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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.
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.
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.
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 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.
Denison suspended certain activities at Wheeler River during 2020, including the Environmental Assessment process, which is on the critical path to achieving the project development schedule outlined in the PFS. While the EA process has resumed, the Company is not currently able to estimate the impact to the project development schedule outlined in the PFS, and users are cautioned against relying on the estimates provided therein regarding the start of pre-production activities in 2021 and first production in 2024.
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 as operator. Effective August 3, 2021, Denison acquired 50% of JCU.
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 life | 10 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 assumption | UxC 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 |
Leveraging of existing infrastructure at Gryphon for additional low-cost production
Gryphon PFS Financial Results (100% Basis) | |
Mine life | 6.5 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 assumption | US$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 |
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.
Denison suspended certain activities at Wheeler River during 2020, including the Environmental Assessment process, which is on the critical path to achieving the project development schedule outlined in the PFS. While the EA process has resumed, the Company is not currently able to estimate the impact to the project development schedule outlined in the PFS, and users are cautioned against relying on the estimates provided therein regarding the start of pre-production activities in 2021 and first production 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) | $322.5 million |
Average annual mine production | 7.8 million lbs U3O8 |
Mine life | 14 years |
Exchange rate(4) (US$:CDN$) | 1:1.30 |
Discount rate | 8.00% |
The PFS includes an analysis of project economics on a pre-tax basis (100% basis) and a Denison specific post-tax basis (including a 90% ownership basis, reflecting Denison’s then pro-forma ownership interest in Wheeler River). Inputs into both pre-tax and post-tax models include:
The Wheeler River project post-tax Denison-specific (90% basis) indicative economic results are further detailed in the PFS, and summarized as follows:
Wheeler River Combined PFS Post-Tax Indicative Economic Results (90% Denison direct ownership) | ||
Base Case | High Case | |
Price Assumption | Phoenix: US$29.48 to US$45.14 / lb U3O8 Gryphon: US$50/lb U3O8 | US$65.00 / lb U3O8 |
Base case post-tax NPV8%(1) | $755.9 million | $1,483.8 million |
Base case post-tax IRR(1) | 32.7% | 55.7% |
Base case post-tax payback period(2) | ~26 months | ~ 12 months |
The Denison-specific post-tax indicative economic assessment includes inputs similar to the pre-tax assessment, with the following modifications:
Reserves & Resources
Deposit | Category | Tonnes | Grade (% U3O8) | Million lbs U3O8 (100% Basis) |
Phoenix | Probable | 141,000 | 19.1% | 59.7 million |
Gryphon | Probable | 1,257,000 | 1.8% | 49.7 million |
Total | Probable | 1,398,000 | 3.5% | 109.4 million |
Wheeler River Mineral Resource Estimate (inclusive of Reserves)
Deposit | Category | Tonnes | Grade (% U3O8) | Million lbs U3O8 (100% Basis) | |
Gryphon | Indicated | 1,643,000 | 1.7 | 61.9 | |
Phoenix | Indicated | 166,000 | 19.1 | 70.2 | |
Total Indicated | 1,809,000 | 3.3 | 132.1 | ||
Gryphon | Inferred | 73,000 | 1.2 | 1.9 | |
Phoenix | Inferred | 9,000 | 5.8 | 1.1 | |
Total Inferred | 82,000 | 1.7 | 3.0 |
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 most recent Annual Information Form. 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.
The information of a scientific and technical nature has been reviewed and approved by a Qualified Person in accordance with the requirements of NI 43-101.
Click to View: Executive Summary of the Project Description for the Wheeler River Project