TORONTO, June 26,
2023 /CNW/ - Denison Mines
Corp. ("Denison" or the "Company") (TSX: DML) (NYSE
American: DNN) is pleased to report the results of (i) the
Feasibility Study ("Phoenix FS") completed for In-Situ Recovery
("ISR") mining of the high-grade Phoenix uranium deposit ("Phoenix") and (ii) a
cost update ("Gryphon Update") to the 2018 Pre-Feasibility Study
("2018 PFS") for conventional underground mining of the
basement-hosted Gryphon uranium deposit ("Gryphon"). With the
successful completion of the Phoenix FS, Denison has advanced
the planned Phoenix ISR project through the technical de-risking
process and has already commenced the first phases of project
execution. View PDF version
Phoenix and Gryphon are part of
the Wheeler River Uranium Project ("Wheeler River" or the
"Project"), which is the largest undeveloped uranium mining project
in the infrastructure-rich eastern portion of the Athabasca Basin region in northern
Saskatchewan, Canada. Denison has
an effective 95% ownership interest in Wheeler River and is the
project operator.
David Cates, Denison's President
& CEO commented, "The Phoenix FS and Gryphon Update
confirm the robust economics of the two projects situated within
the Company's flagship Wheeler River property, producing base-case
after-tax net present values of $1.6
billion and $0.9 billion,
respectively.
After 4.5 years of rigorous technical de-risking and
independent third-party validation, Phoenix has cemented its position as one of
the lowest-cost uranium development projects in the world. Notably,
despite the considerable capital cost pressures experienced by the
global mining industry over the last two years, the economics of a
Phoenix ISR mining operation remain exceptionally robust –
producing an improvement in projections of NPV and IRR, when
compared to the 2018 PFS, as a result of favourable design changes
and optimizations. While most contemporary uranium development
projects have not yet been tested against current cost inflation,
the results of the Phoenix FS and Gryphon Update demonstrate that
Denison continues to be uniquely positioned to become a meaningful
uranium producer with multiple low-cost development
assets.
With the highly positive results of the Phoenix FS, our
team has already shifted focus to advancing front-end engineering
and design efforts, with a target of transitioning into detailed
design before the end of the year."
This press release constitutes a "designated news release"
for the purposes of the Company's prospectus supplement dated
September 28, 2021 to its short form
base shelf prospectus dated September 16,
2021.
Phoenix FS Highlights:
- Base case pre-tax Net Present Value ("NPV") (8%) of
$2.34 billion (100% ownership-basis)
is a 150% increase in the base-case pre-tax NPV8% for
Phoenix from the 2018 PFS.
- Very robust base-case pre-tax Internal Rate of Return ("IRR")
of 105.9%.
- Base-case after-tax NPV8% of $1.56 billion (100% basis) and IRR of 90.0% –
with Denison's effective 95% interest in the project equating to a
base-case after-tax NPV8% of $1.48 billion.
- Base-case pre-tax and after-tax payback period of 10 months –
equating to a reduction of 11 months for the pre-tax payback period
from the 2018 PFS.
- Production profile has been optimized, based on ISR mine
planning efforts evaluating production potential for individual
well patterns – resulting in an increase to the planned rate of
production by approximately 43% during the first five years of
operations.
- Estimated pre-production capital costs of under $420 million (100% basis), yielding an impressive
after-tax NPV to initial capital cost ratio in excess of 3.7 to
1.
- Robust economics easily absorb cost-inflation and design
changes impacting both operating and capital costs, confirming
Phoenix's position with estimated
cash operating and all-in costs expected to be amongst the
lowest-cost uranium mines in the world.
- Phoenix FS plans are aligned and costed to meet or exceed
environmental criteria expected to be required by the ongoing
regulatory approval process.
- Updated mineral resource estimate, reflecting results of 70
drill holes completed in support of ISR de-risking and resource
delineation activities, has upgraded 30.9 million pounds
U3O8 into Measured mineral resources, and
increased the average grade of the Zone A high-grade domain, which
is now estimated to contain 56.3 million pounds
U3O8 in Measured and Indicated mineral
resources at an average grade of 46.0%
U3O8.
- Upgraded 3.4 million pounds U3O8 into
Proven mineral reserves, representing the equivalent of 85% of
production planned during the first calendar year of
operations.
Completion of Phoenix ISR
De-Risking
- The Phoenix FS reflects independent third-party validation of
the selection of the ISR mining method for Phoenix, and builds on the findings from a
comprehensive and rigorous multi-year technical de-risking process
highlighted by the highly successful completion of the leaching and
neutralization phases of the Phoenix Feasibility Field Test ("FFT")
in late 2022.
- Through the technical de-risking process, Denison has acquired
extensive deposit-specific data and developed a robust ISR mine
planning model that involved evaluation of the production potential
for individual well patterns.
- With technical de-risking of the project substantially
complete, front-end engineering design ("FEED") efforts to support
the advancement of the planned Phoenix operation are already significantly
progressed and the Company is on track to transition into detailed
design efforts, consistent with the Company's Outlook for 2023,
before the end of the year.
Gryphon Update
Highlights:
- Scope of Gryphon Update was targeted at the review and update
of capital and operating costs – mining and processing plans
remaining largely unchanged from the 2018 PFS aside from minor
scheduling and construction sequencing optimizations.
- Base case pre-tax NPV (8%) of $1.43
billion (100% basis) is a 148% increase in the base-case
pre-tax NPV8% for Gryphon from the 2018 PFS.
- Strong base-case pre-tax IRR of 41.4%.
- Base-case after-tax NPV8% of $864.2 million (100% basis) and IRR of 37.6% –
with Denison's effective 95% interest in the project equating to a
base-case after-tax NPV8% of $821.0 million.
- Base-case pre-tax payback period of 20 months, and base-case
after-tax payback period of 22 months – equating to a reduction of
17 months for the pre-tax payback period from the 2018 PFS.
- Project remains to be positioned amongst the lowest-cost
uranium mines in the world and provides Denison with an additional
source of low-cost potential production to deploy significant free
cash flows expected from Phoenix.
The results of the Phoenix FS and Gryphon Update have been
reviewed and approved by the Technical Committee of Denison's Board
of Directors.
All amounts are in Canadian dollars unless indicated
otherwise.
Phoenix ISR Feasibility
Study
The Phoenix FS was completed by Wood Canada Limited ("Wood"),
WSP USA Environment and
Infrastructure Inc. ("WSP"), SRK Consulting (Canada) Inc. ("SRK"), and Newmans Geotechnique
Inc. ("Newmans"). The study confirms robust economics and the
technical viability of an ISR uranium mining operation with
low initial capital costs and a high rate of return.
The Phoenix FS reflects several design changes and the results
of a rigorous technical de-risking program completed by Denison
over the last 4.5 years following the publication of the 2018 PFS,
which was highlighted by the then-novel selection of the ISR mining
method for Phoenix.
With the benefit of extensive metallurgical and field testing of
all key elements of the proposed ISR mining operation, and current
cost estimates reflecting recent inflationary pressures, the
Phoenix FS is expected to provide Denison with an excellent basis
to advance engineering designs in support of a future final
investment decision ("FID").
