Denison Mines(DNN) - 2021 Q3 - Quarterly Report

INTERIM CONSOLIDATED FINANCIAL STATEMENTS CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As of September 30, 2021, total assets significantly increased to 509,692 thousand CAD, a 58.9% growth from year-end 2020, driven by substantial increases in cash, equity, and uranium investments Condensed Interim Consolidated Statements of Financial Position Overview (thousand CAD) | Metric | September 30, 2021 | December 31, 2020 | Change (%) | | :--------------------------------- | :------------- | :------------- | :------- | | Assets | | | | | Cash and Cash Equivalents | 50,877 | 24,992 | 103.5% | | Trade and Other Receivables | 4,469 | 3,374 | 32.5% | | Inventories | 3,119 | 3,015 | 3.4% | | Equity Investments | 25,958 | 16,657 | 55.8% | | Prepaid Expenses and Other | 1,163 | 1,373 | -15.4% | | Non-Current Inventories - Ore Stockpiles | 2,098 | 2,098 | 0.0% | | Non-Current Equity Investments | 468 | 293 | 59.7% | | Uranium Investments | 131,483 | - | N/A | | Investment in Joint Ventures | 21,771 | - | N/A | | Restricted Cash and Investments | 12,337 | 12,018 | 2.6% | | Property, Plant and Equipment | 255,689 | 256,870 | -0.5% | | Total Assets | 509,692 | 320,690 | 58.9% | | Liabilities | | | | | Accounts Payable and Accrued Liabilities | 9,019 | 7,178 | 25.6% | | Deferred Revenue (Current) | 4,656 | 3,478 | 33.9% | | Deferred Revenue (Non-Current) | 32,526 | 33,139 | -1.8% | | Share Purchase Warrants Liability | 24,801 | - | N/A | | Total Liabilities | 119,393 | 93,405 | 27.8% | | Equity | | | | | Share Capital | 1,508,481 | 1,366,710 | 10.4% | | Deficit | (1,186,961) | (1,208,587) | -1.8% | | Total Equity | 390,299 | 227,285 | 71.7% | | Total Liabilities and Equity | 509,692 | 320,690 | 58.9% | - The company held 50,877 thousand CAD in cash and cash equivalents as of September 30, 2021, a significant 103.5% increase from 24,992 thousand CAD as of December 31, 2020[3] - New asset categories in 2021 include 131,483 thousand CAD in uranium investments and 21,771 thousand CAD in joint venture investments, which were not present at year-end 2020[3] CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) For the nine months ended September 30, 2021, the company reported a net income of 21,626 thousand CAD, reversing a 13,188 thousand CAD net loss in the prior period, driven by significant revenue growth and substantial gains in 'other income (expense)' Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Overview (thousand CAD) | Metric | Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2020 | Change (%) | | :--------------------------------- | :------------------------- | :------------------------- | :------- | | Revenue | 16,663 | 10,329 | 61.3% | | Operating Expenses | (9,898) | (7,726) | 28.1% | | Evaluation Expenses | (12,981) | (2,647) | 390.4% | | Exploration Expenses | (2,718) | (3,133) | -13.3% | | General and Administrative Expenses | (7,076) | (5,719) | 23.7% | | Other Income (Expense) | 39,306 | (2,347) | N/A | | Net Finance Expense | (3,093) | (3,205) | -3.5% | | Share of Loss from Joint Ventures | (84) | - | N/A | | Deferred Income Tax Credit | 1,507 | 1,260 | 19.6% | | Net Income (Loss) for the Period | 21,626 | (13,188) | N/A | | Comprehensive Income (Loss) for the Period | 21,627 | (13,192) | N/A | | Basic Net Income (Loss) Per Share | 0.03 | (0.02) | N/A | | Diluted Net Income (Loss) Per Share | 0.03 | (0.02) | N/A | - Revenue for the nine months ended September 30, 2021, increased by 61.3% year-over-year to 16,663 thousand CAD, up from 10,329 thousand CAD in the prior period[5] - The 'Other Income (Expense)' line item shifted from a (2,347) thousand CAD expense in the prior period to a 39,306 thousand CAD income in 2021, a key factor in the positive net income, primarily due to fair value changes in investments[5] CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the nine months ended September 30, 2021, total equity significantly increased by 71.7% to 390,299 thousand CAD from 227,285 thousand CAD at year-end 2020, primarily driven by share issuances and net income for the period Condensed Interim Consolidated Statements of Changes in Equity Overview (thousand CAD) | Metric | Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2020 | | :--------------------------------- | :------------------------- | :------------------------- | | Share Capital | | | | Beginning Balance | 1,366,710 | 1,335,467 | | Shares Issued for Cash (Net of Issuance Costs) | 134,050 | 6,878 | | Stock Options Exercised (Cash) | 5,349 | 77 | | Stock Options Exercised (Fair Value Adjustment) | 1,833 | 25 | | Share Units Exercised (Fair Value Adjustment) | 538 | 164 | | Warrants Exercised (Cash) | 1 | - | | Ending Balance | 1,508,481 | 1,342,611 | | Contributed Surplus | | | | Beginning Balance | 67,387 | 65,417 | | Share-Based Payment Expense | 1,987 | 1,373 | | Ending Balance | 67,003 | 67,036 | | Deficit | | | | Beginning Balance | (1,208,587) | (1,192,304) | | Net Income (Loss) for the Period | 21,626 | (13,188) | | Ending Balance | (1,186,961) | (1,205,492) | | Accumulated Other Comprehensive Income | | | | Beginning Balance | 1,775 | 1,134 | | Foreign Currency Translation Adjustment | 1 | (4) | | Ending Balance | 1,776 | 1,130 | | Total Equity | 390,299 | 205,285 | - As of September 30, 2021, total share capital was 1,508,481 thousand CAD, an increase of 141,771 thousand CAD from 1,366,710 thousand CAD at year-end 2020, primarily from cash share issuances and stock option/warrant exercises[8][17] - The deficit decreased from (1,208,587) thousand CAD at year-end 2020 to (1,186,961) thousand CAD as of September 30, 2021, reflecting the 21,626 thousand CAD net income for the period[8] CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW