Transcript: Denison Mines (DML) - Focus is on Field Programme & Exploration

April 16 2021, 14:54 GMT+01:00

Denison Mines Corp.

  • TSX: DML
  • Shares Outstanding: 791.65M
  • Share price C$1.30 (15.04.2021)
  • Market Cap: C$1.03B

Interview with David Cates, President and CEO of Denison Mines (TSX: DML). 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 of northern Saskatchewan.

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, contracted to process the ore from the Cigar Lake mine under a toll milling agreement, plus a 25.17% interest in the Midwest and Midwest A deposits, and a 66.90% interest in the Tthe Heldeth Túé ("THT," formerly J Zone) and Huskie deposits on the Waterbury Lake property. Each of Midwest, Midwest A, THT and Huskie are located within 20 kilometres of the McClean Lake mill.

We Discuss:

  • 2:43 - Company Overview
  • 4:44 - Raising Money to Buy U308: Understanding the Strategy
  • 9:54 - Agreements with English River First Nation: Terms, Process, & Outcome
  • 18:56 - Solving Technical Issues: Freeze Walls & Sustainability Long-Term
  • 32:03 - Phased Approach: Options & CapEx Solutions
  • 35:14 - Market Interpretations of Buying U308, it's Uses, & Growth of Followers
  • 45:46 - Field Program & Exploration: Teaser for the Next Update
  • 49:09 - Fundamentals VS Market Games: Inevitability of M&A & Roll-Ups

Matthew Gordon: Why don’t you kick off with the 1-minute overview of your business, and I'll pick it up from there.

David Cates: Perfect, and that's a great idea. Denison is an advanced Uranium developer. We're focused in the Athabasca basin region in northern Saskatchewan. We have a portfolio of development and exploration assets, and really just want to call out to give the big picture for us. Our flagship asset is Wheeler River. This is the largest undeveloped Uranium project in the eastern portion of the Athabasca basin where we have all of the existing mining and milling infrastructure in the region. And that project is going through the permitting process and environmental assessment process and is really at the front of the line for development in the eastern basin. And with that, on top of that, and of course, we'll talk more about Wheeler river, I'm sure, another asset I want to just flag from our portfolio is our interest in the McClean Lake mill. We own 22.5% of the McClean Lake joint venture which includes a number of undeveloped Uranium deposits but also the mill. That mill is operating under a toll milling contract with Cigar Lake. But for the temporary COVID shut down of Cigar Lake, Cigar lake and McClean Lake work together as one production centre, and they represent the only producing or actively operating mine right now in Canada for Uranium.

Matthew Gordon: Does that mean your revenue has turned off there?

David Cates: Well, look, Matt, we sold that revenue stream a few years ago, in a real savvy deal with APG, Anglo Pacific in London so it's worked out actually pretty well for us because the revenue from toll milling is turned off. But that hasn't affected us because we already monetized that stream in 2017. There is no sort of fall out to us with the Cigar Lake mine being shut down right now.

Matthew Gordon: Okay, fine. Lots has happened since we spoke, we weren't even talking about all the shenanigans in the US with elections and RSA and Uranium Reserve Funds, etc. I want to talk about some of the things that you have manufactured for yourself. You came up with quite a novel idea, which is going to raise some money and buy your own pounds in the market. Why do you do it?

David Cates: Well, look, it was an unconventional strategy. Evidently, it's become more conventional, as we saw some others. To explain why we've done it is a bit of a journey to understand our strategy because it was really a deliberate and debated transaction for us. A lot of it had to do with two parts around our project. This is really a project financing initiative. It's not a speculative call on the Uranium price. But we had to be well capitalised in the first part, in the first place before we would consider a transaction like this. And so, over the last 12 months, we've carried out a number of financings and we were in a position by the beginning of March where we were sitting with around $85M in cash and investments. And really that was capital that would take us all the way through our Feasibility Study and environmental permitting for Wheeler River. That's an important part of this story. Because through that process, we've discovered and many others have discovered that the depth of investor interest in our sector has ballooned in the last few months. There was a tremendous amount of unmet investor interest in investing directly in companies like Denison. 

