ISR MINING METHOD ESTIMATED TO PRODUCE
USD$12.23 PER LB
U3O8 OPERATING COSTS J ZONE
DEPOSIT RENAMED TTHE HELDETH TÚÉ ("THT") DEPOSIT
TORONTO, Nov. 17, 2020 /CNW/ - Denison Mines
Corp. ("Denison" or the "Company") (TSX: DML) (NYSE
American: DNN) is pleased to announce the successful
completion of an independent Preliminary Economic Assessment
("PEA") for the Waterbury Lake Property ("Waterbury") evaluating
the potential use of the in-situ recovery ("ISR") mining method at
the Tthe Heldeth Túé (see below, formerly named J Zone)
deposit (the "Project") with associated processing at Denison's
22.5% owned McClean Lake mill. View PDF version
The PEA was prepared by Engcomp Engineering & Computing
Professionals ("Engcomp") of Saskatoon and demonstrates robust economics
for a small-scale Athabasca Basin
ISR uranium mining project – including low initial capital costs,
low operating costs and globally competitive all-in costs, as
follows:
Mine life
|
~ 6 years (Avg.
~1.6 million lbs U3O8 per
year)
|
Projected mine
production (1)
|
9.7 million lbs
U3O8 (177,664 tonnes at 2.49%)
|
Average cash
operating costs
|
USD$12.23 ($16.27)
per lb U3O8
|
Initial capital costs
(2)
|
$112
million
|
Base case pre-tax IRR
(3)
|
39.1%
|
Base case pre-tax
NPV8% (3)
|
$177
million
|
Base case price
assumption
|
UxC spot
price(4) (Avg. USD$53.59 per lb
U3O8)
|
Operating profit
margin (5)
|
77% at USD$53.59
per lb U3O8
|
All-in cost
(6)
|
USD$24.93 ($33.16)
per lb U3O8
|
(1)
|
See Deposit,
Geology & Projected Mine Plan section below for additional
information regarding projected mine production. Scheduled tonnes
and grade do not represent an estimate of mineral
reserves.
|
(2)
|
Initial capital
costs exclude $20.1 million of estimated pre-construction Project
evaluation and development costs.
|
(3)
|
NPV and IRR are
calculated to the start of pre-production activities for the THT
operation.
|
(4)
|
Spot price
forecast is based on "Composite Midpoint" scenario from UxC's
Q3'2020 Uranium Market Outlook ("UMO") for the years 2028 to 2033,
and is stated in constant (not-inflated) dollars.
|
(5)
|
Operating profit
margin is calculated as uranium revenue less operating costs,
divided by uranium revenue. Operating costs exclude all
royalties, surcharges and income taxes.
|
(6)
|
All-in cost is
estimated on a pre-tax basis and includes all project operating
costs and capital costs, excluding project evaluation and
development costs, divided by the estimated number of finished
pounds U3O8 produced.
|
Denison is also pleased to announce the re-naming of the J Zone
deposit to the "Tthe Heldeth Túé" ("THT") deposit –
pronounced "Tey Hel-deth Tway".
The Ya'thi Néné Land and Resource Office ("YNLR"), working together
with Denison, reviewed the Conceptual Mining Study ("Concept
Study") prepared by Denison for the J Zone deposit prior to
initiation of the PEA (see news release dated July 28, 2020). The YNLR provided valuable early
feedback related to the Project's next steps, and recommended the
use of a Dené name for the deposit that would recognize and respect
the connection of the Athabasca Denesųłiné to the land where the
deposit is located.
This press release constitutes a "designated news release"
for the purposes of the Company's prospectus supplement dated
November 13, 2020 to its short form
base shelf prospectus dated April 2,
2020.
David Cates, President and CEO of
Denison, commented:
"The Waterbury PEA further demonstrates the potential for the
ISR mining method to change Canada's global competitiveness in the uranium
mining sector – without requiring the discovery and development of
massive-scale uranium mines. The selection of the ISR mining method
for the Tthe Heldeth Túé deposit has transformed
our expectations for the Project – generating robust preliminary
financial results with comparatively modest upfront capital costs
and positioning the Project as Denison's second ISR amenable
development asset with a cost profile that is highly competitive
amongst undeveloped uranium mining assets globally."
David Bronkhorst, VP Operations
of Denison further added:
"Denison's technical team successfully modelled the
application of the ISR mining method to the Tthe Heldeth
Túé deposit in the internal concept study and the
preliminary results have now been validated with the completion of
an independent NI 43-101 compliant PEA. Denison's plan for the
Project includes a 'freeze wall' design adapted from the 'freeze
dome' outlined for the Phoenix
deposit in the Wheeler River Pre-Feasibility Study ('Wheeler PFS').
The freeze wall design allows for the containment of a smaller area
and a significant reduction in up front capital costs, as compared
to the 'freeze dome'. Additionally, the freeze wall is
expected to offer environmental advantages by providing containment
of the ISR mining operation from the depth of the uranium deposit
all the way to surface. With the positive results of the freeze
wall design demonstrated in the Waterbury PEA, Denison is also
evaluating the potential benefits of a freeze wall (rather than
freeze dome) for use at Wheeler River's Phoenix deposit."