For the nine months ended September 30, 2021, the ending cash and cash equivalents balance significantly increased to 50,877 thousand CAD from 24,992 thousand CAD at the beginning of the period, primarily due to 151,688 thousand CAD in net cash inflows from financing activities, offsetting outflows from operating and investing activities Condensed Interim Consolidated Statements of Cash Flow Overview (thousand CAD) | Metric | Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2020 | Change (%) | | :--------------------------------- | :------------------------- | :------------------------- | :------- | | Cash Flow from Operating Activities | | | | | Net Income (Loss) for the Period | 21,626 | (13,188) | N/A | | Adjustments for Non-Cash Items | (36,353) | 4,841 | N/A | | Change in Non-Cash Working Capital Items | (114) | (133) | -14.3% | | Net Cash Outflow from Operating Activities | (14,841) | (8,480) | 75.0% | | Cash Flow from Investing Activities | | | | | Purchase of Uranium Investments | (87,811) | (7) | N/A | | Increase in Term Loan Receivable and Investment in Joint Ventures | (40,950) | - | N/A | | Repayment of Term Loan Receivable | 20,450 | - | N/A | | Purchase of Property, Plant and Equipment | (446) | (153) | 191.5% | | Net Cash Outflow from Investing Activities | (110,429) | 258 | N/A | | Cash Flow from Financing Activities | | | | | Proceeds from Unit Issuances (Net of Issuance Costs) | 135,630 | - | N/A | | Proceeds from Share Issuances (Net of Issuance Costs) | 10,863 | 6,878 | 57.9% | | Proceeds from Stock Option Exercises | 5,349 | 77 | 6846.8% | | Net Cash Inflow from Financing Activities | 151,688 | 6,550 | 2210.0% | | Increase (Decrease) in Cash and Cash Equivalents | 26,418 | (1,672) | N/A | | Ending Cash and Cash Equivalents | 50,877 | 6,518 | 680.6% | - Net cash outflow from operating activities increased from 8,480 thousand CAD in the prior period to 14,841 thousand CAD in 2021, primarily due to the impact of non-cash adjustments (e.g., fair value changes in uranium investments and warrant liabilities) despite a positive net income[10] - Net cash outflow from investing activities totaled 110,429 thousand CAD, mainly driven by the 87,811 thousand CAD purchase of uranium investments and a 40,950 thousand CAD increase in joint venture investments[11] - Financing activities provided 151,688 thousand CAD in net cash inflow, primarily from 135,630 thousand CAD in unit issuances and 10,863 thousand CAD in share issuances[14] NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS Denison Mines Corp. and its subsidiaries primarily engage in uranium mining activities, including acquisition, exploration, development, extraction, processing, sales, and investment, while also providing mine decommissioning and environmental services - Denison Mines Corp. primarily engages in uranium mining activities, including the acquisition, exploration, development, extraction, processing, sale, and investment in uranium properties[16] - The company holds interests in several uranium project joint ventures in Saskatchewan, Canada, including Wheeler River, Waterbury Lake, McClean Lake, and Midwest[17][18] - The company provides mine decommissioning and other environmental services to third parties through its closed mines division[19] 2. STATEMENT OF COMPLIANCE These condensed interim consolidated financial statements are prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting,' using Canadian Dollars (CAD) as the presentation currency, and were approved by the Board on November 4, 2021 - These condensed interim consolidated financial statements are prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting'[20] - The company uses Canadian Dollars (CAD) as its presentation currency[20] - The financial statements were approved for issuance by the Board of Directors on November 4, 2021[21] 3. ACCOUNTING POLICIES AND COMPARATIVE NUMBERS Accounting policies align with the 2020 annual consolidated financial statements, with new policies for uranium investments measured at fair value through profit or loss, and joint venture investments accounted for using the equity method - The accounting policies followed in these interim financial statements are consistent with the 2020 annual consolidated financial statements, with new policies added for uranium investments and investments in joint ventures[22][23] - Certain comparative numbers have been reclassified to conform with the current period's presentation[30] Investments - Uranium Uranium investments are initially recorded at cost and subsequently measured at fair value at each reporting period, with changes recognized in profit or loss - Uranium investments are initially recorded at cost and subsequently measured at fair value at each reporting period end[24] - Fair value is determined based on the latest month-end spot uranium price published by UxC LLC, converted to Canadian Dollars[24] - Gains or losses from fair value changes are recognized in 'Other Income (Expense)' in the consolidated statements of income for the period in which they arise[24] Investments - Joint Venture Investments in joint ventures are accounted for using the equity method, initially recorded at cost and adjusted for the company's share of post-acquisition profit or loss - Investments in joint ventures are accounted for using the equity method, initially recorded at cost and subsequently adjusted for the company's share of profit or loss after acquisition[28][29] - The carrying amount of the investment is also adjusted for capital transactions, including amounts recognized in other comprehensive income, and accounting changes subsequent to the acquisition date[29] 4. CASH AND CASH EQUIVALENTS As of September 30, 2021, total