 2016 and was before this an advisor, regarding complex financial accounting issues and transactions, to Ernst and Young LLP.

The Management team of Denison Mines is tasked with ensuring the continued progress on the company’s asset portfolio.

Wheeler River Uranium Project

Denison's exploration and development portfolio consists of various operations primarily located in the eastern part of the Athabasca Basin region. The company’s portfolio is 280,000 hectares large and includes the 64.2% Waterbury project, 22.5% owned McClean Lake mill project, the 80% owned Hook-Carter project and the 95% owned Wheeler River Uranium Project.

The eastern part of the Athabasca Basin is rich in infrastructure and houses some of the world’s largest uranium mines including Cameco Corporation’s McArthur River and Cigar Lake uranium mines.

The Wheeler River uranium project boasts as being the largest undeveloped uranium project in the eastern portion of the Athabasca Basin. The project lies within close proximity to regional infrastructure including provincial electricity and an all-season accessible provincial highway.

The Wheeler River uranium project consists of two high-grade uranium deposits, namely the Phoenix and Gryphon deposits.

Phoenix is the highest-grade undeveloped uranium deposit in the world with zone A of the deposit housing 62,900 tons of U3O8 at a grade of 43.2%, this equals 59.9 million pounds (lbs) of U3O8. The company completed a pre-feasibility study in 2018 in accordance with NI 43-101 standards for the Phoenix deposit and found that the implementation of In-Situ Recovery (ISR) mining methods would result in a low operating cost of USD$ 4.33 per pound of U3O8.  The feasibility study also outlined a 14-year life of mine (LOM), underground operations at the Gryphon deposit, an NPV of USD$ 1.31 billion, initial pre-production capital expenditure (CAPEX) of USD$ 322.5 million and an internal rate of return (IRR) of 38.7%.

The total probable mineral resources of the Wheeler River uranium project is 109.4 million pounds (lbs) of U3O8. The mineral reserves are comprised of 59.7 million pounds (lbs) of U3O8  at the Phoenix deposit made up of 141,000 tons of uranium-bearing ore at a grade of 19.1% U3O8, and 49.7 million pounds (lbs) of U3O8  at the Gryphon deposit made up of 1,257,000 tons of uranium-bearing ore at a grade of 1.8% U3O8.

The Wheeler River uranium project will also offer social-economic benefits to the community including the creation of 300 jobs during the two years of project construction and 100 jobs during the time the mine is operational. Denison Mines will also focus on the interest of indigenous peoples and local communities with construction and operation opportunities targeted towards Northern Saskatchewan and Indigenous-owned businesses.

In Situ Mining methods at Phoenix deposit

In Situ Recovery (ISR) involves the extraction of minerals from underground ore bodies by the use of a leaching solution and dissolution mechanisms. The uranium-bearing solution is processed from where the uranium is recovered. One of the greatest advantages of implementing ISR mining methods is the minimal surface disturbance and no tailings generation or treatment that it offers. ISR mining methods are conducted from surface facilities, which also adds the safety advantage of no underground employees. ISR mining methods have been used extensively globally within the uranium mining sector, with 50% of all global uranium production being IST mining methods. The Wheeler River uranium project will be the first uranium project in Canada to ever implement ISR mining methods.

Denison Mines concluded with an ISR field test program in October 2021 at its Phoenix deposit. The company states that the completed field test program was able to provide four important conclusions. The first conclusion the field test work program was able to provide was that commercial-scale production flow rates, as were assumed in the pre-feasibility study conducted in 2018, were achieved. The second conclusion was that the company is able to carry out hydraulic control regarding the tracer solution. The field test program did not see any elevated values of the tracer element in the monitoring wells surrounding the commercial-scale test pattern. The third important conclusion that the field test work program provided was the confirmation of the estimated breakthrough times between the injection and recovery wells. The field test program confirmed the values obtained by the proof of concept hydrogeological modelling, which was conducted by Petrotek Corporation.

The fourth and arguably the most important conclusion derived from the field test work program is the efficiency of the cleanup phase of the ISR process. Denison Mines was able to demonstrate its ability to remediate the test pattern and reduce tracer concentration to as low as 4% of the peak test levels within 8 days.

The company is very pleased with the results of the field test work program and believes that the commercial-scale demonstration will allow it to move forward with the project development with CEO, David D. Cates stating that the field test work program is critical work conducted for the Wheeler River uranium project or as he proudly proclaims: “…really critical stuff for our project.”

Finances and future plans

The company boasts a robust balance sheet of CAD$ 200 million in working capital and investments which comprises CAD$ 25 million in uranium equities, CAD$ 50 million in cash and cash equivalents and CAD$ 131 million in physical uranium assets.

The company acquired 2.5 million pounds (lbs) of U3O8 in April 2021 with the aim thereof being to form part of the Wheeler River uranium project finance initiatives. Denison Mines believes that the purchased uranium will strengthen the company's balance sheet and provide the ability to access future project financing by the collateralization of the uranium holdings. The purchased uranium may also provide the flexibility to negotiate long-term Uranium supply arrangements with future customers.

Denison Mines plans to continue with the de-risking of the Wheeler River uranium project in 2022 and plans to submit a draft environmental impact statement to the Canadian Nuclear Safety Commission (CNSC) and the Saskatchewan Ministry of Environment by the end of the first half of 2021.

The company also plans to complete an updated feasibility study for the Wheeler River uranium project in 2022 which it believes will strengthen the project sustainability.

Denison Mines is optimistic regarding the future of the uranium market and believes that the uranium space is backed by market fundamentals.  

David D. Cates explains the company’s optimism and states: “We have supply-demand fundamentals, we have pricing fundamentals, and when you see a uranium price that’s persisted in the $40’s when you see recent record long-term contracting happening, it tells me that the market is not speculative, it’s substantive, and then you see the equities have diverged from that. That, to me, is a buying opportunity.”

Denison Mines will continue to advance its Wheeler River uranium project in the future and plans to be well-positioned to meet the impending uranium market demand.

‍To find out more, go to the Denison Mines website