EX-99.2
3
mcr-2020waterburypea.htm
MATERIAL CHANGE REPORT DATED NOVEMBER 18, 2020
mcr-2020waterburypea
Exhibit 99.2
FORM 51-102F3
MATERIAL CHANGE REPORT
Item
1:
Name and
Address of Company
Denison Mines
Corp. (“Denison”
or the “Company”)
1100 – 40
University Avenue
Toronto, ON M5J
1T1
Item
2:
Dates of
Material Change
November 17,
2020
Item
3:
News
Release
A news release
announcing the material change was disseminated on November 17,
2020 through the facilities of CNW Group (Cision), a copy of which
have been filed under Denison’s profile on
SEDAR.
Item
4:
Summary of
Material Change
On November 17,
2020, Denison announced the successful completion of an independent
Preliminary Economic Assessment (“PEA”) for the
Waterbury Lake Property (“Waterbury”) evaluating the
potential use of the in-situ recovery (“ISR”) mining
method at the Tthe Heldeth Túé (formerly named J Zone)
deposit (the “Project”) with associated processing at
Denison’s 22.5% owned McClean Lake mill.
Item
5:
Full
Description of Material Change
5.1 Full
Description of Material Change
On November 17,
2020, Denison announced the successful completion of an independent
PEA for the Waterbury Lake Property evaluating the potential use of
the ISR mining method at the Tthe Heldeth Túé deposit
(see below, formerly named J Zone) with associated processing at
Denison’s 22.5% owned McClean Lake mill.
The PEA was
prepared by Engcomp Engineering & Computing Professionals
(“Engcomp”) of Saskatoon and demonstrates robust
economics for a small-scale Athabasca Basin ISR uranium mining
project – including low initial capital costs, low operating
costs and globally competitive all-in costs, as
follows:
Mine
life
~ 6 years (Avg. ~1.6 million lbs
U3O8
per year)
Projected mine production (1)
9.7 million lbs U3O8 (177,664 tonnes
at 2.49%)
Average
cash operating costs
USD$12.23 ($16.27) per lb
U3O8
Initial capital costs (2)
$112 million
Base case pre-tax IRR (3)
39.1%
Base case pre-tax NPV8%
(3)
$177 million
Base
case price assumption
UxC spot price(4)
(Avg. USD$53.59 per lb
U3O8)
Operating profit margin (5)
77% at USD$53.59 per lb
U3O8
All-in cost (6)
USD$24.93 ($33.16) per lb
U3O8
(1)
See Deposit, Geology & Projected Mine Plan section below for
additional information regarding projected mine production.
Scheduled tonnes and grade do not represent an estimate of mineral
reserves.
(2)
Initial capital costs exclude $20.1 million of estimated
pre-construction Project evaluation and development
costs.
(3)
NPV and IRR are calculated to the start of pre-production
activities for the THT operation.
(4)
Spot price forecast is based on “Composite Midpoint”
scenario from UxC’s Q3’2020 Uranium Market Outlook
(“UMO”) for the years 2028 to 2033, and is stated in
constant (not-inflated) dollars.
(5)
Operating profit margin is calculated as uranium revenue less
operating costs, divided by uranium revenue. Operating costs
exclude all royalties, surcharges and income taxes.
(6)
All-in cost is estimated on a pre-tax basis and includes all
project operating costs and capital costs, excluding project
evaluation and development costs, divided by the estimated number
of finished pounds U3O8
produced.
Denison also
announced the re-naming of the J Zone deposit to the “Tthe
Heldeth Túé” (“THT”)
deposit – pronounced “Tey Hel-deth Tway”. The
Ya’thi Néné Land and Resource Office
(“YNLR”), working together with Denison, reviewed the
Conceptual Mining Study (“Concept Study”) prepared by
Denison for the J Zone deposit prior to initiation of the PEA. The
YNLR provided valuable early feedback related to the
Project’s next steps, and recommended the use of a Dené
name for the deposit that would recognize and respect the
connection of the Athabasca Denesųłiné to the land
where the deposit is located.
Waterbury is
owned by the Waterbury Lake Uranium Limited Partnership
(“WLULP”), of which Denison Waterbury Corp. (a
wholly-owned subsidiary of Denison) owns 66.90% and Korea Waterbury
Lake Uranium Limited Partnership (“KWULP”) owns 33.10%.
KWULP is comprised of a consortium of investors, in which Korea
Hydro & Nuclear Power (“KHNP”) holds a majority
position. KHNP is headquartered in Gyeongju, South Korea and is the
country’s largest electrical power generation company,
operating 24 nuclear power reactors and supplying approximately
one-quarter of the country’s electricity. KHNP is also a
significant shareholder in Denison.