cash and cash equivalents significantly increased by 103.5% to 50,877 thousand CAD from 24,992 thousand CAD at December 31, 2020, primarily driven by a rise in cash equivalents Composition of Cash and Cash Equivalents (thousand CAD) | Item | September 30, 2021 | December 31, 2020 | Change (%) | | :----------------- | :------------- | :------------- | :------- | | Cash | 2,344 | 12,004 | -80.5% | | Cash in MLJV and MWJV | 613 | 540 | 13.5% | | Cash Equivalents | 47,920 | 12,448 | 285.0% | | Total | 50,877 | 24,992 | 103.5% | - Cash equivalents significantly increased from 12,448 thousand CAD as of December 31, 2020, to 47,920 thousand CAD as of September 30, 2021[31] 5. TRADE AND OTHER RECEIVABLES As of September 30, 2021, total trade and other receivables increased by 32.5% to 4,469 thousand CAD from 3,374 thousand CAD at December 31, 2020, primarily due to higher trade and sales tax receivables Composition of Trade and Other Receivables (thousand CAD) | Item | September 30, 2021 | December 31, 2020 | Change (%) | | :----------------- | :------------- | :------------- | :------- | | Trade Receivables | 3,836 | 2,644 | 45.1% | | Receivables in MLJV and MWJV | 307 | 394 | -22.1% | | Sales Tax Receivables | 325 | 154 | 111.0% | | Miscellaneous Receivables | 1 | 182 | -99.5% | | Total | 4,469 | 3,374 | 32.5% | - Trade receivables increased by 45.1% from 2,644 thousand CAD as of December 31, 2020, to 3,836 thousand CAD as of September 30, 2021[32] 6. INVENTORIES As of September 30, 2021, total inventories slightly increased by 2.0% to 5,217 thousand CAD from 5,113 thousand CAD at December 31, 2020, with ore stockpiles remaining constant and MLJV mine and mill supplies showing a modest increase Composition of Inventories (thousand CAD) | Item | September 30, 2021 | December 31, 2020 | Change (%) | | :--------------------- | :------------- | :------------- | :------- | | Ore Stockpiles | 2,098 | 2,098 | 0.0% | | MLJV Mine and Mill Supplies | 3,119 | 3,015 | 3.4% | | Total | 5,217 | 5,113 | 2.0% | | Presented on the Statements of Financial Position: | | | | | Current | 3,119 | 3,015 | 3.4% | | Non-Current - Ore Stockpiles | 2,098 | 2,098 | 0.0% | - Ore stockpiles (non-current) remained unchanged at 2,098 thousand CAD at both reporting period ends[34] 7. INVESTMENTS As of September 30, 2021, total investments significantly increased to 157,909 thousand CAD from 16,950 thousand CAD at December 31, 2020, primarily due to 131,483 thousand CAD in new uranium investments and growth in equity instrument investments Composition of Investments (thousand CAD) | Item | September 30, 2021 | December 31, 2020 | Change (%) | | :----------------- | :------------- | :------------- | :------- | | Investments: | | | | | Equity Instruments - Shares | 25,958 | 16,657 | 55.8% | | Equity Instruments - Warrants | 468 | 293 | 59.7% | | Uranium | 131,483 | - | N/A | | Total | 157,909 | 16,950 | 831.6% | | Presented on the Statements of Financial Position: | | | | | Current | 25,958 | 16,657 | 55.8% | | Non-Current | 131,951 | 293 | 45002.7% | - The company added 131,483 thousand CAD in uranium investments as of September 30, 2021, a new category not present at year-end 2020[35] - For the nine months ended September 30, 2021, the company purchased 2,400,000 pounds of physical uranium (U3O8) as a long-term investment at a cost of 87,811 thousand CAD (71,070 thousand USD)[35] - Fair value gains on investments totaled 53,148 thousand CAD, comprising 9,476 thousand CAD from equity instruments and 43,672 thousand CAD from physical uranium[35] 8. INVESTMENT IN JOINT VENTURE As of September 30, 2021, the company's investment in the JCU joint venture totaled 21,771 thousand CAD, resulting from the August 3, 2021 acquisition of a 50% interest for 20,500 thousand CAD cash and 1,355 thousand CAD in transaction costs JCU Investment Overview (thousand CAD) | Item | September 30, 2021 | | :----------------- | :------------- | | Balance as of December 31, 2020 | - | | Investment at Cost: | | | Acquisition of 50% Interest in JCU | 21,855 | | Share of Loss from Joint Venture | (84) | | Balance as of September 30, 2021 | 21,771 | - On August 3, 2021, Denison acquired a 50% interest in JCU for a cash consideration of 20,500 thousand CAD and 1,355 thousand CAD in transaction costs[39] - JCU holds interests in several Canadian uranium project joint ventures, including Wheeler River (10%), Millennium (30.099%), Kiggavik (33.8123%), and Christie Lake (34.4508%)[41] - The company records its share of JCU's profit (loss) with a one-month lag, adjusted for known significant transactions[42] 9. RESTRICTED CASH AND INVESTMENTS As of September 30, 2021, total restricted cash and investments slightly increased to 12,337 thousand CAD from 12,018 thousand CAD at December 31, 2020, primarily comprising the Elliot Lake reclamation trust and assets pledged for letter of credit facilities Composition of Restricted Cash and Investments (thousand CAD) | Item | September 30, 2021 | December 31, 2020 | Change (%) | | :----------------------- | :------------- | :------------- | :------- | | Cash and Cash Equivalents | 3,202 | 2,883 | 11.1% | | Investments | 9,135 | 9,135 | 0.0% | | Total | 12,337 | 12,018 | 2.6% | | By Item: | | | | | Elliot Lake Reclamation Trust | 3,202 | 2,883 | 11.1% | | Assets Pledged for Letter of Credit Facilities | 9,000 | 9,000 | 0.0% | | Additional Collateral for Letters of Credit | 135 | 135 | 0.0% | - As of September 30, 2021, the company had 3,202 thousand CAD deposited in the Elliot Lake reclamation trust and 9,000 thousand CAD pledged for letter of credit facilities[46][48] 10. PROPERTY, PLANT AND EQUIPMENT As of September 30, 2021, the carrying value of property, plant, and equipment (PP&E) slightly