• The cornerstone asset in Denison’s portfolio is the Wheeler River Project located in the eastern portion of the Athabasca Basin in Northern Saskatchewan.
• In turn, most of the value associated with the Wheeler River Project resides inside the Phoenix deposit that is expected to reach first production by 2027 or 2028.
• With cash and physical uranium on the balance sheet worth approximately CAD$348.7 million, Denison should have plenty of options available to finance construction.
• Denison Mines will be on my watchlist moving forward, and if an opportunity presents itself, I will be ready to capitalize on it.

Summary

The Phoenix deposit is characterized by its proximity to existing infrastructure along with its in-situ recovery method. Those two elements are reflected by the low capital required to bring the deposit into production, and by the low operating costs, which are expected to be among the lowest in the world.

I first got involved in the uranium trade back in 2015, and although prices could continue to increase, the easy money has already been made in my view. Although I fully recognize the world-class status of the Phoenix deposit, the risk/reward proposition offered by the CAD$2.6 billion market capitalization is not compelling enough for me to initiate a position, hence my hold rating.

Denison Mines – Description

Denison (NYSE:DNN) is a uranium exploration and development company with a 95% interest in the Wheeler River Project located in the Athabasca Basin. The second largest asset in the company’s portfolio is a 22.5% interest in the McClean Lake Joint Venture, which includes various uranium deposits along with the McClean Lake uranium mill currently under contract to process the ore from the Cigar Lake Mine owned by Cameco (CCJ). In addition, Denison owns numerous undeveloped deposits as well as a large portfolio of exploration properties.

The name of the company refers to the Denison Mine that operated in the Elliot Lake region of Ontario from 1957 to 1992 during which time it produced 69 million tonnes of ore. The site has been rehabilitated, and its tailings facility is still monitored by Denison.

The Athabasca Basin is one of the most important sources of high-grade uranium and accounts for approximately 20% of the world’s uranium production. Uranium was initially discovered in the region in the 1940s and first production started in 1975 with the opening of the Rabbit Lake Mine. As of the third quarter of 2024, Rabbit Lake remains in a state of care and maintenance following the suspension of production in 2016.

The area also hosts the McArthur River Mine owned by Cameco (70%) and Orano (30%), which is also known as the largest high-grade uranium mine in the world. Following a prolonged period of low prices, the mine was placed on care and maintenance in January 2018.

Wheeler River Project

Phoenix Deposit

The first element that differentiates the Wheeler River Project is its location in the eastern portion of the Athabasca Basin, as this is where most of the existing infrastructure is located. In comparison, the Triple R deposit owned by Fission Uranium (FCU:CA) and the Arrow deposit owned by NexGen (NXE) are located in a more remote area of the basin where there is minimal infrastructure already in place. The advantage of being close to existing infrastructure is visible in the form of lower initial capital requirements. According to the NI 43-101 Technical Report published in June 2023, the initial capital costs to bring the Phoenix deposit into production are estimated at CAD$419.4 million, which is one of the lowest capital intensities in the industry. In comparison, the initial capital costs are estimated at CAD$1.2 billion and CAD$2.2 billion for Triple R and Arrow, respectively.

The second element differentiating the Wheeler River Project is its usage of an in-situ recovery method. The impacts become visible when looking at all-in production costs per pound estimated at ~$16.00, which are among the lowest in the world and directly comparable to those of in-situ assets located in Kazakhstan and owned by Kazatomprom (OTC:NATKY). If we look at operating costs, the Wheeler River Project remains one of the most competitive in the Athabasca Basin at $8.51 per pound versus $13.02 for Triple R and $13.86 for Arrow.

If we combine the low initial capital requirements with one of the lowest all-in operating costs in the world, the economics of the project are robust in almost any uranium price environment. Using a fixed selling price of $65 per pound, the after-tax IRR is estimated at 83.9% with a payback period of only 11 months. As illustrated in the chart below, spot and long-term uranium prices are closer to $80 per pound at the moment, so that would boost the economics of the project even further.

The key strengths of the Wheeler River Project are its proximity to existing infrastructure along with its in-situ recovery method. In terms of size, we are talking about 53.8 million pounds of proven and probable U3O8, which is more than enough to support the construction of a mine, although it is much smaller than Triple R and Arrow.

In my view, economic returns are more important than size alone when it comes to putting a project into production, and over time, once the asset is in production, reserves are likely to increase further. Considering that mine life is estimated at 10 years using the mineral reserves from Phoenix only, it would not make economic sense at this point to invest additional capital to simply increase the reserves. If we add the Gryphon portion of the Wheeler River Project to the equation, mine life increases to 16.5 years. To put those numbers in perspective, the Triple R and Arrow deposits are estimated to contain 93.7 million and 239.6 million pounds of proven and probable U3O8, respectively.

Gryphon Deposit

The Gryphon deposit is expected to be mined using conventional underground operations, and the pre-feasibility study assumes that the mined ore will be transported to the McClean Lake mill for processing. As mentioned previously, the mill is currently processing material from the Cigar Lake mine, but it has an additional licensed processing capacity of up to 24 million pounds of U3O8 per annum. In comparison, the mill produced 15.1 million pounds of U3O8 from Cigar Lake in 2023, so there is room to expand production by almost 60%. The proposed production scenarios from Gryphon do not exceed McClean Lake’s production capacity under various assumptions regarding Cigar Lake’s future production. Once again, the proximity to existing infrastructure is an important asset.

Even though Gryphon creates interesting reinvestment opportunities for the free cash flows that will come out of Phoenix, the project’s economics put it in a lower tier when it comes to economic returns. Using the same assumption of $65 per pound of U3O8, the after-tax IRR is estimated at 30.6% along with a payback period of 26 months.

Using a price assumption of $75 per pound, which is closer to today’s market prices, Gryphon is expected to deliver an after-tax IRR of 37.6% and a payback period of 22 months. The expected returns on invested capital are certainly compelling, although they are not as impressive as those provided by the Phoenix deposit.

The Gryphon deposit adds 49.7 million pounds of proven U3O8 to the Wheeler River Project, which represents an increase of 92.4% versus reserves at Phoenix alone, and with additional ore, the mine life of the project increases to 16.5 years.

Balance Sheet

With cash and cash equivalents of CAD$105.9 million and investments in physical uranium worth CAD$242.8 million at the end of September 2024, Denison is in a unique position to move the Wheeler River Project into production. Once combined, the cash and the physical uranium are worth approximately CAD$348.7 million, which represents almost 85% of the initial capital requirements of CAD$419.4 million to bring the Phoenix deposit into production.

According to the June 2023 Technical Report, Phoenix is expected to deliver CAD$432.8 million in after-tax cash flows during its first year of full production, so Denison will have plenty of financial resources to advance Gryphon and other exploration projects at this point. From a financial resource perspective, Denison is in a unique position compared to other advanced developers like Fission Uranium or NexGen Energy.

In addition, McClean North is expected to produce around 800,000 pounds of uranium in 2025 on a 100% basis. If we include the Caribou deposit, production could increase up to 3.0 million pounds between 2026 and 2030. Once again, the ownership and the excess capacity of the McClean Mill are key, and mining the small deposits around it is a great way to generate some cash to support the development of Phoenix.

Using a net production to Denison of 180,000 pounds coming from McClean North in 2025, we are talking about CAD$20.2 million in revenue under the assumptions of a $80.00 uranium price at a USD/CAD exchange rate of 1.40.

Valuation

Based on a share price of CAD$2.93, Denison is currently trading at a market capitalization of CAD$2.6 billion. Using a fixed uranium price of $65 per pound, the Phoenix deposit alone has an NPV (8%) estimated at CAD$1.4 billion. According to the sensitivity chart provided in the feasibility study, the NPV (8%) increases to almost $2.0 billion using uranium prices of around $80 per pound, which is more reflective of current market prices. Of note, those numbers are on a 100% ownership basis despite Denison owning 95% of the property.

If we subtract the CAD$348.7 million in cash and physical uranium on the balance sheet, Denison is currently trading at 1.2x the net asset value of Phoenix alone using an 8% discount rate and $80 uranium prices.