The PEA is
prepared on a Project (100% ownership) and pre-tax basis, as each
of the partners to the WLULP are subject to different tax and other
obligations. After-tax results attributable to Denison’s
ownership interest are provided below under the heading
“Indicative Denison Post-Tax Results”. All amounts are
in Canadian dollars unless otherwise noted.
The PEA is a
preliminary analysis of the potential viability of the
Project’s mineral resources, and should not be considered the
same as a Pre-Feasibility or Feasibility Study, as various factors
are preliminary in nature. There is no certainty that the results
from the PEA will be realized. Mineral resources are not mineral
reserves and do not have demonstrated economic
viability.
Preliminary Economic Assessment Highlights
●
Selection of ISR mining method
potentially unlocks the value of the THT deposit:
Following the release of the Wheeler
PFS in 2018 and subsequent studies aimed at increasing confidence
in the ISR mining method for the Phoenix deposit, including the
achievement of “proof of concept”, Denison evaluated
the application of the ISR mining method on the THT deposit.
Similar to Phoenix, the THT deposit is an unconformity-related
uranium deposit, where the mineralization is interpreted to be
situated in permeable ground – expected to allow a mining
solution to travel within the mineralized zone. Additionally, the
basement rock located below the mineralized zone is interpreted to
be highly impermeable and is expected to allow for containment of
the mining solution beneath the deposit.
●
Freeze Wall design expected to
reduce technical risk and upfront capital costs:
Full hydraulic containment of the
orebody during mining activities has been planned for the Project
with the installation of a freeze wall from surface to the basement
rocks underlying the THT deposit– effectively creating
containment 360 degrees around the deposit. This design makes use
of established ground-freezing technology and conventional diamond
drilling to create a physical perimeter around the deposit –
containing the mining solution used in the ISR mining process and
protecting the surrounding environment to minimize environmental
impacts of the Project. Several additional containment
methodologies were evaluated as part of the Concept Study –
including the freeze dome design outlined in the Wheeler PFS.
Results of the Concept Study showed that the freeze wall design
offered considerably lower technical risk, equal
or greater environmental protection, a
smaller environmental footprint, sustainability benefits associated
with the utilization of drilling techniques conducive to local
employment, and improved economic results with significantly lower
initial capital costs.
●
Existing regional
infrastructure offers significant benefit: The Waterbury Lake property is located
approximately 15 kilometres from Denison’s 22.5% owned
McClean Lake uranium mill, in the infrastructure rich eastern
portion of the Athabasca Basin region. The PEA assumes the McClean
Lake uranium mill will be used to process the Uranium Bearing
Solution (“UBS”) to be recovered from the ISR wellfield
and the nearby Points North Landing (“Points North”)
facilities will be used for accommodations and other support
services. Taken together, this existing regional infrastructure
results in a significant reduction in the initial capital costs and
operating costs estimated in the PEA.
●
Potential to be one of the most
environmentally responsible mining operations in the world:
The combination of the ISR mining
method with a high-grade uranium deposit in the Athabasca Basin
region has the potential to result in one of the most
environmentally protective mining operations in the world –
owing to the small foot print of the operation and its minimal
surface disturbances, as well as the fact that there are no
tailings expected to be generated and no site water discharge
planned. The modelled operation also has access to the Provincial
power grid and is not expected to rely on diesel generators for
primary power on site. Additionally, the freeze wall design
provides for the physical isolation of the ISR mining operation
from the surrounding environment, which alleviates the primary
environmental concern of conventional ISR mining operations and
facilitates a controlled restoration process once mining has been
completed.
THT ISR Operation – Summary
The THT ISR operation is estimated to produce
total mine production of 9.7 million pounds U3O8
(177,664 tonnes at 2.49%
U3O8)
over an approximate six year mine-life with final processing
occurring at Denison’s 22.5% owned McClean Lake mill.
The PEA includes an indicative
timeline with pre-production activities beginning in 2025, and with
first production estimated in 2028.
Table 1 – Waterbury PEA Financial Results (100%
Basis)
Base case pre-tax NPV8%
(1)
$177 million
Base case pre-tax IRR (1)
39.1%
Base case pre-tax payback period
(2)
~22 months
Initial capital costs (3)
$112 million
Average annual mine production(4)
~1.6 million lbs U3O8
Mine
life
~6 years
Exchange rate (5)
(US$:CAD$)
1:1.33
Discount
rate
8.00%
(1)
NPV and IRR are calculated to the start of pre-production
activities for the Project.
(2)
Payback period is stated as number of months to pay-back from the
start of uranium production.
