EX-99.4

EX-99.4 5 d543551dex994.htm EX-99.4 EX-99.4

Exhibit 4

DENISON MINES CORP.

Condensed Interim Consolidated Statements of Financial Position

(Unaudited—Expressed in thousands of U.S. dollars except for share amounts)


	At March 31 2013			At December 31 2012
				Restated (note 3)
ASSETS
Current
Cash and cash equivalents (note 5)	$	26,907		$	38,188
Trade and other receivables (note 6)		3,756			2,638
Inventories (note 7)		1,711			1,792
Prepaid expenses and other		830			683

		33,204			43,301
Non-Current
Inventories – ore in stockpiles (note 7)		2,020			2,062
Investments (note 8)		1,817			2,843
Restricted cash and investments (note 9)		2,905			2,254
Property, plant and equipment (note 10)		255,601			247,888
Intangibles (note 11)		1,748			2,008

Total assets	$	297,295		$	300,356

LIABILITIES
Current
Accounts payable and accrued liabilities	$	4,497		$	6,628
Current portion of long-term liabilities:
Post-employment benefits (note 12)		394			402
Reclamation obligations (note 13)		831			848
Debt obligations (note 14)		110			125

		5,832			8,003
Non-Current
Post-employment benefits (note 12)		3,171			3,262
Reclamation obligations (note 13)		14,435			14,816
Debt obligations (note 14)		79			104
Other liabilities (note 15)		984			1,005
Deferred income tax liability		8,544			9,443

Total liabilities		33,045			36,633

EQUITY
Share capital (note 16)		990,080			979,124
Share purchase warrants (note 17)		17			—
Contributed surplus (note 18)		51,112			50,671
Deficit		(782,468	)		(776,999	)
Accumulated other comprehensive income (note 19)		5,509			10,927

Total equity		264,250			263,723

Total liabilities and equity	$	297,295		$	300,356

Issued and outstanding common shares (note 16)		396,781,394			388,805,915

Commitments and contingencies (note 25)
Subsequent events (note 26)

The accompanying notes are integral to the condensed interim consolidated financial statements.

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DENISON MINES CORP.

Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(Unaudited—Expressed in thousands of U.S. dollars except for share and per share amounts)


	Three Months Ended
	March 31			March 31
	2013			2012
				Restated (note 3)
REVENUES (note 21)	$	2,291		$	3,604

EXPENSES
Operating expenses (note 20)		(2,496	)		(3,793	)
Mineral property exploration (note 21)		(4,709	)		(3,020	)
General and administrative (note 21)		(1,903	)		(2,605	)
Other income (expense) (note 20)		(929	)		(4,363	)

		(10,037	)		(13,781	)

Income (loss) before finance charges		(7,746	)		(10,177	)
Finance income (expense) (note 20)		(159	)		(95	)

Income (loss) before taxes		(7,905	)		(10,272	)
Income tax recovery (expense) (note 23)
Current		—			—
Deferred		2,436			756

Net income (loss) from continuing operations		(5,469	)		(9,516	)
Net income (loss) from discontinued operations, net of tax (note 4)		—			(42,475	)

Net income (loss) for the period	$	(5,469	)	$	(51,991	)

Comprehensive income (loss) from continuing operations:
Unrealized gain (loss) on investments-net of tax		283			184
Foreign currency translation change		(5,701	)		4,981
Comprehensive income (loss) from discontinued operations:
Unrealized gain (loss) on investments-net of tax		—			4
Foreign currency translation change		—			(30	)

Comprehensive income (loss) for the period	$	(10,887	)	$	(46,852	)

Net income (loss) per share from continuing operations:
Basic and diluted	$	(0.01	)	$	(0.03	)

Net income (loss) per share from discontinued operations:
Basic and diluted	$	—		$	(0.11	)

Net income (loss) per share:
Basic and diluted	$	(0.01	)	$	(0.14	)

Weighted-average number of shares outstanding (in thousands):
Basic and diluted		394,123			384,661

The accompanying notes are integral to the condensed interim consolidated financial statements.

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DENISON MINES CORP.

Condensed Interim Consolidated Statements of Changes in Equity

(Unaudited—Expressed in thousands of U.S. dollars)


	Three Months Ended
	March 31			March 31
	2013			2012
				Restated (note 3)
Share capital
Balance–beginning of period		979,124			974,312
Shares issued on acquisition of JNR Resources (note 4)		10,956			—

Balance–end of period		990,080			974,312

Share purchase warrants
Balance–beginning of period		—			—
Warrants issued on acquisition of JNR Resources (note 4)		17			—

Balance–end of period		17			—

Contributed surplus
Balance–beginning of period		50,671			49,171
Stock-based compensation expense		310			621
Share options issued on acquisition of JNR Resources (note 4)		131			—

Balance–end of period		51,112			49,792

Deficit
Balance-beginning of period-restated (note 3)		(776,999	)		(579,640	)
Net loss		(5,469	)		(51,991	)

Balance-end of period		(782,468	)		(631,631	)

Accumulated other comprehensive income
Balance-beginning of period-restated (note 3)		10,927			11,167
Unrealized gain (loss) on investments		283			188
Foreign currency translation unrealized		(5,701	)		4,951

Balance–end of period		5,509			16,306

Total Equity
Balance–beginning of period	$	263,723		$	455,010

Balance–end of period	$	264,250		$	408,779

The accompanying notes are integral to the condensed interim consolidated financial statements.

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DENISON MINES CORP.

Condensed Interim Consolidated Statements of Cash Flow

(Unaudited—Expressed in thousands of U.S. dollars)


	Three Months Ended
	March 31			March 31
CASH PROVIDED BY (USED IN):	2013			2012
				Restated (note 3)
OPERATING ACTIVITIES
Net loss for the period	$	(5,469	)	$	(51,991	)
Items not affecting cash:
Depletion, depreciation, amortization and accretion		643			11,440
Impairment-mineral properties (note 4)		—			23,867
Impairment-plant and equipment (note 4)		—			20,212
Impairment-investments		18			—
Stock-based compensation		310			621
Losses (gains) on asset disposals		(8	)		—
Losses (gains) on investments and restricted investments		697			135
Non-cash inventory adjustments		—			(27	)
Deferred income tax expense (recovery)		(2,436	)		(756	)
Foreign exchange		80			3,565
Change in non-cash working capital items (note 20):		(2,933	)		(11,823	)

Net cash provided by (used in) operating activities ⁽¹⁾		(9,098	)		(4,757	)

INVESTING ACTIVITIES
Asset acquisition, net of cash acquired (note 4)		(715	)		—
Decrease (increase) in notes receivable		298			10
Expenditures on property, plant and equipment		(486	)		(5,731	)
Proceeds on sale of property, plant and equipment		8			—
Decrease (increase) in restricted cash and investments		(703	)		(765	)

Net cash provided by (used in) investing activities ⁽¹⁾		(1,598	)		(6,486	)

FINANCING ACTIVITIES
Increase (decrease) in debt obligations		(35	)		230

Net cash provided by (used in) financing activities ⁽¹⁾		(35	)		230

Increase (decrease) in cash and cash equivalents		(10,731	)		(11,013	)
Foreign exchange effect on cash and cash equivalents		(550	)		987
Cash and cash equivalents, beginning of period		38,188			53,515

Cash and cash equivalents, end of period	$	26,907		$	43,489

(1)	See note 4 for that portion of cash flows attributable to discontinued operations.