If we look at it from an undiscounted basis, Phoenix is expected to generate CAD$2.1 billion in after-tax cash flows at a fixed uranium price of $65 over its initial mine life of 10 years, which is slightly below the current market capitalization after having subtracted the cash, the uranium investments, and the 5% interest that Denison does not own.

Of course, there is value associated with the Gryphon deposit, the 22.5% ownership of the McClean mill and the portfolio of development and exploration projects. However, Gryphon is not expected to come into production before the early 2030s, and the development and exploration portfolio is unlikely to move the needle of a $2.6 billion market capitalization, although they add to the upside potential by acting like call options.

Conclusion

The cornerstone asset in Denison’s portfolio is the Wheeler River Project located in the eastern portion of the Athabasca Basin in Northern Saskatchewan. In turn, most of the value associated with the Wheeler River Project resides inside the Phoenix deposit that is expected to reach first production by 2027 or 2028.

The economics of the Phoenix deposit are impressive, especially at today’s uranium prices close to $80. Given the close proximity to existing infrastructure, the initial capital requirements are low at only CAD$419.4 million. In addition, the in-situ recovery method supports low all-in-production costs per pound of ~$16.00. With cash and physical uranium on the balance sheet worth approximately CAD$348.7 million, Denison should have plenty of options available to finance construction.

I first got involved in the uranium industry back in 2015. I remember pitching Cameco during an interview for an analyst position at the Caisse de dépôt et placement du Québec in the fall of 2016. The portfolio manager looked at me and asked how I could pitch such a company, as it was not covering its cost of capital at the time. I told him that uranium prices in the low $20s were not sustainable in the long term, and although I was right from a fundamental perspective, I was completely off on timing. Cameco is up by approximately 500% since, so that would have been an annualized return of about 25% over this 8-year period.

In my view, the easy money has been made in the uranium industry, and Denison’s market capitalization of slightly above CAD$2.6 billion is reflective of that. Of course, uranium prices could continue to rally and cross the important threshold of $100 per pound, but I cannot base my investment thesis on that upside potential alone. In other words, the risk/reward proposition is not compelling enough for me at this point with Denison, although I fully recognize the impressive economics of the Phoenix deposit.

Denison Mines will be on my watchlist moving forward, and if an opportunity presents itself, I will be ready to capitalize on it.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This article should be seen as part of a personal notebook documenting a personal journey. Please consider that I have been consistently wrong in the past. I am not in a position to give advice to anyone.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Denison Mines: Uniquely Positioned To Bring The World-Class Phoenix Deposit Into Production appeared first on Up2info.com.

• Denison Mines Corp.’s financial position is robust, with C$106m in cash, C$243m in uranium investments, and no debt, ensuring operational funding until production starts.
• The company’s premier project, Wheeler River’s Phoenix site, targets production by 2027-2028 using cost-effective and environmentally friendly ISR mining techniques.
• The outlook for nuclear energy is promising, with increasing demand from governments and tech giants like Amazon and Alphabet, boosting uranium’s long-term prospects.
• I am closely monitoring Denison Mines, expecting substantial rewards from its projects and considering it a significant investment opportunity despite potential short-term uranium price fluctuations.

Introduction

Denison Mines Corp. (NYSE:DNN) recently reported its Q3 results, so I wanted to go through the company’s operational progress and what is out there for the future potential. DNN’s financial position is outstanding, which will continue to help fund its operations until meaningful production begins to bear fruit in the upcoming years. Its strategic positioning and overall projected demand increase in nuclear energy should make the company very profitable.

By The Numbers

The company’s top line came in at C$700k, -35.8% y/y, while its GAAP loss came in at -C$0.03. For the nine months ended September 30^th, ’24, the company’s total revenues came in at around $2.85m.

The company’s financial position shows that DNN has around C$106m in cash and equivalents and C$243m in physical investments in uranium. To accompany this great liquidity position, the company has no debt on its books. The company is flush with cash, which means it has plenty of time to get through the pre-production stages until the projects start to yield the product in the future. So, until then, it is expected that the company will continue to run at a loss consistently. That is, unless it decides to continue to fund its operations through the sale of its physical uranium (UXA:COM), which it did last year. The company sold some of its uranium for a C$68m gain, which brought the company into profitable territory. This year, it appears that the company sold some uranium for a loss of around -C$15m. DNN sold 100,000 pounds of uranium for proceeds of C$13,598,000, or US$10M.

Nothing exciting out of these quarterly results, since the company isn’t making much out of production yet and mostly makes its revenues from toll milling and other activities related to exploration, evaluation, and development. That will come once the projects start production.

Comments on the Outlook

The company is quite shareholder-friendly, in my opinion. Denison provides a monthly update on the progress of its operations. There is not much that changes m/m, but it is nice to see the progress.

Let’s look at the company’s main project, which the company holds a 95% interest in, the Wheeler River project. Within the project, the company’s premier development site, the Phoenix, which will be an ISR operation with on-site processing, will have around 16.5 years of mining life. The company has been taking all the necessary actions to get the site up and running by getting all the permits, environmental impact statements, de-risking programs, and feasibility tests a couple of years back. It has a timeline of 2 years of construction to take place, which means the first production is targeted to be for 2027 or 2028, depending on how well these plans go.

This site is considered one of the largest undeveloped uranium mining projects around the world and contains high-grade uranium deposits. DNN is going to use the ISR mining technique (In-Situ Recovery), which should please environmentalists because this technique involves injecting a leaching solution into the ground to dissolve the ore and pump it back up for recovery. This is an environmental advantage because it doesn’t require a lot of disturbance of the surrounding earth’s surface and reduces the need for large-scale infrastructure. This method is also very cost-effective and one of the lowest-cost methods out there currently. All the company has to do now is to continue its ambitious plan of getting it into the operation stage, extracting the uranium, and generating substantial top-line and cash flows.

After the company begins full production at the Phoenix site, the next project on the list is the Gryphon site. This project is expected to be funded by the proceeds of the Phoenix site.

The company also has some interest in other mines and uranium mills at much lower interest, for example, 22.5% in McClean Lake Uranium Mills & Mines. This site is currently processing ore from the Cigar Lake Mine, with mining restart approved and begin operations once more next year of around 800,000 lbs. of uranium.

Denison also has around 70% interest in the Waterbury Lake Project, which will employ the same ISR mining technique as in the Phoenix. It is not a particularly massive development, with an estimated 6 years of mining life, however, once it is fully in production, the company expects around 77% in operating profits. The company also has a vested interest in other strategic development-stage assets, which should help the company eventually.

So, it looks to me like the company is getting much closer to beginning its production stage of the cycle already. The company’s timeline of operations is very promising, and I expect DNN to reap massive rewards once operations get going. The company has plenty of different projects, and most of them will start to reward everyone in the upcoming years. The company’s projections show fantastic profit margins, which may vary depending on the prices of uranium, of course. Over the last few years, uranium prices skyrocketed and even passed $100/lb. Since the end of FY23, prices have come down slightly, but are still very much elevated from the price it saw just back in 2020.

Recently, the Biden Administration announced that it plans to triple nuclear energy capacity by 2050, which coincides with DNN’s outlook for the sector, as it expects more than 20 nations to triple nuclear energy capacity by 2050. That is, of course, excellent news for the company. There will not be a shortage of demand, but that doesn’t apply to supply, which can affect uranium prices dramatically.

Not only the governments are looking to nuclear, but also mega tech companies like Amazon (AMZN), which recently announced that it is looking to enter the race for nuclear energy to power its AI operations going forward. Alphabet (GOOG) (GOOGL) is also buying up nuclear power for the same reason, as AMZN recently announced that it will be buying energy from a fleet of mini reactors from California’s Kairos Power. I am sure this is just the beginning as AI becomes more powerful and power-hungry. Other players will follow suit. Meta Platforms (META) recently faced some complications with its nuclear power plant due to a rare species of bees on location. I doubt that is going to stop it from looking somewhere else. META is not going to fall behind the other cloud and AI players.

In Conclusion

I think there will be a giant opportunity for investors in the coming years, and I will be monitoring the situation going forward. This relies upon the next government taking place in the US and how the demand for nuclear energy progresses over the coming quarters.

I am also going to look at the company in a lot more detail by following the investor updates for a while. I would like to see if there will be more updates on the progress of all the projects in the future. For now, I am putting the company on my main watch list, as it is getting rather interesting.