(3)
Initial capital costs exclude $20.1 million of estimated
pre-construction Project evaluation and development
costs.
(4)
Scheduled tonnes and grade do not represent an estimate of mineral
reserves. See Deposit, Geology & Mine plan section below for
additional information regarding projected mine
production.
(5)
Exchange rate applied on uranium sales.
Table 2 – THT Operating Cost per
Pound U3O8
CAD$
USD$
Mining
/ Wellfield
5.73
4.31
Milling
/ Processing
8.07
6.07
Transport
to converter
0.53
0.40
Site
support and administration
1.94
1.46
Total Operating Costs per pound
U3O8
$16.27
$12.23
Table 3
– THT Capital Costs ($ million) (1)
Initial
Sustaining
Total
Wellfield
49.6
24.4
74.0
Milling
(McClean Lake modifications)
1.1
-
1.1
Surface
facilities
2.1
-
2.1
Utilities
0.7
-
0.7
Electrical
5.0
-
5.0
Civil
& earthworks
5.8
0.4
6.2
Offsite
infrastructure
7.5
-
7.5
Decommissioning
-
19.4
19.4
Construction
Indirect
14.0
-
14.0
Subtotal
85.8
44.2
130.0
Contingency
25.8
5.8
31.6
Total Capital Costs (100%)
111.6
50.0
161.6
(1)
Initial capital costs exclude $20.1 million of estimated
pre-construction Project evaluation and development
costs.
The PEA has been
completed in accordance with NI 43-101, Canadian Institute of
Mining, Milling and Petroleum (CIM) standards and best practices,
as well as other standards such as the AACE Cost Estimation
Standards. The PEA is a
preliminary analysis of the potential viability of the
Project’s mineral resources, and should not be considered the
same as a Pre-Feasibility or Feasibility Study, as various factors
are preliminary in nature. There is no certainty that the results
from the PEA will be realized. Mineral resources are not mineral
reserves and do not have demonstrated economic
viability.
The technical
report supporting the PEA results included in the news release will
be filed on SEDAR within 45 days of the release. Estimated
capital and operating costs are
summarized above, with details provided throughout the balance of
this report. Initial capital costs reflect the estimated cost of
building the proposed ISR mining operation and exclude future
project evaluation and development costs that must be incurred
prior to construction. These costs should be considered when
assessing the merit of advancing the project to a development
decision in the future.
Price Assumptions & Sensitivities
The base-case economic analysis assumes uranium
sales will be made from time to time throughout production at
UxC’s forecasted annual “Composite Midpoint” spot
price from the Q3’2020 Uranium Market Outlook
(“UMO”), which is stated annually in constant
(non-inflated) 2020 dollars and ranges from ~USD$49 per lb
U3O8
to USD$57 per lb U3O8
during the approximate six year
estimated life of the THT operation (assumed for pricing purposes
to be from 2028 to 2033). The average base case selling price is
USD$53.59 per lb U3O8.
Given the estimated all-in costs of USD$24.93 per
lb U3O8,
the Project is projected to be able to generate positive economic
results at uranium selling prices in the range of recent market
conditions, while also offering excellent leverage to a rising
uranium price, as outlined below:
Table 4 – Sensitivity of Waterbury to Uranium Pricing
Scenarios (100% Basis)
Low Case
Base case
High Case
Uranium
price
USD$35 per lb U3O8
UxC spot price (3)
USD$65 per lb U3O8
Pre-tax NPV8%
(1)
$38 million
$ 177 million
$ 265 million
Pre-tax IRR (1)
17.4%
39.1%
50.0%
Pre-tax payback period (2)
~33 months
~22 months
~18 months
(1)
NPV and IRR are calculated to the start of pre-production
activities for the Project.
(2)
Payback period is stated as number of months to pay-back from the
start of uranium production.
(3)
Spot price forecast is based on “Composite Midpoint”
scenario from UxC’s Q3’2020 Uranium Market Outlook
(“UMO”) for the years 2028 to 2033 and is stated in
constant (not-inflated) dollars.
The
ISR mining method currently accounts for over 50% of the
world’s uranium production – with most of the
production coming from the low-cost mining operations in
Kazakhstan. The mining method involves pumping a mining solution
(lixiviant) through a suitable orebody via a series of injection
wells drilled from surface. As the lixiviant travels through the
host rock, it dissolves or leaches the uranium into the mining
solution, producing a UBS, which is then pumped back to surface via
recovery wells. Once on surface, the UBS is transported (either by
pipeline or trucks) to a surface processing plant for the chemical
separation / removal of the uranium, and reconditioning of the
lixiviant for reinjection into the orebody and further mining
cycles.
