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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Denison Mines Corp | AMEX:DNN | AMEX | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.01 | -0.65% | 1.54 | 1.59 | 1.54 | 1.57 | 13,791,742 | 22:13:59 |
Denison Mines Corp.
|
||||
/s/ Brenda Lazare | ||||
Brenda Lazare | ||||
Date: August 13, 2008 | Canadian Counsel and Corporate Secretary |
2
Exhibit Number | Description | |
|
||
1.
|
Press release dated August 13, 2008 | |
|
||
2.
|
Managements Discussion and Analysis for the six months ended June 30, 2008 | |
|
||
3.
|
Financial Statements for the six months ended June 30, 2008 | |
|
||
4.
|
Form 52-109F2 for each of Messrs. Farmer and Anderson dated August 13, 2008 |
3
Denison Mines Corp.
Atrium on Bay, 595 Bay Street, Suite 402 Toronto, ON M5G 2C2 Ph. 416-979-1991 Fx. 416-979-5893 www.denisonmines.com |
PRESS RELEASE | Trading symbols: DML-T, DNN-A | |
| Denison sold 100,000 pounds U 3 O 8 during the quarter from U.S. production at an average price of $83.13 per pound and 271,950 pounds U 3 O 8 from its Canadian production under the existing long-term contracts at an average price of $50.96 per pound. | ||
| Spot prices for U 3 O 8 decreased from $71.00 per pound at March 31, 2008 to $59.00 per pound at June 30, 2008 as quoted by Ux Consulting. The long-term price for U 3 O 8 dropped from $95.00 per pound at March 31, 2008 to $80.00 per pound at June 30, 2008 as quoted by Ux Consulting. | ||
| Denison purchased 5,465,000 common equity units in Uranerz Energy Corp., each unit consisting of one common share and one-half warrant for $2.40 per unit or $13,116,000. |
| Denison commenced processing of conventional ore at its White Mesa mill in Utah on April 28, 2008. | ||
| Denison entered into a credit agreement with the Bank of Nova Scotia for a US$125,000,000 revolving three year term credit facility. |
Contracted Canadian Sales Volumes | ||||||||||||||||
(pounds U 3 O 8 x 1000) | ||||||||||||||||
(in thousands) | 2008 | 2009 | 2010 | Pricing | ||||||||||||
|
||||||||||||||||
Market Related
|
588 | 392 | 49 | 80% to 85% of Spot | ||||||||||||
Legacy Base Escalated
|
95 | 0 | 0 | $20.00 to $26.00 | ||||||||||||
Legacy Market Related
|
60 | 0 | 0 | 96% of Spot |
-2-
-3-
1 | The grades reported herein are equivalent U 3 O 8 grades based on down hole radiometric probing at a cut-off grade of 0.05% eU; geochemical corroborative assay results have not been completed at this time. All intersections and geological interpretations are based on diamond drill core only and mineralized intervals may not represent true thickness. For a description of the quality assurance program and quality control measures applied by both ARC and Denison during the above described work, please see Denisons Annual Information Form filed under the Companys profile on March 28, 2008 on the SEDAR website at www.sedar.com. |
-4-
| Increase U 3 O 8 production by over 200% to 2.1 to 2.4 million pounds | ||
| Produce 3.0 to 4.0 million pounds of vanadium (V 2 O 5 ) | ||
| Sell 1.7 million pounds U 3 O 8 and 3.0 million pounds V 2 O 5 at or near market prices | ||
| Develop three new near-term projects: Midwest, Mongolia and Mutanga | ||
| Pursue aggressive exploration program for long-term growth | ||
| Attract and retain great people |
-5-
For further information contact: | ||
E. Peter Farmer | (416) 979-1991 Extension 231 | |
Chief Executive Officer | ||
Ron Hochstein | (416) 979-1991 Extension 232 | |
President and Chief Operating Officer | ||
James R. Anderson | (416) 979-1991 Extension 372 | |
Executive Vice President and Chief Financial Officer |
-6-
-7-
Three Months | Three Months | Six Months | Six Months | |||||||||||||
Ended June 30, | Ended June 30, | Ended June 30, | Ended June 30, | |||||||||||||
(in thousands) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Results of Operations:
|
||||||||||||||||
Total revenues
|
$ | 31,713 | $ | 18,809 | $ | 49,894 | $ | 30,528 | ||||||||
Net income (loss)
|
(13,756 | ) | 40,489 | (24,218 | ) | 35,423 | ||||||||||
Earnings (loss) per share Basic
|
(0.07 | ) | 0.21 | (0.13 | ) | 0.19 | ||||||||||
Diluted
|
(0.07 | ) | 0.21 | (0.13 | ) | 0.18 | ||||||||||
As at June 30, | As at December 31, | |||||||
2008 | 2007 | |||||||
Financial Position:
|
||||||||
Working capital
|
$ | 54,910 | $ | 75,915 | ||||
Long-term investments
|
58,944 | $ | 20,507 | |||||
Property, plant and equipment
|
767,197 | 727,823 | ||||||
Total assets
|
1,054,249 | 1,001,581 | ||||||
Total long-term liabilities
|
$ | 259,901 | $ | 175,081 | ||||
-8-
Contracted Canadian Sales Volumes | ||||||||||||||||
(pounds U 3 O 8 x 1000) | ||||||||||||||||
(in thousands) | 2008 | 2009 | 2010 | Pricing | ||||||||||||
|
||||||||||||||||
Market Related
|
588 | 392 | 49 | 80% to 85% of Spot | ||||||||||||
Legacy Base Escalated
|
95 | 0 | 0 | $20.00 to $26.00 | ||||||||||||
Legacy Market Related
|
60 | 0 | 0 | 96% of Spot |
-9-
-10-
-11-
1 | The grades reported herein are equivalent U 3 O 8 grades based on down hole radiometric probing at a cut-off grade of 0.05% eU ; geochemical corroborative assay results have not been completed at this time. All intersections and geological interpretations are based on diamond drill core only and mineralized intervals may not represent true thickness. For a description of the quality assurance program and quality control measures applied by both ARC and Denison during the above described work, please see Denisons Annual Information Form filed under the Companys profile on March 28, 2008 on the SEDAR website at www.sedar.com. |
-12-
| Minimum tangible net worth of $450,000,000 plus 50% of positive quarterly net income and 50% of net proceeds of all equity issues after December 31, 2007; | ||
| Maximum ratio of total net debt to earnings before interest, taxes, depreciation and amortization (EBITDA) of 3.5 to 1.0 for each fiscal quarter starting with the fiscal quarter ending December 31, 2008 and including the fiscal quarter September 30, 2009 and 3.0 to 1.0 for each fiscal quarter thereafter; | ||
| Minimum interest coverage ratio of 3.0 to 1.0 for each fiscal quarter starting with the fiscal quarter ending December 31, 2008; and | ||
| Minimum current ratio of 1.1 to 1.0. |
-13-
Three Months | Three Months | Six Months | Six Months | |||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||
(in thousands) | June 30, 2008 | June 30, 2007 | June 30, 2008 | June 30, 2007 | ||||||||||||
Revenue
|
||||||||||||||||
Uranium sales
|
$ | | $ | 9,750 | $ | | $ | 9,750 | ||||||||
Management fees (including expenses)
|
385 | 706 | 1,001 | 1,190 | ||||||||||||
Commission fees on purchase and sale of uranium
|
962 | 1,423 | 1,185 | 1,423 | ||||||||||||
Other income (expense)
|
||||||||||||||||
Loan interest under credit facility
|
| 25 | | 191 | ||||||||||||
Standby fee under credit facility
|
| 1 | | 9 | ||||||||||||
Total fees earned from UPC
|
$ | 1,347 | $ | 11,905 | $ | 2,186 | $ | 12,563 | ||||||||
-14-
a) | CICA Handbook Section 3031 Inventories which provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realizable value. It also provides guidance on the cost formulas that are used to assign costs to inventories. There was no impact to the Companys financial results from adopting this standard. | ||
b) | CICA Handbook Section 3862 Financial Instruments Disclosures and Section 3863 Financial Instruments Presentation which requires disclosures in the financial statements that will enable users to evaluate: the significance of financial instruments for the companys financial positions and performance; the nature and extent of risks arising from financial instruments to which the company is exposed during the period and at the balance sheet date; and how the company manages those risks. | ||
c) | CICA Handbook Section 1535 Capital Disclosures which requires the disclosure of both qualitative and quantitative information that enable users to evaluate the companys objectives, policies and processes for managing capital. |
a) | CICA Handbook Section 3064 Goodwill and intangible assets which establishes revised standards for recognition, measurement, presentation and disclosure of goodwill and intangible assets. Concurrent with the introduction of this standard, the CICA withdrew EIC 27 Revenues and expenses during the pre-operating period. As a result of the withdrawal of EIC 27, the Company will no longer be able to defer costs and revenues incurred prior to commercial production at new mine operations. |
-15-
At June 30 | At December 31 | |||||||
2008 | 2007 | |||||||
|
||||||||
ASSETS
|
||||||||
Current
|
||||||||
Cash and equivalents
|
$ | 7,388 | $ | 19,680 | ||||
Trade and other receivables
|
26,881 | 39,667 | ||||||
Note receivable
|
342 | 455 | ||||||
Inventories (Note 3)
|
36,086 | 30,921 | ||||||
Investments (Note 4)
|
5,536 | 13,930 | ||||||
Prepaid expenses and other
|
2,797 | 1,492 | ||||||
|
79,030 | 106,145 | ||||||
|
||||||||
Inventories ore in stockpiles (Note 3)
|
5,663 | | ||||||
Investments (Note 4)
|
60,893 | 20,507 | ||||||
Property, plant and equipment, net (Note 5)
|
767,197 | 727,823 | ||||||
Restricted investments (Note 6)
|
18,161 | 17,797 | ||||||
Intangibles (Note 7)
|
6,331 | 6,979 | ||||||
Goodwill (Note 8)
|
118,923 | 122,330 | ||||||
|
||||||||
|
$ | 1,056,198 | $ | 1,001,581 | ||||
|
||||||||
LIABILITIES
|
||||||||
Current
|
||||||||
Accounts payable and accrued liabilities
|
$ | 19,719 | $ | 22,642 | ||||
Current portion of long-term liabilities:
|
||||||||
Post-employment benefits (Note 9)
|
392 | 404 | ||||||
Reclamation and remediation obligations (Note 10)
|
549 | 565 | ||||||
Debt obligations (Note 11)
|
16 | 42 | ||||||
Other long-term liabilities (Note 12)
|
3,444 | 6,577 | ||||||
|
24,120 | 30,230 | ||||||
|
||||||||
Deferred revenue
|
2,733 | 2,359 | ||||||
Provision for post-employment benefits (Note 9)
|
3,828 | 4,030 | ||||||
Reclamation and remediation obligations (Note 10)
|
19,849 | 19,824 | ||||||
Debt obligations (Note 11)
|
65,291 | | ||||||
Other long-term liabilities (Note 12)
|
2,531 | 7,343 | ||||||
Future income tax liability (Note 22)
|
165,669 | 141,525 | ||||||
|
||||||||
|
284,021 | 205,311 | ||||||
|
||||||||
SHAREHOLDERS EQUITY
|
||||||||
Share capital (Note 13)
|
659,811 | 662,949 | ||||||
Share purchase warrants (Note 14)
|
11,728 | 11,728 | ||||||
Contributed surplus (Notes 15 & 16)
|
25,886 | 25,471 | ||||||
Deficit
|
(39,052 | ) | (14,834 | ) | ||||
Accumulated other comprehensive income (Note 17)
|
||||||||
Unrealized gains on investments
|
37,500 | 18,100 | ||||||
Cumulative foreign currency translation gain
|
76,304 | 92,856 | ||||||
|
772,177 | 796,270 | ||||||
|
||||||||
|
$ | 1,056,198 | $ | 1,001,581 | ||||
|
||||||||
Issued and outstanding common shares (Note 13)
|
189,979,035 | 189,731,635 | ||||||
|
||||||||
Contingent liabilities and commitments (Note 23)
|
-16-
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | June 30 | June 30 | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
|
||||||||||||||||
REVENUES
|
$ | 31,713 | $ | 18,809 | $ | 49,894 | $ | 30,528 | ||||||||
|
||||||||||||||||
EXPENSES
|
||||||||||||||||
|
||||||||||||||||
Operating expenses
|
24,892 | 10,607 | 37,685 | 19,700 | ||||||||||||
Sales royalties and capital taxes
|
999 | 436 | 1,808 | 981 | ||||||||||||
Mineral property exploration
|
3,787 | 3,480 | 10,352 | 8,529 | ||||||||||||
General and administrative
|
4,674 | 3,558 | 8,794 | 6,460 | ||||||||||||
|
34,352 | 18,081 | 58,639 | 35,670 | ||||||||||||
|
||||||||||||||||
Income (loss) from operations
|
(2,639 | ) | 728 | (8,745 | ) | (5,142 | ) | |||||||||
Other income (expense), net (Note 18)
|
(10,742 | ) | 37,678 | (8,516 | ) | 38,236 | ||||||||||
|
||||||||||||||||
Income (loss) for the period before taxes
|
(13,381 | ) | 38,406 | (17,261 | ) | 33,094 | ||||||||||
|
||||||||||||||||
Income tax recovery (expense) (Note 22):
|
||||||||||||||||
Current
|
2,759 | (1,735 | ) | 1,590 | (1,735 | ) | ||||||||||
Future
|
(3,134 | ) | 3,818 | (8,547 | ) | 4,064 | ||||||||||
|
||||||||||||||||
Income (loss) for the period
|
$ | (13,756 | ) | $ | 40,489 | $ | (24,218 | ) | $ | 35,423 | ||||||
|
||||||||||||||||
Deficit, beginning of period
|
(25,296 | ) | (67,144 | ) | (14,834 | ) | (62,078 | ) | ||||||||
|
||||||||||||||||
Deficit, end of period
|
$ | (39,052 | ) | $ | (26,655 | ) | $ | (39,052 | ) | $ | (26,655 | ) | ||||
|
||||||||||||||||
Income (loss) for the period
|
$ | (13,756 | ) | $ | 40,489 | $ | (24,218 | ) | $ | 35,423 | ||||||
Other comprehensive income (loss) (Note 17)
|
||||||||||||||||
Change in foreign currency translation
|
3,813 | 55,084 | (16,552 | ) | 61,854 | |||||||||||
Change in unrealized gain on investments net
|
27,735 | (14,125 | ) | 19,400 | 3,465 | |||||||||||
|
||||||||||||||||
Comprehensive income (loss)
|
$ | 17,792 | $ | 81,448 | $ | (21,370 | ) | $ | 100,742 | |||||||
|
||||||||||||||||
Net income (loss) per share:
|
||||||||||||||||
Basic
|
$ | (0.07 | ) | $ | 0.21 | $ | (0.13 | ) | $ | 0.19 | ||||||
Diluted
|
$ | (0.07 | ) | $ | 0.21 | $ | (0.13 | ) | $ | 0.18 | ||||||
|
||||||||||||||||
Weighted-average number of shares
outstanding (in thousands):
|
||||||||||||||||
Basic
|
189,856 | 189,459 | 189,814 | 187,740 | ||||||||||||
Diluted
|
191,244 | 196,019 | 192,236 | 194,049 | ||||||||||||
-17-
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | June 30 | June 30 | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
CASH PROVIDED BY (USED IN): | ||||||||||||||||
|
||||||||||||||||
OPERATING ACTIVITIES
|
||||||||||||||||
Net income (loss) for the period
|
$ | (13,756 | ) | $ | 40,489 | $ | (24,218 | ) | $ | 35,423 | ||||||
Items not affecting cash:
|
||||||||||||||||
Depletion, depreciation, amortization and accretion
|
4,385 | 3,123 | 10,484 | 5,384 | ||||||||||||
Stock-based compensation
|
619 | 342 | 1,232 | 688 | ||||||||||||
Losses (gains) on asset disposals
|
(181 | ) | | (181 | ) | | ||||||||||
Losses (gains) on restricted investments
|
463 | (38,633 | ) | (37 | ) | (38,663 | ) | |||||||||
Equity in loss of Fortress Minerals Corp.