Uranium prices may come down over the next while even more since the price does seem rather high, but that is only speculation on my end.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Denison Mines Corp. Q3: A Lot Of Potential In The Future Due To Nuclear Demand appeared first on Up2info.com.

• Denison Mines is a Canadian uranium development company listed in the U.S. and Canada, with recent stock price volatility.
• Denison’s main asset is the Wheeler River Project, including Phoenix and Gryphon, with strong projected economics.
• Denison is well-capitalized with no debt, trading at an attractive valuation, with an enterprise value to NAV ratio of 0.5 using current uranium prices.

Overview

Denison Mines (NYSE:DNN) is a Canadian high-quality uranium development company with several interesting assets. The company is listed in the U.S. and Canada (TSX:DML:CA). I have covered Denison a few times with my first article on the company in 2020, the prior articles can be found here.

The stock price of Denison had its recent lows around $1 a little over a year ago, it then had a strong run in the back half of 2023 into 2024 as the price of uranium recovered from very depressed levels.

More recently, the stock has taken a beating along with most uranium equities following some general market turbulence, a slight pullback in the spot price of uranium, and a poor overall sentiment for uranium stocks.

This has caused the valuation to now be very attractive as the price of Denison has corrected more the spot price of uranium. It is also worth pointing out that the long-term contract price for uranium, which is probably more relevant to Denison, has continued to climb unabated to now above $80/lb. That is a 16-year high for the long-term contract price.

Assets

The main asset of Denison is the Wheeler River Project, which is comprised of Phoenix and Gryphon. Denison owns 95% of Wheeler River and did last year release a feasibility study (“FS”) on Phoenix and an updated pre-feasibility study (“PFS”) on Gryphon, from where I have derived much of the valuation of those assets.

Phoenix is an ISR project currently in permitting, where the company has communicated some progress, and a permit approval is likely expected sometime during 2025.

The projected AISC is below $20/lb for Phoenix and the after-tax net present value is around $1.3B using current uranium prices. The initial capital cost is relatively manageable as well at C$419M. The internal rate of return (“IRR”) is above 90% at current uranium prices, so the margin of error is pretty good if we see some cost creep for either the construction capital or on the operating side.

Gryphon is a number of years behind Phoenix in the development pipeline. AISC is projected to be below $30/lb, which is very competitive globally, but the initial capital cost is a more substantial C$737M. The cash flows from Phoenix are expected to finance the construction of this mine. The after-tax net present value is around $800M at current uranium prices, which is impressive, but the IRR is more modest than Phoenix, which is in a league of its own.

Denison had the very good foresight to purchase 2.5Mlbs of uranium for $29.6/lb in 2021, that uranium has appreciated a lot in value since then. The company has sold some of the uranium over the last year, but still owns 2.2Mlbs worth around $180M today.

The company also owns 22.5% of McClean Lake, which has mill with an annual licensed production capacity of 24Mlbs or uranium. Cigar Lake is currently processing its ore at the mill, but Denison has monetized the toll milling cash flow for the Cigar Lake ore. So, the ownership in the mill is more of long-term interest.

McClean Lake also has a deposit where uranium production is expected to commence in 2025 using the SABRE mining method. We are talking about more minor amounts of production, but this project still has the potential to provide some cash flows going forward for Denison.

Denison also owns 69% of the Waterbury Lake project, did last year make a C$15M convertible investment in F3 Uranium (FUU:CA), and also owns a few more uranium exploration & development assets. Waterbury Lake has a value just above $100M using current uranium prices, but the other assets and investment have more marginal values.

In the chart below, we can see the various assets mentioned in this section and my estimated values at different uranium prices. At a uranium price of $80/lb, the combined net asset value (“NAV”) is around $2.4B and it increases to about $3.4B using a uranium price of $100/lb.

Denison has no debt and did at the end of Q2 2024 have C$121M in cash, not included in the assets above. If we count the 2.2Mlbs or uranium worth around $180M as liquidity, Denison is very well capitalized and that together with the quality assets is likely the reason why the stock has performed better than many peers over the last few years.

Valuation & Conclusion

The latest share price of Denison was $1.56 and the fully diluted share count was 905.5M as of the 8th of August. That gives us a market cap of $1.4B and an enterprise value of $1.3B, the market cap and enterprise value are down down materially from the peak just a few months ago.

Denison is consequently trading with an EV to NAV around 0.5 using a uranium price of $80/lb and 0.4 using a uranium price of $100/lb, which I think is probably more appropriate given the current uranium deficit. Based on how few high-quality uranium developers there are, with assets of scale in good jurisdictions, this is a very attractive valuation in my view. The recent pullback has provided a good opportunity for anyone that missed the rally that started in 2023.

Permitting uranium projects is never risk free though, where delays are very prevalent. Given that Phoenix is an ISR project, which has not been used in Saskatchewan before, even if it is the most common uranium mining method globally, adds a bit of risk to the permitting process.

However, when you factor in the very high internal rate of return for Phoenix and how well-capitalized the company is, I consider Denison Mines one of the better risk reward investments in the uranium industry today.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of DNN either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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I primarily invest in turnarounds in natural resource industries, where I have a typical holding period of 1-3 years. Focusing on value offers good downside protection and can still provide great upside participation. My portfolio has had the following returns: 81% in 2020, 39% in 2021, -8% in 2022, 12% in 2023, and 14% YTD2024.

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The post Denison Mines: A High-Quality Uranium Developers On Sale appeared first on Up2info.com.

• Denison Mines Corp. is a Canadian uranium miner with a focus on the Athabasca Basin area of north Saskatchewan.
• The company has seen steady progress in its stock price over the past year, doubling in value.
• Denison Mines Corp. has made a profitable decision to store uranium rather than sell it at a low price.

Introduction

The Green Dream is alive and well with the mission for clean energy from a sustainable source still high on the priority list of many countries. For instance, targets have been set for the internal combustion engines, both petrol and diesel powered to go out of production by 2030. These will be replaced by vehicles that are powered by hydrogen, electricity, and some form of hybrid engines. These are all noble endeavors, but I would add that I am skeptical that all concerned will not achieve these targets for a myriad of reasons. However, the green energy basket includes nuclear power, and so we have seen a resurgence of interest in this form of energy generation with a subsequent improvement in the fortunes of the uranium mining industry.

Today we will take a look at one such enterprise, namely Denison Mines Corp. (NYSE:DNN) which I last covered on 11 May 2021. Back then I gave it a ‘Buy’ rating and according to Seeking Alpha, it has gained 82.61% versus the S&P 500 which has gained 28.78% over the same period. However, one of the giants in this space, Cameco Corp (CCJ) gained a magnificent 182% over a similar period. Although I gave it a ‘Hold’ rating I didn’t own it as my preference was for Dennison Mines Corp. and a selection of juniors that were too small to meet the criteria for publication.

Fundamentals

Denison is a Canadian Uranium miner possessing a number of development and exploration assets in the Athabasca Basin area of north Saskatchewan. The jewel in the crown is the Wheeler River Uranium Project, which is the largest undeveloped uranium project in this area of Saskatchewan. Other interests include a 22.5% ownership in a number of uranium deposits via the McClean Lake joint venture, which includes the McClean Lake uranium mill, which is processing ore from the Cigar Lake mine. They also have exposure to a myriad of uranium mining opportunities via their investments in with other operators in this area as per following the summary table in their recent Investor update

Also I would draw your attention to the 2.5Million lbs U3O8 of uranium they purchased at an average cost of US$29.66/lb. for future funding purposes for the Wheeler River project. Given that uranium costs around $87.40/lb today they have generated a handsome profit for what now looks to be a visionary acquisition. In an update released on the 8th May 2024 we can see that 100,000lbs of uranium was sold in April 2024, at a price of US$100.00/lb. This sale was expected as it forms part of Denison’s plans to dispose of approximately 300,000lbs from its physical uranium store this year.

I would remind you to do your own due diligence and seek out the metrics that you consider important when assessing an investment opportunity, as I tend to focus on those metrics that interest me, rightly or wrongly.

From the chart below, we can glean that Denison is one of the lowest all-in cost producers of uranium, which bodes well for the future.

