0001654954-18-002301.txt : 20180309 0001654954-18-002301.hdr.sgml : 20180309 20180308174330 ACCESSION NUMBER: 0001654954-18-002301 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 145 CONFORMED PERIOD OF REPORT: 20171231 FILED AS OF DATE: 20180309 DATE AS OF CHANGE: 20180308 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DENISON MINES CORP. CENTRAL INDEX KEY: 0001063259 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS METAL ORES [1090] IRS NUMBER: 000000000 STATE OF INCORPORATION: A6 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-33414 FILM NUMBER: 18677617 BUSINESS ADDRESS: STREET 1: 40 UNIVERSITY AVE., SUITE 1100 CITY: TORONTO STATE: A6 ZIP: M5J 1T1 BUSINESS PHONE: (416) 979-1991 MAIL ADDRESS: STREET 1: 40 UNIVERSITY AVE., SUITE 1100 CITY: TORONTO STATE: A6 ZIP: M5J 1T1 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL URANIUM CORP DATE OF NAME CHANGE: 19980603 6-K 1 Form6K.htm FORM 6K DATED MARCH 9, 2018 Blueprint
 

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
FORM 6-K
 
 
 
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
 
Date: March 9, 2018
Commission File Number: 001-33414
 
 
 
Denison Mines Corp.
(Translation of registrant’s name into English)
 
 
 
1100-40 University Avenue, Toronto Ontario, M5J 1T1 Canada
(Address of principal executive offices)
 
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
 
Form 20-F  ☐            Form    40-F   ☒
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐
 
 
 
 
Signatures
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
 
 
Denison Mines Corp.
 
 
 
 
 
 
 
/s/ Amanda Willett
Date March 9, 2018
 
 
 
Amanda Willett
 
 
 
 
Corporate Counsel and Corporate Secretary
 
 
 
 
 
EXHIBIT INDEX
 
Exhibit Number
  
Description
 
 
99.1
 
99.2
 
 99.3 
 
99.4
 
 99.5 
 
 
 
   
101.INS 
 
XBRL Instance Document   
 101.SCH 
 
XBRL Taxonomy Extension Schema   
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase   
 101.DEF 
 
XBRL Taxonomy Extension Definition Linkbase   
  101.LAB 
 
XBRL Taxonomy Extension Label Linkbase 
 101.PRE 
 
XBRL Taxonomy Extension Presentation Linkbase   
 
 
EX-99.1 2 a2017-12dmcnracmailing.htm PRESS RELEASE DATED MARCH 8, 2018 Blueprint
 
 

 
 Denison Mines Corp.
1100 – 40 University Ave
Toronto, ON M5J 1T1
www.denisonmines.com
PRESS RELEASE
 
DENISON REPORTS RESULTS FROM 2017 AND OUTLOOK FOR 2018
 
Toronto, ON – March 8, 2018. Denison Mines Corp. (“Denison” or the “Company”) (DML: TSX, DNN: NYSE MKT) today filed its Consolidated Financial Statements and Management’s Discussion & Analysis (“MD&A”) for the year ended December 31, 2017. Both documents can be found on the Company’s website at www.denisonmines.com or on SEDAR (at www.sedar.com) and EDGAR (at www.sec.gov/edgar.shtml). The highlights provided below are derived from these documents and should be read in conjunction with them. All amounts in this release are in U.S. dollars unless otherwise stated.
 
David Cates, President and CEO of Denison commented, "2017 was a volatile year for the uranium market.  While the spot price of uranium benefited from upward momentum on multiple occasions during the year, that momentum was not sustained long enough for a meaningful change to the low price environment that saw the market reach 12 and 13 year lows in late 2016.  Despite these disappointing market trends, Denison managed to have another productive year as we continue to focus on our strategy of positioning the Company for the future and a return to a much higher uranium price.  Much of the work completed by our team in 2017 was in preparation for an updated resource estimate for the Wheeler River project, which we announced in early 2018, and associated advancements ahead of the planned completion of a PFS in 2018.  With an 88% increase in our estimated indicated mineral resources at Wheeler River, we feel confident that the project has the ability to become the next producing uranium mine in the Athabasca Basin region. We also strengthened our balance sheet in early 2017, raising CAD$63.5M in gross proceeds, with minimal dilution to our shareholders, providing us with the financial flexibility to advance Wheeler River.
 
2018 is poised to be a very interesting year for Denison and the uranium market. Our project development team has its sights set on delivering a positive PFS for Wheeler River, while our exploration team has changed its focus, from the last two years of delineation drilling at Wheeler River, to once again concentrate on the considerable discovery potential at Wheeler River and our high-priority pipeline projects. From an industry perspective, we will be watching to see how the market digests (a) the significance of Cameco’s shut-down of the world’s largest and highest grade uranium mining operation (the McArthur River mine), and (b) the potential for an extended shutdown of McArthur River in the absence of a significant increase in the long term uranium price.”
 
PERFORMANCE HIGHLIGHTS
 
Completed a highly successful 2017 exploration and definition drilling program at Wheeler River
 
During 2017, Denison completed a total of 43,956 metres of drilling in 90 holes at Wheeler River, with work focused at or near the Gryphon deposit, during the summer and the winter drilling programs. To reduce drilling meterage, 77 of the 90 holes were completed as subsurface ‘daughter’ holes, which were drilled as off-cuts from surface ‘parent’ holes, and a directional drilling method was employed to ensure drilling accuracy. Highlights from the 2017 drilling program included:
 
Expansion of mineralization ahead of the updated Gryphon deposit mineral resource estimate
 
During 2017, Gryphon mineralization was expanded in numerous areas by infill and step-out drilling on an approximate 25 x 25 meter spacing, including: 1) expansion of high-grade mineralization within the D series lenses; 2) discovery and expansion of the E series lenses both at the unconformity and within the upper basement; and 3) expansion of the A and B series lenses both up-dip and down dip.
 
Completion of the definition drilling program at the Gryphon Deposit
 
In the fourth quarter of 2017, the Company successfully completed the definition drilling program on the Gryphon deposit’s A, B and C series mineralized lenses, with the objective of increasing the confidence of the previously estimated mineral resources from an inferred to indicated level. The definition drilling program, which commenced in the summer of 2016, included a total of 42 infill and delineation drill holes to complete an approximate 25 x 25 metre drill spacing.
 
Completed an updated mineral resource estimate for Wheeler River’s Gryphon Deposit
 
On January 31, 2018, Denison announced an updated mineral resource estimate for the Gryphon deposit, which included, above a cut-off grade of 0.2% U3O8, 61.9 million pounds of U3O8 (1,643,000 tonnes at 1.71% U3O8) in Indicated Mineral Resources, plus 1.9 million pounds of U3O8 (73,000 tonnes at 1.18% U3O8) in Inferred Mineral Resources. With this update to the resources estimated for the Gryphon deposit, the combined Indicated Mineral Resources estimated for the Wheeler River project increased by 88% to 132.1 million pounds U3O8, which will be used to support the Pre-Feasibility Study (‘PFS’), initiated for the project in July 2016, and expected to be completed during 2018. Following the update, Wheeler River retained and improved its standing as the largest undeveloped high-grade uranium project in the infrastructure rich eastern portion of the Athabasca Basin.
 
 
 
Discovered the high-grade, basement-hosted, Huskie Zone on the Waterbury Lake property
 
During the summer 2017 drilling program at Waterbury Lake, Denison discovered high-grade, basement-hosted mineralization located approximately 1.5 kilometres to the northeast of the property’s J Zone uranium deposit. The summer program included nine drill holes totaling 3,722 metres. Of the eight drill holes designed to test for basement-hosted mineralization, seven holes intersected significant mineralization, including 9.1% U3O8 over 3.7 metres (drill hole WAT17-446A), 1.7% U3O8 over 7.5 metres (drill hole WAT17-449) and 1.5% U3O8 over 4.5 metres (drill hole WAT17-450A). The Huskie zone has been defined over a strike length of 100 metres (the extent of the 2017 drilling) and remains open in all directions. 
 
Increased Ownership of Wheeler River Project to 63.3%
 
In January 2017, the Company executed an agreement with the partners of the Wheeler River Joint Venture (‘WRJV’) that will result in an increase in Denison's ownership of the Wheeler River project by up to approximately 66% by the end of 2018. Under this agreement, Denison is funding 50% of Cameco Corp.’s (‘Cameco’) ordinary share (30%) of joint venture expenses in 2017 and 2018. On January 31, 2018, Denison announced it had increased its interest in the Wheeler River project, based on spending on the project during 2017, from 60% to 63.3% in accordance with this agreement.
 
Closed non-dilutive financing for CAD$43.5 million to fund future project development activities
 
In the first quarter of 2017, Denison announced and closed a financing arrangement for gross proceeds of CAD$43.5 million, which has the effect of monetizing Denison’s future share of the toll milling revenue earned by the McClean Lake mill from the processing of ore from the Cigar Lake mine through the combination of a limited recourse loan and a streaming arrangement. Through this transaction, Denison retains its 22.5% ownership of the McClean Lake Joint Venture (‘MLJV’), but has de-risked its income from certain toll milling revenue, as the Company is not providing any warranty to the future rate of production at the Cigar Lake mine or the McClean Lake mill. The proceeds from the financing are expected to fund the Company’s project development costs for Wheeler River towards the completion of a Feasibility Study and ultimately project financing.
 
Obtained financing for the Company’s 2018 Canadian exploration activities
 
In March 2017, the Company completed a private placement of 18,337,000 common shares for gross proceeds of $14,806,000 (CAD$20,200,290). The financing included (1) a ‘Common Share’ offering of 5,790,000 common shares of Denison at a price of CAD$0.95 per share for gross proceeds of CAD$5,500,500; (2) a ‘Tranche A Flow Through’ offering of 8,482,000 flow through shares at a price of CAD$1.12 per share for gross proceeds of $9,499,840; and (3) A ‘Tranche B Flow Through’ offering of 4,065,000 flow through shares at a price of CAD$1.23 per share for gross proceeds of CAD$4,999,950. The proceeds from the flow through tranches of the financing will be used to fund Canadian exploration activities through to the end of 2018.
 
Denison Environmental Services (‘DES’) renewed its cornerstone environmental services contract
 
In July 2017, DES entered into a new two-year services agreement with Rio Algom Limited, a subsidiary of BHP Billiton Limited for the management and operation of nine decommissioned mine sites in Ontario and Quebec.
 
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 60% owned Wheeler River project, which hosts the high grade Phoenix and Gryphon uranium deposits, Denison's exploration portfolio consists of numerous projects covering approximately 351,000 hectares in the Athabasca Basin region. Denison's interests in Saskatchewan also include a 22.5% ownership interest in the McClean Lake joint venture (MLJV), which includes several uranium deposits and the McClean Lake uranium mill, which is currently processing ore from the Cigar Lake mine under a toll milling agreement, plus a 25.17% interest in the Midwest deposit and a 64.22% interest in the J Zone deposit on the Waterbury Lake property. Both the Midwest and J Zone deposits are located within 20 kilometres of the McClean Lake mill.
 
Denison is engaged in mine decommissioning and environmental services through its Denison Environmental Services (DES) division, which manages Denison’s Elliot Lake reclamation projects and provides post-closure mine and maintenance services to a variety of industry and government clients.
 
Denison is also the manager of Uranium Participation Corporation (UPC), a publicly traded company listed on the TSX under the symbol “U”, which invests in uranium oxide in concentrates (U3O8) and uranium hexafluoride (UF6).
 
 
 
SELECTED ANNUAL FINANCIAL INFORMATION
 
(in thousands, except for per share amounts)
 
 
 
Year Ended
December 31,
2017
 
Year Ended
December 31,
2016
 
 
 
 
 
 
 
 
 
Results from Continuing Operations:
 
 
 
 
 
 
Total revenues
 
 
$
11,085
$
13,833
Exploration and evaluation
 
 
$
(12,834)
$
(11,196)
Impairment of property, plant & equipment
 
 
$
246
$
(2,320)
Net loss
 
 
$
(14,087)
$
(11,699)
Basic and diluted loss per share
$
(0.03)
$
(0.02)
 
Results from Discontinued Operations:
 
 
 
 
Net loss
$
(81)
$
(5,644)
Basic and diluted loss per share
$
0.0
$
(0.01)
 
 (in thousands)
 
 
 
As at
December 31,
2017
 
As at
December 31,
2016
 
 
 
 
 
 
 
 
 
Financial Position:
 
 
 
 
 
 
Cash and cash equivalents
 
 
$
2,898
$
11,838
Investments in debt instruments (GICs)
 
 
$
30,136
$
-
Cash, cash equivalents and GIC’s
 
 
$
33,034
$
11,838
 
 
 
 
 
 
 
Working capital
$
29,140
$
9,853
Property, plant and equipment
$
198,480
$
187,982
Total assets
$
260,068
$
217,423
Total long-term liabilities
$
65,121
$
37,452
 
RESULTS OF CONTINUING OPERATIONS
 
Revenues
 
On February 13, 2017, Denison closed an arrangement with Anglo Pacific Group PLC and one of its wholly owned subsidiaries (the ‘APG Transaction’) under which Denison received an upfront payment of $32,860,000 (CAD$43,500,000) in exchange for its right to receive future toll milling cash receipts from the MLJV under the current toll milling agreement with the Cigar Lake Joint Venture (‘CLJV’) from July 1, 2016 onwards. The APG Transaction represents a contractual obligation of Denison to forward to APG any cash proceeds of toll milling revenue earned by the Company after July 1, 2016 related to the processing of the specified Cigar Lake ore through the McClean Lake mill, and as such, the upfront payment has been accounted for as deferred revenue.
 
