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Wheeler River Project

Wheeler River

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Project Highlights

PROJECT DESCRIPTION & LOCATION

Wheeler River is the largest undeveloped uranium project in the eastern portion of the Athabasca Basin region in northern Saskatchewan, Canada. The project is situated in close proximity to important regional infrastructure, including the Provincial electrical transmission grid and an all-season Provincial highway.

DEPOSIT HIGHLIGHTS

Two high-grade uranium deposits; Phoenix and Gryphon.

Phoenix is the highest grade undeveloped uranium deposit known, including a high-grade core at Phoenix Zone A estimated to contain 62,900 tonnes at 43.2% U3O8 for 59.9M lbs U3O8.

PRE-FEASIBILITY STUDY (PFS)

A PFS was completed in accordance with NI 43-101 in September 2018 and is highlighted by the selection of the in-situ recovery (“ISR”) mining method for the development of the Phoenix deposit, with an estimated average operating cost of $4.33 (US$3.33) per pound U3O8.

RESERVES

Probable Mineral Reserves of 109.4 million pounds U3O8 (Phoenix 59.7 million pounds U3O8 from 141,000 tonnes at 19.1% U3O8; Gryphon 49.7 million pounds U3O8 from 1,257,000 tonnes at 1.8% U3O8)

EXPLORATION

Exploration activities are on-going, with a current focus on the discovery of additional high-grade uranium deposits following years of delineation drilling at both Phoenix and Gryphon.

Location

The property is located along the eastern edge of the Athabasca Basin in northern Saskatchewan, Canada and is located approximately 35 kilometres northeast of the Key Lake mill and 35 kilometres southwest of the McArthur River uranium mine. The property is well located with respect to all-weather roads and the provincial power grid. Vehicle access to the property is by the provincial highway system to the Key Lake mill then by the ore haul road between the Key Lake and McArthur River operations to the eastern part of the property.

Ownership

The project is a joint venture between Denison (90%) and JCU (Canada) Exploration Company Ltd. (10%), with Denison to act as operator.

Pre-Feasibility Study

Denison completed its PFS for the Wheeler River property during 2018. The PFS considers the potential economic merit of co-developing the Phoenix and Gryphon deposits. The high-grade Phoenix deposit is designed as an ISR mining operation, with associated processing to a finished product occurring at a plant to be built on site at Wheeler River. The Gryphon deposit is designed as an underground mining operation, utilizing a conventional long hole mining approach with processing of mine production assumed at Denison’s 22.5% owned McClean Lake mill. Taken together, the project (100% basis) is estimated to have mine production of 109.4 million pounds U3O8 over a 14-year mine life, with a base case pre-tax Net Present Value (“NPV”) of $1.31 billion (8% discount rate), Internal Rate of Return (“IRR”) of 38.7%, and initial pre-production capital expenditures of $322.5 million.

Denison’s base-case economic analysis included in its PFS results assumes uranium sales are made at UxC Consulting Company, LLC’s (“UxC”) annual estimated spot price (composit midpoint scenario) for mine production from the Phoenix deposit (from ~US$29/lb U3O8 to US$45/lb U3O8), and a fixed price for mine production from the Gryphon deposit (US$50/lb U3O8).

Using the same price assumed for the project’s 2016 Preliminary Economic Assessment(“2016 PEA”), a fixed uranium price of US$44/lb U3O8, the PFS produces a combined pre-tax project NPV of $1.41 billion – representing roughly 275% of the $513 million pre-tax project NPV estimated in the 2016 PEA.

Highlights of the PFS study include:

  • Exceptional operating costs at Phoenix and manageable initial capex with ISR

    Phoenix PFS Financial Results (100% Basis)
    Mine life10 years (6.0 million lbs U3O8 per year on average)
    Probable reserves(1)59.7 million lbs U3O8 (141,000 tonnes at 19.1% U3O8)
    Average cash operating costs$4.33 (US$3.33) per lb U3O8
    Initial capital costs$322.5 million
    Base case pre-tax IRR(2)43.3%
    Base case pre-tax NPV8%(2)$930.4 million
    Base case price assumptionUxC spot price(3) (from ~US$29 to US$45/lb U3O8)
    Operating profit margin(4)89.0% at US$29/lb U3O8
    All-in cost(5)$11.57 (US$8.90) per lb U3O8
    1. See below for additional information regarding Probable reserves;
    2. NPV and IRR are calculated to the start of pre-production activities for the Phoenix operation in 2021;
    3. Spot price forecast is based on “Composite Midpoint” scenario from UxC’s Q3’2018 Uranium Market Outlook (“UMO”) and is stated in constant (not-inflated) dollars;
    4. Operating profit margin is calculated as uranium revenue less operating costs, divided by uranium revenue. Operating costs exclude all royalties, surcharges and income taxes;
    5. All-in cost is estimated on a pre-tax basis and includes all project operating costs and capital costs, divided by the estimated number of pounds U3O8 to be produced.
  • Leveraging of existing infrastructure at Gryphon for additional low-cost production