The accompanying notes are integral to the condensed interim consolidated financial statements.

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DENISON MINES CORP.

Notes to the Condensed Interim Consolidated Financial Statements for the three months ended March 31, 2013 and 2012

(Unaudited—Expressed in U.S. dollars except for shares and per share amounts)

NATURE OF OPERATIONS

Denison Mines Corp. and its subsidiary companies and joint arrangements (collectively, the “Company”) are engaged in uranium mining and related activities, including acquisition, exploration and development of uranium bearing properties, extraction, processing and selling of uranium.

The Company has a 22.5% interest in the McClean Lake mill located in the Athabasca Basin of Saskatchewan, Canada and varying ownership interests in a number of development and exploration projects located in Canada, Mongolia and Zambia. Through its environmental services division, the Company provides mine decommissioning and decommissioned site monitoring services to third parties.

The Company is also the manager of Uranium Participation Corporation (“UPC”), a publicly-listed investment holding company formed to invest substantially all of its assets in uranium oxide concentrates (“U₃O₈”) and uranium hexafluoride (“UF₆”). The Company has no ownership interest in UPC but receives various fees for management services and commissions from the purchase and sale of U₃O₈and UF₆ by UPC.

Denison Mines Corp. (“DMC”) is incorporated under the Business Corporations Act (Ontario) and domiciled in Canada. The address of its registered head office is 595 Bay Street, Suite 402, Toronto, Ontario, Canada, M5G 2C2.

BASIS OF PRESENTATION

These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. The condensed interim consolidated financial statements should be read in conjunction with the annual financial statements for the year ended December 31, 2012.

The Company’s presentation currency is U.S. dollars.

These financial statements were approved by the board of directors for issue on May 8, 2013.

SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies followed in these condensed interim consolidated financial statements are consistent with those applied in the Company’s annual financial statements for the year ended December 31, 2012, except as described below.

Accounting Standards Adopted

The Company has adopted the following new and revised accounting standards, along with any consequential amendments, effective January 1, 2013. These changes were made in accordance with the applicable transitional provisions.

International Financial Reporting Standard 10, Consolidated Financial Statements (“IFRS 10”)

IFRS 10 replaces the guidance on control and consolidation in IAS 27 “Consolidated and Separate Financial Statements”, and SIC-12 “Consolidation – Special Purpose Entities”. IFRS 10 requires consolidation of an investee only if the investor possesses power over the investee, has exposure to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect its returns. Detailed guidance is provided on applying the definition of control. The accounting requirements for consolidation have remained largely consistent with IAS 27.

The Company assessed its consolidation conclusions on January 1, 2013 and determined that the adoption of IFRS 10 did not result in any change in the consolidation status of any of its subsidiaries and investees.

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International Financial Reporting Standard 11, Joint Arrangements (“IFRS 11”)

IFRS 11 supersedes IAS 31 “Interests in Joint Ventures” and requires joint arrangements to be classified either as joint operations or joint ventures depending on the contractual rights and obligations of each investor that jointly controls the arrangement. For joint operations, a company recognizes its share of assets, liabilities, revenues and expenses of the joint operation. An investment in a joint venture is accounted for using the equity method as set out in IAS 28 “Investments in Associates and Joint Ventures”.

The Company has reviewed its joint arrangements and concluded that the adoption of IFRS 11 did not result in any changes in the accounting for its joint arrangements.

International Financial Reporting Standard 12, Disclosure of Interest in Other Entities (“IFRS 12”)

IFRS 12 was issued in May 2011 and it is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. The standard carries forward existing disclosures and also introduces significant additional disclosure requirements that address the nature of, and risks associated with, an entity’s interest in other entities.

The Company has not implemented any disclosure changes in these interim statements as a result of this standard. Additional disclosure will be required in the Company’s annual statements.

International Financial Reporting Standard 13, Fair Value Measurement (“IFRS 13”)

IFRS 13 establishes new guidance on fair value measurement and related disclosure requirements and clarifies that the measurement of fair value of an asset or liability is based on assumptions that market participants would use when pricing the asset or liability under current market conditions, including assumptions about risk.

The adoption of IFRS 13 by the Company did not require any adjustments to the valuation techniques used by the Company to measure fair value and did not result in any measurement adjustments; however, the adoption of this standard has resulted in additional disclosure about the fair value of financial instruments that are measured on a recurring basis as reported in the interim consolidated financial statements (see note 24).

International Accounting Standard 19, Post-Employment Benefits (“IAS 19”)

IAS 19 was amended to eliminate an entity’s option to defer the recognition of certain gains and losses related to post-employment benefits and require re-measurement of associated assets and liabilities in other comprehensive income.

The Company reviewed its accounting policy for post-employment benefits and concluded that under IAS 19 it would no longer be able to amortize the experience gains associated with its post-employment benefits. In addition, the unamortized experience gain previously reported as a component of the post-employment benefit liability would need to be reclassified to accumulated other comprehensive income (“AOCI”), net of tax.

The Company adopted these amendments retrospectively and adjusted its opening equity as at January 1, 2012 to reflect the unamortized experience gain portion of its post-employment liability as a component of AOCI. Any experience gain amortization amounts previously recorded within operating expenses in the statement of operations have been reversed.

- 6 -

The following table summarizes the effects of this change:


(in thousands)	As Previously Reported			Adjustment			As Restated
At December 31, 2011:
Statement of Financial Position:
Post-employment benefits	$	3,891		$	(206	)	$	3,685
Deficit-opening		(579,696	)		56			(579,640	)
Accumulated other comprehensive income
Unamortized experience gain, net of tax		—			150			150
At March 31, 2012:
Statement of Financial Position:
Post-employment benefits	$	3,935		$	(204	)	$	3,731
Deferred income tax liability		12,240			(2	)		12,238
Deficit-opening		(579,696	)		56			(579,640	)
Deficit-net income (loss)		(51,987	)		(4	)		(51,991	)
Accumulated other comprehensive income
Cumulative translation adjustment		16,283			4			16,287
Unamortized experience gain, net of tax		—			150			150
At December 31, 2012:
Statement of Financial Position:
Post-employment benefits	$	3,852		$	(188	)	$	3,664
Deferred income tax liability		9,449			(6	)		9,443
Deficit-opening		(579,696	)		56			(579,640	)
Deficit-net income (loss)		(117,948	)		(16	)		(117,964	)
Accumulated other comprehensive income
Cumulative translation adjustment		11,058			4			11,062
Unamortized experience gain, net of tax		—			150			150

Accounting Standards Issued But Not Yet Applied

The Company has not yet adopted the following new accounting pronouncements which are effective for fiscal periods of the Company beginning on or after January 1, 2014:

International Financial Reporting Standard 9, Financial Instruments (“IFRS 9”)

IFRS 9 was issued in November 2009 and contained requirements for financial assets. This standard addresses classification and measurement of financial assets and replaces the multiple category and measurement models in IAS 39 for debt instruments with a new mixed measurement model having only two categories: amortized cost and fair value through profit or loss.