decreased to 255,689 thousand CAD from 256,870 thousand CAD at December 31, 2020, with the McClean Lake mill and various mineral properties representing significant portions Carrying Value of Property, Plant and Equipment (thousand CAD) | Item | September 30, 2021 | December 31, 2020 | Change (%) | | :----------------- | :------------- | :------------- | :------- | | Owned Plant and Equipment | 75,453 | 76,592 | -1.49% | | Right-of-Use Plant and Equipment | 462 | 535 | -13.64% | | Mineral Properties | 179,774 | 179,743 | 0.02% | | Total | 255,689 | 256,870 | -0.46% | - The McClean Lake mill's carrying value was 67,592 thousand CAD, representing 89% of the total owned plant and equipment carrying value as of September 2021[53] - Mineral properties including Wheeler River, Waterbury Lake, Midwest, Mann Lake, Wolly, Johnston Lake, and McClean Lake collectively accounted for 90.5% (162,673 thousand CAD) of the total mineral properties carrying value as of September 2021[55] 11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES As of September 30, 2021, total accounts payable and accrued liabilities increased by 25.6% to 9,019 thousand CAD from 7,178 thousand CAD at December 31, 2020, primarily driven by a 1,606 thousand CAD increase in trade payables Composition of Accounts Payable and Accrued Liabilities (thousand CAD) | Item | September 30, 2021 | December 31, 2020 | Change (%) | | :----------------- | :------------- | :------------- | :------- | | Trade Payables | 4,119 | 2,513 | 64.7% | | Payables in MLJV and MWJV | 4,010 | 3,719 | 7.8% | | Other Payables | 890 | 946 | -6.0% | | Total | 9,019 | 7,178 | 25.6% | - Trade payables increased by 64.7% from 2,513 thousand CAD as of December 31, 2020, to 4,119 thousand CAD as of September 30, 2021[56] 12. DEFERRED REVENUE As of September 30, 2021, total deferred revenue slightly increased to 37,182 thousand CAD from 36,617 thousand CAD at December 31, 2020, primarily related to the pre-sale processing services agreement with Anglo Pacific Group PLC (APG) for Cigar Lake ore Composition of Deferred Revenue (thousand CAD) | Item | September 30, 2021 | December 31, 2020 | Change (%) | | :----------------------- | :------------- | :------------- | :------- | | Deferred Revenue from Pre-Sale Processing Services | 37,182 | 36,617 | 1.5% | | Presented on the Statements of Financial Position: | | | | | Current | 4,656 | 3,478 | 33.9% | | Non-Current | 32,526 | 33,139 | -1.8% | - For the nine months ended September 30, 2021, the company recognized 1,756 thousand CAD in processing services revenue, with 1,695 thousand CAD based on Cigar Lake processing volumes and 61 thousand CAD from a retrospective revenue increase due to a change in estimate[60] - Production at the Cigar Lake mine and McClean Lake mill was suspended in early 2021 due to COVID-19 and restarted in April and May 2021, respectively[61] 13. POST-EMPLOYMENT BENEFITS As of September 30, 2021, post-employment benefits slightly decreased to 1,294 thousand CAD from 1,361 thousand CAD at December 31, 2020, with 84 thousand CAD in benefits paid during the period Composition of Post-Employment Benefits (thousand CAD) | Item | September 30, 2021 | December 31, 2020 | Change (%) | | :----------------- | :------------- | :------------- | :------- | | Accrued Benefit Obligation | 1,294 | 1,361 | -5.07% | | Presented on the Statements of Financial Position: | | | | | Current | 120 | 120 | 0.0% | | Non-Current | 1,174 | 1,241 | -5.48% | - For the nine months ended September 30, 2021, the company paid 84 thousand CAD in post-employment benefits[64] 14. RECLAMATION OBLIGATIONS As of September 30, 2021, total reclamation obligations slightly increased to 38,828 thousand CAD from 38,420 thousand CAD at December 31, 2020, with major obligations at Elliot Lake and the McClean Lake and Midwest joint ventures, supported by 24,135 thousand CAD in irrevocable standby letters of credit Composition of Reclamation Obligations (thousand CAD) | Item | September 30, 2021 | December 31, 2020 | Change (%) | | :----------------------- | :------------- | :------------- | :------- | | By Location: | | | | | Elliot Lake | 21,489 | 21,523 | -0.16% | | McClean and Midwest Joint Ventures | 17,317 | 16,875 | 2.62% | | Other | 22 | 22 | 0.0% | | Total | 38,828 | 38,420 | 1.06% | | Presented on the Statements of Financial Position: | | | | | Current | 802 | 802 | 0.0% | | Non-Current | 38,026 | 37,618 | 1.08% | - As of September 30, 2021, the company provided 24,135 thousand CAD in irrevocable standby letters of credit to satisfy Saskatchewan's financial assurance requirements for future decommissioning and reclamation plans[69] - For the nine months ended September 30, 2021, accrued expenses for reclamation obligations were 1,007 thousand CAD, with 599 thousand CAD in expenditures incurred[65] 15. SHARE PURCHASE WARRANTS LIABILITY As of September 30, 2021, the share purchase warrants liability totaled 24,801 thousand CAD, a new liability since year-end 2020, arising from 55,011,475 USD-denominated warrants issued in February and March 2021, classified as derivative liabilities and measured at fair value Changes in Share Purchase Warrants Liability (thousand CAD) | Item | Number of Warrants | Warrant Liability | | :----------------------- | :------------- | :------------- | | Balance as of December 31, 2020 | - | - | | Issued February 19, 2021 | 15,796,975 | 3,499 | | Issued March 22, 2021 | 39,215,000 | 9,735 | | Warrants Exercised February 2021 | (500) | - | | Change in Fair Value Estimate | - | 11,567 | | Balance as of September 30, 2021 | 55,011,475 | 24,801 | - As the warrants are exercisable in USD, differing from the company's functional currency (CAD), they are classified as derivative