Table 1 – Summary
of Key Phoenix Operation Parameters (100% Basis)
|
Mine life
|
10
years
|
Proven & Probable
reserves(1)
|
56.7 million lbs
U3O8 (220,900 tonnes at 11.6%
U3O8)
|
First 5 years of
reserves(2)
|
41.9 million lbs
U3O8 (Average 8.4 million lbs
U3O8 / year)
|
Remaining years of
reserves
|
14.8 million lbs
U3O8 (Average 3.0 million lbs
U3O8 / year)
|
Initial capital
costs(3)
|
$419.4
million
|
Average cash operating
costs
|
$8.51 (USD$6.28) per
lb U3O8
|
All-in
cost(4)
|
$21.73 (USD$16.04)
per lb U3O8
|
(1)
|
See Table 5 below
for additional information regarding Proven & Probable
reserves.
|
(2)
|
The first five years
is determined by reference to the 60 month period that commences at
the start of operations, which occurs half way through calendar
year 1, and ends half way through calendar year 6. See below for
details.
|
(3)
|
Initial capital
costs exclude $67.4 million in estimated pre-construction
expenditures expected to be incurred pre-FID.
|
(4)
|
All-in cost is
estimated on a pre-tax basis and includes all project operating
costs, capital costs post-FID, and decommissioning costs divided by
the estimated number of pounds U3O8 to be
produced.
|
Table 2 – Summary
of Phoenix Economic Results (100% Basis)
|
|
Base
Case
|
PFS Ref.
Case(1)
|
Uranium selling
price
|
UxC Spot
Price(2)
(~USD$66 to USD$70/lb
U3O8)
|
USD$65/lb
U3O8
(Fixed selling
price)
|
Exchange Rate
(USD$:CAD$)
|
1.35
|
1.30
|
Discount
Rate
|
8 %
|
8 %
|
Operating profit
margin(3)
|
90.9 %
|
89.9 %
|
|
|
|
Pre-tax
NPV8%(4) (Change from 2018
PFS)(7)
|
$2.34 billion
(+150%)
|
$2.05 billion
(+5%)
|
Pre-tax
IRR(4)
|
105.9 %
|
98.4 %
|
Pre-tax payback
period(6)
|
~10
months
|
~ 10
months
|
|
|
|
Post-tax
NPV8%(4)(5)
|
$1.56
billion
|
$1.38
billion
|
Post-tax
IRR(4)(5)
|
90.0 %
|
83.9 %
|
Post-tax payback
period(5)(6)
|
~10
months
|
~ 11
months
|
(1)
|
The "PFS Reference
Case" economic analysis reflects the outcome of the current Phoenix
FS based on a uranium selling price that is the same as the "High
Case" previously reported from the 2018 PFS, which was based on a
fixed uranium selling price of USD$65 per pound
U3O8 and a US to Canadian dollar exchange
rate of 1.3 to 1. This case allows for a direct comparison of the
NPV outcome from the Phoenix FS to the 2018 PFS.
|
(2)
|
Spot price forecast
is based on "Composite Midpoint" scenario from UxC's Q2'2023
Uranium Market Outlook ("UMO") and is stated in constant
(not-inflated) dollars, see details below.
|
(3)
|
Operating profit
margin is calculated as aggregate uranium revenue less aggregate
operating costs, divided by aggregate uranium revenue. Operating
costs exclude all royalties, surcharges and income
taxes.
|
(4)
|
NPV and IRR are
calculated to the start of construction activities for the Phoenix
operation, and excludes $67.4 million in pre-FID
expenditures.
|
(5)
|
Post-tax NPV, IRR
and payback period are based on the "adjusted Post-tax" scenario,
discussed below, which includes the benefit of certain entity level
tax attributes which are expected to be available and used to
reduce taxable income from the Phoenix operation.
|
(6)
|
Payback period is
stated as number of months to payback from the start of uranium
production.
|
(7)
|
Change from 2018 PFS
is computed by reference to the same scenario from the 2018 PFS, as
discussed below, adjusted to incorporate certain pre-FID costs for
consistent comparability.
|
Mineral Resource Estimate
The Phoenix mineral resource
estimate has been updated to reflect 70 additional drill holes
completed since the previous mineral resource estimate from 2018.
The additional drilling consisted primarily of test wells installed
to support ISR de-risking activities and certain targeted
resource definition drill holes. As a result of the additional
drilling, 30.9 million pounds U3O8 have been
upgraded from Indicated mineral resources to Measured mineral
resources in recognition of the increased confidence in certain
areas of Phoenix Zone A.
The updated Phoenix mineral
resource estimate, inclusive of mineral reserves, is summarized
below. Mineral resources that are not mineral reserves do not have
demonstrated economic viability at this time.
Table 3 –
Estimated Phoenix Mineral Resources (100% Basis)
|
Confidence
Category
|
Domain
|
Volume
(m³)
|
Density
(g/cm³)
|
Tonnes
(kt)
|
Average
Grade
(%U3O8)
|
Contained
U3O8
(Mlbs)
|
Measured
|
ZoneA_HG
|
6,729
|
3.84
|
25.9
|
50.7
|
28.9
|
ZoneA_LG
|
16,459
|
2.33
|
38.3
|
2.3
|
2.0
|
Total
|
23,187
|
2.77
|
64.2
|
21.8
|
30.9
|
Indicated
|
ZoneA_HG
|
8,773
|
3.37
|
29.6
|
42.0
|
27.4
|
ZoneA_LG
|
57,858
|
2.33
|
134.8
|
2.0
|
5.8
|
ZoneB_HG
|
4,334
|
2.66
|
11.5
|
22.3
|
5.7
|
ZoneB_LG
|
17,114
|
2.34
|
40.1
|
0.9
|
0.8
|
Total
|
88,079
|
2.45
|
216.0
|
8.3
|
39.7
|
Total Measured
and Indicated
|
111,266
|
2.52
|
280.2
|
11.4
|
70.5
|
Inferred
|
ZoneA_Bsmt
|
2,401
|
2.34
|
5.6
|
2.6
|
0.3
|
(1)
|
The effective date
of the mineral resource estimate is June 23, 2023. The Qualified
Person (QP) for the estimate is Mr. Cliff Revering, P.Eng., an
employee of SRK.
|
(2)
|
Mineral resource
estimates are prepared in accordance with CIM Definition Standards
(CIM, 2014) and the CIM Estimation of Mineral Resources and Mineral
Reserves Best Practice Guidelines (CIM, 2019).
|
(3)
|
Mineral resources are
reported at a cut-off grade of 0.1%
U3O8.
|
(4)
|
Mineral resources are
reported using a uranium price of USD$55/lb.
|
(5)
|
All figures have
been rounded to reflect the relative accuracy of the estimate and
may not add due to rounding.
|
Mining Overview & Mineral Reserve Estimate
Phoenix is planned to be the
first uranium IthefSR mining operation in the Athabasca Basin region. Comprehensive
field and laboratory test work has been completed to de-risk the
use of the ISR mining method at the Phoenix deposit – including the highly
successful completion of the leaching and neutralization phases of
the FFT at Phoenix in the fall of
2022. Over 3,300 data points have been collected within
Phoenix to advance hydrogeological
evaluations, and extensive groundwater flow modelling has been
completed to develop an advanced three-dimensional estimation of
the subsurface flows within and surrounding the Phoenix deposit. The data allowed for
modelling of complex hydrogeological and geochemical datasets,
which together with the uranium recovery curve, were used to
estimate the rate of uranium dissolution within the orebody and
facilitate the detailed wellfield design and production planning
process.
The uranium recovery curve was obtained empirically from
metallurgical testing completed at the Saskatchewan Research
Council ("SRC") facility under the supervision of industry experts.
Over 125 kilograms (kg) of Phoenix
mineralized samples were leached in a variety of settings,
including intact cores under ISR conditions representative of the
deposit, and column leaching and remediation tests representative
of specific hydrogeological units ("HGUs") of the deposit. The
results, including those from (i) the FFT (which confirm the early
stages of the leaching curve), (ii) core leach test #4 (which was
leached over 377 days to over 97% recovery), and (iii) core leach
test #5 (which is representative of the HGU estimated to contain
the largest mass of uranium in the deposit) were used to inform and
validate the uranium recovery curve.