|
| (884 | ) | | | |||||||||||
Future income taxes
|
3,134 | (3,818 | ) | 8,547 | (4,064 | ) | ||||||||||
Foreign exchange translation
|
12,766 | | 12,766 | | ||||||||||||
Net change in non-cash working capital items
|
||||||||||||||||
Trade and other receivables
|
(5,168 | ) | 1,854 | 12,494 | (423 | ) | ||||||||||
Inventories
|
(4,632 | ) | (1,080 | ) | (15,260 | ) | (3,466 | ) | ||||||||
Prepaid expenses and other assets
|
(1,480 | ) | (719 | ) | (1,317 | ) | (599 | ) | ||||||||
Accounts payable and accrued liabilities
|
(1,943 | ) | 198 | (2,642 | ) | 3,256 | ||||||||||
Post-employment benefits
|
(85 | ) | (112 | ) | (206 | ) | (209 | ) | ||||||||
Reclamation and remediation obligations
|
(174 | ) | (97 | ) | (366 | ) | (181 | ) | ||||||||
Deferred revenue
|
100 | (126 | ) | 374 | (2,051 | ) | ||||||||||
|
||||||||||||||||
Net cash from (used in) operating activities
|
(5,952 | ) | 537 | 1,670 | (4,905 | ) | ||||||||||
|
||||||||||||||||
INVESTING ACTIVITIES
|
||||||||||||||||
Decrease in notes receivable
|
80 | 10,203 | 113 | 9,691 | ||||||||||||
Purchase of long-term investments
|
(13,365 | ) | (5,262 | ) | (13,413 | ) | (49,766 | ) | ||||||||
Proceeds from sale of long-term investments
|
1,320 | 45,446 | 1,320 | 45,446 | ||||||||||||
Expenditures on property, plant and equipment
|
(37,755 | ) | (7,649 | ) | (64,964 | ) | (16,976 | ) | ||||||||
Proceeds from sale of property, plant and equipment
|
4 | 88 | 4 | 88 | ||||||||||||
Decrease (increase) in restricted investments
|
92 | (457 | ) | (382 | ) | (759 | ) | |||||||||
|
||||||||||||||||
Net cash from (used in) investing activities
|
(49,624 | ) | 42,369 | (77,322 | ) | (12,276 | ) | |||||||||
|
||||||||||||||||
FINANCING ACTIVITIES
|
||||||||||||||||
Increase (decrease) in debt obligations
|
57,110 | (13 | ) | 66,064 | (21 | ) | ||||||||||
Deposits in advance of shares issued
|
| (5,856 | ) | | | |||||||||||
Issuance of common shares for:
|
||||||||||||||||
Private placements
|
| 15,540 | | 102,166 | ||||||||||||
Exercise of stock options and warrants
|
1,070 | 2,600 | 1,312 | 4,949 | ||||||||||||
|
||||||||||||||||
Net cash from (used in) financing activities
|
58,180 | 12,271 | 67,376 | 107,094 | ||||||||||||
|
||||||||||||||||
Foreign exchange effect on cash and equivalents
|
(2,340 | ) | 17,554 | (4,016 | ) | 18,718 | ||||||||||
|
||||||||||||||||
Increase (decrease) in cash and equivalents
|
264 | 72,731 | (12,292 | ) | 108,631 | |||||||||||
Cash and equivalents, beginning of period
|
7,124 | 105,027 | 19,680 | 69,127 | ||||||||||||
|
||||||||||||||||
Cash and equivalents, end of period
|
$ | 7,388 | $ | 177,758 | $ | 7,388 | $ | 177,758 | ||||||||
-18-
1. | NATURE OF OPERATIONS | |
Denison Mines Corp. (DMC) is incorporated under the Business Corporations Act (Ontario) (OBCA). Denison Mines Corp. and its subsidiary companies and joint ventures (collectively, the Company) are engaged in uranium mining and related activities, including acquisition, exploration and development of uranium bearing properties, extraction, processing, selling and reclamation. The environmental services division of the Company provides mine decommissioning and decommissioned site monitoring services for third parties. | ||
The Company has a 100% interest in the White Mesa mill located in Utah, United States and a 22.5% interest in the McClean Lake mill located in the Athabasca Basin of Saskatchewan, Canada. The Company has interests in a number of nearby mines at both locations, as well as interests in development and exploration projects located in Canada, the United States, Mongolia and Zambia, some of which are operated through joint ventures. Uranium, the Companys primary product, is produced in the form of uranium oxide concentrates (U 3 O 8 ) and sold to various customers around the world for further processing. Vanadium, a co-product of some of the Companys mines is also produced. The Company is also in the business of recycling uranium bearing waste materials, referred to as alternate feed materials. | ||
Denison Mines Inc. (DMI), a subsidiary of the Company is the manager of Uranium Participation Corporation (UPC), a publicly-listed investment holding company formed to invest substantially all of its assets in U 3 O 8 and uranium hexafluoride (UF 6 ). The Company has no ownership interest in UPC but receives various fees for management services and commissions from the purchase and sale of U 3 O 8 and UF 6 by UPC. | ||
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | ||
These unaudited consolidated financial statements have been prepared by management in U.S. dollars, unless otherwise stated, in accordance with generally accepted accounting principles in Canada (Canadian GAAP) for interim financial statements. | ||
Certain information and note disclosures normally included in the annual consolidated financial statements prepared in accordance with Canadian GAAP have been condensed or excluded. As a result, these unaudited interim consolidated financial statements do not contain all disclosures required for annual financial statements and should be read in conjunction with the Companys audited consolidated financial statements and notes thereto for the year ended December 31, 2007. | ||
All material adjustments which, in the opinion of management, are necessary for fair presentation of the results of the interim periods have been reflected in these financial statements. The results of operations for the six months ended June 30, 2008 are not necessarily indicative of the results to be expected for the full year. | ||
These unaudited interim consolidated financial statements are prepared following accounting policies consistent with the Companys audited consolidated financial statements and notes thereto for the year ended December 31, 2007, except for the changes noted under the New Accounting Standards Adopted section below. |
-19-
Significant Mining Interests | ||
The following table sets forth the Companys ownership of its significant mining interests that have projects at the development stage within them as at June 30, 2008: |
Ownership | ||||||||
Location | Interest | |||||||
|
||||||||
Through majority owned subsidiaries
|
||||||||
Arizona Strip
|
USA | 100.00 | % | |||||
Henry Mountains
|
USA | 100.00 | % | |||||
Colorado Plateau
|
USA | 100.00 | % | |||||
Sunday Mine
|
USA | 100.00 | % | |||||
Gurvan Saihan Joint Venture
|
Mongolia | 70.00 | % | |||||
Mutanga
|
Zambia | 100.00 | % | |||||
|
||||||||
As interests in unincorporated joint
ventures, or jointly controlled assets
|
||||||||
McClean Lake
|
Canada | 22.50 | % | |||||
Midwest
|
Canada | 25.17 | % | |||||
New Accounting Standards Adopted | ||
The Company adopted the following new accounting standards issued by the Canadian Institute of Chartered Accountants (CICA) Handbook effective January 1, 2008: |
a) | CICA Handbook Section 3031 Inventories which provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realizable value. It also provides guidance on the cost formulas that are used to assign costs to inventories. There was no impact to the Companys financial results from adopting this standard. | ||
b) | CICA Handbook Section 3862 Financial Instruments Disclosures and Section 3863 Financial Instruments Presentation which requires disclosures in the financial statements that will enable users to evaluate: the significance of financial instruments for the companys financial positions and performance; the nature and extent of risks arising from financial instruments to which the company is exposed during the period and at the balance sheet date; and how the company manages those risks (see note 21). | ||
c) | CICA Handbook Section 1535 Capital Disclosures which requires the disclosure of both qualitative and quantitative information that enable users to evaluate the companys objectives, policies and processes for managing capital (see note 21). |
Accounting Standards Issued but not yet Adopted | ||
The CICA has issued the following accounting standards which are effective for the Companys fiscal years beginning on or after January 1, 2009: |
a) | CICA Handbook Section 3064 Goodwill and intangible assets which establishes revised standards for recognition, measurement, presentation and disclosure of goodwill and intangible assets. Concurrent with the introduction of this standard, the CICA withdrew EIC 27 Revenues and expenses during the pre-operating period. As a result of the withdrawal of EIC 27, the Company will no longer be able to defer costs and revenues incurred prior to commercial production at new mine operations. |
The Company has not yet determined the impact of adopting the above accounting standards. | ||
Comparative Numbers | ||
Certain classifications of the comparative figures have been changed to conform to those used in the current period. |
-20-
3. | INVENTORIES | |
The inventories balance consists of: |
At June 30 | At December 31 | |||||||
(in thousands) | 2008 | 2007 | ||||||
|
||||||||
Uranium and vanadium concentrates
|
$ | 9,415 | $ | 8,344 | ||||
Inventory of ore in stockpiles
|
26,999 | 19,289 | ||||||
Mine and mill supplies
|
5,335 | 3,288 | ||||||
|
||||||||
|
$ | 41,749 | $ | 30,921 | ||||
|
||||||||
Inventories:
|
||||||||
Current
|
$ | 36,086 | $ | 30,921 | ||||
Long-term ore in stockpiles
|
5,663 | | ||||||
|
||||||||
|
$ | 41,749 | $ | 30,921 | ||||
Long-term ore in stockpile inventory represents an estimate of the amount of pounds on the stockpile in excess of the next twelve months of planned mill production. | ||
4. | LONG-TERM INVESTMENTS | |
The long-term investments balance consists of: |
At June 30 | At December 31 | |||||||
(in thousands) | 2008 | 2007 | ||||||
|
||||||||
Portfolio investments
|
||||||||
Available for sale securities at fair value
|
$ | 66,429 | $ | 34,437 | ||||
|
||||||||
|
$ | 66,429 | $ | 34,437 | ||||
|
||||||||
Investments:
|
||||||||
Current
|
$ | 5,536 | $ | 13,930 | ||||
Long-term
|
60,893 | 20,507 | ||||||
|
||||||||
|
$ | 66,429 | $ | 34,437 | ||||
Purchases | ||
During the six months ended June 30, 2008, the Company acquired additional equity interests at a cost of $13,413,000. | ||
In April 2008, the Company purchased 5,465,000 units of Uranerz Energy Corporation (Uranerz), a public company listed on the Toronto, American and Frankfurt Stock Exchanges, for an aggregate purchase price of approximately $13,365,000. Each unit is comprised of one common share and one-half of one common share purchase warrant. Each whole warrant will entitle the holder to purchase one additional share of Uranerz common stock for a period of 24 months after closing (subject to acceleration under certain conditions) at an exercise price of US$3.50 per share. Immediately after the purchase, Denison owned approximately 9.9% of the issued and outstanding common share of Uranerz. | ||
Sales | ||
During the six months ended June 30, 2008, the Company sold equity interests in four public companies for cash consideration of $1,320,000. The resulting gain has been included in net other income (expense) in the statement of operations (see Note 18). |
-21-
5. | PROPERTY, PLANT AND EQUIPMENT | |
Property, plant and equipment consist of: |
At June 30 | At December 31 | |||||||
(in thousands) | 2008 | 2007 | ||||||
|
||||||||
Cost
|
||||||||
Plant and equipment
|
||||||||
Mill and mining related
|
$ | 177,327 | $ | 135,375 | ||||
Environmental services and other
|
2,700 | 2,742 | ||||||
Mineral properties
|
619,419 | 609,569 | ||||||
|
||||||||
|
799,446 | 747,686 | ||||||
|
||||||||
Accumulated depreciation and amortization
|
||||||||
Plant and equipment
|
||||||||
Mill and mining related
|
12,524 | 9,182 | ||||||
Environmental services and other
|
1,059 | 843 | ||||||
Mineral properties
|
18,666 | 9,838 | ||||||
|
||||||||
|
32,249 | 19,863 | ||||||
|
||||||||
Property, plant and equipment, net
|
$ | 767,197 | $ | 727,823 | ||||
|
||||||||
Net book value
|
||||||||
Plant and equipment
|
||||||||
Mill and mining related
|
$ | 164,803 | $ | 126,193 | ||||
Environmental services and other
|
1,641 | 1,899 | ||||||
Mineral properties
|
600,753 | 599,731 | ||||||
|
||||||||
|
$ | 767,197 | $ | 727,823 | ||||
Mineral Properties | ||
The company has various interests in development and exploration projects located in Canada, the U.S., Mongolia and Zambia which are held directly or through option or joint venture agreements. Amounts spent on development projects are capitalized as mineral property assets. Exploration projects are expensed. | ||
Canada | ||