liabilities, measured at fair value, with changes recognized in profit or loss[71] - As of September 30, 2021, the fair value estimate for warrants issued in February 2021 was 0.4408 CAD per warrant, and for those issued in March 2021, it was 0.4549 CAD per warrant[73][75] 16. OTHER LIABILITIES As of September 30, 2021, total other liabilities decreased to 562 thousand CAD from 637 thousand CAD at December 31, 2020, primarily comprising lease and loan liabilities, with the credit facility extended to January 31, 2022, providing up to 24,000 thousand CAD for reclamation obligations Composition of Other Liabilities (thousand CAD) | Item | September 30, 2021 | December 31, 2020 | Change (%) | | :----------------- | :------------- | :------------- | :------- | | Lease Liabilities | 502 | 582 | -13.8% | | Loan Liabilities | 60 | 33 | 81.8% | | Flow-Through Share Premium Obligation | - | 22 | -100.0% | | Total | 562 | 637 | -11.8% | | Presented on the Statements of Financial Position: | | | | | Current | 205 | 262 | -21.7% | | Non-Current | 357 | 375 | -4.8% | - In January 2021, the company amended its letter of credit facility with Scotiabank, extending the maturity date to January 31, 2022[82] - The facility continues to provide a credit limit of up to 24,000 thousand CAD for non-financial letters of credit supporting reclamation obligations[82] 17. SHARE CAPITAL As of September 30, 2021, the number of issued common shares increased to 807,362,479, with total share capital reaching 1,508,481 thousand CAD, reflecting significant equity financing activities through unit issuances, other share issuances, and stock option exercises Changes in Issued Common Shares and Share Capital (thousand CAD, shares in thousands) | Item | Number of Common Shares | Share Capital | | :--------------------------------- | :------------- | :------------- | | Balance as of December 31, 2020 | 678,981,882 | 1,366,710 | | Proceeds from Unit Issuances (Gross) | 110,023,950 | 144,214 | | Less: Allocated to Warrant Liability | - | (13,234) | | Unit Issuance Costs (Gross) | - | (8,584) | | Add: Allocated to Warrant Issuance Costs | - | 791 | | Proceeds from Other Share Issuances (Gross) | 10,156,186 | 11,914 | | Less: Other Share Issuance Costs | - | (1,051) | | Stock Options Exercised | 7,280,548 | 5,349 | | Stock Options Exercised (Fair Value Adjustment) | - | 1,833 | | Warrants Exercised (Fair Value Adjustment) | 500 | 1 | | Share Units Exercised (Fair Value Adjustment) | 919,413 | 538 | | Balance as of September 30, 2021 | 807,362,479 | 1,508,481 | Unit and Other Share Issuances The company engaged in multiple equity financing activities, including 'at-the-market' (ATM) offerings and public and private unit issuances, significantly increasing its common share count and capital - In January and February 2021, the company issued 4,230,186 common shares through its 'at-the-market' (ATM) program, generating gross proceeds of 3,914 thousand CAD[87] - On February 19, 2021, the company completed a public offering of 31,593,950 units, generating gross proceeds of 36,265 thousand CAD, with each unit comprising one common share and one-half of a warrant[88] - On March 3, 2021, the company completed a private placement of 5,926,000 flow-through shares, generating gross proceeds of approximately 8,000 thousand CAD[89] - On March 22, 2021, the company completed a public offering of 78,430,000 units, generating gross proceeds of 107,949 thousand CAD, with each unit comprising one common share and one-half of a warrant[90] - On September 16, 2021, the company filed a 2021 short form base shelf prospectus, allowing for the issuance of up to 250,000 thousand CAD in securities over a 25-month period[94] Flow-Through Share Issuances Flow-through share issuances fund exploration projects, with associated tax deductions claimed by investors, and the company has incurred expenditures to fulfill its exploration commitments - The company funds certain exploration projects through flow-through share issuances, where associated income tax deductions are claimed by investors rather than the company[96] - As of September 30, 2021, the company estimated it had fulfilled 930 thousand CAD of its qualified exploration expenditure obligations from the December 2020 flow-through share issuance[97] - As of September 30, 2021, the company had incurred 946 thousand CAD in expenditures to fulfill its 8,000 thousand CAD qualified exploration expenditure obligations from the March 2021 flow-through share issuance[98] 18. SHARE-BASED COMPENSATION For the nine months ended September 30, 2021, share-based compensation expense increased to 1,987 thousand CAD from 1,373 thousand CAD in the prior period, comprising stock options, restricted share units (RSUs), and performance share units (PSUs), with 3,084 thousand CAD remaining to be recognized Share-Based Compensation Expense Overview (thousand CAD) | Item | Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2020 | Change (%) | | :----------------- | :------------------------- | :------------------------- | :------- | | Stock Options | (983) | (434) | 126.5% | | RSUs | (1,011) | (760) | 33.0% | | PSUs | 7 | (179) | N/A | | Total | (1,987) | (1,373) | 44.7% | - As of September 30, 2021, 3,084 thousand CAD in share-based compensation expense remains to be recognized through August 2024[100] Stock Options Stock option activity for the period included grants, exercises, expirations, and forfeitures, resulting in 10,767,195 unexercised options with a weighted average exercise price of 0.84 CAD as of September 30, 2021 Stock Option Activity Overview | Item | Number of Common Shares | Weighted Average Exercise Price Per Share (CAD) | | :----------------------- | :------------- | :------------------------- | | Unexercised