    Gryphon PFS Financial Results (100% Basis)
    Mine life6.5 years (7.6 million lbs U3O8 per year on average)
    Probable reserves(1)49.7M lbs U3O8 (1,257,000 tonnes at 1.8% U3O8)
    Average cash operating costs$15.21 (US$11.70) per lb U3O8
    Initial capital costs$623.1 million
    Base case pre-tax IRR(2)23.2%
    Base case pre-tax NPV8%(2)$560.6 million
    Base case price assumptionUS$50 per pound U3O8
    Operating profit margin(3)77.0% at US$50/lb U3O8
    All-in cost(4)$29.67 (US$22.82) per lb U3O8
    1. See below for additional information regarding Probable reserves;
    2. NPV and IRR are calculated to the start of pre-production activities for the Gryphon operation in 2026;
    3. Operating profit margin is calculated as uranium revenue less operating costs, divided by uranium revenue. Operating costs exclude all royalties, surcharges and income taxes;
    4. All-in cost is estimated on a pre-tax basis and includes all project operating costs and capital costs, divided by the estimated number of pounds U3O8 to be produced.
  • Selection of ISR mining method for high-grade Phoenix deposit – Following the completion of the 2016 PEA, the Company evaluated 32 alternate mining methods to replace the high-cost Jet Bore Mining System (“JBS”) assumed for the Phoenix deposit in the 2016 PEA. The suitability of ISR mining for Phoenix has been confirmed by significant work completed in the field and laboratory – including drill hole injection, permeability, metallurgical leach, agitation, and column tests. Results demonstrate high rates of recovery in both extraction (+90%) and processing (98.5%) following a simplified flow sheet that precipitates uranium directly from the uranium bearing solution (“UBS”), without the added costs associated with ion exchange or solvent extraction circuits.

  • Novel application of established mining technologies – Given the unique geological setting of the Phoenix deposit, straddling the sub-Athabasca unconformity in permeable ground, the project development team has combined the use of existing and proven technologies from ISR mining, ground freezing, and horizontal directional drilling to create an innovative model for in situ uranium extraction in the Athabasca Basin. While each of the technologies are well established, the combination of technologies results in a novel mining approach applicable only to deposits occurring in a similar geological setting to Phoenix – which now represents the first deposit identified for ISR mining in the Athabasca Basin.

  • Environmental advantages of ISR mining at Phoenix – The Company’s evaluation of the ISR mining method for Phoenix has also identified several significant environmental and permitting advantages, namely the absence of tailings generation, the potential for no water discharge to surface water bodies, and the potential to use the existing Provincial power grid to operate on a near zero carbon emissions basis. In addition, the use of a freeze wall, to encapsulate the ore zone and contain the mining solution used in an ISR operation, eliminates common environmental concerns associated with ISR mining and facilitates a controlled reclamation of the site. Taken together, the Phoenix operation has the potential to be one of the most environmentally friendly mining operations in the world. Owing largely to these benefits, consultation with regulatory agencies and stakeholder communities, to date, has been encouraging regarding the use of ISR mining

The Phoenix ISR operation and Gryphon underground operation are estimated to produce combined total mine production of 109.4 million pounds U3O8 over a 14-year mine life. Pre-production activities are estimated to begin in 2021, assuming receipt of required regulatory approvals, with first production from the Phoenix deposit expected in 2024.

Wheeler River Combined PFS Financial Results (100% Basis)
Base case pre-tax NPV8%(1)$1.31 billion
Base case pre-tax “IRR (1)38.7%
Base case pre-tax payback period(2)~24 months
Initial capital costs(3)$322.5 million
Average annual mine production7.8 million lbs U3O8
Mine life14 years
Exchange rate(4) (US$:CDN$)1:1.30
Discount rate8.00%
  1. NPV and IRR are calculated to the start of pre-production activities for the Phoenix operation in 2021;
  2. Payback period is stated as number of months to pay-back from the start of uranium production;
  3. Initial capital costs for the Wheeler River project are the initial capital costs estimated for Phoenix;
  4. Exchange rate applied on uranium sales.

