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Wheeler River Project

Wheeler River

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Project Highlights

PROJECT DESCRIPTION

Wheeler River Project is the largest undeveloped uranium project in the infrastructure-rich eastern Athabasca Basin

DEPOSIT HIGHLIGHTS

High-grade Phoenix and Gryphon uranium deposits.

Phoenix deposit is the highest grade undeveloped uranium deposit known, including a high-grade core at Phoenix Zone A estimated to contain 62,900 tonnes at 43.2% U3O8 for 59.9M lbs U3O8 

PRE-FEASIBILITY STUDY (PFS)

in progress with expected completion in 2018

RESOURCES

97% of total mineral resources at Indicated level of confidence, eligible for inclusion in PFS

OWNERSHIP

Denison is funding 75% of JV expenditures in 2017 and 2018, under agreement with JV partners, to increase ownership from 60% to ~66% by the end of 2018

EXPLORATION

Exploration activities transitioning back to discovery focus in 2018 and beyond

Location

The property is located along the eastern edge of the Athabasca Basin in northern Saskatchewan, Canada and is located approximately 35 kilometres northeast of the Key Lake mill and 35 kilometres southwest of the McArthur River uranium mine.The property is well located with respect to all-weather roads and the provincial power grid. Vehicle access to the property is by the provincial highway system to the Key Lake mill then by the ore haul road between the Key Lake and McArthur River operations to the eastern part of the property.

Ownership

The Wheeler River project is owned by Denison (63.30%) and its joint venture partners, Cameco Corp. (“Cameco”) (26.70%) and JCU (Canada) Exploration Company, Limited (“JCU”) (10.00%) pursuant to the Wheeler River Joint Venture.Denison is the operator and manager of the project.As announced on January 10, 2017, Denison entered into an agreement with its Wheeler River Joint Venture partners, Cameco and 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% by the end of 2018.By the end of 2017, Denison had increased its interest in Wheeler River to 63.3%.

Pre-Feasibility Study

Denison expects to complete a PFS for the Wheeler River property during 2018. The PFS will be based on the combined Indicated Mineral Resources for the project, which includes the Phoenix and Gryphon deposits. Denison has retained Stantec Consulting Inc. ("Stantec"), ENGCOMP Engineering and Computing Professionals Inc. ("ENGCOMP") and Hatch Ltd., as leading engineering and consulting firms, to lead and author the PFS and to support the Company’s in-house project development team in the completion of the PFS. The PFS is expected to evaluate production potential from both the Gryphon and Phoenix deposits while utilizing Denison’s McClean Lake mill.

The PFS will evaluate Gryphon production using a conventional longhole mining program and assess innovative extraction techniques for the Phoenix deposit. Mineral processing activities are expected to take advantage of the capacity available at the McClean Lake facility with limited capital upgrade requirements. With the already established regional infrastructure (mill, provincial highway, provincial power line, supply chain, etc.) initial capital costs are expected to be well below comparables in the industry. If determined achievable, low capital costs, combined with high grades and low operating expenses, could lead to an economically robust project that is able to thrive in difficult market conditions.

Estimated Mineral Resources

Deposit

Classification

Tonnes

Grade % U3O8

M Lbs U3O8

Denison
Share (M Lbs
U3O8)

Phoenix

Indicated

166,000

19.1

70.2

44.4

Gryphon

Indicated

1,634,000

1.7

61.9

39.2

Phoenix

Inferred

9,000

5.8

1.1

0.7

Gryphon

Inferred

73,000

1.2

1.9

1.2

Notes:

  1. The Mineral Resource estimates were prepared for the Company by RPA Inc. in accordance with CIM Definition Standards (2014) and NI 43-101.
  2. Mineral Resources for the Phoenix and Gryphon deposit are reported above a cut-off grade of 0.8% U3O8 and 0.2% U3O8 respectively.

