Denison Mines Corp. ("Denison" or the "Company") (TSX:DML)(NYSE
Amex:DNN) today reported its financial results for the three months
ended March 31, 2012.
The Company recorded a net loss of $51,987,000 or $0.14 per
share for the three months ended March 31, 2012 compared with a net
loss of $7,067,000 or $0.02 per share for the same period in 2011.
The results for the quarter include a charge of $44,079,000 related
to an impairment of the US Mining segment which was recorded as a
result of the transaction with Energy Fuels Inc. ("EFR") referred
to below.
All amounts in this release are in U.S. dollars unless otherwise
indicated.
Financial Highlights
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Three Months Three Months
(in thousands) Ended Ended
March 31, March 31,
2012 2011
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Results of Operations:
Total revenues $ 26,359 $ 26,768
Net income (loss) (51,987) (7,067)
Basic earnings (loss) per share (0.14) (0.02)
Diluted earnings (loss) per share (0.14) (0.02)
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As at As at
March 31, December 31,
2012 2011
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Financial Position:
Working capital $ 87,805 $ 93,516
Property, plant and equipment 326,032 367,370
Total assets 459,332 504,486
Total long-term liabilities $ 38,326 $ 38,391
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Transaction with EFR
On April 16, 2012, the Company and EFR announced that they had
entered into a Letter Agreement to complete a transaction (the
"Transaction") whereby EFR will acquire all of Denison's mining
assets and operations located in the United States (the "US Mining
segment") from Denison in exchange for 425,441,494 common shares of
EFR (the "EFR Share Consideration"). Immediately following the
closing of the Transaction, Denison will complete a Plan of
Arrangement (the "Denison Arrangement") whereby Denison will
complete a reorganization of its capital and will distribute the
EFR Share Consideration to Denison shareholders on a pro rata basis
as a return of capital in the course of that reorganization. Upon
completion of the Denison Arrangement, Denison shareholders will
receive approximately 1.106 common shares of EFR for each common
share of the Company owned and will in aggregate own approximately
66.5% of the issued and outstanding common shares of EFR. The
Transaction is subject to a number of conditions, including
shareholder approval of the Denison Arrangement. A special meeting
of Denison's shareholders is scheduled for June 25, 2012.
Operating Highlights
-- Denison's production for the quarter totaled 414,000 pounds uranium
oxide ("U3O8").
-- Uranium sales revenue for the quarter was $22,703,000 from the sale of
380,000 pounds U3O8 at an average price of $59.74 per pound.
-- The Company continued development of its Pinenut mine in Arizona. Ore
production is expected to commence in mid-2012.
-- The Company completed the winter drill program at its 60% owned Wheeler
River exploration property in Saskatchewan. The winter program has
identified opportunities to further expand the Phoenix Zone A deposit.
Revenue
Uranium sales revenue for the quarter was $22,703,000 from the
sale of 380,000 pounds U3O8 at an average price of $59.74 per
pound. Uranium sales for the same period in 2011 were 267,000
pounds U3O8 at an average price of $63.26 per pound resulting in
revenue of $16,870,000.
No vanadium was sold in the quarter. In the first quarter of
2011, the Company sold 856,000 pounds of V2O5 equivalent at an
average price of $6.52 per pound. Total vanadium sales revenue for
the first quarter 2011 was $5,579,000.
Revenue from the environmental services division ("DES") for the
three months ended March 31, 2012 was $3,169,000 compared to
$3,484,000 in the same period in 2011. Revenue from the management
contract with Uranium Participation Corporation ("UPC") for the
three months ended March 31, 2012 was $435,000 compared to $551,000
in the same period in 2011.
Operating Expenses
The McClean Lake mill remains on stand-by. Operating costs for
the period totaled $510,000, including stand-by costs, compared to
$143,000 in the first quarter of 2011. The Cigar Lake Joint Venture
continues to pay nearly all of the stand-by expenses under the
terms of the toll milling agreement. However, operating costs were
higher than 2011 due to increased funding of the Surface Access
Borehole Mining program ("SABM", formerly known as the MED program)
which is not part of stand-by costs.
At the White Mesa mill, uranium production during the quarter
totaled 414,000 pounds U3O8. No V2O5 was produced in the quarter.
This compares to production of 340,000 pounds U3O8 and 413,000 V2O5
for the three months ended March 31, 2011. During the first quarter
of 2012, the mill processed Arizona 1 and Daneros ore, as compared
to Colorado Plateau ore in 2011.