In October 2004, the Company entered into an option agreement to earn up to a 22.5% ownership interest in the Wolly project by funding CDN$5,000,000 in exploration expenditures over the next six years. As at June 30, 2008, the Company has incurred a total of CDN$3,272,000 towards this option and has earned a 13.0% ownership interest in the project under the phase-in ownership provisions of the agreement. | ||
In the first quarter of 2006, the Company entered into an option agreement to earn up to a 75% interest in the Park Creek project. The Company is required to incur exploration expenditures of CDN$2,800,000 over three years to earn an initial 49% interest and a further CDN$3,000,000 over two years to earn an additional 26% interest. As at June 30, 2008, the Company has incurred a total of CDN$3,295,000 towards the option and has earned a 49% ownership interest in the project under the phase-in-ownership provisions of the agreement. |
-22-
6. | RESTRICTED INVESTMENTS | |
The Company has certain restricted investments deposited to collateralize its reclamation and certain other obligations. The restricted investments balance consists of: |
At June 30 | At December 31 | |||||||
(in thousands) | 2008 | 2007 | ||||||
|
||||||||
U.S. mill and mine reclamation
|
$ | 16,179 | $ | 15,849 | ||||
Elliot Lake reclamation trust fund
|
1,982 | 1,948 | ||||||
|
||||||||
|
$ | 18,161 | $ | 17,797 | ||||
U.S. Mill and Mine Reclamation | ||
The Company has cash and cash equivalents and fixed income securities as collateral for various bonds posted in favour of the State of Utah and the applicable state regulatory agencies in Colorado and Arizona for estimated reclamation costs associated with the White Mesa mill and U.S. mining properties. During the six months ended June 30, 2008, the Company has not deposited any additional monies into its collateral account. | ||
Elliot Lake Reclamation Trust Fund | ||
Pursuant to its Reclamation Funding Agreement with the Governments of Canada and Ontario, the Company deposited an additional CDN$350,000 into the Elliot Lake Reclamation Trust Fund during the six months ended June 30, 2008. | ||
7. | INTANGIBLES | |
A continuity summary of intangibles is presented below: |
Six Months | ||||
Ended | ||||
(in thousands) | June 30, 2008 | |||
|
||||
Intangibles, beginning of period
|
$ | 6,979 | ||
Amortization
|
(472 | ) | ||
Foreign exchange
|
(176 | ) | ||
|
||||
Other intangibles, end of period
|
$ | 6,331 | ||
|
||||
Other intangibles, by item:
|
||||
UPC management contract
|
5,878 | |||
Urizon technology licenses
|
453 | |||
|
||||
|
$ | 6,331 | ||
-23-
8. | GOODWILL | |
A continuity summary of goodwill is presented below: |
Six Months | ||||
Ended | ||||
(in thousands) | June 30, 2008 | |||
|
||||
Goodwill, beginning of period
|
$ | 122,330 | ||
Foreign exchange
|
(3,407 | ) | ||
|
||||
Goodwill, end of period
|
$ | 118,923 | ||
|
||||
Goodwill, allocation by business unit:
|
||||
Canada mining segment
|
$ | 118,923 | ||
Goodwill is not amortized and is tested annually for impairment. | ||
9. | POST-EMPLOYMENT BENEFITS | |
A continuity summary of post-employment benefits is presented below: |
Six Months | ||||
Ended | ||||
(in thousands) | June 30, 2008 | |||
|
||||
Post-employment liability, beginning of period
|
$ | 4,434 | ||
Benefits paid
|
(206 | ) | ||
Interest cost
|
114 | |||
Foreign exchange
|
(122 | ) | ||
|
||||
Post-employment liability, end of period
|
$ | 4,220 | ||
|
||||
Post-employment benefits liability by duration:
|
||||
Current
|
$ | 392 | ||
Non-current
|
3,828 | |||
|
||||
|
$ | 4,220 | ||
-24-
10. | RECLAMATION AND REMEDIATION OBLIGATIONS | |
A continuity summary of reclamation and remediation obligations is presented below: |
Six Months | ||||||||
Ended | ||||||||
(in thousands) | June 30, 2008 | |||||||
|
||||||||
Reclamation obligations, beginning of period
|
$ | 20,389 | ||||||
Accretion
|
759 | |||||||
Expenditures incurred
|
(366 | ) | ||||||
Liability adjustments
|
(107 | ) | ||||||
Foreign exchange
|
(277 | ) | ||||||
|
||||||||
Reclamation obligations, end of period
|
$ | 20,398 | ||||||
|
||||||||
Site restoration liability by location:
|
||||||||
U.S. Mill and Mines
|
$ | 10,757 | ||||||
Elliot Lake
|
8,024 | |||||||
McLean Lake and Midwest Joint Ventures
|
1,617 | |||||||
|
||||||||
|
$ | 20,398 | ||||||
|
||||||||
Site restoration liability :
|
||||||||
Current
|
$ | 549 | ||||||
Non-current
|
19,849 | |||||||
|
$ | 20,398 | ||||||
11. | DEBT OBLIGATIONS | |
Debt obligations consist of: |
At June 30 | At December 31 | |||||||
(in thousands) | 2008 | 2007 | ||||||
|
||||||||
Temporary line of credit
|
$ | 65,527 | $ | | ||||
Revolving line of credit
|
(236 | ) | | |||||
Notes payable and other
|
16 | 42 | ||||||
|
||||||||
|
$ | 65,307 | $ | 42 | ||||
|
||||||||
Other long-term liabilities:
|
||||||||
Current
|
16 | 42 | ||||||
Non-current
|
65,291 | | ||||||
|
||||||||
|
$ | 65,307 | $ | 42 | ||||
Temporary Line of Credit | ||
In March 2008, the Company replaced all prior credit facility arrangements with a temporary CDN$40,000,000 uncommitted revolving credit facility with the Bank of Nova Scotia secured by the assets of DMI with interest payable at Canadian bank prime. In June 2008, this facility was increased to CDN$70,000,000. As at June 30, 2008, the Company had drawn CDN$66,816,000 under the facility and has incurred interest expense of CDN$524,000 for this facility. | ||
In July 2008, the temporary line of credit facility has been replaced with the revolving line of credit facility. |
-25-
Revolving Line of Credit | ||
In July 2008, the Company has put in place a $125,000,000 revolving term credit facility with the Bank of Nova Scotia. The facility is repayable in full on June 30, 2011. The facility requires mandatory prepayment of outstanding credit in excess of $80,000,000 should the Companys uranium production in 2008 fall below 1,700,000 pounds. | ||
The borrower under the facility is DMI and DMC has provided an unlimited full recourse guarantee and a pledge of all of the shares of DMI. DMI has provided a first-priority security interest in all present and future personal property and an assignment of its rights and interests under all material agreements relative to the McClean Lake and Midwest projects. | ||
The Company is required to maintain certain financial covenants on a consolidated basis. | ||
Interest payable under the facility is bankers acceptance or LIBOR rate plus a margin or prime rate plus a margin. The facility is also subject to standby fees. | ||
As at June 30, 2008, the Company has not incurred any indebtedness under the facility and has deferred $236,000 of incremental costs associated with its set-up. | ||
12. | OTHER LONG-TERM LIABILITIES | |
Other long-term liabilities consist of: |
At June 30 | At December 31 | |||||||
(in thousands) | 2008 | 2007 | ||||||
|
||||||||
Unamortized fair value of sales contracts
|
$ | 4,889 | $ | 12,812 | ||||
Unamortized fair value of toll milling contracts
|
981 | 1,008 | ||||||
Other
|
105 | 100 | ||||||
|
||||||||
|
$ | 5,975 | $ | 13,920 | ||||
|
||||||||
Other long-term liabilities:
|
||||||||
Current
|
3,444 | 6,577 | ||||||
Non-current
|
2,531 | 7,343 | ||||||
|
||||||||
|
$ | 5,975 | $ | 13,920 | ||||
Unamortized fair values of sales contracts are amortized to revenue as deliveries under the applicable contracts are made. |
-26-
13. | SHARE CAPITAL | |
Denison is authorized to issue an unlimited number of common shares without par value. A continuity summary of the issued and outstanding common shares and the associated dollar amounts is presented below: |
Number of | ||||||||
Common | ||||||||
(in thousands except share amounts) | Shares | Amount | ||||||
|
||||||||
Balance at December 31, 2007
|
189,731,635 | $ | 662,949 | |||||
|
||||||||
Issues for cash
|
||||||||
Exercise of stock options
|
247,400 | 1,312 | ||||||
Flow-through share liability renunciation
|
| (5,267 | ) | |||||
Fair value of stock options exercised
|
| 817 | ||||||
|
||||||||
|
247,400 | (3,138 | ) | |||||
|
||||||||
Balance at June 30, 2008
|
189,979,035 | $ | 659,811 | |||||
Flow-Through Share Issues | ||
The Company finances a portion of its exploration programs through the use of flow-through share issuances. Income tax deductions relating to these expenditures are claimable by the investors and not by the Company. As at June 30, 2008, the Company estimates that it has spent CDN$16,666,000 of the CDN$18,000,000 April 2007 flow-through share issue obligation. The Company renounced the tax benefit of this issue to subscribers in February 2008. | ||
14. | SHARE PURCHASE WARRANTS | |
A continuity summary of the issued and outstanding share purchase warrants in terms of common shares of the company and the associated dollar amounts is presented below: |
Number of | ||||||||
Common Shares | Fair Value | |||||||
(in thousands except share amounts) | Issuable | Amount | ||||||
|
||||||||
Balance at December 31, 2007 and June 30, 2008
|
9,564,915 | $ | 11,728 | |||||
|
||||||||
Share purchase warrants by series:
|
||||||||
November 2004 series
(1)
|
3,156,915 | $ | 5,898 | |||||
March 2006 series
(2)
|
6,408,000 | 5,830 | ||||||
|
||||||||
|
9,564,915 | $ | 11,728 | |||||
(1) | The November 2004 series has an effective exercise price of CDN$5.21 per issuable share (CDN$15.00 per warrant adjusted for the 2.88 exchange ratio associated with the Denison and IUC merger) and expires on November 24, 2009. | |
(2) | The March 2006 series has an effective exercise price of CDN$10.42 per issuable share (CDN$30.00 per warrant adjusted for the 2.88 exchange ratio associated with the Denison and IUC merger) and expires on March 1, 2011. |
-27-
Six Months | ||||
Ended | ||||
(in thousands) | Six 30, 2008 | |||
|
||||
Balance, beginning of period
|
$ | 25,471 | ||
Stock-based compensation expense (note 16)
|
1,232 | |||
Fair value of stock options exercised
|
(817 | ) | ||
|
||||
Balance, end of period
|
$ | 25,886 | ||
Weighted- | ||||||||
Average | ||||||||
Exercise | ||||||||
Number of | Price per | |||||||
Common | Share | |||||||
Shares | (CDN $) | |||||||
|
||||||||
Stock options outstanding, beginning of period
|
5,961,354 | $ | 7.27 | |||||
|
||||||||
Granted
|
2,660,000 | 8.12 | ||||||
Exercised
|
(247,400 | ) | 5.30 | |||||
Expired
|
(97,500 | ) | 9.40 | |||||
|
||||||||
Stock options outstanding, end of period
|
8,276,454 | $ | 7.57 | |||||
|
||||||||
Stock options exercisable, end of period
|
5,491,964 | $ | 7.15 | |||||
-28-
Weighted | Weighted- | |||||||||||
Average | Average | |||||||||||
Remaining | Exercise | |||||||||||
Range of Exercise | Contractual | Number of | Price per | |||||||||
Prices per Share | Life | Common | Share | |||||||||
(CDN$) | (Years) | Shares | (CDN $) | |||||||||
|
||||||||||||
Stock options outstanding
|
||||||||||||
$1.87 to $4.99
|
6.04 | 1,034,555 | $ | 2.12 | ||||||||
$5.00 to $8.50
|
5.56 | 4,628,399 | 6.91 | |||||||||
$10.08 to $15.30
|
1.59 | 2,613,500 | 10.91 | |||||||||
|
||||||||||||
Stock options outstanding, end of period
|
4.37 | 8,276,454 | $ | 7.57 | ||||||||
Six Months | ||||
Ended | ||||
June 30, 2008 | ||||
|
||||
Risk-free interest rate
|
2.86% - 3.29 | % | ||
Expected stock price volatility
|
52.2% - 55.4 | % | ||
Expected life
|
2.1 3.5 years | |||
Expected dividend yield
|
| |||
Fair value per share under options granted
|
CDN$2.16 - CDN$4.49 | |||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | June 30 | June 30 | |||||||||||||
(in thousands) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
|
||||||||||||||||
Mineral property exploration
|
$ | 58 | $ | 61 | $ | 114 | $ | 113 | ||||||||
General and administrative
|
561 | 281 | 1,118 | 575 | ||||||||||||
|
||||||||||||||||
|
$ | 619 | $ | 342 | $ | 1,232 | $ | 688 | ||||||||
-29-
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | June 30 | June 30 | |||||||||||||
(in thousands) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
|
||||||||||||||||
Accumulated other comprehensive income,
beginning of period
|
$ | 82,256 | $ | 40,704 | $ | 110,956 | $ | (8,498 | ) | |||||||
|
||||||||||||||||
Cumulative foreign currency translation gain (loss)
|
||||||||||||||||
Balance, beginning of period
|
$ | 72,491 | $ | (1,728 | ) | $ | 92,856 | $ | (8,498 | ) | ||||||
Change in foreign currency
|
3,813 | 55,084 | (16,552 | ) | 61,854 | |||||||||||
Balance, end of period
|
76,304 | 53,356 | 76,304 | 53,356 | ||||||||||||
|
||||||||||||||||
Unrealized gains on investments
|
||||||||||||||||
Balance, beginning of period
|
9,765 | 42,432 | 18,100 | | ||||||||||||
Unrealized gains as at January 1, 2007, net of tax
(1)
|
| | | 24,842 | ||||||||||||
Net unrealized gains (losses), net of tax
(2)
|