IFRS 9 also replaces the models for measuring equity instruments, and such instruments are either recognized at fair value through profit or loss or at fair value through other comprehensive income. Where such equity instruments are measured at fair value through other comprehensive income, dividends are recognized in profit or loss to the extent not clearly representing a return of investment; however, other gains and losses (including impairments) associated with such instruments remain in accumulated comprehensive income indefinitely.

Requirements for financial liabilities were added in October 2010 and they largely carried forward existing requirements in IAS 39, Financial Instruments – Recognition and Measurement, except that fair value changes due to credit risk for liabilities designated at fair value through profit and loss would generally be recorded in other comprehensive income.

This standard is required to be applied for accounting periods beginning on or after January 1, 2015, with earlier adoption permitted. The Company has not evaluated the impact of adopting this standard.

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Comparative Numbers – Change in Classification due to Discontinued Operations

In fiscal 2012, the Company completed its transaction with Energy Fuels Inc. (“EFR”) to sell all of its mining assets and operations located in the United States (“U.S. Mining Division”) and, in conjunction with the sale, reorganize the Company’s capital (see note 4). In accordance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”, the Company has reclassified its fiscal 2012 results in the statement of comprehensive income to include only the Company’s continuing operations in the line item detail of the statement and to disclose the results of its U.S. Mining Division, net of tax, as a single line item amount. Note disclosure relating to the statement of comprehensive income (loss) for fiscal 2012 has also been restated.

ACQUISITIONS AND DIVESTITURES

Acquisition of JNR Resources Inc.

On January 31, 2013, Denison completed a plan of arrangement (the “JNR Arrangement”) to acquire all of the outstanding common shares of JNR Resources Inc. (“JNR”). Pursuant to the JNR Arrangement, the former shareholders of JNR received, for each JNR common share held, 0.073 of a Denison common share (the “Exchange Ratio”). No fractional shares were issued. All of the outstanding options and common share purchase warrants of JNR were exchanged for options and warrants to purchase common shares of Denison with a number and exercise price determined by reference to the Exchange Ratio.

For accounting purposes, JNR Resources is not considered a business under IFRS 3 “Business Combinations” as at the time of the acquisition it is not capable of generating outputs that can provide a return to Denison. The JNR Arrangement has been accounted for as an asset acquisition with share based consideration. Transaction costs incurred by Denison related to the JNR Arrangement have been capitalized as part of the consideration amount. Denison is including the results of JNR as part of its Canadian mining segment for reporting purposes.

The following table summarizes the fair value of the JNR assets acquired and the liabilities assumed at the acquisition date of January 31, 2013:


(in thousands)	JNR Fair Value
Cash and cash equivalents	$	39
Trade and other receivables		50
Prepaid expenses and other		7
Investments		22
Property, plant and equipment
Plant and equipment		62
Mineral properties		13,012

Total assets		13,192

Account payable and accrued liabilities		767

Net assets	$	12,425

The total consideration relating to the JNR Arrangement is summarized below:


(in thousands except for share amounts)
Fair value of 7,975,479 common shares issued by Denison	$	10,956
Fair value of 272,290 common share purchase warrants issued by Denison		17
Fair value of 579,255 common share options issued by Denison		131
Fair value of JNR shares held by Denison prior to acquisition		567
Costs incurred by the Company pursuant to arrangement:
JNR loan		351
Transaction costs		403

Fair value of total consideration	$	12,425

The fair value of the common shares issued by Denison totaled $10,956,000. The fair value of the common shares was determined using Denison’s closing share price on January 31, 2013 of CAD$1.37 converted to USD$ using the January 31, 2013 foreign exchange rate of 1.0027.

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The fair value of the common share purchase warrants issued by Denison to replace those of JNR totaled $17,000 or $0.0615 per warrant. The fair value was determined using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 1.16%, expected stock price volatility of 47.58%, expected life of 0.75 years and expected dividend yield of nil%.

The fair value of the common share options issued by Denison to replace those of JNR totaled $131,000 or $0.2262 per option. The fair value was determined using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate between 1.16% and 1.42%, expected stock price volatility between 58.00% and 62.15%, expected life between 0.04 years and 3.70 years and expected dividend yield of nil%. As at January 31, 2013, all of the options issued to replace the JNR options are fully-vested.

Discontinued Operation—U.S. Mining Division Transaction and Denison Capital Reorganization

On June 29, 2012, the Company completed its transaction with EFR to sell all of its mining assets and operations located in the United States (the “U.S. Mining Division”) in exchange for consideration equal to 425,440,872 common shares of EFR (the “EFR Share Consideration”). Immediately following the closing of the sale transaction, Denison completed the remaining steps in the Plan of Arrangement (the “Denison Arrangement”) to reorganize its capital and distribute the EFR Share Consideration to Denison shareholders on a pro rata basis as a return of capital

During the interim reporting periods prior to the sale, the Company tested the U.S. Mining Division for impairment using the fair value of the EFR Share Consideration as the recoverable amount. The recoverable amount on the sale date was determined to be $79,395,000 based on 425,440,872 common shares of EFR to be distributed to the Company’s shareholders, a share price of CAD$0.19 per share and a CAD$ to USD$ foreign exchange rate of 0.9822. The fair value of the EFR share consideration, $79,395,000 has been accounted for as a non-cash distribution of assets to shareholders and has been recorded as a component of Deficit in the statement of financial position.

In performing the impairment tests, the Company concluded that the recoverable amount of the U.S. Mining Division was lower than the carrying value. As a result, the Company recognized cumulative impairment losses of $97,944,000 in the six months ended June 30, 2012 which were allocated on a pro rata basis between plant and equipment and mineral property assets in the U.S. Mining Division’s results. The cumulative impairment loss amount was recognized as follows: $44,079,000 in the three months ended March 31, 2012 and $53,865,000 in the three months ended June 30, 2012.

As a result of the transaction, the Company presented the results of the U.S. Mining Division as discontinued operations and, in accordance with IFRS 5, revised its statement of comprehensive income (loss) to reflect this change in presentation. The condensed consolidated statements of financial position and the condensed consolidated statement of cash flows have not been revised. A summary of the impact of the discontinued operations on the condensed consolidated statement of cash flows is presented below.

