ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

 

To the Board of Directors and Shareholders of Denison Mines Corp.

 

Opinions on the financial statements and internal control over financial reporting

We have audited the accompanying consolidated statements of financial position of Denison Mines Corp. and its subsidiaries (together, the Company) as of December 31, 2019 and 2018, and the related consolidated statements of income (loss) and comprehensive income (loss), changes in equity and cash flow for the years then ended, including the related notes (collectively referred to as the consolidated financial statements). We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.

 

Substantial doubt about the Company's ability to continue as a going concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and negative cash outflows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

 

 

 

 

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

 

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

(Signed) “PricewaterhouseCoopers LLP”

 

Chartered Professional Accountants, Licensed Public Accountants

 

Toronto, Ontario, Canada

March 5, 2020

 

We have served as the Company's auditor since at least 1996. We have not been able to determine the specific year we began serving as auditor of the Company.

 

 

 

 

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION   (Expressed in thousands of Canadian dollars (“CAD”) except for share amounts)
				At December 31 2019		At December 31 2018
ASSETS
Current
Cash and cash equivalents (note 6)			$	8,190	$	23,207
Trade and other receivables (note 7)				4,023		4,072
Inventories (note 8)				3,352		3,584
Prepaid expenses and other				978		843
				16,543		31,706
Non-Current
Inventories-ore in stockpiles (note 8)				2,098		2,098
Investments (note 9)				12,104		2,255
Investment in associate (note 10)				-		5,582
Restricted cash and investments (note 11)				11,994		12,255
Property, plant and equipment (note 12)				257,259		258,291
Total assets			$	299,998	$	312,187
LIABILITIES
Current
Accounts payable and accrued liabilities			$	7,930	$	5,554
Current portion of long-term liabilities:
Deferred revenue (note 13)				4,580		4,567
Post-employment benefits (note 14)				150		150
Reclamation obligations (note 15)				914		877
Other liabilities (note 16)				1,372		1,337
				14,946		12,485
Non-Current
Deferred revenue (note 13)				31,741		33,160
Post-employment benefits (note 14)				2,108		2,145
Reclamation obligations (note 15)				31,598		29,187
Other liabilities (note 16)				532		-
Deferred income tax liability (note 17)				8,924		12,963
Total liabilities				89,849		89,940
EQUITY
Share capital (note 18)				1,335,467		1,331,214
Share purchase warrants (note 19)				435		435
Contributed surplus				65,417		63,634
Deficit				(1,192,304)		(1,174,163)
Accumulated other comprehensive income (note 21)				1,134		1,127
Total equity				210,149		222,247
Total liabilities and equity			$	299,998	$	312,187
Issued and outstanding common shares (note 18)				597,192,153		589,175,086
Going concern basis of accounting (note 2)
Commitments and contingencies (note 26)
Subsequent events (note 28)
The accompanying notes are an integral part of the consolidated financial statements

 

 

 

On behalf of the Board of Directors:

"Signed" Catherine J.G. Stefan	"Signed" Brian D. Edgar
Director	Director

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
						Year Ended December 31
(Expressed in thousands of CAD dollars except for share and per share amounts)						2019		2018
REVENUES (note 23)					$	15,549	$	15,550
EXPENSES
Operating expenses (note 22, 23)						(14,436)		(15,579)
Exploration and evaluation (note 23)						(15,238)		(15,457)
General and administrative (note 23)						(7,811)		(7,189)
Impairment expense (note 12)						-		(6,086)
Other income (expense) (note 22)						2,970		(6,234)
						(34,515)		(50,545)
Loss before finance charges, equity accounting						(18,966)		(34,995)
Finance expense, net (note 22)						(4,125)		(3,653)
Equity share of income (loss) of associate (note 10)						(426)		277
Loss before taxes						(23,517)		(38,371)
Income tax recovery (note 17):
Deferred						5,376		8,294
Net loss for the period					$	(18,141)	$	(30,077)
Other comprehensive income (loss) (note 21):
Items that may be reclassified to loss:
Foreign currency translation change						7		(13)
Comprehensive loss for the period					$	(18,134)	$	(30,090)
Basic and diluted net loss per share					$	(0.03)	$	(0.05)
Weighted-average number of shares outstanding (in thousands):
Basic and diluted						590,343		564,976
The accompanying notes are an integral part of the consolidated financial statements

 

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

Consolidated Statements of Changes in Equity
						Year Ended December 31
(Expressed in thousands of CAD dollars)						2019		2018
Share capital (note 18)
Balance-beginning of period					$	1,331,214	$	1,310,473
Shares issued for cash, net of issue costs						4,292		4,549
Flow-through share premium						(902)		(1,337)
Shares issued on acquisition of additional mineral property interests (note 12)						19		17,529
Share options exercised-cash						405		-
Share options exercised-fair value adjustment						140		-
Share units exercised-fair value adjustment						299		-
Balance-end of period						1,335,467		1,331,214
Share purchase warrants (note 19)
Balance-beginning of period						435		435
Balance-end of period						435		435
Contributed surplus
Balance-beginning of period						63,634		61,799
Share-based compensation expense (note 20)						2,222		1,835
Share options exercised-fair value adjustment						(140)		-
Share units exercised-fair value adjustment						(299)		-
Balance-end of period						65,417		63,634
Deficit
Balance-beginning of period						(1,174,163)		(1,144,086)
Net loss						(18,141)		(30,077)
Balance-end of period						(1,192,304)		(1,174,163)
Accumulated other comprehensive income (note 21)
Balance-beginning of period						1,127		1,140
Foreign currency translation						7		(13)
Balance-end of period						1,134		1,127
Total Equity
Balance-beginning of period					$	222,247	$	229,761
Balance-end of period					$	210,149	$	222,247
The accompanying notes are an integral part of the consolidated financial statements