Exploration

Very little regional exploration has taken place on the Wheeler River property in recent years, with drilling efforts focused on the Phoenix and Gryphon deposits, which were discovered by Denison in 2008 and 2014 respectively. The property is host to numerous prospective lithostructural corridors which are under- or unexplored and have the potential for additional large, high-grade unconformity or basement hosted deposits. The 2018 and future exploration programs are expected to place a renewed focus along these corridors to follow-up on previous mineralized drill results, or to test geophysical targets identified from recent surveys.

2016 Preliminary Economic Assessment

Denison completed a Preliminary Economic Assessment (“PEA”) for the Wheeler River project in 2016.For the purposes of the 2016 PEA, the Jet bore mining system (JBS) was selected for the high grade Phoenix deposit, owing to the similarities between Phoenix and the Cigar Lake mine – which is currently operating using the JBS mining method.For Gryphon, the physical properties of the deposit and host rock led to the selection of conventional longhole open stoping with backfill as the optimum mining method.The PEA envisaged a co-development scenario where the Gryphon deposit would be developed first, producing approximately 6M lbs U3O8/year for 7 years, followed by the Phoenix deposit producing approximately 7Mlbs U3O8/year for a further 9 years for a total life of mine of 16 years.

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.

Capital costs for the project were estimated, for the purposes of the PEA, to be $1,103 million including a contingency of 26%, and initial capital of $560 million.

Capital Costs
(CAD, millions)

Initial

Sustaining

Total

Owner’s cost

$25

-

$25

Surface Infrastructure

$167

$7

$174

Mine

$219

$335

$554

Plant Feed Handling & Processing

$18

$60

$78

Decommissioning

$0

$40

$40

Subtotal

$429

$442

$871

Contingency

$131

$101

$232

Total

$560

$543

$1,103

Capital costs are expressed in 2015 Canadian dollars to a bottom line accuracy of +/- 40%. Initial capital costs are based on the five-year period from January 1, 2021 through to December 31, 2025. Sustaining capital costs are for the period from January 1, 2026 through to the end of 2041.

Operating costs for the project were estimated, for the purposes of the PEA, as low as US$14.28/lb U3O8.

Operating Costs

(CAD$/lb U3O8)

Gryphon

Phoenix

Mining

$3.45

$17.45

Surface Transportation

$1.63

$0.85

Mineral Processing (including tolling)

$10.03

$8.03

General & Admin

$4.17

$3.57

Total (CAD$/lb U3O8)

$19.28

$29.90

   

Total (USD$/lb U3O8)*

$14.28

$22.15

* USD based on PEA CAD:USD exchange rate of 1.35.

Because of the long lead time to production (estimated to be 2026 in the PEA), the PEA considers the following two pricing scenarios, both sourced from UxC: (1) a Base case scenario using a long-term contract price of US$44.00 per pound U3O8 as of March 28, 2016; and (2) a Production case price sensitivity using a long-term contract price of US$62.60 per pound U3O8 for the year 2026 (based on UxC’s Uranium Market Outlook Q1 2016) when the project production period begins. These prices have been converted to CAD using an exchange rate of 1.35 CAD / USD based on Bloomberg long term projections as of February 2016.

The project economics have been further analyzed on a pre-tax basis (100% basis) and a Denison specific post-tax basis (60% basis, based on Denison’s ownership interest as at the PEA date).

Pre-tax (100% basis) economic results:

 

Base Case

Production Case

Internal rate of return (IRR)

20.4%

34.1%

Net present value (NPV) at 8% discounting

$513 million

$1,420 million

Pay-back period (from the start of production)

~3 years

~18 months

Denison specific post-tax (60% basis) economic results:

 

Base Case

Production Case

Internal rate of return (IRR)

17.8%

29.2%

Net present value (NPV) at 8% discounting

$206 million

$548 million

 

References

(1) Technical Report with an Updated Resource Estimate for the Wheeler River Property, Northern Saskatchewan, Canada, dated March 15, 2018, by Mr. Mark Mathisen, C.P.G. of Roscoe Postle Associates Inc. (“RPA”) and Mr. Ken Reipas, P.Eng of SRK Consulting (Canada) Inc. The report includes the Preliminary Economic Analysis completed March 2016.

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