Waterbury is owned by the Waterbury Lake Uranium Limited
Partnership ("WLULP"), of which Denison Waterbury Corp. (a
wholly-owned subsidiary of Denison) owns 66.90% and Korea Waterbury
Lake Uranium Limited Partnership ("KWULP") owns 33.10%. KWULP is
comprised of a consortium of investors, in which Korea Hydro &
Nuclear Power ("KHNP") holds a majority position. KHNP is
headquartered in Gyeongju, South
Korea and is the country's largest electrical power
generation company, operating 24 nuclear power reactors and
supplying approximately one-quarter of the country's electricity.
KHNP is also a significant shareholder in Denison.
The PEA is prepared on a Project (100% ownership) and pre-tax
basis, as each of the partners to the WLULP are subject to
different tax and other obligations. After-tax results attributable
to Denison's ownership interest are provided below under the
heading "Indicative Denison Post-Tax Results". All amounts are in
Canadian dollars unless otherwise noted.
The PEA is a preliminary analysis of the potential viability of
the Project's mineral resources, and should not be considered the
same as a Pre-Feasibility or Feasibility Study, as various factors
are preliminary in nature. There is no certainty that the results
from the PEA will be realized. Mineral resources are not mineral
reserves and do not have demonstrated economic viability.
Preliminary Economic Assessment Highlights
- Selection of ISR mining method potentially unlocks the value
of the THT deposit: Following the release of the Wheeler
PFS in 2018 and subsequent studies aimed at increasing confidence
in the ISR mining method for the Phoenix deposit, including the achievement of
"proof of concept" (see Denison's news release dated June 4, 2020), Denison evaluated the application
of the ISR mining method on the THT deposit. Similar to
Phoenix, the THT deposit is an
unconformity-related uranium deposit, where the mineralization is
interpreted to be situated in permeable ground – expected to allow
a mining solution to travel within the mineralized zone.
Additionally, the basement rock located below the mineralized zone
is interpreted to be highly impermeable and is expected to allow
for containment of the mining solution beneath the deposit.
- Freeze Wall design expected to reduce technical risk and
upfront capital costs: Full hydraulic containment of the
orebody during mining activities has been planned for the Project
with the installation of a freeze wall from surface to the basement
rocks underlying the THT deposit– effectively creating containment
360 degrees around the deposit. This design makes use of
established ground-freezing technology and conventional diamond
drilling to create a physical perimeter around the deposit –
containing the mining solution used in the ISR mining process and
protecting the surrounding environment to minimize environmental
impacts of the Project. Several additional containment
methodologies were evaluated as part of the Concept Study –
including the freeze dome design outlined in the Wheeler PFS.
Results of the Concept Study showed that the freeze wall design
offered considerably lower technical risk, equal or greater
environmental protection, a smaller environmental footprint,
sustainability benefits associated with the utilization of drilling
techniques conducive to local employment, and improved economic
results with significantly lower initial capital costs.
- Existing regional infrastructure offers significant
benefit: The Waterbury Lake property is located approximately
15 kilometres from Denison's 22.5% owned McClean Lake uranium mill,
in the infrastructure rich eastern portion of the Athabasca Basin region. The PEA assumes the
McClean Lake uranium mill will be used to process the Uranium
Bearing Solution ("UBS") to be recovered from the ISR wellfield and
the nearby Points North Landing ("Points North") facilities will be
used for accommodations and other support services. Taken together,
this existing regional infrastructure results in a significant
reduction in the initial capital costs and operating costs
estimated in the PEA.
- Potential to be one of the most environmentally responsible
mining operations in the world: The combination of the ISR
mining method with a high-grade uranium deposit in the Athabasca Basin region has the potential to
result in one of the most environmentally protective mining
operations in the world – owing to the small foot print of the
operation and its minimal surface disturbances, as well as the fact
that there are no tailings expected to be generated and no site
water discharge planned. The modelled operation also has access to
the Provincial power grid and is not expected to rely on diesel
generators for primary power on site. Additionally, the freeze wall
design provides for the physical isolation of the ISR mining
operation from the surrounding environment, which alleviates the
primary environmental concern of conventional ISR mining operations
and facilitates a controlled restoration process once mining has
been completed.
THT ISR Operation – Summary
The THT ISR operation is estimated to produce total mine
production of 9.7 million
pounds U3O8 (177,664 tonnes at
2.49% U3O8) over an approximate six year
mine-life with final processing occurring at Denison's 22.5%
owned McClean Lake mill. The PEA includes an indicative
timeline with pre-production activities beginning in 2025, and with
first production estimated in 2028.