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Cash Flow
						Year Ended December 31
(Expressed in thousands of CAD dollars)						2019		2018
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net loss for the period					$	(18,141)	$	(30,077)
Items not affecting cash and cash equivalents:
Depletion, depreciation, amortization and accretion						8,711		8,585
Impairment expense (note 12)						-		6,086
Share-based compensation (note 20)						2,222		1,835
Recognition of deferred revenue (note 13)						(4,609)		(4,239)
Losses on reclamation obligation revisions (note 15)						845		369
Gains on debt obligation revisions (note 16)						(26)		-
Losses on property, plant and equipment disposals (note 22)						37		135
Losses on investments (note 22)						1,085		5,411
Equity loss of associate (note 10)						678		472
Dilution gain of associate (note 10)						(252)		(749)
Gain on deconsolidation of associate						(5,267)		-
Non-cash inventory adjustments and other						-		56
Deferred income tax recovery (note 17)						(5,376)		(8,294)
Foreign exchange losses (gains) (note 22)						(2)		1
Post-employment benefits (note 14)						(107)		(142)
Reclamation obligations (note 15)						(855)		(755)
Change in non-cash working capital items (note 22)						2,256		355
Net cash used in operating activities						(18,801)		(20,951)
INVESTING ACTIVITIES
Decrease (increase) in loans receivable (note 7, 25)						250		(250)
Sale of investments (note 9)						-		37,500
Purchase of investments (note 9)						(511)		-
Expenditures on property, plant and equipment (note 12)						(929)		(1,567)
Proceeds on sale of property, plant and equipment						8		361
Decrease (increase) in restricted cash and investments						261		(71)
Net cash provided by (used in) investing activities						(921)		35,973
FINANCING ACTIVITIES
Issuance of debt obligations (note 16)						670		-
Repayment of debt obligations (note 16)						(662)		-
Issuance of common shares for:
New share issues-net of issue costs (note 18)						4,292		4,549
Share options exercise proceeds (note 18)						405		-
Net cash provided by financing activities						4,705		4,549
Increase (decrease) in cash and cash equivalents						(15,017)		19,571
Cash and cash equivalents, beginning of period						23,207		3,636
Cash and cash equivalents, end of period					$	8,190	$	23,207
Supplemental cash flow disclosure (note 22)
The accompanying notes are an integral part of the consolidated financial statements

 

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

Notes to the consolidated financial statements for the years ended December 31, 2019 and 2018
(Expressed in CAD dollars except for shares and per share amounts)

 

 

Denison Mines Corp. (“DMC”) and its subsidiary companies and joint operations (collectively, “Denison” or the “Company”) are engaged in uranium mining related activities, which can include acquisition, exploration and development of uranium properties, as well as the extraction, processing and selling of uranium.

 

The Company has a 90.0% interest in the Wheeler River Joint Venture (“WRJV”), a 66.57% interest in the Waterbury Lake Uranium Limited Partnership (“WLULP”), a 22.5% interest in the McClean Lake Joint Venture (“MLJV”) (which includes the McClean Lake mill) and a 25.17% interest in the Midwest Joint Venture (“MWJV”), each of which are located in the eastern portion of the Athabasca Basin region in northern Saskatchewan, Canada. The McClean Lake mill provides toll milling services to the Cigar Lake Joint Venture (“CLJV”) under the terms of a toll milling agreement between the parties (see note 13). In addition, the Company has varying ownership interests in a number of other development and exploration projects located in Canada.

 

The Company provides mine decommissioning and other services (collectively “environmental services”) to third parties through its Denison Closed Mines Group (formerly Denison Environmental Services) and is also the manager of Uranium Participation Corporation (“UPC”), a publicly-listed company formed to invest substantially all of its assets in uranium oxide concentrates (“U3O8“) and uranium hexafluoride (“UF6”). The Company has no ownership interest in UPC but receives fees for management services and commissions from the purchase and sale of U3O8 and UF6 by UPC.

 

DMC is incorporated under the Business Corporations Act (Ontario) and domiciled in Canada. The address of its registered head office is 40 University Avenue, Suite 1100, Toronto, Ontario, Canada, M5J 1T1.

 

References to “2019” and “2018” refer to the year ended December 31, 2019 and the year ended December 31, 2018 respectively.

 

 

These consolidated financial statements have been prepared using International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), on a going concern basis. These financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary if the Company ceases to exist as a going concern in the normal course of operations. Such adjustments could be material.

 

At December 31, 2019, the Company does not have sufficient liquidity on hand to fund its operations for the next twelve months and will require further financing to meet its financial obligations, execute its plans and maintain rights under existing agreements.

 

During 2019 and early 2020, the Company was successful in raising funds through a private placement and renegotiating the terms of the Company’s credit facility as noted in note 28. However, further additional sources of financing will be required in 2020 to fund the Company’s planned operations, which includes the strategic advancement of the Wheeler River uranium project. The Company believes it will be able to raise additional financing either through equity or debt financing, sale of equity investments or other assets, or by selling a stream and/or royalty on the Wheeler River project.

 

The Company is actively pursuing access to different sources of funding and while it has been successful in the past in obtaining financing for its activities, there is no assurance that it will be able to obtain adequate financing in the future. These events and conditions indicate the existence of material uncertainties that may cast substantial doubt as to the Company’s ability to continue as a going concern.

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

Statement of Compliance

 

These consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB.

 

These financial statements were approved by the board of directors for issue on March 5, 2020.

 

Significant accounting policies

 

These consolidated financial statements are presented in Canadian dollars (“CAD”) and all financial information is presented in CAD, unless otherwise noted.

