Wheeler River – Phoenix ISR Project

Phoenix FS Highlights:

• Base case pre-tax Net Present Value (“NPV”) (8%) of $2.34 billion (100% ownership-basis) is a 150% increase in the base-case pre-tax NPV_8% for Phoenix from the 2018 PFS.
• Very robust base-case pre-tax Internal Rate of Return (“IRR”) of 105.9%.
• Base-case after-tax NPV_8% of $1.56 billion (100% basis) and IRR of 90.0% – with Denison’s effective 95% interest in the project equating to a base-case after-tax NPV_8% of $1.48 billion.
• Base-case pre-tax and after-tax payback period of 10 months – equating to a reduction of 11 months for the pre-tax payback period from the 2018 PFS.
• Production profile has been optimized, based on ISR mine planning efforts evaluating production potential for individual well patterns – resulting in an increase to the planned rate of production by approximately 43% during the first five years of operations.
• Estimated pre-production capital costs of under $420 million (100% basis), yielding an impressive after-tax NPV to initial capital cost ratio in excess of 3.7 to 1.
• Robust economics easily absorb cost-inflation and design changes impacting both operating and capital costs, confirming Phoenix’s position with estimated cash operating and all-in costs expected to be amongst the lowest-cost uranium mines in the world.
• Phoenix FS plans are aligned and costed to meet or exceed environmental criteria expected to be required by the ongoing regulatory approval process.
• Updated mineral resource estimate, reflecting results of 70 drill holes completed in support of ISR de-risking and resource delineation activities, has upgraded 30.9 million pounds U₃O₈ into Measured mineral resources, and increased the average grade of the Zone A high-grade domain, which is now estimated to contain 56.3 million pounds U₃O₈ in Measured and Indicated mineral resources, at an average grade of 46.0% U₃O₈.
• Upgraded 3.4 million pounds U₃O₈ into Proven mineral reserves, representing the equivalent of 85% of production planned during the first calendar year of operations.

Phoenix ISR Feasibility Study

The Phoenix FS was completed by Wood Canada Limited (“Wood”), WSP USA Environment and Infrastructure Inc. (“WSP”), SRK Consulting (Canada) Inc. (“SRK”), and Newmans Geotechnique Inc. (“Newmans”). The study confirms robust economics and the technical viability of an ISR uranium mining operation with low initial capital costs and a high rate of return.

The Phoenix FS reflects several design changes and the results of a rigorous technical de-risking program completed by Denison over the last 4.5 years following the publication of the 2018 PFS, which was highlighted by the then-novel selection of the ISR mining method for Phoenix. 

With the benefit of extensive metallurgical and field testing of all key elements of the proposed ISR mining operation, and current cost estimates reflecting recent inflationary pressures, the Phoenix FS is expected to provide Denison with an excellent basis to advance engineering designs in support of a future final investment decision (“FID”).

1. See Table 5 below for additional information regarding Proven & Probable reserves.
2. The first five years is determined by reference to the 60 month period that commences at the start of operations, which occurs half way through calendar year 1, and ends half way through calendar year 6. See below for details.
3. Initial capital costs exclude $67.4 million in estimated pre-construction expenditures expected to be incurred pre-FID.
4. All-in cost is estimated on a pre-tax basis and includes all project operating costs, capital costs post-FID, and decommissioning costs divided by the estimated number of pounds U₃O₈ to be produced.

1. The “PFS Reference Case” economic analysis reflects the outcome of the current Phoenix FS based on a uranium selling price that is the same as the “High Case” previously reported from the 2018 PFS, which was based on a fixed uranium selling price of USD$65 per pound U₃O₈ and a US to Canadian dollar exchange rate of 1.3 to 1. This case allows for a direct comparison of the NPV outcome from the Phoenix FS to the 2018 PFS.
2. Spot price forecast is based on “Composite Midpoint” scenario from UxC’s Q2’2023 Uranium Market Outlook (“UMO”) and is stated in constant (not-inflated) dollars, see details below.
3. Operating profit margin is calculated as aggregate uranium revenue less aggregate operating costs, divided by aggregate uranium revenue.  Operating costs exclude all royalties, surcharges and income taxes.
4. NPV and IRR are calculated to the start of construction activities for the Phoenix operation, and excludes $67.4 million in pre-FID expenditures.
5. Post-tax NPV, IRR and payback period are based on the “adjusted Post-tax” scenario, discussed below, which includes the benefit of certain entity level tax attributes which are expected to be available and used to reduce taxable income from the Phoenix operation.
6. Payback period is stated as number of months to payback from the start of uranium production.
7. Change from 2018 PFS is computed by reference to the same scenario from the 2018 PFS, as discussed below, adjusted to incorporate certain pre-FID costs for consistent comparability.