Notably,
the ISR mining method does not involve the mechanical excavation or
milling (e.g. crushing and grinding) of the uranium bearing host
rock. Additionally, as the leaching process occurs underground, as
the lixiviant travels through the host rock, there is little waste
produced by the ISR mining process – including no generation
of conventional tailings requiring long term storage. Taken
together, the capital cost profile of ISR mining is typically a
fraction of a conventional uranium mine – which would require
a shaft, decline, or open pit to access the orebody, as well as a
processing plant capable of accepting the host rock, leaching in
vessels on surface, and neutralizing any associated waste for
long-term storage.
Similarly,
the ISR mining process relies primarily on the flow of the mining
solution through the network of injection and recovery wells, which
involves a support system of pumps and piping, but does not require
heavy equipment, is generally not energy intensive, and does not
require miners to work underground or in close proximity to the
uranium orebody, which is advantageous from a safety and radiation
protection standpoint. These factors, amongst others, contribute to
ISR mining operations typically having lower operating cost
profiles in comparison to conventional uranium mines.
While
the ISR mining method is not currently being used in Canada for
uranium mining, unconformity-related uranium deposits in the
Athabasca Basin, including the THT deposit and the Phoenix deposit,
have all the attributes necessary to be a successful ISR operation,
as outlined below:
1.
Mineralization
that is situated in permeable ground, allowing the mining solution
to travel from the injection well through the orebody and
ultimately back to surface via a recovery well;
2.
Mineralization
that is readily dissolvable by the mining solution;
and
3.
Mineralization
that is within a setting which allows for containment of the mining
solution – such that the mining solution can be recovered
without contaminating the environment or being diluted by natural
ground water.
The
geological features found in the THT deposit are similar to those
of Wheeler River’s Phoenix deposit, offering amenability to
ISR mining – including the position of the deposit at the
unconformity, anticipated permeability of the mineralized zone, and
the impermeability of the underlying basement rock.
The
results of the PEA for the THT deposit demonstrate that even
smaller-scale uranium deposits in the Athabasca Basin region, with
access to an existing processing plant, have the potential to
become globally competitive as a result of the unique cost
advantages associated with the ISR mining method.
As
ISR mining is a novel mining method for the Athabasca Basin, there
is risk that the Company may not be able to complete ISR operations
as outlined in the PEA and/or that the costs could be materially
different than estimated.
Deposit, Geology & Projected Mine Plan
Waterbury
is host to two uranium deposits, THT and Huskie, with estimated
mineral resources listed in the table below.
For further details, see the Company’s report entitled
"Technical Report with an Updated Mineral Resource Estimate for the
Waterbury Lake Property, Northern Saskatchewan, Canada –
Mineral Resource Estimate”, as filed on SEDAR and available
on the Company’s website. Mineral resources that are
not mineral reserves do not have demonstrated economic
viability.
(3)
For presentation purposes for the release and this report, the THT
mineral resource estimate presented in this table has been divided
into the East and West pods, to illustrate each zone’s
estimated size and the potential applicability of mining methods,
and is not intended to replace or amend the mineral resource
estimate in the technical report referred to in note (2)
above.
The
PEA has been prepared to evaluate the technical and economic
viability of extracting the Indicated mineral resources estimated
for the THT deposit, and excludes the Inferred mineral resources
estimated for the Huskie deposit. The geologic setting of the
Huskie deposit differs from the THT deposit – in that it is
hosted entirely in the basement rocks underlying the Athabasca
sandstone, and accordingly is not expected to be sufficiently
permeable to be amenable to development with the ISR mining
method.
As
discussed above, the THT deposit is expected to be amenable to ISR
mining owing to its position at the contact of the basement rocks
and the overlying Athabasca Sandstone, where permeability is
increased. The THT deposit is hosted in an east-west fault with the
underlying basement consisting of metasediments bounded by
orthogneiss to the north and south. The metasediments are 90 to 120
metres thick and include a 20 metre thick graphitic pelitic
gneiss.
There are two defined mineralized pods that make
up the THT deposit – the West pod and the East pod. The East
pod contains over 90% of the Indicated mineral resources and angled
drilling from land is expected to allow for ISR wells and the
associated freeze wall to reach the THT deposit East pod without
constructing a berm or peninsula into the surrounding lakes (see
Figure 1). Accordingly, the PEA considers the recovery of the East
pod only. A portion of the East pod is expected to be sterilized as
a result of the installation of the freeze wall, rendering
approximately 206,000 lbs U3O8
unrecoverable. The balance of the East
pod is assumed to be recoverable based on an 85% mining recovery
rate, resulting in total projected mine production of 9.7 million
lbs of U3O8, as shown in Table 6 below. Projections of
scheduled tonnes and grade do not represent an estimate of mineral
reserves.