We saw that through our own financings, we saw through other financings where there was massive oversubscription on financings that were being put into the market. This is where we started to think about, we don't need that money, we don't need more money, we've got $85M in cash and investments, we can see ourselves through Feasibility Study, you know, when you go through the conventional junior mining playbook, we would be well capitalised and we don't really need more money. And so it would really be a negative to go back to the market and just take cash for the sake of having more cash, right? That would be dilutive, in a way, because you'd be saying, Well, today is the price that I want to raise more money to fund my future project, even though I'm funded for the next several years. And I think that's something that we wouldn't have been pursuing. Because we do see value increasing over time as we de risk our project and move it forward. So, but we didn't want to ignore the depth of investor interest, and the potential for us to significantly de risk future project financing efforts for Wheeler River. So that's where we developed this idea where we could access that capital but rather than put that capital just as cash on the balance sheet, we could park it in a dynamic store of value that would be leveraged, similar to our existing asset base. The concept there was let's go buy physical Uranium and hold it as a long-term asset and then down the road, when we go to project finance use it as a really reliable source of collateral to give us a different type of access to credit markets. Now, we sit with around CAD$100M in physical Uranium, once we've closed all those contracts against a project that has upfront capital of under $300M to Denison. We've got about a third of our capital covered and that's really what we were trying to do was just de risk that, but without just holding stagnant cash. 

As Uranium price changes, our value of that material will change, it might go down, we are of a view that it's more likely to go up. But it isn't really about the value going up, right? It was really just about having the same or similar leverage to our existing assets. And that's where I say we broke the dilution model because we raised money to buy assets. We didn't raise money to just fund operations with the same assets.

Matthew Gordon: Well, that's the bit that intrigued me. Because saying, I wanted to address the unmet demand for investment in Uranium, that was a bold move, I think shareholders would typically go, that's dilutive, why are you doing that, but this feels highly structured. And potentially, as you say, one would hope that the price of Uranium goes up and appreciates and in that sense it is a structured finance deal. And that's perhaps why you haven't seen dilution or angry shareholders. But there's a few other players out there, which doesn't quite make sense, but I'll come back to that in a second here. So just focus on what you are going to do with it. So you're saying we've invested in an appreciating asset, in all likelihood which will finance our capital needs or could contribute significantly towards our capital expenditure needs when we get into production? So, let's talk about that. 

The other big bit of news is, you made an announcement about the agreement of the English River First Nations. That's an important step for you moving towards permitting, because that's been the big elephant in the room for you; the ability to get this thing permanently, technically, and environmentally, it was a problem for you. Tell me about that agreement then, and maybe explain how that's helped you?

David Cates: Well, look, I mean, permitting is I want to agree that it's been a problem for us, right. I think it's been flagged, rightly as something that's on our road to production, is that we need to work through the permitting process. And so it's right for people to understand that these are milestones ahead and that these are processes we will have to go through before we can produce. But look, there's a number of elements to the permitting process for Uranium development projects in Canada. Some of them are technical. The technical elements are really scientifically assessed and driven by our regulators. They are going to be looking at science around the project, and the potential impacts of any project to the environment. That process is ongoing, It's a very busy year in 2021 focused on the technical side of things. We have a whole army of technical experts going through these different elements of mining operation and the interactions that could have with the environment. It could be water, could be air, could be noise, like these types of things are all being studied and that part of the process really is technical and science driven. 

There's another part of the process though, that is softer. And this is where the English River agreements I think really come in. It is a consultation and engagement process, they move side by side with those technical assessments. Our project is located in the traditional territory of the English River First Nation, and it's also in the homeland of the Metis. And so these are indigenous groups along with municipal communities that have ties to this area that we will have a regulatory obligation to consult with but we also have, I don't want to call it necessarily a moral obligation but it's a sensible thing to do to be working with anyone who may have potential impact related to our project. Now, English River is a very important group to us. We have a long history of having been through the communities that are connected to English River. Even before we had our PFS, even before we were talking about ISR mining, these agreements definitely reflect those years of discussions that we've had. And what they really reflect now is a common commitment to work together towards going through this engagement and consultation process for the environmental assessment. We have guidelines on how we're going to go through that how that's going to be funded. And on top of it, we reached an even broader agreement around all of our exploration activities in the Athabasca basin that might overlap with English River traditional territories. And that's the part that gets me very excited, obviously, I'm pleased that we have this path forward on Wheeler river, in terms of engagement with English River, but it's also the exploration agreement that reflects really progressive approach from Denison, to working with indigenous communities in Saskatchewan, because exploration agreements are not the norm for Uranium mining in Saskatchewan. And we've really embraced the opportunity to create a new norm that does reflect our respect for the indigenous communities that do have ties to the territories where we're operating.

Matthew Gordon: Okay, it's a participation and funding agreement plus LOI, in connection with advancement of the proposal of the ISR project, right? So what I'm trying to work out is, how meaningful is this, is this a, we're going to agree to try and find a way of working together or is there been more commitment than that?

David Cates: While its participation in funding and I think that says a lot is that English River and Denison have reached an agreement where we'll be participating in the environmental assessment process. We'll be participating in working towards and negotiating a bigger agreement related to the Wheeler River Project and de-risking essentially that part of this project in terms of community engagement, community support, and the EA because they do interrelate. One part that the regulator's will be doing is working with the potentially impacted communities to understand how they feel about the project and how the project may or may not impact them.

