Denison Reports Significant Increase in Economic Results for Wheeler River
David Cates, Denison's President & CEO commented, "The Phoenix FS and Gryphon Update confirm the robust economics of the two projects situated within the Company's flagship Wheeler River property, producing base-case after-tax net present values of
After 4.5 years of rigorous technical de-risking and independent third-party validation,
With the highly positive results of the Phoenix FS, our team has already shifted focus to advancing front-end engineering and design efforts, with a target of transitioning into detailed design before the end of the year."
This press release constitutes a "designated news release" for the purposes of the Company's prospectus supplement dated September 28, 2021 to its short form base shelf prospectus dated September 16, 2021.
- Base case pre-tax Net Present Value ("NPV") (
8% ) of$2.34 billion 100% ownership-basis) is a150% increase in the base-case pre-tax NPV8% forPhoenix from the 2018 PFS. - Very robust base-case pre-tax Internal Rate of Return ("IRR") of
105.9% . - Base-case after-tax NPV
8% of$1.56 billion 100% basis) and IRR of90.0% – with Denison's effective95% interest in the project equating to a base-case after-tax NPV8% of$1.48 billion - Base-case pre-tax and after-tax payback period of 10 months – equating to a reduction of 11 months for the pre-tax payback period from the 2018 PFS.
- Production profile has been optimized, based on ISR mine planning efforts evaluating production potential for individual well patterns – resulting in an increase to the planned rate of production by approximately
43% during the first five years of operations. - Estimated pre-production capital costs of under
$420 million 100% basis), yielding an impressive after-tax NPV to initial capital cost ratio in excess of 3.7 to 1. - Robust economics easily absorb cost-inflation and design changes impacting both operating and capital costs, confirming
Phoenix 's position with estimated cash operating and all-in costs expected to be amongst the lowest-cost uranium mines in the world. - Phoenix FS plans are aligned and costed to meet or exceed environmental criteria expected to be required by the ongoing regulatory approval process.
- Updated mineral resource estimate, reflecting results of 70 drill holes completed in support of ISR de-risking and resource delineation activities, has upgraded 30.9 million pounds U3O8 into Measured mineral resources, and increased the average grade of the Zone A high-grade domain, which is now estimated to contain 56.3 million pounds U3O8 in Measured and Indicated mineral resources at an average grade of
46.0% U3O8. - Upgraded 3.4 million pounds U3O8 into Proven mineral reserves, representing the equivalent of
85% of production planned during the first calendar year of operations.
- The Phoenix FS reflects independent third-party validation of the selection of the ISR mining method for
Phoenix , and builds on the findings from a comprehensive and rigorous multi-year technical de-risking process highlighted by the highly successful completion of the leaching and neutralization phases of the Phoenix Feasibility Field Test ("FFT") in late 2022. - Through the technical de-risking process, Denison has acquired extensive deposit-specific data and developed a robust ISR mine planning model that involved evaluation of the production potential for individual well patterns.
- With technical de-risking of the project substantially complete, front-end engineering design ("FEED") efforts to support the advancement of the planned
Phoenix operation are already significantly progressed and the Company is on track to transition into detailed design efforts, consistent with the Company's Outlook for 2023, before the end of the year.
- Scope of Gryphon Update was targeted at the review and update of capital and operating costs – mining and processing plans remaining largely unchanged from the 2018 PFS aside from minor scheduling and construction sequencing optimizations.
- Base case pre-tax NPV (
8% ) of$1.43 billion 100% basis) is a148% increase in the base-case pre-tax NPV8% for Gryphon from the 2018 PFS. - Strong base-case pre-tax IRR of
41.4% . - Base-case after-tax NPV
8% of$864.2 million 100% basis) and IRR of37.6% – with Denison's effective95% interest in the project equating to a base-case after-tax NPV8% of$821.0 million - Base-case pre-tax payback period of 20 months, and base-case after-tax payback period of 22 months – equating to a reduction of 17 months for the pre-tax payback period from the 2018 PFS.
- Project remains to be positioned amongst the lowest-cost uranium mines in the world and provides Denison with an additional source of low-cost potential production to deploy significant free cash flows expected from
Phoenix .
The results of the Phoenix FS and Gryphon Update have been reviewed and approved by the Technical Committee of Denison's Board of Directors.
All amounts are in Canadian dollars unless indicated otherwise.
The Phoenix FS was completed by Wood Canada Limited ("Wood"), WSP
The Phoenix FS reflects several design changes and the results of a rigorous technical de-risking program completed by Denison over the last 4.5 years following the publication of the 2018 PFS, which was highlighted by the then-novel selection of the ISR mining method for Phoenix.
With the benefit of extensive metallurgical and field testing of all key elements of the proposed ISR mining operation, and current cost estimates reflecting recent inflationary pressures, the Phoenix FS is expected to provide Denison with an excellent basis to advance engineering designs in support of a future final investment decision ("FID").