27,735 | (14,125 | ) | 19,400 | 3,465 | |||||||||||
Balance, end of period
|
37,500 | 28,307 | 37,500 | 28,307 | ||||||||||||
|
||||||||||||||||
Accumulated other comprehensive income, end of period
|
$ | 113,804 | $ | 81,663 | $ | 113,804 | $ | 81,663 | ||||||||
(1) | Reflects the adoption of CICA Section 3855 on January 1, 2007. | |
(2) | Unrealized gains (losses) on investments deemed available-for-sale are included in other comprehensive income (loss) until realized. When the investment is disposed of or incurs a decline in value that is other than temporary, the gain (loss) is realized and reclassified to the income statement. For the three months and six months ending June 30, 2008, approximately $195,000 of gains were realized and reclassified to the income statement within Other income (expense) net. For the three months and six months ending June 30, 2007, approximately $15,944,000 of gains were realized and reclassified to the income statement within Other income (expense) net. |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | June 30 | June 30 | |||||||||||||
(in thousands) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
|
||||||||||||||||
Interest income, net of fees
|
$ | 236 | $ | 1,638 | $ | 609 | $ | 3,242 | ||||||||
Interest expense
|
(516 | ) | | (520 | ) | | ||||||||||
Gains (losses) on:
|
||||||||||||||||
Foreign exchange
|
(10,197 | ) | (3,399 | ) | (8,965 | ) | (3,645 | ) | ||||||||
Land, plant and equipment
|
| | 125 | (17 | ) | |||||||||||
Portfolio investments
|
195 | 38,643 | 195 | 38,643 | ||||||||||||
Restricted investments
|
(463 | ) | (92 | ) | 37 | (53 | ) | |||||||||
Equity gain of affiliates
|
| 884 | | | ||||||||||||
Other
|
3 | 4 | 3 | 66 | ||||||||||||
|
||||||||||||||||
Other income (expense), net
|
$ | (10,742 | ) | $ | 37,678 | $ | (8,516 | ) | $ | 38,236 | ||||||
-30-
Canada | U.S.A | Africa | Asia | Corporate | ||||||||||||||||||||
(in thousands) | Mining | Mining | Mining | Mining | and Other | Total | ||||||||||||||||||
|
||||||||||||||||||||||||
Statement of Operations:
|
||||||||||||||||||||||||
Revenues
|
32,351 | 12,862 | | | 4,681 | 49,894 | ||||||||||||||||||
|
||||||||||||||||||||||||
Expenses
|
||||||||||||||||||||||||
Operating expenses
|
24,237 | 10,487 | | | 2,961 | 37,685 | ||||||||||||||||||
Sales royalties and capital taxes
|
1,722 | | | | 86 | 1,808 | ||||||||||||||||||
Mineral property exploration
|
8,474 | 56 | | 1,708 | 114 | 10,352 | ||||||||||||||||||
General and administrative
|
| | | | 8,794 | 8,794 | ||||||||||||||||||
|
34,433 | 10,543 | | 1,708 | 11,955 | 58,639 | ||||||||||||||||||
|
||||||||||||||||||||||||
Income (loss) from operations
|
(2,082 | ) | 2,319 | | (1,708 | ) | (7,274 | ) | (8,745 | ) | ||||||||||||||
|
||||||||||||||||||||||||
Revenues supplemental:
|
||||||||||||||||||||||||
Uranium concentrates
|
32,351 | 12,825 | | | | 45,176 | ||||||||||||||||||
Environmental services
|
| | | | 2,495 | 2,495 | ||||||||||||||||||
Management fees and commissions
|
| | | | 2,186 | 2,186 | ||||||||||||||||||
Alternate feed processing and other
|
| 37 | | | | 37 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
32,351 | 12,862 | | | 4,681 | 49,894 | ||||||||||||||||||
|
||||||||||||||||||||||||
Long-lived assets:
|
||||||||||||||||||||||||
Property, plant and equipment
Plant and equipment
|
89,017 | 74,894 | 550 | 342 | 1,641 | 166,444 | ||||||||||||||||||
Mineral properties
|
351,628 | 28,935 | 216,886 | 3,304 | | 600,753 | ||||||||||||||||||
Intangibles
|
| 453 | | | 5,878 | 6,331 | ||||||||||||||||||
Goodwill
|
118,923 | | | | | 118,923 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
559,568 | 104,282 | 217,436 | 3,646 | 7,519 | 892,451 | ||||||||||||||||||
-31-
Canada | U.S.A | Africa | Asia | Corporate | ||||||||||||||||||||
(in thousands) | Mining | Mining | Mining | Mining | and Other | Total | ||||||||||||||||||
|
||||||||||||||||||||||||
Statement of Operations:
|
||||||||||||||||||||||||
Revenues
|
20,686 | 8,326 | | | 2,701 | 31,713 | ||||||||||||||||||
|
||||||||||||||||||||||||
Expenses
|
||||||||||||||||||||||||
Operating expenses
|
13,987 | 9,172 | | | 1,733 | 24,892 | ||||||||||||||||||
Sales royalties and capital taxes
|
982 | | | | 17 | 999 | ||||||||||||||||||
Mineral property exploration
|
2,546 | 56 | | 1,127 | 58 | 3,787 | ||||||||||||||||||
General and administrative
|
| | | | 4,674 | 4,674 | ||||||||||||||||||
|
17,515 | 9,228 | | 1,127 | 6,482 | 34,352 | ||||||||||||||||||
|
||||||||||||||||||||||||
Income (loss) from operations
|
3,171 | (902 | ) | | (1,127 | ) | (3,781 | ) | (2,639 | ) | ||||||||||||||
|
||||||||||||||||||||||||
Revenues supplemental:
|
||||||||||||||||||||||||
Uranium concentrates
|
20,686 | 8,312 | | | | 28,998 | ||||||||||||||||||
Environmental services
|
| | | | 1,354 | 1,354 | ||||||||||||||||||
Management fees and commissions
|
| | | | 1,347 | 1,347 | ||||||||||||||||||
Alternate feed processing and other
|
| 14 | | | | 14 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
20,686 | 8,326 | | | 2,701 | 31,713 | ||||||||||||||||||
-32-
Canada | U.S.A | Africa | Asia | Corporate | ||||||||||||||||||||
(in thousands) | Mining | Mining | Mining | Mining | and Other | Total | ||||||||||||||||||
Statement of Operations:
|
||||||||||||||||||||||||
Revenues
|
13,806 | 12,161 | | | 4,561 | 30,528 | ||||||||||||||||||
|
||||||||||||||||||||||||
Expenses
|
||||||||||||||||||||||||
Operating expenses
|
12,291 | 4,953 | | | 2,456 | 19,700 | ||||||||||||||||||
Sales royalties and capital taxes
|
937 | | | | 44 | 981 | ||||||||||||||||||
Mineral property exploration
|
7,894 | | | 522 | 113 | 8,529 | ||||||||||||||||||
General and administrative
|
| | | | 6,460 | 6,460 | ||||||||||||||||||
|
21,122 | 4,953 | | 522 | 9,073 | 35,670 | ||||||||||||||||||
|
||||||||||||||||||||||||
Income (loss) from operations
|
(7,316 | ) | 7,208 | | (522 | ) | (4,512 | ) | (5,142 | ) | ||||||||||||||
|
||||||||||||||||||||||||
Revenues supplemental:
|
||||||||||||||||||||||||
Uranium concentrates
|
13,806 | 9,750 | | | | 23,556 | ||||||||||||||||||
Environmental services
|
| | | | 1,948 | 1,948 | ||||||||||||||||||
Management fees and commissions
|
| | | | 2,613 | 2,613 | ||||||||||||||||||
Alternate feed processing and other
|
| 2,411 | | | | 2,411 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
13,806 | 12,161 | | | 4,561 | 30,528 | ||||||||||||||||||
|
||||||||||||||||||||||||
Long-lived assets:
|
||||||||||||||||||||||||
Property, plant and equipment
|
||||||||||||||||||||||||
Plant and equipment
|
76,980 | 11,481 | | 66 | 1,694 | 90,221 | ||||||||||||||||||
Mineral properties
|
348,434 | 13,939 | | 960 | | 363,333 | ||||||||||||||||||
Intangibles
|
6,459 | 516 | | | | 6,975 | ||||||||||||||||||
Goodwill
|
114,216 | | | | | 114,216 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
546,089 | 25,936 | | 1,026 | 1,694 | 574,745 | ||||||||||||||||||
-33-
Canada | U.S.A | Africa | Asia | Corporate | ||||||||||||||||||||
(in thousands) | Mining | Mining | Mining | Mining | and Other | Total | ||||||||||||||||||
Statement of Operations:
|
||||||||||||||||||||||||
Revenues
|
5,493 | 10,013 | | | 3,303 | 18,809 | ||||||||||||||||||
|
||||||||||||||||||||||||
Expenses
|
||||||||||||||||||||||||
Operating expenses
|
5,960 | 3,333 | | | 1,314 | 10,607 | ||||||||||||||||||
Sales royalties and capital taxes
|
410 | | | | 26 | 436 | ||||||||||||||||||
Mineral property exploration
|
3,059 | | | 375 | 46 | 3,480 | ||||||||||||||||||
General and administrative
|
| | | | 3,558 | 3,558 | ||||||||||||||||||
|
9,429 | 3,333 | | 375 | 4,944 | 18,081 | ||||||||||||||||||
|
||||||||||||||||||||||||
Income (loss) from operations
|
(3,936 | ) | 6,680 | | (375 | ) | (1,641 | ) | 728 | |||||||||||||||
|
||||||||||||||||||||||||
Revenues supplemental:
|
||||||||||||||||||||||||
Uranium concentrates
|
5,493 | 9,750 | | | | 15,243 | ||||||||||||||||||
Environmental services
|
| | | | 1,174 | 1,174 | ||||||||||||||||||
Management fees and commissions
|
| | | | 2,129 | 2,129 | ||||||||||||||||||
Alternate feed processing and other
|
| 263 | | | | 263 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
5,493 | 10,013 | | | 3,303 | 18,809 | ||||||||||||||||||
Major Customers | ||
The Companys business is such that, at any given time, it sells its uranium and vanadium concentrates to and enters into process milling arrangements and other services with a relatively small number of customers. In the six months ended June 30, 2008, two customers accounted for approximately 66% of total revenues. | ||
20. | RELATED PARTY TRANSACTIONS | |
Uranium Participation Corporation | ||
The Company is a party to a management services agreement with UPC. Under the terms of the agreement, the Company will receive the following fees from UPC: a) a commission of 1.5% of the gross value of any purchases or sales of U 3 O 8 and UF 6 completed at the request of the Board of Directors of UPC; b) a minimum annual management fee of CDN$400,000 (plus reasonable out-of-pocket expenses) plus an additional fee of 0.3% per annum based upon UPCs net asset value between CDN$100,000,000 and CDN$200,000,000 and 0.2% per annum based upon UPCs net asset value in excess of CDN$200,000,000; c) a fee of CDN$200,000 upon the completion of each equity financing where proceeds to UPC exceed CDN$20,000,000; d) a fee of CDN$200,000 for each transaction or arrangement (other than the purchase or sale of U 3 O 8 and UF 6 ) of business where the gross value of such transaction exceeds CDN$20,000,000 (an initiative); and e) an annual fee up to a maximum of CDN$200,000, at the discretion of the Board of Directors of UPC, for on-going maintenance or work associated with an initiative. | ||
In accordance with the management services agreement, all uranium investments owned by UPC are held in accounts with conversion facilities in the name of Denison Mines Inc. as manager for and on behalf of UPC. | ||
From time to time, the Company has also provided temporary revolving credit facilities to UPC which generate interest and standby fee income. No such facilities were in place for the six month period ending June 30, 2008. |
-34-
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | June 30 | June 30 | |||||||||||||
(in thousands) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Fees earned included in revenue:
|
||||||||||||||||
Uranium Sales
|
$ | | $ | 9,750 | $ | | $ | 9,750 | ||||||||
Management fees, including
out-of-pocket expenses
|
385 | 706 | 1,001 | 1,190 | ||||||||||||
Commission fees on purchase and
sale of uranium
|
962 | 1,423 | 1,185 | 1,423 | ||||||||||||
Fees earned included in other income:
|
||||||||||||||||
Loan interest under credit facility
|
| 25 | | 191 | ||||||||||||
Standby fee under credit facility
|
| 1 | | 9 | ||||||||||||
|
$ | 1,347 | $ | 11,905 | $ | 2,186 | $ | 12,563 | ||||||||
At June 30, 2008, accounts receivable includes $345,000 due from UPC with respect to the fees indicated above. | ||
Other | ||
During the six months ended June 30, 2008, the Company incurred management and administrative service fees of $99,000 (June 2007: $95,000) with a company owned by the Chairman of the Company which provides corporate development, office premises, secretarial and other services in Vancouver at a rate of CDN$15,000 per month plus expenses. At June 30, 2008, $44,000 was due to this company. | ||
21. | CAPITAL MANAGEMENT AND FINANCIAL INSTRUMENTS | |
Capital Management | ||
The Companys capital includes debt and shareholders equity. The Companys primary objective with respect to its capital management is to ensure that it has sufficient capital to maintain its ongoing operations, to provide returns for shareholders and benefits for other stakeholders and to pursue growth opportunities. As at June 30, 2008, the Company is subject to externally imposed capital requirements related to its revolving credit facility (see note 11). | ||
Fair Values of Financial Instruments | ||
The Company examines the various financial instrument risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, currency risk, interest rate risk and price risk. |
(a) | Credit Risk |
(b) | Liquidity Risk |
-35-
(c) | Currency Risk |
Change in | ||||||||
Change in | Comprehensive | |||||||
(in thousands) | Net Income (1) | Net Income (1) | ||||||
Canadian dollar
|
||||||||
10% increase in value
|
$ | 166 | $ | 59,965 | ||||
10% decrease in value
|
$ | (166 | ) | $ | (59,965 | ) | ||
Zambian kwacha
|
||||||||
10% increase in value
|
$ | (8,124 | ) | $ | (8,124 | ) | ||
10% decrease in value
|
$ | 8,124 | $ | 8,124 | ||||