Tonnage, Grade, Contained Metal and Sterilized Metal presented at a
0% grade cut off to reflect ISR mining
method.
(2)
ISR Mine Projected Production uses the application of an 85% ISR
mining recovery factor with a 0% mineral resource grade
cut-off.
The THT deposit is extremely well defined by 268
drill holes intersecting uranium mineralization over a combined
east-west strike length of up to 700 metres and a maximum
north-south lateral width of 70 metres. The mineralization
thickness varies from 0.50 to 19.5 metres and the mineralization is
found within several metres of the unconformity at depths of 195 to
230 metres. The THT
deposit has been drilled, on average, at 10 metre by 25 metre
spacings across the deposit and in some cases a more dense drill
spacing has been applied. The genesis and structural complexity of
the deposit are well understood. There are no outlying elements of
the deposit requiring further drill testing.
Importantly,
during the PEA process, additional work was undertaken to obtain
permeability data for the THT deposit. Permeability values
collected from core samples from within the mineralized zone were
reviewed by a team of independent experts who concluded that
adequate hydraulic conductivity values, necessary to support
economical ISR production rates, could be achieved through a
combination of engineering controls (e.g. well spacing) and
utilization of permeability enhancement techniques. Additional
hydrogeologic testing and characterization of the THT deposit will
be required to validate these assumptions in future
studies.
THT Freeze Wall Design
In
conventional ISR operations, containment of the mining solution is
typically achieved by natural impermeable bounding layers in the
geological strata and/or by creating a natural drawdown (via
pumping) of the water table towards the ore zone. At the THT
deposit, there is a natural impermeable layer below the
deposit,
in
the form of a competent package of basement rocks, but the deposit
is otherwise hydraulically connected to the vast regional
groundwater system in the overlying sandstone formation that
defines the Athabasca Basin. An artificial freeze wall is planned
to isolate the ISR wellfield from the surrounding environment and
contain the mining solution within the mineralized
zone.
The
freeze wall is expected to be established by drilling a series of
vertical or angled drill holes from surface. Once the hole has been
completed, it will be cased with a dual-layered pipe that will
allow for the circulation of a low-temperature brine solution in
the holes, which is designed to remove heat from the ground and
result in the freezing of the natural groundwater in the vicinity
of the freeze hole. The frozen ground will expand out from each
freeze hole and merge together with the frozen ground associated
with an adjacent freeze hole, establishing an impermeable frozen
wall that will surround the perimeter of the deposit from surface
to depth. The freeze holes will also be keyed into the basement
rock below the deposit to effectively create an in-ground leach
vessel for the ISR mining to take place within.
The
freeze wall design is comprised of 92 holes planned at 7 metre
spacing to a target depth of 200 metres, which will extend below
the unconformity elevation into the basement rock. This represents
a total of 28,766 metres of drilling, which is anticipated to be
completed using commonly used diamond drilling methods conducive to
local employment. This drilling method and design has a much lower
technical risk profile than the horizontal drilling required as
part of the freeze dome design included in the Wheeler PFS, as both
diamond drilling and the associated ground freezing in vertical or
angled drill holes, are well established throughout the world and
are already in use in the existing mining operations in the
Athabasca Basin region. The PEA assumes that it will take 12
months, after installing the necessary freeze holes, for the ground
freezing process to advance to a sufficient point to achieve the
desired level of containment.
Several
other containment options were investigated as part of the Concept
Study, including the freeze dome design outlined in the Wheeler
PFS. The installation of a freeze wall showed significant
advantages in comparison to a freeze dome, with a much lower
technical risk profile and equal or greater environmental
protection, as well as a smaller environmental footprint, and
greater potential for community benefits. Denison is evaluating a
potential adaptation to the ground freezing containment design at
Wheeler River to take advantage of the potential benefits of a
freeze wall design similar to the proposed design for the THT
deposit.
See
Figure 1 for proposed THT Wellfield and Freeze Wall Containment
Configuration
ISR Wellfield Design
Conventional ISR roll-front uranium deposits are
typically spread out over several square kilometres of area, owing
to the low-grade nature of the deposits. An ISR uranium mining
operation in the United States or Kazakhstan will typically have
uranium grades in the range of 0.03 - 0.30% U3O8.
Accordingly, the low-grade nature of these deposits, combined with
well spacing, reagent consumption, surface piping and pumping
distribution systems, all contribute to create economic thresholds
which impact the viability of some deposits.
In the case of the THT east pod, the ore is
confined to a relatively small area (300 metres x 70 metres) and
has demonstrated itself to be readily leachable in laboratory
testing. The average grade of mineralization in the east pod
(approximately 2.49% U3O8)
is also several times higher than a typical low-grade ISR
operation.