Table 1 – Summary of Key Phoenix Operation Parameters ( | |
Mine life | 10 years |
Proven & Probable reserves(1) | 56.7 million lbs U3O8 (220,900 tonnes at |
First 5 years of reserves(2) | 41.9 million lbs U3O8 (Average 8.4 million lbs U3O8 / year) |
Remaining years of reserves | 14.8 million lbs U3O8 (Average 3.0 million lbs U3O8 / year) |
Initial capital costs(3) | |
Average cash operating costs | |
All-in cost(4) | |
(1) | See Table 5 below for additional information regarding Proven & Probable reserves. |
(2) | The first five years is determined by reference to the 60 month period that commences at the start of operations, which occurs half way through calendar year 1, and ends half way through calendar year 6. See below for details. |
(3) | Initial capital costs exclude |
(4) | All-in cost is estimated on a pre-tax basis and includes all project operating costs, capital costs post-FID, and decommissioning costs divided by the estimated number of pounds U3O8 to be produced. |
Table 2 – Summary of Phoenix Economic Results ( | ||
Base Case | PFS Ref. Case(1) | |
Uranium selling price | UxC Spot Price(2) ( | (Fixed selling price) |
Exchange Rate (USD$:CAD$) | 1.35 | 1.30 |
Discount Rate | 8 % | 8 % |
Operating profit margin(3) | 90.9 % | 89.9 % |
Pre-tax NPV | ||
Pre-tax IRR(4) | 105.9 % | 98.4 % |
Pre-tax payback period(6) | ~10 months | ~ 10 months |
Post-tax NPV | ||
Post-tax IRR(4)(5) | 90.0 % | 83.9 % |
Post-tax payback period(5)(6) | ~10 months | ~ 11 months |
(1) | The "PFS Reference Case" economic analysis reflects the outcome of the current Phoenix FS based on a uranium selling price that is the same as the "High Case" previously reported from the 2018 PFS, which was based on a fixed uranium selling price of |
(2) | Spot price forecast is based on "Composite Midpoint" scenario from UxC's Q2'2023 Uranium Market Outlook ("UMO") and is stated in constant (not-inflated) dollars, see details below. |
(3) | Operating profit margin is calculated as aggregate uranium revenue less aggregate operating costs, divided by aggregate uranium revenue. Operating costs exclude all royalties, surcharges and income taxes. |
(4) | NPV and IRR are calculated to the start of construction activities for the |
(5) | Post-tax NPV, IRR and payback period are based on the "adjusted Post-tax" scenario, discussed below, which includes the benefit of certain entity level tax attributes which are expected to be available and used to reduce taxable income from the |
(6) | Payback period is stated as number of months to payback from the start of uranium production. |
(7) | Change from 2018 PFS is computed by reference to the same scenario from the 2018 PFS, as discussed below, adjusted to incorporate certain pre-FID costs for consistent comparability. |
Mineral Resource Estimate
The
The updated
Table 3 – Estimated Phoenix Mineral Resources ( | ||||||
Confidence | Domain | Volume (m³) | Density (g/cm³) | Tonnes (kt) | Average (%U3O8) | Contained (Mlbs) |
Measured | ZoneA_HG | 6,729 | 3.84 | 25.9 | 50.7 | 28.9 |
ZoneA_LG | 16,459 | 2.33 | 38.3 | 2.3 | 2.0 | |
Total | 23,187 | 2.77 | 64.2 | 21.8 | 30.9 | |
Indicated | ZoneA_HG | 8,773 | 3.37 | 29.6 | 42.0 | 27.4 |
ZoneA_LG | 57,858 | 2.33 | 134.8 | 2.0 | 5.8 | |
ZoneB_HG | 4,334 | 2.66 | 11.5 | 22.3 | 5.7 | |
ZoneB_LG | 17,114 | 2.34 | 40.1 | 0.9 | 0.8 | |
Total | 88,079 | 2.45 | 216.0 | 8.3 | 39.7 | |
Total Measured and Indicated | 111,266 | 2.52 | 280.2 | 11.4 | 70.5 | |
Inferred | ZoneA_Bsmt | 2,401 | 2.34 | 5.6 | 2.6 | 0.3 |
(1) | The effective date of the mineral resource estimate is June 23, 2023. The Qualified Person (QP) for the estimate is Mr. Cliff Revering, P.Eng., an employee of SRK. |
(2) | Mineral resource estimates are prepared in accordance with CIM Definition Standards (CIM, 2014) and the CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines (CIM, 2019). |
(3) | Mineral resources are reported at a cut-off grade of |
(4) | Mineral resources are reported using a uranium price of |
(5) | All figures have been rounded to reflect the relative accuracy of the estimate and may not add due to rounding. |
Mining Overview & Mineral Reserve Estimate
The uranium recovery curve was obtained empirically from metallurgical testing completed at the Saskatchewan Research Council ("SRC") facility under the supervision of industry experts. Over 125 kilograms (kg) of
Based on the results of the mine planning process, mining activities have been divided into five phases, with a total of 74 extraction wells, 172 injection wells, and 22 monitoring wells, as outlined below:
Table 4 –Wellfield composition for | |||
Mining | Extraction | Injection | Monitoring |
1 | 14 | 36 | 6 |
2 | 12 | 30 | 4 |
3 | 13 | 32 | 4 |
4 | 23 | 44 | 4 |
5 | 16 | 30 | 6 |
Total | 74 | 172 | 22 |
An illustration of the mine planning process is provided in Figure 1, which depicts the planned location of extraction, injection and monitoring wells within the Phase 1 mining area. In general, each extraction well is surrounded by 4 or more injection wells, the type of which has been selected and/or located to optimize cost and recovery.