Options as of December 31, 2020 | 15,077,243 | 0.67 | | Granted | 4,067,000 | 1.28 | | Exercised | (7,280,548) | 0.74 | | Expired | (31,000) | 0.66 | | Forfeited | (1,065,500) | 0.77 | | Unexercised Options as of September 30, 2021 | 10,767,195 | 0.84 | | Exercisable Options as of September 30, 2021 | 5,517,195 | 0.66 | - Stock options granted in 2021 vest in installments over 24 months[103] - As of September 30, 2021, there were 10,767,195 unexercised options with a weighted average exercise price of 0.84 CAD[103] Share Units Share unit activity for the period included grants, exercises, and forfeitures of RSUs and PSUs, with their fair values estimated based on the company's closing share price on the grant date RSUs and PSUs Activity Overview | Item | Number of RSUs | Weighted Average Fair Value of RSUs (CAD) | Number of PSUs | Weighted Average Fair Value of PSUs (CAD) | | :----------------------- | :------------- | :------------------------- | :------------- | :------------------------- | | Unvested Units as of December 31, 2020 | 5,691,899 | 0.52 | 2,020,000 | 0.63 | | Granted | 1,905,000 | 1.42 | - | - | | Exercised | (709,413) | 0.56 | (210,000) | 0.66 | | Forfeited | (1,052,729) | 0.63 | (280,000) | 0.68 | | Unvested Units as of September 30, 2021 | 5,834,757 | 0.79 | 1,530,000 | 0.62 | | Vested Units as of September 30, 2021 | 2,041,260 | 0.59 | 870,000 | 0.63 | - RSUs granted in 2021 vest in installments over three years[106] - The fair value of RSUs and PSUs is estimated based on the company's closing share price on the trading day prior to the grant date[110] 19. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) As of September 30, 2021, accumulated other comprehensive income (loss) slightly increased to 1,776 thousand CAD from 1,775 thousand CAD at December 31, 2020, primarily due to accumulated foreign currency translation adjustments Composition of Accumulated Other Comprehensive Income (Loss) (thousand CAD) | Item | September 30, 2021 | December 31, 2020 | Change (%) | | :----------------------- | :------------- | :------------- | :------- | | Accumulated Foreign Currency Translation Adjustment | 414 | 413 | 0.24% | | Unamortized Actuarial Gains on Post-Employment Liabilities (Gross) | 1,847 | 1,847 | 0.0% | | Tax Impact | (485) | (485) | 0.0% | | Total | 1,776 | 1,775 | 0.06% | - Foreign currency translation adjustments slightly increased from 413 thousand CAD as of December 31, 2020, to 414 thousand CAD as of September 30, 2021[111] 20. SUPPLEMENTAL FINANCIAL INFORMATION This section provides detailed breakdowns of operating expenses, other income (expense), finance income (expense), depreciation, employee benefits, and non-cash working capital changes, highlighting significant gains from fair value changes in uranium investments and equity instruments - For the nine months ended September 30, 2021, other income (expense) was 39,306 thousand CAD, compared to (2,347) thousand CAD in the prior period, primarily driven by fair value gains on uranium investments (43,672 thousand CAD) and equity instruments (9,476 thousand CAD)[115] - Total operating expenses for the nine months ended September 30, 2021, increased to (9,898) thousand CAD from (7,726) thousand CAD in the prior period, mainly driven by higher mining, other development, and processing and conversion expenses[112] Operating Expenses Operating expenses for the nine months ended September 30, 2021, increased to (9,898) thousand CAD, primarily due to higher mining, development, processing, and service costs Composition of Operating Expenses (thousand CAD) | Item | Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2020 | Change (%) | | :----------------------- | :------------------------- | :------------------------- | :------- | | Cost of Mineral Concentrate Sales | - | (526) | -100.0% | | Mining, Other Development Expenses | (2,254) | (1,001) | 125.2% | | Processing, Conversion Expenses | (1,242) | (830) | 49.6% | | Service Costs | (6,224) | (5,147) | 20.9% | | Amortization of Reclamation Assets | (210) | (182) | 15.4% | | Total Operating Expenses | (9,898) | (7,726) | 28.1% | Other Income (Expense) Other income (expense) for the nine months ended September 30, 2021, significantly improved to 39,306 thousand CAD, primarily driven by fair value gains on uranium investments and equity instruments, offsetting foreign exchange losses and warrant liability changes Composition of Other Income (Expense) (thousand CAD) | Item | Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2020 | Change (%) | | :----------------------- | :------------------------- | :------------------------- | :------- | | Foreign Exchange Gain (Loss) | (1,219) | (159) | 666.7% | | Gain (Loss) on Disposal of Property, Plant and Equipment | (2) | 407 | -100.5% | | Fair Value Change in Equity Instruments | 9,476 | (2,094) | N/A | | Fair Value Change in Uranium Investments | 43,672 | - | N/A | | Fair Value Change in Warrant Liability | (11,567) | - | N/A | | Warrant Issuance Costs | (791) | - | N/A | | Uranium Investment Holding Costs | (126) | - | N/A | | Other | (137) | (501) | -72.7% | | Total | 39,306 | (2,347) | N/A | Finance Income (Expense) Net finance expense for the nine months ended September 30, 2021, slightly decreased to (3,093) thousand CAD, primarily due to deferred revenue and reclamation obligation accruals, partially offset by interest income Composition of Finance Income (Expense) (thousand CAD) | Item | Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2020 | Change (%) | | :----------------------- | :------------------------- | :------------------------- | :------- | | Interest Income | 288 | 216 | 33.3% | | Interest Expense | (1) | (4) | -75.0% | | Accretion Expense