Please note that when I covered Denison two years ago it generated over 200 diverse comments much of which centered around the proposed In-Situ Recovery (“ISR”) field test program. If we fast forward to today, Denison announced on the 3rd of June 2024 that it has completed the inaugural In-Situ Recovery (“ISR”) field test program at Denison’s 25.17% owned Midwest Uranium Project as follows:

“The Program involved drilling 10 small diameter boreholes within the Midwest Main deposit primarily undertaken to evaluate site-specific conditions for ISR mining. A series of tests were successfully performed on each borehole, creating an extensive database of geological, hydrogeological, geotechnical, and metallurgical data, and validating certain key assumptions in the previously completed internal conceptual mining study”

These results would appear to validate the proposed In-Situ Recovery (“ISR”); however, I must point out that I am not a qualified person in this area to corroborate their findings and shall leave that to the experts in this field. However, on face value, it does appear to be a step in the right direction.

Financials

The following graphic gives us a snapshot of the capital structure and the management team. The market capitalization is US$891 with 902.3 million fully diluted shares with an average trading volume of around 15 million shares traded each day, so the liquidity is good for those traders who are nimble enough to trade on a frequent basis.

The 52-week trading price ranges from $1.15 to $2.47, it has a P/E Ratio (TTM) of 35 and an EPS (TTM) of 0.06.

If we now take a quick look at the Seeking Alpha Quant section, this stock is Ranked in Sector at 114 out of 238 and Ranked in Industry at 3 out of 16 which is pretty good, and it has been ranked as a Hold.

Denison Mines Corp. can be found trading on the NYSE American under the symbol DNN and on the TSX under the symbol DML

A Quick Look At The Chart Of Denison Mines Progress

DNN has made steady progress over the last 12 months as its stock price has almost doubled. Note that the 50dma and the 200dma are tracking almost in parallel, which I view as a positive sign.

Denison is in and out of the overbought zone so sharp pullbacks should be expected. This sort of volatility offers nimble traders the opportunity to trade this stock on a frequent basis or apply some well thought out options trades. However, timing the market requires considerable skill, years of experience and a strong stomach, if that’s not, you then tread very carefully as losses can soon mount up.

Denison Compared to Other Uranium Stocks

The following chart shows the progress for one year for Denison Mines Corp. (DNN) compared with Cameco Corp (CCJ) a much bigger stock, and Mega Uranium Limited (MGA:CA) and Laramide Resources Limited (LAM:CA) two very much smaller uranium miners. There is an old adage that “all boats rise when the tide comes in” and the chart below suggests that some of the smaller enterprises in this space are also doing quite well.

Of course, it goes without saying that when we can change the time period we will get a different result, on this occasion I have chosen the one-year period

Conclusion

I am Long Denison Mines Corp. and happy to continue holding it for now.

Progress so far has been steady with the stock price heading north and overcoming corrections along the way.

The management’s vision to store uranium rather sell it at a low price has proved to be a profitable decision on their part.

My readers are aware that I am Long both physical silver and gold and that I own a portfolio of gold, silver and uranium mining stocks in the precious metals space, including but not limited:

Mega Uranium Limited (MGA:CA)

Laramide Resources (LAM:CA)

Denison Mines Corp (DNN)

Avino Silver & Gold Mines Ltd (ASM)

Wheaton Precious Metals Corp. (WPM)

Agnico Eagle Mines Limited (AEM)

SSR Mining Inc. (SSRM)

Endeavour Silver Corp. (EXK)

Fortuna Silver Mines Inc. (FSM)

First Majestic Silver Corp. (AG)

IMPACT Silver Corp. (IPT:CA)

Pan American Silver Corp. (PAAS)

Sandstorm Gold Ltd. (SAND)

Silvercorp Metals Inc. (SVM)

Now, whether you are a fan of Denison Mines Corp. or not, please feel free to fire in your comments and I will attempt to reply to every one of them.

As always, do your own due diligence as this is going to be a bumpy ride.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of EXK, IPT:CA, SVM, AG, AEM, SAND, WPM SSRM, DNN,MGA,LAM either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Denison Mines Corp.’s Innovative Management Makes It A Buy appeared first on Up2info.com.

• Denison Mines Corp. is a Canadian company focused on uranium exploration and exploitation, with three principal assets.
• The company’s main value driver is its Phoenix project, which, if successful, could more than justify its current market cap.
• Recent global dynamics, including geopolitical tensions and supply disruptions, have led to an increase in uranium prices, benefiting companies like Denison Mines Corp.
• Despite potential high returns, DNN’s investment appeal is subject to U308 price fluctuations and regulatory challenges.
• Overall, I consider DNN a “buy”, specially for investors with a favorable long-term view on U308.

Denison Mines Corp. (NYSE:DNN) is a primarily Canadian company focused on the exploration and exploitation of uranium. DNN has three principal assets: the McClean Lake mine, the Wheeler River Project, and the Midwest Uranium Project. The McClean Lake mine is one of the largest uranium mining facilities of the highest-grade uranium. The world stage is set for the surging investor’s confidence in the companies producing this crucial geopolitical mineral critical for energy production and military applications. As such, DNN’s main value driver is its Pheonix project, which, if developed successfully, should be more than enough to justify DNN’s current market cap. However, this ties its value directly to U308’s price, a layer of risk entirely outside management’s control. Thus, DNN is a “Buy” for investors aware of the commodity-related risks embedded here.

A U308 Bet: Business Overview

Denison Mines Corp. (DNN) is a Canadian mining company dedicated to exploring, developing, and producing uranium in the Athabasca Basin. The Athabasca Basin is located in northern Saskatchewan, Canada, a region recognized for presenting the highest-grade uranium and the world’s largest mines for this mineral. DNN’s principal assets are the McClean Lake mine, the Wheeler River Project, and the Midwest Uranium Project. The company is evaluating its Wheeler River, Waterbury Lake, and Midwest properties.

Additionally, DNN owns 22.5% of the McClean Lake Mine in the eastern part of the Athabasca Basin. DNN shares the ownership of the McClean Lake joint venture operated by Orano Canada Inc. The mill on this site is one of the world’s largest uranium processing installations to treat high-grade, not dissolved, uranium solution. This is likely DNN’s main source of stable repeat revenues as it’s linked to the deal DNN signed in 2017 with Ecora, though most of it is just being recognized as deferred revenues from a previous upfront payment. DNN has $35.26 million left in deferred revenues related to this deal to be recognized.

Furthermore, DNN owns 95% of the Wheeler River project. On the other hand, this is DNN’s main value driver in the future, and likely the bet investors are making if they invest in the shares today. This project contains two assets: 1) Phoenix deposit of U308 uranium concentrate, described as a low-cost in situ recovery [ISR] operation that involves dissolving the uranium from the surrounding rock using a solution injected into the ground and pumping the liquefied uranium back into the surface for treatment. 2) The Gryphon site is a low-cost production mine that uses conventional underground ore extraction that is later processed at a mill.

The Midwest Uranium Project is also found in the Athabasca Basin and is a joint venture with multiple partners. DNN owns 25.17% of this property, and Orano Canada Inc. owns 74.83%. This site has two high-grade uranium deposits, MidWest Main and MidWest A. They are close to the McClean Lake mill, which has the infrastructure to process ore from these mines. The extraction technique that is discussed for these sites is ISR.

Also, DNN used to oversee the care and maintenance of sites no longer operating in the Elliot Lake area, managing decommissioned mines, which involves site rehabilitation and environmental monitoring to avoid potential contamination. The extraction and use of uranium are strictly regulated because of its radioactive properties and effects on the environment and human health. However, as of September 2023, the company has ceased this part of its business, signaling a strategic pivot toward focusing on its Phoenix project.

Global Dynamics Spark a Surge in Uranium

Recently, world events have increased the need for energy sources, and Uranium is an alternative to standard fossil fuels. Thus, uranium-producing companies have enjoyed secular tailwinds as a result. This is mostly a macroeconomic event related to the Russian invasion of Ukraine, which has pressured energy needs across Europe and raised the need for additional energy sources.