(1) | In the above table, positive (negative) values represent increases (decreases) in net income and comprehensive net income respectively. |
(d) | Interest Rate Risk |
(e) | Price Risk |
Change in | ||||||||
Change in | Comprehensive | |||||||
(in thousands) | Net Income (1) | Net Income (1) | ||||||
Commodity price risk
|
||||||||
10% increase in uranium prices
(2)
|
$ | 1,992 | $ | 1,992 | ||||
10% decrease in uranium prices
(2)
|
$ | (2,072 | ) | $ | (2,072 | ) | ||
Equity price risk
|
||||||||
10% increase in equity prices
|
$ | | $ | 6,643 | ||||
10% decrease in equity prices
|
$ | | $ | (6,643 | ) | |||
(1) | In the above table, positive (negative) values represent increases (decreases) in net income and comprehensive net income respectively. | |
(2) | The Company is exposed to fluctuations in both the spot price and long-term price of uranium as a result of the various pricing formulas in the uranium contracts. The above sensitivity analysis includes 10% adjustments to both of these prices. |
-36-
(f) | Fair Value Estimation |
22. | INCOME TAXES | |
For the six months ended June 30, 2008, the Company has provided for current tax recovery of $1,590,000 and for future tax expense of $8,547,000. | ||
In March, 2008, the Zambian government enacted legislation which increased the income tax rate for mining companies from 25% to 30%. Accordingly, the Company recorded a future tax expense of $10,740,000 in the period to adjust the future income tax liability associated with its Zambian assets. This amount has been partially offset by the recognition of previously unrecognized Canadian tax assets of $3,700,000. | ||
23. | COMMITMENTS AND CONTINGENCIES | |
General Legal Matters | ||
The Company is involved, from time to time, in various other legal actions and claims in the ordinary course of business. In the opinion of management, the aggregate amount of any potential liability is not expected to have a material adverse effect on the Companys financial position or results. | ||
Third Party Indemnities | ||
The Company has agreed to indemnify Calfrac Well Services against any future liabilities it may incur related to the assets or liabilities transferred to the Company on March 8, 2004. |
-37-
-1-
Three Months | Three Months | Six Months | Six Months | |||||||||||||
Ended June 30, | Ended June 30, | Ended June 30, | Ended June 30, | |||||||||||||
(in thousands) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Results of Operations:
|
||||||||||||||||
Total revenues
|
$ | 31,713 | $ | 18,809 | $ | 49,894 | $ | 30,528 | ||||||||
Net income (loss)
|
(13,756 | ) | 40,489 | (24,218 | ) | 35,423 | ||||||||||
Earnings (loss) per share Basic
|
(0.07 | ) | 0.21 | (0.13 | ) | 0.19 | ||||||||||
Diluted
|
(0.07 | ) | 0.21 | (0.13 | ) | 0.18 |
As at June 30, | As at December 31, | |||||||
Financial Position: | 2008 | 2007 | ||||||
Working capital
|
$ | 54,910 | $ | 75,915 | ||||
Long-term investments
|
58,944 | $ | 20,507 | |||||
Property, plant and equipment
|
767,197 | 727,823 | ||||||
Total assets
|
1,054,249 | 1,001,581 | ||||||
Total long-term liabilities
|
$ | 259,901 | $ | 175,081 | ||||
-2-
Contracted Canadian Sales Volumes | ||||||||||||||||
(pounds U 3 O 8 x 1000) | ||||||||||||||||
(in thousands) | 2008 | 2009 | 2010 | Pricing | ||||||||||||
|
||||||||||||||||
Market Related
|
588 | 392 | 49 | 80% to 85% of Spot | ||||||||||||
Legacy Base Escalated
|
95 | 0 | 0 | $20.00 to $26.00 | ||||||||||||
Legacy Market Related
|
60 | 0 | 0 | 96% of Spot |
-3-
-4-
-5-
1 | The grades reported herein are equivalent U 3 O 8 grades based on down hole radiometric probing at a cut-off grade of 0.05% eU ; geochemical corroborative assay results have not been completed at this time. All intersections and geological interpretations are based on diamond drill core only and mineralized intervals may not represent true thickness. For a description of the quality assurance program and quality control measures applied by both ARC and Denison during the above described work, please see Denisons Annual Information Form filed under the Companys profile on March 28, 2008 on the SEDAR website at www.sedar.com. |
-6-
| Minimum tangible net worth of $450,000,000 plus 50% of positive quarterly net income and 50% of net proceeds of all equity issues after December 31, 2007; | ||
| Maximum ratio of total net debt to earnings before interest, taxes, depreciation and amortization (EBITDA) of 3.5 to 1.0 for each fiscal quarter starting with the fiscal quarter ending December 31, 2008 and including the fiscal quarter September 30, 2009 and 3.0 to 1.0 for each fiscal quarter thereafter; | ||
| Minimum interest coverage ratio of 3.0 to 1.0 for each fiscal quarter starting with the fiscal quarter ending December 31, 2008; and | ||
| Minimum current ratio of 1.1 to 1.0. |
-7-
Three Months | Three Months | Six Months | Six Months | |||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||
(in thousands) | June 30, 2008 | June 30, 2007 | June 30, 2008 | June 30, 2007 | ||||||||||||
Revenue
|
||||||||||||||||
Uranium sales
|
$ | | $ | 9,750 | $ | | $ | 9,750 | ||||||||
Management fees (including expenses)
|
385 | 706 | 1,001 | 1,190 | ||||||||||||
Commission fees on purchase and sale of uranium
|
962 | 1,423 | 1,185 | 1,423 | ||||||||||||
Other income (expense)
|
||||||||||||||||
Loan interest under credit facility
|
| 25 | | 191 | ||||||||||||
Standby fee under credit facility
|
| 1 | | 9 | ||||||||||||
|
||||||||||||||||
Total fees earned from UPC
|
$ | 1,347 | $ | 11,905 | $ | 2,186 | $ | 12,563 | ||||||||
-8-
a) | CICA Handbook Section 3031 Inventories which provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realizable value. It also provides guidance on the cost formulas that are used to assign costs to inventories. There was no impact to the Companys financial results from adopting this standard. | ||
b) | CICA Handbook Section 3862 Financial Instruments Disclosures and Section 3863 Financial Instruments Presentation which requires disclosures in the financial statements that will enable users to evaluate: the significance of financial instruments for the companys financial positions and performance; the nature and extent of risks arising from financial instruments to which the company is exposed during the period and at the balance sheet date; and how the company manages those risks. | ||
c) | CICA Handbook Section 1535 Capital Disclosures which requires the disclosure of both qualitative and quantitative information that enable users to evaluate the companys objectives, policies and processes for managing capital. |
a) | CICA Handbook Section 3064 Goodwill and intangible assets which establishes revised standards for recognition, measurement, presentation and disclosure of goodwill and intangible assets. Concurrent with the introduction of this standard, the CICA withdrew EIC 27 Revenues and expenses during the pre-operating period. As a result of the withdrawal of EIC 27, the Company will no longer be able to defer costs and revenues incurred prior to commercial production at new mine operations. |
-9-
At June 30 | At December 31 | |||||||
2008 | 2007 | |||||||
|
||||||||
ASSETS
|
||||||||
Current
|
||||||||
Cash and equivalents
|
$ | 7,388 | $ | 19,680 | ||||
Trade and other receivables
|
26,881 | 39,667 | ||||||
Note receivable
|
342 | 455 | ||||||
Inventories (Note 3)
|
36,086 | 30,921 | ||||||
Investments (Note 4)
|
5,536 | 13,930 | ||||||
Prepaid expenses and other
|
2,797 | 1,492 | ||||||
|
79,030 | 106,145 | ||||||
|
||||||||
Inventories ore in stockpiles (Note 3)
|
5,663 | | ||||||
Investments (Note 4)
|
60,893 | 20,507 | ||||||
Property, plant and equipment, net (Note 5)
|
767,197 | 727,823 | ||||||
Restricted investments (Note 6)
|
18,161 | 17,797 | ||||||
Intangibles (Note 7)
|
6,331 | 6,979 | ||||||
Goodwill (Note 8)
|
118,923 | 122,330 | ||||||
|
||||||||
|
$ | 1,056,198 | $ | 1,001,581 | ||||
|
||||||||
LIABILITIES
|
||||||||
Current
|
||||||||
Accounts payable and accrued liabilities
|
$ | 19,719 | $ | 22,642 | ||||
Current portion of long-term liabilities:
|
||||||||
Post-employment benefits (Note 9)
|
392 | 404 | ||||||
Reclamation and remediation obligations (Note 10)
|
549 | 565 | ||||||
Debt obligations (Note 11)
|
16 | 42 | ||||||
Other long-term liabilities (Note 12)
|
3,444 | 6,577 | ||||||
|
24,120 | 30,230 | ||||||
|
||||||||
Deferred revenue
|
2,733 | 2,359 | ||||||
Provision for post-employment benefits (Note 9)
|
3,828 | 4,030 | ||||||
Reclamation and remediation obligations (Note 10)
|
19,849 | 19,824 | ||||||
Debt obligations (Note 11)
|
65,291 | | ||||||
Other long-term liabilities (Note 12)
|
2,531 | 7,343 | ||||||
Future income tax liability (Note 22)
|
165,669 | 141,525 | ||||||
|
||||||||
|
284,021 | 205,311 | ||||||
|
||||||||
SHAREHOLDERS EQUITY
|
||||||||
Share capital (Note 13)
|
659,811 | 662,949 | ||||||
Share purchase warrants (Note 14)
|
11,728 | 11,728 | ||||||
Contributed surplus (Notes 15 & 16)
|
25,886 | 25,471 | ||||||
Deficit
|
(39,052 | ) | (14,834 | ) | ||||
Accumulated other comprehensive income (Note 17)
|
||||||||
Unrealized gains on investments
|
37,500 | 18,100 | ||||||
Cumulative foreign currency translation gain
|
76,304 | 92,856 | ||||||
|
772,177 | 796,270 | ||||||
|
||||||||
|
$ | 1,056,198 | $ | 1,001,581 | ||||
|
||||||||
Issued and outstanding common shares (Note 13)
|
189,979,035 | 189,731,635 | ||||||
|
||||||||
Contingent liabilities and commitments (Note 23)
|
-1-
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | June 30 | June 30 | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
|
||||||||||||||||
REVENUES
|
$ | 31,713 | $ | 18,809 | $ | 49,894 | $ | 30,528 | ||||||||
|
||||||||||||||||
EXPENSES
|
||||||||||||||||
|
||||||||||||||||
Operating expenses
|
24,892 | 10,607 | 37,685 | 19,700 | ||||||||||||
Sales royalties and capital taxes
|
999 | 436 | 1,808 | 981 | ||||||||||||
Mineral property exploration
|
3,787 | 3,480 | 10,352 | 8,529 | ||||||||||||
General and administrative
|
4,674 | 3,558 | 8,794 | 6,460 | ||||||||||||
|
34,352 | 18,081 | 58,639 | 35,670 | ||||||||||||
|
||||||||||||||||
Income (loss) from operations
|
(2,639 | ) | 728 | (8,745 | ) | (5,142 | ) | |||||||||
Other income (expense), net (Note 18)
|
(10,742 | ) | 37,678 | (8,516 | ) | 38,236 | ||||||||||
|
||||||||||||||||
Income (loss) for the period before taxes
|
(13,381 | ) | 38,406 | (17,261 | ) | 33,094 | ||||||||||
|
||||||||||||||||
Income tax recovery (expense) (Note 22):
|
||||||||||||||||
Current
|
2,759 | (1,735 | ) | 1,590 | (1,735 | ) | ||||||||||
Future
|
(3,134 | ) | 3,818 | (8,547 | ) | 4,064 | ||||||||||
|
||||||||||||||||
Income (loss) for the period
|
$ | (13,756 | ) | $ | 40,489 | $ | (24,218 | ) | $ | 35,423 | ||||||
|
||||||||||||||||
Deficit, beginning of period
|
(25,296 | ) | (67,144 | ) | (14,834 | ) | (62,078 | ) | ||||||||
|
||||||||||||||||
Deficit, end of period
|
$ | (39,052 | ) | $ | (26,655 | ) | $ | (39,052 | ) | $ | (26,655 | ) | ||||
|
||||||||||||||||
Income (loss) for the period
|
$ | (13,756 | ) | $ | 40,489 | $ | (24,218 | ) | $ | 35,423 | ||||||
Other comprehensive income (loss) (Note 17)
|
||||||||||||||||
Change in foreign currency translation
|
3,813 | 55,084 | (16,552 | ) | 61,854 | |||||||||||
Change in unrealized gain on investments net
|
27,735 | (14,125 | ) | 19,400 | 3,465 | |||||||||||
|
||||||||||||||||
|
||||||||||||||||
Comprehensive income (loss)
|
$ | 17,792 | $ | 81,448 | $ | (21,370 | ) | $ | 100,742 | |||||||
|
||||||||||||||||
Net income (loss) per share:
|
||||||||||||||||
Basic
|
$ | (0.07 | ) | $ | 0.21 | $ | (0.13 | ) | $ | 0.19 | ||||||
Diluted
|
$ | (0.07 | ) | $ | 0.21 | $ | (0.13 | ) | $ | 0.18 | ||||||
|
||||||||||||||||
Weighted-average number of shares
outstanding (in thousands):
|
||||||||||||||||
Basic
|
189,856 | 189,459 | 189,814 | 187,740 | ||||||||||||
Diluted
|
191,244 | 196,019 | 192,236 | 194,049 | ||||||||||||
-2-
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | June 30 | June 30 | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
CASH PROVIDED BY (USED IN):
|
||||||||||||||||
|
||||||||||||||||
OPERATING ACTIVITIES
|
||||||||||||||||
Net income (loss) for the period
|
$ | (13,756 | ) | $ | 40,489 | $ | (24,218 | ) | $ | 35,423 | ||||||
Items not affecting cash:
|
||||||||||||||||
Depletion, depreciation, amortization and accretion
|
4,385 | 3,123 | 10,484 | 5,384 | ||||||||||||
Stock-based compensation
|
619 | 342 | 1,232 | 688 | ||||||||||||
Losses (gains) on asset disposals
|
(181 | ) | | (181 | ) | | ||||||||||
Losses (gains) on restricted investments
|
463 | (38,633 | ) | (37 | ) | (38,663 | ) | |||||||||
Equity in loss of Fortress Minerals Corp.