Table 1 –
Waterbury PEA Financial Results (100% Basis)
|
Base case pre-tax
NPV8% (1)
|
$177
million
|
Base case pre-tax IRR
(1)
|
39.1%
|
Base case pre-tax
payback period (2)
|
~22
months
|
Initial capital costs
(3)
|
$112
million
|
Average annual mine
production(4)
|
~1.6 million lbs
U3O8
|
Mine life
|
~6
years
|
Exchange rate
(5) (US$:CAD$)
|
1:1.33
|
Discount
rate
|
8.00%
|
(1)
|
NPV and IRR are
calculated to the start of pre-production activities for the
Project.
|
(2)
|
Payback period is
stated as number of months to pay-back from the start of uranium
production.
|
(3)
|
Initial capital
costs exclude $20.1 million of estimated pre-construction Project
evaluation and development costs.
|
(4)
|
Scheduled tonnes
and grade do not represent an estimate of mineral reserves. See
Deposit, Geology & Mine plan section below for additional
information regarding projected mine production.
|
(5)
|
Exchange rate
applied on uranium sales.
|
Table 2 – THT
Operating Cost per Pound
U3O8
|
|
CAD$
|
USD$
|
Mining /
Wellfield
|
5.73
|
4.31
|
Milling /
Processing
|
8.07
|
6.07
|
Transport to
converter
|
0.53
|
0.40
|
Site support and
administration
|
1.94
|
1.46
|
Total Operating
Costs per pound U3O8
|
$16.27
|
$12.23
|
Table 3 – THT
Capital Costs ($ million) (1)
|
|
Initial
|
Sustaining
|
Total
|
Wellfield
|
49.6
|
24.4
|
74.0
|
Milling (McClean Lake
modifications)
|
1.1
|
-
|
1.1
|
Surface
facilities
|
2.1
|
-
|
2.1
|
Utilities
|
0.7
|
-
|
0.7
|
Electrical
|
5.0
|
-
|
5.0
|
Civil &
earthworks
|
5.8
|
0.4
|
6.2
|
Offsite
infrastructure
|
7.5
|
-
|
7.5
|
Decommissioning
|
-
|
19.4
|
19.4
|
Construction
Indirect
|
14.0
|
-
|
14.0
|
Subtotal
|
85.8
|
44.2
|
130.0
|
Contingency
|
25.8
|
5.8
|
31.6
|
Total Capital
Costs (100%)
|
111.6
|
50.0
|
161.6
|
(1)
|
Initial capital
costs exclude $20.1 million of estimated pre-construction Project
evaluation and development costs.
|
The PEA has been completed in accordance with NI 43-101,
Canadian Institute of Mining, Milling and Petroleum (CIM) standards
and best practices, as well as other standards such as the AACE
Cost Estimation Standards. The PEA is a preliminary analysis
of the potential viability of the Project's mineral resources, and
should not be considered the same as a Pre-Feasibility or
Feasibility Study, as various factors are preliminary in nature.
There is no certainty that the results from the PEA will be
realized. Mineral resources are not mineral reserves and do not
have demonstrated economic viability.
The technical report supporting the PEA results included in this
news release will be filed on SEDAR within 45 days of this release.
Estimated capital and operating costs are summarized above, with
details provided throughout the balance of this news release.
Initial capital costs reflect the estimated cost of building the
proposed ISR mining operation and exclude future project evaluation
and development costs that must be incurred prior to construction.
These costs should be considered when assessing the merit of
advancing the project to a development decision in the future.
Price Assumptions & Sensitivities
The base-case economic analysis assumes uranium sales will be
made from time to time throughout production at UxC's forecasted
annual "Composite Midpoint" spot price from the Q3'2020 Uranium
Market Outlook ("UMO"), which is stated annually in constant
(non-inflated) 2020 dollars and
ranges from ~USD$49 per lb
U3O8 to USD$57
per lb U3O8 during the approximate six year
estimated life of the THT operation (assumed for pricing purposes
to be from 2028 to 2033). The average base case selling price is
USD$53.59 per lb
U3O8.
Given the estimated all-in costs of USD$24.93 per lb U3O8, the
Project is projected to be able to generate positive economic
results at uranium selling prices in the range of recent market
conditions, while also offering excellent leverage to a rising
uranium price, as outlined below:
Table 4 –
Sensitivity of Waterbury to Uranium Pricing Scenarios (100%
Basis)
|
|
Low
Case
|
Base
case
|
High
Case
|
Uranium
price
|
USD$35 per lb
U3O8
|
UxC spot price
(3)
|
USD$65 per lb
U3O8
|
Pre-tax
NPV8% (1)
|
$38
million
|
$ 177
million
|
$ 265
million
|
Pre-tax IRR
(1)
|
17.4%
|
39.1%
|
50.0%
|
Pre-tax payback
period (2)
|
~33
months
|
~22
months
|
~18
months
|
(1)
|
NPV and IRR are
calculated to the start of pre-production activities for the
Project.
|
(2)
|
Payback period is
stated as number of months to pay-back from the start of uranium
production.
|
(3)
|
Spot price
forecast is based on "Composite Midpoint" scenario from UxC's
Q3'2020 Uranium Market Outlook ("UMO") for the years 2028 to
2033 and is stated in constant
(not-inflated) dollars.
|
ISR Mining Method Transforms Potential for Smaller Scale
Unconformity Hosted Deposits
The ISR mining method currently accounts for over 50% of the
world's uranium production – with most of the production coming
from the low-cost mining operations in Kazakhstan. The mining method involves pumping
a mining solution (lixiviant) through a suitable orebody via a
series of injection wells drilled from surface. As the lixiviant
travels through the host rock, it dissolves or leaches the uranium
into the mining solution, producing a UBS, which is then pumped
back to surface via recovery wells. Once on surface, the UBS is
transported (either by pipeline or trucks) to a surface processing
plant for the chemical separation / removal of the uranium, and
reconditioning of the lixiviant for reinjection into the orebody
and further mining cycles.