At March 31, 2012, a total of 100,000 tons of conventional ore
was stockpiled at the White Mesa mill containing approximately
572,000 pounds U3O8 and 1,899,000 pounds V2O5. The Company also had
approximately 526,000 pounds U3O8 contained in alternate feed
material stockpiled at the mill at March 31, 2012.
Production costs(1) at White Mesa for the three months ended
March 31, 2012 were $32.49 per pound U3O8. Production costs were
$50.18 per pound U3O8 in the three months ended March 31, 2011.
Production costs are lower than in the first quarter of 2011 due to
the types of ore feed to the mill and lower sulphuric acid
costs.
Inventory available for sale from U.S. production was 230,000
pounds U3O8 at March 31, 2012.
Other
Operating costs include expenses relating to DES amounting to
$3,021,000 for the three months in 2012 compared to $3,410,000 for
the same period in 2011.
Mineral Property Exploration
Denison is engaged in uranium exploration, as both operator and
non-operator of joint ventures and as operator of its own
properties in Canada, the U.S., Mongolia and Zambia. For the three
months ended March 31, 2012 exploration expenditures totaled
$3,035,000 as compared to $3,185,000 for the three months ended
March 31, 2011.
A majority of the exploration expenditures during the 2012
period were spent in the Athabasca Basin region of northern
Saskatchewan. During the quarter, Denison engaged in uranium
exploration as part of the AREVA Resources Canada Inc. ("ARC")
operated McClean and Wolly joint ventures, as well as on three
other exploration projects including the Company's 60% owned
Wheeler River project. Denison's share of exploration spending on
its Canadian properties totaled $2,595,000 for the three months
ended March 31, 2012. For the three months ended March 31, 2011,
Canadian exploration spending totaled $2,730,000. The 2012 winter
drilling program on Wheeler River consisted of a total of 25 holes
for 12,468 metres, with the major focus directed to testing several
areas interpreted to host fault controlled thickening or stacking
of mineralization in Zone A of the Phoenix Deposit. The program
identified opportunities for expanding the existing estimate of the
mineral resources in Zone A with further Zone B targets yet to be
drilled this summer.
Exploration expenditures of $306,000 for the three months ended
March 31, 2012 ($305,000 for the three months ended March 31, 2011)
were incurred in Mongolia on the Company's joint venture
properties. The Company currently has an 85% interest in the Gurvan
Saihan Joint Venture ("GSJV") in Mongolia. The other party to the
joint venture is the Mongolian government. Under the Nuclear Energy
Law of Mongolia, the Mongolian participant in the GSJV is entitled
to hold a 34% to 51% interest in the GSJV, depending on the amount
of historic exploration that was funded by the Government of
Mongolia, to be acquired at no cost to the Mongolian participant.
This interest would be held by Mon-Atom LLC, the Mongolian
state-owned uranium company.
The Company and Mon-Atom are proceeding with restructuring the
GSJV to meet the requirements of the Nuclear Energy law, pending
government reviews and authorizations. In March 2012, the Company
acquired the 15% interest of Geologorazvedka, a Russian entity, for
cash consideration of $742,000 and the release of Geologorazvedka's
share of unfunded joint venture obligations. This additional
interest is expected to be transferred to Mon-Atom as part of the
restructuring plan. The final restructuring of the GSJV is expected
to result in the Company having its interest reduced to 66%. It is
anticipated that the restructuring will be completed in 2012.
Exploration expenditures of $119,000 and $15,000 for the three
months ended March 31, 2012 were made on the Company's Mutanga
project in Zambia and on its properties in the United States,
respectively, in preparation for more extensive programs to begin
in the second quarter.
Liquidity & Capital Resources
Cash and cash equivalents were $43,489,000 at March 31, 2012
compared with $53,515,000 at December 31, 2011. The decrease of
$10,026,000 was due primarily to cash used in operations of
$4,757,000 and expenditures on property, plant and equipment
totaling $5,731,000.
Net cash used in operating activities of $4,757,000 during the
three months ended March 31, 2012 is comprised of net loss for the
period adjusted for non-cash items and for changes in working
capital items. Significant changes in working capital items during
the period include an increase of $5,699,000 in inventories and an
increase of $7,839,000 in trade and other receivables.
Net cash used in investing activities was $6,486,000 consisting
primarily of expenditures on property, plant and equipment of
$5,731,000 and an increase in restricted cash of $765,000.
Net cash from financing activities totaled $230,000 consisting
of an increase in debt obligations.
In total, these sources and uses of cash resulted in a net cash
outflow after the effect of foreign exchange of $10,026,000 during
the period.