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The statement of income (loss) for discontinued operations for the three months ended March 31, 2012 is as follows:


(in thousands)	Three Months Ended March 31 2012
Revenues
Mineral concentrates		22,703
Services and other		52

	$	22,755

Expenses
Operating expenses		(19,164	)
Mineral property exploration		(15	)
General and administrative		(1,917	)
Impairment-mineral properties		(23,867	)
Impairment-plant and equipment		(20,212	)
Other income (expense)		(112	)

		(65,287	)

Income (loss) before finance charges		(42,532	)
Finance income (expense)		57

Income (loss) before taxes		(42,475	)
Income tax recovery (expense)
Current		—

Net income (loss) for the period	$	(42,475	)

Cash flows for discontinued operations for the three months ended March 31, 2012 is as follows:


(in thousands)	Three Months Ended March 31 2012
Cash inflow (outflow):
Operating activities		(2,503	)
Investing activities		(5,312	)
Financing activities		—

Net cash inflow (outflow) for the period	$	(7,815	)

CASH AND CASH EQUIVALENTS

The cash and cash equivalent balance consists of:


(in thousands)	At March 31 2013		At December 31 2012
Cash	$	2,269	$	4,614
Cash equivalents		24,638		33,574

	$	26,907	$	38,188

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TRADE AND OTHER RECEIVABLES

The trade and other receivables balance consists of:


(in thousands)	At March 31 2013		At December 31 2012
Trade receivables – other	$	2,714	$	1,684
Receivables in joint ownership arrangements		182		186
Sales tax receivables		623		322
Sundry receivables		237		144
Notes and lease receivables		—		302

	$	3,756	$	2,638

INVENTORIES

The inventories balance consists of:


(in thousands)	At March 31 2013		At December 31 2012
Uranium concentrates and work-in-progress	$	4	$	4
Inventory of ore in stockpiles		2,158		2,203
Mine and mill supplies		1,569		1,647

	$	3,731	$	3,854

Inventories—by duration:
Current	$	1,711	$	1,792
Long-term – ore in stockpiles		2,020		2,062

	$	3,731	$	3,854

Long-term ore in stockpile inventory represents an estimate of the amount of ore on the stockpile in excess of the next twelve months of planned mill production.

INVESTMENTS

The investments balance consists of:


(in thousands)	At March 31 2013		At December 31 2012
Investments:
Available for sale securities at fair value	$	1,817	$	2,843

	$	1,817	$	2,843

At March 31, 2013, investments consist of equity instruments in publicly-traded companies. An amount of $567,000 was transferred out of available for sale investments during the quarter as part of the JNR acquisition (see note 4).

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RESTRICTED CASH AND INVESTMENTS

The Company has certain restricted cash and investments deposited to collateralize its reclamation obligations. The restricted cash and investments balance consists of:


	At Mach 31		At December 31
(in thousands)	2013		2012
Cash	$	401	$	42
Cash equivalents		1,976		2,212
Investments		528		—

	$	2,905	$	2,254

Restricted cash and investments – by item:
Elliot Lake reclamation trust fund	$	2,905	$	2,254

	$	2,905	$	2,254

Elliot Lake Reclamation Trust Fund

The Company has the obligation to maintain its decommissioned Elliot Lake uranium mine pursuant to a Reclamation Funding Agreement effective December 21, 1995 (“Agreement”) with the Governments of Canada and Ontario. The Agreement, as further amended in February 1999, requires the Company to maintain funds in the Reclamation Trust Fund equal to estimated reclamation spending for the succeeding six calendar years, less interest expected to accrue on the funds during the period. Withdrawals from this Reclamation Trust Fund can only be made with the approval of the Governments of Canada and Ontario to fund Elliot Lake monitoring and site restoration costs. During the three months ended March 31, 2013, the Company deposited an additional $702,000 (CAD$708,000) into the Elliot Lake Reclamation Trust Fund and withdrew $ nil (CAD$ nil).

10.

PROPERTY, PLANT AND EQUIPMENT

The property, plant and equipment balance consists of:


	At March 31			At December 31
(in thousands)	2013			2012
Plant and equipment:
Cost	$	89,717		$	91,467
Construction-in-progress		7,831			7,880
Accumulated depreciation		(12,097	)		(12,143	)

Net book value	$	85,451		$	87,204

Mineral properties:
Cost	$	170,376		$	160,915
Accumulated amortization		(226	)		(231	)

Net book value	$	170,150		$	160,684

Net book value	$	255,601		$	247,888

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The property, plant and equipment continuity summary is as follows:


				Accumulated
				Amortization /			Net
(in thousands)	Cost			Depreciation			Book Value
Plant and equipment:
Balance – December 31, 2012	$	99,347		$	(12,143	)	$	87,204
Additions		207			—			207
Amortization		—			(9	)		(9	)
Depreciation		—			(207	)		(207	)
Disposals		(8	)		8			—
Asset acquisition – JNR (note 4)		62			—			62
Foreign exchange		(2,060	)		254			(1,806	)

Balance – March 31, 2013	$	97,548		$	(12,097	)	$	85,451

Mineral properties:
Balance – December 31, 2012	$	160,915		$	(231	)	$	160,684
Additions		316			—			316
Asset acquisition – JNR (note 4)		13,012			—			13,012
Foreign exchange		(3,867	)		5			(3,862	)

Balance – March 31, 2013	$	170,376		$	(226	)	$	170,150

Plant and Equipment-Mining

The Company has a 22.5% interest in the McClean Lake mill and mines located in the Athabasca Basin of Saskatchewan, Canada. The mill is currently on stand-by; however start-up is anticipated during 2013. A toll milling agreement has been signed with the participants in the Cigar Lake Joint Venture that provides for the processing of the future output of the Cigar Lake mine at the McClean Lake mill, for which the owners of the McClean Lake mill will receive a toll milling fee and other benefits. In determining the amortization rate for the McClean Lake mill, the amount to be amortized has been adjusted to reflect Denison’s expected share of mill feed from future toll milling.

Plant and Equipment—Services and Other

The environmental services division of the Company provides mine decommissioning and decommissioned site monitoring services for third parties.

Mineral Properties

The Company has various interests in development and exploration projects located in Canada, Mongolia and Zambia which are held directly or through option or joint venture agreements.

The most significant of the Company’s mineral property interests are as follows:

Canada

The Company’s significant mineral property interests in Canada and their location are:

•

McClean Lake (Saskatchewan) – the Company has a 22.5% interest in the project which also includes a mill processing facility;

•

Midwest (Saskatchewan) – the Company has a 25.17% interest in the project;

•

Wheeler River (Saskatchewan) – the Company has a 60% interest in the project;

•

Moore Lake (Saskatchewan) – the Company has a 100% interest in the project subject to a 2.5% net smelter return royalty;

•

Wolly (Saskatchewan) – the Company has a 22.5% interest in the project; and

•

Park Creek (Saskatchewan) – the Company has entered into an option agreement to earn up to a 75% interest in the project. Under the option, the Company is required to incur exploration expenditures of CAD$2,800,000 on or before December 31, 2008 to earn an initial 49% interest and has an opportunity to earn an additional 26% interest by incurring a further CAD$3,350,000 on or before December 31, 2017. As at March 31, 2013, the Company has incurred a total of CAD$4,219,000 towards the option and has earned a 49% ownership interest in the project.

- 13 -

On January 31, 2013, Denison completed the acquisition JNR and acquired additional mineral property interests in Canada with a fair value of $13,022,000 (see note 4). As a result of the JNR Arrangement, Denison increased its interest in five projects it was already participating in to 100% (which includes Moore Lake) and it acquired interests in nine additional properties.