Mineral Resource Estimate

The Phoenix mineral resource estimate has been updated to reflect 70 additional drill holes completed since the previous mineral resource estimate from 2018. The additional drilling consisted primarily of test wells installed to support ISR de-risking activities and certain targeted resource definition drill holes. As a result of the additional drilling, 30.9 million pounds U3O8 have been upgraded from Indicated mineral resources to Measured mineral resources in recognition of the increased confidence in certain areas of Phoenix Zone A.

The updated Phoenix mineral resource estimate, inclusive of mineral reserves, is summarized below. Mineral resources that are not mineral reserves do not have demonstrated economic viability at this time.

Figure 1 – Proposed ISR Wellfield Layout for Mining Phase 1

A unique characteristic of the planned Phoenix ISR mine is the use of artificial ground freezing around the perimeter of the planned Phoenix mining phases to create a vertical hydraulic barrier surrounding the ISR mining area.  The freeze perimeter is a tertiary containment measure, and is planned to consist of vertical freeze wells constructed from surface and extending into the impermeable lower basement rock underlying the deposit, which are designed to reduce the temperature of and freeze the ground adjacent to the wells to encircle the mining area with up to a 10-metre thickness of frozen ground.

Mining is planned to occur over a 10-year period, spanning 11 calendar years, with partial years of production occurring in both the first and final calendar year of the production plan.  Progressive reclamation and decommissioning is planned to commence in each phase of the ore zone once production has ceased. 

The Proven and Probable mineral reserves are estimated to be 56.7 million pounds U₃O₈. This estimate is based on the aggregate mine feed to the plant and represents 80.6% recovery of the total available uranium (U3O8 in the measured and indicated mineral resources. Proven mineral reserves are those which awere subject to a recovery test during the FFT in 2022.

1. The effective date of the mineral reserve estimate is June 23, 2023. The QP for the estimate is Mr. Dan Johnson, P.E., an employee of WSP.
2. Mineral reserves are estimated at a cut-off grade of 0.5% U₃O₈ based on the ISR mining method using a long-term uranium price of USD$50/lb U₃O₈ and a USD$/CAD$ exchange rate of 1.33. The mineral reserves are based on mine operating cost of $0.78/lb U₃O₈, process operating cost of $5.20/lb U₃O₈, and process recovery of 99%, as discussed below.

Processing Overview

Consistent with the 2018 PFS, the Phoenix FS calls for the construction of a processing plant on the Wheeler River site, which has been designed to receive uranium bearing solution (“UBS”) from the wellfield for processing to a finished yellowcake product that meets industry standards.

An acidic lixiviant solution is prepared in the processing plant and transferred to an injection solution handling system for distribution in the wellfield. The solution is injected through a series of wells arranged in a pattern surrounding extraction / recovery wells, which are designed to pump the UBS up to surface once the lixiviant has travelled through the ore zone and dissolved the uranium from the host rock.

Once the UBS is received at the processing plant, removal of impurities such as iron (Fe) and radium (Ra) occur via Stage 1 (Fe/Ra) precipitation. Next the purified leach solution feeds the Stage 2 yellowcake precipitation circuit and the yellowcake product is dried and packaged for shipment. The processing plant has been designed based on an average uranium head grade of the UBS recovered from the wellfield of 22 grams per litre and is expected to recover 96.5% of the uranium feed contained in UBS after a 6 month ramp up period of the plant (when recovery is expected to be initially 93.4%). Taken together with planned subsequent recoveries of uranium contained in the Stage 1 (Fe/Ra) precipitation product, total recovered uranium of 56.2 million pounds U₃O₈ is planned to be available for sale – representing a combined 99% recovery rate.