Notably, the ISR mining method does not involve the mechanical
excavation or milling (e.g. crushing and grinding) of the uranium
bearing host rock. Additionally, as the leaching process
occurs underground, as the lixiviant travels through the host rock,
there is little waste produced by the ISR mining process –
including no generation of conventional tailings requiring long
term storage. Taken together, the capital cost profile of ISR
mining is typically a fraction of a conventional uranium mine –
which would require a shaft, decline, or open pit to access the
orebody, as well as a processing plant capable of accepting the
host rock, leaching in vessels on surface, and neutralizing any
associated waste for long-term storage.
Similarly, the ISR mining process relies primarily on the flow
of the mining solution through the network of injection and
recovery wells, which involves a support system of pumps and
piping, but does not require heavy equipment, is generally not
energy intensive, and does not require miners to work underground
or in close proximity to the uranium orebody, which is advantageous
from a safety and radiation protection standpoint. These factors,
amongst others, contribute to ISR mining operations typically
having lower operating cost profiles in comparison to conventional
uranium mines.
While the ISR mining method is not currently being used in
Canada for uranium mining,
unconformity-related uranium deposits in the Athabasca Basin, including the THT deposit and
the Phoenix deposit, have all the
attributes necessary to be a successful ISR operation, as outlined
below:
- Mineralization that is situated in permeable ground, allowing
the mining solution to travel from the injection well through the
orebody and ultimately back to surface via a recovery well;
- Mineralization that is readily dissolvable by the mining
solution; and
- Mineralization that is within a setting which allows for
containment of the mining solution – such that the mining solution
can be recovered without contaminating the environment or being
diluted by natural ground water.
The geological features found in the THT deposit are similar to
those of Wheeler River's Phoenix
deposit, offering amenability to ISR mining – including the
position of the deposit at the unconformity, anticipated
permeability of the mineralized zone, and the impermeability of the
underlying basement rock.
The results of the PEA for the THT deposit demonstrate that even
smaller-scale uranium deposits in the Athabasca Basin region, with access to an
existing processing plant, have the potential to become globally
competitive as a result of the unique cost advantages associated
with the ISR mining method.
As ISR mining is a novel mining method for the Athabasca Basin, there is risk that the
Company may not be able to complete ISR operations as outlined in
the PEA and/or that the costs could be materially different than
estimated.
Deposit, Geology & Projected Mine Plan
Waterbury is host to two uranium deposits, THT and Huskie, with
estimated mineral resources listed in the table below.
Table 5 –
Waterbury Mineral resource Statement (1), (2) (100%
Basis, 0.1% grade cut-off)
|
Deposit
|
Deposit
Zone
|
Category
|
Tonnage
(kt)
|
Grade
(%U3O8)
|
Contained
Metal
(x1,000 lbs. U3O8)
|
Tthe Heldeth
Túé
|
East pod
(3)
|
Indicated
|
164
|
3.2
|
11,580
|
West pod
(3)
|
Indicated
|
128
|
0.4
|
1,230
|
Total
|
Indicated
|
291
|
2.0
|
12,810
|
Huskie
|
Total
|
Inferred
|
268
|
0.96
|
5,687
|
(1)
|
Numbers may not
add due to rounding.
|
(2)
|
For further
details, see the Company's report entitled "Technical Report with
an Updated Mineral Resource Estimate for the Waterbury Lake
Property, Northern Saskatchewan, Canada – Mineral Resource
Estimate", as filed on SEDAR and available on the Company's
website. Mineral resources that are not mineral reserves do
not have demonstrated economic viability.
|
(3)
|
For presentation
purposes for this press release, the THT mineral resource estimate
presented in this table has been divided into the East and West
pods, to illustrate each zone's estimated size and the potential
applicability of mining methods, and is not intended to replace or
amend the mineral resource estimate in the technical report
referred to in note (2) above.
|
The PEA has been prepared to evaluate the technical and economic
viability of extracting the Indicated mineral resources estimated
for the THT deposit, and excludes the Inferred mineral resources
estimated for the Huskie deposit. The geologic setting of the
Huskie deposit differs from the THT deposit – in that it is hosted
entirely in the basement rocks underlying the Athabasca sandstone, and accordingly is not
expected to be sufficiently permeable to be amenable to development
with the ISR mining method.
As discussed above, the THT deposit is expected to be amenable
to ISR mining owing to its position at the contact of the basement
rocks and the overlying Athabasca Sandstone, where permeability is
increased. The THT deposit is hosted in an east-west fault
with the underlying basement consisting of metasediments bounded by
orthogneiss to the north and south. The metasediments are 90 to 120
metres thick and include a 20 metre thick graphitic pelitic
gneiss.