Starting on January 9, 2024, Uranium stocks rose after the US Department of Energy called for proposals to create a domestic supply of high assay low enriched uranium [HALEU] to counteract that currently HALEU is mainly sourced from Russia, and its price has doubled since the Russian invasion of Ukraine. The next day, on January 10, analysts anticipated a continuous rise in the price of uranium due to supply issues provoked by the possible US banning of Russian uranium and the unstable Niger political situation. Niger is one of the top producers of uranium in the world. Furthermore, on January 12, Kazatomprom, the world’s largest uranium producer, announced a reduced output for the next two years due to a shortage of sulfuric acid for uranium extraction.

The interesting part of this is that DNN appears to be trying to capitalize on these events because, on January 24, DNN and Orano Canada announced their joint venture (22.5% DNN, 77.5% Orano) would restart uranium mining at the McClean Lake JV in Saskatchewan. This mine was closed in 2008 due to declining prices. The mining activities would start in 2025. During 2024, the joint venture activities will focus on preparations such as installing pilot holes. Recently, on February 1, Kazatomprom announced even more reductions. It would produce only 80% of its uranium output instead of the anticipated 90%. This decrease was due to the difficulty of acquiring sulfuric acid and construction delays. So, DNN is riding high on macroeconomic tailwinds favorable for Uranium prices and its specific mining operations.

Therefore, this series of events has led to an increment in the stock prices of uranium producers. These occurrences are a combination of geopolitical tensions following the Russian invasion of Ukraine, the anticipation of regulatory actions such as the possible US banning of Russian uranium, potential supply disruptions due to the coup in Niger, and supply reductions like the Kazatomprom’s output reduction. In simple terms, the current macro environment benefits companies like DNN.

A Speculative Buy: Valuation Analysis

However, from an investment perspective, DNN is relatively straightforward. Its main value driver going forward will be its Phoenix project. After all, most of its repeat revenues come from the toll milling agreement, of which only $35.26 million is left in deferred revenues. Other than that, DNN has ceased providing closed mine services, which brought in $6.58 million in revenues for the first nine months of 2023. Also, DNN used to have mineral sale revenues, but as of September 2023, this was zero. Therefore, it’s fair to say that DNN is a bet on its Phoenix project.

If you look at the figure above, you’ll see DNN’s valuation in NPV terms of its Phoenix project. The pre-tax NPV estimate is $2.34 billion, whereas the post-tax projections range from $1.43 billion to $1.56 billion. Naturally, DNN assumed a price of $66-$70 per pound of U308, which appears conservative compared to today’s prices. After all, if we look at U308 futures, these trade today at roughly $100 or higher, depending on the settlement date. Moreover, the implied NPV value doesn’t increase linearly with the price of U308 because operational leverage is inherent in mining projects. So, these marginal U308 price increases on the model above can significantly add to the NPV estimates.

All of this suggests that DNN’s main project alone (Phoenix) should be enough to justify its current market capitalization of just $1.70 billion. Furthermore, if you have a particularly bullish view on the Uranium price from now on, DNN could be a high-beta play, which could be DNN’s main investment selling point. You see, it’s cheaper to buy DNN for an effectively leveraged bet on the price of U308 than it is to leverage on it via future or debt and pay interests or fees. So, as a whole, I think there’s an embedded discount given in the share price at these levels because U308 prices are significantly higher than the inputs for the NPV estimates. That alone justifies an investment in DNN, in my view. But if the ongoing Uranium bull market continues, DNN could be a fantastic investment vehicle to ride that, given negligible debt and embedded optionality due to its Phoenix project. Hence, I rate DNN a “buy” at these levels.

Investment Thesis Risks

Naturally, the main risk to this investment thesis is the price of U308 itself. If this commodity declines in price significantly, then the NPV of DNN’s Phoenix project would plunge even faster, which would be reflected in the share price rather quickly. Beyond that, there are also regulatory risks because uranium is a highly regulated commodity, given that it’s also potentially harmful to the environment if mishandled.

Additionally, it’s worth mentioning that DNN’s cash burn for the latest quarter was about $6.4 million. I estimated this figure by adding its quarterly CFOs and CAPEX. If we annualize these numbers, DNN’s implied yearly cash burn is roughly $25.6 million, which, compared to its current cash reserves of $61.6 million, suggests a cash runway of 2.4 years. This is not terrible, given that the Phoenix project should quickly bring in cash flows once fully operational. Yet, for now, it’s worth considering that if unforeseen circumstances delay that, DNN could be forced to tap into additional liquidity from debt or equity. Yet, overall, I think these risks seem relatively unlikely, and even if they occur, DNN appears to be well-positioned to handle them.

Conclusion

I think DNN is a well-run mining and development operation that exposes investors to a leveraged bet on the price of U308. For the most part, I believe that this is a reasonable bet, and in fact, DNN’s Phoenix project alone should be enough to justify a “buy” rating. I don’t give it a “strong-buy” rating because DNN is undoubtedly dependent on U308 prices and regulatory risks beyond management’s control. This layer of uncertainty can quickly erode shareholder value if it turns unfavorable. Moreover, U308 has increased significantly in price, and past returns do not indicate future returns. If anything, we could see a mean reversal in such prices, and DNN would quickly reflect that in its stock price. Yet, as a whole, I think DNN does offer a compelling investment position and could be a great way to express a leveraged bullish view on Uranium in the future.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Unlocking Value In Uranium: Denison Mines Corp.’s Strategic Bet On The Phoenix Project appeared first on Up2info.com.

• Denison Mines has multiple uranium projects, including the flagship Wheeler River project.
• DNN’s balance sheet has improved with the increase in the price of uranium and an equity raise.
• We update our views in light of the recent run-up.

Denison Mines Corp. (NYSE:DNN) was one of the rare mining plays that we gave a buy rating. The rationale was a depressed commodity set to rise (uranium, of course), alongside a clean balance sheet and ownership of projects that offered value at current commodity pricing. We suggested investors play it with a defensive covered call as the high implied volatility offered radioactive returns, even if the stock declined by 15%.

That, of course, has played out as the stock was well above $1.00 per share when the option expired. Investors made 52.31% total returns with the least amount of volatility (thanks to the large premium). We examine the situation today and update our views.

The Company

Denison is no one-trick pony and has its hands in several different uranium projects.

Effective 95% interest in flagship Wheeler River project – largest undeveloped uranium project in the infrastructure rich eastern Athabasca Basin

22.5% interest in Strategic McClean Lake Uranium Mill, which has excess licensed annual capacity, and authorization for significant expansion of tailings management facility

67.41% interest in emerging Waterbury Lake project, with Preliminary Economic Assessment stage development plans for the The Heldeth Túé deposit (formerly J Zone).

Participating interests in key development-stage assets operated by uranium “majors”, including 22.5% in McClean Lake (Orano), 25.17% in Midwest (Orano), and an effective 15% in Millennium (Cameco) through 50% ownership of JCU (Canada) Exploration Company, Limited

2.5M lbs U₃O₈ of physical uranium held in North American storage facilities – acquired at an average cost of US$29.66/lb U₃O₈, as a long-term investment expected to enhance access to future project financing for Wheeler River

~300,000 hectares of prospective exploration ground in the Athabasca Basin

Source: Denison

But the key one is, of course, the Wheeler River one, and that is the one we talked about previously. While the costs associated with completion of these projects tend to go up over time, Denison has stuck with its earlier estimates. Even the cost of mining on a per-pound basis remains incredibly low.

That is because Wheeler project is one of the richest uranium mines and extraction costs will be low relative to lower grade mines around the world. In addition to this, the setup that made Denison appealing was the strong balance sheet, which would survive the years from planning to first production. That balance sheet is actually stronger today. Denison held 2.5 million pounds of physical uranium on its balance sheet (wonder who volunteers to audit that) and the price of uranium has gone vertical over the last 12 months.

So, automatically, Denison got a big boost from the price increase. 2.5 million pounds into $40 is another $100 million of current assets for the company. Denison also did an equity raise in October 2023 just as the price was flying. Overall, the balance sheet is now in better shape than when we last wrote on it.

Outlook

Denison completed feasibility work for Phoenix, and we are now at the permitting stage for this project.

Estimated timelines are possibly the end of 2024 (optimistic) to the second quarter of 2025 (most likely). Investors tend to forget that even the best projects have long lead times in mining and, even the lowest-cost ones, are expensive.