Impairment of US Mining Segment
Under the terms of the proposed Transaction with EFR, the
Company's US Mining segment will be sold to EFR in exchange for EFR
shares which in turn will be distributed to the Company's
shareholders. The Company anticipates that, on completion of the
Transaction, it will be accounted for in accordance with the
requirements of IFRIC 17 'Distribution of Non-cash Assets to
Owners'. One of the requirements of IFRIC 17 is to fair value the
assets being distributed to shareholders, which in this case is
expected to be the EFR shares.
The Company identified a potential impairment triggering event
as a result of entering into the proposed Transaction with EFR and
has therefore undertaken an impairment test on the US Mining
segment as at March 31, 2012. The Company used a fair value less
costs to sell analysis to determine the recoverable amount based on
the terms of the proposed transaction with EFR. For the purposes of
the impairment test, the estimated fair value less costs to sell
was based on the 425,441,494 common shares of EFR to be received by
the Company (prior to distribution to the Company's shareholders)
and a volume weighted average share price for EFR shares of $0.30
per share. As a result, the Company recognized an impairment loss
of $44,079,000 in the first quarter.
Outlook for 2012
With the announcement of the sale of the Company's US Mining
segment, the outlook for the remainder of 2012 changes for Denison
in terms of production and sales. As the result of the Transaction
with EFR, the US Mining segment will be sold to EFR effective at
the closing date, which is currently expected to be at the end of
June. As a result, production and sales from the closing date will
accrue to EFR.
In the second quarter, Denison's uranium production is estimated
at 277,000 pounds U3O8 from alternate feed sources.
Uranium sales are forecasted to be approximately 316,000 pounds
of U3O8 during the second quarter.
Business Development
Denison's plans for Canada, Zambia and Mongolia are not
anticipated to change for 2012 as a result of the Transaction.
Total expenditures on development and exploration projects in 2012,
excluding the U.S., are estimated at $19.3 million.
In Canada, Denison will manage or participate in six exploration
programs, of which Wheeler River will continue to be the primary
focus. The total budget for these programs is CAD$11.7 million of
which Denison's share is CAD$7.8 million. At Wheeler River, a
12,468 metre winter drill program is complete and a 15,000 metre
summer drill program is projected to begin in early June. Total
cost for the Wheeler River program is estimated at CAD$6.8 million
(Denison's share CAD$4.1 million). Exploration work will also be
carried out this summer on the Moore Lake, Murphy Lake, South
Dufferin and Wolly projects.
In Canada, a total of $3.5 million is expected to be spent by
Denison on development stage projects in 2012. The McClean North
underground development feasibility study is being advanced to
include the Sue D and Caribou deposits, along with continued
evaluation and approval of the Environmental Assessment for the
Midwest development project. This summer, a three-hole test program
of the SABM mining method will be carried out on one of the McClean
North ore pods.
In Zambia, the Company plans to follow up on its successful 2011
drill program on its 100% owned Mutanga project. In May, a 15,000
metre exploration drill program will begin, which will focus on
several targets that have been identified near the existing
resources. The Zambian program will total an estimated $7.1
million.
In Mongolia, a $4.3 million exploration and development program
is projected, contingent upon receipt of the mining licences in
mid-2012. Included in this budget is a $2.5 million, 27,900 metre
exploration program focused on the Ulziit and Urt Tsav 2011
discoveries.
Qualified Person
The disclosure of scientific and technical information regarding
Denison's properties in this press release was prepared by or under
the supervision of Lawson Forand, P. Geo., the Company's
Exploration Manager Saskatchewan, and Terry Wetz P.E., Director of
Project Development, who are Qualified Persons in accordance with
the requirements of National Instrument 43-101.
Conference Call
Denison is hosting a conference call on Thursday, May 10, 2012
starting at 9 A.M. (Toronto time) to discuss the first quarter 2012
results. The call will be available live through a webcast link on
Denison's website www.denisonmines.com and by telephone at
416-340-2216. A recorded version of the conference call will be
available by calling 905-694-9451 (password: 7981406) approximately
two hours after the conclusion of the call. The presentation will
also be available at www.denisonmines.com.
Additional Information
Denison's consolidated financial statements for the three month
period ended March 31, 2012 and related management's discussion and
analysis are available on Denison's website at www.denisonmines.com
or under its profile on SEDAR at www.sedar.com and on EDGAR at
www.sec.gov/edgar.shtml.