Matthew Gordon: So you say participate, you're paying for everything, they don't pay for anything.

David Cates: We're going to be funding, its participation and funding. So there's definitely a commitment for us to fund this process with English River. But more importantly, there's an agreement on what the process is. That's I think, key to all of this is us having a common view of what the process looks like and involves. That way, we can really just move assertively on that process rather than spending time back and forth talking about what we will be doing.

Matthew Gordon: Well, that's my point. That's what I'm trying to get to, we see these sorts of announcements by companies and it's just wishy washy, and it's just headline grabbing stuff. I want to know how serious this is, how involved, how engaged, how committed, how much money, how long it’s going to take? And is this just trying to look like you're a good ESG citizen, socially aware of the First Nations around you or is there some meat to it?

David Cates: No, these are substantive agreements. There are detailed work plans, detailed scopes of work in terms of what we will be doing and how we'll be working together to move forward with the permitting and the environmental assessment process at Wheeler River.

Matthew Gordon: That's your benefit. I'm interested in the First Nations, okay, what it means for them, are you bolting them on or are you truly integrating them into a process you're going through. You're paying for these surveys, these are commitments that you need to do anyway. But getting them involved is obviously smart, it’s essential and is the right thing to do but I want to know how engaged they are. What's this going to mean for you?

David Cates: It's a good question. Let me put it this way. We didn't sign the agreement with ourselves and English River First Nations, they don't have to sign any agreement with us. So, this has been a process of determining what is a mutually acceptable, a mutually beneficial process to move Wheeler River forward and to make sure that we do incorporate the feedback and the results of our engagement with English River, right? These are the kinds of things that are actually substantively in these agreements. 

Matthew Gordon: Okay, got it. So that process is going to last, how long how much money you're spending on that, what’s the outcome, what if you do all the things you hope to do?

David Cates: I think the first notable milestone will be the submission of the draft environmental impact statement. So we've got a plan to be working through the legwork on that over the next 12 months, and to be in a position to submit that draft EIS at the beginning of 2022. Now, I do want to make sure we touch on the exploration agreement as well, because you're right, that the focus is on participation funding and the LOI in connection with the advancement of ISR at Wheeler River, absolutely correct. But really important to understand our relationship with English River is going beyond that with the exploration agreement. And similarly, the exploration agreement is a substantive agreement. There are financial commitments, there are commitments around permitting and the processes involved for us to operate in English River traditional territory. This type of agreement is not common in Uranium mining in the Athabasca basin. We are blazing a trail here, in terms of indigenous partnership with this agreement, and it does show a sustained support from Denison to English River beyond what we're talking about is just an English River, beyond what we're talking about at Wheeler River. And so that is an important part of this dynamic because we are really trying to build a durable partnership between our company and English River First Nations.

Matthew Gordon: Brilliant, I look forward to seeing how that works out and what happens at the end of it. You'd refer to it as the kind of the soft component. If you get the buy in of your partners and the endorsement of your partners, you're going to say, well, that's going to help our EIA application and our ability to get permits. The other hard bet to list is you being able to technically solve the freeze wall. A lot of water is in a basin, I guess, by definition, a lot of water so you've got to solve that problem, where are you with that?

David Cates: Again, you're right, there's the soft and the hard. And I just want to say on the soft before we go on to the hard like, it's not just about moving the EIA forward. Obviously, that's an important element of our business. We do have a genuine interest in sharing benefits and finding mutually beneficial arrangements with indigenous groups and communities where we're operating. So, this is something that we've genuinely committed to and it is more about just the way we want to do business with durable partnerships. 

Matthew Gordon: As you should, as all companies should, and I commend you for it. None of that counts for anything if you can't solve a permanent, sustainable freeze wall solution. So where are you?

David Cates: That's a great question and you're absolutely right about that. We've done really well on the technical side of things over the last 2.5 years. We have been de-risking every turn to the point where we're now really focusing on 2021 and 2022 field programme and more information to come on both of these. But the intent here is to bring us technically to the point where we will be at a Feasibility Study. level of comfort by the end of 2022. And so, all of this has been building on work that we've done one step at a time. It's been a progressive approach. We started in 2019 with initial ISR field testing to prove that we could move solution through the ore body. We were in the field for months, we drilled many holes, we had this actual testing in our ore body. And about a year ago, we came out with a report from our technical QP on the hydrogeology that said, Look, the actual pump and injection tests at Denison ran and the hydro-geologic modelling that we've carried out with all of this data actually tells us that they've achieved proof of concept on the ability to move solution like an ISR mine so that's been hugely successful. Partway through to the tail end of 2020 we did adopt a design change on the freeze containment. And so we've moved away from a freeze dome and we've adopted a freeze wall design. 