We are fairly certain that by the time the first uranium pound comes up from the ground, that cost will be north of $500 million. Also, keep in mind that based on estimated construction lead times, we are looking at 2028 for the first production. Then the following mine profile will apply if everything goes right.

In the interim, there is the cash burn to deal with. This cash burn for 2024 does not even include any construction costs. Those come in 2025-2028. The company will likely burn at least $40 million in 2024, though the liquidity is high enough that this won’t be a bother.

Valuation & Verdict

On such long lead times, pricing a development project is fraught with difficulties. You have to project costs to completion accurately and also be certain those reserves will really jump out of the ground like fluffy bunnies. Of course, the key parameter is the price of uranium itself. There you can see all kinds of projections from uranium returning to $60/pound (most sell side analysts are using this to calculate NAV) to all the way to $500 a pound. What we can tell you with a fair degree of certainty is that Denison is nowhere near as cheap as our covered call entry price of $1.00 per share. In fact, adjusting for the capital raise that was just done, and the share price appreciation, the enterprise value has about doubled since then.

Denison is hardly alone, though. Cameco Corp. (CCJ) the sector leader and one sporting a far bigger market capitalization, has also moved substantially since then.

Yes, the uranium price is higher, but there are no guarantees it will stay here over the next 4 years. If you run a NAV analysis here at $60 pounds of uranium and a 10% discounting of cash flows, you will come to a price lower than the stock price today. If you use $80 pounds, you likely come out ahead, but then this is a speculative asset, and you should aim to make a boatload if you are right. At present, we think a long, healthy consolidation is the most likely course as investors digest the gains and the company makes its progress towards construction. We are moving this to a “hold” rating and would look for opportunities to initiate covered calls near the $1.30-$1.40 price zone.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Please note that this is not financial advice. It may seem like it, sound like it, but surprisingly, it is not. Investors are expected to do their own due diligence and consult a professional who knows their objectives and constraints.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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The post Denison Mines: A Pause Coming In Uranium Bull Market appeared first on Up2info.com.

• Denison Mines poised for success in a resurgent uranium bull market.
• Potential for two operational mines, yet market undervalues the second mine.
• Denison Mines positioned as a key player in the evolving landscape of nuclear energy, offering investors a bullish outlook.

Investment Thesis

Denison Mines (NYSE:DNN) is well placed for strong uranium prices.

Earlier I had stated in a bullish analysis that,

Denison has a reasonably clean balance sheet, with approximately CAD$47 million in cash and equivalents. It’s not a particularly large amount of cash. But what it lacks in cash, it more than makes up for in the fact that the business has no significant debt.

However, the business is not in production as of yet, as it must wait until the price of uranium stabilizes above $60 per lbs for a period of months. But with uranium prices jumping higher of late, there’s a lot to be excited about Denison.

Since I wrote that piece, the share price has been trending higher, but it’s far from pricing in all its future prospects, as you’ll soon see.

Denison’s Q3 2023 results describe how the company has successfully raised enough capital to shore up its balance sheet for at least 2 years at its current free cash flow burn rate.

But even that isn’t the full bull case. The bull case here is that if the price of uranium stabilizes at the current price, this business will soon have not only one but two mines in operation.

But what is particularly bullish here, is that the market isn’t even pricing in its second mine. There’s a lot to be bullish about here, so let’s get to it.

Why Invest in Uranium?

In the current landscape, a profound energy evolution is underway as nations strive to embrace a net-zero carbon future. At the heart of this transformation are two powerful drivers shaping our energy narrative: the electrification of everything and a determined push for decarbonization.

In this electrification era, we’re witnessing a sweeping shift toward electricity as the lifeblood of our daily existence. From consumer electronic gadgets to the wheels on our roads, the goal is to replace conventional, fossil fuel-driven systems with electric alternatives. EVs are at the forefront, revolutionizing transportation and curbing the carbon footprint associated with it.

Simultaneously, the decarbonization wave seeks to redefine the very sources that power our world. The focus is on steering away from carbon-heavy fuels like coal and natural gas, and instead, embracing cleaner, sustainable alternatives for electricity generation. Solar, wind, and hydropower have become linchpins in this pursuit of a greener energy mix.

Amidst this dynamic landscape, nuclear energy emerges as a pivotal player. Fueled by uranium, nuclear power plants harness controlled nuclear reactions to generate electricity. Nuclear power is not only scalable, capable of meeting the colossal energy demands of our modern societies, but it also represents a low-carbon option. What’s more, green energies like wind and solar power hold promise for a sustainable future, challenges remain in terms of scalability, intermittency, and the need for grid adaptation.

Furthermore, advancements in nuclear technology, particularly the development of next-generation reactors, promise enhanced safety, efficiency, and a reduction in nuclear waste.

Given this context, it’s practically obvious why uranium pricing continues to move higher.

Next, allow me to put forward the following figure.

Towards the middle of this decade, there’s going to be a massive gap between the amount of supply and demand for uranium. To compound matters, to get enough supply onto the market is not only costly but also extremely time-consuming.

How to Think About Its Valuation?

After Q3 results, Denison holds about US$100 million (CAD$140 million) of cash. Yes, the business holds no debt, but the fact of the matter is that Denison is burning through about CAD$30 million of free cash flow on an annualized basis.

So even though the business has just last month diluted shareholders by close to 4%, having earlier in 2023 raised approximately US$27 million of cash through a capital raise, this business needs uranium prices to remain elevated for it to be able to get into production.

On the other hand, consider the table that follows.

What you see above is Denison’s bull case that if the price of uranium remains stably above US$70, then Denison will have access to approximately 57 million lbs of proven uranium, which would deliver a triple digit IRR, putting its Phoenix mine alone at US$1.5 billion, with the rest of its mines being given for free.

Put another way, consider this graphic.

At US$70 lbs for uranium, Denison’s current market cap is pricing in the Phoenix mine, but its Gryphon underground mine, which has a higher cost basis of US$75 per lb, is not even being priced in.

The Bottom Line

Denison Mines presents a compelling investment opportunity for those seeking exposure to the rising uranium market. With a sound financial position, marked by approximately US$100 million in cash and no significant debt, the company is strategically positioned to capitalize on the increasing uranium prices.

Despite not yet being in production, Denison’s trajectory is promising, especially as uranium prices surge. The recent Q3 2023 results indicate that the company has successfully secured enough capital to fortify its balance sheet for at least the next two years at the current free cash flow burn rate.

Notably, the bull case for Denison extends beyond financial stability, as the potential for not just one but two operational mines looms on the horizon. What makes this investment particularly bullish is the market’s apparent oversight of Denison’s second mine, suggesting room for further upside.

Against the backdrop of a widening gap between uranium supply and demand, Denison Mines emerges as a strategic player positioned to deliver robust returns, provided uranium prices remain elevated. Investors should take note of the exciting prospect in the uranium sector.

Personally I’ve chosen to invest with Uranium Energy Corp. (UEC), but I wouldn’t say there’s a lot of difference between the two.

In fact, it appears that the whole sector has been posting positive returns in this past year.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Deep Value Returns recommends UEC.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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The post Denison Mines Q3 Results: Riding High On The Uranium Bull Market Surge appeared first on Up2info.com.

• Denison Mines has seen a significant increase in the uranium price during the fall, leading to a 38% YTD increase in the stock price.
• The recent bought deal and sale of uranium has resulted in a substantial cash position for Denison.
• The valuation of Denison’s assets ranges from $2.0B to $3.5B based on different uranium prices, making it an attractive investment.

Overview

During the summer, I wrote an article on Denison Mines (NYSE:DNN), following the release of the feasibility study on Phoenix and updated pre-feasibility study on Gryphon. This is a follow-up on that article as we have seen a significantly higher uranium price during the fall.

Denison is up 38% YTD and has performed in-line with many uranium peers, as the chart below illustrates.

The $55M bought deal that was announced and closed in October of this year has likely had a negative impact on the stock price, compared to how it would have done without the financing. However, many uranium stocks, with Cameco (CCJ) being a notable exception, are down some from the highs seen in late September.

We have also seen a very marginal decline in the spot price of uranium, even though the spot price has climbed again over the last week and is now at $73.95/bl, which is less than $1/lb below another 15-year high.