Based on the results of the mine planning process, mining
activities have been divided into five phases, with a total of 74
extraction wells, 172 injection wells, and 22 monitoring wells, as
outlined below:
Table 4
–Wellfield composition for Phoenix by phase
|
Mining
Phase
|
Extraction
Wells
|
Injection
Wells
|
Monitoring
Wells
|
1
|
14
|
36
|
6
|
2
|
12
|
30
|
4
|
3
|
13
|
32
|
4
|
4
|
23
|
44
|
4
|
5
|
16
|
30
|
6
|
Total
|
74
|
172
|
22
|
An illustration of the mine planning process is provided in
Figure 1, which depicts the planned location of extraction,
injection and monitoring wells within the Phase 1 mining area. In
general, each extraction well is surrounded by 4 or more injection
wells, the type of which has been selected and/or located to
optimize cost and recovery.
A unique characteristic of the planned Phoenix ISR mine is the
use of artificial ground freezing around the perimeter of the
planned Phoenix mining phases to
create a vertical hydraulic barrier surrounding the ISR mining
area. The freeze perimeter is a tertiary containment measure
and is planned to consist of vertical freeze wells constructed from
surface and extending into the impermeable lower basement rock
underlying the deposit, which are designed to reduce the
temperature of and freeze the ground adjacent to the wells to
encircle the mining area with up to a 10-metre thickness of frozen
ground.
Mining is planned to occur over a 10-year period, spanning 11
calendar years, with partial years of production occurring in both
the first and final calendar year of the production plan.
Progressive reclamation and decommissioning is planned to commence
in each phase of the ore zone once production has ceased.
The Proven and Probable mineral reserves are estimated to be
56.7 million pounds U3O8. This estimate is
based on the aggregate mine feed to the plant and represents 80.6%
recovery of the total available uranium
(U3O8) in the measured and indicated mineral
resources. Proven mineral reserves are those which were subject to
a recovery test during the FFT in 2022.
Table 5 –Phoenix
Mineral Reserves (100% Basis)
|
Mining Phase by
Confidence Category
|
Tonnes
(kt)
|
Grade
(%
U3O8)
|
Recoverable
U3O8
(Mlbs)
|
Proven
|
|
|
|
Phase
1
|
6.3
|
24.5
|
3.4
|
Probable
|
|
|
|
Phase
1
|
41.3
|
20.2
|
18.4
|
Phase
2
|
45.2
|
13.8
|
13.7
|
Phase
3
|
20.3
|
11.0
|
4.9
|
Phase
4
|
68.9
|
7.2
|
10.9
|
Phase
5
|
37.0
|
6.6
|
5.4
|
Total
|
219.0
|
11.7
|
56.7
|
(1)
|
The effective date
of the mineral reserve estimate is June 23, 2023.
The QP for the estimate is Mr. Dan
Johnson, P.E., an employee of WSP.
|
(2)
|
Mineral reserves are
estimated at a cut-off grade of 0.5% U3O8
based on the ISR mining method, using a
long-term uranium price of USD$50/lb U3O8 and
a USD$/CAD$ exchange rate of 1.33. The mineral reserves
are based on a mine operating cost of $0.78/lb
U3O8, process operating cost of $5.20/lb
U3O8, and process
recovery of 99%, as discussed below.
|
Processing Overview
Consistent with the 2018 PFS, the Phoenix FS calls for the
construction of a processing plant on the Wheeler River site, which
has been designed to receive uranium bearing solution ("UBS") from
the wellfield for processing to a finished yellowcake product that
meets industry standards.
An acidic lixiviant solution is prepared in the processing plant
and transferred to an injection solution handling system for
distribution in the wellfield. The solution is injected through a
series of wells arranged in a pattern surrounding extraction /
recovery wells, which are designed to pump the UBS up to surface
once the lixiviant has travelled through the ore zone and dissolved
the uranium from the host rock.
Once the UBS is received at the processing plant, removal of
impurities such as iron (Fe) and radium (Ra) occur via Stage 1
(Fe/Ra) precipitation. Next the purified leach solution feeds the
Stage 2 yellowcake precipitation circuit and the yellowcake product
is dried and packaged for shipment. The processing plant has been
designed based on an average uranium head grade of the UBS
recovered from the wellfield of 22 grams per litre and is expected
to recover 96.5% of the uranium feed contained in UBS after a 6
month ramp up period of the plant (when recovery is expected to be
initially 93.4%). Taken together with planned subsequent recoveries
of uranium contained in the Stage 1 (Fe/Ra) precipitation product,
total recovered uranium of 56.2 million pounds
U3O8 is planned to be available for sale –
representing a combined 99% recovery rate.
Overall, the processing plant flowsheet remains largely
consistent with the 2018 PFS; however, additional provisions have
been included for effluent treatment via a three-stage
neutralization process. Whereas the 2018 PFS assumed a "closed
loop" processing system, the Phoenix FS design is aligned with the
engineering components and criteria included in the Environmental
Assessment ("EA") for the project, which allow for the treatment of
process solutions and controlled release of a treated effluent to
the environment. This is an example of how the iterative nature of
the EA process has informed project designs during the Phoenix
FS process, to ensure that the plans are aligned and costed to meet
or exceed environmental criteria expected to be required by the
ongoing regulatory approval process. While this design for effluent
treatment has been adopted for the Phoenix FS, the potential
remains for ongoing FEED studies to optimize the processing plant
design.
Site Infrastructure
The Phoenix site is compact and
designed to limit environmental disturbance. The natural terrain of
the area is used where advantageous, further reducing the impact of
the project on the environment. Based on the Phoenix FS site
layout, shown in Figure 2, the primary site facilities will consist
of the ISR wellfield, ISR processing plant, freeze plant, storage
pads, power substation and distribution, process ponds, and camp
accommodations for between 100 and 150 occupants. These facilities
are contained within an area estimated to be less than one
square kilometre.
Additional on-site infrastructure includes a seven kilometre
gravel road from Highway 914 to the site, electrical power line
from the existing SaskPower transmission line located alongside
Highway 914, airstrip, domestic and construction waste management
areas, potable water treatment facilities, sewage treatment
facilities, and fuel storage and distribution facilities.
Capital Costs
Estimated initial direct capital costs of $273.8 million represent a 32% increase compared
to the initial direct capital costs from 2018 PFS, which have been
adjusted to reflect the movement of offsite infrastructure costs
from direct costs to Other (Owner's) costs. The increase in initial
direct capital costs reflects recent inflationary trends in labour
and materials costs and the impact of several design changes
resulting from the substantive advancement of project designs from
the 2018 PFS. Importantly, the design changes in the
Phoenix FS reflect (i) modifications necessary to allow for
production plan optimizations, leading to a 43% increase in the
rate of production during the first five years of production, (ii)
choices made as a result of the iterative EA evaluation process,
and (iii) results of the multi-year technical de-risking
program.
Initial capital costs are expected to be incurred during a
24-month construction period that will include the establishment of
site infrastructure (discussed above), as well as the freeze wall
perimeter around the Phase 1 mining zone and initial wellfield
development within Phase 1.