During 2017, the McClean Lake mill continued to process ore received from the Cigar Lake mine and packaged approximately 18.0 million pounds U3O8 from the mine. In 2017, the Company recognized total toll milling revenue of $2,558,000. The Company’s share of toll milling revenue for January 2017 of $444,000, prior to the closing of the APG Transaction, was recognized as toll milling revenue in the first quarter of 2017. Following the closing of the APG Transaction, CAD$4,770,000 in toll milling cash receipts were received from the MLJV, and the Company recognized toll milling revenue from the draw-down of deferred revenue of $2,114,000.
 
Revenue from DES division was $7,130,000 and revenue from the Company’s management contract with UPC was $1,397,000 during 2017.
 
Operating expenses
 
Operating expenses in the Canadian mining segment include depreciation, mining and other development costs, as well as adjustments to the estimates of future reclamation costs in relation to the companies mining properties. Operating expenses during 2017 were $4,088,000, including $2,989,000 of depreciation from the McClean Lake mill, associated with the processing of U3O8 for the CLJV.
 
Operating expenses at DES during 2017 totaled $6,357,000 and relate primarily to care and maintenance, and environmental consulting services provided to clients, and includes labour and other costs.
 
 
 
Exploration and evaluation
 
During 2017, the Company continued to focus on its significant portfolio of projects in the eastern portion of the Athabasca Basin region in Saskatchewan. Denison’s share of exploration and evaluation expenditures in 2017 was $12,834,000. The Company’s Athabasca land package increased during the fourth quarter from 346,761 hectares (244 claims) to 351,365 hectares (267 claims) owing to selective staking contiguous with, or proximal to, Denison’s existing claims.
 
Wheeler River
 
 Project Highlights:
 
Largest undeveloped high-grade uranium project in the eastern Athabasca
 
On January 31, 2018 Denison announced an updated mineral resource estimate for the Gryphon deposit following drilling results from a further 144 drill holes completed during 2016 and 2017. The updated mineral resource estimate for Gryphon, above a cut-off grade of 0.2% U3O8, includes 61.9 million pounds of U3O8 (1,643,000 tonnes at 1.71% U3O8) in Indicated Mineral Resources, and 1.9 million pounds of U3O8 (73,000 tonnes at 1.18% U3O8) in Inferred Mineral Resources.
 
The Phoenix deposit, located approximately three kilometres southeast of Gryphon, is estimated to include Indicated Mineral Resources of 70.2 million pounds of U3O8 above a cut-off grade of 0.8% U3O8 (166,000 tonnes at 19.1% U3O8).
 
With the update to the Gryphon deposit resource estimate, the combined Indicated Mineral Resources estimated for Wheeler River have increased by 88% to 132.1 million pounds U3O8, which will be used to support the PFS.
 
With the updated mineral resource estimate for the property’s Gryphon deposit, the Wheeler River project retains and improves its position as the largest undeveloped high-grade uranium project in the eastern portion of the Athabasca Basin region, in northern Saskatchewan.
 
Proximal to existing uranium mining and milling infrastructure
 
The property is located in the infrastructure rich eastern portion of the Athabasca Basin, which is host to existing uranium mining and milling infrastructure, including the 22.5% Denison owned McClean Lake mill. The Wheeler River property lies alongside provincial highway 914 and a provincial powerline.
 
Positive preliminary project economics
 
On April 4, 2016, Denison announced the results of its PEA for the Wheeler River Project, which considers the potential economic merit of co-developing the high-grade Gryphon and Phoenix deposits as a single underground mining operation. The PEA was based on the resources estimated at the Gryphon deposit in November 2015, and returned a base case pre-tax Internal Rate of Return (‘IRR’) of 20.4% based on the then current long term contract price of uranium ($44.00 per pound U3O8). Denison's share of initial capital expenditures (‘CAPEX’) in the PEA was estimated to be CAD$336M (CAD$560M on 100% ownership basis) based on its 60% ownership interest at that time. The PEA is preliminary in nature, was based on Inferred Mineral Resources that are considered at the time to be too speculative geologically to have the economic considerations applied to them to allow them to be categorized as mineral reserves, and there is no certainty that the results from the PEA will be realized. The results of the updated estimate of Indicated Mineral Resources for the project of 132.1 million pounds U3O8, have not been included in the PEA, but will be used to support the PFS.
 
Increasing Denison ownership
 
As previously announced on January 10, 2017, Denison entered into an agreement with its Wheeler River Joint Venture partners, Cameco and JCU (Canada) Exploration Company, Limited (‘JCU’), to fund 75% of Joint Venture expenses in 2017 and 2018 (ordinarily 60%) in exchange for an increase in Denison's interest in the project up to approximately 66%. Under the terms of the agreement, Cameco is funding 50% of its ordinary 30% share in 2017 and 2018, and JCU continues to fund based on its 10% interest in the project. On January 31, 2018, Denison announced it had increased its interest in the Wheeler River project during 2017 from 60% to 63.3% in accordance with this agreement.
 
 
 
Significant potential for resource growth
 
The Gryphon deposit is a growing, high-grade uranium deposit that belongs to a select group of large basement-hosted uranium deposits in the eastern Athabasca Basin. The Gryphon deposit remains open in numerous areas with significant potential for future resource growth. Priority target areas include: (1) Along strike to the northeast of the E series lenses, where both unconformity and basement potential exists; (2) Down plunge of the A and B series lenses; (3) Along strike to the northeast and southwest of the D series lenses; and (4) Within the currently defined D series lenses, where additional high-grade shoots may exist.
 
In addition, very little regional exploration has taken place on the property in recent years, with drilling efforts focussed on Phoenix and Gryphon, which were discovered in 2008 and 2014 respectively. The property is host to numerous uranium-bearing lithostructural corridors, which are under- or unexplored and have the potential for additional large, high-grade unconformity or basement hosted deposits. Exploration drilling is warranted along these corridors to follow-up on previous mineralized drill results, or to test geophysical targets identified from past surveys.
 
Exploration Program:
 
Denison’s share of exploration costs at Wheeler River amounted to $7,240,000 during the winter and summer 2017 diamond drilling programs for a total of 43,956 metres in 90 drill holes (refer Denison’s press releases dated May 26, 2017 and November 27, 2017).
 
Highlight results for the 2017 drilling program include:
 
Continued expansion of high-grade within the D series lenses;
Discovery and extension of the E series lenses;
Continued expansion of the A and B series lenses; and
Completion of the definition drilling program.
 
Evaluation Program:
 
During 2017, Denison’s share of evaluation costs at Wheeler River amounted to $1,737,000, which related to work on a PFS and environmental activities.
 
PFS Activities highlights include:
 
Engineering activities
 
o
Ongoing engineering data collections;
o
Further metallurgical test program;
o
Assessment of Phoenix alternate mining methods; and
o
Other engineering activities.
 
Sustainability Activities
 
o
Community consultation and engagement process; and
o
Completed the collection of a full year of environmental baseline data.
 
Exploration Pipeline Properties
 
During 2017, the Company managed or participated in five other exploration drilling programs (three operated by Denison) on the Company’s pipeline properties.
 
At Waterbury Lake (Denison 64.22% interest and operator), Denison discovered high-grade, basement-hosted mineralization, located approximately 1.5 kilometres to the northeast of the property’s J Zone uranium deposit. The new zone of mineralization has been named the ‘Huskie’ zone. The mineralized zone occurs between 50 and 175 metres vertically below the sub-Athabasca unconformity (265 and 390 metres vertically below surface) and measures approximately 100 metres along strike (the extent of the 2017 drilling), up to 120 metres along dip, with individual lenses varying in interpreted true thickness between approximately 2 and 7 metres. The zone is wide-open in all directions in terms of the mineralization and associated alteration intersected. Assay results for the summer 2017 drilling program were reported in Denison’s press release dated October 11, 2017.
 
General and administrative expenses
 
Total general and administrative expenses were $5,858,000 during 2017. These costs are mainly comprised of head office salaries and benefits, office costs in multiple regions, audit and regulatory costs, legal fees, investor relations expenses, project costs, and all other costs related to operating a public company with listings in Canada and the United States, as well as non-recurring project costs associated with the APG transaction.
 
 
Other income and expenses
 
During 2017, the Company recognized a gain of $2,210,000 in other income. The gain is predominantly due to net gains on investments carried at fair value of $1,891,000, as well as a gain of $679,000 recorded in the first quarter of 2017 related to the extinguishment of the toll milling contract liability related to the Cigar Lake toll milling arrangement, offset by letter of credit fees of $317,000.
 
Equity share of income from associates
 
During 2017, the Company recognized a loss of $489,000 from its equity share of its associate GoviEx Uranium Inc. (‘GoviEx’). The loss in 2017 is predominantly due to an equity loss of $751,000, which is based on the Company’s share of GoviEx’s net loss during the period. In addition, during 2017, the Company recorded a net dilution gain of $262,000, as a result of equity issuances completed by GoviEx as well as other shareholders’ exercise of GoviEx share warrants, which reduced the Company’s ownership position in GoviEx from 20.68% at December 31, 2016 to approximately 18.72% at December 31, 2017.
 
Results of discontinued operations
 
In November 2015, Denison completed the sale of its interest in the Gurvan Saihan Joint Venture (‘GSJV’) to Uranium Industry a.s. (‘Uranium Industry’), of the Czech Republic, as more particularly described in Denison’s press release dated December 1, 2015. In connection therewith, Denison received $1.25 million in initial payments during 2015, and the right to receive additional contingent consideration of (a) $10,000,000, payable within 60 days of the issuance of certain mining licenses (the ‘Mining License Receivable’), and (b) up to an additional $2,000,000 within 365 days following the attainment of certain production targets on the mining licenses (the ‘Production Threshold Consideration’).
 
In September 2016, the mining license certificates for all four projects were formally issued. As a result, in the third quarter of 2016, the Company recognized the $10,000,000 fair value of the Mining License Receivable and it also recognized a corresponding gain on sale, net of additional applicable transaction costs. The original due date for payment of the Mining License Receivable by Uranium Industry was in November 2016.
 
Pursuant to a subsequent extension agreement between Uranium Industry and the Company, the payment due date of the Mining License Receivable was extended from November 16, 2016 to July 16, 2017 (‘Extension Agreement’). As consideration for the extension, Uranium Industry agreed to pay interest on the Mining License Receivable amount at a rate of 5% per year, payable monthly up to July 16, 2017 and they also agreed to pay a $100,000 instalment amount towards the balance of the Mining License Receivable amount. The first payment under the Extension Agreement was due on or before January 31, 2017, but the required payments were not made by Uranium Industry.
 
On February 24, 2017, the Company served notice to Uranium Industry that it was in default of its obligations under the GSJV Agreement and the Extension Agreement and that the Mining License Receivable and all interest payable thereon are immediately due and payable. The Company intends to pursue all proceedings available to it to collect the Mining License Receivable amount, and on December 12, 2017, the Company filed a Request for Arbitration under the Arbitration Rules of the London Court of International Arbitration in relation to the default of Uranium Industry’s obligations under the GSJV Agreement and Extension Agreement. Uranium Industry submitted its response to Denison’s Request for Arbitration and a counterclaim on February 14, 2018. The parties are currently working to appoint a chair of the arbitration panel.
 
In light of the uncertainty regarding collectability, at December 21, 2016, Denison impaired the $10,000,000 Mining License Receivable to $nil. The Production Threshold Consideration is fair valued at $nil and will be re-measured at each subsequent reporting date.
 
Liquidity and capital resources
 
Cash and cash equivalents were $2,898,000 at December 31, 2017 and the company also held investments in Guaranteed Investment Certificates (‘GICs’) of $30,136,000, which are categorized as short term investments on the balance sheet.
 
The Company holds the large majority of its cash, cash equivalents, and investments in Canadian dollars. As at December 31, 2017, the Company’s cash and cash equivalents and GICs amount to approximately CAD$41.4 million.
 
In January, 2018, the Company’s CAD$24 million credit facility was amended and extended to January 31, 2019. The credit facility is fully utilized for non-financial letters of credit in relation to future decommissioning and reclamation plans.
 
 
 
Outlook for 2018
 
Denison’s plans for 2018 are a continuation of its strategy focused on the activities necessary to position it as the next uranium producer in Canada. Accordingly, the 2018 budget is heavily concentrated on evaluation and exploration activities designed to strategically advance the Company’s 63.3% owned flagship Wheeler River project.
 