Denison Assets

I delved more into Denison assets in the last article during the summer. Relatively little has changed with the asset base since then, even though we have seen a much higher uranium price since during the fall.

Denison gets most of its value from the Wheeler River project, which is in turn comprised on Phoenix and Gryphon. Phoenix is the larger of the two, closer to production, with more attractive costs. Phoenix is also an ISR project, while Gryphon is a conventional mining project. There is also the earlier stage Waterbury Lake project, which presently has preliminary economic assessment in place.

Following the recent bought deal and announced sale of 200Klbs of uranium, Denison also has a substantial cash position. Part of the cash will probably be spent before a construction decision on Phoenix, but likely not all of it, as we are now looking at above $100M in cash. This figure includes the cash as of Q3-23, money from the October bought deal, together with the expected cash from uranium sales and options. There is also 2.3Mlbs of uranium on the books, after the recently announced sales.

Please note that I have not included the 22.5% ownership in the McClean Lake Uranium Mill, nor the $15M strategic investment in F3 Uranium (FUU:CA) in the valuation, as they have more marginal value in my view. The reason the ownership in the mill is less material is because Denison has already been paid for the toll milling fees the mill receives from processing the Cigar Lake ore.

Valuation

If we add up the assets mentioned above, using a few different uranium prices, we get the following combined values. Where we can see that Denison’s total value is in the $2.0B to $3.5B range using a $70-100/lb uranium price. The values are primarily derived from the technical reports, even if there is more uncertainty at the higher prices, due to the lack of details in all the technical reports.

In the chart below, we can see the market cap and enterprise value in relation to the estimated value of Denison’s total assets at various uranium prices. The EV to NPV is for example 0.52 at a $80/lb uranium price. That is still a relatively attractive price for a company with some of the best uranium projects in the world when things like location, grade, scale, projected operating costs, and IRR are considered.

Conclusion

Denison Mines is a relatively late-stage uranium developer, which is primarily focused on getting the Phoenix ISR project permitted over the next couple of years. This is the main risk to consider with an investment in Denison, as ISR uranium mining has not been used in Saskatchewan, Canada before, even if it is the more common uranium mining method elsewhere in the world.

I am not overly concerned about the execution risk otherwise, as the field test program has shown excellent results. Given the sizable cash position and uranium investments on the books, the financing risk should not be a major hurdle for Denison either. Especially when we consider that Phoenix has an IRR of 90%, with a uranium price of $70/lb.

Denison does still offer good value at the current level, given that we now seem to be in a higher uranium price environment.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of DNN either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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The post Denison Mines: Still Good Value After The Recent Rally In The Industry appeared first on Up2info.com.

• Denison Mines has been in the uranium mining business for seven decades. Its Wheeler River project is one of the best in the world, measured by AISC, grade, and resource base.
• Denison’s balance sheet has zero debt and carries 2.5 million pounds of uranium, while the share dilution is minimal. The company owns 22.5% of McClean Mill, too.
• DNN is for sale at a significant discount using NAV calculations with a $50/lb uranium price. These reasons are more than enough to give Denison a strong buy rating.

Thesis

Gold, uranium, Latin America, and banking are my passions as a researcher and investor. Recently, I presented my thesis on why uranium is poised to be one of the best investments of the current decade, illustrating how to bet on it using NexGen (NXE) among the top uranium miners. Today, I will share another enticing uranium stock, Denison Mines (NYSE:DNN). DNN is one of the most significant holdings in my portfolio, with double-digit weight.

Denison and NexGen develop the best uranium deposits outside Kazakhstan, measured with AISC, grade, and resource base. DNN has zero debt and owns an inventory of 2.5 million lb of uranium. Denison is one of the oldest companies in the business that has survived all the ups and downs since post-World War 2.

Last month, all uranium equities, including DNN, made strong upside moves. Despite that, DNN is still undervalued based on NAV. That said, I give Denison a strong buy rating.

Denison Mines overview

Denison assets are in the Saskatchewan province Athabasca basin. The latter is the most prominent uranium mining region in the Western Hemisphere. The map below from the last company presentation shows the location of DNN’s mines, Cameco (CCJ), and NexGen assets.

Denison major asset is the Wheeler River project. It is divided into two areas: Phoenix and Gryphon. Both have outstanding parameters such as grade, AISC, and resource base. The cost of extraction is crucial for any mining enterprise. Many uranium miners have AISC above $50/lb, except Kazakhstan deposits, the Olympic dam in Australia, and Cameco’s mines. That said, companies in Namibia, Niger, Canada, and the US barely reached their breakeven until last year. Besides, some are not profitable yet, even at the current spot price of $67.5/lb.

The chart below illustrates the AISC quartiles by region and companies.

Cameco Cigar Lake and McArthur River are the only operating mines in the Western Hemisphere, with AISC below $30/lb. NexGen and Denison projects will change that. AISC below $30/lb provides Denison with an undisputable moat. Once the Wheeler River projects are complete, and they start to deliver uranium, it will put DNN in line with Cameco and Kazatoprom.

I picked Denison over NexGen due to two subtle advantages. DNN holds a massive inventory of 2.5 million pounds of uranium and a 22.5% share of McClean Lake Mill. Orano owns the remaining 75%. The uranium extracted from Cigar Lake is processed in McClean. In 2022, that was 14% of the global uranium production. McClean has an annual license capacity of 24 million lb of uranium. This is more than close to 18% of the total annual output. That said, McClean is not just a strategic asset in Denison’s balance sheet. It is a geopolitical asset crucial for national defense.

Consider the scenario of further fragmentation of uranium supply due to a few potential factors:

• Possible ban on Russian uranium imports by the US
• Deepening strains in Niger’s uranium export to Europe
• Last but not least, the possibility of Russia banning uranium exports to the EU and US

The last is a purely speculative statement. However, the uranium industry represents a negligible percentage of Russia’s GDP, and much of its production is sold to its geopolitical allies. Cutting exports to the EU and USA will not strain the Russian economy. However, both are still dependent on Russian uranium imports. In other words, Russia, with minimal effort, could potentially achieve these outcomes.

Company Financials

All major uranium developers have impressive balance sheets in my view. Below, I present you with DNN’s metrics assessing its solvency and liquidity. The data was taken from the last financial report.

Click to enlarge

Given the costs of developing mines, having zero debt is an outstanding achievement. Usually, mining companies dilute the shareholder base excessively during the development stage. In the meantime, their balance sheets are looking neat and clean. The case with Denison is different. The company has increased the number of fully diluted shares by a mere 2.1% over the last six months. The image below shows the company’s previous income statement with share capital at the bottom.

Buying stock in the company in the development stage means accepting a share dilution. The point is not to be excessive. Denison seems to prudently undergo share dilution, thus not really harming its shareholders in my opinion.

Valuation

Denison is not producing uranium yet. Thus, to estimate its value, I will use NAV, but instead of owner earnings per unit of production, I will apply the company’s pilot projects, Gryphon and Phoenix NPV:

• Net asset value, including Gryphon and Phoenix’s NPV
• Plausible Reserves/Fully Diluted Shares and EV/Plausible Reserves

I use the following formulas to estimate plausible reserves and net asset value:

PR (plausible reserves) = 100% * P&P Reserves + 50%*M&I Resources + 30%*Inferred Resources

NAV = 0.8*NPV + cash + inventories + total receivables – total liabilities

The following two images illustrate Phoenix and Gryphon metrics.

Phoenix Feasibility Study (FS) 2023 overview:

Gryphon pre-feasibility study update (PFS) 2023:

I must point out two things. I multiply the stated NPV figures by 0.8, given that I assume the discount rate is 8.8-9.2%. Second, I use two scenarios with uranium price at $50/lb (conservative case) and $60/lb (base case) instead of $65/lb.