A unique characteristic of the planned Phoenix ISR mine is the use of artificial ground freezing around the perimeter of the planned
Mining is planned to occur over a 10-year period, spanning 11 calendar years, with partial years of production occurring in both the first and final calendar year of the production plan. Progressive reclamation and decommissioning is planned to commence in each phase of the ore zone once production has ceased.
The Proven and Probable mineral reserves are estimated to be 56.7 million pounds U3O8. This estimate is based on the aggregate mine feed to the plant and represents
Table 5 –Phoenix Mineral Reserves ( | |||
Mining Phase by | Tonnes | Grade | Recoverable U3O8 |
Proven | |||
Phase 1 | 6.3 | 24.5 | 3.4 |
Probable | |||
Phase 1 | 41.3 | 20.2 | 18.4 |
Phase 2 | 45.2 | 13.8 | 13.7 |
Phase 3 | 20.3 | 11.0 | 4.9 |
Phase 4 | 68.9 | 7.2 | 10.9 |
Phase 5 | 37.0 | 6.6 | 5.4 |
Total | 219.0 | 11.7 | 56.7 |
(1) | The effective date of the mineral reserve estimate is June 23, 2023. The QP for the estimate is Mr. Dan |
(2) | Mineral reserves are estimated at a cut-off grade of |
Processing Overview
Consistent with the 2018 PFS, the Phoenix FS calls for the construction of a processing plant on the Wheeler River site, which has been designed to receive uranium bearing solution ("UBS") from the wellfield for processing to a finished yellowcake product that meets industry standards.
An acidic lixiviant solution is prepared in the processing plant and transferred to an injection solution handling system for distribution in the wellfield. The solution is injected through a series of wells arranged in a pattern surrounding extraction / recovery wells, which are designed to pump the UBS up to surface once the lixiviant has travelled through the ore zone and dissolved the uranium from the host rock.
Once the UBS is received at the processing plant, removal of impurities such as iron (Fe) and radium (Ra) occur via Stage 1 (Fe/Ra) precipitation. Next the purified leach solution feeds the Stage 2 yellowcake precipitation circuit and the yellowcake product is dried and packaged for shipment. The processing plant has been designed based on an average uranium head grade of the UBS recovered from the wellfield of 22 grams per litre and is expected to recover
Overall, the processing plant flowsheet remains largely consistent with the 2018 PFS; however, additional provisions have been included for effluent treatment via a three-stage neutralization process. Whereas the 2018 PFS assumed a "closed loop" processing system, the Phoenix FS design is aligned with the engineering components and criteria included in the Environmental Assessment ("EA") for the project, which allow for the treatment of process solutions and controlled release of a treated effluent to the environment. This is an example of how the iterative nature of the EA process has informed project designs during the Phoenix FS process, to ensure that the plans are aligned and costed to meet or exceed environmental criteria expected to be required by the ongoing regulatory approval process. While this design for effluent treatment has been adopted for the Phoenix FS, the potential remains for ongoing FEED studies to optimize the processing plant design.
Site Infrastructure
The
Additional on-site infrastructure includes a seven kilometre gravel road from Highway 914 to the site, electrical power line from the existing SaskPower transmission line located alongside Highway 914, airstrip, domestic and construction waste management areas, potable water treatment facilities, sewage treatment facilities, and fuel storage and distribution facilities.
Capital Costs
Estimated initial direct capital costs of
Initial capital costs are expected to be incurred during a 24-month construction period that will include the establishment of site infrastructure (discussed above), as well as the freeze wall perimeter around the Phase 1 mining zone and initial wellfield development within Phase 1.