on Deferred Revenue | (2,321) | (2,309) | 0.5% | | Accretion Expense on Post-Employment Benefits | (17) | (51) | -66.7% | | Accretion Expense on Reclamation Obligations | (1,007) | (1,014) | -0.7% | | Accretion Expense on Debt Obligations | (35) | (43) | -18.6% | | Total | (3,093) | (3,205) | -3.5% | Depreciation Expense Total depreciation expense for the nine months ended September 30, 2021, increased by 25.4% to (1,485) thousand CAD, primarily driven by higher depreciation in processing and conversion activities Depreciation Expense Overview (thousand CAD) | Item | Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2020 | Change (%) | | :----------------------- | :------------------------- | :------------------------- | :------- | | Mining, Other Development Expenses | (1) | (2) | -50.0% | | Processing, Conversion Expenses | (1,107) | (798) | 38.7% | | Service Costs | (136) | (147) | -7.48% | | Evaluation | (27) | (27) | 0.0% | | Exploration | (129) | (114) | 13.2% | | General and Administrative | (85) | (96) | -11.46% | | Total Depreciation Expense | (1,485) | (1,184) | 25.4% | Employee Benefits Expense Total employee benefits expense for the nine months ended September 30, 2021, increased by 36.3% to (9,412) thousand CAD, primarily due to higher salaries, short-term benefits, and share-based compensation Employee Benefits Expense Overview (thousand CAD) | Item | Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2020 | Change (%) | | :----------------------- | :------------------------- | :------------------------- | :------- | | Salaries and Short-Term Employee Benefits | (7,311) | (5,534) | 32.1% | | Share-Based Compensation | (1,987) | (1,373) | 44.7% | | Termination Benefits | (114) | - | N/A | | Total Employee Benefits Expense | (9,412) | (6,907) | 36.3% | Change in Non-Cash Working Capital Items Non-cash working capital items for the nine months ended September 30, 2021, resulted in a (114) thousand CAD change, compared to (133) thousand CAD in the prior period Change in Non-Cash Working Capital Items (thousand CAD) | Item | Nine Months Ended September 30, 2020 | | :----------------------- | :------------------------- | | Trade and Other Receivables | 1,013 | | Inventories | 157 | | Prepaid Expenses and Other Assets | 151 | | Accounts Payable and Accrued Liabilities | (1,454) | | Total Change in Non-Cash Working Capital Items | (133) | - For the nine months ended September 30, 2021, the change in non-cash working capital items was (114) thousand CAD, compared to (133) thousand CAD in the prior period[10] 21. SEGMENTED INFORMATION The company operates in three segments: Mining, Closed Mines Services, and Corporate and Other, with the Mining segment reporting a loss despite revenue, while Closed Mines Services and Corporate and Other segments generated income for the nine months ended September 30, 2021 - The company operates in three primary segments: Mining, Closed Mines Services, and Corporate and Other[118] Segment Performance for the Nine Months Ended September 30, 2021 (thousand CAD) | Metric | Mining | Closed Mines Services | Corporate and Other | Total | | :----------------------- | :----- | :----------- | :--------- | :----- | | Revenue | 1,756 | 6,943 | 7,964 | 16,663 | | Total Expenses | (19,391) | (6,225) | (7,057) | (32,673) | | Segment Income (Loss) | (17,635) | 718 | 907 | (16,010) | Segment Performance for the Three Months Ended September 30, 2021 (thousand CAD) | Metric | Mining | Closed Mines Services | Corporate and Other | Total | | :----------------------- | :----- | :----------- | :--------- | :----- | | Revenue | 1,037 | 2,633 | 5,871 | 9,541 | | Total Expenses | (6,708) | (2,294) | (2,087) | (11,089) | | Segment Income (Loss) | (5,671) | 339 | 3,784 | (1,548) | 22. RELATED PARTY TRANSACTIONS The company's related party relationship with Uranium Participation Corporation (UPC) terminated on July 19, 2021, resulting in a 5,848 thousand CAD termination payment, while Korea Electric Power Corporation (KEPCO) remains a significant shareholder - The management services agreement with Uranium Participation Corporation (UPC) terminated on July 19, 2021, with the company receiving a 5,848 thousand CAD termination payment[130] - As of September 30, 2021, UPC is no longer considered a related party of Denison[131] - As of September 30, 2021, Korea Electric Power Corporation (KEPCO), through its subsidiary, held approximately 7.23% of Denison's shares[135] Uranium Participation Corporation The company previously had a management services agreement with UPC, earning fees and commissions, which was terminated on July 19, 2021 - The company previously had a management services agreement with UPC, earning base, variable, and discretionary fees, as well as commissions on U3O8 or UF6 purchases or sales[129] Overview of Transactions with UPC (thousand CAD) | Item | Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2020 | | :----------------- | :------------------------- | :------------------------- | | Base and Variable Management Fees | 1,069 | 1,523 | | Commission Fees | 697 | 247 | | Termination Fee | 5,848 | - | | Discretionary Fees | 350 | 300 | | Total | 7,964 | 2,070 | Korea Electric Power Corporation ("KEPCO") and Korea Hydro & Nuclear Power ("KHNP") KEPCO, through its subsidiary, holds a 7.23% equity interest in Denison, and KHNP is a key member of the partnership holding non-Denison interests in the Waterbury Lake property - As of September 30, 2021, KEPCO, through its subsidiary, held 58,284,000 shares of Denison, representing approximately a 7.23% equity interest[135] - KHNP Canada Energy Ltd. is a key member of Korea Waterbury Uranium Limited Partnership (KWULP), which holds the non-Denison interests in the Waterbury Lake