 

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, revenue and expenses. Actual results may vary from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.

 

The significant accounting policies used in the preparation of these consolidated financial statements are described below:

 

 

The financial statements of the Company include the accounts of DMC, its subsidiaries, its joint operations and its investments in associates.

 

Subsidiaries

 

Subsidiaries are all entities (including structured entities) over which the DMC group of entities has control. The group controls an entity where the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group and are deconsolidated from the date that control ceases. Intercompany transactions, balances and unrealized gains and losses from intercompany transactions are eliminated.

 

Joint Operations

 

Joint operations are contractual arrangements which involve joint control between the parties. In the mining industry, these arrangements govern the formation, ownership and ongoing operation and management of various mineral property interests contributed to the joint operation. A joint operation may or may not be structured through a separate financial vehicle. The consolidated financial statements of the Company include its share of the assets in such joint operations, together with its share of the liabilities, revenues and expenses arising jointly or otherwise from those operations. All such amounts are measured in accordance with the terms of each arrangement.

 

Investments in associates

 

An associate is an entity over which the Company has significant influence and is neither a subsidiary, nor an interest in a joint operation. Significant influence is the ability to participate in the financial and operating policy decisions of the entity without having control or joint control over those policies.

 

Associates are accounted for using the equity method. Under this method, the investment in associates is initially recorded at cost and adjusted thereafter to record the Company’s share of post-acquisition earnings or loss of the associate as if the associate had been consolidated. The carrying value of the investment is also increased or decreased to reflect the Company’s share of capital transactions, including amounts recognized in other comprehensive income, and for accounting changes that relate to periods subsequent to the date of acquisition. Dilution gains or losses arising from changes in the interest in investments in associates are recognized in the statement of income or loss.

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

The Company assesses at each period-end whether there is any objective evidence that an investment in an associate is impaired. If impaired, the carrying value of the Company's share of the underlying assets of the associate is written down to its estimated recoverable amount, being the higher of fair value less costs of disposal or value in use, and charged to the statement of income or loss.

 

 

Functional and presentation currency

 

Items included in the financial statements of each entity in the DMC group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). Primary and secondary indicators are used to determine the functional currency. Primary indicators include the currency that mainly influences sales prices, labour, material and other costs. Secondary indicators include the currency in which funds from financing activities are generated and in which receipts from operating activities are usually retained. Typically, the local currency has been determined to be the functional currency of Denison’s entities.

 

The financial statements of entities that have a functional currency different from the presentation currency of DMC (“foreign operations”) are translated into Canadian dollars as follows: assets and liabilities-at the closing rate at the date of the statement of financial position, and income and expenses-at the average rate of the period (as this is considered a reasonable approximation to actual rates). All resulting changes are recognized in other comprehensive income or loss as cumulative foreign currency translation adjustments.

 

When the Company disposes of its entire interest in a foreign operation, or loses control, joint control, or significant influence over a foreign operation, the foreign currency gains or losses accumulated in other comprehensive income or loss related to the foreign operation are recognized in the statement of income or loss as translational foreign exchange gains or losses.

 

Transactions and balances

 

Foreign currency transactions are translated into an entity’s functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in currencies other than an operation’s functional currency are recognized in the statement of income or loss as transactional foreign exchange gains or losses.

 

 

Cash and cash equivalents include cash on hand, deposits held with banks, and other short-term highly liquid investments with original maturities of three months or less which are subject to an insignificant risk of changes in value.

 

 

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of a financial instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognized when the obligations specified in the contract are discharged, cancelled or expire.

 

At initial recognition, the Company classifies its financial instruments in the following categories:

 

Financial assets and liabilities at fair value through profit or loss (“FVTPL”)

 

A financial asset is classified in this category if it is a derivative instrument, an equity instrument for which the Company has not made the irrevocable election to classify as fair value through other comprehensive income (“FVTOCI”), or a debt instrument that is not held within a business model whose objective includes holding the financial assets in order to collect contractual cash flows that are solely payments of principal and interest. Derivative financial liabilities and contingent consideration liabilities related to business combinations are also classified in this category. Financial instruments in this category are recognized initially and subsequently at fair value. Transaction costs are expensed in the statement of income or loss. Gains and losses arising from changes in fair value are presented in the statement of income or loss – within other income (expense) - in the period in which they arise.

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

Financial assets at amortized cost

 

A financial asset is classified in this category if it is a debt instrument and / or other similar asset that is held within a business model whose objective is to hold the asset in order to collect the contractual cash flows (i.e. principal and interest). Financial assets in this category are initially recognized at fair value plus transaction costs and subsequently measured at amortized cost using the effective interest method less a provision for impairment. Interest income is recorded in the statement of income or loss through finance income.

 

Financial liabilities at amortized cost

 

All financial liabilities that are not recorded as FVTPL are classified in this category and are initially recognized less a discount (when material) to reduce the financial liabilities to fair value and less any directly attributable transaction costs. Subsequently, financial liabilities are measured at amortized cost using the effective interest method. Interest expense is recorded in net income through finance expense.

 

Refer to the “Fair Value of Financial Instruments” section of note 25 for the Company’s classification of its financial assets and liabilities within the fair value hierarchy.

 

 

At each reporting date, the Company assesses the expected credit losses associated with its financial assets that are not carried at FVTPL. Expected credit losses are calculated based on the difference between the contractual cash flows and the cash flows that the Company expects to receive, discounted, where applicable, based on the assets original effective interest rate.

 

For “Trade and other receivables”, the Company calculates expected credit losses based on historical credit loss experience, adjusted for forward-looking factors specific to debtors and the economic environment. In recording an impairment loss, the carrying amount of the asset is reduced by this computed amount either directly or indirectly through the use of an allowance account.