(CAD ‘000)
 
2018 BUDGET
 
Canada (1)
 
 
 
Development & Operations
 
(5,230)
 
Mineral Property Exploration & Evaluation
 
(16,760)
 
 
 
(21,990)
 
Other (1)
 
 
 
UPC Management Services
 
1,230
 
DES Environmental Services
 
1,330
 
Corporate Administration & Other
 
(4,760)
 
 
 
(2,200)
 
Total(2)
 
$                        (24,190)
 
Notes:
1.
Budget figures are expressed in Canadian dollars as the Company’s presentation currency changed to the Canadian dollar effective January 1, 2018.
2.
Only material operations shown.
 
Development & Operations
 
In 2018, Denison’s share of operating and capital expenditures at McClean Lake and Midwest are budgeted to be CAD$4.3 million. Operating expenditures at McClean include CAD$3,965,000 in respect of Denison’s share of the planned 2018 budget for the advancement of the SABRE mining method.
 
2018 operating expenditures are also expected to include CAD$751,000 for reclamation expenditures at Denison’s legacy Elliot Lake mine site.
 
Mineral Property Exploration & Evaluation
 
Including partner’s share of expenses, the projected 2018 exploration and evaluation work program is budgeted to be CAD$21.8 million, and is expected to include approximately 80,000 metres of drilling across six of Denison’s projects.
 
The budget will be mainly focused on the Company’s high priority projects, namely Wheeler River, Waterbury Lake and Hook-Carter. Consistent with past years, the majority of the exploration activity will occur during the winter and summer months, resulting in higher levels of expenditures in the first and third quarters of 2018. Evaluation activities are expected to continue at the Wheeler River project throughout the year.
 
Wheeler River
 
A CAD$13.1 million budget (100% basis) has been approved for the Wheeler River project. The budget includes exploration expenditures of CAD$9.5 million and evaluation expenditures of CAD$3.6 million.
 
Denison’s share of the budget is expected to be CAD$9.8 million, which represents 75% of joint venture expenses. (see Denison’s press release dated January 10, 2017).
 
The 2018 exploration program is expected to include approximately 45,000 metres of diamond drilling in 60 drill holes and will be results oriented with an initial focus on step-out drilling along strike of the Gryphon deposit and drill testing of high-priority and largely untested regional targets on the property. Refer Denison news release on January 17, 2018 for details on the 2018 exploration and evaluation pan.
 
 
 
 
Exploration Pipeline Properties
 
Work on pipeline properties will be focused on 3 main Denison-operated properties:
 
Waterbury Lake Project
 
The Huskie Zone was discovered during the Company’s summer 2017 drilling program at Waterbury Lake. The 2018 exploration program is budgeted at CAD$3.5 million (100% Denison funded with KWULP continuing to dilute) and is designed with the potential to expand the Huskie zone mineralization through step-out drilling. A diamond drilling program of approximately 14,400 metres in 36 drill holes is planned for 2018 and is expected to be carried out during the winter and summer drilling seasons.
 
Hook-Carter Project
 
The Hook-Carter property consists of 45 claims covering 20,522 hectares and is located in the western portion of the Athabasca Basin. A diamond drilling program is planned for the winter of 2018, consisting of approximately 10,000 metres in 17 drill holes, with a budget of CAD$2.2 million (100% Denison funded due to ALX’s carried interest).
 
South Dufferin
 
The South Dufferin project is 100% Denison owned and located just off the southern margin of the Athabasca Basin of northern Saskatchewan. Priority drill targets have been developed across the property from recent ground geochemical and geophysical surveying. A diamond drilling program is planned for summer 2018 comprising approximately 2,200 metres of drilling in 16 holes with a total budget of approximately CAD$1.0 million.
 
UPC management services and DES
 
Net management fees expected for 2018 from the management services agreement with UPC are budgeted at CAD$1.2 million. A portion of the management fees earned from UPC are based on UPC’s net asset value, and thus the uranium spot price. Denison’s budget for 2018 assumes a uranium spot price of $20.00 per pound U3O8. Each $2 per pound U3O8 increase is expected to translate into approximately CAD$0.2 million in additional management fees to Denison.
 
Revenue from operations at DES during 2018 is budgeted to be CAD$9.6 million, and operating, overhead, and capital expenditures are budgeted to be CAD$8.3 million.
 
Corporate admin and Other Income
 
Corporate administration expenses are budgeted to be CAD$4.7 million in 2018 and include head office salaries and benefits, office costs, audit and regulatory costs, legal fees, investor relations expenses and all other costs related to operating a public company with listings in Canada and the United States.
 
Letter of credit and standby fees relating to the 2018 Credit Facility are expected to be approximately CAD$400,000, which is expected to be largely offset by interest income on the Company’s short-term investments.
 
 
 
 
 
 
For more information, please contact
 
 David Cates
 (416) 979-1991 ext 362
 President and Chief Executive Officer
 
 
 
 Sophia Shane
 (604) 689-7842
 Investor Relations
 
 
 
 Follow Denison on Twitter
 @DenisonMinesCo
 
 
 
 
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
Certain information contained in this news release constitutes ‘forward-looking information’, within the meaning of the United States Private Securities Litigation Reform Act of 1995 and similar Canadian legislation concerning the business, operations and financial performance and condition of Denison.
 
Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as ‘plans’, ‘expects’, ‘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 benefits to be derived from corporate transactions including the potential for receipt of any contingent payments; use of proceeds of financing activities; the estimates of Denison's mineral reserves and mineral resources; exploration, development and expansion plans and objectives, including the results of the PEA, the completion of the PFS, and statements regarding anticipated budgets, fees and expenditures; expectations regarding Denison’s joint venture ownership and other contractual interests in its properties and projects and the continuity of its agreements with its partners and other counterparties; expectations regarding adding to its mineral reserves and resources through acquisitions and exploration; expectations regarding the toll milling of Cigar Lake ores; expectations regarding revenues and expenditures from operations at DES; expectations regarding revenues from the UPC management contract; capital expenditure programs, estimated exploration and development expenditures and reclamation costs and Denison's share of same; expectations of market prices and costs; supply and demand for uranium; and possible impacts of litigation and regulatory actions. Statements relating to ‘mineral reserves’ or ‘mineral resources’ are deemed to be forward-looking information, as they involve the implied assessment, based on certain estimates and assumptions that the mineral reserves and mineral resources described can be profitably produced in the future.
 
Forward looking statements are based on the opinions and estimates of management as of the date such statements are made, and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Denison to be materially different from those expressed or implied by such forward-looking statements. Denison believes that the expectations reflected in this forward-looking information are reasonable but no assurance can be given that these expectations will prove to be accurate and 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 this MD&A 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 are expressly qualified by this cautionary statement. Any forward-looking information and the assumptions made with respect thereto speaks only as of the date of this news release. Denison does not undertake any obligation to publicly update or revise any forward-looking information after the date of this news release to conform such information to actual results or to changes in Denison's expectations except as otherwise required by applicable legislation.
 
Cautionary Note to United States Investors Concerning Estimates of Measured, Indicated and Inferred Mineral Resources: This news release may use the terms ‘measured’, ‘indicated’ and ‘inferred’ mineral resources. United States investors are advised that while such terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize them. ‘Inferred mineral resources’ have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be converted into mineral reserves. United States investors are also cautioned not to assume that all or any part of an inferred mineral resource exists, or is economically or legally mineable.
 
 
EX-99.2 3 a2017-12dmcfinancialsacve.htm CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 Blueprint
 
 
 
 
 
 
 
 
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
FOR THE YEAR ENDED DECEMBER 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
Responsibility for Financial Statements
 
The Company’s management is responsible for the integrity and fairness of presentation of these consolidated financial statements. The consolidated financial statements have been prepared by management, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, for review by the Audit Committee and approval by the Board of Directors.
 
The preparation of financial statements requires the selection of appropriate accounting policies in accordance with International Financial Reporting Standards and the use of estimates and judgements by management to present fairly and consistently the consolidated financial position of the Company. Estimates are necessary when transactions affecting the current period cannot be finalized with certainty until future information becomes available. In making certain material estimates, the Company’s management has relied on the judgement of independent specialists.
 
The Company’s management has developed and maintains a system of internal accounting controls to ensure, on a reasonable and cost-effective basis, that the financial information is timely reported and is accurate and reliable in all material respects and that the Company’s assets are appropriately accounted for and adequately safeguarded.
 
The consolidated financial statements have been audited by PricewaterhouseCoopers LLP, our independent auditor. Its report outlines the scope of its examination and expresses its opinions on the consolidated financial statements and internal control over financial reporting.
 
 
Original signed by “David D.Cates”
 
 
Original signed by “Gabriel (Mac) McDonald”
 
David D. Cates
 
Gabriel (Mac) McDonald
President and Chief Executive Officer
 
Vice-President Finance and Chief Financial Officer
 
 
March 8, 2018
 
 
 
Management’s Report on Internal Control over Financial Reporting
 
The Company’s management is responsible for establishing and maintaining an adequate system of internal control over financial reporting. Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the Internal Control – Integrated Framework, 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2017.
 
The effectiveness of the Company’s internal control over financial reporting as at December 31, 2017 has been audited by PricewaterhouseCoopers LLP, our independent auditor, as stated in its report which appears herein.
 
 
Changes to Internal Control over Financial Reporting
 
There has not been any change in the Company’s internal control over financial reporting that occurred during 2017 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
 
 
 
 
Report of Independent Registered Public Accounting Firm
 
 
To the Board of Directors and Shareholders of Denison Mines Corp.
 
Opinions on the financial statements and internal control over financial reporting
 
We have audited the accompanying consolidated statements of financial position of Denison Mines Corp. and its subsidiaries, (together, the Company) as of December 31, 2017 and 2016, and the related consolidated statements of income (loss) and comprehensive income (loss), changes in equity and cash flows for the years then ended, including the related notes (collectively referred to as the consolidated financial statements). We also have audited the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and their financial performance and their cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.
 
Basis for opinions
 
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
 
 
PricewaterhouseCoopers LLP
PwC Tower, 18 York Street, Suite 2600, Toronto, Ontario, Canada M5J 0B2
T: +1 416 863 1133, F: +1 416 365 8215, www.pwc.com/ca
 
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
 
 
 
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
 
Definition and limitations of internal control over financial reporting
 
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
(Signed) “PricewaterhouseCoopers LLP”
 
Chartered Professional Accountants, Licensed Public Accountants
 
Toronto, Ontario, Canada
March 8, 2018.
 
We have served as the Company's auditor since at least 1996. We have not determined the specific year we began serving as auditor of the Company.
 
 
 
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
Consolidated Statements of Financial Position
 
 
(Expressed in thousands of U.S. dollars except for share amounts)
 
At December 31
2017
 
At December 31
2016
 
ASSETS
 
 
 
 
 
 
 
 
Current
 
 
 
 
 
 
 
 
Cash and cash equivalents (note 6)
 
 
 
 
$
2,898
$
11,838
Investments (note 9)
 
 
 
 
 
30,136
 
-
Trade and other receivables (note 7)
 
 
 
 
 
3,819
 
2,403
Inventories (note 8)
 
 
 
 
 
2,753
 
2,381
Prepaid expenses and other
 
 
 
 
 
529
 
491
 
 
 
 
 
 
40,135
 
17,113
Non-Current
 
 
 
 
 
 
 
 
Inventories-ore in stockpiles (note 8)
 
 
 
 
 
1,672
 
1,562
Investments (note 9)
 
 
 
 
 
5,866
 
3,760
Investments in associates (note 10)
 
 
 
 
 
4,203
 
4,692
Restricted cash and investments (note 11)
 
 
 
 
 
9,712
 
2,314
Property, plant and equipment (note 12)
 
 
 
 
 
198,480
 
187,982
Total assets
 
 
 
 
$
260,068
$
217,423
 
 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
 
Current
 
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
 
 
 
$
4,588
$
4,141
Current portion of long-term liabilities:
 
 
 
 
 
 
 
 
Deferred revenue (note 13)
 
 
 
 
 
2,498
 
-
Post-employment benefits (note 14)
 
 
 
 
 
199
 
186
Reclamation obligations (note 15)
 
 
 
 
 
653
 
810
Other liabilities (note 16)
 
 
 
 
 
3,057
 
2,123
 
 
 
 
 
 
10,995
 
7,260
Non-Current
 
 
 
 
 
 
 
 
Deferred revenue (note 13)
 
 
 
 
 
27,181
 
-
Post-employment benefits (note 14)
 
 
 
 
 
1,687
 
1,646
Reclamation obligations (note 15)
 
 
 
 
 
22,071
 
20,155
Other liabilities (note 16)
 
 
 
 
 
-
 
630
Deferred income tax liability (note 17)
 
 
 
 
 
14,182
 
15,021
Total liabilities
 
 
 
 
 
76,116
 
44,712
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
 
 
 
 
Share capital (note 18)
 
 
 
 
 
1,151,927
 
1,140,631
Share purchase warrants (note 19)
 
 
 
 
 
333
 
-
Contributed surplus (note 20)
 
 
 
 
 
55,165
 
54,306
Deficit
 
 
 
 
 
(975,608)
 
(961,440)
Accumulated other comprehensive loss (note 21)
 
 
 
(47,865)
 
(60,786)
Total equity
 
 
 
 
 
183,952
 
172,711
Total liabilities and equity
 
 
 
 
$
260,068
$
217,423
 
 
 
 
 
 
 
 
 
Issued and outstanding common shares (note 18)
 