There are two defined mineralized pods that make up the THT
deposit – the West pod and the East pod. The East pod contains over
90% of the Indicated mineral resources and angled drilling from
land is expected to allow for ISR wells and the associated freeze
wall to reach the THT deposit East pod without constructing a berm
or peninsula into the surrounding lakes (see Figure 1).
Accordingly, the PEA considers the recovery of the East pod only. A
portion of the East pod is expected to be sterilized as a result of
the installation of the freeze wall, rendering approximately
206,000 lbs U3O8 unrecoverable. The balance
of the East pod is assumed to be recoverable based on an 85% mining
recovery rate, resulting in total projected mine production of 9.7
million lbs of U3O8, as shown in Table 6
below. Projections of scheduled tonnes and grade do not represent
an estimate of mineral reserves.
Table 6 - Tthe
Heldeth Túé Projected Mine Production (100% Basis, 0.0% grade
cut-off)
|
Tthe Heldeth
Túé
Deposit Area
|
Tonnage(1) (kt)
|
Grade(1)
(%U3O8)
|
Contained
Metal(1) (x1,000 lbs.
U3O8)
|
Sterilized
Metal(1) (x1,000 lbs.
U3O8)
|
Projected Mine
Production(2) (x1,000 lbs.
U3O8)
|
West Pod
|
226
|
0.27
|
1,347
|
n/a
|
0
|
East Pod
|
212
|
2.49
|
11,634
|
206
|
9,713
|
(1)
|
Tonnage, Grade,
Contained Metal and Sterilized Metal presented at a 0% grade cut
off to reflect ISR mining method.
|
(2)
|
ISR Mine Projected
Production uses the application of an 85% ISR mining recovery
factor with a 0% mineral resource grade
cut-off.
|
The THT deposit is extremely well defined by 268 drill holes
intersecting uranium mineralization over a combined east-west
strike length of up to 700 metres and a maximum north-south lateral
width of 70 metres. The mineralization thickness varies from 0.50
to 19.5 metres and the mineralization is found within several
metres of the unconformity at depths of 195 to 230 metres. The THT
deposit has been drilled, on average, at 10 metre by 25 metre
spacings across the deposit and in some cases a more dense drill
spacing has been applied. The genesis and structural complexity of
the deposit are well understood. There are no outlying elements of
the deposit requiring further drill testing.
Importantly, during the PEA process, additional work was
undertaken to obtain permeability data for the THT deposit.
Permeability values collected from core samples from within the
mineralized zone were reviewed by a team of independent experts who
concluded that adequate hydraulic conductivity values, necessary to
support economical ISR production rates, could be achieved through
a combination of engineering controls (e.g. well spacing) and
utilization of permeability enhancement techniques. Additional
hydrogeologic testing and characterization of the THT deposit will
be required to validate these assumptions in future studies.
THT Freeze Wall Design
In conventional ISR operations, containment of the mining
solution is typically achieved by natural impermeable bounding
layers in the geological strata and/or by creating a natural
drawdown (via pumping) of the water table towards the ore zone. At
the THT deposit, there is a natural impermeable layer below the
deposit, in the form of a competent package of basement rocks, but
the deposit is otherwise hydraulically connected to the vast
regional groundwater system in the overlying sandstone formation
that defines the Athabasca Basin.
An artificial freeze wall is planned to isolate the ISR wellfield
from the surrounding environment and contain the mining solution
within the mineralized zone.
The freeze wall is expected to be established by drilling a
series of vertical or angled drill holes from surface. Once
the hole has been completed, it will be cased with a dual-layered
pipe that will allow for the circulation of a low-temperature brine
solution in the holes, which is designed to remove heat from the
ground and result in the freezing of the natural groundwater in the
vicinity of the freeze hole. The frozen ground will expand out from
each freeze hole and merge together with the frozen ground
associated with an adjacent freeze hole, establishing an
impermeable frozen wall that will surround the perimeter of the
deposit from surface to depth. The freeze holes will also be keyed
into the basement rock below the deposit to effectively create an
in-ground leach vessel for the ISR mining to take place
within.
The freeze wall design is comprised of 92 holes planned at 7
metre spacing to a target depth of 200 metres, which will extend
below the unconformity elevation into the basement rock. This
represents a total of 28,766 metres of drilling, which is
anticipated to be completed using commonly used diamond drilling
methods conducive to local employment. This drilling method and
design has a much lower technical risk profile than the horizontal
drilling required as part of the freeze dome design included in the
Wheeler PFS, as both diamond drilling and the associated ground
freezing in vertical or angled drill holes, are well established
throughout the world and are already in use in the existing mining
operations in the Athabasca Basin
region. The PEA assumes that it will take 12 months, after
installing the necessary freeze holes, for the ground freezing
process to advance to a sufficient point to achieve the desired
level of containment.