Now, this is a massive step for us in that the freeze dome, we've always felt it was technically quite feasible because it would be relying on existing directional drilling technologies used in the oil sands and ground freezing is a very common thing in the Athabasca basin so we're just kind of putting those two things together. There was no doubt that there was a higher level of technical risk associated with the dome than what we've devised now with the freeze wall. And maybe important to just unpack that a little bit because a freeze wall in the Athabasca basin is actually extremely ordinary. So, at MacArthur river and Cigar Lake, they're doing exactly what we will do in the freeze wall design. They're drilling holes from surface using a diamond drill bit and they are casing those holes to depth with a double lined case, double line pipe that circulates a freeze brine kind of like you'd have at a hockey rink, or an ice rink to freeze the ice through that pipe and then they're freezing the water that's in the rock to create basically ground of ice and that ice is then competent. 

And at Cigar Lake, for example, they're mining underneath it, they're using that to create stability in their ore body and above. And MacArthur river, they're using it as a curtain in places to keep water out of their mine. What we'll be doing is creating a fence all the way around our wellfield from the surface. So basically create a cylinder from surface down tied into the competent basement rock and then it will create this freeze fence all the way around. And our intent is to keep our ISR mining solution in to keep the water out because we don't want the dilution but keep ISR mining operation and the solution in the cylinder. Now, from a technical standpoint, being able to complete these drill holes and that kind of freeze wall is quite conventional. So just by design change, we've made a massive step forward on the freeze containment. 

One of the most important parts, though, is the environmental piece, right? Because now, instead of having this dome, 400m below surface that we were piercing with the ISR wells, we now have everything from surface down within our freeze column if you want to call it that. And that's a real advantage from an environmental standpoint because there's no longer this risk that your ISR wells that are operating above the dome to surface could rupture, be damaged and then you'd have an excursion of mining solution. Now we have the entire operation contained within this freeze perimeter. We're quite upbeat in terms of what that will mean for the permitting process in terms of people understanding the environmental impacts, like we've really created a failsafe around the operation now.

Matthew Gordon: How are you sure that the dome solution was the right solution for you?

David Cates: Well, at the time, the dome was really designing, it was really replicating the textbook for ISR mining. And maybe a bit of a history lesson it might make sense on that right. Like, typical ISR environment for Uranium is you're going to have a confining layer below your deposit, a confining layer above your deposit and you're going to be mining in the middle. And so in the Athabasca basin, we have the confining layer below, we don't have a confining layer above. So the dome was meant to replicate that by at depth creating this chamber that essentially was creating the textbook or closer to textbook environment. What was really important was all the test work we did in 2019. With all of that pumping injection testing right in our ore body, we discovered that solution that we inject into the ore body at 400m does not actually migrate vertically, minimal migration vertically because the ground itself is disrupted, it's broken up, this is all about this type of deposit at that depth. Solution moves laterally, that started to open up the idea of moving away from the dome, because maybe we don't need a top on this deposit. And that's what got us into using the wall design, where we could now actually contain the entire operation and realise that we don't, if we pump injection, if we inject solution in 400m deep, it doesn't start coming back up, it stays there, and especially when we're then pumping it out from that depth. So, you know, now we've realised through actual fieldwork, that the cap isn't at all needed. And that's allowed us to then design a better form of freeze containment, that's better for the environment and it really reduces our operational risk. And a really important element we haven't touched on yet allows us to develop the mine in a phased way. So we don't need to dome the entire deposit upfront, we can create a wall around a 1st phase, and then extend it to a 2nd phase and a 3rd phase. And that should allow us to reduce our upfront capital costs on the freezing and really allow us to be more nimble as we develop the deposit over the life of the mine.

Matthew Gordon: Okay, the reason I ask this and the question I'm about to ask you is because you need to deal with to persuade people that you should be given a permit. So technically, you thought you're the right solution and with all things technology, there's something better comes along because a better new thinking, new data and any change things. So I kind of nicely concerned that you've gone from one to the other so it's more an evolution so that's fine. What happens if we have a scenario like another Fukushima, or some sort of Black Swan event? market crashes, you guys go bust, you've got to keep this this freeze ball going, that takes energy, who deals without that? Whose liability is that in that scenario?

David Cates: Well, so in operation like this is a very reasonable question, questions that we get, like all the time through the community consultation process. I mean, people are rightly concerned about operating these mines and even closure and how they will be held to sustain in good and bad times. Number one, with our cost profile, I do think we have a very good prospect of operating even in very bad markets.