|
| (884 | ) | | | |||||||||||
Future income taxes
|
3,134 | (3,818 | ) | 8,547 | (4,064 | ) | ||||||||||
Foreign exchange translation
|
12,766 | | 12,766 | | ||||||||||||
Net change in non-cash working capital items
|
||||||||||||||||
Trade and other receivables
|
(5,168 | ) | 1,854 | 12,494 | (423 | ) | ||||||||||
Inventories
|
(4,632 | ) | (1,080 | ) | (15,260 | ) | (3,466 | ) | ||||||||
Prepaid expenses and other assets
|
(1,480 | ) | (719 | ) | (1,317 | ) | (599 | ) | ||||||||
Accounts payable and accrued liabilities
|
(1,943 | ) | 198 | (2,642 | ) | 3,256 | ||||||||||
Post-employment benefits
|
(85 | ) | (112 | ) | (206 | ) | (209 | ) | ||||||||
Reclamation and remediation obligations
|
(174 | ) | (97 | ) | (366 | ) | (181 | ) | ||||||||
Deferred revenue
|
100 | (126 | ) | 374 | (2,051 | ) | ||||||||||
|
||||||||||||||||
Net cash from (used in) operating activities
|
(5,952 | ) | 537 | 1,670 | (4,905 | ) | ||||||||||
|
||||||||||||||||
INVESTING ACTIVITIES
|
||||||||||||||||
Decrease in notes receivable
|
80 | 10,203 | 113 | 9,691 | ||||||||||||
Purchase of long-term investments
|
(13,365 | ) | (5,262 | ) | (13,413 | ) | (49,766 | ) | ||||||||
Proceeds from sale of long-term investments
|
1,320 | 45,446 | 1,320 | 45,446 | ||||||||||||
Expenditures on property, plant and equipment
|
(37,755 | ) | (7,649 | ) | (64,964 | ) | (16,976 | ) | ||||||||
Proceeds from sale of property, plant and equipment
|
4 | 88 | 4 | 88 | ||||||||||||
Decrease (increase) in restricted investments
|
92 | (457 | ) | (382 | ) | (759 | ) | |||||||||
|
||||||||||||||||
Net cash from (used in) investing activities
|
(49,624 | ) | 42,369 | (77,322 | ) | (12,276 | ) | |||||||||
|
||||||||||||||||
FINANCING ACTIVITIES
|
||||||||||||||||
Increase (decrease) in debt obligations
|
57,110 | (13 | ) | 66,064 | (21 | ) | ||||||||||
Deposits in advance of shares issued
|
| (5,856 | ) | | | |||||||||||
Issuance of common shares for:
|
||||||||||||||||
Private placements
|
| 15,540 | | 102,166 | ||||||||||||
Exercise of stock options and warrants
|
1,070 | 2,600 | 1,312 | 4,949 | ||||||||||||
|
||||||||||||||||
Net cash from (used in) financing activities
|
58,180 | 12,271 | 67,376 | 107,094 | ||||||||||||
|
||||||||||||||||
Foreign exchange effect on cash and equivalents
|
(2,340 | ) | 17,554 | (4,016 | ) | 18,718 | ||||||||||
|
||||||||||||||||
Increase (decrease) in cash and equivalents
|
264 | 72,731 | (12,292 | ) | 108,631 | |||||||||||
Cash and equivalents, beginning of period
|
7,124 | 105,027 | 19,680 | 69,127 | ||||||||||||
|
||||||||||||||||
Cash and equivalents, end of period
|
$ | 7,388 | $ | 177,758 | $ | 7,388 | $ | 177,758 | ||||||||
-3-
1. | NATURE OF OPERATIONS | |
Denison Mines Corp. (DMC) is incorporated under the Business Corporations Act (Ontario) (OBCA). Denison Mines Corp. and its subsidiary companies and joint ventures (collectively, the Company) are engaged in uranium mining and related activities, including acquisition, exploration and development of uranium bearing properties, extraction, processing, selling and reclamation. The environmental services division of the Company provides mine decommissioning and decommissioned site monitoring services for third parties. | ||
The Company has a 100% interest in the White Mesa mill located in Utah, United States and a 22.5% interest in the McClean Lake mill located in the Athabasca Basin of Saskatchewan, Canada. The Company has interests in a number of nearby mines at both locations, as well as interests in development and exploration projects located in Canada, the United States, Mongolia and Zambia, some of which are operated through joint ventures. Uranium, the Companys primary product, is produced in the form of uranium oxide concentrates (U 3 O 8 ) and sold to various customers around the world for further processing. Vanadium, a co-product of some of the Companys mines is also produced. The Company is also in the business of recycling uranium bearing waste materials, referred to as alternate feed materials. | ||
Denison Mines Inc. (DMI), a subsidiary of the Company is the manager of Uranium Participation Corporation (UPC), a publicly-listed investment holding company formed to invest substantially all of its assets in U 3 O 8 and uranium hexafluoride (UF 6 ). The Company has no ownership interest in UPC but receives various fees for management services and commissions from the purchase and sale of U 3 O 8 and UF 6 by UPC. |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | ||
These unaudited consolidated financial statements have been prepared by management in U.S. dollars, unless otherwise stated, in accordance with generally accepted accounting principles in Canada (Canadian GAAP) for interim financial statements. | ||
Certain information and note disclosures normally included in the annual consolidated financial statements prepared in accordance with Canadian GAAP have been condensed or excluded. As a result, these unaudited interim consolidated financial statements do not contain all disclosures required for annual financial statements and should be read in conjunction with the Companys audited consolidated financial statements and notes thereto for the year ended December 31, 2007. | ||
All material adjustments which, in the opinion of management, are necessary for fair presentation of the results of the interim periods have been reflected in these financial statements. The results of operations for the six months ended June 30, 2008 are not necessarily indicative of the results to be expected for the full year. | ||
These unaudited interim consolidated financial statements are prepared following accounting policies consistent with the Companys audited consolidated financial statements and notes thereto for the year ended December 31, 2007, except for the changes noted under the New Accounting Standards Adopted section below. |
- 4 -
Significant Mining Interests | ||
The following table sets forth the Companys ownership of its significant mining interests that have projects at the development stage within them as at June 30, 2008: |
Ownership | ||||||||
Location | Interest | |||||||
|
||||||||
Through majority owned subsidiaries
|
||||||||
Arizona Strip
|
USA | 100.00 | % | |||||
Henry Mountains
|
USA | 100.00 | % | |||||
Colorado Plateau
|
USA | 100.00 | % | |||||
Sunday Mine
|
USA | 100.00 | % | |||||
Gurvan Saihan Joint Venture
|
Mongolia | 70.00 | % | |||||
Mutanga
|
Zambia | 100.00 | % | |||||
|
||||||||
As interests in unincorporated joint ventures, or jointly controlled assets
|
||||||||
McClean Lake
|
Canada | 22.50 | % | |||||
Midwest
|
Canada | 25.17 | % |
New Accounting Standards Adopted | ||
The Company adopted the following new accounting standards issued by the Canadian Institute of Chartered Accountants (CICA) Handbook effective January 1, 2008: |
a) | CICA Handbook Section 3031 Inventories which provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realizable value. It also provides guidance on the cost formulas that are used to assign costs to inventories. There was no impact to the Companys financial results from adopting this standard. | ||
b) | CICA Handbook Section 3862 Financial Instruments Disclosures and Section 3863 Financial Instruments Presentation which requires disclosures in the financial statements that will enable users to evaluate: the significance of financial instruments for the companys financial positions and performance; the nature and extent of risks arising from financial instruments to which the company is exposed during the period and at the balance sheet date; and how the company manages those risks (see note 21). | ||
c) | CICA Handbook Section 1535 Capital Disclosures which requires the disclosure of both qualitative and quantitative information that enable users to evaluate the companys objectives, policies and processes for managing capital (see note 21). |
Accounting Standards Issued but not yet Adopted | ||
The CICA has issued the following accounting standards which are effective for the Companys fiscal years beginning on or after January 1, 2009: |
a) | CICA Handbook Section 3064 Goodwill and intangible assets which establishes revised standards for recognition, measurement, presentation and disclosure of goodwill and intangible assets. Concurrent with the introduction of this standard, the CICA withdrew EIC 27 Revenues and expenses during the pre-operating period. As a result of the withdrawal of EIC 27, the Company will no longer be able to defer costs and revenues incurred prior to commercial production at new mine operations. |
The Company has not yet determined the impact of adopting the above accounting standards. | ||
Comparative Numbers | ||
Certain classifications of the comparative figures have been changed to conform to those used in the current period. |
- 5 -
3. | INVENTORIES | |
The inventories balance consists of: |
At June 30 | At December 31 | |||||||
(in thousands) | 2008 | 2007 | ||||||
|
||||||||
Uranium and vanadium concentrates
|
$ | 9,415 | $ | 8,344 | ||||
Inventory of ore in stockpiles
|
26,999 | 19,289 | ||||||
Mine and mill supplies
|
5,335 | 3,288 | ||||||
|
||||||||
|
$ | 41,749 | $ | 30,921 | ||||
|
||||||||
Inventories:
|
||||||||
Current
|
$ | 36,086 | $ | 30,921 | ||||
Long-term ore in stockpiles
|
5,663 | | ||||||
|
||||||||
|
$ | 41,749 | $ | 30,921 | ||||
Long-term ore in stockpile inventory represents an estimate of the amount of pounds on the stockpile in excess of the next twelve months of planned mill production. |
4. | LONG-TERM INVESTMENTS | |
The long-term investments balance consists of: |
At June 30 | At December 31 | |||||||
(in thousands) | 2008 | 2007 | ||||||
Portfolio investments
|
||||||||
Available for sale securities at fair value
|
$ | 66,429 | $ | 34,437 | ||||
|
||||||||
|
$ | 66,429 | $ | 34,437 | ||||
|
||||||||
Investments:
|
||||||||
Current
|
$ | 5,536 | $ | 13,930 | ||||
Long-term
|
60,893 | 20,507 | ||||||
|
||||||||
|
$ | 66,429 | $ | 34,437 | ||||
Purchases | ||
During the six months ended June 30, 2008, the Company acquired additional equity interests at a cost of $13,413,000. | ||
In April 2008, the Company purchased 5,465,000 units of Uranerz Energy Corporation (Uranerz), a public company listed on the Toronto, American and Frankfurt Stock Exchanges, for an aggregate purchase price of approximately $13,365,000. Each unit is comprised of one common share and one-half of one common share purchase warrant. Each whole warrant will entitle the holder to purchase one additional share of Uranerz common stock for a period of 24 months after closing (subject to acceleration under certain conditions) at an exercise price of US$3.50 per share. Immediately after the purchase, Denison owned approximately 9.9% of the issued and outstanding common share of Uranerz. | ||
Sales | ||
During the six months ended June 30, 2008, the Company sold equity interests in four public companies for cash consideration of $1,320,000. The resulting gain has been included in net other income (expense) in the statement of operations (see Note 18). |
- 6 -
At June 30 | At December 31 | |||||||
(in thousands) | 2008 | 2007 | ||||||
|
||||||||
Cost
|
||||||||
Plant and equipment
|
||||||||
Mill and mining related
|
$ | 177,327 | $ | 135,375 | ||||
Environmental services and other
|
2,700 | 2,742 | ||||||
Mineral properties
|
619,419 | 609,569 | ||||||
|
||||||||
|
799,446 | 747,686 | ||||||
|
||||||||
Accumulated depreciation and amortization
|
||||||||
Plant and equipment
|
||||||||
Mill and mining related
|
12,524 | 9,182 | ||||||
Environmental services and other
|
1,059 | 843 | ||||||
Mineral properties
|
18,666 | 9,838 | ||||||
|
||||||||
|
32,249 | 19,863 | ||||||
|
||||||||
Property, plant and equipment, net
|
$ | 767,197 | $ | 727,823 | ||||
|
||||||||
Net book value
|
||||||||
Plant and equipment
|
||||||||
Mill and mining related
|
$ | 164,803 | $ | 126,193 | ||||
Environmental services and other
|
1,641 | 1,899 | ||||||
Mineral properties
|
600,753 | 599,731 | ||||||
|
||||||||
|
$ | 767,197 | $ | 727,823 | ||||
Mineral Properties | ||
The company has various interests in development and exploration projects located in Canada, the U.S., Mongolia and Zambia which are held directly or through option or joint venture agreements. Amounts spent on development projects are capitalized as mineral property assets. Exploration projects are expensed. | ||
Canada | ||
In October 2004, the Company entered into an option agreement to earn up to a 22.5% ownership interest in the Wolly project by funding CDN$5,000,000 in exploration expenditures over the next six years. As at June 30, 2008, the Company has incurred a total of CDN$3,272,000 towards this option and has earned a 13.0% ownership interest in the project under the phase-in ownership provisions of the agreement. | ||
In the first quarter of 2006, the Company entered into an option agreement to earn up to a 75% interest in the Park Creek project. The Company is required to incur exploration expenditures of CDN$2,800,000 over three years to earn an initial 49% interest and a further CDN$3,000,000 over two years to earn an additional 26% interest. As at June 30, 2008, the Company has incurred a total of CDN$3,295,000 towards the option and has earned a 49% ownership interest in the project under the phase-in-ownership provisions of the agreement. |
- 7 -
6. | RESTRICTED INVESTMENTS | |
The Company has certain restricted investments deposited to collateralize its reclamation and certain other obligations. The restricted investments balance consists of: |
At June 30 | At December 31 | |||||||
(in thousands) | 2008 | 2007 | ||||||
|
||||||||
U.S. mill and mine reclamation
|
$ | 16,179 | $ | 15,849 | ||||
Elliot Lake reclamation trust fund
|
1,982 | 1,948 | ||||||
|
||||||||
|
$ | 18,161 | $ | 17,797 | ||||
U.S. Mill and Mine Reclamation | ||