 
 
559,183,209
 
540,722,365
Commitments and contingencies (note 26)
Subsequent events (note 28)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of the consolidated financial statements
 
 
On behalf of the Board of Directors:
 
“Signed”
“Signed”
William A. Rand
Catherine J.G. Stefan
Director
Director
 
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
Consolidated Statements of Income (Loss) and
Comprehensive Income (Loss)
 
 
 
 
 
Year Ended
 
 
 
 
 
 
December 31
 
December 31
(Expressed in thousands of U.S. dollars except for share and per share amounts)
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES (note 23)
 
 
 
 
$
11,085
$
13,833
 
 
 
 
 
 
 
 
 
EXPENSES
 
 
 
 
 
 
 
 
Operating expenses (note 22, 23)
 
 
 
 
 
(10,616)
 
(10,622)
Exploration and evaluation (note 23)
 
 
 
 
 
(12,834)
 
(11,196)
General and administrative (note 23)
 
 
 
 
 
(5,858)
 
(4,420)
Impairment reversal (expense) (note 12)
 
 
 
 
246
 
(2,320)
Foreign exchange
 
 
 
 
 
(611)
 
(1,477)
Other income (note 22)
 
 
 
 
 
2,210
 
906
 
 
 
 
 
 
(27,463)
 
(29,129)
Loss before finance charges, equity accounting
 
 
 
 
 
(16,378)
 
(15,296)
 
 
 
 
 
 
 
 
 
Finance expense (note 22)
 
 
 
 
 
(858)
 
(811)
Equity share of income (loss) of associate (note 10)
 
 
 
 
 
(489)
 
453
Loss before taxes
 
 
 
 
 
(17,725)
 
(15,654)
Income tax recovery (expense) (note 17):
 
 
 
 
 
 
 
 
Deferred
 
 
 
 
 
3,638
 
3,955
Loss from continuing operations
 
 
 
 
 
(14,087)
 
(11,699)
Net loss from discontinued operations (note 5)
 
 
 
(81)
 
(5,644)
Net loss for the period
 
 
 
 
$
(14,168)
$
(17,343)
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss) (note 21):
 
 
 
 
 
 
Items that may be reclassified to loss:
 
 
 
 
 
 
Unrealized gain (loss) on investments-net of tax
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
4
 
3
Unamortized experience gain – post employment liability
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
-
 
428
Foreign currency translation change
 
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
12,917
 
6,155
Discontinued operations
 
 
 
 
 
-
 
6,220
Comprehensive loss for the period
 
 
 
 
$
(1,247)
$
(4,537)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic and diluted net income (loss) per share:
 
 
 
 
 
 
Continuing operations
 
 
 
$
(0.03)
$
(0.02)
Discontinued operations
 
 
 
$
0.00
$
(0.01)
All operations
 
 
 
 
$
(0.03)
$
(0.03)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average number of shares outstanding (in thousands):
 
 
 
 
 
 
Basic and diluted
 
 
 
 
 
555,263
 
529,053
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of the consolidated financial statements
 
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
Consolidated Statements of Changes in Equity
 
 
 
 
 
Year Ended
 
 
 
 
 
 
December 31
 
December 31
(Expressed in thousands of U.S. dollars)
 
 
 
 
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Share capital (note 18)
 
 
 
 
 
 
 
 
Balance-beginning of period
 
 
 
 
$
1,140,631
$
1,130,779
Shares issued-net of issue costs
 
 
 
 
 
13,955
 
8,841
Flow-through share premium
 
 
 
 
 
(2,839)
 
(1,843)
Shares issued on acquisition of Hook Carter property (note 12)
 
 
 
-
 
2,854
Share options exercised-cash
 
 
 
 
 
70
 
-
Share options exercised-non cash
 
 
 
 
 
110
 
-
Balance-end of period
 
 
 
 
 
1,151,927
 
1,140,631
 
 
 
 
 
 
 
 
 
Share purchase warrants (note 19)
 
 
 
 
 
 
 
 
Balance-beginning of period
 
 
 
 
 
-
 
-
Warrants issued in connection with APG Arrangement (note 13)
 
 
 
333
 
-
Balance-end of period
 
 
 
 
 
333
 
-
 
 
 
 
 
 
 
 
 
Contributed surplus (note 20)
 
 
 
 
 
 
 
 
Balance-beginning of period
 
 
 
 
 
54,306
 
53,965
Stock-based compensation expense
 
 
 
 
 
969
 
341
Share options exercised-non-cash
 
 
 
 
 
(110)
 
-
Balance-end of period
 
 
 
 
 
55,165
 
54,306
 
 
 
 
 
 
 
 
 
Deficit
 
 
 
 
 
 
 
 
Balance-beginning of period
 
 
 
 
 
(961,440)
 
(944,097)
Net loss
 
 
 
 
 
(14,168)
 
(17,343)
Balance-end of period
 
 
 
 
 
(975,608)
 
(961,440)
 
 
 
 
 
 
 
 
 
Accumulated other comprehensive loss (note 21)
 
 
 
 
 
 
 
Balance-beginning of period
 
 
 
 
 
(60,786)
 
(73,592)
Unrealized gain (loss) on investments
 
 
 
 
 
4
 
3
Unamortized experience gain – post employment liability
 
 
 
-
 
428
Foreign currency translation
 
 
 
 
 
12,917
 
13,012
Foreign currency translation realized in net income (loss)
 
 
 
-
 
(637)
Balance-end of period
 
 
 
 
 
(47,865)
 
(60,786)
 
 
 
 
 
 
 
 
 
Total Equity
 
 
 
 
 
 
 
 
Balance-beginning of period
 
 
 
 
$
172,711
$
167,055
Balance-end of period
 
 
 
 
$
183,952
$
172,711
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of the consolidated financial statements
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
Consolidated Statements of Cash Flow
 
 
 
 
 
Year Ended
 
 
 
 
 
 
December 31
 
December 31
(Expressed in thousands of U.S. dollars)
 
 
 
2017
 
2016
CASH PROVIDED BY (USED IN):
 
 
 
 
 
 
 
OPERATING ACTIVITIES
 
 
 
 
 
 
Net loss for the period
 
 
$
(14,168)
$
(17,343)
Items not affecting cash and cash equivalents:
 
 
 
 
 
 
Depletion, depreciation, amortization and accretion
 
 
 
4,628
 
4,024
Impairment expense (reversal) (note 12)
 
 
 
(246)
 
2,320
Stock-based compensation (note 20)
 
 
 
969
 
341
Recognition of deferred revenue (note 13)
 
 
 
(2,114)
 
-
Losses on reclamation obligation revisions (note 15)
 
 
 
56
 
461
Gain on extinguishment of toll milling liability (note 16, 22)
 
 
 
(679)
 
-
Loss on divestiture of Africa Mining Division (note 5)
 
 
 
81
 
102
Losses (gains) on property, plant and equipment disposals (note 22)
 
 
(21)
 
113
Gains on investments (note 22)
 
 
 
(1,891)
 
(1,473)
Equity loss of associate (note 10)
 
 
 
751
 
96
Dilution gain of associate (note 10)
 
 
 
(262)
 
(549)
Non-cash inventory adjustments and other
 
 
 
136
 
-
Deferred income tax recovery (note 17)
 
 
 
(3,638)
 
(3,955)
Foreign exchange losses (note 5)
 
 
 
611
 
6,631
Deferred revenue cash receipts (note 13)
 
 
 
30,201
 
-
Post-employment benefits (note 14)
 
 
 
(130)
 
(137)
Reclamation obligations (note 15)
 
 
 
(754)
 
(502)
Change in non-cash working capital items (note 22)
 
 
 
(1,150)
 
1,741
Net cash provided by (used in) operating activities
 
 
 
12,380
 
(8,130)
 
 
 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
 
 
Divestiture of asset group, net of cash and cash equivalents divested:
 
 
 
 
 
Africa Mining Division (note 5)
 
 
 
(81)
 
(830)
Sale of investments (note 9)
 
 
 
1,967
 
8,523
Purchase of investments (note 9)
 
 
 
(29,889)
 
(500)
Expenditures on property, plant and equipment (note 12)
 
 
 
(836)
 
(1,266)
Proceeds on sale of property, plant and equipment
 
 
186
 
55
Increase in restricted cash and investments
 
 
(6,849)
 
(195)
Net cash provided by (used in) investing activities
 
 
 
(35,502)
 
5,787
 
 
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
 
 
Issuance of debt obligations (note 16)
 
 
 
-
 
312
Repayment of debt obligations (note 16)
 
 
 
(282)
 
(348)
Issuance of common shares for:
 
 
 
 
 
 
New share issues-net of issue costs (note 18)
 
 
 
13,955
 
8,841
Share options exercised (note 18)
 
 
 
70
 
-
Net cash provided by financing activities
 
 
 
13,743
 
8,805
 
 
 
 
 
 
 
Increase (decrease) in cash and cash equivalents
 
 
 
(9,379)
 
6,462
Foreign exchange effect on cash and cash equivalents
 
 
439
 
9
Cash and cash equivalents, beginning of period
 
 
 
11,838
 
5,367
Cash and cash equivalents, end of period
 
 
$
2,898
$
11,838
Supplemental cash flow disclosure (note 22)
 
The accompanying notes are an integral part of the consolidated financial statements
 
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
Notes to the consolidated financial statements for the years ended December 31, 2017 and 2016
 
(Expressed in U.S. dollars except for shares and per share amounts)
 
 
1.
NATURE OF OPERATIONS
 
Denison Mines Corp. (“DMC”) and its subsidiary companies and joint arrangements (collectively, “Denison” or the “Company”) are engaged in uranium mining related activities, including acquisition, exploration and development of uranium properties, extraction, processing and selling of uranium.
 
The Company has a 63.3% interest in the Wheeler River Joint Venture (“WRJV”), a 22.5% interest in the McClean Lake Joint Venture (“MLJV”) (which includes the McClean Lake mill) and a 25.17% interest in the Midwest Joint Venture (“MWJV”), each of which are located in the eastern portion of the Athabasca Basin region in northern Saskatchewan, Canada. The McClean Lake mill provides toll milling services to the Cigar Lake Joint Venture (“CLJV”) under the terms of a toll milling agreement between the parties (see note 13). In addition, the Company has varying ownership interests in a number of other development and exploration projects located in Canada.
 
The Company provides mine decommissioning and decommissioned site monitoring services to third parties through its Denison Environmental Services (“DES”) division and 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 fees for management services and commissions from the purchase and sale of U3O8 and UF6 by UPC.
 
DMC is incorporated under the Business Corporations Act (Ontario) and domiciled in Canada. The address of its registered head office is 40 University Avenue, Suite 1100, Toronto, Ontario, Canada, M5J 1T1.
 
References to “2017” and “2016” refer to the year ended December 31, 2017 and the year ended December 31, 2016 respectively.
 
 
2.
BASIS OF PRESENTATION
 
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
 
The Company’s presentation currency is U.S dollars.
 
These financial statements were approved by the board of directors for issue on March 8, 2018.
 
 
3.
ACCOUNTING POLICIES AND COMPARATIVE NUMBERS
 
Significant accounting policies
 
The significant accounting policies used in the preparation of these consolidated financial statements are described below:
 
(a)
Consolidation
 
The financial statements of the Company include the accounts of DMC and its subsidiaries and joint operations. Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity where the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group and are deconsolidated from the date that control ceases. Intercompany transactions, balances and unrealized gains and losses from intercompany transactions are eliminated.
 
Joint operations include various mineral property interests which are held through option or contractual agreements. These arrangements involve joint control of one or more of the assets acquired or contributed for the purpose of the joint operation. The consolidated financial statements of the Company include its share
 
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
of the assets in such joint operations, together with its share of the liabilities, revenues and expenses arising jointly or otherwise from those operations. All such amounts are measured in accordance with the terms of each arrangement.
 
(b) Investment in associates
 
An associate is an entity over which the Company has significant influence and is neither a subsidiary, nor an interest in a joint operation. Significant influence is the ability to participate in the financial and operating policy decisions of the entity without having control or joint control over those policies.
 
Associates are accounted for using the equity method. Under this method, the investment in associates is initially recorded at cost and adjusted thereafter to record the Company’s share of post-acquisition earnings or loss of the associate as if the associate had been consolidated. The carrying value of the investment is also increased or decreased to reflect the Company’s share of capital transactions, including amounts recognized in other comprehensive income, and for accounting changes that relate to periods subsequent to the date of acquisition. Dilution gains or losses arising from changes in the interest in investments in associates are recognized in the statement of income or loss.
 
The Company assesses at each period-end whether there is any objective evidence that an investment in an associate is impaired. If impaired, the carrying value of the Company's share of the underlying assets of the associate is written down to its estimated recoverable amount, being the higher of fair value less costs of disposal or value in use, and charged to the statement of income or loss.
 
(c)
Foreign currency translation
 
(i)
Functional and presentation currency
 
Items included in the financial statements of each entity in the DMC group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). Primary and secondary indicators are used to determine the functional currency. Primary indicators include the currency that mainly influences sales prices, labour, material and other costs. Secondary indicators include the currency in which funds from financing activities are generated and in which receipts from operating activities are usually retained. Typically, the local currency has been determined to be the functional currency of Denison’s entities.
 