Matthew Gordon: All empires rise and fall. So let's go with what if 40 years down the line, you are long gone, the company whatever bad times how does something like this because it's going to be sustainable? Because you're talking about a good ecosystem and I'm sure you get asked this a lot so tell us what's the answer?

David Cates: Yeah, so the freeze wall it will stay up until the mine has been reclaimed. There is no doubt a cost to installing it and there's a cost to maintaining it. I will say that the cost to maintaining it is low because it's one of those things where when you build an ice block and once it's frozen, it doesn't take a lot of energy to keep it frozen when it's in the ground. But to your point, there are quite clear requirements from the government of Saskatchewan around any mining operation, where for example, we will need to post financial assurances that cover the complete closure cost of this mine as soon as we are essentially in operation. We already do that with our interest at McClean Lake and so the concept is that if for example, Denison disappeared, like literally puff, we disappeared one day, the money is already on deposit, it's already secured so that someone else can come in and do whatever it takes to shut the mine down or and not just shut it down, reclaim it. So the government of Saskatchewan has very strict and stringent process for that and we will have to comply with that and post that type of financial security. 

Matthew Gordon: So you're going through a process now of looking at your new design and it's from last year but it's still a new design. Will that have delayed things as far as the permitting process is concerned? Are you putting your timelines out? What have you heard or what do you know with regards to that when we talked last May you said 2 or 3 years easy?

David Cates: We've been…nothing's actually easy, come on, that's not the quote. But, we were delayed by COVID-19, that's the real delay. This time last year we were about to start building a road show together to tour through the communities in northern Saskatchewan and talk about our project right now. You're right, we would have been talking about a freeze dome this time last year. So we took the pandemic delay, because really it was not right for us to start touring during the onset of this pandemic. We paused the environmental assessment process through 2020. We took that time and we moved certain files on the EA forward, including this freeze wall design. And so now with that freeze wall design settled, we've restarted the EA in January and all this consultation. And so, you know, in terms of will there be a delay because of this design, there won't, because really, we took the COVID delay and moved the design forward. And now we're at the right point, in terms of consultation where we can consult on the design that we're moving forward with, which is the freeze wall. The freeze wall does have the potential though, to shorten our timelines for construction because of the phased approach. We no longer have to dome or freeze the entire deposit to start mining. We can just create that fence around our first of 5 phases which is a much smaller endeavour than setting that full dome over the deposit.

Matthew Gordon: Okay, you're busting to tell us about this phased approach. So let's talk about it. Because one of the things I liked when we talked last May was a slightly unique approach to the Capex solution. It could have been a very big Capex sub 300M from last year that you're suggesting, and perhaps could even go lower with this new set up. And so I did like that a lot is kind of unique, instead of saying, Oh, it's about scale, this is about getting into production. So let's assume permits got, they are granted, this phased approach that's going to be what market dependent or how are you planning it out? What are the options for you?

David Cates: Well, the phases are not that complicated. It's really just about spending that capital for freezing over the life of the mine rather than freezing all upfront. There is real potential for us to reduce our upfront Capex on freezing because we're no longer freezing the entire deposit, we will freeze in phases. Now it will mean that capital will go to sustaining Capex rather than initial Capex. But when you play that out through the life of the mine and you look at things like cost of money and the NPV, like we're pretty confident that the phased approach will have a very positive impact overall on the project, likely also reduced that upfront Capex. And really, when you look at developer, that upfront Capex is really important because the capital comes from somewhere, it's not coming from existing cash flows. And that's how we're trying to manage and maximise the value we can create for our shareholders. And that's where we were talking last year about the phased approach. I mean, we could build Phoenix and Gryphon together and spend a billion dollars up front and we'd have a bigger NPV. But we'd also be taking, we'd also have to raise that billion dollars up front, right? Here we can raise, we're looking at about $300M upfront for Denison we're 90% and that can be the catalyst that starts cash flow, that gets our company running and really minimises the dilutive effect to our shareholders of starting the mine. 

The phased approach is also important from a risk standpoint. And what we'll have to do to start this mine up is now much smaller scale from a freezing standpoint. A lot of things happen when people build mines, a lot of things can go wrong. Anytime you can take something like a big process of creating a large freeze dome and simplify into drilling diamond drill holes, 25,000m of diamond drill holes to be a first phase, like that is a win for de-risking project construction. Because the risk around doing that is just fundamentally much lower than setting in this directional drill hole dome over the entire deposit. And so we see that as a big win with this phased approach as well is that we're just simplifying that startup construction process as well.