Mongolia

The Company currently has an 85% interest in and is the managing partner of the Gurvan Saihan Joint Venture (“GSJV”) in Mongolia. The other party to the GSJV is the Mongolian government with a 15% interest. The results of the GSJV have been 100% consolidated in these financial statements since the Company exercises control and its partner in the GSJV has a carried interest at this time.

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 will be held by Mon-Atom LLC, the Mongolian state owned uranium company.

The Company and Mon-Atom are progressing with restructuring the GSJV to meet the requirements of the Nuclear Energy law, pending government reviews and authorizations. The final restructuring of the GSJV is expected to result in the Company having its interest reduced to 66%. The anticipated timing of the completion of the restructuring is uncertain at this time.

Zambia

The Company has a 100% interest in the Mutanga project located in Zambia.

11.

INTANGIBLES

The intangibles balance consists of:


	At March 31			At December 31
(in thousands)	2013			2012
Cost	$	7,284		$	7,438
Accumulated amortization		(5,536	)		(5,430	)

Net book value	$	1,748		$	2,008

Net book value-by item:
UPC management services agreement		1,748			2,008

Net book value	$	1,748		$	2,008

The intangibles continuity summary is as follows:


				Accumulated			Net
(in thousands)	Cost			Amortization			Book Value
Balance – December 31, 2012	$	7,438		$	(5,430	)	$	2,008
Amortization		—			(220	)		(220	)
Foreign exchange		(154	)		114			(40	)

Balance – March 31, 2013	$	7,284		$	(5,536	)	$	1,748

UPC Management Services Agreement

The UPC management services agreement is associated with the acquisition of DMI in 2006. The contract is being amortized over its estimated useful life.

- 14 -

12.

POST-EMPLOYMENT BENEFITS

The Company provides post employment benefits for former Canadian employees who retired on immediate pension prior to 1997. The post employment benefits provided include life insurance and medical and dental benefits as set out in the applicable group policies but does not include pensions. No post employment benefits are provided to employees outside the employee group referenced above. The post employment benefit plan is not funded.

The effective date of the most recent actuarial valuation of the accrued benefit obligation is December 31, 2011. The amount accrued is based on estimates provided by the plan administrator which are based on past experience, limits on coverage as set out in the applicable group policies and assumptions about future cost trends. The significant assumptions used in the valuation are listed below:

•

Discount rate of 3.65%;

•

Medical cost trend rates at 7.00% per annum initially, grading down to 4.50% per annum over 20 years and remaining at 4.50% per annum thereafter; and

•

Dental cost trend rates at 4.00% per annum for the first ten years, 3.50% per annum for the following ten years and 3.0% per annum thereafter.

The post-employment benefits balance consists of:


	At March 31		At December 31
(in thousands)	2013		2012
			Restated (note 3)
Accrued benefit obligation	$	3,565	$	3,664

	$	3,565	$	3,664

Post-employment benefits liability-by duration:
Current	$	394	$	402
Non-current		3,171		3,262

	$	3,565	$	3,664

The post-employment benefits continuity summary is as follows:


(in thousands)
Balance – December 31, 2012	$	3,664
Benefits paid		(55	)
Interest cost		32
Foreign exchange		(76	)

Balance – March 31, 2013	$	3,565

13.

RECLAMATION OBLIGATIONS

The reclamation obligations balance consists of:


	At March 31		At December 31
(in thousands)	2013		2012
Reclamation liability – by location:
Elliot Lake	$	12,298	$	12,673
McClean and Midwest Joint Ventures		2,968		2,991

	$	15,266	$	15,664

Reclamation and remediation liability – by duration:
Current		831		848
Non-current		14,435		14,816

	$	15,266	$	15,664

- 15 -

The reclamation obligations continuity summary is as follows:


(in thousands)
Balance – December 31, 2012	$	15,664
Accretion		203
Expenditures incurred		(278	)
Foreign exchange		(323	)

Balance – March 31, 2013	$	15,266

Site Restoration: Elliot Lake

The Elliot Lake uranium mine was closed in 1992 and capital works to decommission this site were completed in 1997. The remaining provision is for the estimated cost of monitoring the Tailings Management Areas at the Company and Stanrock sites and for treatment of water discharged from these areas. The Company conducts its activities at both sites pursuant to decommissioning licenses issued by the Canadian Nuclear Safety Commission. The above accrual represents the Company’s best estimate of the present value of the total future reclamation cost based on assumptions as to levels of treatment, which will be required in the future, discounted at 5.26%. The undiscounted amount of estimated future reclamation costs at December 31, 2012 is $27,967,000 (CAD$27,825,000).

Spending on restoration activities at the Elliot Lake site is funded from monies in the Elliot Lake Reclamation Trust fund (see note 9).

Site Restoration: McClean Lake Joint Venture and Midwest Joint Venture

The McClean Lake and Midwest operations are subject to environmental regulations as set out by the Saskatchewan government and the Canadian Nuclear Safety Commission. Cost estimates of the estimated future decommissioning and reclamation activities are prepared periodically and filed with the applicable regulatory authorities for approval. The above accrual represents the Company’s best estimate of the present value of the future reclamation cost contemplated in these cost estimates discounted at 5.26%. The undiscounted amount of estimated future reclamation costs at December 31, 2012 is $9,496,000 (CAD$9,448,000). Reclamation costs are expected to be incurred between 2025 and 2052.

Under the Mineral Industry Environmental Protection Regulations (1996), the Company is required to provide its pro-rata share of financial assurances to the Province. As at March 31, 2013, the Company has provided irrevocable standby letters of credit, from a chartered bank, in favour of Saskatchewan Environment, totalling CAD$9,698,000.

14.

DEBT OBLIGATIONS

The debt obligations balance consists of:


	At March 31		At December 31
(in thousands)	2013		2012
Notes payable and other financing	$	189	$	229

	$	189	$	229

Debt obligations, by duration:
Current		110		125
Non-current		79		104

	$	189	$	229

Revolving Line of Credit

The Company currently has a revolving term credit facility (the “facility”) with the Bank of Nova Scotia for up to $15,000,000. The maturity date of the facility is June 28, 2013.

The facility contains a covenant to maintain a level of tangible net worth greater than or equal to the sum of $230,000,000 plus an amount equal to (i) 50% of each equity issue from and including March 31, 2012; and (ii) 50% of positive net income in each fiscal quarter from and including March 31, 2012.

- 16 -

DMC has provided an unlimited full recourse guarantee and a pledge of all of the shares of DMI. DMI has provided a first-priority security interest in all present and future personal property and an assignment of its rights and interests under all material agreements relative to the McClean Lake and Midwest projects.

Interest payable under the facility is bankers acceptance or LIBOR rate plus a margin or prime rate plus a margin. The facility is subject to standby fees.

At March 31, 2013, the Company has no outstanding borrowings under the facility (December 31, 2012—$nil) and it is in compliance with its facility covenants. At March 31, 2013, approximately $9,546,000 of the facility is being utilized as collateral for certain letters of credit and is not available to draw upon (December 31, 2012—$9,748,000). During the three months ended March 31, 2013, the Company did not incur any interest under the facility.

15.