The consolidated financial statements are presented in U.S. dollars, unless otherwise stated.
 
The financial statements of entities that have a functional currency different from the presentation currency of DMC (“foreign operations”) are translated into U.S. dollars as follows: assets and liabilities-at the closing rate at the date of the statement of financial position, and income and expenses-at the average rate of the period (as this is considered a reasonable approximation to actual rates). All resulting changes are recognized in other comprehensive income or loss as cumulative foreign currency translation adjustments.
 
When the Company disposes of its entire interest in a foreign operation, or loses control, joint control, or significant influence over a foreign operation, the foreign currency gains or losses accumulated in other comprehensive income or loss related to the foreign operation are recognized in the statement of income or loss as translational foreign exchange gains or losses.
 
(ii)
Transactions and balances
 
Foreign currency transactions are translated into an entity’s functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in currencies other than an operation’s functional currency are recognized in the statement of income or loss as transactional foreign exchange gains or losses.
 
(d)
Cash and cash equivalents
 
Cash and cash equivalents include cash on hand, deposits held with banks, and other short-term highly liquid investments with original maturities of three months or less which are subject to an insignificant risk of changes in value.
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
(e) Financial instruments
 
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognized when the obligations specified in the contract is discharged, cancelled or expires.
 
At initial recognition, the Company classifies its financial instruments in the following categories:
 
(i)
Financial assets and liabilities at fair value through profit or loss (“FVPL”)
 
A financial asset or liability is classified in this category if acquired principally for the purpose of selling or repurchasing in the short-term. Financial instruments in this category are recognized initially and subsequently at fair value. Transaction costs are expensed in the statement of income or loss. Gains and losses arising from changes in fair value are presented in the statement of income or loss in the period in which they arise.
 
(ii)
Available-for-sale investments
 
Available-for-sale investments are recognized initially at fair value plus transaction costs and are subsequently carried at fair value. Gains or losses arising from re-measurement are recognized in other comprehensive income or loss. When an available-for-sale investment is sold or impaired, the accumulated gains or losses are moved from accumulated other comprehensive income or loss to the statement of income or loss.
 
(iii)
Held-to-maturity investments
 
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that are intended to be held to maturity. Held-to-maturity investments are initially recognized at fair value plus transaction costs and subsequently measured at amortized cost using the effective interest method less a provision for impairment.
 
(iv)
Loans and receivables
 
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are initially recognized at the amount expected to be received, less a discount (when material) to reduce the loans and receivables to fair value. Subsequently, loans and receivables are measured at amortized cost using the effective interest method less a provision for impairment.
 
(v)
Financial liabilities at amortized cost
 
Financial liabilities are initially recognized at the amount required to be paid, less a discount (when material) to reduce the financial liabilities to fair value. Subsequently, financial liabilities are measured at amortized cost using the effective interest method.
 
The Company has designated its financial assets and liabilities as follows:
 
(i)
“Trade and other receivables” are classified as loans and receivables and are measured at amortized cost using the effective interest rate method. Interest income is recorded in net income through finance income (expense), as applicable;
(ii)
Some of “Investments” are classified as FVPL and any period change in fair value is recorded in net income within other income (expense). The remaining investments are classified as available-for-sale and any period change in fair value is recorded in other comprehensive income. When the investment’s value becomes impaired, the loss is recognized in net income within other income (expense) in the period of impairment;
(iii)
“Restricted cash and investments” is classified as held-to-maturity investments; and
(iv)
“Accounts payable and accrued liabilities” and “Debt obligations” are classified as other financial liabilities and are measured at amortized cost using the effective interest rate method. Interest expense is recorded in net income through finance income (expense), as applicable.
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
(f)
Impairment of financial assets
 
At each reporting date, the Company assesses whether there is objective evidence that a financial asset (other than a financial asset classified as fair value through profit and loss) is impaired. Objective evidence of an impairment loss includes: i) significant financial difficulty of the debtor; ii) delinquencies in interest or principal payments; iii) increased probability that the borrower will enter bankruptcy or other financial reorganization; and (iv) in the case of equity investments, a significant or prolonged decline in the fair value of the security below its cost.
 
If such evidence exists, the Company recognizes an impairment loss, as follows:
 
(i)
Financial assets carried at amortized cost: The loss is the difference between the amortized cost of the loan or receivable and the present value of the estimated future cash flows, discounted using the instrument’s original effective interest rate. The carrying amount of the asset is reduced by this amount either directly or indirectly through the use of an allowance account.
 
(ii)
Available-for-sale financial assets: The impairment loss is the difference between the original cost of the asset and its fair value at the measurement date, less any impairment losses previously recognized in the statement of income. This amount represents the cumulative loss in accumulated other comprehensive income that is reclassified to net income.
 
(g)
Inventories
 
Expenditures, including depreciation, depletion and amortization of production assets, incurred in the mining and processing activities that will result in the future concentrate production are deferred and accumulated as ore in stockpiles and in-process and concentrate inventories. These amounts are carried at the lower of average costs or net realizable value (“NRV”). NRV is the difference between the estimated future concentrate price (net of selling costs) and estimated costs to complete production into a saleable form.
 
Stockpiles are comprised of coarse ore that has been extracted from the mine and is available for further processing. Mining production costs are added to the stockpile as incurred and removed from the stockpile based upon the average cost per tonne of ore produced from mines considered to be in commercial production. The current portion of ore in stockpiles represents the amount expected to be processed in the next twelve months.
 
In-process and concentrate inventories include the cost of the ore removed from the stockpile, a pro-rata share of the amortization of the associated mineral property, as well as production costs incurred to process the ore into a saleable product. Processing costs typically include labor, chemical reagents and directly attributable mill overhead expenditures. Items are valued at weighted average cost.
 
Materials and other supplies held for use in the production of inventories are carried at average cost and are not written down below that cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when a decline in the price of concentrates indicates that the cost of the finished products exceeds net realizable value, the materials are written down to net realizable value. In such circumstances, the replacement cost of the materials may be the best available measure of their net realizable value.
 
(h)
Property, plant and equipment
 
Property, plant and equipment are recorded at acquisition or production cost and carried net of depreciation and impairments. Cost includes expenditures incurred by the Company that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost can be measured reliably. The carrying amount of a replaced asset is derecognized when replaced. Repairs and maintenance costs are charged to the statement of income during the period in which they are incurred.
 
Depreciation is calculated on a straight line or unit of production basis as appropriate. Where a straight line methodology is used, the assets are depreciated to their estimated residual value over an estimated useful life which ranges from three to twenty years depending upon the asset type. Where a unit of production methodology is used, the assets are depreciated to their estimated residual value over the useful life defined by management’s best estimate of recoverable reserves and resources in the current mine plan. When assets are retired or sold, the resulting gains or losses are reflected in the statement of income or loss as a component
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
of other income or expense. The Company allocates the amount initially recognized in respect of an item of property, plant and equipment to its significant parts and depreciates separately each such part. Residual values, method of depreciation and useful lives of the assets are reviewed at least annually and adjusted if appropriate.
Where straight-line depreciation is utilized, the range of useful lives for various asset classes is generally as follows:
 
Buildings
15 - 20 years;
Production machinery and equipment
5 - 7 years;
Other
3 - 5 years;
 
(i)
Mineral property acquisition, exploration, evaluation and development costs
 
Costs relating to the acquisition of acquired mineral rights and acquired exploration rights are capitalized.
 
Exploration expenditures are expensed as incurred.
 
Evaluation expenditures are expensed as incurred, until an area of interest is considered by management to be sufficiently advanced. Once this determination is made, the area of interest is classified as an evaluation stage mineral property, a component of the Company’s mineral properties, and all further non-exploration expenditures for the current and subsequent periods are capitalized. These expenses include further evaluation expenditures such as mining method selection and optimization, metallurgical sampling test work and costs to further delineate the ore body to a higher confidence level.
 
Once commercial and technical viability has been established for a property, the property is classified as a development stage mineral property and all further development costs are capitalized to the asset. Further development costs include costs related to constructing a mine, such as shaft sinking and access, lateral development, drift development, engineering studies and environmental permitting, infrastructure development and the costs of maintaining the site until commercial production.
 
Such capital costs represent the net expenditures incurred and capitalized as at the balance sheet date and do not necessarily reflect present or future values.
 
Once a development stage mineral property goes into commercial production, the property is classified as “Producing” and the accumulated costs are amortized over the estimated recoverable resources in the current mine plan using a unit of production basis. Commercial production occurs when a property is substantially complete and ready for its intended use.
 
Proceeds received from the sale of an interest in a property are credited against the carrying value of the property, with any difference recorded as a gain or loss on sale.
 
(j)
Impairment of non-financial assets
 
Property, plant and equipment assets are assessed at the end of each reporting period to determine if there is any indication that the asset may be impaired. If any such indication exists, an estimate of the recoverable amount of the asset is made. For the purpose of measuring recoverable amounts, assets are grouped at the lowest level, or cash generating unit (“CGU”), for which there are separately identifiable cash inflows. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use (being the present value of the expected future cash flows of the relevant asset or CGU, as determined by management). An impairment loss is recognized for the amount by which the CGU’s carrying amount exceeds its recoverable amount.
 
Mineral property assets are tested for impairment using the impairment indicators under IFRS 6 “Exploration for and Evaluation of Mineral Resources” up until the commercial and technical feasibility for the property is established. From that point onwards, mineral property assets are tested for impairment using the impairment indicators of IAS 36 “Impairment of Assets”.
 
(k)
Deferred revenue – toll milling
 
Deferred revenue associated with toll milling services consists of an upfront cash payment received by the Company in exchange for the monetization of its rights to proceeds from future toll milling activities under the applicable toll milling agreement. The Company recognizes revenue on a pro-rata basis, based on the actual
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
cash receipts from toll milling received in the period as a percentage of the total undiscounted cash receipts expected to be received under the applicable toll milling agreement.
 
(l)
Employee benefits
 
(i)
Post-employment benefit obligations
 
The Company assumed the obligation of a predecessor company to provide life insurance, supplemental health care and dental benefits, excluding pensions, to its former Canadian employees who retired from active service prior to 1997. The estimated cost of providing these benefits is actuarially determined using the projected benefits method and is recorded on the balance sheet at its estimated present value. The interest cost on this unfunded liability is being accreted over the remaining lives of this retiree group. Experience gains and losses are being deferred as a component of accumulated other comprehensive income or loss and are adjusted, as required, on the obligations re-measurement date.
 
(ii)
Stock-based compensation
 
The Company uses a fair value-based method of accounting for stock options to employees and to non-employees. The fair value is determined using the Black-Scholes option pricing model on the date of the grant. The cost is recognized on a graded method basis, adjusted for expected forfeitures, over the applicable vesting period as an increase in stock-based compensation expense and the contributed surplus account. When such stock options are exercised, the proceeds received by the Company, together with the respective amount from contributed surplus, are credited to share capital.
 
(iii)
Termination benefits
 
The Company recognizes termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing benefits as a result of an offer made to encourage voluntary termination. Benefits falling due more than twelve months after the end of the reporting period are discounted to their present value.
 
(m)
Reclamation provisions
 
Reclamation provisions, any legal and constructive obligation related to the retirement of tangible long-lived assets, are recognized when such obligations are incurred and if a reasonable estimate of the value can be determined. These obligations are measured initially at the present value of expected cash flows using a pre-tax discount rate reflecting risks specific to the liability and the resulting costs are capitalized and added to the carrying value of the related assets. In subsequent periods, the liability is adjusted for the accretion of the discount and the expense is recorded in the statement of income or loss. Changes in the amount or timing of the underlying future cash flows or changes in the discount rate are immediately recognized as an increase or decrease in the carrying amounts of the related asset and liability. These costs are amortized to the results of operations over the life of the asset. Reductions in the amount of the liability are first applied against the amount of the net reclamation asset on the books with any excess value being recorded in the statement of income or loss.
 
The Company’s activities are subject to numerous governmental laws and regulations. Estimates of future reclamation liabilities for asset decommissioning and site restoration are recognized in the period when such liabilities are incurred. These estimates are updated on a periodic basis and are subject to changing laws, regulatory requirements, changing technology and other factors which will be recognized when appropriate. Liabilities related to site restoration include long-term treatment and monitoring costs and incorporate total expected costs net of recoveries. Expenditures incurred to dismantle facilities, restore and monitor closed resource properties are charged against the related reclamation and remediation liability.
 
(n)
Provisions
 
Provisions for restructuring costs and legal claims, where applicable, are recognized in liabilities when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the end of the reporting period, and are discounted to present value where the effect is material. The Company performs evaluations to identify onerous contracts and, where applicable, records provisions for such contracts.
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
(o)
Current and deferred Income tax
 
Current income tax payable is based on taxable income for the period. Taxable income differs from income as reported in the statement of income or loss because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
 
Deferred income taxes are accounted for using the balance sheet liability method. Deferred income tax assets and liabilities are computed based on temporary differences between the financial statement carrying values of the existing assets and liabilities and their respective income tax bases used in the computation of taxable income. Computed deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable income will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable income nor the accounting income. Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries and investments, and interests in joint ventures, except where the Company is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable earnings will be available to allow all or part of the asset to be recovered.
 