Table 6 – Phoenix
Capital Costs ($ millions)
|
|
Initial
|
Sustaining
|
Total
|
Wellfield
|
63.0
|
177.1
|
240.1
|
ISR processing
plant
|
102.6
|
-
|
102.6
|
Surface
facilities
|
14.7
|
2.1
|
16.8
|
Utilities
|
34.8
|
-
|
34.8
|
Electrical
|
19.1
|
-
|
19.1
|
Civil &
earthworks
|
39.6
|
-
|
39.6
|
Decommissioning
|
-
|
88.8
|
88.8
|
Subtotal – Direct
Costs
|
273.8
|
268.0
|
541.8
|
Indirect
costs
|
70.5
|
31.6
|
102.1
|
Other (Owner's)
costs
|
32.7
|
-
|
32.7
|
Contingency
|
42.6
|
23.3
|
65.9
|
Total Capital Costs
(100%)
|
419.4
|
322.9
|
742.3
|
(1)
|
Numbers may not add
due to rounding.
|
Contingencies reflect approximately 11% of total capital costs,
which is considered appropriate given the estimate was prepared to
meet AACE Class 3 requirements, as well as Denison's significant
experience with key capital cost drivers through the completion of
multiple field test programs at Phoenix since the 2018 PFS.
Taken together with estimated indirect costs, owner's costs,
sustaining and decommissioning capital costs, contingencies, and
with the reallocation of certain costs to the pre-FID period, total
life of mine capital costs are estimated at $742.3 million. This represents a 74% increase in
life of mine capital costs compared to the 2018 PFS.
As is demonstrated by the project's current NPV in the PFS
Reference Case (up 5% from the 2018 PFS), the economic outcome of
the project has not been adversely impacted by the increase in life
of mine capital costs. Significant contributors to the overall
increase in capital costs include the wellfield, ISR
processing plant, and decommissioning costs, as further described
below:
Wellfield
+$141.0
million
|
The increase includes
the adoption of a phased "freeze wall" design to
replace the novel "freeze dome" concept included in 2018 PFS. The
freeze
dome introduced significant technical risk to the ISR mining
process and
added complexity from an environmental protection standpoint. The
cost of
the freeze dome was included in initial capital costs, whereas the
cost of the
freeze wall is spread over the life of mine, thus significantly
reducing the
impact to the NPV from the overall increase in capital
costs.
Materials and
installation costs for the ISR injection and extraction wells
are
now based on the Company's actual experience in installing both
large and
small-diameter test wells during the de-risking process, providing
a much
more accurate estimate of costs compared to the 2018
PFS.
|
Processing
Plant
+$47.1
million
|
The increase reflects a
variety of design adjustments to the processing plant,
including those which enable an increase in the planned production
rate by
43% during the first 5 years, which has a positive impact on
the NPV.
|
Decommissioning
+$60.2million
|
The increase reflects
the incorporation of costs associated with ore zone
groundwater remediation to achieve targets proposed in the EA;
more
detailed management and regulatory cost requirements, improved
accuracy
in well decommissioning activities, process plant decontamination
and
demolition including transport and disposal of waste materials,
additional
costs for decommissioning larger industrial water treatment
facilities, and
environmental monitoring labour and analytical costs. As these
increased
capital costs are primarily expected to occur at the end of the
mine life, the
impact to the NPV from the increased capital costs is
minimized.
|
Operating Costs
Average estimated operating costs of $8.51 (USD$6.28)
per pound U3O8 produced remain highly
competitive amongst the lowest-cost uranium mining operations
globally. Operating costs during the first five years of production
are expected to be $6.64 (USD$4.90) per pound U3O8,
benefitting from increased scale of operations and higher
concentrations of uranium contained in recovered UBS. During the
remaining years of production, operating costs are expected to be
$13.69 (USD$10.10) per pound
U3O8.
As a proportion of operating costs per pound, processing costs
have increased from the 2018 PFS, now accounting for nearly 62%, as
compared to 45% in the 2018 PFS. The biggest contributors to the
increased processing costs include reagent usage, as well as
estimated costs for reagents, fuel/propane, and labour.
Changes to reagent usage reflect the results of the Company's
multi-year technical de-risking process, which has provided a
robust data set of metallurgical tests on which the current
estimate of reagent usage has been based, as compared to limited
preliminary leach data used for the 2018 PFS.
The cost of reagents, fuel/propane, and labour reflect the
impact of inflation and supply chain challenges experienced through
2022 and into 2023. Based on the timing of this study, reagent and
fuel/propane prices used may be reflective of "peak inflation"
pricing and present a possible opportunity for optimization in
future years. These cost increases are expected to impact uranium
mining operations globally; however, few have completed significant
operating cycles and/or estimates of future costs in the current
cost environment.
Table 7 – Phoenix
Operating Cost per Pound
U3O8
|
|
CAD$
|
USD$
|
Mining /
Wellfield
|
0.79
|
0.58
|
Processing
|
5.25
|
3.88
|
Transport to
converter
|
0.24
|
0.18
|
Site support and
administration
|
2.23
|
1.64
|
Total Operating
Costs per pound U3O8
|
$8.51
|
$6.28
|
(1)
|
Numbers may not add
due to rounding.
|
Uranium Selling Price Assumptions
The base-case economic analysis assumes uranium sales from
Phoenix mine production will be
made from time to time throughout the production period at the
forecasted annual "Composite Midpoint" uranium spot price from the
Q2'2023 Uranium Market Outlook ("UMO") issued by UxC, LLC ("UxC"),
which is stated annually in constant (non-inflated) 2023 dollars and ranges from ~USD$66 to USD$70
per pound U3O8 during the indicative
production period of the Phoenix
operation. This is the same pricing methodology applied for
Phoenix as the base-case scenario
in the 2018 PFS, where the "Composite Midpoint" uranium prices
during the indicative years of production then ranged from only
USD$29 to USD$45 per pound U3O8 in
constant 2018 dollars. Consistent
with the 2018 PFS, the overall cost profile and construction
timeline of the planned Phoenix ISR mine is not expected to require
substantial contract base loading to justify development.
Accordingly, the spot price indicator from UxC has been used
for the Phoenix base-case economic
analysis.
The PFS reference case economic analysis reflects the outcome of
the current Phoenix FS based on a uranium selling price that is the
same as the "High Case" previously reported from the 2018 PFS,
which was based on a fixed uranium selling price of USD$65 per pound U3O8 and a
US to Canadian dollar exchange rate of 1.3 to 1. This case allows
for a direct comparison of the NPV outcome from the Phoenix FS to
the 2018 PFS.
Post-Tax Economic Analysis
The Phoenix FS considers two post-tax scenarios for the
project's base-case economic analysis. In the "Basic" post-tax
scenario, Canadian federal income taxes plus provincial income
taxes and profit-based royalties were calculated without
incorporating the impact of the opening tax pool balances that are
available to the applicable Wheeler River Joint Venture ("WRJV")
owners. The "Adjusted" post-tax scenario estimates the after-tax
cash flows of the project by consolidating the expected
entity-level after-tax cash flows for each of the parties to
the WRJV and includes estimates of opening tax balances that
are expected to be used to reduce taxable income. The impact of
opening tax balances is significant and thus the "Adjusted"
post-tax scenario is considered to better represent the true
after-tax economic outcome to the owners of the project.
Table 8 – Phoenix
Post-Tax Economic Analysis (Base Case)
|
|
Basic
|
Adjusted
|
Post-Tax
NPV8%
|
$1.43
billion
|
$1.56
billion
|
Post-Tax IRR
|
82.3 %
|
90.0 %
|
Post-Tax Payback
Period
|
~11 months
|
~10 months
|
Environmental Studies, Permitting and Social Impacts
The regulatory approval process and the legislation associated
with the EA does not allow for the advancement of any project
component before an EA decision is reached by the Saskatchewan Minister of Environment and the
Canadian Nuclear Safety Commission ("CNSC"). For this reason,
project advancement is gated by regulatory approvals and,
while Denison plans to move towards construction readiness by
advancing engineering design and planning activities, a FID cannot
be made until necessary regulatory permission is granted.