OTHER LIABILITIES

The other liabilities balance consists of:


	At March 31		At December 31
(in thousands)	2013		2012
Unamortized fair value of toll milling contracts	$	984	$	1,005

	$	984	$	1,005

Other long-term liabilities—by duration:
Non-current		984		1,005

	$	984	$	1,005

16.

SHARE CAPITAL

Denison is authorized to issue an unlimited number of common shares without par value. A continuity summary of the issued and outstanding common shares and the associated dollar amounts is presented below:


(in thousands except share amounts)	Number of Common Shares
Balance at December 31, 2012		388,805,915	$	979,124

Acquisition of JNR Resources Inc.		7,975,479		10,956

Balance at March 31, 2013		396,781,394	$	990,080

Acquisition Related Issues

In January 2013, the Company issued 7,975,479 shares at a value of $10,956,000 (CAD$10,926,000) as part of the acquisition of JNR (see note 4).

Flow-Through Share Issues

The Company finances a portion of its exploration programs through the use of flow-through share issuances. Income tax deductions relating to these expenditures are claimable by the investors and not by the Company.

As at March 31, 2013, the Company estimates that it has spent CAD$4,268,000 of its CAD$7,005,000 October 2012 flow-through share obligation. The Company renounced the income tax benefits of this issue to its subscribers in February 2013. The related flow-through share premium liability has been reversed and recognized in deferred tax recoveries in conjunction with the renunciation (see note 23).

- 17 -

17.

WARRANTS

A continuity summary of the issued and outstanding share purchase warrants in terms of common shares of the Company and associated dollar amount is presented below:


	Weighted
	Average		Number of
	Exercise		Common		Fair
	Price Per		Shares		Value
(in thousands except share amounts)	Share (CAD$)		Issuable		Amount
Balance outstanding at December 31, 2012	$	—		—	$	—
Warrants issued on acquisition of JNR		2.05		272,290		17

Balance outstanding at March 31, 2013	$	2.05		272,290		17

Balance of common shares issuable by warrant series:
JNR May 2012 series ⁽¹⁾				272,290		17

Balance outstanding at March 31, 2013				272,290	$	17

(1)	The JNR May 2012 series has an effective exercise price of CAD$2.05 per issuable share (CAD$0.15 per warrant adjusted for the 0.073 exchange ratio associated with the Denison and JNR arrangement) and expires on November 1, 2013;

18.

STOCK OPTIONS

The Company’s stock-based compensation plan (the “Plan”) provides for the granting of stock options up to 10% of the issued and outstanding common shares at the time of grant, subject to a maximum of 20 million common shares. As at March 31, 2013, an aggregate of 14,569,880 options have been granted (less cancellations) since the Plan’s inception in 1997.

Under the Plan, all stock options are granted at the discretion of the Company’s board of directors, including any vesting provisions if applicable. The term of any stock option granted may not exceed ten years and the exercise price may not be lower than the closing price of the Company’s shares on the last trading day immediately preceding the date of grant. In general, stock options granted under the Plan have five year terms and vesting periods up to thirty months.

A continuity summary of the stock options of the Company granted under the Plan is presented below:


				Weighted-
				Average
				Exercise
	Number of			Price per
	Common			Share
	Shares			(CAD$)
Stock options outstanding—beginning of period		7,013,765		$	2.47
Issued on acquisition of JNR Resources (note 4)		579,255			5.70
Granted		1,320,000			1.30
Forfeitures		(137,500	)		1.97
Expiries		(211,325	)		12.30

Stock options outstanding—end of period		8,564,195		$	2.28

Stock options exercisable—end of period		6,547,195		$	2.56

- 18 -

A summary of the Company’s stock options outstanding at March 31, 2013 is presented below:


	Weighted				Weighted-
	Average				Average
	Remaining				Exercise
Range of Exercise	Contractual		Number of		Price per
Prices per Share	Life		Common		Share
(CAD$)	(Years)		Shares		(CAD$)
Stock options outstanding
$ 1.16 to $ 2.49		2.48		6,493,626	$	1.73
$ 2.50 to $ 4.99		2.29		1,406,230		3.30
$ 5.00 to $ 7.49		2.21		584,339		5.07
$ 7.50 to $ 7.95		0.13		80,000		7.95

Stock options outstanding—end of period		2.41		8,564,195	$	2.28

Options outstanding at March 31, 2013 expire between April 2013 and March 2018.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model. The following table outlines the range of assumptions used in the model to determine the fair value of options granted (excluding those granted pursuant to the JNR acquisition – refer to note 4):


	Three Months Ended
	March 31, 2013
Risk-free interest rate		1.29	%
Expected stock price volatility		60.2	%
Expected life		3.6 years
Estimated forfeiture rate		4.8	%
Expected dividend yield		—
Fair value per share under options granted		CAD$0.58

The fair values of stock options with vesting provisions are amortized on a graded method basis as stock-based compensation expense over the applicable vesting periods. Included in the statement of income (loss) is stock-based compensation of $310,000 and $621,000 for the three months ended March 31, 2013 and March 31, 2012, respectively. At March 31, 2013, the Company had an additional $955,000 in stock-based compensation expense to be recognized periodically to March 2014.

19.

ACCUMULATED OTHER COMPREHENSIVE INCOME

The accumulated other comprehensive income balance consists of:


	At March 31			At December 31
(in thousands)	2013			2012
				Restated (note 3)
Cumulative foreign currency translation	$	5,361		$	11,062
Unamortized experience gain – post employment liability
Gross		206			206
Tax effect		(56	)		(56	)
Unrealized gains (losses) on investments
Gross		(2	)		(285	)
Tax effect		—			—

	$	5,509		$	10,927

- 19 -

20.

SUPPLEMENTAL FINANCIAL INFORMATION

The components of operating expenses from continuing operations are as follows:


	Three Months Ended
	March 31			March 31
(in thousands)	2013			2012
Cost of goods and services sold:
Operating Overheads:
Mining, other development expense	$	(605	)	$	(967	)
Milling, conversion expense		(30	)		(17	)
Less absorption:
-Stockpiles, mineral properties		316			443
Cost of services		(2,168	)		(3,244	)

Cost of goods and services sold		(2,487	)		(3,785	)
Reclamation asset amortization		(9	)		(8	)

Operating expenses	$	(2,496	)	$	(3,793	)

The components of other income (expense) from continuing operations are as follows:


	Three Months Ended
	March 31			March 31
(in thousands)	2013			2012
Gains (losses) on:
Foreign exchange	$	(80	)	$	(3,595	)
Disposal of property, plant and equipment		8			—
Investment impairments		(18	)		—
Investment fair value through profit (loss)		(697	)		—
Restructuring of GSJV⁽¹⁾		—			(742	)
Other		(142	)		(26	)

Other income (expense)	$	(929	)	$	(4,363	)

(1)

In March 2012, Denison acquired an additional 15% interest in the GSJV, from a prior participant, for cash consideration of $742,000 and the release of the prior participant’s share of unfunded GSJV obligations. This payment has been expensed in the statement of operations as Denison expects to transfer this additional interest to Mon-Atom as part of a restructuring plan associated with its Mongolian interests (see note 10).