About Denison
Denison Mines Corp. is an intermediate uranium producer with
production in the U.S., combined with a diversified development
portfolio of projects in the U.S., Canada, Zambia and Mongolia.
Denison's assets include its 100% ownership of the White Mesa mill
in Utah and its 22.5% ownership of the McClean Lake mill in
Saskatchewan. The Company also produces vanadium as a co-product
from some of its mines in Colorado and Utah. Denison owns interests
in world-class exploration projects in the Athabasca Basin in
Saskatchewan, including its flagship project at Wheeler River, and
in the southwestern United States, Mongolia and Zambia. Denison is
the manager of Uranium Participation Corporation (TSX:U), a
publicly traded company which invests in uranium oxide in
concentrates and uranium hexafluoride.
Cautionary Statements
Certain information contained in this press release, including
without limitation any information relating to the proposed
Transaction, constitutes "forward-looking information", within the
meaning of the United States Private Securities Litigation Reform
Act of 1995 and similar 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"
or "does not expect", "is expected", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates" or "does not
anticipate", or "believes", 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".
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.
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 correct and such
forward-looking information included in this press release should
not be unduly relied upon. This information speaks only as of the
date of this press release. In particular, this press release may
contain forward-looking information pertaining to the following:
the benefits and synergies of the Transaction, future opportunities
for the combined company and any other statements regarding EFR's
and Denison's future expectations, beliefs, goals or prospects, the
estimates of Denison's mineral resources; estimates regarding
Denison's uranium and vanadium production levels and sales volumes;
capital expenditure programs, estimated production costs,
exploration and development expenditures and reclamation costs;
expectations of market prices and costs; supply and demand for
uranium and vanadium; possible impacts of litigation and regulatory
actions on Denison; exploration, development and expansion plans
and objectives; Denison's expectations regarding raising capital
and adding to its mineral reserves and resources through
acquisitions and development; and receipt of regulatory approvals,
permits and licences and treatment under governmental regulatory
regimes.
There can be no assurance that such statements will prove to be
accurate, as Denison's actual results and future events could
differ materially from those anticipated in this forward-looking
information as a result of those factors discussed in or referred
to under the heading "Risk Factors" in Denison's Annual Information
Form dated March 28, 2012, available at http://www.sedar.com, and
in its Form 40-F available at http://www.sec.gov, as well as the
following: the parties' ability to consummate the Transaction, the
conditions to the completion of the Transaction, the ability of the
parties to agree to the terms of the definitive agreements relating
to the Transaction, the parties' ability to meet expectations
regarding the timing, completion and accounting and tax treatments
of the Transaction, global financial conditions, the market price
of Denison's securities, volatility in market prices for uranium
and vanadium; ability to access capital, changes in foreign
currency exchange rates and interest rates; liabilities inherent in
mining operations; uncertainties associated with estimating mineral
reserves and resources and production; uncertainty as to
reclamation and decommissioning liabilities; failure to obtain
industry partner and other third party consents and approvals, when
required; delays in obtaining permits and licenses for development
properties; competition for, among other things, capital,
acquisitions of mineral reserves, undeveloped lands and skilled
personnel; public resistance to the expansion of nuclear energy and
uranium mining; uranium industry competition and international
trade restrictions; incorrect assessments of the value of
acquisitions; property title risk; geological, technical and
processing problems; the ability of Denison to meet its obligations
to its creditors; actions taken by regulatory authorities with
respect to mining activities; the potential influence of or
reliance upon its business partners, and the adequacy of insurance
coverage.
Accordingly, readers should not place undue reliance on
forward-looking statements. These factors are not, and should not
be construed as being, exhaustive. Statements relating to "mineral
reserves" or "mineral resources" are deemed to be forward-looking
information, as they involve the implied assessment, based on
certain estimates and assumptions that the mineral reserves and
mineral resources described can be profitably produced in the
future. The forward-looking information contained in this press
release is expressly qualified by this cautionary statement.
Denison does not undertake any obligation to publicly update or
revise any forward-looking information after the date of this press
release to conform such information to actual results or to changes
in Denison's expectations except as otherwise required by
applicable legislation.
(1) Production costs include the costs of mining the ore fed to
the mill in the period plus the costs of milling less a credit for
vanadium produced in the period and excluding depreciation and
amortization, which is a non-GAAP measure.
Contacts: Denison Mines Corp. Ron Hochstein President and Chief
Executive Officer (416) 979-1991 Extension 232 Denison Mines Corp.
James R. Anderson Executive Vice President and Chief Financial
Officer (416) 979-1991 Extension 372 www.denisonmines.com
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