The
wellfield design included in the PEA uses 184 wells at 7 metre
spacing arranged in a 5-spot pattern, with four injection wells
around one recovery well. The wells will be drilled from surface
within the freeze wall and angled out to penetrate the mineralized
zone at depth with a roughly 7 metre spacing. The maximum drilling
angle is limited to 45 degrees to reduce the technical risk of
drilling and well installation.
Eight
monitoring wells will be installed outside of the freeze wall to
detect and remediate any excursion of lixiviant from the mining
zone, which is considered unlikely due to the containment of the
freeze wall.
Table 7 – Summary THT ISR Wellfield Wells
Number of Wells
Drill Metres
Recovery
Wells
66
20,637
Injection
Wells
118
36,896
Monitoring
Wells
8
1,750
Total
192
59,283
See
Figure 1 for proposed THT Wellfield and Freeze Wall Containment
Configuration
Metallurgy, Lixiviant Supply & Processing of UBS
Production of the lixiviant mix and final mineral
processing of the UBS expected to be recovered from the THT deposit
is assumed to occur at the nearby McClean Lake mill. The mill is
owned by the McClean Lake Joint Venture (“MLJV”) of
which Orano Canada Inc. holds a 70% interest, Denison Mines Inc. (a
wholly-owned subsidiary of Denison) holds a 22.5% interest, and
OURD (Canada) Co., Ltd. holds a 7.5% interest. The mill is
currently processing material from the Cigar Lake mine under a toll
milling agreement (up to 18 million lbs U3O8
per year); however, it has
approximately 6 million lbs U3O8
per year in additional licenced
processing capacity, with a total licensed capacity of up to 24
million lbs U3O8
per year. The PEA assumes a recovery rate of 98.5% from the
processing of UBS from the THT deposit at the McClean Lake
mill.
The
lixiviant mix needed at the THT site is anticipated to be a low-ph
(acidic) solution, which is capable of being generated by the
existing acid plant at the McClean Lake mill and transported by
trucks and specifically designed transport containers to the THT
site by road (45 kilometres one way). The trucks would then
complete their return loop to the McClean Lake mill transporting
the UBS from the wellfield back to the McClean Lake mill for final
processing.
Historical
metallurgical testing of mineralized core recovered from the THT
deposit and surrounding deposits was used to estimate lixiviant and
UBS characteristics. In comparison to ores milled at the McClean
Lake mill, mineralization from the THT deposit contains
significantly fewer contaminants of concern, which further confirms
the ability of the McClean Lake mill to refine the UBS into a
high-quality yellowcake product with minimal waste streams. A
metallurgical test program was developed for the purpose of the
Waterbury PEA and was completed in 2020 to further support the
selected production rate with a UBS uranium concentration of 7
grams per litre (“g/l”).
The
lixiviant mix has been estimated to require 100 g/l of acid to be
injected in the deposit with free acid concentration remaining in
the resulting UBS of 80 g/l. This effectively results in an acid
consumption rate of 20 g/l to mine the THT deposit with ISR. The
UBS recovered from the THT wellfield would be inserted directly
into the McClean Lake mill's leaching process stream to allow for
the remaining acid in the UBS to be used to leach co-milled ores
from Cigar Lake or other sources. Based on this process, the
McClean Lake mill is expected to require minimal modifications to
accommodate the UBS from the THT deposit. Expected mill
modifications have been costed and are included in the Project
economics.
While
the PEA assumes the use of the McClean Lake mill, the actual use of
the McClean Lake mill’s acid generation and uranium
processing capabilities will require the negotiation of a toll
milling agreement. The PEA approximates the anticipated cost of
using the McClean Lake mill facilities, based on precedent
agreements, but no such terms have been negotiated and/or agreed
with the owners of the MLJV.
Site Infrastructure
Infrastructure requirements for the THT site are
minimal, due to its proximity to the existing Mc Clean Lake mill
and the Points North Landing facility. Given the assumed use of the
McClean Lake mill, the THT ISR operation is expected to
essentially operate as a wellfield site with minimal local
infrastructure. Coupled with the assumed ability to lodge the
workforce at the nearby Points North Landing facilities, project
construction risk and capital costs associated with reaching first
production are significantly reduced. The PEA includes the
following key site infrastructure elements:
●
Thirteen-kilometre
site power line and associated fixturing connected to the
Provincial power grid;
●
1.5 kilometre extension of
the existing access road to the adjacent Roughrider
property;
●
Site operations centre
including offices, water and sewage;
●
Supplies warehousing and fuel
storage facilities;
●
Emergency / back-up power
generators;
●
Wash bay, scanning facilities
for trucks transporting UBS to McClean Lake; and
●
UBS, lixiviant & drilling
waste pads
Construction
activities required to install the wellfield and associated
equipment for mining the THT deposit is relatively simple from a
technical standpoint and is expected to involve limited risk to
capital costs.