The components of finance income (expense) from continuing operations are as follows:


	Three Months Ended
	March 31			March 31
(in thousands)	2013			2012
Interest income	$	77		$	136
Interest expense		(1	)		—
Accretion expense-reclamation obligations		(203	)		(198	)
Accretion expense-post-employment benefits		(32	)		(33	)

Finance income (expense)	$	(159	)	$	(95	)

- 20 -

A summary of depreciation expense recognized in the statement of income (loss) for continuing operations is as follows:


	Three Months Ended
	March 31			March 31
(in thousands)	2013			2012
Operating expenses:
Mining, other development expense	$	(75	)	$	(78	)
Milling, conversion expense		(5	)		(10	)
Cost of services		(69	)		(95	)
Mineral property exploration		(38	)		(21	)
General and administrative		(20	)		(21	)

Depreciation expense—gross	$	(207	)	$	(225	)

A summary of employee benefits expense recognized in the statement of income (loss) for continuing operations is as follows:


	Three Months Ended
	March 31			March 31
(in thousands)	2013			2012
Salaries and short-term employee benefits	$	(2,685	)	$	(2,871	)
Share-based compensation		(310	)		(418	)
Termination benefits		(143	)		—

Employee benefits expense	$	(3,138	)	$	(3,289	)

The change in non-cash working capital items in the consolidated statements of cash flows is as follows:


	Three Months Ended
	March 31			March 31
(in thousands)	2013			2012
Change in non-cash working capital items:
Trade and other receivables	$	(1,433	)	$	(7,839	)
Inventories		44			(5,699	)
Prepaid expenses and other assets		(164	)		1,117
Accounts payable and accrued liabilities		(1,047	)		553
Post-employment benefits		(55	)		(59	)
Reclamation obligations		(278	)		(153	)
Deferred revenue		—			257

Change in non-cash working capital items	$	(2,933	)	$	(11,823	)

21.

SEGMENTED INFORMATION

Business Segments

The Company operates in two primary segments – the Mining segment and the Services and Other segment. The Mining segment, which has been further subdivided by major geographic regions, includes activities related to exploration, evaluation and development, mining, milling and the sale of mineral concentrates. The Services and Other segment includes the results of the Company’s environmental services business, management fees and commission income earned from UPC and other customers and general corporate expenses not allocated to the other segments.

- 21 -

For the three months ended March 31, 2013, business segment results were as follows:


(in thousands)	Canada Mining			Asia Mining			Africa Mining			Services and Other			Total
Statement of Operations:
Revenues		—			—			—			2,291			2,291

Expenses:
Operating expenses		(283	)		—			(45	)		(2,168	)		(2,496	)
Mineral property exploration		(4,173	)		(341	)		(195	)		—			(4,709	)
General and administrative		—			(229	)		(272	)		(1,402	)		(1,903	)

		(4,456	)		(570	)		(512	)		(3,570	)		(9,108	)

Segment income (loss)		(4,456	)		(570	)		(512	)		(1,279	)		(6,817	)

Revenues – supplemental:
Environmental services		—			—			—			1,907			1,907
Management fees and commissions		—			—			—			384			384

		—			—			—			2,291			2,291

Capital additions:
Property, plant and equipment		192			57			235			39			523

Long-lived assets:
Plant and equipment
Cost		91,398			587			1,193			4,370			97,548
Accumulated depreciation		(9,020	)		(404	)		(735	)		(1,938	)		(12,097	)
Mineral properties		85,311			8,275			76,564			—			170,150
Intangibles		—			—			—			1,748			1,748

		167,689			8,458			77,022			4,180			257,349

For the three months ended March 31, 2012, business segment results were as follows:


(in thousands)	Canada Mining			Asia Mining			Africa Mining			Services and Other			Total
Statement of Operations ⁽¹⁾:
Revenues		—			—			—			3,604			3,604

Expenses:
Operating expenses		(536	)		—			(15	)		(3,242	)		(3,793	)
Mineral property exploration		(2,595	)		(306	)		(119	)		—			(3,020	)
General and administrative		—			(142	)		(261	)		(2,202	)		(2,605	)

		(3,131	)		(448	)		(395	)		(5,444	)		(9,418	)

Segment income (loss)		(3,131	)		(448	)		(395	)		(1,840	)		(5,814	)

Revenues – supplemental:
Environmental services		—			—			—			3,169			3,169
Management fees and commissions		—			—			—			435			435

		—			—			—			3,604			3,604

Capital additions ⁽¹⁾:
Property, plant and equipment		113			66			372			22			573

(1)	In June 2012, the Company sold the U.S. Mining Division (see note 4). The segmented statement of operations has been restated to reflect this disposition. The capital additions amount reported above excludes $5,868,000 of capital additions attributable to the former U.S. mining segment.

Revenue Concentration

The Company’s business from continuing operations is such that, at any given time, it sells its uranium concentrates and other services to a relatively small number of customers. During the three months ended March 31, 2013, four customers from the services and other segment accounted for approximately 96% of total revenues consisting of 55%, 17%, 12% and 12% individually. During the three months ended March 31, 2012, three customers from the services and other segment accounted for approximately 93% of total revenues consisting of 50%, 31% and 12% individually.

- 22 -

22.

RELATED PARTY TRANSACTIONS

Uranium Participation Corporation

The Company is a party to a management services agreement with UPC. Under the terms of the agreement, the Company receives the following fees from UPC: a) a commission of 1.5% of the gross value of any purchases or sales of uranium completed at the request of the Board of Directors of UPC; b) a minimum annual management fee of CAD$400,000 (plus reasonable out-of-pocket expenses) plus an additional fee of 0.3% per annum based upon UPC’s net asset value between CAD$100,000,000 and CAD$200,000,000 and 0.2% per annum based upon UPC’s net asset value in excess of CAD$200,000,000; c) a fee of CAD$200,000 upon the completion of each equity financing where proceeds to UPC exceed CAD$20,000,000; d) a fee of CAD$200,000 for each transaction or arrangement (other than the purchase or sale of uranium) of business where the gross value of such transaction exceeds CAD$20,000,000 (“an initiative”); e) an annual fee up to a maximum of CAD$200,000, at the discretion of the Board of Directors of UPC, for on-going maintenance or work associated with an initiative; and f) a fee equal to 1.5% of the gross value of any uranium held by UPC prior to the completion of any acquisition of at least 90% of the common shares of UPC.

In accordance with the management services agreement, all uranium investments owned by UPC are held in accounts with conversion facilities in the name of DMI as manager for and on behalf of UPC.

The management services agreement expired on March 31, 2013. A new management services agreement with UPC was signed on April 1, 2013 with changes to the financial terms of the agreement (see note 26).

The following transactions were incurred with UPC for the periods noted:


	Three Months Ended
	March 31		March 31
(in thousands)	2013		2012
Revenue:
Management fees	$	384	$	435

	$	384	$	435

At March 31, 2013, accounts receivable includes $139,000 (December 31, 2012: $143,000) due from UPC with respect to the fees and transactions indicated above.

