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

April 29 2021, 12:17 GMT+01:00

Denison Mines

  • TSX: DML
  • Shares Outstanding: 791.65M
  • Share price C$1.30 (15.04.2021)
  • Market Cap: C$1Bn

Denison Mines is a uranium exploration & 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.

Recently we had a chance to interview David Cates, President and CEO of Dennison Mines, a major uranium player in the Athabasca basin of western Canada. He shared with us some of the latest news about the company’s activities.

 

Company Overview

Dennison Mines is a is a Toronto-based uranium exploration and development company with interests focused in the uranium-rich Athabasca Basin of northern Saskatchewan. The company projects and assets are distributed in the southern and eastern part of the Athabasca basin, cumulatively covering approximately 280,000 hectares. Fifteen percent of the company is owned by Korean Electric and Power (KEPCO). The company trades on the Toronto stock exchange (DML) and the American stock exchange (DNN).Denison Mines (DML) - Focus is on Field Programme & Exploration

C-Suite                                                         

In addition to Cates, Dennison Mines is managed by Mac McDonald, Executive Vice President and CEO; David Bronkhorst, Vice President Operations; Michael Schoonderwoerd, Vice President Controller; and Amanda Willet, Vice President Legal and Corporate Secretary. Dennson Mines’ board of directors includes Catherine Stefan, Chair of the Board; David Cates, our interviewee; and board members W. Robert Dengler, Brian Edgar, Ron Hochstein, Jack Luden, Patricia Volker, and Jun Gon Kim.

Major Projects

The company’s flagship project is the Wheeler River Asset, in the Athabasca Basin. It represents the largest undeveloped uranium project in the infrastructure-rich eastern portion of the basin. Dennison has a 90% interest in the project, with the other 10 % owned by JCU Exploration / UEX Corp. Wheeler River has probable reserves of nearly 60Mlbs of U3O8 and a probable mine life of 10 years.

In addition to the Wheeler River projects, the company’s Athabascan interests include:  

  • The Waterbury Project (66.9% interest), where a preliminary economic assessment (PEA), indicates robust economics associated with a promising in-situ mining process,
  • The McClean Lake and Mill Joint Venture (22.5% interest), which includes several uranium deposits and the McClean Lake uranium mill, and is currently processing ore from the Cigar Lake mine under a toll milling agreement, and 
  • In addition, Denison has an extensive portfolio of additional exploration projects in the Athabasca Basin region.

Dennison is also involved with mine decommissioning and environmental services via its Closed Mines group, which is active in the Athabasca basin.

The company is also managing the Uranium Participation Corporation (UPC), a publicly traded firm that invests in concentrated uranium oxides.Denison Mines (DML) - Focus is on Field Programme & ExplorationCates’ High Level Perspective on Dennison

The Wheeler River project is the company’s main focus, according to Cates. That project is going through the permitting and environmental-assessment processes and is at the front of the line for development in the eastern basin.

In addition, the McClean Lake Mill project is very important to the company. It includes a number of undeveloped uranium deposits in close proximity to the mill. Together with Cigar Lake (temporarily shut down because of the pandemic), this represents the only active uranium mine in Canada today.

Dennison’s Novel Idea

The company has embarked on a planned strategy of purchasing physical uranium, holding it as a long-term investment, and then using it as a reliable source of collateral to give them a different type of future access to credit markets. Cates shared with us the genesis of this plan.

While they were in the process of raising some $85M in financing over the last year, Dennison realized that there was a tremendous amount of unmet investor interest in companies like his that are operating in Canada’s uranium space. They saw what he referred to as “massive oversubscriptions” on financings that were being put to market. At the same time, having raised $85M, they realized that they really didn't need any more money right now to advance their work in a prudent fashion. Thus, they came up with the idea to purchase physical uranium.

Now, Dennison sits with approximately CAD$100M in physical Uranium. As future project contracts close, they’ll have a tidy sum of capital covered. According to Cates, what they are really trying to do is simply de-risk their business and protect against shareholder dilution without just holding stagnant cash.