• Cash $35 million
• Short Term Investments $6.4 million
• Inventory $150 million (at uranium spot $60/lb)
• Total receivables: $4.3 million
• Total Liabilities $61.1 million
• Fully diluted shares 854 million
• Gryphon After-tax NPV (uranium at $50/lb) $0.53 billion
• Gryphon After-tax NPV (uranium at $60/lb) $0.64 billion
• Phoenix After-tax NPV (uranium at $50/lb) $0.96 billion
• Phoenix After-tax NPV (uranium at $60/lb) $1.15 billion

Conservative case NAV = $1.74 billion

Conservative NAV per share = $2.03

Base case NAV = $2.034 billion

Base NAV per share = $2.38

Denison’s current market price = $1.57 on Sept 22, 2023

I compare Denison with similar-sized companies developing projects in Canada and the US:

• NexGen Energy
• Fission Energy (OTCQX:FCUUF)
• Uranium Energy Corp (UEC)

I use Plausible Reserves/Fully Diluted Shares and EV/Plausible Reserve to measure how cheap or expensive DNN is.

NexGen offers the most value per share measured in uranium pounds, and Denison is third. On the other hand, Denison and Fission are the cheapest estimated with EV/Plausible reserves. Besides that, Denison is deeply undervalued, even in my conservative assessment, with a spot price of uranium at $50/lb.

Risk

Denison carries the usual risks as any miner does. More pronounced are metallurgical, economic risks, and operational risks. Geology finds the ore; however, metallurgy tells us how to extract it. The latter means the cost per unit. Phoenix and Gryphon seem to be among the uranium mines under development, but until the mines start producing, we are not guaranteed that AISC will match the FS and PFS figures.

The economic risk means high inflation and rising interest rates. The former will push the building and operating costs, while the latter will increase the cost of financing. Considering the AISC below $30/lb projects, the inflation pressures will squeeze that mush projects NPV and mine operation once complete.

The operational risk is too tough for retail investors to assess. However, considering the quality of the management team, I believe operational risk is under control. On top of that, Denison has almost seven decades of history navigating uranium market uncertainties.

Canada is a commodity powerhouse. As such, doing mining business there carries relatively low risks. Of course, the risk varies between the provinces, but Saskatchewan is among the best jurisdictions. All required services and infrastructure have been there for decades. Regulatory issues are still present but are well-known and thus manageable.

The market risk is always present. With the recent hawkish Fed pause, all equities took a nose dive. However, uranium stocks realized lower declines compared to the broad market. Keep in mind uranium is a commodity in its own league. Its market is too tiny compared even to coal and zinc. Thus, demand is not subject to recession fears or growth expectations in my view.

Conclusion

Investing is an art of exclusion. In the mining business, that statement has even more profound implications. Many projects prove nothing more than shareholders’ capital destroyers and, too often, a milking cow for their founders. Following that trope, investing in uranium stocks becomes easy once you discard all enticing “promising” ideas.

In the uranium segment, a few companies shine NexGen, Cameco, and Denison. In my portfolio, I hold Cameco LEAPS call options and Denison equity. I chose Denison over NexGen because of its flagship project, Phoenix, large uranium inventory, and its share in McClean Mill. On top of that, DNN is for sale at a significant discount using NAV calculations with a $50/lb uranium price. These reasons are more than enough to give Denison a strong buy rating.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of DNN either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Denison Mines: Top Projects, Robust Balance Sheet, And Deeply Undervalued appeared first on Up2info.com.

• Denison Mines Corp. is a Canadian uranium exploration company with a clean balance sheet and CAD$47 million in cash.
• The demand for nuclear energy is increasing due to the growth of AI infrastructure and data centers, as well as expansion in China and India.
• Denison Mines is focused on projects in Canada’s Athabasca Basin and has high-grade uranium deposits, making it a compelling investment.

Investment Thesis

Denison Mines Corp. (NYSE:DNN) is a Canadian uranium exploration company. Denison has a reasonably clean balance sheet, with approximately CAD$47 million in cash and equivalents. It’s not a particularly large amount of cash. But what it lacks in cash, it more than makes up for in the fact that the business has no significant debt.

However, the business is not in production as of yet, as it must wait until the price of uranium stabilizes above $60 per lbs for a period of months. But with uranium prices jumping higher of late, there’s a lot to be excited about Denison.

In this analysis, I explain my thoughts on nuclear energy, why Denison is a compelling investment, and some of the risks that readers should be mindful of.

Personally, I’m investing in Uranium Energy Corporation (UEC), but frankly speaking, I don’t believe there’s that much to tell them apart. Realistically, if the price of uranium stays above $60-70 per lbs for some time, both these companies will do well. Note, in this analysis, I’ve not discussed the impact of Small Modular Reactors (”SMRs”), as I’ve already discussed this at length here.

Why Invest in Nuclear Energy?

Uranium plays a crucial role in nuclear energy, making it an integral part of the broader transition towards cleaner and more sustainable energy sources.

Nuclear power plants provide what is known as “base load” power, which means they can operate continuously at a high capacity level. This stability makes them well-suited for supplying the consistent electricity needs of energy industries, such as AI infrastructure.

More specifically, high energy demand, in the context of AI infrastructure and data centers, has become a significant challenge as technology continues to advance. The rapid growth of digital technologies, such as AI and cloud computing, has led to a massive increase in demand for energy. These data centers are the backbone of AI infrastructure, supporting tasks like data storage, processing, and machine learning model training.

Nuclear power is a low-carbon energy source that can provide a stable and substantial electricity supply to meet the energy needs of data centers and AI infrastructure. Unlike fossil fuels, nuclear power does not produce direct carbon emissions during electricity generation, making it an environmentally friendly option.

On top of the demand for more nuclear energy in the West, the expansion of nuclear energy in China and India can further increase demand. These countries are actively investing in nuclear power to meet their growing energy needs.

This context, all points to the inevitable fact, that there’s just not enough supply to meet the oncoming demand, see below.

As you can see above, starting in 2024 and into 2025, demand for uranium is rapidly increasing, with supply not likely to match demand.

Why Invest in Denison Mines?

Denison Mines is engaged in the exploration and acquisition of uranium assets, with a focus on projects in Canada’s Athabasca Basin. One of Denison Mines’ main projects is the Wheeler River Uranium Project. This project includes the Phoenix and Gryphon uranium deposits, which are among the highest-grade uranium deposits in the world.

Denison Mines is actively working on advancing its flagship Wheeler River Project to bring these deposits into production.

In this graphic above, we see that assuming the price of uranium is in the $66 to $70 per lbs range, its net present value is around CAD$2.4 (or $1.8 billion). This means that even now, after the rally this stock had, the business is still selling for less than its NPV.

What Are The Risks?

There are two main risks facing Denison.

Firstly, the exact size of the secondary supply of uranium remains uncertain, and this ambiguity could potentially exert downward pressure on uranium prices.

Secondary supply includes sources such as government stockpiles, uranium recycling, and excess inventories, among others. Due to the lack of transparency and comprehensive data on these secondary sources, all stakeholders are forced to grapple with limited visibility into the magnitude of available uranium supply. This uncertainty can make it challenging to assess the balance between supply and demand in the uranium market.

To be clear, the story of there being a shortfall in uranium supply in the middle of this decade isn’t new. Market participants have known about this aspect for at least two or three years. So it’s important to keep in mind that the new uranium prices we are seeing are not reflective of any new information.

This leads me to my second risk factor. While the prospect of higher uranium prices may seem enticing, it’s crucial to consider that such a scenario could trigger a substantial near-term supply response, albeit with a time lag of a few years.

When uranium prices rise significantly, it becomes economically viable for uranium producers to restart idled mines, explore new deposits, and expand production.

This potential influx of additional uranium supply could act as a restraining factor on further price escalation. As a result, while the uranium market may experience upward momentum in response to various factors such as increased demand from nuclear power generation, the anticipation of substantial supply coming online in the future can act as a lid on the extent to which uranium prices can continue their upward trajectory.

The Bottom Line

While they’re not in production yet due to uranium price conditions, recent price increases in uranium offer promising prospects.

I believe that Denison stands to benefit if uranium prices stay above $60-70 per lbs. The growth in nuclear energy, especially in China and India, points to a supply-demand gap in uranium. Denison Mines focuses on projects like the Wheeler River Uranium Project, with high-grade uranium deposits, positioning them well for potential future production. However, there are risks, including uncertainty in secondary uranium supply and the possibility of increased production in response to rising prices.

Altogether, it’s difficult not to be excited about Denison’s prospects over the next twelve months.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Michael is long UEC. Michael recommends UEC as part of the Deep Value Returns service.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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