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realized, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited to income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also recorded within equity.
 
Income tax assets and liabilities are offset when there is a legally enforceable right to offset the assets and liabilities and when they relate to income taxes levied by the same tax authority on either the same taxable entity or different taxable entities where there is an intention to settle the balance on a net basis.
 
(p)
Flow-through common shares
 
The Company’s Canadian exploration activities have been financed in part through the issuance of flow-through common shares whereby the Canadian income tax deductions relating to these expenditures are claimable by the subscribers and not by the Company. The proceeds from issuing flow-through shares are allocated between the offering of shares and the sale of tax benefits. The allocation is based on the difference (“premium”) between the quoted price of the Company’s existing shares and the amount the investor pays for the actual flow-through shares. A liability is recognized for the premium when the shares are issued, and is extinguished when the tax effect of the temporary differences, resulting from the renunciation of the tax deduction to the flow-through shareholders, is recorded - with the difference between the liability and the value of the tax assets renounced being recorded as a deferred tax expense. The tax effect of the renunciation is recorded at the time the Company makes the renunciation to its subscribers – which may differ from the effective date of renunciation. If the flow-through shares are not issued at a premium, a liability is not established, and on renunciation the full value of the tax assets renounced is recorded as a deferred tax expense.
 
(q)
Revenue recognition
 
Revenue from the sale of mineral concentrates is recognized when it is probable that the economic benefits will flow to the Company. This is generally the case once delivery has occurred, the sales price and costs incurred with respect to the transaction can be measured reliably and collectibility is reasonably assured. For uranium, revenue is typically recognized when delivery is evidenced by book transfer at the applicable uranium storage facility.
 
Revenue from toll milling services which have not been monetized is recognized as material is processed in accordance with the specifics of the applicable toll milling agreement. Revenue and unbilled accounts receivable are recorded as related costs are incurred, using billing formulas included in the applicable toll milling agreement.
 
Revenue on environmental service contracts is recognized using the percentage of completion method, whereby sales, earnings and unbilled accounts receivable are recorded as related costs are incurred.
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
Earnings rates are adjusted periodically as a result of revisions to projected contract revenues and estimated costs of completion. Losses, if any, are recognized fully when first anticipated. Revenues from engineering services are recognized as the services are provided in accordance with customer agreements.
 
Management fees from UPC are recognized as management services are provided under the contract on a monthly basis. Commission revenue earned on acquisition or sale of U3O8 and UF6 on behalf of UPC (or other parties where Denison acts as an agent) is recognized on the date when title of the U3O8 and UF6 passes.
 
(r)
Earnings (loss) per share
 
Basic earnings (loss) per share (“EPS”) is calculated by dividing the net income or loss for the period attributable to equity owners of DMC by the weighted average number of common shares outstanding during the period.
 
Diluted EPS is calculated by adjusting the weighted average number of common shares outstanding for dilutive instruments. The number of shares included with respect to options, warrants and similar instruments is computed using the treasury stock method.
 
(s)
Discontinued operations
 
A discontinued operation is a component of the Company that has either been disposed of or that is classified as held for sale. A component of the Company is comprised of operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company. Net income or loss of a discontinued operation and any gain or loss on disposal are combined and presented as net income or loss from discontinued operations, net of tax, in the statement of income or loss.
 
New accounting pronouncements and accounting policy changes for fiscal 2018
 
The Company will adopt the following new accounting pronouncements which are effective for fiscal periods of the Company beginning on or after January 1, 2018:
 
International Financial Reporting Standard 9, Financial Instruments (“IFRS 9”)
 
In July 2014, the IASB published the final version of IFRS 9 Financial Instruments (“IFRS 9”), which brings together the classification, measurement, impairment and hedge accounting phases of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 replaces the multiple classifications for financial assets in IAS 39 with a single principle based approach for determining the classification of financial assets based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. The final version of IFRS 9 is effective for periods beginning on or after January 1, 2018; however, it is available for early adoption.
 
Denison will adopt IFRS 9 on January 1, 2018 and has identified certain modifications to the Company’s current accounting policies that are expected to be required. Notable changes include (1) investments in equity securities currently being accounted for as fair value through other comprehensive income will need to be accounted for as fair value through profit and loss under IFRS 9, and (2) impairments on loan and receivables currently being recognized when there is objective evidence of impairment will need to be recognized based upon an expected credit loss model under IFRS 9.
 
Neither of these changes are significant in amount and the adoption of IFRS 9 will not have a material impact on Denison’s reported financial results.
 
International Financial Reporting Standard 15, Revenue from Contracts with Customers (“IFRS 15”)
 
IFRS 15 deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Under IFRS 15, revenue is recognized when a customer obtains control of a good or service. The standard replaces IAS 18 “Revenue” and IAS 11”Construction Contracts” and related interpretations. The standard is effective for annual periods beginning on or after January 1, 2018 and earlier application is permitted.
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
The Company has reviewed its contracts with customers and does not expect that the timing or amounts of revenue currently recognized related to its UPC management services and DES care and maintenance contracts will be impacted by the transition to IFRS 15. It is anticipated, however, that the revenue associated with the arrangement with Anglo Pacific Group PLC and its subsidiaries (see note 4 and 13) will be impacted by the adoption of IFRS 15 resulting from the fact that there is a significant financing component in the contract as defined by IFRS 15. It is expected that the finance costs and revenue will increase on adoption of this standard. The Company will use the modified retrospective approach of adoption.
 
The Company will adopt the following accounting policy change effective for reporting periods beginning on or after January 1, 2018:
 
Foreign Currency Translation – Presentation Currency
 
The Company will change its presentation currency from U.S dollars to Canadian dollars effective for reporting periods of the Company after January 1, 2018. Comparative periods will be restated to reflect the changes.
 
New accounting pronouncements effective for periods after fiscal 2018
 
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, 2019:
 
International Financial Reporting Standard 16, Leases (“IFRS 16”)
 
In January 2016, the IASB issued IFRS 16 which replaces existing standards and interpretations under IAS 17 “Leases”. IFRS 16 requires all leases, including financing and operating leases, to be reported on the balance sheet with the intent of providing greater transparency on a company’s lease assets and liabilities. IFRS 16 is effective for annual periods beginning on or after January 1, 2019 with early adoption permitted.
 
The Company has not evaluated the impact of adopting this standard and will not adopt the standard early.
 
Comparative numbers
 
Certain classifications of the comparative figures have been changed to conform to those used in the current period.
 
 
4.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
 
The preparation of consolidated financial statements in accordance with IFRS requires the use of certain critical accounting estimates and judgements that affect the amounts reported. It also requires management to exercise judgement in applying the Company’s accounting policies. These judgements and estimates are based on management’s best knowledge of the relevant facts and circumstances taking into account previous experience. Although the Company regularly reviews the estimates and judgements made that affect these financial statements, actual results may be materially different.
 
Significant estimates and judgements made by management relate to:
 
 
(a)
Determination of a mineral property being sufficiently advanced
 
The Company follows a policy of capitalizing non-exploration related expenditures on properties it considers to be sufficiently advanced. Once a mineral property is determined to be sufficiently advanced, that determination is irrevocable and the capitalization policy continues to apply over the life of the property. In determining whether or not a mineral property is sufficiently advanced, management considers a number of factors, including, but not limited to: current uranium market conditions, the quality of resources identified, access to the resource, the suitability of the resource to current mining methods, ease of permitting, confidence in the jurisdiction in which the resource is located and milling complexity.
 
Many of these factors are subject to risks and uncertainties that can support a “sufficiently advanced” determination as at one point in time but not support it at another. The final determination requires significant judgment on the part of the Company’s management and directly impacts the carrying value of the Company’s mineral properties.
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
(b)
Mineral property impairment reviews and impairment adjustments
 
Mineral properties are tested for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. When an indicator is identified, the Company determines the recoverable amount of the property, which is the higher of an asset’s fair value less costs of disposal or value in use. An impairment loss is recognized if the carrying value exceeds the recoverable amount. The recoverable amount of a mineral property may be determined by reference to estimated future operating results and discounted net cash flows, current market valuations of similar properties or a combination of the above. In undertaking this review, management of the Company is required to make significant estimates of, amongst other things: reserve and resource amounts, future production and sale volumes, forecast commodity prices, future operating, capital and reclamation costs to the end of the mine’s life and current market valuations from observable market data which may not be directly comparable. These estimates are subject to various risks and uncertainties, which may ultimately have an effect on the expected recoverable amount of a specific mineral property asset. Changes in these estimates could have a material impact on the carrying value of the mineral property amounts and the impairment losses recognized.
 
(c)
Deferred revenue – toll milling
 
In February 2017, Denison closed an arrangement with Anglo Pacific Group PLC and one of its wholly-owned subsidiaries (collectively “APG”). Under the arrangement, Denison monetized its right to receive future toll milling cash receipts from July 1, 2016 onwards from the MLJV under the current toll milling agreement with the CLJV (see note 13) for an upfront cash payment. The arrangement consisted of a loan structure and a stream arrangement (collectively, the “APG Arrangement”). Significant judgement was required to determine whether the APG Arrangement should be accounted for as a financial obligation (i.e. debt) or deferred revenue.
 
Key factors that support the deferred revenue conclusion reached by management include, but are not limited to: a) Limited recourse loan structure – amounts due to APG are generally repayable only to the extent of Denison’s share of the toll milling revenues earned by the MLJV from the processing of the first 215 million pounds of U3O8 from the Cigar Lake mine on or after July 1, 2016, under the terms of the current Cigar Lake toll milling agreement; and b) No warranty of the future rate of production - no warranty is provided by Denison to APG regarding the future rate of production at the Cigar Lake mine and / or the McClean Lake mill, or the amount and / or collectability of cash receipts to be received by the MLJV in respect of toll milling of Cigar Lake ore.
 
(d)
Deferred tax assets and liabilities
 
Deferred tax assets and liabilities are computed in respect of taxes that are based on taxable profit. Taxable profit will often differ from accounting profit and management may need to exercise judgement to determine whether some taxes are income taxes (and subject to deferred tax accounting) or operating expenses.
 
Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply when the temporary differences between accounting carrying values and tax basis are expected to be recovered or settled. The determination of the ability of the Company to utilize tax loss carry forwards to offset deferred tax liabilities requires management to exercise judgment and make certain assumptions about the future performance of the Company. Management is required to assess whether it is “probable” that the Company will benefit from these prior losses and other deferred tax assets. Changes in economic conditions, commodity prices and other factors could result in revisions to the estimates of the benefits to be realized or the timing of utilizing the losses.
 
(e)
Reclamation obligations
 
Asset retirement obligations are recorded as a liability when the asset is initially constructed or a constructive or legal obligation exists and typically involve identifying costs to be incurred in the future and discounting them to the present using an appropriate discount rate for the liability. The determination of future costs involves a number of estimates relating to timing, type of costs, mine closure plans, and review of potential methods and technical advancements. Furthermore, due to uncertainties concerning environmental remediation, the ultimate cost of the Company’s decommissioning liability could differ materially from amounts provided. The estimate of the Company’s obligation is subject to change due to amendments to applicable laws and regulations and as new information concerning the Company’s operations becomes available. The Company is not able to determine the impact on its financial position, if any, of environmental laws and regulations that may be enacted in the future.
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
5.
DISCONTINUED OPERATIONS
 
Discontinued operation – Africa Mining Division
 
On June 10, 2016, the Company completed a transaction with GoviEx Uranium Inc. (“GoviEx”) to sell its mining assets and operations located in Africa (the “Africa Mining Division”). The primary assets of the African Mining Division at that time were the mineral property rights for the Falea, Mutanga and Dome projects.
 
Under the terms of the transaction, GoviEx acquired Denison’s wholly owned subsidiary, Rockgate Capital Corp, which held all of the assets of the African Mining Division, in exchange for 56,050,450 common shares (the “Consideration Shares”) of GoviEx plus 22,420,180 share purchase warrants (the “Consideration Warrants”). Each Consideration Warrant is convertible into one common share of GoviEx for a period of three years at a price of $0.15 per share. The Consideration Warrants include an acceleration clause based on GoviEx’s share price, which, if triggered, give the holders 30 days within which to exercise the Consideration Warrants under the terms outlined above. If the holders do not exercise within that period, the exercise price of the Consideration Warrants increases to $0.18 per share and the term is reduced by six months.
 
At closing, Denison ensured that the Africa Mining Division was capitalized with a minimum working capital of $700,000 and it provided the lead order, representing approximately 22.7% of the total financing, in a concurrent equity financing by GoviEx done in conjunction with the transaction. Under the concurrent equity financing by GoviEx, Denison acquired an additional 9,093,571 units of GoviEx for $500,000. Each unit consists of one common share (“Concurrent Share”) and one common share purchase warrant (“Concurrent Warrant”). Each Concurrent Warrant is convertible into one common share of GoviEx for a period of three years at a price of $0.12 per share until June 10, 2018 and $0.14 per share thereafter. The Concurrent Warrants include an acceleration clause based on GoviEx’s share price, which, if triggered, give the holders 60 days within which to exercise the Concurrent Warrants under the terms outlined above. If the holders do not exercise within that period, the Concurrent Warrants will expire unexercised.
 