Table 6 – Phoenix Capital Costs ($ millions) | |||
Initial | Sustaining | Total | |
Wellfield | 63.0 | 177.1 | 240.1 |
ISR processing plant | 102.6 | - | 102.6 |
Surface facilities | 14.7 | 2.1 | 16.8 |
Utilities | 34.8 | - | 34.8 |
Electrical | 19.1 | - | 19.1 |
Civil & earthworks | 39.6 | - | 39.6 |
Decommissioning | - | 88.8 | 88.8 |
Subtotal – Direct Costs | 273.8 | 268.0 | 541.8 |
Indirect costs | 70.5 | 31.6 | 102.1 |
Other (Owner's) costs | 32.7 | - | 32.7 |
Contingency | 42.6 | 23.3 | 65.9 |
Total Capital Costs ( | 419.4 | 322.9 | 742.3 |
(1) | Numbers may not add due to rounding. |
Contingencies reflect approximately
Taken together with estimated indirect costs, owner's costs, sustaining and decommissioning capital costs, contingencies, and with the reallocation of certain costs to the pre-FID period, total life of mine capital costs are estimated at
As is demonstrated by the project's current NPV in the PFS Reference Case (up
Wellfield | The increase includes the adoption of a phased "freeze wall" design to
Materials and installation costs for the ISR injection and extraction wells are
|
Processing Plant | The increase reflects a variety of design adjustments to the processing plant,
|
Decommissioning | The increase reflects the incorporation of costs associated with ore zone
|
Operating Costs
Average estimated operating costs of
As a proportion of operating costs per pound, processing costs have increased from the 2018 PFS, now accounting for nearly
Changes to reagent usage reflect the results of the Company's multi-year technical de-risking process, which has provided a robust data set of metallurgical tests on which the current estimate of reagent usage has been based, as compared to limited preliminary leach data used for the 2018 PFS.
The cost of reagents, fuel/propane, and labour reflect the impact of inflation and supply chain challenges experienced through 2022 and into 2023. Based on the timing of this study, reagent and fuel/propane prices used may be reflective of "peak inflation" pricing and present a possible opportunity for optimization in future years. These cost increases are expected to impact uranium mining operations globally; however, few have completed significant operating cycles and/or estimates of future costs in the current cost environment.
Table 7 – Phoenix Operating Cost per Pound U3O8 | ||
CAD$ | USD$ | |
Mining / Wellfield | 0.79 | 0.58 |
Processing | 5.25 | 3.88 |
Transport to converter | 0.24 | 0.18 |
Site support and administration | 2.23 | 1.64 |
Total Operating Costs per pound U3O8 | ||
(1) | Numbers may not add due to rounding. |
Uranium Selling Price Assumptions
The base-case economic analysis assumes uranium sales from
The PFS reference case economic analysis reflects the outcome of the current Phoenix FS based on a uranium selling price that is the same as the "High Case" previously reported from the 2018 PFS, which was based on a fixed uranium selling price of
Post-Tax Economic Analysis
The Phoenix FS considers two post-tax scenarios for the project's base-case economic analysis. In the "Basic" post-tax scenario, Canadian federal income taxes plus provincial income taxes and profit-based royalties were calculated without incorporating the impact of the opening tax pool balances that are available to the applicable Wheeler River Joint Venture ("WRJV") owners. The "Adjusted" post-tax scenario estimates the after-tax cash flows of the project by consolidating the expected entity-level after-tax cash flows for each of the parties to the WRJV and includes estimates of opening tax balances that are expected to be used to reduce taxable income. The impact of opening tax balances is significant and thus the "Adjusted" post-tax scenario is considered to better represent the true after-tax economic outcome to the owners of the project.
Table 8 – Phoenix Post-Tax Economic Analysis (Base Case) | ||
Basic | Adjusted | |
Post-Tax NPV | ||
Post-Tax IRR | 82.3 % | 90.0 % |
Post-Tax Payback Period | ~11 months | ~10 months |
Environmental Studies, Permitting and Social Impacts
The regulatory approval process and the legislation associated with the EA does not allow for the advancement of any project component before an EA decision is reached by the
The EA for the Phoenix ISR mine and process plant is well advanced through the Federal and Provincial approval process as guided by the Canadian Environmental Assessment Act 2012 and the Saskatchewan Environmental Assessment Act. The draft Environmental Impact Statement ("EIS") was submitted in October 2022 and Denison has since received comments and information requests from the Provincial and Federal regulatory review teams and from Indigenous communities through the Federal public review process. Once the regulatory reviewers are satisfied with Denison's responses to such comments, a final EIS will be submitted for ultimate approval.
Additionally, Denison will be required to make an application to the CNSC to obtain a license to construct a uranium mine and mill and to obtain a permit from the Saskatchewan Ministry of Environment to construct and operate a pollutant control facility. Denison has scheduled the submission of these applications such that the anticipated license and permit approvals align with the timing of the EA approval.
An important part of the regulatory review and approval process relates to engagement with Indigenous and non-Indigenous interested parties. Denison has carried out several years of engagement efforts related to the advancement of the project and in 2021 Denison's Board of Directors adopted an Indigenous Peoples Policy ("IPP"), which sets out the Company's guiding principles for and commitment to advancing reconciliation with Indigenous People. The IPP outlines Denison's focus on specific efforts in relation to engagement, employment, environment, education, and empowerment, each of which support the advancement of sustainable mining operations.