Several other containment options were investigated as part of
the Concept Study, including the freeze dome design outlined in the
Wheeler PFS. The installation of a freeze wall showed significant
advantages in comparison to a freeze dome, with a much lower
technical risk profile and equal or greater environmental
protection, as well as a smaller environmental footprint, and
greater potential for community benefits. Denison is
evaluating a potential adaptation to the ground freezing
containment design at Wheeler River to take advantage of the
potential benefits of a freeze wall design similar to the proposed
design for the THT deposit.
See Figure 1 for proposed THT Wellfield and Freeze Wall
Containment Configuration
ISR Wellfield Design
Conventional ISR roll-front uranium deposits are typically
spread out over several square kilometres of area, owing to the
low-grade nature of the deposits. An ISR uranium mining operation
in the United States or
Kazakhstan will typically have
uranium grades in the range of 0.03 - 0.30%
U3O8. Accordingly, the low-grade nature of
these deposits, combined with well spacing, reagent consumption,
surface piping and pumping distribution systems, all contribute to
create economic thresholds which impact the viability of some
deposits.
In the case of the THT east pod, the ore is confined to a
relatively small area (300 metres x 70 metres) and has demonstrated
itself to be readily leachable in laboratory testing. The average
grade of mineralization in the east pod (approximately 2.49%
U3O8) is also several times higher than a
typical low-grade ISR operation.
The wellfield design included in the PEA uses 184 wells at 7
metre spacing arranged in a 5-spot pattern, with four injection
wells around one recovery well. The wells will be drilled from
surface within the freeze wall and angled out to penetrate the
mineralized zone at depth with a roughly 7 metre spacing. The
maximum drilling angle is limited to 45 degrees to reduce the
technical risk of drilling and well installation.
Eight monitoring wells will be installed outside of the freeze
wall to detect and remediate any excursion of lixiviant from the
mining zone, which is considered unlikely due to the containment of
the freeze wall.
Table 7 –
Summary THT ISR Wellfield Wells
|
|
Number of
Wells
|
Drill
Metres
|
Recovery
Wells
|
66
|
20,637
|
Injection
Wells
|
118
|
36,896
|
Monitoring
Wells
|
8
|
1,750
|
Total
|
192
|
59,283
|
See Figure 1 for proposed THT Wellfield and Freeze Wall
Containment Configuration
Metallurgy, Lixiviant Supply & Processing of
UBS
Production of the lixiviant mix and final mineral processing of
the UBS expected to be recovered from the THT deposit is assumed to
occur at the nearby McClean Lake mill. The mill is owned by the
McClean Lake Joint Venture ("MLJV") of which Orano Canada Inc.
holds a 70% interest, Denison Mines Inc. (a wholly-owned subsidiary
of Denison) holds a 22.5% interest, and OURD (Canada) Co., Ltd. holds a 7.5% interest.
The mill is currently processing material from the Cigar Lake mine
under a toll milling agreement (up to 18 million lbs
U3O8 per year); however, it has approximately
6 million lbs U3O8 per year in additional
licenced processing capacity, with a total licensed capacity of up
to 24 million lbs U3O8 per year. The PEA
assumes a recovery rate of 98.5% from the processing of UBS from
the THT deposit at the McClean Lake mill.
The lixiviant mix needed at the THT site is anticipated to be a
low-ph (acidic) solution, which is capable of being generated by
the existing acid plant at the McClean Lake mill and transported by
trucks and specifically designed transport containers to the THT
site by road (45 kilometres one way). The trucks would then
complete their return loop to the McClean Lake mill transporting
the UBS from the wellfield back to the McClean Lake mill for final
processing.
Historical metallurgical testing of mineralized core recovered
from the THT deposit and surrounding deposits was used to estimate
lixiviant and UBS characteristics. In comparison to ores milled at
the McClean Lake mill, mineralization from the THT deposit contains
significantly fewer contaminants of concern, which further confirms
the ability of the McClean Lake mill to refine the UBS into a
high-quality yellowcake product with minimal waste streams. A
metallurgical test program was developed for the purpose of the
Waterbury PEA and was completed in 2020 to further support the
selected production rate with a UBS uranium concentration of 7
grams per litre ("g/l").
The lixiviant mix has been estimated to require 100 g/l of acid
to be injected in the deposit with free acid concentration
remaining in the resulting UBS of 80 g/l. This effectively results
in an acid consumption rate of 20 g/l to mine the THT deposit with
ISR. The UBS recovered from the THT wellfield would be
inserted directly into the McClean Lake mill's leaching process
stream to allow for the remaining acid in the UBS to be used to
leach co-milled ores from Cigar Lake or other sources. Based on
this process, the McClean Lake mill is expected to require minimal
modifications to accommodate the UBS from the THT deposit.
Expected mill modifications have been costed and are included in
the Project economics.
While the PEA assumes the use of the McClean Lake mill, the
actual use of the McClean Lake mill's acid generation and uranium
processing capabilities will require the negotiation of a toll
milling agreement. The PEA approximates the anticipated cost of
using the McClean Lake mill facilities, based on precedent
agreements, but no such terms have been negotiated and/or agreed
with the owners of the MLJV.