See
Figure 2 for Proposed THT Site Layout
See
Figure 3 for THT Deposit Regional Location Map
See
Figure 4 for Proposed THT Site Location Map
Production Schedule
Once commenced, construction is expected to occur
over approximately 2.5 years with the critical path to production
being establishing the freeze wall. Mine production is expected to
begin part way through the first calendar year after construction
is completed with approximately 840,000 lbs of U3O8
mill production expected in year one.
In years two through five, mill production ramps up to a
steady-state annual production level of 2.1 million lbs
U3O8
per year, with total
U3O8
finished produced expected to be 9.6
million lbs over an approximate six-year
period.
Table 8
– Tthe Heldeth Túé East Pod Deposit Overall
Projected Production(1)
Year
1
Year
2
Year
3
Year
4
Year
5
Year
6
Total
Mined
tonnes
15,599
38,994
38,994
38,994
38,994
6,089
177,664
Grade
2.49%
2.49%
2.49%
2.49%
2.49%
2.49%
2.49%
Mine production
(millions lbs U3O8)
0.853
2.132
2.132
2.132
2.132
0.333
9.713
Finished
goods(millions lbs U3O8) (2)
0.840
2.100
2.100
2.100
2.100
0.328
9.567
(1)
Numbers may not add due to rounding.
(2)
Reflects 98.5% recovery rate assumed for processing of UBS from THT
deposit at the McClean Lake mill. Projections of scheduled tonnes
and grade do not represent an estimate of mineral
reserves.
Indicative Denison Post-Tax Results
The PEA is
prepared on a pre-tax and 100% ownership basis, as each partner to
the WLULP is subject to different tax and other obligations.
Denison has completed an indicative post-tax assessment that
reflects its ownership interest in the WLULP (66.90%), the impact
of expected toll mill fees recovered from its 22.5% interest in the
MLJV, and the benefit of Denison’s applicable existing tax
shelter balances.
Net Saskatchewan
sales royalties consist of the resource surcharge (3%), and the
basic uranium royalty (5%), which is partially offset by the
resource credit (0.75%). These amounts are included in the pre-tax
NPV calculations throughout the PEA; however, they are excluded
from the U3O8 operating cost
per pound metrics, as they vary with the value of assumed uranium
sales. The profit from operations is subject to an additional
Provincial uranium profit royalty, which is treated as an income
tax, and allows for the use of certain tax shelter
balances.
Denison’s
post-tax indicative results for the THT project are summarized
below and are based on the prevailing Federal and Provincial
taxation regulations in place at the time of the PEA as well as
Denison’s 66.90% ownership of the property as of the end of
November 2020.
Initial capital cost excludes estimated pre-construction Project
evaluation and development costs
(2)
NPV and IRR are calculated to the start of pre-production
activities for the THT operation.
(3)
Payback period is stated as number of months to pay-back from the
start of uranium production.
The PEA is a
preliminary analysis of the potential viability of the
Project’s mineral resources, and should not be considered the
same as a Pre-Feasibility or Feasibility Study, as various factors
are preliminary in nature. There is no certainty that the results
from the PEA will be realized. Mineral resources are not mineral
reserves and do not have demonstrated economic
viability.
Development Outlook
The results of
the PEA demonstrate the potential for robust project economics
– highlighting the potential for the ISR mining method to
unlock considerable value in the THT deposit, despite its
relatively small resource size. The future initiation of a PFS is
supported by the PEA conclusions and will be required to further
de-risk the application of the IRS mining method at the THT
deposit. The timing of a future PFS for the THT deposit is expected
to be dependent on receipt of the requisite partnership approvals
and Denison’s future efforts to advance and further de-risk
the ISR mining method for the Phoenix deposit at the
Company’s flagship Wheeler River property.
Denison is the
industry leader in advancing the use of the low-cost ISR mining
method amongst the high-grade uranium deposits of the Athabasca
Basin. The PEA for the THT deposit demonstrates the potential for
Denison to convert its existing project portfolio (including an
extensive exploration portfolio) into a portfolio of low-cost
development assets that would supplement the Company’s
flagship Wheeler River project and uniquely position the Company to
offer nuclear utility customers uranium from a diverse portfolio of
supply sources in future years.