Development Plans
The completion of the Phoenix FS is a key milestone to support the next phases of engineering design for the project. The FEED phase has already commenced and is expected to be completed before the end of the year. The objective of the FEED phase is to assess optimization opportunities and identify key long lead procurement requirements. Including the detailed design phase, project engineering efforts are expected to be completed in approximately two years. Upon engineering completion, construction is expected to last another two years. Assuming sufficient funding is secured by the owners of the WRJV, engineering and other pre-construction activities advance per plan, and timely receipt of required regulatory approvals, first production is currently anticipated to occur in 2027 or 2028.
Opportunities
Several opportunities for optimization have been identified during the FS completion process and are expected to be evaluated during the FEED phase, including (i) reducing the volume of treated effluent by increasing the recycling of solutions within the process plant; (ii) reducing the plant footprint by improving the FS conceptual layout and maximizing modularization of process equipment; (iii) reducing the size of certain site processing infrastructure through improved solids/liquid separation in the processing plant design; and (iv) modifications to the ISR mine model to incorporate potential operational optimization techniques to reduce the number of wells required to mine the deposit.
The Phoenix FS results reflect the culmination of a comprehensive and rigorous multi-year technical de-risking process that focused on assessing the key criteria necessary for the successful application of the ISR mining method to the specific characteristics of
In general, advancing ISR mining projects requires significant time and effort due to the extensive three-dimensional characterization and modeling required for project confidence. Forgoing detailed characterization efforts to accelerate project timelines or "simplify" the assessment process may substantially endanger long-term project success. The successful application of ISR in any geological setting largely depends on three fundamental requirements: (i) permeability (of the deposit), (ii) leachability (of the mineralization), and (iii) containment (of the mining solution).
Permeability
Hydrogeological investigations have been ongoing in the field and in laboratories since 2014. In-ground permeability tests conducted via a series of small-diameter test wells and large-diameter commercial scale wells ("CSWs") have evaluated the physical flows and connections through the groundwater systems within the orebody. Pump and injection tests have collectively demonstrated the positive application of ISR at
Additional hydrogeological characterization, including borehole geophysics in over 43 wells, was completed to further refine the hydraulic sweep and vertical heterogeneity of the deposit.
In 2021, Denison completed an ISR field test program which included an ion tracer test utilizing a five-spot pattern of CSWs. The program was successful in demonstrating production flowrates assumed in the 2018 PFS, confirming hydraulic control of injected solutions during the ion tracer test, establishing breakthrough times between injection and recovery wells consistent with previous 'Proof of Concept' modelling, and showcasing the ability to remediate the test pattern by completing a 'clean up phase'.
Leachability
Test programs conducted since 2017 included various forms of leaching tests, process plant circuit tests, and tests of effluent and solid waste streams treatment steps, to define design criteria for the Phoenix FS. Numerous column, batch, static, and core leach tests were conducted on defined hydrogeological and metallurgical units of the deposit to gain a comprehensive understanding of leachability and to ultimately define a recovery curve specific to the deposit. The collective tests have demonstrated excellent recovery of uranium from various deposit settings.
Containment
Proven freeze technology is planned to be used to surround the high-grade
Completion of ISR De-Risking
In late 2022, after several years of systematic de-risking field and laboratory investigations, Denison completed the FFT, which was designed primarily to assess the effectiveness and efficiency of the leaching process in the ore zone. The first component of the test included the controlled injection of an acidic mining solution into the ore zone within a portion of the CSW test pattern installed in 2021 and the recovery of the solution back to the surface ("Leaching Phase"). The FFT was highly successful and resulted in the recovery of approximately 14,400 pounds U3O8 over 10 days of active leaching following completion of initial acidification of the leaching area. Through the completion of the second phase of the test ("Neutralization Phase"), the FFT also provided further evidence and validation of both permeability and containment assumptions. The completion of the leaching and neutralization phases of the FFT represents the conclusion of the final substantive scope of technical de-risking for the project.
Overall, the multi-year ISR de-risking process has supported Denison's acquisition of extensive deposit-specific data and the development of a robust ISR mine planning model that involves evaluation of the production potential for individual well patterns.
With technical de-risking of the project substantively complete, evaluation efforts supporting the advancement of
The 2018 PFS and the Gryphon Update describe the planned development of Gryphon as a conventional underground mine with a mine life of 6.5 years and annual average mine production of 7.6 million pounds U3O8. The Gryphon Update was prepared by Engcomp Engineering and Computing Professionals Inc. ("Engcomp"), SLR International Corporation ("SLR"), Stantec Consulting Ltd. ("Stantec"), and Hatch Ltd. ("Hatch"), and is largely based on the 2018 PFS, with efforts targeted at the review and update of capital and operating costs, as well as various minor scheduling and design optimizations. The study remains at the Pre-Feasibility ("PFS") level of confidence.