The EA for the Phoenix ISR mine and process plant is well
advanced through the Federal and Provincial approval process as
guided by the Canadian Environmental Assessment Act 2012 and
the Saskatchewan Environmental Assessment Act. The draft
Environmental Impact Statement ("EIS") was submitted in
October 2022 and Denison has since
received comments and information requests from the Provincial and
Federal regulatory review teams and from Indigenous communities
through the Federal public review process. Once the regulatory
reviewers are satisfied with Denison's responses to such
comments, a final EIS will be submitted for ultimate approval.
Additionally, Denison will be required to make an application to
the CNSC to obtain a license to construct a uranium mine and mill
and to obtain a permit from the Saskatchewan Ministry of
Environment to construct and operate a pollutant control facility.
Denison has scheduled the submission of these applications such
that the anticipated license and permit approvals align with the
timing of the EA approval.
An important part of the regulatory review and approval process
relates to engagement with Indigenous and non-Indigenous interested
parties. Denison has carried out several years of engagement
efforts related to the advancement of the project and in 2021
Denison's Board of Directors adopted an Indigenous Peoples Policy
("IPP"), which sets out the Company's guiding principles for and
commitment to advancing reconciliation with Indigenous People. The
IPP outlines Denison's focus on specific efforts in relation to
engagement, employment, environment, education, and empowerment,
each of which support the advancement of sustainable mining
operations.
Development Plans
The completion of the Phoenix FS is a key milestone to support
the next phases of engineering design for the project. The FEED
phase has already commenced and is expected to be completed before
the end of the year. The objective of the FEED phase is to assess
optimization opportunities and identify key long lead procurement
requirements. Including the detailed design phase, project
engineering efforts are expected to be completed in approximately
two years. Upon engineering completion, construction is expected to
last another two years. Assuming sufficient funding is secured by
the owners of the WRJV, engineering and other pre-construction
activities advance per plan, and timely receipt of required
regulatory approvals, first production is currently anticipated to
occur in 2027 or 2028.
Opportunities
Several opportunities for optimization have been identified
during the FS completion process and are expected to be evaluated
during the FEED phase, including (i) reducing the volume of treated
effluent by increasing the recycling of solutions within the
process plant; (ii) reducing the plant footprint by improving the
FS conceptual layout and maximizing modularization of process
equipment; (iii) reducing the size of certain site processing
infrastructure through improved solids/liquid separation in the
processing plant design; and (iv) modifications to the ISR mine
model to incorporate potential operational optimization techniques
to reduce the number of wells required to mine the deposit.
Completion of Phoenix ISR
De-Risking
The Phoenix FS results reflect the culmination of a
comprehensive and rigorous multi-year technical de-risking process
that focused on assessing the key criteria necessary for the
successful application of the ISR mining method to the specific
characteristics of Phoenix.
In general, advancing ISR mining projects requires significant
time and effort due to the extensive three-dimensional
characterization and modeling required for project confidence.
Forgoing detailed characterization efforts to accelerate project
timelines or "simplify" the assessment process may substantially
endanger long-term project success. The successful application of
ISR in any geological setting largely depends on three fundamental
requirements: (i) permeability (of the deposit), (ii) leachability
(of the mineralization), and (iii) containment (of the mining
solution).
Permeability
Hydrogeological investigations have been ongoing in the field
and in laboratories since 2014. In-ground permeability tests
conducted via a series of small-diameter test wells and
large-diameter commercial scale wells ("CSWs") have evaluated the
physical flows and connections through the groundwater systems
within the orebody. Pump and injection tests have collectively
demonstrated the positive application of ISR at Phoenix. Additionally, packer, open hole, and
cross hole tests have been completed in conjunction with drilling
programs, and permeability tests have been completed on sections of
available competent core from within Phoenix. Collectively, over 250 pump and
injection tests and 3,120 permeameter samples have been
collected over the deposit area.
Additional hydrogeological characterization, including borehole
geophysics in over 43 wells, was completed to further refine the
hydraulic sweep and vertical heterogeneity of the deposit.
In 2021, Denison completed an ISR field test program which
included an ion tracer test utilizing a five-spot pattern of CSWs.
The program was successful in demonstrating production flowrates
assumed in the 2018 PFS, confirming hydraulic control of injected
solutions during the ion tracer test, establishing breakthrough
times between injection and recovery wells consistent with previous
'Proof of Concept' modelling, and showcasing the ability to
remediate the test pattern by completing a 'clean up phase'.
Leachability
Test programs conducted since 2017 included various forms of
leaching tests, process plant circuit tests, and tests of effluent
and solid waste streams treatment steps, to define design criteria
for the Phoenix FS. Numerous column, batch, static, and core leach
tests were conducted on defined hydrogeological and
metallurgical units of the deposit to gain a comprehensive
understanding of leachability and to ultimately define a recovery
curve specific to the deposit. The collective tests have
demonstrated excellent recovery of uranium from various deposit
settings.
Containment
Proven freeze technology is planned to be used to surround the
high-grade Phoenix deposit, within
which an ISR wellfield of over 250 injection and recovery wells are
planned to be installed. Permeability enhancement techniques have
been tested extensively to validate augmentation of the
natural hydrogeological flow paths to facilitate a higher
degree of hydrological control. Through robust well design,
achieved and validated through several years of field-based
refinements, combined with adequately tested injection pressure and
pumping rates, it has been collectively established that the
coordinated process of pumping and injecting solutions into and
from the wellfield serves as the primary means of containment, and
that the freeze wall provides a tertiary control, which may provide
opportunities for optimization during operations.
Completion of ISR De-Risking
In late 2022, after several years of systematic de-risking field
and laboratory investigations, Denison completed the FFT, which was
designed primarily to assess the effectiveness and efficiency of
the leaching process in the ore zone. The first component of the
test included the controlled injection of an acidic mining solution
into the ore zone within a portion of the CSW test pattern
installed in 2021 and the recovery of the solution back to the
surface ("Leaching Phase"). The FFT was highly successful and
resulted in the recovery of approximately 14,400 pounds
U3O8 over 10 days of active leaching
following completion of initial acidification of the leaching area.
Through the completion of the second phase of the test
("Neutralization Phase"), the FFT also provided further evidence
and validation of both permeability and containment assumptions.
The completion of the leaching and neutralization phases of
the FFT represents the conclusion of the final substantive
scope of technical de-risking for the project.
Overall, the multi-year ISR de-risking process has supported
Denison's acquisition of extensive deposit-specific data and the
development of a robust ISR mine planning model that involves
evaluation of the production potential for individual well
patterns.
With technical de-risking of the project substantively complete,
evaluation efforts supporting the advancement of Phoenix are expected to focus on optimizing
key areas of operations through FEED and advancing detailed design
efforts in preparation for a future development decision.
Gryphon Underground
Pre-Feasibility Study Update
The 2018 PFS and the Gryphon Update describe the planned
development of Gryphon as a conventional underground mine with a
mine life of 6.5 years and annual average mine production of 7.6
million pounds U3O8. The Gryphon Update
was prepared by Engcomp Engineering and Computing Professionals
Inc. ("Engcomp"), SLR International Corporation ("SLR"), Stantec
Consulting Ltd. ("Stantec"), and Hatch Ltd. ("Hatch"), and is
largely based on the 2018 PFS, with efforts targeted at the review
and update of capital and operating costs, as well as various minor
scheduling and design optimizations. The study remains at the
Pre-Feasibility ("PFS") level of confidence.
Overall, the Gryphon Update demonstrates that the underground
development of Gryphon is a positive potential future use of cash
flows generated from Phoenix, as
it is able to leverage existing infrastructure to provide an
additional source of low-cost production.