Site Infrastructure
Infrastructure requirements for the THT site are minimal, due to
its proximity to the existing Mc Clean Lake mill and the Points
North Landing facility. Given the assumed use of the McClean Lake
mill, the THT ISR operation is expected to essentially operate as a
wellfield site with minimal local infrastructure. Coupled with the
assumed ability to lodge the workforce at the nearby Points North
Landing facilities, project construction risk and capital costs
associated with reaching first production are significantly
reduced. The PEA includes the following key site infrastructure
elements:
- Thirteen-kilometre site power line and associated fixturing
connected to the Provincial power grid;
- 1.5 kilometre extension of the existing access road to the
adjacent Roughrider property;
- Site operations centre including offices, water and
sewage;
- Supplies warehousing and fuel storage facilities;
- Emergency / back-up power generators;
- Wash bay, scanning facilities for trucks transporting UBS to
McClean Lake; and
- UBS, lixiviant & drilling waste pads
Construction activities required to install the wellfield and
associated equipment for mining the THT deposit is relatively
simple from a technical standpoint and is expected to involve
limited risk to capital costs.
See Figure 2 for Proposed THT Site Layout
See Figure 3 for THT Deposit Regional Location Map
See Figure 4 for Proposed THT Site Location Map
Production Schedule
Once commenced, construction is expected to occur over
approximately 2.5 years with the critical path to production being
establishing the freeze wall. Mine production is expected to begin
part way through the first calendar year after construction is
completed with approximately 840,000 lbs of
U3O8 mill production expected in year one. In
years two through five, mill production ramps up to a steady-state
annual production level of 2.1 million lbs
U3O8 per year, with total
U3O8 finished produced expected to be 9.6
million lbs over an approximate six-year period.
Table 8 – Tthe
Heldeth Túé East Pod Deposit Overall Projected
Production(1)
|
|
Year 1
|
Year 2
|
Year 3
|
Year 4
|
Year 5
|
Year 6
|
Total
|
Mined
tonnes
|
15,599
|
38,994
|
38,994
|
38,994
|
38,994
|
6,089
|
177,664
|
Grade
|
2.49%
|
2.49%
|
2.49%
|
2.49%
|
2.49%
|
2.49%
|
2.49%
|
Mine production
(millions lbs U3O8)
|
0.853
|
2.132
|
2.132
|
2.132
|
2.132
|
0.333
|
9.713
|
Finished goods
(millions lbs U3O8) (2)
|
0.840
|
2.100
|
2.100
|
2.100
|
2.100
|
0.328
|
9.567
|
(1)
|
Numbers may not
add due to rounding.
|
(2)
|
Reflects 98.5%
recovery rate assumed for processing of UBS from THT deposit at the
McClean Lake mill. Projections of scheduled tonnes and grade
do not represent an estimate of mineral reserves.
|
Indicative Denison Post-Tax Results
The PEA is prepared on a pre-tax and 100% ownership basis, as
each partner to the WLULP is subject to different tax and other
obligations. Denison has completed an indicative post-tax
assessment that reflects its ownership interest in the WLULP
(66.90%), the impact of expected toll mill fees recovered from its
22.5% interest in the MLJV, and the benefit of Denison's applicable
existing tax shelter balances.
Net Saskatchewan sales
royalties consist of the resource surcharge (3%), and the basic
uranium royalty (5%), which is partially offset by the resource
credit (0.75%). These amounts are included in the pre-tax NPV
calculations throughout the PEA; however, they are excluded from
the U3O8 operating cost per pound metrics, as
they vary with the value of assumed uranium sales. The profit from
operations is subject to an additional Provincial uranium profit
royalty, which is treated as an income tax, and allows for the use
of certain tax shelter balances.
Denison's post-tax indicative results for the THT project are
summarized below and are based on the prevailing Federal and
Provincial taxation regulations in place at the time of the PEA as
well as Denison's 66.90% ownership of the property as of the end of
November 2020.
Table 9 –
Denison Indicative Post-Tax Results (66.90%
ownership)
|
Initial capital costs
– Denison Share (1)
|
$75
million
|
|
|
Base case post-tax
IRR (2)
|
30.4%
|
Base case post-tax
NPV8% (2)
|
$72
million
|
Base case post-tax
payback period (3)
|
~ 23
months
|
|
|
High case post-tax
IRR (2)
|
38.9%
|
High case post-tax
NPV8% (2)
|
$109
million
|
High case post-tax
payback period (3)
|
~19
months
|
|
|
Low case post-tax IRR
(2)
|
13.5%
|
Low case post-tax
NPV8% (2)
|
$14
million
|
Low case post-tax
payback period (1)
|
~34
months
|
(1)
|
Initial capital
cost excludes estimated pre-construction Project evaluation and
development costs
|
(2)
|
NPV and IRR are
calculated to the start of pre-production activities for the THT
operation.
|
(3)
|
Payback period
is stated as number of months to pay-back from the start of uranium
production.
|
The PEA is a preliminary analysis of the potential viability of
the Project's mineral resources, and should not be considered the
same as a Pre-Feasibility or Feasibility Study, as various factors
are preliminary in nature. There is no certainty that the results
from the PEA will be realized. Mineral resources are not mineral
reserves and do not have demonstrated economic viability.