Overall, the Gryphon Update demonstrates that the underground development of Gryphon is a positive potential future use of cash flows generated from
Table 9 – Summary of Key Gryphon Operation Parameters ( | |
Mine life | 6.5 years |
Probable reserves(1) | 49.7 million lbs U3O8 (1,275,000 tonnes at |
Average annual production | 7.6 million lbs U3O8 |
Initial capital costs(2) | |
Average cash operating costs | |
All-in cost(3) | |
(1) | See below for additional information regarding Probable reserves. |
(2) | Initial capital costs exclude |
(3) | All-in cost is estimated on a pre-tax basis and includes all project operating costs, capital costs post-FID, and decommissioning costs, divided by the estimated number of pounds U3O8 to be produced. |
Table 10 – Summary of Gryphon Economic Results ( | ||
Base Case | PFS Ref. Case(1) | |
Uranium selling price | (Fixed selling price) | (Fixed selling price) |
Exchange Rate (USD$:CDN$) | 1.35 | 1.30 |
Discount Rate | 8 % | 8 % |
Operating profit margin(3) | 83.0 % | 79.6 % |
Pre-tax NPV | ||
Pre-tax IRR(4) | 41.4 % | 34.0 % |
Pre-tax payback period(6) | ~ 20 months | ~ 24 months |
Post-tax NPV | ||
Post-tax IRR(4)(5) | 37.6 % | 30.6 % |
Post-tax payback period(5)(6) | ~23 months | ~ 26 months |
(1) | The "PFS Reference Case" economic analysis reflects the outcome of the current Phoenix FS based on a uranium selling price that is the same as the "High Case" previously reported from the 2018 PFS, which was based on a fixed uranium selling price of |
(2) | Fixed selling price is based on the forecasted annual "composite Midpoint" long-term uranium price from UxC's Q2'2023 UMO and is stated in constant (not-inflated) dollars, see details below. |
(3) | Operating profit margin is calculated as aggregate uranium revenue less aggregate operating costs, divided by aggregate uranium revenue. Operating costs exclude all royalties, surcharges and income taxes. |
(4) | NPV and IRR are calculated to the start of construction activities for the Gryphon operation, and excludes |
(5) | Post-tax NPV, IRR and payback period for Gryphon are the same on a "Basic" and "Adjusted" basis, as entity level tax attributes are assumed to have been fully depleted by the |
(6) | Payback period is stated as number of months to payback from the start of uranium production. |
(7) | Change from 2018 PFS is computed by reference to the same scenario from the 2018 PFS, as discussed below, adjusted to incorporate certain pre-FID costs for consistent comparability. |
Mineral Resource Estimate
The mineral resource estimate for Gryphon remains unchanged from the 2018 PFS. Using a cut-off grade of
Mineral resources are stated inclusive of mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Mining Overview & Mineral Reserve Estimate
The mine development and production plan for Gryphon remains largely the same as the 2018 PFS. Access to the deposit is planned to be via a primary production shaft with a diameter of 6.1 metres, installed using a blind boring method to a depth of 550 metres below surface. A ventilation shaft with a diameter of 5.8 metres, is also planned to be excavated via blind boring to a depth of 550 metres. Both shafts will be lined with a watertight steel/concrete composite liner.
Access from the shaft to the mine workings will be via a single ramp located on the hanging wall of the deposit. Mining is planned to consist of conventional underground longhole stoping mining methods, and is expected to primarily utilize a longitudinal retreat approach. Mined stopes will be backfilled using a combination of rockfill, cemented rockfill, and hydraulic fill.
Mining is expected to produce approximately 605 tonnes per day of ore and an average of 330 tonnes per day of waste rock during the steady-state operating period. While the mine has the potential to exceed this rate of production, the study constrains mine production based on expected processing capacity of 9 million pounds U3O8 per year (as discussed below).
The project development and construction schedule was reviewed during the completion of the Gryphon Update, and minor capital and scheduling efficiencies were found to allow for the deferral of some construction activities without an impact to the overall project schedule. These modifications have been reflected in timing of anticipated expenditures for Gryphon.