Table 9 – Summary
of Key Gryphon Operation Parameters (100% Basis)
|
Mine life
|
6.5
years
|
Probable
reserves(1)
|
49.7 million lbs
U3O8 (1,275,000 tonnes at 1.8%
U3O8)
|
Average annual
production
|
7.6 million lbs
U3O8
|
Initial capital
costs(2)
|
$737.4
million
|
Average cash operating
costs
|
$17.27 (USD$12.75)
per lb U3O8
|
All-in
cost(3)
|
$34.50 (USD$25.47)
per lb U3O8
|
(1)
|
See below for
additional information regarding Probable reserves.
|
(2)
|
Initial capital
costs exclude $56.5 million in pre-construction expenditures
expected to be incurred prior to making a final investment decision
("FID").
|
(3)
|
All-in cost is
estimated on a pre-tax basis and includes all project operating
costs, capital costs post-FID, and decommissioning costs, divided
by the estimated number of pounds U3O8 to be
produced.
|
Table 10 –
Summary of Gryphon Economic Results (100% Basis)
|
|
Base
Case
|
PFS Ref.
Case(1)
|
Uranium selling
price
|
USD$75/lb
U3O8(2)
(Fixed selling
price)
|
USD$65/lb
U3O8
(Fixed selling
price)
|
Exchange Rate
(USD$:CDN$)
|
1.35
|
1.30
|
Discount
Rate
|
8 %
|
8 %
|
Operating profit
margin(3)
|
83.0 %
|
79.6 %
|
|
|
|
Pre-tax
NPV8%(4) (Change from 2018 PFS)(7)
|
$1.43 billion
(+148%)
|
$1.00 billion
(-5%)
|
Pre-tax
IRR(4)
|
41.4 %
|
34.0 %
|
Pre-tax payback
period(6)
|
~ 20
months
|
~ 24
months
|
|
|
|
Post-tax
NPV8%(4)(5)
|
$864.2
million
|
$599.9
million
|
Post-tax
IRR(4)(5)
|
37.6 %
|
30.6 %
|
Post-tax payback
period(5)(6)
|
~23
months
|
~ 26
months
|
(1)
|
The "PFS Reference
Case" economic analysis reflects the outcome of the current Phoenix
FS based on a uranium selling price that is the same as the "High
Case" previously reported from the 2018 PFS, which was based on a
fixed uranium selling price of USD$65 per pound
U3O8 and a US to Canadian dollar exchange
rate of 1.3 to 1. This case allows for a direct comparison of the
NPV outcome from the Phoenix FS to the 2018 PFS.
|
(2)
|
Fixed selling
price is based on the forecasted annual "composite Midpoint"
long-term uranium price from UxC's Q2'2023 UMO and is stated in
constant (not-inflated) dollars, see details below.
|
(3)
|
Operating profit
margin is calculated as aggregate uranium revenue less aggregate
operating costs, divided by aggregate uranium revenue. Operating
costs exclude all royalties, surcharges and income
taxes.
|
(4)
|
NPV and IRR are
calculated to the start of construction activities for the Gryphon
operation, and excludes $56.5 million in pre-FID
expenditures.
|
(5)
|
Post-tax NPV, IRR
and payback period for Gryphon are the same on a "Basic" and
"Adjusted" basis, as entity level tax attributes are assumed to
have been fully depleted by the Phoenix operation.
|
(6)
|
Payback period is
stated as number of months to payback from the start of uranium
production.
|
(7)
|
Change from 2018 PFS
is computed by reference to the same scenario from the 2018 PFS, as
discussed below, adjusted to incorporate certain pre-FID costs for
consistent comparability.
|
Mineral Resource Estimate
The mineral resource estimate for Gryphon remains unchanged from
the 2018 PFS. Using a cut-off grade of 0.2%
U3O8, Gryphon is estimated to contain
Indicated mineral resources of 1,643,000 tonnes, at a grade of 1.7%
U3O8 for a total of 61.9 million pounds
U3O8, plus Inferred mineral resources of
73,000 tonnes at a grade of 1.2% U3O8 for a
total of 1.9 million pounds U3O8.
Mineral resources are stated inclusive of mineral reserves.
Mineral resources that are not mineral reserves do not have
demonstrated economic viability.
Mining Overview & Mineral Reserve Estimate
The mine development and production plan for Gryphon remains
largely the same as the 2018 PFS. Access to the deposit is planned
to be via a primary production shaft with a diameter of 6.1 metres,
installed using a blind boring method to a depth of 550 metres
below surface. A ventilation shaft with a diameter of 5.8 metres,
is also planned to be excavated via blind boring to a depth of 550
metres. Both shafts will be lined with a watertight steel/concrete
composite liner.
Access from the shaft to the mine workings will be via a single
ramp located on the hanging wall of the deposit. Mining is planned
to consist of conventional underground longhole stoping mining
methods, and is expected to primarily utilize a longitudinal
retreat approach. Mined stopes will be backfilled using a
combination of rockfill, cemented rockfill, and hydraulic fill.
Mining is expected to produce approximately 605 tonnes per day
of ore and an average of 330 tonnes per day of waste rock during
the steady-state operating period. While the mine has the potential
to exceed this rate of production, the study constrains mine
production based on expected processing capacity of 9 million
pounds U3O8 per year (as discussed
below).
The project development and construction schedule was reviewed
during the completion of the Gryphon Update, and minor capital and
scheduling efficiencies were found to allow for the deferral of
some construction activities without an impact to the overall
project schedule. These modifications have been reflected in timing
of anticipated expenditures for Gryphon.
Overall, 49.7 million pounds U3O8 over
1,260,000 tonnes grading 1.8% U3O8 are
planned to be extracted from Gryphon over an approximately 6.5-year
mine life.
Table 11 –
Gryphon Mineral Reserves (100% Basis)
|
Confidence
Category
|
Tonnes
|
Grade
(% U3O8)
|
Million lbs
U3O8
|
Probable
|
1,257,000
|
1.8
|
49.7
|
TOTAL
|
1,257,000
|
1.8
|
49.7
|
(1)
|
The effective date
of the mineral reserve estimate is Sept 1 2018. The QP for the
estimate is Mr. Mark Hatton, P.Eng., an employee of
Stantec.
|
(2)
|
The mineral reserve
estimate was prepared in accordance with the CIM Definition
Standards (CIM, 2014).
|
(3)
|
Mineral Reserves are
stated at a processing plant feed reference point.
|
(4)
|
Mineral Reserves for
the Gryphon deposit are estimated at a cut-off grade of 0.58%
U3O8 based on longhole mining using a
long-term uranium price of USD$50/lb and a USD$/CA$ exchange rate
of 0.80. The mineral reserves are based on a mine operating cost of
$150/t, mil operating cost of $275/t, G&A cost of $99/t,
transportation cost of $50/t, milling recovery of 97%, and 7.25%
fee for Saskatchewan royalties. Mineral reserves estimates account
for diluting material and mining losses.
|
Processing Overview
Consistent with the 2018 PFS, production from the Gryphon
operation is assumed to be processed at the 22.5% Denison-owned
McClean Lake processing plant, which is located in the northeastern
portion of the Athabasca Basin
region. The results from the 2018 PFS indicate that the
Gryphon deposit is amenable to recovery utilizing the existing
flowsheet for the McClean Lake mill with minimal required upgrades
and an estimated recovery rate of 98.2%.
The McClean Lake mill received a 10-year operating license from
the CNSC in 2017 and is currently processing 100% of the mine
production from the Cigar Lake mine under a toll milling agreement.
Additionally, in early 2022, the McClean Lake operation was
granted the final approval needed to amend its license to allow for
an expansion of the tailings management facility on site.