Immediately after the completion of the transaction and concurrent equity financing, Denison had 65,144,021 of the outstanding shares of GoviEx (which equated to approximately 24.59% of GoviEx’s issued and outstanding shares at June 10, 2016) and was entitled to appoint one director to the GoviEx board so long as its share interest in GoviEx remains at 5% or higher. As at December 31, 2017, Denison’s share interest has been diluted to approximately 18.72% due to various share issuances by GoviEx subsequent to closing in which Denison did not participate (see note 10).
 
Denison has reported the value attributed to the Consideration Warrants and the Concurrent Warrants as a component of “Investments” (see note 9) while the value attributed to the Consideration Shares and the Concurrent Shares is reported within “Investment in Associates” (see note 10). Denison is accounting for its share investment in GoviEx using the equity method.
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
The details of the net assets of the African Mining Division sold to GoviEx on June 10, 2016 are as follows:
 
(in thousands, except share amounts)
 
2017
 
 
2016
 
 
 
 
 
 
 
 
Consideration received at fair value:
 
 
 
 
 
 
Fair value of 56,050,450 GoviEx Consideration Shares received
 $- 
 $3,954 
Fair value of 22,420,180 GoviEx Consideration Warrants received
  - 
  1,162 
Transaction costs
  (81)
  (170)
Consideration received at fair value
 $(81)
 $4,946 
 
    
    
Net assets disposed of at carrying value:
    
    
Cash and cash equivalents
 $- 
 $(660)
Prepaid and other current assets
  - 
  (109)
Property, plant and equipment
    
    
Plant and equipment
  - 
  (258)
Mineral properties-Mali, Namibia and Zambia
  - 
  (3,427)
Total assets
 $- 
  (4,454)
 
    
    
Accounts payable and accrued liabilities
  - 
  43 
Net assets disposed of at carrying value
 $- 
 $(4,411)
 
    
    
Cumulative foreign currency loss translation adjustment realized in income
  - 
  (637)
 
    
    
Loss on disposal of Africa Mining Division
 $(81)
 $(102)
 
The fair value of the GoviEx Consideration Shares received was determined using GoviEx’s closing share price on June 10, 2016 of CAD$0.09 per share converted to USD using the June 10, 2016 foreign exchange rate of 0.7839.
 
The fair value of the GoviEx Consideration Warrants received totaled $1,162,000 or $0.0518 per warrant. The fair value was determined using the Black-Scholes option pricing model with the following assumptions: risk-free rate of 0.50%, expected stock price volatility of 151.97%, expected life of 3.0 years and expected dividend yield of nil%. No fair value adjustment has been made for the acceleration clause included in the Consideration Warrants.
 
The 2017 loss on disposal of $81,000 consists of additional transaction costs incurred by the Company for professional fees related to the GoviEx transaction. The 2016 loss on disposal of $102,000 includes $637,000 of cumulative foreign currency losses recognized as translational foreign exchange losses in the period of disposal.
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
The consolidated statement of income (loss) for the Africa Mining Division discontinued operation for 2017 and 2016 is as follows:
 
(in thousands)
 
2017
 
 
2016
 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
Operating expenses
 $- 
 $(64)
Exploration and evaluation
  - 
  (74)
General and administrative
  - 
  (280)
Foreign exchange
    
    
Transactional
  - 
  (5,154)
Other income (expense)
    
    
Gains on disposal of plant and equipment
  - 
  49 
Other
  - 
  (19)
Loss before taxes
  - 
  (5,542)
Income tax recovery (expense)
  - 
  - 
Net loss for the period
  - 
  (5,542)
Loss on disposal
  (81)
  (102)
Loss from discontinued operations
 $(81)
 $(5,644)
 
Cash flows for the Africa Mining Division discontinued operation for 2017 and 2016 is as follows:
 
(in thousands)
 
2017
 
 
2016
 
 
 
 
 
 
 
 
Cash inflow (outflow):
 
 
 
 
 
 
Operating activities
 $- 
 $(442)
Investing activities
  (81)
  (854)
Net cash outflow for the period
 $(81)
 $(1,296)
 
 
Discontinued operation - Mongolia Mining Division
 
On November 30, 2015, the Company completed its transaction with Uranium Industry a.s (“Uranium Industry”) to sell all of its mining assets and operations located in Mongolia (the “Mongolia Mining Division”) pursuant to an amended and restated share purchase agreement entered into on November 25, 2015 (the “GSJV Agreement”). The primary assets of the Mongolia Mining Division at that time were the exploration licenses for the Hairhan, Haraat, Gurvan Saihan and Ulzit projects.
 
As consideration for the sale per the GSJV Agreement, the Company received cash consideration of $1,250,000 prior to closing and the rights to receive additional contingent consideration of $12,000,000. The contingent consideration is payable as follows:
$5,000,000 (the “First Contingent Payment”) within 60 days of the issuance of a mining license for an area covered by any of the exploration licenses in the Mongolia Mining Division (the “First Project”);
$5,000,000 (the “Second Contingent Payment”) within 60 days of the issuance of a mining license for an area covered by any of the other exploration licenses held by the Mongolia Mining Division (the “Second Project”);
$1,000,000 (the “Third Contingent Payment”) within 365 days following the production of an aggregate of 1,000 pounds U3O8 from the operation of the First Project; and
$1,000,000 (the “Fourth Contingent Payment”) within 365 days following the production of an aggregate of 1,000 pounds U3O8 from the operation of the Second Project.
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
On September 20, 2016, the Mineral Resources Authority of Mongolia (“MRAM”) formally issued mining license certificates for all four projects triggering the First Contingent Payment and the Second Contingent Payment (collectively, the “Mining License Receivable”). The original due date for payment of the Mining License Receivable by Uranium Industry was November 16, 2016.
 
Pursuant to a subsequent extension agreement between Uranium Industry and the Company, the payment due date of the Mining License Receivable was extended from November 16, 2016 to July 16, 2017 (the “Extension Agreement”). As consideration for the extension, Uranium Industry agreed to pay interest on the Mining License Receivable amount at a rate of 5% per year, payable monthly up to July 16, 2017 and they also agreed to pay a $100,000 instalment amount towards the balance of the Mining License Receivable amount. The first payment under the Extension Agreement was due on or before January 31, 2017. The required payments were not made and Uranium Industry is now in default of both the GSJV Agreement and the Extension Agreement.
 
On February 24, 2017, the Company served notice to Uranium Industry that it was in default of its obligations under the GSJV Agreement and the Extension Agreement and that the Mining License Receivable and all interest payable thereon are immediately due and payable. On December 12, 2017, the Company filed a Request for Arbitration between the Company and Uranium Industry under the Arbitration Rules of the London Court of International Arbitration (see note 28).
 
In the third quarter of 2016, Denison recognized the $10,000,000 Mining License Receivable and subsequently impaired it to $nil in the fourth quarter of 2016 in light of the uncertainty regarding collectability. The recognition and subsequent impairment of the Mining License Receivable has been included within the net gain on sale for the Mongolia Mining Division presented within discontinued operations as the adjustments directly relate to the anticipated proceeds realized to date on the sale of the Mongolia Mining Division to Uranium Industry. Accordingly, any subsequent payments realized on the impaired receivable will be recognized within discontinued operations. The production related contingent consideration amounts continue to be fair valued at $nil and will be re-measured at each subsequent reporting date and will also be recognized within discontinued operations should any amounts be received in the future.
 
 
6.
CASH AND CASH EQUIVALENTS
 
The cash and cash equivalent balance consists of:
 
 
 
At December 31
 
 
At December 31
 
(in thousands)
 
2017
 
 
2016
 
 
 
 
 
 
 
 
Cash
 $2,166 
 $5,159 
Cash in MLJV and MWJV
  728 
  1,160 
Cash equivalents
  4 
  5,519 
 
 $2,898 
 $11,838 
 
Cash equivalents consist of various investment savings account instruments and money market funds all of which are readily convertible into cash.
 
 
7.
TRADE AND OTHER RECEIVABLES
 
The trade and other receivables balance consists of:
 
 
 
At December 31
 
 
At December 31
 
(in thousands)
 
2017
 
 
2016
 
 
 
 
 
 
 
 
Trade receivables
 $3,187 
 $1,792 
Receivables in MLJV and MWJV
  511 
  583 
Sales tax receivables
  67 
  18 
Sundry receivables
  54 
  10 
 
 $3,819 
 $2,403 
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
8.
INVENTORIES
 
The inventories balance consists of:
 
 
 
At December 31
 
 
At December 31
 
(in thousands)
 
2017
 
 
2016
 
 
 
 
 
 
 
 
Uranium concentrates and work-in-progress
 $419 
 $392 
Inventory of ore in stockpiles
  1,672 
  1,562 
Mine and mill supplies
  2,334 
  1,989 
 
 $4,425 
 $3,943 
 
    
    
Inventories-by duration:
    
    
Current
 $2,753 
 $2,381 
Long term-ore in stockpiles
  1,672 
  1,562 
 
 $4,425 
 $3,943 
 
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.
 
 
9.
INVESTMENTS
 
The investments balance consists of:
 
 
 
At December 31
 
 
At December 31
 
(in thousands)
 
2017
 
 
2016
 
 
 
 
 
 
 
 
Investments:
 
 
 
 
 
 
Equity instruments-fair value through profit and loss
 $5,846 
 $3,745 
Equity instruments-available for sale
  20 
  15 
Debt instruments-fair value through profit and loss
  30,136 
  - 
 
 $36,002 
 $3,760 
 
    
    
Investments-by duration
    
    
Current
 $30,136 
 $- 
Long-term
  5,866 
  3,760 
 
 $36,002 
 $3,760 
 
The investments continuity summary is as follows:
 
(in thousands)
 
2017
 
 
2016
 
 
 
 
 
 
 
 
Balance-January 1
 $3,760 
 $7,778 
Purchases
    
    
Equity instruments
  149 
  215 
Debt instruments
  29,740 
  - 
Sales
    
    
Equity instruments
  - 
  (760)
Debt instruments
  (1,967)
  (7,763)
Acquisition, divestitures
    
    
Receipts from option agreement
  - 
  1,242 
Receipts from African Mining Division divestiture
  - 
  1,162 
Fair value changes through profit and loss
  1,891 
  1,473 
 Fair value changes through OCI
  4 
  3 
Foreign exchange
  2,425 
  410 
Balance-December 31
 $36,002 
 $3,760 
 
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
Equity instruments consist of investments in publicly-traded companies. The debt instruments at December 31, 2017 consists of a 5 year redeemable guaranteed investment certificate (“GIC”) with guaranteed early redemption rates of interest ranging between 0.25% and 1.60% per annum.
 
Investment purchases, sales, impairments and other movements
 
During 2017, the Company purchased debt instruments, consisting of GIC’s, at a cost of $29,740,000 and it purchased additional equity instruments in Skyharbour Resources Ltd (“Skyharbour”) at a cost of $149,000. During 2016, the Company received GoviEx Consideration Warrants valued at $1,162,000 in connection with the sale of the Africa Mining Division (see note 5) and received shares of Skyharbour valued at $1,242,000 pursuant to an option agreement involving Denison’s Moore Lake property (see note 12). The Company purchased GoviEx Concurrent Warrants at a cost of $215,000 during 2016 (see note 5).
 
During 2017, the Company sold debt instruments of $1,967,000. During 2016, the Company sold debt instruments of $7,763,000 and sold equity instruments for $760,000.
 
 
10.
INVESTMENT IN ASSOCIATES
 
The investment in associates balance consists of:
 
 
 
At December 31
 
 
At December 31
 
(in thousands)
 
2017
 
 
2016
 
 
 
 
 
 
 
 
Investment in associates-by investee:
 
 
 
 
 
 
GoviEx
 $4,203 
 $4,692 
 
 $4,203 
 $4,692 
 
A summary of the investment in GoviEx is as follows:
 
(in thousands except share amounts)
 
Number of Common Shares
 
 
 
 
 
 
 
 
 
 
 
Balance-December 31, 2015
  - 
 $- 
Investment at cost:
    
    
Acquisition of Consideration Shares (note 5)
  56,050,450 
  3,954 
Purchase of Concurrent Shares (note 5)
  9,093,571 
  285 
Share of equity loss
  - 
  (96)
Dilution gain
  - 
  549 
Balance-December 31, 2016
  65,144,021 
 $4,692 
 
    
    
Share of equity loss
  - 
  (751)
Dilution gain
  - 
  262 
Balance-December 31, 2017
  65,144,021 
 $4,203 
 
GoviEx is a mineral resource company focused on the exploration and development of its uranium properties located in Africa. GoviEx maintains a head office located in Canada and is a public company listed on the TSX Venture Exchange. At December 31, 2017, Denison holds an approximate 18.72% interest in GoviEx based on publicly available information (December 31, 2016: 20.68%) and has one director appointed to the GoviEx board of directors. Through the extent of its share ownership interest and its seat on the board of directors, Denison has the ability to exercise significant influence over GoviEx and accordingly, is using the equity method to account for this investment.
 