Matthew Gordon: Okay. I understand, that gives some optionality on that. Good, that kind of like the way you structure the Capex, you've thought about this. Can I just I need to come back there’s a question slightly bugging me. I didn't ask with regards to the buying pounds in the marketplace. I think it has been positioned by some observers as Oh, fantastic Denison are going out there and they're mopping out all this mobile inventory in the marketplace. Well done then, problem will be solved that way. You're saying to me, no, the problem you were trying to solve was I'm addressing unmet demand for investment and your junior equities. One, the by-product of that is maybe mopping up some mobile inventory. But there's a lot out there. And what kind of I was surprised by was how quickly you got access to it. Was it because you bought it pretty quick right, within a month?

David Cates: I'm glad you brought it back up because I think there's a few more things we can touch on here. So let's talk about how we mopped up the material. But before that, let's just talk a little bit more about what we'll do with those pounds. Because I think this is again, something that's misunderstood in some camps around the strategy. It is a store value to support future project financing. What does that mean? So it could mean that we borrow against these pounds, use them as collateral. We're not trying to sell these pounds to raise money later. That would make it sort of speculative, if the price goes up, great, we think that if the price stays the same, it's still that's actually the strategy of $100M of material that we can borrow against. And then ultimately, you borrow against that material, you build your mine, you pay off the debt. The debts been low cost because it's secured against that material and that material becomes available, like partway through your mine life to sell to your customers. That's what we're trying to do with this material. 

The other things you can do is help you contract with utilities. Having a new mine or building a new mine is a tough thing for utility to support because they want to make sure they get the pounds. Well, no better way to de-risk that than to already have the 2.5M lb so that the utility customer can be comfortable, they will get deliveries from you. So that's really what we're trying to do, not trying to mop up the spot market. Now, that said, there is that collateral benefit that to acquire this Uranium for that strategy, we have been in the spot market. Now, we were cautious around how we did this. We are not entirely sensitive to price, like it wasn't a razor thin margin for us. I mean, we could pay a range of prices and we'd still be accumulating that store of value. So that gave us a lot of flexibility as to how we would approach this. 

I have heard sort of this feedback that while it looks like they acquired that 2.5M lbs pretty easily. Well, I'll tell you, it was not that easy. We've guided that, we have deliveries as far out as October, so these lbs are not all available. Today, we couldn't back up the truck and just say put the pounds in right now and they were flowing out of the taps of the market. We had to work pretty hard to find these pounds and we have many, many transactions. We did not go and hit 3 transactions to get2.5M lbs. We're approaching 20 different transactions to get up there. Lots of different pieces, lots of different pockets and I have no doubt that we did end up sweeping off a good chunk of material that was mobile to the market in the near term but also in that sort of next 8 to 10 months. Now. There will be more materials. There's always places where material will come out but it's at what price. And you know, we certainly saw that as soon as we started taking chunks, prices were moving up to be able to liberate pounds into that market again. So it has mopped up, not just us but others acting at the same time. We have mopped up the low hanging fruit in the market. And I think sellers are more selective right now. We can expect that the price should see some level of stability. We're not the only ones commenting that, the price reporters and others are saying this seems to have set a new level that will that they expect to hold around $30.

Matthew Gordon: Okay, well that was going to be my question because it had been as low as $27 in the last couple a couple of weeks, somewhere around $30, $31 so it's moved a lot of it since you guys and some of the copycats is a fair phrase to use because it was quite an innovative thing for a junior equities company to do. I know you've kind of got the history you hold power,  there's a track record, but the others I'm thinking of UEC, it feels a bit more of a marketing ploy with them, Boss where it felt like what like as you say they hope to be in near term production at that when the price is right but it gives them the permission to maybe have conversations now with its security of pounds acquired and we've even seen enCore, a small amount but he definitely felt like a marketing ploy. But do you expect to see more of this? Is that de rigueur?

David Cates: Look, it's hard. I've been of two minds on this whole thing, because obviously, we worked very hard to put this strategy together and we think it's a great strategy. So I can't be overly critical of others. 

Matthew Gordon: My point is you hold you already when holding accounts.

David Cates: We already have experience doing right.

Matthew Gordon: So you've got experience of doing that, it makes sense. I understand the strategy why you would do it. But for others, I'm struggling a little bit. It was make great TV, people are going what's going on? What's it going to do? Will it mop up pounds? Is it a good strategic move and everyone's talking about it again and I think it's driven the price up a little bit. But utilities don't care it seems, there's not a lot of bunch of new RFPs as a result.

