Mr. David Cates reports
DENISON TO INCREASE ITS INTEREST IN THE WHEELER RIVER URANIUM PROJECT
Denison Mines Corp. has entered into an agreement with Cameco Corp. to increase its ownership in the Wheeler River uranium project through the acquisition of Cameco's minority interest in the project.
Pursuant to the terms of the transaction, and subject to certain rights of first refusal (ROFR) in favour of JCU (Canada) Exploration Company Ltd. (JCU), Denison has agreed to acquire 100 per cent of Cameco's interest (expected to be approximately 24 per cent by the end of 2018) in the Wheeler River joint venture in exchange for the issuance of 24,615,000 common shares of Denison at a deemed price of 65 cents per share for a total consideration valued at approximately $16-million. The acquisition of Cameco's interest in the Wheeler River joint venture will increase Denison's interest in the project to 90 per cent (or approximately 86.84 per cent if JCU exercises its ROFR).
David Cates, president and chief executive officer of Denison Mines, commented:
"We are pleased to have reached an agreement with Cameco to acquire their remaining minority interest in Wheeler River. Denison, Cameco and JCU have worked together since 2004 to advance Wheeler River to the point of being the largest undeveloped uranium project in the eastern Athabasca basin.
We believe this transaction represents a unique opportunity to add to our existing controlling interest in the project and offer significant value accretion to Denison shareholders.
We are eager to continue advancing the project towards a development decision -- with the next step being the planned completion of a prefeasibility study before the end of the third quarter."
Wheeler River is host to the Phoenix and Gryphon uranium deposits, which are estimated to contain combined indicated mineral resources of 132.1 million pounds U3O8 (triuranium octoxide) at an average grade of 3.3 per cent U3O8, plus combined inferred mineral resources of three million pounds U3O8 at an average grade of 1.7 per cent U3O8. The project is situated along the road and power line that runs between Cameco's McArthur River mine and Key Lake mill complex in Northern Saskatchewan, and is a joint venture between Denison (63.3 per cent, increasing to approximately 66 per cent by the end of 2018 under a previously announced earn-in agreement), Cameco (26.7 per cent, decreasing to approximately 24 per cent by the end of 2018) and JCU (10 per cent).
Restriction on Denison shares
The consideration shares will be subject to a six-month escrow period. During this time, Cameco has agreed to not, directly or indirectly, transfer any consideration shares without the prior written consent of Denison. The transfer of the consideration shares is also restricted for a further six-month period, where Denison retains the right, under certain circumstances, to designate a purchaser upon notice from Cameco of the intent to transfer or sell all or a portion of the consideration shares. The issuance of the consideration shares is subject to the receipt of regulatory approvals from the Toronto Stock Exchange and New York Stock Exchange.
Rights of first refusal
Under the terms of the Wheeler River joint venture, JCU's ROFR allows for JCU to purchase its proportional interest of Cameco's share of the Wheeler River joint venture alongside of Denison. Based on Denison's expected ownership interest of approximately 66 per cent and JCU's ownership interest of 10 per cent, JCU would have the right to purchase approximately 13.16 per cent of Cameco's expected 24 per cent interest in the Wheeler River joint venture.
The transaction is not conditional on JCU waiving its ROFR. Accordingly, should JCU elect to exercise the ROFR, the purchase price to be paid to Cameco by Denison shall be reduced to approximately $13.9-million and Denison will own approximately 86.84 per cent (rather than 90 per cent) of the Wheeler River joint venture on completion of the transaction.
Advisers and counsel
Haywood Securities Inc. is acting as financial adviser to Denison in connection with the transaction. Blake, Cassels & Graydon LLP is acting as legal counsel to Denison.
About Wheeler River
Wheeler River is the largest undeveloped high-grade uranium project in the infrastructure-rich eastern portion of the Athabasca basin region, in Northern Saskatchewan, including combined indicated mineral resources of 132.1 million pounds U3O8 at an average grade of 3.3 per cent U3O8, plus combined inferred mineral resources of three million pounds U3O8 at an average grade of 1.7 per cent U3O8. The project is host to the high-grade Gryphon and Phoenix uranium deposits (discovered by Denison in 2014 and 2008, respectively) and is a joint venture between Denison (63.3 per cent and operator), Cameco (26.7 per cent) and JCU (10 per cent).
A prefeasibility study was initiated for the Wheeler River project in Q3 2016 and is expected to be completed during Q3 2018. Prior to initiation of the PFS, a preliminary economic assessment was completed in Q2 2016, which considered the potential economic merit of co-developing the high-grade Gryphon and Phoenix deposits as a single underground mining operation. The PEA returned a base case pretax internal rate of return of 20.4 per cent based on the then-current long-term contract price of uranium ($44 (U.S.) per pound U3O8) and Denison's share of estimated initial capital expenditures of $336-million ($560-million on 100-per-cent basis).
The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them to be categorized as mineral reserves, and there is no certainty that the preliminary economic assessment will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
In January, 2017, Denison entered into an agreement with its Wheeler River joint venture partners, Cameco and JCU, to finance 75 per cent of joint venture expenses in 2017 and 2018 (ordinarily 60 per cent) in exchange for an increase in Denison's interest in the project to up to approximately 66 per cent. Under the terms of the agreement, Cameco will finance 50 per cent of its ordinary 30-per-cent share in 2017 and 2018, and JCU is expected to continue to finance its 10-per-cent interest in the project. Pursuant to the agreement, as at Dec. 31, 2017, Denison had increased its interest in the Wheeler River project from 60 per cent to 63.3 per cent.
Further details regarding the Wheeler River project are provided in the National Instrument 43-101 technical report for the Wheeler River project titled "Technical Report with an Updated Resource Estimate for the Wheeler River Property, Northern Saskatchewan, Canada," dated March 15, 2018, with an effective date of March 9, 2018. A copy of this report is available on Denison's website as well as under its profile on SEDAR and on EDGAR.
Dale Verran, MSc, PGeo, PrSciNat, Denison's vice-president of exploration, is a qualified person in accordance with the requirements of NI 43-101. Mr. Verran has reviewed and approved the technical information contained in this release.
About Denison Mines Corp.
Denison Mines is a uranium exploration and development company with interests focused in the Athabasca basin region of Northern Saskatchewan, Canada. In addition to its 63.3-per-cent-owned Wheeler River project, which ranks as the largest undeveloped high-grade uranium project in the infrastructure-rich eastern portion of the Athabasca basin region, Denison's Athabasca basin exploration portfolio consists of numerous projects covering approximately 353,000 hectares. Denison's interests in Athabasca basin also include a 22.5-per-cent 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-per-cent interest in the Midwest and Midwest A deposits, and a 65.45-per-cent interest in the J zone deposit and Huskie discovery on the Waterbury Lake property.
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