Overall, the processing plant flowsheet remains largely consistent with the 2018 PFS; however, additional provisions have been included for effluent treatment via a three-stage neutralization process. Whereas the 2018 PFS assumed a “closed loop” processing system, the Phoenix FS design is aligned with the engineering components and criteria included in the Environmental Assessment (“EA”) for the project, which allow for the treatment of process solutions and controlled release of a treated effluent to the environment. This is an example of how the iterative nature of the EA process has informed project designs during the Phoenix FS process, to ensure that the plans are aligned and costed to meet or exceed environmental criteria expected to be required by the ongoing regulatory approval process. While this design for effluent treatment has been adopted for the Phoenix FS, the potential remains for ongoing FEED studies to optimize the processing plant design.

Site Infrastructure

The Phoenix site is compact and designed to limit environmental disturbance. The natural terrain of the area is used where advantageous, further reducing the impact of the project on the environment. Based on the Phoenix FS site layout, shown in Figure 2, the primary site facilities will consist of the ISR wellfield, ISR processing plant, freeze plant, storage pads, power substation and distribution, process ponds, and camp accomodations for between 100 and 150 occupants. These facilities are contained within an area estimated to be less than one square kilometre.

Figure 2 – Phoenix Site Layout

Additional on-site infrastructure includes a seven kilometre gravel road from Highway 914 to the site, electrical power line from the existing SaskPower transmission line located alongside Highway 914, airstrip, domestic and construction waste management areas, potable water treatment facilities, sewage treatment facilities, and fuel storage and distribution facilities.

Capital Costs

Initial capital costs are expected to be incurred during a 24-month construction period that will include the establishment of site infrastructure (discussed above), as well as the freeze wall perimeter around the Phase 1 mining zone and initial wellfield development within Phase 1.

1. Numbers may not add due to rounding.

Contingencies reflect approximately 11% of total capital costs, which is considered appropriate given the estimate was prepared to meet AACE Class 3 requirements, as well as Denison’s significant experience with key capital cost drivers through the completion of multiple field test programs at Phoenix since the 2018 PFS.

Operating Costs

Average estimated operating costs of $8.51 (USD$6.28) per pound U₃O₈ produced remain highly competitive amongst the lowest-cost uranium mining operations globally. Operating costs during the first five years of production are expected to be $6.64 (USD$4.90) per pound U₃O₈, benefitting from increased scale of operations and higher concentrations of uranium contained in recovered UBS. During the remaining years of production, operating costs are expected to be $13.69 (USD$10.10) per pound U₃O₈.

1. Numbers may not add due to rounding.

Uranium Selling Price Assumptions

The base-case economic analysis assumes uranium sales from Phoenix mine production will be made from time to time throughout the production period at the forecasted annual “Composite Midpoint” uranium spot price from the Q2’2023 Uranium Market Outlook (“UMO”) issued by UxC, LLC (“UxC”), which is stated annually in constant (non-inflated) 2023 dollars and ranges from ~USD$66 to USD$70 per pound U₃O₈ during the indicative production period of the Phoenix operation. This is the same pricing methodology applied for Phoenix as the base-case scenario in the 2018 PFS, where the “Composite Midpoint” uranium prices during the indicative years of production then ranged from only USD$29 to USD$45 per pound U₃O₈ in constant 2018 dollars. Consistent with the 2018 PFS, the overall cost profile and construction timeline of the planned Phoenix ISR mine is not expected to require substantial contract base loading to justify development.  Accordingly, the spot price indicator from UxC has been used for the Phoenix base-case economic analysis.

The PFS reference case economic analysis reflects the outcome of the current Phoenix FS based on a uranium selling price that is the same as the “High Case” previously reported from the 2018 PFS, which was based on a fixed uranium selling price of USD$65 per pound U₃O₈ and a US to Canadian dollar exchange rate of 1.3 to 1. This case allows for a direct comparison of the NPV outcome from the Phoenix FS to the 2018 PFS.