David Cates: Well, it's interesting. The utilities are cautious. And one thing that I don't believe that they will respond to is this concept of the hashtag Uranium squeeze, right? Could it be perceived that that's what's happening? I understand why people would say that. But let's be honest about the quantities, take Yellowcake, take Denison, take UEC, take Boss, take enCore. It's sizable, but it's not more sizable than the buying activity we've seen from Cameco for the last several years. So we should all be grateful that this activity is happening and is assisting with the draining of the swamp of these free pounds, and they're being parked in places like Denison where we're saying, look, these pounds don't come out until after we're in production. Like Yellowcake has got them locked up, like a UEC has them locked up. So this is all very good but the utilities are not in my mind, they're sophisticated, they're not going to bite to say, well, this is a Uranium squeeze and we must be call to action. 

That said, they have to be looking at this, to understand what a company like Denison is seeing in this opportunity. And to realise that we're seeing this ability to access capital and buy Uranium as something that is attractive to our business and that is in competition with their business. They would like to be able to buy those pounds, they haven't been rushing to buy those pounds because they believe that they're there. The narrative in the market is changing and they have to understand that there are other financial players that could come in and see these pounds in this market as attractive investments. These types of different transactions should be cluing them in that people are looking at these pounds in the spot market at these prices differently. Maybe those pounds in the spot market will not be there for them as utilities, the way they've been expecting them to be there. It's very interesting, Matt, like when we're buying pounds in the market and we're taking deliveries out in October and we're seeing that the people who are buying alongside us in some cases are traders. These are guys we're supposed to have be the conduit from produced pounds from Uzbekistan or wherever it is. They're supposed to have the material to sell to the market and they're having to buy in the market because they don't have a trading business if they don't have inventory. That's something that should be on the radar of market watchers to realise that the depth may not be there the way that people expect it to me.

Matthew Gordon: But utilities are managing their budgets, they'd rather have their money in the back pocket with the option of paying a little bit more further down the line so that they retain control of their money rather than stocking up now a bit low prices and then not be able to do things like maintenance of their own facilities or they've got other energy sources which they need to fund. So I think that’s sensible and why should they reveal their cards and ask for there are other buyers out there and metal buyers in the market. They're always on until that there's no market and then they go off and do something else. So none of that I think is surprising in itself but I think the bit, which I'm sort of intrigued by is why some of these companies felt the need to emulate what you did, because their business models and the plan is very different from yours. That's the most confusing.

David Cates: You're going to have to get those guys on and ask them that question. 

Matthew Gordon: I will. Some of them won't come on, I don't know why. Okay, well, I just kind of wanted to deal with that kind of mopping up issue because it's been talked about. I think that makes for some delightful conversation as ever. We've had a weekly Uranium show for the last 51 weeks, there's always something to talk about. It's a fascinating and intriguing space and I'm so conscious of time here, and you promised to come on again, soon. So I would like to get it all in there. Talk to me about a little bit just headlines around, field programme exploration, you've got a stack of money in here now, you got to give us some clues as to how you're going to be spending it.

David Cates: Absolutely and we'll leave this as a teaser for our next update, but 2020 one's a big year for us. We will be in the field, we've got guidance out on a $20M budget for Wheeler River for evaluation. And really, the purpose here is to install a 5 spot commercial scale test pattern and take our actual work that we've done over the last 2 years to a commercial scale level where we can test the ability to operate ISR mine in this pattern. This pattern alone is in our ore body, it's an area that has I think it's somewhere in the range of 2 to 3Mlbs just within that test pattern. The intent is to be able to operate that pattern with water and tracers this year, that's sort of a commercial scale, use that information and data to then build a programme for 2022 where we would bring in live mining solution, and actually carry out a field leach test. And that would be the ultimate way for us to de-risk this project ahead of a Feasibility Study is to actually demonstrate that we've leached the Uranium in this field test in a commercial pattern. So following along for 2021 is important. We will have more de-risking news throughout the year in terms of completing the wall pattern in terms of operating with the water and tracer test, collecting more data, all of that stuff very exciting for us and then ultimately setting us up to do an even more advanced test in 2022. 

At the same time, we do have exploration plan for the year. Back at Wheeler River, we had some great results that we reported beginning of this year from drilling late last year, we've discovered a new high-grade zone 4km away from Wheeler River on K West. Grades up over 7.6% in a brand new area that’s open entirely on strike, hundreds of metres either way and in the right position we've hit this mineralization at that unconformity, which does make it potentially analogous to Phoenix. The possibility of finding a satellite deposit or any other ISR mineral deposits at Wheeler is just really amazing blue sky for us. Because, we see what we can do at Phoenix and we can talk about Waterbury and THT another time. But we've done other studies now on smaller ISR deposits where you already have access to a processing plant. And we know that finding anything in this vicinity to Phoenix will be very positive for the overall project economics and could extend life, could increase rates of production. So this is a case where act we're exploration really does have a very quick and tangible potential benefit if we are able to delineate another ISR pod. So stay tuned for on both of those channels definitely throughout the year. 