Due to the volume of throughput expected from the Gryphon
operation, the McClean Lake mill will require certain upgrades to
process the mine production from Gryphon. Various other small
upgrades are also expected to be required to achieve production at
the licensed annual capacity of 24 million pounds
U3O8. The study assumes that Cigar Lake
production will decline from 18 million pounds
U3O8, at present, to approximately 15 million
pounds U3O8 at the time of co-processing with
ore from the Gryphon operation. In order to assess compatibility
with Gryphon mill feed and to approximate the split of estimated
mill operating costs, various assumptions have been made in regard
to the nature and quantity of the mill feed from the Cigar Lake
mine. Denison's interest in the McClean Lake Joint Venture ("MLJV")
does not entitle the Company or the WRJV to process its mine
production at the facility in the absence of a toll milling
agreement. Accordingly, certain further assumptions have been made
regarding the likelihood and terms of a toll milling agreement with
the MLJV. The estimated cost of production for Gryphon could
be materially different should processing not be available at an
existing local facility.
To facilitate access to the McClean Lake mill from the Wheeler
River site, the Gryphon Update carries certain costs of building an
extension to Highway 914 to connect the McArthur River and Cigar
Lake operations and to allow for the transport of Gryphon mine
production over an approximately 160 kilometre route.
Site Infrastructure
Due to its proximity to Phoenix, the Gryphon operation is expected to
benefit from site infrastructure that is planned to be established
in support of the Phoenix ISR mine (e.g., airstrip, camp, access
road, power distribution). Additional site infrastructure
for Gryphon is generally limited to items directly related to
the underground mining operation, including incremental power
distribution requirements, ore and waste rock handling, as well as
mine water handling and treatment.
Capital Costs
Estimated direct initial capital costs of $487.6 million represent a 48% increase compared
to the 2018 PFS. The increase in direct initial capital costs
reflect recent inflationary trends in labour and
materials costed using the Chemical Engineering Plant Cost
Index. Initial capital costs are expected to be incurred during a
42-month construction period that will include approximately 24
months for the completion of the production shaft and vent raise.
Surface facilities, underground excavation, haulage road, and
McClean Lake mill upgrades are expected to take approximately 18
months. Initial ore recovery occurs prior to the completion of
construction and ramps up for the mine to achieve full production
by year 3.
Table 12 –
Gryphon Capital Costs ($ millions)
|
|
Initial
|
Sustaining
|
Total
|
Shafts
|
222.4
|
-
|
222.4
|
Surface
facilities
|
63.0
|
7.5
|
70.5
|
Underground
|
63.9
|
86.2
|
150.1
|
Utilities
|
5.3
|
-
|
5.3
|
Electrical
|
5.4
|
-
|
5.4
|
Civil &
earthworks
|
16.0
|
-
|
16.0
|
McClean Lake mill
upgrades
|
67.9
|
-
|
67.9
|
Offsite
infrastructure
|
43.7
|
-
|
43.7
|
Decommissioning
|
-
|
5.0
|
5.0
|
Subtotal – Direct
Costs
|
487.6
|
98.7
|
586.3
|
Indirect
costs
|
76.5
|
5.0
|
81.5
|
Other (Owner's)
costs
|
25.6
|
-
|
25.6
|
Contingency
|
147.7
|
-
|
147.7
|
Total Capital Costs
(100%)
|
737.4
|
103.7
|
841.1
|
(1)
|
Numbers may not add
due to rounding.
|
Contingencies reflect approximately 25% of total capital costs,
which is considered appropriate given the estimate was prepared to
meet AACE Class 4 requirements in alignment with the stage of
engineering and design efforts for the project.
Taken together with estimated indirect costs, sustaining and
decommissioning capital costs, and the reallocation of certain
costs to the pre-FID period, total life of mine capital costs are
estimated at $841.1 million. This
represents a 19% increase in life of mine capital costs compared to
the 2018 PFS. Due to construction schedule optimization, the
impact of increased capital costs to the NPV has been
minimized.
Operating Costs
Estimated operating costs of $17.27 (USD$12.75)
per pound U3O8 produced have increased by
approximately 14% from the 2018 PFS, and remain highly competitive
amongst the lowest-cost uranium mining operations globally.
Operating costs have increased as a result of recent inflationary
trends in labour and materials, partially offset by favourable
updates to certain milling assumptions.
Table 13 –
Gryphon Operating Cost per Pound
U3O8
|
|
CAD$
|
USD$
|
Mining
|
6.85
|
5.05
|
Milling
|
8.76
|
6.47
|
Transport to
Converter
|
0.27
|
0.20
|
Site support and
administration
|
1.40
|
1.03
|
Total Operating
Costs per pound U3O8
|
$17.27
|
$12.75
|
(1)
|
Numbers may not add
due to rounding.
|
Uranium Selling Price Assumptions
The base-case economic analysis assumes uranium sales from
Gryphon mine production will be made throughout the mine life at a
fixed price of USD$75 per pound
U3O8, which is based on the average of the
forecasted annual "Composite Midpoint" long-term uranium price from
UxC's Q2'2023 UMO, which is stated in constant (non-inflated)
2023 dollars, during the indicative
production period of Gryphon to the nearest USD$5 per pound U3O8. This
is the same pricing methodology applied for Gryphon as the
base-case scenario in the 2018 PFS, where the "composite Midpoint"
long-term uranium price during the indicative years of production
averaged ~USD$50 per pound
U3O8 in then constant 2018 dollars. Consistent with the 2018 PFS, the
overall cost profile and construction timeline of the planned
Gryphon underground mine is considered to be more amenable to fixed
(base escalated) price contracts with nuclear energy utilities to
reduce risk and justify a development decision. Accordingly, the
long-term price indicator from UxC has been used for the Gryphon
base-case economic analysis.
The PFS reference case economic analysis reflects the outcome of
the current Gryphon Update based on a uranium selling price that is
the same as the "High Case" previously reported from the 2018 PFS,
which was based on a fixed uranium selling price of USD$65 per pound U3O8 and a
US to Canadian dollar exchange rate of 1.3 to 1. This case allows
for a direct comparison of the NPV outcome from the Gryphon
Update to the 2018 PFS.
Post-Tax Economic Analysis
The Gryphon Update only considers one post-tax scenario for the
project's base-case economic analysis, as there is no basis for an
"adjusted" case, given that the entity level tax attributes of the
WRJV owners are assumed to have been fully depleted by the
Phoenix operation. In calculating
the profit royalties and Canadian federal and provincial taxes
payable for the Gryphon Update, it has been assumed that the
Gryphon construction period will occur at a time when it will be
allowable to deduct the pre-production expenditures against income
from Phoenix that is not otherwise
sheltered, thus the cash flow benefit of those deductions have been
reflected prior to first production from Gryphon.
Permitting and Development Plans
At this time, Denison has not made a decision to advance
Gryphon. While the project may benefit from certain infrastructure
associated with the development of Phoenix, Gryphon is currently considered a
stand-alone project. Gryphon is not expected to be subject to a
Federal EA, as it would not meet the criteria of a designated
activity as contemplated by the Physical Activities Regulations
under the Impact Assessment Act ("IAA"), which replaced CEAA
2012 for projects commencing the regulatory review process after
August 28, 2019. If advanced into the
permitting process, Gryphon will, however, remain subject to
the requirement to complete an EA under the Saskatchewan
Environmental Assessment Act, and will require (i) licensing by
the CNSC and (ii) permitting by the Saskatchewan Ministry of
Environment. The required licenses and permits cannot be issued
until a decision on the Provincial EA has been made.