The Company has cash and cash equivalents and fixed income securities as collateral for various bonds posted in favour of the State of Utah and the applicable state regulatory agencies in Colorado and Arizona for estimated reclamation costs associated with the White Mesa mill and U.S. mining properties. During the six months ended June 30, 2008, the Company has not deposited any additional monies into its collateral account. | ||
Elliot Lake Reclamation Trust Fund | ||
Pursuant to its Reclamation Funding Agreement with the Governments of Canada and Ontario, the Company deposited an additional CDN$350,000 into the Elliot Lake Reclamation Trust Fund during the six months ended June 30, 2008. | ||
7. | INTANGIBLES | |
A continuity summary of intangibles is presented below: |
Six Months | ||||
Ended | ||||
(in thousands) | June 30, 2008 | |||
|
||||
Intangibles, beginning of period
|
$ | 6,979 | ||
Amortization
|
(472 | ) | ||
Foreign exchange
|
(176 | ) | ||
|
||||
Other intangibles, end of period
|
$ | 6,331 | ||
|
||||
Other intangibles, by item:
|
||||
UPC management contract
|
5,878 | |||
Urizon technology licenses
|
453 | |||
|
||||
|
$ | 6,331 | ||
-8-
8. | GOODWILL | |
A continuity summary of goodwill is presented below: |
Six Months | ||||
Ended | ||||
(in thousands) | June 30, 2008 | |||
|
||||
Goodwill, beginning of period
|
$ | 122,330 | ||
Foreign exchange
|
(3,407 | ) | ||
|
||||
Goodwill, end of period
|
$ | 118,923 | ||
|
||||
Goodwill, allocation by business unit:
|
||||
Canada mining segment
|
$ | 118,923 | ||
Goodwill is not amortized and is tested annually for impairment. | ||
9. | POST-EMPLOYMENT BENEFITS | |
A continuity summary of post-employment benefits is presented below: |
Six Months | ||||
Ended | ||||
(in thousands) | June 30, 2008 | |||
|
||||
Post-employment liability, beginning of period
|
$ | 4,434 | ||
Benefits paid
|
(206 | ) | ||
Interest cost
|
114 | |||
Foreign exchange
|
(122 | ) | ||
|
||||
Post-employment liability, end of period
|
$ | 4,220 | ||
|
||||
Post-employment benefits liability by duration:
|
||||
Current
|
$ | 392 | ||
Non-current
|
3,828 | |||
|
||||
|
$ | 4,220 | ||
-9-
10. | RECLAMATION AND REMEDIATION OBLIGATIONS | |
A continuity summary of reclamation and remediation obligations is presented below: |
Six Months | ||||
Ended | ||||
(in thousands) | June 30, 2008 | |||
|
||||
Reclamation obligations, beginning of period
|
$ | 20,389 | ||
Accretion
|
759 | |||
Expenditures incurred
|
(366 | ) | ||
Liability adjustments
|
(107 | ) | ||
Foreign exchange
|
(277 | ) | ||
|
||||
Reclamation obligations, end of period
|
$ | 20,398 | ||
|
||||
Site restoration liability by location:
|
||||
U.S. Mill and Mines
|
$ | 10,757 | ||
Elliot Lake
|
8,024 | |||
McLean Lake and Midwest Joint Ventures
|
1,617 | |||
|
||||
|
$ | 20,398 | ||
|
||||
Site restoration liability :
|
||||
Current
|
$ | 549 | ||
Non-current
|
19,849 | |||
|
||||
|
$ | 20,398 | ||
11. | DEBT OBLIGATIONS | |
Debt obligations consist of: |
At June 30 | At December 31 | |||||||
(in thousands) | 2008 | 2007 | ||||||
|
||||||||
Temporary line of credit
|
$ | 65,527 | $ | | ||||
Revolving line of credit
|
(236 | ) | | |||||
Notes payable and other
|
16 | 42 | ||||||
|
||||||||
|
$ | 65,307 | $ | 42 | ||||
|
||||||||
Other long-term liabilities:
|
||||||||
Current
|
16 | 42 | ||||||
Non-current
|
65,291 | | ||||||
|
||||||||
|
$ | 65,307 | $ | 42 | ||||
Temporary Line of Credit | ||
In March 2008, the Company replaced all prior credit facility arrangements with a temporary CDN$40,000,000 uncommitted revolving credit facility with the Bank of Nova Scotia secured by the assets of DMI with interest payable at Canadian bank prime. In June 2008, this facility was increased to CDN$70,000,000. As at June 30, 2008, the Company had drawn CDN$66,816,000 under the facility and has incurred interest expense of CDN$524,000 for this facility. | ||
In July 2008, the temporary line of credit facility has been replaced with the revolving line of credit facility. |
-10-
12. | OTHER LONG-TERM LIABILITIES |
At June 30 | At December 31 | |||||||
(in thousands) | 2008 | 2007 | ||||||
Unamortized fair value of sales contracts
|
$ | 4,889 | $ | 12,812 | ||||
Unamortized fair value of toll milling contracts
|
981 | 1,008 | ||||||
Other
|
105 | 100 | ||||||
|
$ | 5,975 | $ | 13,920 | ||||
|
||||||||
Other long-term liabilities:
|
||||||||
Current
|
3,444 | 6,577 | ||||||
Non-current
|
2,531 | 7,343 | ||||||
|
$ | 5,975 | $ | 13,920 | ||||
-11-
13. | SHARE CAPITAL |
Number of | ||||||||
Common | ||||||||
(in thousands except share amounts) | Shares | Amount | ||||||
|
||||||||
Balance at December 31, 2007
|
189,731,635 | $ | 662,949 | |||||
|
||||||||
Issues for cash
Exercise of stock options
|
247,400 | 1,312 | ||||||
Flow-through share liability renunciation
|
| (5,267 | ) | |||||
Fair value of stock options exercised
|
| 817 | ||||||
|
247,400 | (3,138 | ) | |||||
|
||||||||
Balance at June 30, 2008
|
189,979,035 | $ | 659,811 | |||||
14. | SHARE PURCHASE WARRANTS |
Number of | ||||||||
Common Shares | Fair Value | |||||||
(in thousands except share amounts) | Issuable | Amount | ||||||
|
||||||||
Balance at December 31, 2007 and June 30, 2008
|
9,564,915 | $ | 11,728 | |||||
|
||||||||
Share purchase warrants by series:
|
||||||||
November 2004 series
(1)
|
3,156,915 | $ | 5,898 | |||||
March 2006 series
(2)
|
6,408,000 | 5,830 | ||||||
|
||||||||
|
9,564,915 | $ | 11,728 | |||||
(1) | The November 2004 series has an effective exercise price of CDN$5.21 per issuable share (CDN$15.00 per warrant adjusted for the 2.88 exchange ratio associated with the Denison and IUC merger) and expires on November 24, 2009. | |
(2) | The March 2006 series has an effective exercise price of CDN$10.42 per issuable share (CDN$30.00 per warrant adjusted for the 2.88 exchange ratio associated with the Denison and IUC merger) and expires on March 1, 2011. |
-12-
15. | CONTRIBUTED SURPLUS |
Six Months | ||||
Ended | ||||
(in thousands) | Six 30, 2008 | |||
|
||||
Balance, beginning of period
|
$ | 25,471 | ||
Stock-based compensation expense (note 16)
|
1,232 | |||
Fair value of stock options exercised
|
(817 | ) | ||
|
||||
Balance, end of period
|
$ | 25,886 | ||
16. | STOCK OPTIONS |
Weighted- | ||||||||
Average | ||||||||
Exercise | ||||||||
Number of | Price per | |||||||
Common | Share | |||||||
Shares | (CDN $) | |||||||
|
||||||||
Stock options outstanding, beginning of period
|
5,961,354 | $ | 7.27 | |||||
|
||||||||
Granted
|
2,660,000 | 8.12 | ||||||
Exercised
|
(247,400 | ) | 5.30 | |||||
Expired
|
(97,500 | ) | 9.40 | |||||
|
||||||||
Stock options outstanding, end of period
|
8,276,454 | $ | 7.57 | |||||
|
||||||||
Stock options exercisable, end of period
|
5,491,964 | $ | 7.15 | |||||
-13-
Weighted | Weighted- | |||||||||||
Average | Average | |||||||||||
Remaining | Exercise | |||||||||||
Range of Exercise | Contractual | Number of | Price per | |||||||||
Prices per Share | Life | Common | Share | |||||||||
(CDN$) | (Years) | Shares | (CDN $) | |||||||||
|
||||||||||||
Stock options outstanding
|
||||||||||||
$1.87 to $4.99
|
6.04 | 1,034,555 | $ | 2.12 | ||||||||
$5.00 to $8.50
|
5.56 | 4,628,399 | 6.91 | |||||||||
$10.08 to $15.30
|
1.59 | 2,613,500 | 10.91 | |||||||||
|
||||||||||||
Stock options outstanding, end of period
|
4.37 | 8,276,454 | $ | 7.57 | ||||||||
Six Months | ||||
Ended | ||||
June 30, 2008 | ||||
|
||||
Risk-free interest rate
|
2.86% 3.29% | |||
Expected stock price volatility
|
52.2% 55.4% | |||
Expected life
|
2.1 3.5 years | |||
Expected dividend yield
|
| |||
Fair value per share under options granted
|
CDN$2.16 CDN$4.49 | |||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | June 30 | June 30 | |||||||||||||
(in thousands) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
|
||||||||||||||||
Mineral property exploration
|
$ | 58 | $ | 61 | $ | 114 | $ | 113 | ||||||||
General and administrative
|
561 | 281 | 1,118 | 575 | ||||||||||||
|
||||||||||||||||
|
$ | 619 | $ | 342 | $ | 1,232 | $ | 688 | ||||||||
-14-
17. | ACCUMULATED OTHER COMPREHENSIVE INCOME | |
A continuity summary of accumulated other comprehensive income is as follows: |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | June 30 | June 30 | |||||||||||||
(in thousands) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
|
||||||||||||||||
Accumulated other comprehensive income,
beginning of period
|
$ | 82,256 | $ | 40,704 | $ | 110,956 | $ | (8,498 | ) | |||||||
|
||||||||||||||||
Cumulative foreign currency translation gain (loss)
|
||||||||||||||||
Balance, beginning of period
|
$ | 72,491 | $ | (1,728 | ) | $ | 92,856 | $ | (8,498 | ) | ||||||
Change in foreign currency
|
3,813 | 55,084 | (16,552 | ) | 61,854 | |||||||||||
Balance, end of period
|
76,304 | 53,356 | 76,304 | 53,356 | ||||||||||||
|
||||||||||||||||
Unrealized gains on investments
|
||||||||||||||||
Balance, beginning of period
|
9,765 | 42,432 | 18,100 | | ||||||||||||
Unrealized gains as at January 1, 2007, net of tax
(1)
|
| | | 24,842 | ||||||||||||
Net unrealized gains (losses), net of tax
(2)
|
27,735 | (14,125 | ) | 19,400 | 3,465 | |||||||||||
Balance, end of period
|
37,500 | 28,307 | 37,500 | 28,307 | ||||||||||||
|
||||||||||||||||
Accumulated other comprehensive income, end of period
|
$ | 113,804 | $ | 81,663 | $ | 113,804 | $ | 81,663 | ||||||||
(1) | Reflects the adoption of CICA Section 3855 on January 1, 2007. | |
(2) | Unrealized gains (losses) on investments deemed available-for-sale are included in other comprehensive income (loss) until realized. When the investment is disposed of or incurs a decline in value that is other than temporary, the gain (loss) is realized and reclassified to the income statement. For the three months and six months ending June 30, 2008, approximately $195,000 of gains were realized and reclassified to the income statement within Other income (expense) net. For the three months and six months ending June 30, 2007, approximately $15,944,000 of gains were realized and reclassified to the income statement within Other income (expense) net. |
18. | OTHER INCOME AND EXPENSES | |
The elements of net other income in the statement of operations is as follows: |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | June 30 | June 30 | |||||||||||||
(in thousands) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
|
||||||||||||||||
Interest income, net of fees
|
$ | 236 | $ | 1,638 | $ | 609 | $ | 3,242 | ||||||||
Interest expense
|
(516 | ) | | (520 | ) | | ||||||||||
Gains (losses) on:
|
||||||||||||||||
Foreign exchange
|
(10,197 | ) | (3,399 | ) | (8,965 | ) | (3,645 | ) | ||||||||
Land, plant and equipment
|
| | 125 | (17 | ) | |||||||||||
Portfolio investments
|
195 | 38,643 | 195 | 38,643 | ||||||||||||
Restricted investments
|
(463 | ) | (92 | ) | 37 | (53 | ) | |||||||||
Equity gain of affiliates
|
| 884 | | | ||||||||||||
Other
|
3 | 4 | 3 | 66 | ||||||||||||
|
||||||||||||||||
Other income (expense), net
|
$ | (10,742 | ) | $ | 37,678 | $ | (8,516 | ) | $ | 38,236 | ||||||
-15-
19. | SEGMENTED INFORMATION | |
Business Segments | ||
The Company operates in two primary segments the mining segment and the corporate and other segment. The mining segment, which has been further subdivided by major geographic regions, includes activities related to exploration, evaluation and development, mining, milling and the sale of mineral concentrates. The corporate and other segment includes the results of the Companys environmental services business, management fees and commission income earned from UPC and general corporate expenses not allocated to the other segments. | ||
For the six months ended June 30, 2008, business segment results were as follows: |
Canada | U.S.A | Africa | Asia | Corporate | ||||||||||||||||||||
(in thousands) | Mining | Mining | Mining | Mining | and Other | Total | ||||||||||||||||||
|
||||||||||||||||||||||||
Statement of Operations:
|
||||||||||||||||||||||||
Revenues
|
32,351 | 12,862 | | | 4,681 | 49,894 | ||||||||||||||||||
|
||||||||||||||||||||||||
Expenses
|
||||||||||||||||||||||||
Operating expenses
|
24,237 | 10,487 | | | 2,961 | 37,685 | ||||||||||||||||||
Sales royalties and capital taxes
|
1,722 | | | | 86 | 1,808 | ||||||||||||||||||
Mineral property exploration
|
8,474 | 56 | | 1,708 | 114 | 10,352 | ||||||||||||||||||
General and administrative
|
| | | | 8,794 | 8,794 | ||||||||||||||||||
|
34,433 | 10,543 | | 1,708 | 11,955 | 58,639 | ||||||||||||||||||
|
||||||||||||||||||||||||
Income (loss) from operations
|
(2,082 | ) | 2,319 | | (1,708 | ) | (7,274 | ) | (8,745 | ) | ||||||||||||||
|
||||||||||||||||||||||||
Revenues supplemental:
|
||||||||||||||||||||||||
Uranium concentrates
|
32,351 | 12,825 | | | | 45,176 | ||||||||||||||||||
Environmental services
|
| | | | 2,495 | 2,495 | ||||||||||||||||||
Management fees and commissions
|
| | | | 2,186 | 2,186 | ||||||||||||||||||
Alternate feed processing and other
|
| 37 | | | | 37 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
32,351 | 12,862 | | | 4,681 | 49,894 | ||||||||||||||||||
|
||||||||||||||||||||||||
Long-lived assets:
|
||||||||||||||||||||||||
Property, plant and equipment
|
||||||||||||||||||||||||
Plant and equipment
|
89,017 | 74,894 | 550 | 342 | 1,641 | 166,444 | ||||||||||||||||||
Mineral properties
|
351,628 | 28,935 | 216,886 | 3,304 | | 600,753 | ||||||||||||||||||
Intangibles
|
| 453 | | | 5,878 | 6,331 | ||||||||||||||||||
Goodwill
|
118,923 | | | | | 118,923 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
559,568 | 104,282 | 217,436 | 3,646 | 7,519 | 892,451 | ||||||||||||||||||
-16-
Canada | U.S.A | Africa | Asia | Corporate | ||||||||||||||||||||
(in thousands) | Mining | Mining | Mining | Mining | and Other | Total | ||||||||||||||||||
|
||||||||||||||||||||||||
Statement of Operations:
|
||||||||||||||||||||||||
Revenues
|
20,686 | 8,326 | | | 2,701 | 31,713 | ||||||||||||||||||
|