Matthew Gordon: That's the teaser for that one. So I'll leave with one last question. This is coming out of, there's a bunch of money there and we've talked about some people doing things for marketing reasons, sometimes because it's strategic and it's fundamental to the business. M&A roll up, people are talking about, people saying it's inevitable. They're the CEOs that I talk to, everyone knows what the good assets look like and what the good companies look like and everyone knows what the bad ones look like. But that's not going to stop the inevitable thing in mining is someone's going to roll up a bunch of mixture of all of the above and create some potential super BMF in the shape of a large Uranium company, which fundamentally doesn't stack up but looks great on paper. Do you think someone's going to do a roll up? Is that person or is that company going to be Denison or will you leave that to others?

David Cates: It's totally rational question to ask as the Uranium market sort of returns to life. I mean, you've seen it in the Gold sector where as soon as there's sort of that life in that commodity, people do look to consolidation. What I'll say about the Uranium space is that it's pretty small space. We've been familiar and are familiar with pretty much every asset in the sector and that's been the case for the last number of years. There aren't many new assets that I think change the menu of things available for consolidation. I think if consolidation was going to happen amongst the junior sort of developer crew, it probably would have been considered or looked at through some of the tough times as a way to sort of create scale, things like that.

Obviously something new coming out, I'm not so sure that we'll see that much consolidation. There's definitely some pairings that I think makes some sense, but they haven't happened to this point so one has to wonder, what will be the catalyst for them to happen next? Obviously, anything new is something we would follow with great interest. Anything that discovery that has that ISR potential speaking on behalf of our company, we're going to look at with great interest. There haven't really been those types of discoveries because people haven't been looking for those types of deposits. And so my answer on the roll up on the Denison side, is more that we're going to look probably within our portfolio to discover those types of assets because we've got the exploration team to do that and nobody else has found them. So we'll take our team, go look for those deposits, try to build organically. But I think there's a bigger picture discussion above us that says, like, what will happen in our sector. You've got an interesting situation where you've got developers that are moving assets forward at a rate that's much faster and with much more motivation than any of the majors. But at the same time, you have the majors commenting on how short the market will be. So the narrative out of some of the majors has evolved over the last 3 or 4 years where it was a commentary on while there should be no new investment in Greenfield exploration, and it will be an incumbents recovery. Well, I don't think I disagree with that. I mean, if you have an existing mine, then you're probably going to be able to exploit the rising price before a developer. But then the narrative has pivoted over the last call it a year to say, well, it's not just one MacArthur river that needs to come back online, it's maybe 5 of them. So okay, well, that's interesting because the majors don't have 5 MacArthur rivers. So, I think that and frankly, you probably do need Greenfield development, to be able to deliver 5 MacArthur rivers. And so I think that starting should be starting to flag for people that as we move forward in this cycle, the companies that have advanced their assets, the companies that are in a position where they can produce or are producing, those ones will be the sort of ripest cherries for the majors, when they look to fill in those 5 MacArthur rivers, that they will need.

Matthew Gordon: I totally get that and we discussed this week at cruxinvestor.com/club, the weekly Uranium show where we talk about some of these issues, those are good problems to have. My concern is the way that the game is played in the marketplace because you CEOs can't say much about each other's assets but you know, what it looks like and what not so good looks like, but you can't say anything and that's poor retail guys, see some great news, shining Phoenix rising. 

David Cates: I’ve got something for you. This won't be a popular statement, okay amongst some of my counterparts and peers, but if the assets are good, they were probably already owned by someone through the tough times. If the assets are coming out of nowhere, and you didn't even know about them and they're not a new discovery, it's probably because they were on the scrap heap. It doesn't mean that there isn’t a basis to generate some value for shareholders through that. But I mean, if it didn't make it through the last cycle and it was already there, who's to say it's going to make it through this cycle that’s all I am saying. 

Matthew Gordon: That's playing the market with gaming the market, that's not the fundamentals of good projects, that's not the next MacArthur river.

David Cates: It's not to say people can add value and change a narrative and change a project. But it's something to flag is that if it really had that potential, it had been in someone's hands. It had been something that someone was advancing or at least holding during the down years.

Matthew Gordon: Watch out folks, be careful, keep your eyes peeled. But in the meantime, David thank you so much for that, good to catch up. It was way too long the first time you've promised come back on more regularly. We'll see you soon. I do want to pick you up on that teaser of the exploration and field programme and you've got a few things out of the way today. So I'm more interested in how you move this thing towards getting in production, how the market is moving and where you position yourself. Are you the next MacArthur river is the question.

David Cates: Matt, I appreciate it. Thanks again for having me.

To find out more, got to  the Denison Mines Website

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