Post-Tax Economic Analysis

The Phoenix FS considers two post-tax scenarios for the project’s base-case economic analysis. In the “Basic” post-tax scenario, Canadian federal income taxes plus provincial income taxes and profit-based royalties were calculated without incorporating the impact of the opening tax pool balances that are available to the applicable Wheeler River Joint Venture (“WRJV”) owners. The “Adjusted” post-tax scenario estimates the after-tax cash flows of the project by consolidating the expected entity-level after-tax cash flows for each of the parties to the WRJV and includes estimates of opening tax balances that are expected to be used to reduce taxable income. The impact of opening tax balances is significant and thus the “Adjusted” post-tax scenario is considered to better represent the true after-tax economic outcome to the owners of the project.

Environmental Studies, Permitting and Social Impacts

The regulatory approval process and the legislation associated with the EA does not allow for the advancement of any project component before an EA decision is reached by the Saskatchewan Minister of Environment and the Canadian Nuclear Safety Commission (“CNSC”). For this reason, project advancement is gated by regulatory approvals and, while Denison plans to move towards construction readiness by advancing engineering design and planning activities, a FID cannot be made until necessary regulatory permission is granted.

The EA for the Phoenix ISR mine and process plant is well advanced through the Federal and Provincial approval process as guided by the Canadian Environmental Assessment Act 2012 and the Saskatchewan Environmental Assessment Act. The draft Environmental Impact Statement (“EIS”) was submitted in October 2022 and Denison has since received comments and information requests from the Provincial and Federal regulatory review teams and from Indigenous communities through the Federal public review process. Once the regulatory reviewers are satisfied with Denison’s responses to such comments, a final EIS will be submitted for ultimate approval.

Additionally, Denison will be required to make an application to the CNSC to obtain a license to construct a uranium mine and mill and to obtain a permit from the Saskatchewan Ministry of Environment to construct and operate a pollutant control facility. Denison has scheduled the submission of these applications such that the anticipated license and permit approvals align with the timing of the EA approval.

An important part of the regulatory review and approval process relates to engagement with Indigenous and non-Indigenous interested parties. Denison has carried out several years of engagement efforts related to the advancement of the project and in 2021 Denison’s Board of Directors adopted an Indigenous Peoples Policy (“IPP”), which sets out the Company’s guiding principles for and commitment to advancing reconciliation with Indigenous People. The IPP outlines Denison’s focus on specific efforts in relation to engagement, employment, environment, education, and empowerment, each of which support the advancement of sustainable mining operations.

Development Plans

The completion of the Phoenix FS is a key milestone to support the next phases of engineering design for the project. The FEED phase has already commenced and is expected to be completed before the end of the year. The objective of the FEED phase is to assess optimization opportunities and identify key long lead procurement requirements. Including the detailed design phase, project engineering efforts are expected to be completed in approximately two years. Upon engineering completion, construction is expected to last another two years. Assuming sufficient funding is secured by the owners of the WRJV, engineering and other pre-construction activities advance per plan, and timely receipt of required regulatory approvals, first production is currently anticipated to occur in 2027 or 2028.

Opportunities

Several opportunities for optimization have been identified during the FS completion process and are expected to be evaluated during the FEED phase, including (i) reducing the volume of treated effluent by increasing the recycling of solutions within the process plant; (ii) reducing the plant footprint by improving the FS conceptual layout and maximizing modularization of process equipment; (iii) reducing the size of certain site processing infrastructure through improved solids/liquid separation in the processing plant design; and (iv) modifications to the ISR mine model to incorporate potential operational optimization techniques to reduce the number of wells required to mine the deposit.

Completion of Phoenix ISR De-Risking

The Phoenix FS results reflect the culmination of a comprehensive and rigorous multi-year technical de-risking process that focused on assessing the key criteria necessary for the successful application of the ISR mining method to the specific characteristics of Phoenix.