Reserves & Resources

DepositCategoryTonnesGrade
(% U3O8)
Million lbs U3O8
(100% Basis)
PhoenixProbable141,00019.1%59.7 million
GryphonProbable1,257,0001.8%49.7 million
TotalProbable1,398,0003.5%109.4 million
  1. Reserve statement is as of September 24, 2018;
  2. CIM definitions (2014) were followed for classification of mineral reserves;
  3. Mineral reserves for the Phoenix deposit are reported at the mineral resource cut-off grade of 0.8% U3O8. The mineral reserves are based on the block model generated for the May 28, 2014 mineral resource estimate. A mining recovery factor of 85% has been applied to the mineral resource above the cut-off grade;
  4. Mineral reserves for the Gryphon deposit are estimated at a cut-off grade of 0.58% U3O8 using a long-term uranium price of USD$40/lb, and a USD$/CAD$ exchange rate of 0.80. The mineral reserves are based on the block model generated for the January 30, 2018 mineral resource estimate.  The cut-off grade is based on an operating cost of CAD$574/tonne, milling recovery of 97%, and 7.25% fee for Saskatchewan royalties; 
  5. Mineral reserves include diluting material and mining losses;
  6. Mineral reserves are stated at a processing plant feed reference point;
  7. Numbers may not add due to rounding.

Wheeler River Mineral Resource Estimate (inclusive of Reserves)

DepositCategoryTonnesGrade
(% U3O8)
Million lbs U3O8
(100% Basis)
 
GryphonIndicated1,643,0001.761.9 
PhoenixIndicated166,00019.170.2 
Total Indicated1,809,0003.3132.1 
GryphonInferred73,0001.21.9 
PhoenixInferred9,0005.81.1 
Total Inferred82,0001.73.0 
  1. CIM definitions (2014) were followed for classification of mineral resources.
  2. Mineral resources for the Gryphon deposit are estimated at an incremental cut-off grade of 0.2% U3O8 using a long-term uranium price of USD$50/lb and a USD$/CAD$ exchange rate of 0.75.  The cut-off grade is based on incremental operating costs for low-grade material.
  3. Mineral resources for the Phoenix deposit are reported above a cut-off grade of 0.8% U3O8.  Mineral resources for the Phoenix deposit were last estimated in 2014 to reflect the expansion of the high-grade zone.  As no new drilling has been complted at Phoenix since that time, the mineral resource estimates for the Phoenix deposit remain current.
  4. High-grade mineralization was capped at 30% U3O8 and restricted at 20% U3O8 for the A1HG and capped at 20% U3O8 for the D1HG with no search restrictions.
  5. Low-grade mineralization was capped at 20% U3O8 for the C1 domain with search restrictions applied to U3O8 grades greater than or equal to 10.0% U3O8.
  6. Low-grade mineralization was capped at 15% U3O8 for the B1, B2, E1, and E2 domains with search restrictions applied to U3O8 grades greater than or equal to 10.0% U3O8 for the B1 domain and 5.0% U3O8 for the E2 domain.
  7. Low-grade mineralization was capped at 10% U3O8 for the A1-A4, B3-B7, C4-C5, and D2-D4 domains with no search restrictions.
  8. Low-grade mineralization was capped at 5% U3O8 for the D1 domain with no search restrictions.
  9. Bulk density is derived from grade using a formula based on 196 measurements from Phoenix and 279 measurements from Gryphon.
  10. A minimum mining width of 2 m was used.
  11. Numbers may not add due to rounding.
  12. Mineral resources are inclusive of mineral reserves.
  13. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Exploration

Very little regional exploration has taken place on the Wheeler River property in recent years, with drilling efforts focused on the Phoenix and Gryphon deposits, which were discovered by Denison in 2008 and 2014 respectively. The property is host to numerous prospective lithostructural corridors which are under- or unexplored and have the potential for additional large, high-grade unconformity or basement hosted deposits. The 2018 and future exploration programs are expected to place a renewed focus along these corridors to follow-up on previous mineralized drill results, or to test geophysical targets identified from recent surveys.

References & Reports:

For further details regarding the Wheeler River project, please refer to the Company's press release dated September 24, 2018 and the technical report titled "Prefeasibility Study for the Wheeler River Uranium Project, Saskatchewan, Canada" with an effective date of September 24, 2018. For a description of the data verification, assay procedures and the quality assurance program and quality control measures applied by Denison, please see Denison's Annual Information Form dated March 27, 2018. Copies of the foregoing are available on Denison's website and under its profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar.shtml.

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