property[135] Compensation of Key Management Personnel Compensation for key management personnel for the nine months ended September 30, 2021, increased to (3,638) thousand CAD, primarily due to higher salaries, short-term benefits, and share-based compensation Compensation of Key Management Personnel Overview (thousand CAD) | Item | Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2020 | | :----------------------- | :------------------------- | :------------------------- | | Salaries and Short-Term Employee Benefits | (2,055) | (1,420) | | Share-Based Compensation | (1,583) | (1,133) | | Total | (3,638) | (2,553) | 23. INCOME TAXES For the nine months ended September 30, 2021, the company recognized 1,507 thousand CAD in deferred income tax credits, including 247 thousand CAD from previously unrecognized Canadian tax assets related to the December 2020 flow-through share issuance - For the nine months ended September 30, 2021, Denison recognized 1,507 thousand CAD in deferred income tax credits[139] - This deferred tax credit includes 247 thousand CAD of previously unrecognized Canadian tax assets related to the renunciation of tax benefits from the December 2020 flow-through share issuance in February 2021[139] 24. FAIR VALUE OF FINANCIAL INSTRUMENTS As of September 30, 2021, the company's financial assets totaled 94,109 thousand CAD and financial liabilities totaled 34,382 thousand CAD, with fair value measurements categorized into a three-level hierarchy as per IFRS requirements Fair Value Hierarchy Classification of Financial Instruments (thousand CAD) | Item | Financial Instrument Category | Fair Value Hierarchy | Fair Value as of September 30, 2021 | Fair Value as of December 31, 2020 | | :----------------------- | :----------- | :----------- | :--------------------- | :--------------------- | | Financial Assets: | | | | | | Cash and Equivalents | Category B | | 50,877 | 24,992 | | Trade and Other Receivables | Category B | | 4,469 | 3,374 | | Equity Instruments - Shares | Category A | Level 1 | 25,958 | 16,657 | | Equity Instruments - Warrants | Category A | Level 2 | 468 | 293 | | Elliot Lake Reclamation Trust | Category B | | 3,202 | 2,883 | | Assets Pledged for Letter of Credit Facilities | Category B | | 9,000 | 9,000 | | Reclamation Letter of Credit Collateral | Category B | | 135 | 135 | | Total | | | 94,109 | 57,334 | | Financial Liabilities: | | | | | | Accounts Payable and Accrued Liabilities | Category C | | 9,019 | 7,178 | | Share Purchase Warrants Liability | Category A | Level 2 | 24,801 | - | | Debt Obligations | Category C | | 562 | 615 | | Total | | | 34,382 | 7,793 | - The fair value hierarchy for financial instruments is categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable market data)[142] - For the nine months ended September 30, 2021, there were no transfers between levels, and no changes in valuation techniques[144] 25. COMMITMENTS AND CONTINGENCIES The company is involved in an arbitration proceeding related to the sale of its Mongolian mining division, where it was awarded 10,000 thousand USD plus interest, and has commitments to purchase 2,500,000 pounds of U3O8 in 2021 - The arbitration proceeding with Uranium Industry a.s (UI) regarding the sale of the Mongolian mining division resulted in a final award on July 27, 2020, in favor of Denison, requiring UI to pay 10,000 thousand USD plus interest[151] - The company has agreements to purchase 2,500,000 pounds of U3O8 in 2021, with 2,400,000 pounds delivered as of September 30, 2021[152] - The remaining commitment to purchase 100,000 pounds of U3O8 for 3,070 thousand USD was delivered on October 4, 2021[152] Specific Legal Matters The company successfully pursued arbitration against Uranium Industry a.s (UI) for a 10,000 thousand USD contingent consideration related to the 2015 sale of its Mongolian mining assets, with a final award in its favor on July 27, 2020 - In 2015, the company sold all its Mongolian mining assets and operations to Uranium Industry a.s (UI), with the right to receive up to 12,000 thousand USD in additional contingent consideration[146][148] - On September 20, 2016, the Mongolian Mineral Resources Authority formally issued mining licenses for all four projects, triggering the company's right to collect 10,000 thousand USD in contingent consideration[149] - Due to UI's failure to make timely payments, the company initiated arbitration with the London Court of International Arbitration on December 12, 2017, and received a favorable final award on July 27, 2020[150][151] Uranium Purchase Commitments The company committed to purchasing 2,500,000 pounds of U3O8 in 2021, with 2,400,000 pounds delivered by September 30, 2021, and the remaining 100,000 pounds delivered in October 2021 - The company has entered into agreements to purchase 2,500,000 pounds of U3O8 in 2021[152] - As of September 30, 2021, the company had received delivery of 2,400,000 pounds[152] - The remaining commitment to purchase 100,000 pounds for 3,070 thousand USD was delivered on October 4, 2021[152] 26. SUBSEQUENT EVENTS Subsequent to the reporting period, the company sold 32,500,000 common shares and 32,500,000 warrants of GoviEx Uranium Inc. for 15,600 thousand CAD on October 26, 2021, while retaining a significant holding and potential additional proceeds from warrant exercises - On October 26, 2021, Denison sold 32,500,000 common shares and 32,500,000 warrants of GoviEx Uranium Inc. via private agreement, generating gross proceeds of 15,600 thousand CAD[153] - The company continues to hold 32,644,000 common shares of GoviEx[153] - If all warrants are exercised, the company would receive an additional 26,000 thousand CAD and transfer another 32,500,000 common shares of GoviEx[153]