 

 

Expenditures, including depreciation, depletion and amortization of production assets, incurred in the mining and processing activities that will result in future concentrate production are deferred and accumulated as ore in stockpiles, in-process inventories and concentrate inventories. These amounts are carried at the lower of average costs or net realizable value (“NRV”). NRV is calculated as the estimated future concentrate price (net of selling costs) less the estimated costs to complete production into a saleable form.

 

Stockpiles are comprised of coarse ore that has been extracted from the mine and is available for further processing. Mining production costs are added to the stockpile as incurred and removed from the stockpile based upon the average cost per tonne of ore produced from mines considered to be in commercial production. The current portion of ore in stockpiles represents the amount expected to be processed in the next twelve months.

 

In-process and concentrate inventories include the cost of the ore removed from the stockpile, a pro-rata share of the amortization of the associated mineral property, as well as production costs incurred to process the ore into a saleable product. Processing costs typically include labor, chemical reagents and directly attributable mill overhead expenditures. Items are valued at weighted average cost.

 

Materials and other supplies held for use in the production of inventories are carried at average cost and are not written down below that cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when a decline in the price of concentrates indicates that the cost of the finished products exceeds NRV, the materials are written down to NRV. In such circumstances, the replacement cost of the materials may be the best available measure of their net realizable value.

 

 

Plant and equipment

 

Plant and equipment are recorded at acquisition or production cost and carried net of depreciation and impairments. Cost includes expenditures incurred by the Company that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost can be measured reliably. The carrying amount of a replaced asset is derecognized when replaced. Repairs and maintenance costs are charged to the statement of income during the period in which they are incurred.

 

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

Depreciation is calculated on a straight line or unit of production basis as appropriate. Where a straight line methodology is used, the assets are depreciated to their estimated residual value over an estimated useful life which ranges from three to twenty years depending upon the asset type. Where a unit of production methodology is used, the assets are depreciated to their estimated residual value over the useful life defined by management’s best estimate of recoverable reserves and resources in the current estimated mine plan. When assets are retired or sold, the resulting gains or losses are reflected in the statement of income or loss as a component of other income or expense. The Company allocates the amount initially recognized in respect of an item of plant and equipment to its significant parts and depreciates separately each such part over its useful life. Residual values, methods of depreciation and useful lives of the assets are reviewed at least annually and adjusted if appropriate.

 

Where straight-line depreciation is utilized, the range of useful lives for various asset classes is generally as follows:

 

 

Mineral property acquisition, exploration, evaluation and development costs

 

Costs relating to mineral and / or exploration rights acquired through a business combination or asset acquisition are capitalized and reported as part of “Property, plant and equipment”.

 

Exploration expenditures are expensed as incurred.

 

Evaluation expenditures are expensed as incurred, until an area of interest is considered by management to be sufficiently advanced. Once this determination is made, the area of interest is classified as an “Advanced Evaluation Stage” mineral property, a component of the Company’s mineral properties, and all further non-exploration expenditures for the current and subsequent periods are capitalized. These expenses can include further evaluation expenditures such as mining method selection and optimization, metallurgical sampling test work and costs to further delineate the ore body to a higher confidence level.

 

Once commercial and technical viability has been established for a property, the property is classified as a “Development Stage” mineral property and all further development costs are capitalized to the asset. Further development costs include costs related to constructing a mine, such as shaft sinking and access, lateral development, drift development, engineering studies and environmental permitting, infrastructure development and the costs of maintaining the site until commercial production.

 

Such capital costs represent the net expenditures incurred and capitalized as at the balance sheet date and do not necessarily reflect present or future values.

 

Once a development stage mineral property goes into commercial production, the property is classified as “Producing” and the accumulated costs are amortized over the estimated recoverable resources in the current mine plan using a unit of production basis. Commercial production occurs when a property is substantially complete and ready for its intended use.

 

Proceeds received from the sale of an interest in a property are credited against the carrying value of the property, with any difference recorded as a gain or loss on sale.

 

Lease assets (and lease obligations)

 

At the inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:

 

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

If the contract contains a lease, the Company accounts for the lease and non-lease components separately. For the lease component, a right-of-use asset and a corresponding lease liability are set-up at the date at which the leased asset is available for use by the Company. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.

 

The lease payments associated with the lease liability are discounted using either the interest rate implicit in the lease, if available, or the Company’s incremental borrowing rate. Each lease payment is allocated between the liability and the finance cost (i.e. accretion) so as to produce a constant rate of interest on the remaining lease liability balance.

 

 

Property, plant and equipment assets are assessed at the end of each reporting period to determine if there is any indication that the asset may be impaired. If any such indication exists, an estimate of the recoverable amount of the asset is made. For the purpose of measuring recoverable amounts, assets are grouped at the lowest level, or cash generating unit (“CGU”), for which there are separately identifiable cash inflows. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use (being the present value of the expected future cash flows of the relevant asset or CGU, as determined by management). An impairment loss is recognized for the amount by which the CGU’s carrying amount exceeds its recoverable amount.

 

Mineral property assets are tested for impairment using the impairment indicators under IFRS 6 “Exploration for and Evaluation of Mineral Resources” up until the commercial and technical feasibility for the property is established. From that point onwards, mineral property assets are tested for impairment using the impairment indicators of IAS 36 “Impairment of Assets”.

 

 

Post-employment benefit obligations

 

The Company assumed the obligation of a predecessor company to provide life insurance, supplemental health care and dental benefits, excluding pensions, to its former Canadian employees who retired from active service prior to 1997. The estimated cost of providing these benefits is actuarially determined using the projected benefits method and is recorded on the balance sheet at its estimated present value. The interest cost on this unfunded liability is being accreted over the remaining lives of this retiree group. Experience gains and losses are being deferred as a component of accumulated other comprehensive income or loss and are adjusted, as required, on the obligations re-measurement date.