We dove deeper in these purchased with Cates. He addressed what they would be able to do with the physical uranium. He views it as a “store of value” to fund future projects. They might, he said, borrow against these pounds and use them as collateral. By doing so, he said, the company can obtain funds, build the mine, and pay off the debt because it’s secured against the low-cost physical metal.

Additionally, he indicated that holding uranium may help during contract negotiations with utility companies. These power generators want to ensure that they have supply. What better way to de-risk that than to already have the 2.5Mlbs of uranium so that the utility customer knows that it will get deliveries from Dennison Mines? He indicated. And furthermore, Cates said, they were able to “mop up that low-hanging fruit” at a great price. He believes that the supply of uranium that many people think will be available could indeed dry up in the near to intermediate future. 

The “Dome Wall” Solution

Dennison intends to utilize an in-situ recovery (ISR) process at Wheeler River. This method involves using a leaching solution to free up the ore from the host rock.

The company began assessing ISR at Wheeler River in 2019. Today, because of extensive drilling results and subsequent hydro-geologic modelling, that they are in a position to say that they've achieved proof of concept on the ability to move solution in an ISR mining operation.

In fact, the modelling results and subsequent development plan have been so positive that they are terming the solution as a “Dome Wall” ore-extraction process, Cates said. Freeze walls are actually a typical ISR technique in the Athabasca. The newly coined “Dome Wall” term is meant to convey that the entire production operation will be contained within an environmentally friendly subsurface freeze perimeter. Envision this like a cylinder from surface tied down into the competent basement rock with a frozen perimeter fence all the way around, he said.

The company is very upbeat what this brings to the permitting process in terms of people understanding the environmental impacts. Cates believes that they have created a nearly failsafe operating technology now. And, the beauty of it, he says, is that it can be put in place incrementally in phases, reducing overall CAPEX

We pressed Cates further asking him if what he’s really trying to do, in essence, is get a permit. No, he said, the dome wall will stay up until all the way through until the mine has been reclaimed. The cost of maintaining it is low.

The Timeline at Wheeler River

We asked the CEO to review the timeline at Wheeler River, as it stands now. He indicated that they have paused a few things in 2020 because of COVID. With the dome wall solution in place, they restarted the environmental assessment back in January.

They are now looking at business options on the preferred phased-development scenario, attempting to structure solutions that are in the best financial interest of the company, which would enable them to start up at a smaller, less costly scale.

In addition, they intend this year to install a 5-spot commercial scale test pattern at Wheeler River and take the actual work that they've done over the last 2 years to a commercial scale level where they can test the ability to operate as an ISR mine.

Also, they have more exploration work on tap. Finding any satellite occurrences close to Wheeler River would be “blue sky” for Dennison, the CEO said. Denison Mines (DML) - Focus is on Field Programme & Exploration

English River Agreements: Recent Progress with First Nations People

We then turned to another important component of the firm’s business vis-a-vis the First Nations people living in the Athabaska region. Wheeler River is located in the traditional territory of the English River First Nation. The English River Agreements provide, among other things, for the regulatory obligation of close consultation with indigenous people. More importantly to Cates, however, is the fact that collaboration with the Frist Nations is really a moral obligation, particularly, but by no means exclusively, regarding environmental protection.

We mentioned to Cates that it seems like Denison is paying 100% for the whole collaborative effort and asked him for his comment. He replied that yes, they will take on the funding component. Nevertheless, in his mind, they have actually come to a common agreement on how the ongoing interaction and process is structured. There are detailed work plans, detailed scopes of work, and details on how we'll be working together to move forward with the permitting and the environmental-assessment process at Wheeler River. He believes that this will give Dennison the ability to move assertively on proceeding with a durable process rather than spending time back and forth talking about what both parties will be doing.

He also indicates that the way Dennison is working with the First Nations people is somewhat of a trailblazing modus operandi. Cates shared this: “What we're talking about is not just an English River, it’s beyond what we're talking about at Wheeler River”.

Wrap Up

We asked a final hypothetical question to the CEO wondering if M&A fever might beset the Athabasca basin uranium companies sometime soon. Cates discounted the possibility a bit, saying that the uranium players occupy a “pretty small space”. He believes that there are definitely some pairings that make sense but overall he doesn’t see it happening, at least not big time. 

To find out more, got to  the Denison Mines Website


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