Korea Electric Power Corporation (“KEPCO”)

In June 2009, Denison completed definitive agreements with KEPCO. The agreements included a long-term offtake agreement which provides for the delivery to KEPCO of 20% of Denison’s annual U₃O₈ production (±10%) but not less than 350,000 pounds (±10%) per year from 2010 to 2015 inclusive. This long-term offtake agreement has been assigned to EFR as part of the U.S. Mining Division transaction (see note 4).

KEPCO also entered into a strategic relationship agreement. Pursuant to this agreement, KEPCO is entitled to subscribe for additional common shares in Denison’s future share offerings. The strategic relationship agreement also provides KEPCO with a right of first opportunity if Denison intends to sell any of its substantial assets and a right to participate in certain purchases of substantial assets which Denison proposes to acquire.

As at March 31, 2013, KEPCO’s holds 58,000,000 shares of Denison representing a share interest of approximately 14.62%. Under the terms of the strategic relationship agreement, KEPCO is entitled to nominate one director to Denison’s board of directors so long as its share interest in Denison is above 5.0%.

Other

During the three months ended March 31, 2013, the Company has incurred management and administrative service fees and other expenses of $31,000 with a company owned by the Chairman of the Company which provides corporate development, office premises, secretarial and other services. At March 31, 2012, an amount of $3,000 (December 31, 2012: $nil) was due to this company.

- 23 -

During the three months ended March 31, 2013, the Company has incurred legal fees of $207,000 from a law firm of which a director of the Company is a partner. At March 31, 2012, an amount of $207,000 (December 31, 2012: $285,000) is due to this legal firm.

Compensation of Key Management Personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. Key management personnel include the Company’s executive officers, vice-presidents and members of its Board of Directors.

The following compensation was awarded to key management personnel:


	Three Months Ended
	March 31		March 31
(in thousands)	2013		2012
Salaries and short-term employee benefits	$	511	$	446
Share-based compensation		182		304

Key management personnel compensation	$	693	$	750

23.

INCOME TAXES

For the three months ended March 31, 2013, Denison has recognized deferred tax recoveries of $2,436,000. The deferred tax recovery includes the recognition of previously unrecognized Canadian tax assets of $1,834,000 and deferred tax expense of $107,000 associated with the February 2013 renunciation of the tax benefits associated with the Company’s CAD$7,005,000 flow-through share issue in October 2012.

24.

FAIR VALUE OF FINANCIAL INSTRUMENTS

IFRS requires disclosures about the inputs to fair value measurements, including their classification within a hierarchy that prioritizes the inputs to fair value measurement. The three levels of the fair value hierarchy are:

•

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

•

Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

•

Level 3 – Inputs that are not based on observable market data.

A detailed description of the Company’s financial assets and financial liabilities and its associated risk management in respect thereof are provided in note 26 to the 2012 audited consolidated financial statements. There have been no significant changes in the related financial risks that affect the fair value of the Company’s financial assets and financial liabilities since December 31, 2012.

The following table provides information about financial assets and liabilities measured at fair value in the Company’s statement of financial position and categorized by level according to the significance of the inputs used in making the measurements as at March 31, 2013:

March 31, 2013

Financial

Fair

Instrument

Value

Fair

Carrying

(in thousands)

Category⁽¹⁾

Hierarchy

Value

Financial Assets measured at fair value on a recurring basis:

Investments

Equity instruments

Category A

Level 1

1,782

1,728

Equity instruments

Category B

Level 1

1,817

(1)	Financial instrument designations are as follows: Category A=Financial assets and liabilities at fair value through profit and loss; Category B=Available for sale investments.

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The fair value of financial instruments which trade in active markets is based on quoted market prices at the balance sheet date. The quoted marked price used to value financial assets held by the Company is the current bid price.

25.

COMMITMENTS AND CONTINGENCIES

General Legal Matters

The Company is involved, from time to time, in various legal actions and claims in the ordinary course of business. In the opinion of management, the aggregate amount of any potential liability is not expected to have a material adverse effect on the Company’s financial position or results.

Third Party Indemnities

The Company remains a guarantor under a sales contract included in the sale of the U.S. Mining Division to EFR. The sales contract requires deliveries of 200,000 pounds of U₃O₈ per year from 2013 to 2017 at a selling price of 95% of the long-term U₃O₈price at the time of delivery. Should EFR not be able to deliver for any reason other than “force majeure” as defined under the contract, the Company may be liable to the customer for incremental costs incurred to replace the contracted quantities if the unit price of the replacement quantity is greater than the contracted unit price selling amount. EFR has agreed to indemnify the Company for any future liabilities it may incur related to this guarantee.

The Company has agreed to indemnify EFR against any future liabilities it may incur in connection with ongoing litigation between Denison Mines (USA) Corp (“DUSA”) (a company acquired by EFR as part of the sale of the U.S. Mining Division) and a contractor in respect of a construction project at the White Mesa mill. The outcome of this proceeding has yet to be determined; however, an adverse decision may have a material impact on the Company. In the event that the matter is decided in DUSA’s favour, the Company is entitled to any proceeds that are received or recovered by EFR pursuant to its indemnity.

26.

SUBSEQUENT EVENTS

Renewal of UPC Management Services Agreement

A new management services agreement was signed with UPC on April 1, 2013. Under the terms of the new agreement, UPC will pay the following fees to the Company: a) a commission of 1.5% of the gross value of any purchases or sales of uranium completed at the request of the Board of Directors; b) a minimum annual management fee of CAD$400,000 (plus reasonable out-of-pocket expenses) plus an additional fee of 0.3% per annum based upon UPC’s net asset value in excess of CAD$100,000,000; and c) a fee, at the discretion of the Board, for on-going monitoring or work associated with a transaction or arrangement (other than a financing, or the purchase or sale of uranium).

The new management services agreement has a three-year term and may be terminated by either party upon the provision of 120 days written notice.

Acquisition of Fission Energy Corp.

On April 26, 2013, Denison completed the acquisition of a portfolio of assets from Fission Energy Corp. (“Fission”) which include its 60% interest in the Waterbury Lake uranium project, its interests in all other properties in the eastern part of the Athabasca Basin, Quebec and Nunavut and its interests in two joint ventures in Namibia (collectively, the “Assets”). The acquisition was completed pursuant to an arrangement agreement entered into between the parties on March 7, 2013 (the “Fission Arrangement”). Under the terms of the Fission Arrangement, Fission shareholders received 0.355 of a common share of Denison, a nominal cash payment of CAD$0.0001 and one common share of a newly-formed publicly traded company, Fission Uranium Corp., for each Fission share held.

On closing, Denison issued 53,053,284 common shares with a value of approximately CAD$67,378,000 based on Denison’s closing share price of CAD$1.27 per share on April 26, 2013. All of the outstanding options and common share purchase warrants of Fission were exchanged for options and warrants to purchase 3,485,889 common shares of Denison with a fair value of approximately CAD$2,184,000 as determined by the Black-Scholes option pricing model. Cash consideration of CAD$2,437,000 was advanced to Fission, in respect of the expenditures incurred and paid by Fission between January 16, 2013 and April 25, 2013 on properties that were ultimately acquired by Denison. Further additional consideration may be required under the Fission Arrangement.

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