 

Stock-based compensation

 

The Company uses a fair value-based method of accounting for stock options to employees and to non-employees. The fair value is determined using the Black-Scholes option pricing model on the date of the grant. The cost is recognized on a graded method basis, adjusted for expected forfeitures, over the applicable vesting period as an increase in stock-based compensation expense and the contributed surplus account. When such stock options are exercised, the proceeds received by the Company, together with the respective amount from contributed surplus, are credited to share capital.

 

The Company also has a share unit plan pursuant to which it may grant share units to employees – the share units are equity-settled awards. The Company determines the fair value of the awards on the date of grant. The cost is recognized on a graded method basis, adjusted for expected forfeitures, over the applicable vesting period, as an increase in share-based compensation expense and the contributed surplus account. When such share units are settled for common shares, the applicable amounts of contributed surplus are credited to share capital.

 

Termination benefits

 

The Company recognizes termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing benefits as a result of an offer made to encourage voluntary termination. Benefits falling due more than twelve months after the end of the reporting period are discounted to their present value.

 

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

Reclamation provisions, which are legal and constructive obligations related to the retirement of tangible long-lived assets, are recognized when such obligations are incurred and a reasonable estimate of the value can be determined. These obligations are measured initially at the present value of expected cash flows using a pre-tax discount rate reflecting risks specific to the liability and the resulting costs are capitalized and added to the carrying value of the related assets. In subsequent periods, the liability is adjusted for the accretion of the discount and the expense is recorded in the statement of income or loss. Changes in the amount or timing of the underlying future cash flows or changes in the discount rate are immediately recognized as an increase or decrease in the carrying amounts of the related asset and liability. These costs are amortized to the results of operations over the life of the asset. Reductions in the amount of the liability are first applied against the amount of the net reclamation asset with any excess value being recorded in the statement of income or loss.

 

The Company’s activities are subject to numerous governmental laws and regulations. Estimates of future reclamation liabilities for asset decommissioning and site restoration are recognized in the period when such liabilities are incurred. These estimates are updated on a periodic basis and are subject to changing laws, regulatory requirements, changing technology and other factors which will be recognized when appropriate. Liabilities related to site restoration include long-term treatment and monitoring costs and incorporate total expected costs net of recoveries. Expenditures incurred to dismantle facilities, restore and monitor closed resource properties are charged against the related reclamation liability.

 

 

Provisions for restructuring costs and legal claims, where applicable, are recognized in liabilities when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the end of the reporting period, and are discounted to present value where the impact of the discount is material. The Company performs evaluations to identify onerous contracts and, where applicable, records provisions for such contracts.

 

 

Current income tax payable is based on taxable income for the period. Taxable income differs from income as reported in the statement of income or loss because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

 

Deferred income taxes are accounted for using the balance sheet liability method. Deferred income tax assets and liabilities are computed based on temporary differences between the financial statement carrying values of the existing assets and liabilities and their respective income tax bases used in the computation of taxable income. Computed deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable income will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable income nor the accounting income. Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries and investments, and interests in joint ventures, except where the Company is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable earnings will be available to allow all or part of the asset to be recovered.

 

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realized, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited to income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also recorded within equity.

 

Income tax assets and liabilities are offset when there is a legally enforceable right to offset the assets and liabilities and when they relate to income taxes levied by the same tax authority on either the same taxable entity or different taxable entities where there is an intention to settle the balance on a net basis.

 

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

 

The Company’s Canadian exploration activities have been financed in part through the issuance of flow-through common shares, whereby the Canadian income tax deductions relating to these expenditures are claimable by the subscribers and not by the Company. The proceeds from issuing flow-through shares are allocated between the offering of shares and the sale of tax benefits. The allocation is based on the difference (“premium”) between the quoted price of the Company’s existing shares and the amount the investor pays for the actual flow-through shares. A liability is recognized for the premium when the shares are issued, and is extinguished when the tax effect of the temporary differences, resulting from the renunciation of the tax deduction to the flow-through shareholders, is recorded - with the difference between the liability and the value of the tax assets renounced being recorded as a deferred tax expense. The tax effect of the renunciation is recorded at the time the Company makes the renunciation to its subscribers – which may differ from the effective date of renunciation. If the flow-through shares are not issued at a premium, a liability is not established, and on renunciation the full value of the tax assets renounced is recorded as a deferred tax expense.

 

 

Revenue from pre-sold toll milling services

 

Revenue from the pre-sale of toll milling arrangement cash flows is recognized as the toll milling services are provided. At contract inception, the Company estimates the expected transaction price of the toll milling services being sold based on available information and calculates an average per unit transaction price that applies over the life of the contract. This unit price is used to draw-down the deferred revenue balance as the toll milling services occur. When changes occur to the timing, or volume of toll milling services, the per unit transaction price is adjusted to reflect the change (such review to be done annually, at a minimum), and a cumulative catch up adjustment is made to reflect the updated rate. The amount of the upfront payment received from the toll milling pre-sale arrangements includes a significant financing component due to the longer term nature of such agreements. As such, the Company also recognizes accretion expense on the deferred revenue balance which is recorded in net income through “Finance expense, net”.

 

Revenue from environmental services (i.e. Closed Mines Group)

 

Environmental service contracts represent a series of distinct performance obligations that are substantially the same and have the same pattern of transfer of control to the customer. The transaction price is estimated at contract inception and is recognized over the life of the contract as control is transferred to the customer. Variable consideration, where applicable, is estimated at contract inception using either the expected value method or the most likely amount method. If it is highly probable that a subsequent reversal of revenue will not occur when the uncertainty has been resolved, the Company will recognize as revenue the estimated transaction price, including the estimate of the variable portion, upon transfer of control to the customer. Where it is determined that it is highly probable that a subsequent reversal of revenue will occur upon the resolution of the uncertainty, the variable portion of the transaction price will be constrained, and will not be recognized as revenue until the uncertainty has been resolved.