Development Outlook
The results of the PEA demonstrate the potential for robust
project economics – highlighting the potential for the ISR mining
method to unlock considerable value in the THT deposit, despite its
relatively small resource size. The future initiation of a PFS is
supported by the PEA conclusions and will be required to further
de-risk the application of the IRS mining method at the THT
deposit. The timing of a future PFS for the THT deposit is expected
to be dependent on receipt of the requisite partnership approvals
and Denison's future efforts to advance and further de-risk the ISR
mining method for the Phoenix
deposit at the Company's flagship Wheeler River
property.
Denison is the industry leader in advancing the use of the
low-cost ISR mining method amongst the high-grade uranium deposits
of the Athabasca Basin. The PEA
for the THT deposit demonstrates the potential for Denison to
convert its existing project portfolio (including an extensive
exploration portfolio) into a portfolio of low-cost development
assets that would supplement the Company's flagship Wheeler River
project and uniquely position the Company to offer nuclear utility
customers uranium from a diverse portfolio of supply sources in
future years.
About Denison
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 MLJV, which includes several
uranium deposits and the McClean Lake uranium mill, which is
contracted to process the ore from the Cigar Lake mine under a toll
milling agreement, plus a 25.17% interest in the Midwest deposits
and a 66.90% interest in the THT and Huskie deposits on the
Waterbury Lake property. The Midwest, THT 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, which manages Denison's
Elliot Lake reclamation projects
and provides post-closure mine and maintenance services to industry
and government clients.
Denison is also the manager of Uranium Participation
Corporation, a publicly traded company listed on the TSX under the
symbol 'U', which invests in uranium oxide in concentrates and
uranium hexafluoride.
Follow Denison on
Twitter
@DenisonMinesCo
Qualified Persons
The technical information contained in this release has been
reviewed and approved by Mr. David
Bronkhorst, P.Eng, Denison's Vice President, Operations, who
is a Qualified Person in accordance with the requirements of NI
43-101.
The Mineral Resource Estimates contained in this release have
been reviewed and approved by Mr. Andy
Yackulic, Denison's Director, Exploration, who is a
Qualified Person in accordance with the requirements of NI
43-101.
Gordon Graham, VP mining of
Engcomp, is an independent qualified person in accordance with the
requirements of 43-101 and has reviewed and approved the summary of
the PEA contained in this news release.
Data Verification
For a description of the data verification, assay procedures
and the quality assurance program and quality control measures
applied by Denison, please see Denison's Annual Information Form
dated March 13, 2020 filed under the
Company's profile on SEDAR at www.sedar.com
The Mineral Resource estimates presented in the PEA were
independently reviewed and audited for the Tthe Heldeth Túé (J
Zone) Deposit and for the Husky Deposit as described in "Technical
Report with an Updated Mineral Resource Estimate for the Waterbury
Lake Property, Northern Saskatchewan,
Canada – Mineral Resource Estimate", dated December 21, 2018 as filed on SEDAR and available
on the Company's website.
Further information about the PEA referenced in this news
release, including information in respect of data verification, key
assumptions, parameters, risks and other factors, can be found in
the technical report for Waterbury that the Company intends to file
on SEDAR and on the Company's website within 45 days from the date
of this news release.
Cautionary Statement Regarding Forward-Looking
Statements
Certain information contained in this news 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 results of, and
estimates, assumptions and projections provided in the PEA,
including future development methods and plans, market prices,
costs and capital expenditures; the Company's current plans with
respect to the development of the Project; the results of, and
estimates, assumptions and projections provided in, the Wheeler
PFS; the Company's current intentions to evaluate the potential
benefits of a freeze wall for use at the Wheeler River Phoenix
deposit; assumptions regarding Denison's ability to obtain all
necessary regulatory approvals to commence development in
accordance with the PEA; Denison's percentage interest in its
projects and its agreements with its joint venture partners; and
the availability of services to be provided by third parties.
Statements relating to "mineral resources" are deemed to be
forward-looking information, as they involve the implied assessment
that, based on certain estimates and assumptions, the 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, further studies, including a PFS, may not be
undertaken if the results of the PEA are not maintained after
further testing; Denison may decide or otherwise be required to
discontinue the related work if it is unable to maintain or
otherwise secure the necessary resources (such as testing
facilities, capital funding, regulatory approvals, etc.) or
operations are otherwise affected by COVID-19 and its potentially
far-reaching impacts. 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
or subsequent quarterly financial reports 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 news 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 news release. Denison does not undertake any obligation to
publicly update or revise any forward-looking information after the
date of this news 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.
Figure 1 Proposed Tthe Heldeth Túé Wellfield and Freeze
Wall Containment Configuration
Figure 2 Proposed Tthe Heldeth Túé Site
Layout
Figure 3 Tthe Heldeth Túé Deposit (Waterbury Lake)
Regional Location Map
Figure 4 Proposed Tthe Heldeth Túé Site Location
Map
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