||||||||||||||||||||||||
Expenses
|
||||||||||||||||||||||||
Operating expenses
|
13,987 | 9,172 | | | 1,733 | 24,892 | ||||||||||||||||||
Sales royalties and capital taxes
|
982 | | | | 17 | 999 | ||||||||||||||||||
Mineral property exploration
|
2,546 | 56 | | 1,127 | 58 | 3,787 | ||||||||||||||||||
General and administrative
|
| | | | 4,674 | 4,674 | ||||||||||||||||||
|
17,515 | 9,228 | | 1,127 | 6,482 | 34,352 | ||||||||||||||||||
|
||||||||||||||||||||||||
Income (loss) from operations
|
3,171 | (902 | ) | | (1,127 | ) | (3,781 | ) | (2,639 | ) | ||||||||||||||
|
||||||||||||||||||||||||
Revenues supplemental:
|
||||||||||||||||||||||||
Uranium concentrates
|
20,686 | 8,312 | | | | 28,998 | ||||||||||||||||||
Environmental services
|
| | | | 1,354 | 1,354 | ||||||||||||||||||
Management fees and commissions
|
| | | | 1,347 | 1,347 | ||||||||||||||||||
Alternate feed processing and other
|
| 14 | | | | 14 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
20,686 | 8,326 | | | 2,701 | 31,713 | ||||||||||||||||||
-17-
Canada | U.S.A | Africa | Asia | Corporate | ||||||||||||||||||||
(in thousands) | Mining | Mining | Mining | Mining | and Other | Total | ||||||||||||||||||
|
||||||||||||||||||||||||
Statement of Operations:
|
||||||||||||||||||||||||
Revenues
|
13,806 | 12,161 | | | 4,561 | 30,528 | ||||||||||||||||||
|
||||||||||||||||||||||||
Expenses
|
||||||||||||||||||||||||
Operating expenses
|
12,291 | 4,953 | | | 2,456 | 19,700 | ||||||||||||||||||
Sales royalties and capital taxes
|
937 | | | | 44 | 981 | ||||||||||||||||||
Mineral property exploration
|
7,894 | | | 522 | 113 | 8,529 | ||||||||||||||||||
General and administrative
|
| | | | 6,460 | 6,460 | ||||||||||||||||||
|
21,122 | 4,953 | | 522 | 9,073 | 35,670 | ||||||||||||||||||
|
||||||||||||||||||||||||
Income (loss) from operations
|
(7,316 | ) | 7,208 | | (522 | ) | (4,512 | ) | (5,142 | ) | ||||||||||||||
|
||||||||||||||||||||||||
Revenues supplemental:
|
||||||||||||||||||||||||
Uranium concentrates
|
13,806 | 9,750 | | | | 23,556 | ||||||||||||||||||
Environmental services
|
| | | | 1,948 | 1,948 | ||||||||||||||||||
Management fees and commissions
|
| | | | 2,613 | 2,613 | ||||||||||||||||||
Alternate feed processing and other
|
| 2,411 | | | | 2,411 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
13,806 | 12,161 | | | 4,561 | 30,528 | ||||||||||||||||||
|
||||||||||||||||||||||||
Long-lived assets:
|
||||||||||||||||||||||||
Property, plant and equipment
|
||||||||||||||||||||||||
Plant and equipment
|
76,980 | 11,481 | | 66 | 1,694 | 90,221 | ||||||||||||||||||
Mineral properties
|
348,434 | 13,939 | | 960 | | 363,333 | ||||||||||||||||||
Intangibles
|
6,459 | 516 | | | | 6,975 | ||||||||||||||||||
Goodwill
|
114,216 | | | | | 114,216 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
546,089 | 25,936 | | 1,026 | 1,694 | 574,745 | ||||||||||||||||||
-18-
Canada | U.S.A | Africa | Asia | Corporate | ||||||||||||||||||||
(in thousands) | Mining | Mining | Mining | Mining | and Other | Total | ||||||||||||||||||
|
||||||||||||||||||||||||
Statement of Operations:
|
||||||||||||||||||||||||
Revenues
|
5,493 | 10,013 | | | 3,303 | 18,809 | ||||||||||||||||||
|
||||||||||||||||||||||||
Expenses
|
||||||||||||||||||||||||
Operating expenses
|
5,960 | 3,333 | | | 1,314 | 10,607 | ||||||||||||||||||
Sales royalties and capital taxes
|
410 | | | | 26 | 436 | ||||||||||||||||||
Mineral property exploration
|
3,059 | | | 375 | 46 | 3,480 | ||||||||||||||||||
General and administrative
|
| | | | 3,558 | 3,558 | ||||||||||||||||||
|
9,429 | 3,333 | | 375 | 4,944 | 18,081 | ||||||||||||||||||
|
||||||||||||||||||||||||
Income (loss) from operations
|
(3,936 | ) | 6,680 | | (375 | ) | (1,641 | ) | 728 | |||||||||||||||
|
||||||||||||||||||||||||
Revenues supplemental:
|
||||||||||||||||||||||||
Uranium concentrates
|
5,493 | 9,750 | | | | 15,243 | ||||||||||||||||||
Environmental services
|
| | | | 1,174 | 1,174 | ||||||||||||||||||
Management fees and commissions
|
| | | | 2,129 | 2,129 | ||||||||||||||||||
Alternate feed processing and other
|
| 263 | | | | 263 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
5,493 | 10,013 | | | 3,303 | 18,809 | ||||||||||||||||||
Major Customers | ||
The Companys business is such that, at any given time, it sells its uranium and vanadium concentrates to and enters into process milling arrangements and other services with a relatively small number of customers. In the six months ended June 30, 2008, two customers accounted for approximately 66% of total revenues. | ||
20. | RELATED PARTY TRANSACTIONS | |
Uranium Participation Corporation | ||
The Company is a party to a management services agreement with UPC. Under the terms of the agreement, the Company will receive the following fees from UPC: a) a commission of 1.5% of the gross value of any purchases or sales of U 3 O 8 and UF 6 completed at the request of the Board of Directors of UPC; b) a minimum annual management fee of CDN$400,000 (plus reasonable out-of-pocket expenses) plus an additional fee of 0.3% per annum based upon UPCs net asset value between CDN$100,000,000 and CDN$200,000,000 and 0.2% per annum based upon UPCs net asset value in excess of CDN$200,000,000; c) a fee of CDN$200,000 upon the completion of each equity financing where proceeds to UPC exceed CDN$20,000,000; d) a fee of CDN$200,000 for each transaction or arrangement (other than the purchase or sale of U 3 O 8 and UF 6 ) of business where the gross value of such transaction exceeds CDN$20,000,000 (an initiative); and e) an annual fee up to a maximum of CDN$200,000, at the discretion of the Board of Directors of UPC, for on-going maintenance or work associated with an initiative. | ||
In accordance with the management services agreement, all uranium investments owned by UPC are held in accounts with conversion facilities in the name of Denison Mines Inc. as manager for and on behalf of UPC. | ||
From time to time, the Company has also provided temporary revolving credit facilities to UPC which generate interest and standby fee income. No such facilities were in place for the six month period ending June 30, 2008. |
-19-
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | June 30 | June 30 | |||||||||||||
(in thousands) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
|
||||||||||||||||
Fees earned included in revenue:
|
||||||||||||||||
Uranium Sales
|
$ | | $ | 9,750 | $ | | $ | 9,750 | ||||||||
Management fees, including
out-of-pocket expenses
|
385 | 706 | 1,001 | 1,190 | ||||||||||||
Commission fees on purchase and
sale of uranium
|
962 | 1,423 | 1,185 | 1,423 | ||||||||||||
Fees earned included in other income:
|
||||||||||||||||
Loan interest under credit facility
|
| 25 | | 191 | ||||||||||||
Standby fee under credit facility
|
| 1 | | 9 | ||||||||||||
|
$ | 1,347 | $ | 11,905 | $ | 2,186 | $ | 12,563 | ||||||||
At June 30, 2008, accounts receivable includes $345,000 due from UPC with respect to the fees indicated above. | ||
Other | ||
During the six months ended June 30, 2008, the Company incurred management and administrative service fees of $99,000 (June 2007: $95,000) with a company owned by the Chairman of the Company which provides corporate development, office premises, secretarial and other services in Vancouver at a rate of CDN$15,000 per month plus expenses. At June 30, 2008, $44,000 was due to this company. | ||
21. | CAPITAL MANAGEMENT AND FINANCIAL INSTRUMENTS | |
Capital Management | ||
The Companys capital includes debt and shareholders equity. The Companys primary objective with respect to its capital management is to ensure that it has sufficient capital to maintain its ongoing operations, to provide returns for shareholders and benefits for other stakeholders and to pursue growth opportunities. As at June 30, 2008, the Company is subject to externally imposed capital requirements related to its revolving credit facility (see note 11). | ||
Fair Values of Financial Instruments | ||
The Company examines the various financial instrument risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, currency risk, interest rate risk and price risk. | ||
(a) Credit Risk | ||
The Companys credit risk is related to trade receivables in the ordinary course of business. The Company sells uranium exclusively to large organizations with strong credit ratings and the balance of trade receivables owed to the Company in the ordinary course of business can be significant. In the event that these large organizations are unable to satisfy their financial obligations, the Company may incur additional expenses as a result of such credit exposure. | ||
(b) Liquidity Risk | ||
The Company has in place a planning and budgeting process to help determine the funds required to support the Companys normal operating requirements on an ongoing basis and its development plans. The Company believes that there is sufficient committed capital to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash and cash equivalents. The Company has in place a three year term revolving credit facility in the amount of US$125,000,000 to meet its cash flow needs (see note 11). |
-20-
Change in | ||||||||
Change in | Comprehensive | |||||||
(in thousands) | Net Income (1) | Net Income (1) | ||||||
|
||||||||
Canadian dollar
|
||||||||
10% increase in value
|
$ | 166 | $ | 59,965 | ||||
10% decrease in value
|
$ | (166 | ) | $ | (59,965 | ) | ||
Zambian kwacha
|
||||||||
10% increase in value
|
$ | (8,124 | ) | $ | (8,124 | ) | ||
10% decrease in value
|
$ | 8,124 | $ | 8,124 | ||||
(1) | In the above table, positive (negative) values represent increases (decreases) in net income and comprehensive net income respectively. |
Change in | ||||||||
Change in | Comprehensive | |||||||
(in thousands) | Net Income (1) | Net Income (1) | ||||||
|
||||||||
Commodity price risk
|
||||||||
10% increase in uranium prices
(2)
|
$ | 1,992 | $ | 1,992 | ||||
10% decrease in uranium prices
(2)
|
$ | (2,072 | ) | $ | (2,072 | ) | ||
Equity price risk
|
||||||||
10% increase in equity prices
|
$ | | $ | 6,643 | ||||
10% decrease in equity prices
|
$ | | $ | (6,643 | ) | |||
(1) | In the above table, positive (negative) values represent increases (decreases) in net income and comprehensive net income respectively. | |
(2) | The Company is exposed to fluctuations in both the spot price and long-term price of uranium as a result of the various pricing formulas in the uranium contracts. The above sensitivity analysis includes 10% adjustments to both of these prices. |
-21-
(f) Fair Value Estimation | ||
The fair value of financial instruments which trade in active markets (such as available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted marked price used to fair value financial assets held by the Company is the current bid price. | ||
22. | INCOME TAXES | |
For the six months ended June 30, 2008, the Company has provided for current tax recovery of $1,590,000 and for future tax expense of $8,547,000. | ||
In March, 2008, the Zambian government enacted legislation which increased the income tax rate for mining companies from 25% to 30%. Accordingly, the Company recorded a future tax expense of $10,740,000 in the period to adjust the future income tax liability associated with its Zambian assets. This amount has been partially offset by the recognition of previously unrecognized Canadian tax assets of $3,700,000. | ||
23. | COMMITMENTS AND CONTINGENCIES | |
General Legal Matters | ||
The Company is involved, from time to time, in various other legal actions and claims in the ordinary course of business. In the opinion of management, the aggregate amount of any potential liability is not expected to have a material adverse effect on the Companys financial position or results. | ||
Third Party Indemnities | ||
The Company has agreed to indemnify Calfrac Well Services against any future liabilities it may incur related to the assets or liabilities transferred to the Company on March 8, 2004. |
-22-
1. | I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings ) of Denison Mines Corp. (the issuer) for the interim period ending June 30, 2008; | |
2. | Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; | |
3. | Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings; | |
4. | The issuers other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the issuer, and we have: |
(a) | designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared; and | ||
(b) | designed such internal control over financial reporting, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuers GAAP; and |
5. | I have caused the issuer to disclose in the interim MD&A any change in the issuers internal control over financial reporting that occurred during the issuers most recent interim period that has materially affected, or is reasonably likely to materially affect, the issuers internal control over financial reporting. |
1. | I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings ) of Denison Mines Corp. (the issuer) for the interim period ending June 30, 2008; | |
2. | Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; | |
3. | Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings; | |
4. | The issuers other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the issuer, and we have: |
(a) | designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared; and | ||
(b) | designed such internal control over financial reporting, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuers GAAP; and |
5. | I have caused the issuer to disclose in the interim MD&A any change in the issuers internal control over financial reporting that occurred during the issuers most recent interim period that has materially affected, or is reasonably likely to materially affect, the issuers internal control over financial reporting. |
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