 

Revenue from management services (i.e. UPC)

 

The management services arrangement with UPC represents a series of distinct performance obligations that are substantially the same and have the same pattern of transfer of control to the customer. The transaction price for the contract is estimated at contract inception and is recognized over the life of the contract as control is transferred to the customer as the services are provided. The variable consideration related to the net asset value (“NAV”) based management fee was estimated at contract inception using the expected value method. It was determined that it is highly probable that a subsequent reversal of revenue would occur if the variable consideration was included in the transaction price, and as such, the variable portion of the transaction price will be measured and recognized when the uncertainty has been resolved (i.e. when the actual NAV has been calculated).

 

Commission revenue earned on acquisition or sale of U3O8 and UF6 on behalf of UPC (or other parties where Denison acts as an agent) is recognized when control of the related U3O8 or UF6 passes to the customer, which is the date when title of the U3O8 and UF6 passes to the customer.

 

Revenue from spot sales of uranium

 

In a uranium supply arrangement, the Company is contractually obligated to provide uranium concentrates to the customer. Each delivery is considered a separate performance obligation under the contract – revenue is measured based on the transaction price specified in the contract and the Company recognizes revenue when control to the uranium has been transferred to the customer.

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

Uranium can be delivered either to the customer directly (physical deliveries) or notionally under title within a uranium storage facility (notional deliveries). For physical deliveries to customers, the terms in the supply arrangement specify the location of delivery and revenue is recognized when control transfers to the customer which is generally when the uranium has been delivered and accepted by the customer at that location. For notional deliveries at a uranium storage facility, revenue is recognized on the date that the Company specifies the storage facility to transfer title of a contractually specified quantity of uranium to a customer’s account at the storage facility.

 

 

Basic earnings (loss) per share (“EPS”) is calculated by dividing the net income or loss for the period attributable to equity owners of DMC by the weighted average number of common shares outstanding during the period.

 

Diluted EPS is calculated by adjusting the weighted average number of common shares outstanding for dilutive instruments. The number of shares included with respect to options, warrants and similar instruments is computed using the treasury stock method.

 

Accounting changes for fiscal 2019

 

 

On January 1, 2019, Denison adopted the provisions of IFRS 16 using the modified retrospective approach. As such, comparative information has not been restated and continues to be reported under International Accounting Standard 17 Leases (“IAS 17”) and International Financial Reporting Interpretation Committee 4 Determining Whether an Arrangement Contains a Lease (“IFRIC 4”). The transitional impact of the change in accounting policy is disclosed in note 5 and additional disclosures related to Denison’s IFRS 16 right-of-use assets, lease liabilities and lease amounts recognized in net income or loss are disclosed in notes 12, 16 and 22, respectively. Denison’s accounting policy for leases is noted above within the accounting policy for “Property, Plant and Equipment”.

 

Comparative numbers

 

Certain classifications of the comparative figures have been changed to conform to those used in the current period.

 

 

The preparation of consolidated financial statements in accordance with IFRS requires the use of certain critical accounting estimates and judgements that affect the amounts reported. It also requires management to exercise judgement in applying the Company’s accounting policies. These judgements and estimates are based on management’s best knowledge of the relevant facts and circumstances taking into account previous experience. Although the Company regularly reviews the estimates and judgements made that affect these financial statements, actual results may be materially different.

 

Significant estimates and judgements made by management relate to:

 

 

The Company follows a policy of capitalizing non-exploration related expenditures on properties it considers to be sufficiently advanced. Once a mineral property is determined to be sufficiently advanced, that determination is irrevocable and the capitalization policy continues to apply over the life of the property. In determining whether or not a mineral property is sufficiently advanced, management considers a number of factors, including, but not limited to: current uranium market conditions, the quality of resources identified, access to the resource, the suitability of the resource to current mining methods, ease of permitting, confidence in the jurisdiction in which the resource is located and mill processing complexity.

 

Many of these factors are subject to risks and uncertainties that can support a “sufficiently advanced” determination as at one point in time but not support it at another. The final determination requires significant judgment on the part of the Company’s management and directly impacts the carrying value of the Company’s mineral properties.

 

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

 

Mineral properties are tested for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. When an indicator is identified, the Company determines the recoverable amount of the property, which is the higher of an asset’s fair value less costs of disposal or value in use. An impairment loss is recognized if the carrying value exceeds the recoverable amount. The recoverable amount of a mineral property may be determined by reference to estimated future operating results and discounted net cash flows, current market valuations of similar properties or a combination of the above. In undertaking this review, management of the Company is required to make significant estimates of, amongst other things: reserve and resource amounts, future production and sale volumes, forecast commodity prices, future operating, capital and reclamation costs to the end of the mine’s life and current market valuations from observable market data which may not be directly comparable. These estimates are subject to various risks and uncertainties, which may ultimately have an effect on the expected recoverable amount of a specific mineral property asset. Changes in these estimates could have a material impact on the carrying value of the mineral property amounts and the impairment losses recognized.

 

 

In February 2017, Denison closed an arrangement with Anglo Pacific Group PLC and its subsidiaries (the “APG Arrangement” and “APG” respectively – see note 13). Under the APG Arrangement, Denison monetized its right to receive future toll milling cash receipts from July 1, 2016 onwards from the MLJV under the current toll milling agreement with the CLJV for an upfront cash payment. The APG Arrangement consisted of a loan structure and a stream arrangement. Significant judgement was required to determine whether the APG Arrangement should be accounted for as a financial obligation (i.e. debt) or deferred revenue.