Overall, 49.7 million pounds U3O8 over 1,260,000 tonnes grading
Table 11 – Gryphon Mineral Reserves ( | |||
Confidence | Tonnes | Grade | Million lbs U3O8 |
Probable | 1,257,000 | 1.8 | 49.7 |
TOTAL | 1,257,000 | 1.8 | 49.7 |
(1) | The effective date of the mineral reserve estimate is Sept 1 2018. The QP for the estimate is Mr. Mark Hatton, P.Eng., an employee of Stantec. |
(2) | The mineral reserve estimate was prepared in accordance with the CIM Definition Standards (CIM, 2014). |
(3) | Mineral Reserves are stated at a processing plant feed reference point. |
(4) | Mineral Reserves for the Gryphon deposit are estimated at a cut-off grade of |
Processing Overview
Consistent with the 2018 PFS, production from the Gryphon operation is assumed to be processed at the
The McClean Lake mill received a 10-year operating license from the CNSC in 2017 and is currently processing
Due to the volume of throughput expected from the Gryphon operation, the McClean Lake mill will require certain upgrades to process the mine production from Gryphon. Various other small upgrades are also expected to be required to achieve production at the licensed annual capacity of 24 million pounds U3O8. The study assumes that Cigar Lake production will decline from 18 million pounds U3O8, at present, to approximately 15 million pounds U3O8 at the time of co-processing with ore from the Gryphon operation. In order to assess compatibility with Gryphon mill feed and to approximate the split of estimated mill operating costs, various assumptions have been made in regard to the nature and quantity of the mill feed from the Cigar Lake mine. Denison's interest in the McClean Lake Joint Venture ("MLJV") does not entitle the Company or the WRJV to process its mine production at the facility in the absence of a toll milling agreement. Accordingly, certain further assumptions have been made regarding the likelihood and terms of a toll milling agreement with the MLJV. The estimated cost of production for Gryphon could be materially different should processing not be available at an existing local facility.
To facilitate access to the McClean Lake mill from the Wheeler River site, the Gryphon Update carries certain costs of building an extension to Highway 914 to connect the McArthur River and Cigar Lake operations and to allow for the transport of Gryphon mine production over an approximately 160 kilometre route.
Site Infrastructure
Due to its proximity to
Capital Costs
Estimated direct initial capital costs of
Table 12 – Gryphon Capital Costs ($ millions) | |||
Initial | Sustaining | Total | |
Shafts | 222.4 | - | 222.4 |
Surface facilities | 63.0 | 7.5 | 70.5 |
Underground | 63.9 | 86.2 | 150.1 |
Utilities | 5.3 | - | 5.3 |
Electrical | 5.4 | - | 5.4 |
Civil & earthworks | 16.0 | - | 16.0 |
McClean Lake mill upgrades | 67.9 | - | 67.9 |
Offsite infrastructure | 43.7 | - | 43.7 |
Decommissioning | - | 5.0 | 5.0 |
Subtotal – Direct Costs | 487.6 | 98.7 | 586.3 |
Indirect costs | 76.5 | 5.0 | 81.5 |
Other (Owner's) costs | 25.6 | - | 25.6 |
Contingency | 147.7 | - | 147.7 |
Total Capital Costs ( | 737.4 | 103.7 | 841.1 |
(1) | Numbers may not add due to rounding. |
Contingencies reflect approximately
Taken together with estimated indirect costs, sustaining and decommissioning capital costs, and the reallocation of certain costs to the pre-FID period, total life of mine capital costs are estimated at
Operating Costs
Estimated operating costs of
Table 13 – Gryphon Operating Cost per Pound U3O8 | ||
CAD$ | USD$ | |
Mining | 6.85 | 5.05 |
Milling | 8.76 | 6.47 |
Transport to Converter | 0.27 | 0.20 |
Site support and administration | 1.40 | 1.03 |
Total Operating Costs per pound U3O8 | ||
(1) | Numbers may not add due to rounding. |
Uranium Selling Price Assumptions
The base-case economic analysis assumes uranium sales from Gryphon mine production will be made throughout the mine life at a fixed price of
The PFS reference case economic analysis reflects the outcome of the current Gryphon Update based on a uranium selling price that is the same as the "High Case" previously reported from the 2018 PFS, which was based on a fixed uranium selling price of
Post-Tax Economic Analysis
The Gryphon Update only considers one post-tax scenario for the project's base-case economic analysis, as there is no basis for an "adjusted" case, given that the entity level tax attributes of the WRJV owners are assumed to have been fully depleted by the
Permitting and Development Plans
At this time, Denison has not made a decision to advance Gryphon. While the project may benefit from certain infrastructure associated with the development of
Opportunities
The Gryphon Update remains at the PFS level of confidence, and opportunities remain to complete additional studies to further advance confidence in the project plans. There are notable opportunities for optimization of the Gryphon mine design, including: (i) additional exploration drilling may increase estimated mineral resources, which with further studies could increase available probable reserves to support an extended mine life; (ii) increasing the shaft depth could improve the ramp up schedule of the mine and allow for earlier production; (iii) selecting a conventional method of shaft sinking by reusing ground freezing equipment potentially available from the
Wheeler River is the largest undeveloped uranium project in the infrastructure rich eastern portion of the
Denison is a uranium exploration and development company with interests focused in the
Through its
Denison is also engaged in post-closure mine care and maintenance services through its Closed Mines group, which manages Denison's reclaimed mine sites in the
The technical information contained in this release has been reviewed and approved by Mr. Chad Sorba, P.Geo, Denison's Director, Technical Services, and Mr. Andrew Yackulic, P. Geo., Denison's Director, Exploration, each of whom is a Qualified Person in accordance with the requirements of NI 43-101.