Qualified Persons
The technical
information contained in this report has been reviewed and approved
by Mr. David Bronkhorst, P.Eng, Denison's Vice President
Operations, who is a Qualified Person in accordance with the
requirements of NI 43-101.
The Mineral
Resource Estimates contained in this report have been reviewed and
approved by Mr. Andy Yackulic, Denison's Director Exploration, who
is a Qualified Person in accordance with the requirements of NI
43-101.
Gordon Graham, VP
mining of Engcomp, is an independent qualified person in accordance
with the requirements of 43-101 and has reviewed and approved the
summary of the PEA contained in the news release upon which this
report is based.
Data Verification
For a description
of the data verification, assay procedures and the quality
assurance program and quality control measures applied by Denison,
please see Denison's Annual Information Form dated March 13, 2020
filed under the Company's profile on SEDAR at
www.sedar.com
The Mineral
Resource estimates presented in the PEA were independently reviewed
and audited for the Tthe Heldeth Túé (J Zone) Deposit
and for the Husky Deposit as described in “Technical Report
with an Updated Mineral Resource Estimate for the Waterbury Lake
Property, Northern Saskatchewan, Canada – Mineral Resource
Estimate”, dated December 21, 2018 as filed on SEDAR and
available on the Company’s website.
Further
information about the PEA referenced in this report, including
information in respect of data verification, key assumptions,
parameters, risks and other factors, can be found in the technical
report for Waterbury that the Company intends to file on SEDAR and
on the Company’s website within 45 days from the date of this
news release.
5.2
Disclosure of Restructuring Transactions
Not
applicable
Item
6:
Reliance
on subsection 7.1(2) or (3) of National Instrument
51-102
Not
applicable
Item
7:
Omitted
Information
Not
applicable
Item
8:
Executive
Officer
For further
information, please contact David Cates, President & Chief
Executive Officer, at (416) 979-1991 Ext. 362.
Certain information contained in this material change report
constitutes ‘forward-looking information’, within the
meaning of the applicable United States and 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 report
contains forward-looking information pertaining to the results of,
and estimates, assumptions and projections provided in the PEA,
including future development methods and plans, market prices,
costs and capital expenditures; the Company’s current plans
with respect to the development of the Project; the results of, and
estimates, assumptions and projections provided in, the Wheeler
PFS; the Company’s current intentions to evaluate the
potential benefits of a freeze wall for use at the Wheeler River
Phoenix deposit; assumptions regarding Denison’s ability to
obtain all necessary regulatory approvals to commence development
in accordance with the PEA; Denison’s percentage interest in
its projects and its agreements with its joint venture partners;
and the availability of services to be provided by third parties.
Statements relating to "mineral resources" are deemed to be
forward-looking information, as they involve the implied assessment
that, based on certain estimates and assumptions, the 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. For
example, further studies, including a PFS, may not be undertaken if
the results of the PEA are not maintained after further testing;
Denison may decide or otherwise be required to discontinue the
related work if it is unable to maintain or otherwise secure the
necessary resources (such as testing facilities, capital funding,
regulatory approvals, etc.) or operations are otherwise affected by
COVID-19 and its potentially far-reaching impacts. 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 Annual Information Form dated
March 13, 2020 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 report 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 report.
Denison does not undertake any obligation to publicly update or
revise any forward-looking information after the date of this
report 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 and Probable Mineral Reserves: This report
may use the terms 'measured', 'indicated' and 'inferred' mineral
resources. United States investors are advised that while such
terms have been prepared in accordance with the definition
standards on mineral reserves of the Canadian Institute of Mining,
Metallurgy and Petroleum referred to in Canadian National
Instrument 43-101 Mineral Disclosure Standards ('NI 43-101') and
are recognized and required by Canadian regulations, these terms
are not defined under Industry Guide 7 under the United States
Securities Act and, until recently, have not been permitted to be
used in reports and registration statements filed with the United
States Securities and Exchange Commission ('SEC'). '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. In addition, the terms
"mineral reserve", "proven mineral reserve" and "probable mineral
reserve" for the purposes of NI 43-101 differ from the definitions
and allowable usage in Industry Guide 7. Effective February 2019,
the SEC adopted amendments to its disclosure rules to modernize the
mineral property disclosure requirements for issuers whose
securities are registered with the SEC under the Exchange Act and
as a result, the SEC now recognizes estimates of "measured mineral
resources", "indicated mineral resources" and "inferred mineral
resources". In addition, the SEC has amended its definitions of
"proven mineral reserves" and "probable mineral reserves" to be
"substantially similar" to the corresponding definitions under the
CIM Standards, as required under NI 43-101. However, information
regarding mineral resources or mineral reserves in Denison's
disclosure may not be comparable to similar information made public
by United States companies.