...continued
As at March 31, 2003 the Company had the ability to redraw $5.3 million (December 31, 2002 - $7.3 million) on the McClean Lake loan, upon 45 days' notice, representing the amounts previously prepaid and resulting interest savings. Long-term debt is described more fully in note 5 to the Company's Consolidated Financial Statements for the year ended December 31, 2002.
5. Contingent Liabilities and Commitments
(a) On September 23, 2002 The Federal Court of Canada, Trial Division, quashed the original McClean Lake facility operating license issued in 1999. That license had been superceded and the facility has continued to operate under the new four-year operating license issued in August 2001. The Trial Division decision has been appealed by both the federal regulator of the facility, the Canadian Nuclear Safety Commission ("CNSC") and by the operator and majority owner of the facility, Cogema Resources Inc. The Federal Court of Appeal granted a stay of the Trial Division decision pending the outcome of the appeal.
The Trial Division decision quashed the original 1999 operating license on the basis that the Canadian Environmental Assessment Act was not complied with. Specifically, the project was subject to a lengthy public process under legislation that was replaced by the Canadian Environmental Assessment Act. The Trial Division decision creates a significant amount of uncertainty about the rules applicable to obtaining the necessary approvals for the operation of the McClean Lake facility.
While the outcome of the appeal process cannot be determined, the Company believes that ultimately the Trial Division decision will be nullified through the appeal process, by the completion of further regulatory requirements or by legislative change. Pending the appeal of the decision, the stay granted by the Federal Court of Appeal eliminates the risk of a stoppage in production at McClean Lake. The Company believes that with the continuing efforts of all interested parties, a shut down of the McClean Lake facility is unlikely. The impact of an unfavourable decision cannot be determined at this time.
(b) In September 2002 the Greek Court of Appeal overturned the lower court decision that had ruled that the termination of Denison's former employees, following closure in 1998 of its Greek oil and gas operations, was invalid and abusive and that further payments should be made. In unanimously rejecting the lower court decision, the Court of Appeal determined that the terminations were made in good faith and in accordance with applicable law and ruled that no further severance payments are required to be made. These former employees have further appealed this Court of Appeal decision to the Supreme Court of Greece. The Company believes that this appeal will be unsuccessful. The impact of an unfavourable decision cannot be determined at this time.
(c) The City of Elliot Lake has filed complaints with the Ontario Assessment Review Board, alleging that the Municipal Property Assessment Corporation has:
(i) understated the current value which the City is required to
use indetermining the annual property taxes attributable to
the tailings management areas at the Company's decommissioned
Elliot Lake mine site and those of other closed uranium mines
in Elliot Lake; and
(ii) incorrectly categorized these tailings management areas as
vacant commercial land, rather than occupied industrial land.
The Company believes that the City's complaints are unlikely to be successful. The dollar value of any additional taxes arising from these complaints, in the event the City were to be successful, cannot be determined and no provision has been made for such amounts.
(d) The Company is involved in various other legal actions in the course of business. In the opinion of management, the aggregate amount of any potential liability is not expected to have a material adverse effect on the Company's financial position or results.
(e) In July 2002, the Company raised $5,000,000 through the issue of 1,428,571 flow-through Common Shares. The Company is required to spend proceeds of this issue on Canadian Exploration Expenditures. As at March 31, 2003, $1,193,000 remains to be spent prior to July 30, 2004.
6. Capital Stock
On May 8, 2002 the Shareholders approved a one for 20 share consolidation, which became effective on May 24, 2002. Prior period earnings per share have been calculated to give effect to this share consolidation as if the share consolidation had been effective at the beginning of the earliest period presented.