The Phoenix FS and Gryphon Update have been completed in accordance with NI 43-101, Canadian Institute of Mining, Metallurgy and Petroleum (CIM) standards, and best practices, as well as other standards such as the AACE Cost Estimation Standards. Other than as discussed herein and the risks identified in the Company's Annual Information Form dated March 27, 2023 (the "AIF") or subsequent quarterly financial reports filed under the Company's profile on SEDAR and EDGAR, there are no known legal, political, environmental or other risks that could materially affect the potential development of the mineral resources.
The qualified persons involved in the preparation of the Phoenix FS and Gryphon Update summarized in this press release, and the related technical report, have followed industry accepted practices for verifying that the data used in the study is suitable for the purposes used. Data verification undertaken by Qualified Persons included review of drill core, review of quality assurance program and quality control measures and data, re-sampling and sample analysis programs, and database verification, as applicable. Validation checks were also performed on data. The independent Qualified Persons for the Phoenix FS, led by Wood's David Myers P.Eng., have prepared the scientific and technical information on the Phoenix FS and reviewed the information that is summarized in this press release. Site visits by four of the Qualified Persons (Lorne Schwartz and David Myers from Wood, Cliff Revering from SRK and Dan Johnson from WSP, who each attended at
The NI 43-101 technical report, supporting the results of the Phoenix FS and Gryphon Update included in this release, is in the process of being finalized for review and approval of the WRJV partners and is expected to be filed under Denison's profile on SEDAR within 45 days of this release. A more detailed description of data verification undertaken by the qualified persons will be included in the relevant sections of the technical report.
Once filed, such technical report will supercede and replace any other technical report for the Project. Further details of the 2018 PFS are provided in the NI 43-101 Technical Report titled "Pre-feasibility Study for the Wheeler River Uranium Project,
This news release includes certain terms or performance measures commonly used in the mining industry that are not defined under International Financial Reporting Standards ("IFRS"). Such non-GAAP performance measures, including operating costs, sustaining costs, and all-in costs, are included because the Company understands that investors use this information to determine the Company's ability to generate earnings and cash flows. The Company believes that conventional measures of performance prepared in accordance with IFRS do not fully illustrate the ability of mines to generate cash flows. Non-GAAP financial measures should not be considered in isolation as a substitute for measures of performance prepared in accordance with IFRS and are not necessarily indicative of operating costs, operating profit or cash flows presented under IFRS.
Certain information contained in this news release constitutes 'forward-looking information', within the meaning of the applicable
Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as 'plans', 'expects', 'budget', 'scheduled', 'estimates', 'forecasts', 'intends', 'anticipates', or 'believes', or the negatives and/or variations of such words and phrases, or state that certain actions, events or results 'may', 'could,', 'would', 'might' or 'will be taken', 'occur', 'be achieved' or 'has the potential to'.
In particular, this news release contains forward-looking information pertaining to the following: the interpretation of the Phoenix FS and Gryphon Update and expectations with respect thereto, including estimates of mine production, NPV, capital costs, operating costs and estimated uranium revenue; expectations with respect to pre- and post-FID costs; expectations with respect to taxes and royalties; assumptions with respect to the industry and uranium prices, anticipated impacts of inflation; expectations with respect to project development and permitting, construction and operational processes; infrastructure and the availability of services to be provided by third parties; expectations with respect to project remediation and decommissioning; the results and interpretations of the FFT; plans for FEED and detailed design for
Forward looking statements are based on the opinions and estimates of management as of the date such statements are made, and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Denison to be materially different from those expressed or implied by such forward-looking statements. For example, the modelling and assumptions upon which the interpretation of results are based may not be maintained after further testing or be representative of actual conditions. Denison believes that the expectations reflected in this forward-looking information are reasonable but no assurance can be given that these expectations will prove to be accurate and results may differ materially from those anticipated in this forward-looking information. For a discussion in respect of risks and other factors that could influence forward-looking events, please refer to the factors discussed in Denison's AIF or subsequent quarterly financial reports under the heading 'Risk Factors'. These factors are not, and should not be construed as being exhaustive.
Accordingly, readers should not place undue reliance on forward-looking statements. The forward-looking information contained in this news release is expressly qualified by this cautionary statement. Any forward-looking information and the assumptions made with respect thereto speaks only as of the date of this news release. Denison does not undertake any obligation to publicly update or revise any forward-looking information after the date of this news release to conform such information to actual results or to changes in Denison's expectations except as otherwise required by applicable legislation.
Figure 1 – Proposed ISR Wellfield Layout for Mining Phase 1
Figure 2 – Proposed Phoenix ISR Operation Site Layout
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SOURCE Denison Mines Corp.