The trading price of GoviEx on December 31, 2017 was CAD$0.27 per share which corresponds to a quoted market value of CAD$17,589,000 or $14,020,000 (December 31, 2016: CAD$9,772,000 or $7,278,000) for the Company’s investment in GoviEx common shares.
 
The following table is a summary of the consolidated financial information of GoviEx on a 100% basis taking into account adjustments made by Denison for equity accounting purposes for fair value adjustments and differences in accounting policy. Denison records its equity investment entries in GoviEx one quarter in arrears (due to the financial information not yet being publicly available), adjusted for any material publicly disclosed share issuance transactions that have occurred. A reconciliation of GoviEx’s summarized information to Denison’s investment carrying value is also included.
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 
 
At December 31
 
 
At December 31
 
(in thousands)
 
2017
 
 
2016
 
 
 
 
 
 
 
 
Total current assets
 $6,978 
 $4,480 
Total non-current assets
  24,530 
  23,937 
Total current liabilities
  (7,792)
  (7,220)
Total non-current liabilities
  (112)
  (503)
Total net assets
 $23,604 
 $20,694 
 
    
    
Year Ended   
 
6 Months Ended
 
 
December 31,2017
 
 
December 31,2016
 
 
    
    
Revenue
 $- 
 $- 
Net loss
  (3,632)
  (392)
Comprehensive loss
 $(3,632)
 $(392)
 
    
    
 
    
    
Reconciliation of GoviEx net assets to Denison investment carrying value   
    
    
Net assets of GoviEx – opening / at acquisition (1)
 $20,694 
 $17,240 
Share issue proceeds
  5,796 
  3,440 
Contributed surplus change
  - 
  95 
Share-based payment reserve change
  746 
  311 
Net loss
  (3,632)
  (392)
Net assets of GoviEx – closing
 $23,604 
 $20,694 
Denison ownership interest
  18.72%
  20.68%
Denison share of net assets of GoviEx
  4,419 
  4,280 
Other adjustments
  (216)
  412 
Investment in GoviEx
 $4,203 
 $4,692 
 
(1)
The opening net assets of GoviEx at acquisition is based on available June 30, 2016 financial information.
 
 
11.
RESTRICTED CASH AND INVESTMENTS
 
The Company has certain restricted cash and investments deposited to collateralize a portion of its reclamation obligations. The restricted cash and investments balance consists of:
 
 
 
At December 31
 
 
At December 31
 
(in thousands)
 
2017
 
 
2016
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $2,431 
 $277 
Investments
  7,281 
  2,037 
 
 $9,712 
 $2,314 
 
    
    
Restricted cash and investments-by item:
    
    
Elliot Lake reclamation trust fund
 $2,431 
 $2,213 
Letters of credit facility pledged assets
  7,174 
  - 
Letters of credit additional collateral
  107 
  101 
 
 $9,712 
 $2,314 
 
At December 31, 2017, cash equivalents consist of 30 day term deposits while investments consist of guaranteed investment certificates.
 
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
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
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.
 
In 2017, the Company deposited an additional $693,000 (CAD$917,000) into the Elliot Lake reclamation trust fund and withdrew $668,000 (CAD$873,000). In 2016, the Company deposited an additional $555,000 (CAD$762,000) into the Elliot Lake reclamation trust fund and withdrew $472,000 (CAD$622,000).
 
Letters of credit facility pledged assets
 
In 2017, the Company deposited CAD$9,000,000 with the Bank of Nova Scotia (“BNS”) as pledged restricted cash and investments pursuant to its obligations under an amended and extended letters of credit facility (see notes 13, 15 and 16).
 
Letters of credit additional collateral
 
In 2016, the Company deposited CAD$135,000 of cash collateral with BNS in respect of the portion of its issued reclamation letters of credit in excess of the collateral available under its letters of credit facility (see notes 15 and 16).
 
 
12.
PROPERTY, PLANT AND EQUIPMENT
 
The property, plant and equipment balance consists of:
 
 
 
At December 31
 
 
At December 31
 
(in thousands)
 
2017
 
 
2016
 
 
 
 
 
 
 
 
Plant and equipment:
 
 
 
 
 
 
Cost
 $77,128 
 $72,601 
Construction-in-progress
  5,121 
  4,821 
Accumulated depreciation
  (16,353)
  (12,609)
Net book value
 $65,896 
 $64,813 
 
    
    
Mineral properties:
    
    
Cost
 $132,767 
 $123,340 
Accumulated amortization
  (183)
  (171)
Net book value
 $132,584 
 $123,169 
 
    
    
Net book value
 $198,480 
 $187,982 
 
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
The plant and equipment continuity summary is as follows:
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
Amortization /
 
 
Net
 
(in thousands)
  
Cost
 
 
Depreciation
 
 
Book Value
 
 
 
 
 
 
 
 
 
 
 
Plant and equipment:
 
 
 
 
 
 
 
 
 
Balance-January 1, 2016
 $77,258 
 $(11,640)
 $65,618 
Additions
  536 
  - 
  536 
Amortization
  - 
  (140)
  (140)
Asset divestitures (note 5)
  (1,358)
  1,100 
  (258)
Depreciation (note 22)
  - 
  (2,812)
  (2,812)
Disposals
  (1,231)
  1,063 
  (168)
Impairment
  (67)
  - 
  (67)
Reclamation adjustment (note 15)
  (90)
  140 
  50 
Foreign exchange
  2,374 
  (320)
  2,054 
Balance-December 31, 2016
 $77,422 
 $(12,609)
 $64,813 
 
    
    
    
Additions
  197 
  - 
  197 
Amortization
  - 
  (146)
  (146)
Depreciation (note 22)
  - 
  (3,357)
  (3,357)
Disposals
  (631)
  615 
  (16)
Reclamation adjustment (note 15)
  (169)
  149 
  (20)
Foreign exchange
  5,430 
  (1,005)
  4,425 
Balance-December 31, 2017
 $82,249 
 $(16,353)
 $65,896 
 
The mineral property continuity summary is as follows:
 
 
 
 
 
 
Accumulated
 
 
Net
 
(in thousands)
  
Cost
 
 
Amortization
 
 
Book Value
 
 
 
 
 
 
 
 
 
 
 
Mineral properties:
 
 
 
 
 
 
 
 
 
Balance-January 1, 2016
 $122,797 
 $(165)
 $122,632 
Additions
  3,586 
  - 
  3,586 
Asset divestitures (note 5)
  (3,427)
  - 
  (3,427)
Impairment
  (2,253)
  - 
  (2,253)
Recoveries
  (1,242)
  - 
  (1,242)
Foreign exchange
  3,879 
  (6)
  3,873 
Balance-December 31, 2016
 $123,340 
 $(171)
 $123,169 
 
    
    
    
Additions
  639 
  - 
  639 
Impairment reversal
  246 
  - 
  246 
Recoveries
  (149)
  - 
  (149)
Foreign exchange
  8,691 
  (12)
  8,679 
Balance-December 31, 2017
 $132,767 
 $(183)
 $132,584 
 
Plant and Equipment
 
Canada Mining Segment
 
The Company has a 22.5% interest in the McClean Lake mill located in the Athabasca Basin of Saskatchewan, Canada. A toll milling agreement has been signed with the participants in the CLJV 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 receive a toll milling fee and other benefits. In determining the units of production amortization rate for the McClean Lake mill, the amount of production attributable to the mill assets has been adjusted to include Denison’s expected share of mill feed related to the CLJV toll milling contract.
 
In March 2014, the first ore from the Cigar Lake mine was received at the mill. In September 2014, after being on stand-by since August 2010, milling activities were restarted at the McClean Lake mill and uranium packaging began in October 2014 and has continued during 2015, 2016 and 2017.
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
During 2016, the Company recorded an impairment charge of $67,000 associated with the planned decommissioning and disposal of certain of its mining and milling assets at the McClean Lake site.
 
Environmental Services Segment
 
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 exploration and evaluation projects located in Canada which are held directly or through option or various contractual agreements.
 
Canada Mining Segment
 
As at December 31, 2017, the Company’s mineral property interests in Canada with significant carrying values are (all of the properties below are located in Saskatchewan):
 
a)
McClean Lake - the Company has a 22.5% interest in the project (includes the Sue D, Sue E, Caribou, McClean North and McClean South deposits);
b)
Midwest - the Company has a 25.17% interest in the project (includes the Midwest and Midwest A deposits);
c)
Wheeler River - the Company has a 63.3% interest in the project (includes the Phoenix and Gryphon deposits);
d)
Waterbury Lake - the Company has a 64.22% interest in the project (includes the J Zone deposit) and also has a 2.0% net smelter return royalty on the portion of the project it does not own;
e)
Johnston Lake – the Company has a 100% interest in the project;
f)
Mann Lake - the Company has a 30% interest in the project; and
g)
Wolly - the Company has a 21.89% interest in the project.
 
Wheeler River
 
On January 10, 2017, Denison executed an agreement with the partners of the WRJV that will result in Denison having the potential to increase its ownership in the WRJV from 60% up to approximately 66% by the end of fiscal 2018. Under the terms of the agreement, the partners have agreed to allow for a one-time election by Cameco Corp. (“Cameco”) to fund 50% of its ordinary 30% share of the WRJV expenses for fiscal 2017 and 2018. The shortfall in Cameco’s contribution will be funded by Denison in exchange for a transfer of a portion of Cameco’s interest in the WRJV. Accordingly, Denison’s share of the WRJV expenses were 75% in fiscal 2017 and will be 75% in fiscal 2018.
 
Under the terms of the above agreement, Denison increased its interest in the WRJV from 60% to 63.3% in 2017 by spending CAD$9,909,000 on WRJV expenses.
 
Waterbury Lake
 
In 2016, the Company increased its interest in the Waterbury Lake property from 61.55% to 63.01% and further increased it again in 2017 to 64.22% under the terms of the dilution provisions in the agreements governing the project (see note 24).
 
Moon Lake South
 
In January 2016, the Company entered into an option agreement with CanAlaska Uranium Ltd (“CanAlaska”) to earn an interest in CanAlaska’s Moon Lake South project located in the Athabasca Basin in Saskatchewan. Under the terms of the option, Denison can earn an initial 51% interest in the project by spending CAD$200,000 by December 31, 2017 and it can increase its interest to 75% by spending an additional CAD$500,000 by December 31, 2020. As at December 31, 2017, the Company has spent CAD$551,000 under the option and has earned a 51% interest in the project.
 
Moore Lake
 
In June 2016, the Company recognized an impairment charge of $2,174,000 based on the terms of an announced agreement to option its 100% interest in the Moore Lake property to Skyharbour Resources Ltd (“Skyharbour”) in exchange for cash, stock and exploration spending commitments. The remaining recoverable amount for the property was estimated to be CAD$1,700,000 and was based on a market-based fair value less costs of disposal assessment of the share and cash consideration to be received by the Company under the terms of the option.
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
 
 
While the fair value of the share consideration to be received was determined from observable inputs, the fair value of the cash consideration was not and, as such, management classified the fair value determination within Level 2 of the fair value hierarchy.
 
In August 2016, the Company closed the option agreement with Skyharbour. On closing, Denison received 4,500,000 common shares of Skyharbour and recognized a recovery of $1,242,000 (CAD$1,620,000). To complete the option, Skyharbour is required to make staged cash payments of CAD$500,000 in aggregate over the next five years and spend CAD$3,500,000 in exploration expenditures on the property over the same five year period.
 
In April 2017, Denison received CAD$200,000 of cash consideration from Skyharbour under the terms of the option agreement and a recovery of $149,000 was recognized.
 
In June 2017, the Company recognized an impairment reversal of $246,000 for Moore Lake based on an update of the estimated recoverable amount remaining to be received under the option agreement.
 
Under the terms of the option agreement, Denison also maintains various back-in rights to re-acquire a 51% interest in the Moore Lake property and is entitled to nominate a member to Skyharbour’s Board of Directors as long as Denison maintains a minimum ownership position of 5%. As at December 31, 2017, Denison’s ownership interest in Skyharbour is approximately 10.00% (December 31, 2016: 11.35%).
 
Hook Carter
 
In November 2016, Denison completed the purchase of an 80% interest in the Hook-Carter property, located in the southwestern portion of the Athabasca Basin region in northern Saskatchewan, from ALX Uranium Corp (“ALX”).
 
Under the terms of the agreement, Denison issued 7,500,000 common shares with a value of $2,854,000 (CAD$3,825,000) in exchange for an immediate 80% interest in the property. ALX retained a 20% interest in the property and Denison has agreed to fund ALX’s share of the first CAD$12,000,000 in expenditures. Denison has also agreed to a work commitment of CAD$3,000,000 over 3 years – should Denison not meet this commitment, Denison’s interest in the property will decrease from 80% to 75% and ALX’s interest will increase from 20% to 25%.
 
In November 2016, Denison also purchased the Coppin Lake property from Areva Resources Canada Inc (now known as Orano Canada Inc.) and UEX Corporation for cash payments of $26,000 (CAD$35,000) and a 1.5% net smelter royalty. Under the terms of the Hook Carter agreement, Denison and ALX have elected to have these claims form part of the Hook Carter property and ALX’s interest in these claims will be the same as its interest in Hook Carter.