As of April 30, 2003 the Company has 17,705,724 Common Shares issued and outstanding. During the three months ended March 31, 2003, the Company issued 430,500 (2002 - nil) stock options at prices ranging from $2.22 to $2.74 and 377,750 (2002 - nil) options previously granted at prices from $2.60 to $7.80 were surrendered. As a result, at the end of the quarter, 1,055,000 stock options were outstanding, exercisable at prices ranging from $2.22 to $7.60 per Common Share. If all of the above had been exercised on April 30,2003 the Company would have 18,760,724 Common Shares outstanding. Effective January 1, 2002, the Company has prospectively adopted the Canadian accounting standard on "Stock Based Compensation" pursuant to which the cost of options is being amortized over the vesting period which ranges from one to four years. In the first three months of 2003, Corporate expenses include $90,397 (2002 - nil) for expensing of stock options. This compensation expense has been calculated using the Black- Scholes valuation model, assuming no dividends are paid, a 10-year term, volatility of 62% and an interest rate of 5.4%.
7. Segmented Financial Information
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Three months ended
March 31
(unaudited-in thousands) 2003 2002
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Revenue
Mining $ 4,200 $ 3,041
Environmental services 866 643
Oil and gas - Canada 2,650 1,079
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7,716 4,763
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Operating and exploration costs
Mining 3,026 1,188
Environmental services 781 614
Oil and gas - Canada 1,605 694
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5,412 2,496
Royalties and provincial capital taxes
Mining 320 234
Oil and gas 545 167
Interest on long-term debt - mining 699 751
Interest income - mining (21) (22)
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6,955 3,626
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Segment earnings
Mining 176 890
Environmental services 85 29
Oil and gas 500 218
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761 1,137
General corporate expenses 653 520
Interest on other long-term debt and bank
indebtedness 75 61
Investment and other income (154) (5)
Income tax expenses 62 77
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Net earnings $ 125 $ 484
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General Shareholder Information
Denison Energy Inc.
Common Shares
The Company is authorized to issue an unlimited number of Common Shares. Each holder of Common Shares is entitled to receive notice of and to attend all meetings of shareholders and to vote thereat. Each holder of Common Shares is entitled to one vote in respect of each Common Share held.
Stock Exchange Listing
Denison's Common Shares are listed and posted for trading on the Toronto Stock Exchange under the symbol DEN.
Registrar and Transfer Agent
For information relating to share holdings, lost certificates, estate transfers, etc., or to eliminate duplicate mailings of shareholder material, contact:
Computershare Trust Company of Canada
100 University Avenue
Toronto, Ontario, Canada
M5J 2Y1
Telephone: 514-982-7270
Toll free: 1-800-564-6253
Offices
Corporate
Denison Energy Inc.
Atrium on Bay
Suite 320, 40 Dundas Street West
Toronto, ON M5G 2C2
Telephone: 416-979-1991
Telefax: 416-979-5893
Website: www.denisonenergy.com
Oil and Gas
Denison Energy Inc.
Suite 1900, 520 - 5th Avenue SW
Calgary, AB T2P 3R7
Telephone: 403-264-4111
Telefax: 403-264-4161
Environmental Services
Denison Environmental Services, a division of
Denison Energy Inc.
8 Kilborn Way
Elliot Lake, ON P5A 2T1
Telephone: 705-848-9191
Telefax: 705-848-5814
Website: www.denisonenvironmental.com
Additional Information
Further information about Denison is available by contacting the Corporate Secretary at the corporate address listed above or by email to: dgallant@denisonenergy.com
NOTE REGARDING FORWARD - LOOKING INFORMATION
Some disclosures included in this Quarterly Report respecting production, cash costs, expenses and development schedules represent forward-looking statements. Such statements are based on assumptions and estimates related to future market conditions. While management reviews the reasonableness of such assumptions and estimates, unusual and unanticipated events may occur which render them inaccurate. Under such circumstances, future performance may differ materially from projections. This quarterly report should be read with the Management's Discussion and Analysis Section included in the of the Company's 2002 Annual Report.
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Contact:
Denison Energy Inc.
E. Peter Farmer
President and Chief Executive Officer
Phone: (403) 264-4111 Extension 302 |