 

Key factors that support the deferred revenue conclusion reached by management include, but are not limited to: a) Limited recourse loan structure – amounts due to APG are generally repayable only to the extent of Denison’s share of the toll milling revenues earned by the MLJV from the processing of the first 215 million pounds of U3O8 from the Cigar Lake mine on or after July 1, 2016, under the terms of the current Cigar Lake toll milling agreement; and b) No warranty of the future rate of production - no warranty is provided by Denison to APG regarding the future rate of production at the Cigar Lake mine and / or the McClean Lake mill, or the amount and / or collectability of cash receipts to be received by the MLJV in respect of toll milling of Cigar Lake ore.

 

 

In February 2017, Denison closed the APG Arrangement and effectively monetized its right to receive specified future toll milling cash receipts from the MLJV related to the current toll milling agreement with the CLJV. In exchange, Denison received a net up-front payment of $39,980,000 which has been accounted for as a deferred revenue liability as at the transaction close date.

 

Under IFRS 15, the Company is required to recognize a revenue component and a financing component as it draws down the deferred revenue associated with the APG Arrangement over the life of the specified toll milling production included in the APG Arrangement. In estimating both of these components, the Company is required to make assumptions relating to the future toll milling production volume associated with Cigar Lake Phase 1 and 2 ore reserves and resources (to end of mine life) and estimates of the annual timing of that production. Changes in these estimates affect the underlying production profile, which in turn affects the average toll milling drawdown rate used to recognize revenue.

 

When the average toll milling drawdown rate is changed, the impact is reflected on a life-to-date production basis with a retroactive adjustment to revenue recorded in the current period. Going forward, each time the Company updates its estimates of the underlying production profile for the APG Arrangement (typically in the quarter that information relating to Cigar Lake uranium resource updates and / or production schedules becomes publicly available), retroactive adjustments to revenue will be recorded in the period that the revised estimate is determined – such adjustments, which are non-cash in nature, could be material.

 

 

Deferred tax assets and liabilities are computed in respect of taxes that are based on taxable profit. Taxable profit will often differ from accounting profit and management may need to exercise judgement to determine whether some taxes are income taxes (and subject to deferred tax accounting) or operating expenses.

 

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply when the temporary differences between accounting carrying values and tax basis are expected to be recovered or settled. The determination of the ability of the Company to utilize tax loss carry forwards and other deferred tax assets to offset deferred tax liabilities requires management to exercise judgment and make certain assumptions about the future performance of the Company. Management is required to assess whether it is “probable” that the Company will benefit from these prior losses and other deferred tax assets. Changes in economic conditions, commodity prices and other factors could result in revisions to the estimates of the benefits to be realized or the timing of utilizing the losses.

 

 

Asset retirement obligations are recorded as a liability when the asset is initially constructed or a constructive or legal obligation exists. The valuation of the liability typically involves identifying costs to be incurred in the future and discounting them to the present using an appropriate discount rate for the liability. The determination of future costs involves a number of estimates relating to timing, type of costs, mine closure plans, and review of potential methods and technical advancements. Furthermore, due to uncertainties concerning environmental remediation, the ultimate cost of the Company’s decommissioning liability could differ materially from amounts provided. The estimate of the Company’s obligation is subject to change due to amendments to applicable laws and regulations and as new information concerning the Company’s operations becomes available. The Company is not able to determine the impact on its financial position, if any, of environmental laws and regulations that may be enacted in the future.

 

 

As noted above in Note 3, Denison adopted the provisions of IFRS 16 on January 1, 2019 using the modified retrospective approach. On transition to IFRS 16, the Company recognized an additional $944,000 of right-of-use assets (reported within “Property, Plant and Equipment” – see note 12) and an additional $944,000 of lease liabilities (reported within “Other Liabilities” – see note 16).

 

The underlying lease payments have been discounted using the Company’s incremental borrowing rate on January 1, 2019 of 8.50%. In applying IFRS 16 for the first time, Denison has used the following practical expedients permitted by the standard: a) leases with a term of less than 12 months remaining at January 1, 2019 have been accounted for as short-term leases; and b) initial direct costs for the measurement of the right-of-use asset at the date of initial application have been excluded.

 

A reconciliation of Denison’s December 31, 2018 lease commitments to its opening lease liabilities amount recognized under IFRS 16 is as follows:

 

(in thousands of CAD dollars)
Operating lease and other commitments per Denison’s December 31, 2018 annual financial statements		$	1,259
Adjustments to IFRS 16:
Recognition exemption for short-term leases			(13)
Other			(75)
Lease liabilities - undiscounted			1,171
Present value discount adjustment			(227)
Lease liabilities on transition to IFRS 16 at January 1, 2019		$	944

 

Under IFRS 16, Denison has recognized assets and liabilities for certain lease components which were expensed by the Company in the past. The adoption of IFRS 16 has resulted in the Company reporting: a) increased assets and liabilities; b) increased depreciation and accretion expense and decreased lease expense within the statement of income (loss); and c) decreased cash outflows from operations and increased cash outflows from financing as lease payments are recorded as financing outflows in the cash flow statement.

 

 

 

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

The cash and cash equivalent balance consists of:

 

				At December 31		At December 31
(in thousands)				2019		2018
Cash			$	1,583	$	1,152
Cash in MLJV and MWJV				1,397		654
Cash equivalents				5,210		21,401
			$	8,190	$	23,207

 

Cash equivalents consist of various investment savings account instruments and money market funds, all of which are short term in nature, highly liquid and readily convertible into cash.