Opportunities
The Gryphon Update remains at the PFS level of confidence, and
opportunities remain to complete additional studies to further
advance confidence in the project plans. There are notable
opportunities for optimization of the Gryphon mine design,
including: (i) additional exploration drilling may increase
estimated mineral resources, which with further studies could
increase available probable reserves to support an extended mine
life; (ii) increasing the shaft depth could improve the ramp up
schedule of the mine and allow for earlier production; (iii)
selecting a conventional method of shaft sinking by reusing ground
freezing equipment potentially available from the Phoenix operation could improve schedule and
reduce risks associated with blind boring; (iv) radiometric ore
sorting underground could significantly reduce the quantity of ore
to be transported to the mill for processing and could result in
material reductions in transportation costs, milling costs, and (v)
the addition of a grinding and leaching circuit at Gryphon to
produce UBS to feed the processing plant proposed for the
Phoenix operation, potentially
reducing offsite infrastructure operating and capital costs
associated with the upgrades needed for the McClean lake mill and
the extension of Highway 914.
About Wheeler
River
Wheeler River is the largest undeveloped uranium project in
the infrastructure rich eastern portion of the Athabasca Basin region, in northern
Saskatchewan. The Project is
situated in proximity to important regional infrastructure,
including the Provincial electrical transmission grid and an
all-season Provincial highway. The Project is comprised of 19
contiguous mineral claims covering 11,720 ha and is host to the
high-grade Phoenix and Gryphon
uranium deposits, discovered by Denison in 2008 and 2014,
respectively. The WRJV is a joint venture between Denison
(operator) and JCU (Canada)
Exploration Company Limited ("JCU"). Denison has an effective 95%
ownership interest in Wheeler River (90% directly, and 5%
indirectly through a 50% ownership in JCU).
About Denison
Denison is a uranium exploration and development company with
interests focused in the Athabasca
Basin region of northern Saskatchewan,
Canada. In addition to its effective 95% interest in the
Wheeler River project, Denison's interests in the Athabasca Basin include a 22.5% ownership
interest in the MLJV, which includes several uranium deposits and
the McClean Lake uranium mill that is contracted to process the ore
from the Cigar Lake mine under a toll milling agreement, plus a
25.17% interest in the Midwest Main and Midwest A deposits, and a
67.41% interest in the Tthe Heldeth Túé ("THT," formerly J Zone)
and Huskie deposits on the Waterbury Lake property. The Midwest
Main, Midwest A, THT and Huskie deposits are each located within 20
kilometres of the McClean Lake mill.
Through its 50% ownership of JCU, Denison holds additional
interests in various uranium project joint ventures in Canada, including the Millennium project (JCU
30.099%), the Kiggavik project (JCU 33.8118%) and Christie Lake (JCU 34.4508%). Denison's
exploration portfolio includes further interests in properties
covering ~300,000 hectares in the Athabasca Basin region.
Denison is also engaged in post-closure mine care and
maintenance services through its Closed Mines group, which manages
Denison's reclaimed mine sites in the Elliot Lake region and provides related
services to certain third-party projects.
Qualified Persons
The technical information contained in this release has been
reviewed and approved by Mr. Chad
Sorba, P.Geo, Denison's Director, Technical Services, and
Mr. Andrew Yackulic, P. Geo.,
Denison's Director, Exploration, each of whom is a Qualified Person
in accordance with the requirements of NI 43-101.
Technical Information
The Phoenix FS and Gryphon Update have been completed in
accordance with NI 43-101, Canadian Institute of Mining, Metallurgy
and Petroleum (CIM) standards, and best practices, as well as other
standards such as the AACE Cost Estimation Standards. Other than as
discussed herein and the risks identified in the Company's Annual
Information Form dated March 27, 2023
(the "AIF") or subsequent quarterly financial reports filed under
the Company's profile on SEDAR and EDGAR, there are no known legal,
political, environmental or other risks that could materially
affect the potential development of the mineral
resources.
The qualified persons involved in the preparation of the
Phoenix FS and Gryphon Update summarized in this press release, and
the related technical report, have followed industry accepted
practices for verifying that the data used in the study is suitable
for the purposes used. Data verification undertaken by Qualified
Persons included review of drill core, review of quality assurance
program and quality control measures and data, re-sampling and
sample analysis programs, and database verification, as applicable.
Validation checks were also performed on data. The independent
Qualified Persons for the Phoenix FS, led by Wood's
David Myers P.Eng., have prepared
the scientific and technical information on the Phoenix FS and
reviewed the information that is summarized in this press release.
Site visits by four of the Qualified Persons (Lorne Schwartz and David
Myers from Wood, Cliff
Revering from SRK and Dan
Johnson from WSP, who each attended at Phoenix) was one element of such data
verification procedures for the Phoenix FS. The independent
Qualified Persons for the Gryphon Update, led by Engcomp's Gord
Graham P.Eng., have prepared the scientific and technical
information on the Gryphon Update and reviewed the information that
is summarized in this press release. Site visits by two of the
qualified persons (Mark Mathieson
from SLR at Gryphon and Will McCombe
from Hatch at McClean Lake) was one element of the data
verification procedures for the Gryphon Update.
The NI 43-101 technical report, supporting the results of the
Phoenix FS and Gryphon Update included in this release, is in the
process of being finalized for review and approval of the WRJV
partners and is expected to be filed under Denison's profile on
SEDAR within 45 days of this release. A more detailed
description of data verification undertaken by the qualified
persons will be included in the relevant sections of the technical
report.
Once filed, such technical report will supercede and replace
any other technical report for the Project. Further details of the
2018 PFS are provided in the NI 43-101 Technical Report titled
"Pre-feasibility Study for the Wheeler River Uranium Project,
Saskatchewan, Canada" dated
October 30, 2018, with an effective
date of September 24, 2018, a copy of
which is available under Denison's profile on SEDAR at
www.sedar.com and on EDGAR at
www.sec.gov/edgar.shtml.
Non-GAAP Financial
Measures
This news release includes certain terms or performance
measures commonly used in the mining industry that are not defined
under International Financial Reporting Standards ("IFRS"). Such
non-GAAP performance measures, including operating costs,
sustaining costs, and all-in costs, are included because the
Company understands that investors use this information to
determine the Company's ability to generate earnings and cash
flows. The Company believes that conventional measures of
performance prepared in accordance with IFRS do not fully
illustrate the ability of mines to generate cash flows. Non-GAAP
financial measures should not be considered in isolation as a
substitute for measures of performance prepared in accordance with
IFRS and are not necessarily indicative of operating costs,
operating profit or cash flows presented under IFRS.
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 news release contains forward-looking
information pertaining to the following: the interpretation of the
Phoenix FS and Gryphon Update and expectations with respect
thereto, including estimates of mine production, NPV, capital
costs, operating costs and estimated uranium revenue; expectations
with respect to pre- and post-FID costs; expectations with respect
to taxes and royalties; assumptions with respect to the industry
and uranium prices, anticipated impacts of inflation; expectations
with respect to project development and permitting, construction
and operational processes; infrastructure and the availability of
services to be provided by third parties; expectations with respect
to project remediation and decommissioning; the results and
interpretations of the FFT; plans for FEED and detailed design for
Phoenix; comparisons of the
Phoenix FS and Gryphon Update to the estimates in the 2018 PFS;
future development methods and plans; assumptions regarding
Denison's ability to obtain all necessary regulatory approvals to
commence development; and joint venture ownership interests and the
continuity of its agreements with its joint venture
partners.
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, the modelling and assumptions upon which the
interpretation of results are based may not be maintained after
further testing or be representative of actual conditions. 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 AIF 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.
Figure 1 – Proposed ISR Wellfield Layout
for Mining Phase 1
Figure 2 – Proposed Phoenix ISR Operation Site
Layout
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SOURCE Denison Mines Corp.