In general, advancing ISR mining projects requires significant time and effort due to the extensive three-dimensional characterization and modeling required for project confidence. Forgoing detailed characterization efforts to accelerate project timelines or “simplify” the assessment process may substantially endanger long-term project success. The successful application of ISR in any geological setting largely depends on three fundamental requirements: (i) permeability (of the deposit), (ii) leachability (of the mineralization), and (iii) containment (of the mining solution).

Permeability

Hydrogeological investigations have been ongoing in the field and in laboratories since 2014. In-ground permeability tests conducted via a series of small-diameter test wells and large-diameter commercial scale wells (“CSWs”) have evaluated the physical flows and connections through the groundwater systems within the orebody. Pump and injection tests have collectively demonstrated the positive application of ISR at Phoenix. Additionally, packer, open hole, and cross hole tests have been completed in conjunction with drilling programs, and permeability tests have been completed on sections of available competent core from within Phoenix. Collectively, over 250 pump and injection tests and 3,120 permeameter samples have been collected over the deposit area.

Additional hydrogeological characterization, including borehole geophysics in over 43 wells, was completed to further refine the hydraulic sweep and vertical heterogeneity of the deposit.

In 2021, Denison completed an ISR field test program which included an ion tracer test utilizing a five-spot pattern of CSWs. The program was successful in demonstrating production flowrates assumed in the 2018 PFS, confirming hydraulic control of injected solutions during the ion tracer test, establishing breakthrough times between injection and recovery wells consistent with previous ‘Proof of Concept’ modelling, and showcasing the ability to remediate the test pattern by completing a ‘clean up phase’.

Leachability

Test programs conducted since 2017 included various forms of leaching tests, process plant circuit tests, and tests of effluent and solid waste streams treatment steps, to define design criteria for the Phoenix FS. Numerous column, batch, static, and core leach tests were conducted on defined hydrogeological and metallurgical units of the deposit to gain a comprehensive understanding of leachability and to ultimately define a recovery curve specific to the deposit. The collective tests have demonstrated excellent recovery of uranium from various deposit settings.

Containment

Proven freeze technology is planned to be used to surround the high-grade Phoenix deposit, within which an ISR wellfield of over 250 injection and recovery wells are planned to be installed. Permeability enhancement techniques have been tested extensively to validate augmentation of the natural hydrogeological flow paths to facilitate a higher degree of hydrological control. Through robust well design, achieved and validated through several years of field-based refinements, combined with adequately tested injection pressure and pumping rates, it has been collectively established that the coordinated process of pumping and injecting solutions into and from the wellfield serves as the primary means of containment, and that the freeze wall provides a tertiary control, which may provide opportunities for optimization during operations.

Completion of ISR De-Risking

In late 2022, after several years of systematic de-risking field and laboratory investigations, Denison completed the FFT, which was designed primarily to assess the effectiveness and efficiency of the leaching process in the ore zone. The first component of the test included the controlled injection of an acidic mining solution into the ore zone within a portion of the CSW test pattern installed in 2021 and the recovery of the solution back to the surface (“Leaching Phase”). The FFT was highly successful and resulted in the recovery of approximately 14,400 pounds U₃O₈ over 10 days of active leaching following completion of initial acidification of the leaching area. Through the completion of the second phase of the test (“Neutralization Phase”), the FFT also provided further evidence and validation of both permeability and containment assumptions. The completion of the leaching and neutralization phases of the FFT represents the conclusion of the final substantive scope of technical de-risking for the project.

Overall, the multi-year ISR de-risking process has supported Denison’s acquisition of extensive deposit-specific data and the development of a robust ISR mine planning model that involves evaluation of the production potential for individual well patterns.

With technical de-risking of the project substantively complete, evaluation efforts supporting the advancement of Phoenix are expected to focus on optimizing key areas of operations through FEED and advancing detailed design efforts in preparation for a future development decision.

References & Reports

For more information, see the press release dated June 26, 2023 and the “NI 43-101 Technical Report on the Wheeler River Project, Athabasca Basin, Saskatchewan, Canada” dated August 8, 2023 with an effective date of June 23, 2023.

The technical information has been reviewed and approved by Mr. Chad Sorba, P.Geo, Denison’s Vice President Technical Services & Project Evaluation, a Qualified Person in accordance with the requirements of NI 43-101.