Could you tell us about Denison Mines’ history and current portfolio?
Over a decade ago, Denison was the owner and operator of conventional underground uranium mines and a mill in the USA, but in response to the Fukushima nuclear incident and poor uranium markets, we sold those assets and repositioned our company with a long-term view to the Athabasca Basin in Saskatchewan, which possesses high-grade uranium deposits. Since I became CEO in 2015, we have been focusing on developing high-grade, low-cost assets in Canada.
We now have a diversified portfolio of assets in the Athabasca Basin - Wheeler River being our most valuable asset. There, we have two uranium deposits; Phoenix and Gryphon. The Phoenix deposit is advancing to a final investment decision and is on track to be the next new uranium mine in the eastern portion of the Athabasca Basin region. Taken together with Gryphon, Wheeler is the largest undeveloped uranium project in the Eastern portion of the Athabasca Basin. We also have a 22.5% interest in the McClean Lake joint venture with Orano, which owns a fully licensed and operating uranium mill. The McClean Lake mill processes between 10% and 15% of the global uranium primary production and is licensed for up to 24 million pounds a year. This makes Denison, together with Orano and Cameco, one of only three companies owning an interest in a milling facility in the Athabasca Basin. Our portfolio also includes a smaller development project, which we own jointly with the Korean state-owned power company, KHNP, and several exploration properties.
You mentioned the great potential of the Phoenix deposit. Can you tell us more about it and your expectations?
Our Phoenix project will be the first in-situ recovery (ISR) uranium mine in Canada. ISR is a low-cost and environmentally sustainable extraction method which is common globally but has not yet been deployed in Canada for uranium mining. With ISR, we use wells that go 400 meters down to where the uranium is host in is permeable sandstones. We pump a mining solution into the orebody via injection wells, where the solution passes through the screen at the desired depth and travels through the orebody to dissolve the uranium – after which we pump the uranium bearing solution back up to surface via recovery wells. On the surface we chemically separate the uranium from that solution, which is recovered and reused in further mining. Last year we completed a feasibility field test, which was similar to a mining pilot test, that resulted in the recovery of over 14,000 pounds of uranium in solution from only ten days of active mining. A neutralization phase was completed afterwards, and we were able to successfully restore the ground water conditions to the environmentally required level. Through this test, and our recently announced and independently authored Feasibility Study, we have confirmed the technical viability of using the ISR mining method at Phoenix and have now completed the technical de-risking phase for the project.
The global market for uranium consumes between 180 and 200 million pounds yearly. Existing mines fall significantly short of that level, meaning the market relies on dwindling secondary supplies to stay in balance. For Phoenix we are projecting production of up to 9 million pounds per year, making up about 5% of the market, which makes it a notable project but not so big as to change the market.
Demand is fairly predictable in our business because nuclear power plants run all the time with a consistent consumption.
Given the radioactive nature of uranium, does it pose a risk to people and the environment? and how close are you to really mining it sustainably?
Internationally, the standards vary somewhat. In Canada, as well as the USA, we have very competent and robust nuclear regulatory agencies that take a keen interest in uranium mining. So, existing mines are already highly sustainable—they do not contaminate groundwater, they respect the environment, provide a great deal of employment to members of Indigenous communities, and so on. There are other jurisdictions around the world where uranium mining is regulated simply as a mining operation, which is then subject to the level of rigor of that mining jurisdiction. Of course, there can be natural radiation produced by our high-grade uranium mines. But it is easily mitigated with ventilation, process controls, and monitoring. There are strict protocols in place to prevent damaging effects to the workforce and the environment. Uranium mining is very safe in Canada.
A critical part of our sustainability story with Phoenix is that we extract uranium without generating conventional tailings, which is a waste product that otherwise must be stored, monitored and ultimately remediated. This is something that the Indigenous communities whom we engage with consider very important—they will not have a lifelong tailings facility in their ancestral lands. Once we are done, we can take down our buildings, cover up our wells, plant trees, and leave the place very much like it looked before we started mining. Also, because we work with pumps and pipes, our workers do not need to go underground, nor do they need to work with heavy equipment. When you have areas with 46% uranium grade, there is a lot of uranium in a very small area. The key elements of the entire project fit within one square kilometer. Our surface disturbance is minimal compared to global uranium mining operations with 0.05% grade. But in that little site we can produce up to 5% of the world’s uranium needs.
The price of uranium reached an all-time high over US$100/lb in 2007, and now the spot price is back up in the range of US$50-60/lb. What is the investor sentiment presently?
Most projections point at the continuing rise of uranium prices because of the asymmetry between rising demand and limited supply. Phoenix was economically viable at much lower uranium prices because of its unique combination of high-grade uranium and a low-cost mining method; however, many projects globally require much higher costs to be incentivized. These latter projects are needed in the long-run and are expected to push up prices significantly. At Denison we have been able to invest in our projects over the last several years, before prices started to rise, which is an important differentiator for our business, as our assets are further along and closer to potential development decisions.
There is a conundrum in our industry concerning how high the price will go, mainly because it must incentivize projects in time for the demand. If somebody made a discovery today in the Athabasca Basin, it could take as long as 15 years, to be able to start producing. There are some economically terrible projects in Africa for which the price is not high enough to incentivize production, but which could potentially come to market faster given the permitting regimes and simplicity of mining operations. So, if the demand rises too quickly, some of those high-cost projects will be needed to enter the market, potentially causing the price to increase even more.
Looking ahead, how close are you to production and what are the main ambitions for Denison Mines moving forward?
Our plan is to focus on advancing Phoenix to a final investment decision – through the completion of detailed engineering design and the permitting process. This process is expected to take approximately 2-years, with construction expected to take a further 2-years – which means we are currently expecting to be producing in 2027-2028. Phoenix is a very robust project that is expected to generate enormous cash flows for our company, which we could then use to advance development of our other assets. Although this may seem a little ways out, Phoenix is positioned to be one of the next new large-scale uranium projects in the world.