 

 

The trade and other receivables balance consists of:

 

				At December 31		At December 31
(in thousands)				2019		2018
Trade receivables			$	2,608	$	2,952
Receivables in MLJV and MWJV				1,125		571
Sales tax receivables				92		98
Sundry receivables				198		201
Loan receivable (note 24)				-		250
			$	4,023	$	4,072

 

 

The inventories balance consists of:

 

				At December 31		At December 31
(in thousands)				2019		2018
Uranium concentrates			$	526	$	526
Inventory of ore in stockpiles				2,098		2,098
Mine and mill supplies in MLJV				2,826		3,058
			$	5,450	$	5,682
Inventories-by balance sheet presentation:
Current			$	3,352	$	3,584
Long term-ore in stockpiles				2,098		2,098
			$	5,450	$	5,682

 

Long-term ore in stockpile inventory represents an estimate of the amount of ore on the stockpile in excess of the next twelve months of planned mill production.

 

The uranium concentrate inventory has a fair market value, excluding selling costs, of $844,000 at December 31, 2019 ($1,011,000 - December 31, 2018).

 

 

 

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

 

The investments balance consists of:

 

				At December 31		At December 31
(in thousands)				2019		2018
Investments:
Equity instruments			$	12,104	$	2,255
			$	12,104	$	2,255
Investments-by balance sheet presentation:
Current			$	-	$	-
Long-term				12,104		2,255
			$	12,104	$	2,255

 

The investments continuity summary is as follows:

 

(in thousands)				2019		2018
Balance-January 1			$	2,255	$	45,166
Purchases
Equity instruments				511		-
Sales / redemptions
Debt instruments – GIC redemption.				-		(37,500)
Transfer from investment in associates at fair value (note 10)				10,423		-
Fair value loss to profit and loss (note 22)				(1,085)		(5,411)
Balance-December 31			$	12,104	$	2,255

 

At December 31, 2019, the Company holds equity instruments consisting of shares and warrants in publicly-traded companies and no debt instruments.

 

 

The investment in associate balance consists of:

 

				At December 31		At December 31
(in thousands)				2019		2018
Investment in associate-by investee:
GoviEx Uranium Inc (“GoviEx”)			$	-	$	5,582
			$	-	$	5,582

 

A summary of the investment in GoviEx is as follows:

 

(in thousands except share amounts)				Number of Common Shares
Balance-January 1, 2018				65,144,021	$	5,305
Equity share of net loss				-		(472)
Dilution gain				-		749
Balance-December 31, 2018				65,144,021	$	5,582
Equity share of net loss				-		(678)
Dilution gain				-		252
Deconsolidation of investment in GoviEx				-		(5,156)
Balance-December 31, 2019				65,144,021	$	-

 

 

 

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

 

GoviEx is a mineral resource company focused on the exploration and development of its uranium properties located in Africa. GoviEx maintains a head office located in Canada and is a public company listed on the TSX Venture Exchange. At December 31, 2019, Denison holds an approximate 15.39% interest in GoviEx based on publicly available information (December 31, 2018: 16.21% and December 31, 2017: 18.72%) and has one director appointed to the GoviEx board of directors.

 

Through the voting power of its share ownership interest, its large warrant holdings and its seat on the board of directors, Denison had the ability to demonstrate significant influence over GoviEx and used the equity method to account for this investment up to September 30, 2019. On October 1, 2019 (the deconsolidation date), Denison discontinued use of the equity method based on a determination that Denison’s influence over GoviEx was no longer demonstrable as significant - due to the expiry of its warrant holdings and an increased ownership interest in GoviEx’s main subsidiary by the Government of Niger during GoviEx’s third quarter of 2019.

 

On the deconsolidation date, Denison classified its equity investment in GoviEx as FVTPL. As a result, Denison recognized a gain of $5,267,000 which represents the excess of the fair value of the investment on that date ($10,423,000) as compared to the investment’s carrying value under the equity method ($5,156,000).

 

The following table is a summary of the consolidated financial information of GoviEx on a 100% basis, up to September 30, 2019, taking into account adjustments made by Denison for equity accounting purposes for fair value adjustments and differences in accounting policy. Prior to the deconsolidation date, Denison recorded its equity investment entries in GoviEx one quarter in arrears (due to the information not yet being publicly available), adjusted for any material publicly disclosed share issuance transactions that occurred up to the quarter end date on which Denison is reporting. A reconciliation of GoviEx’s summarized information to Denison’s investment carrying value, for the period when equity accounting was used, is also included.

 

				At September 30		At December 31
(in thousands of USD dollars)				2019		2018
Total current assets			$	4,559	$	4,800
Total non-current assets				32,418		32,432
Total current liabilities				(8,222)		(8,315)
Total net assets			$	28,755	$	28,917
				Nine Months  Ended		Twelve Months Ended
(in thousands of USD dollars)				September 30, 2019		December 31, 2018
Revenue			$	-	$	-
Net loss				(3,202)		(1,892)
Comprehensive loss				(3,202)		(1,892)

 

 

				At September 30		At December 31
(in thousands)				2019		2018
Reconciliation of GoviEx net assets to Denison investment carrying value:
Net assets of GoviEx – beginning of period - USD			$	28,917	$	23,604
Share issue proceeds				2,474		6,654
Contributed surplus change				86		74
Share-based payment reserve change				480		477
Deficit changes
Net loss				(3,202)		(1,892)
Net assets of GoviEx – end of period – USD			$	28,755	$	28,917
Denison ownership interest				15.39%		16.21%
Denison share of net assets of GoviEx				4,425		4,687
Other adjustments				(343)		(283)
Investment in GoviEx – USD				4,082		4,404
At historical exchange rate				1.2631		1.2675
Investment in GoviEx – end of period - CAD			$	5,156	$	5,582