Jeff,
My information on Denison Mines is not complete, but following is what I have from scribbled notes to myself:
(all figures in Cdn dollars)
Total Issued and Outstanding shares=317M
1996 Q3 earnings=$11.9M, eps=$0.04, Revenues=$25.3M
1996 9mo earnings=$$24.1M, eps=$0.08, Revenues=$62.7M
I think earnings for the full year 1996 should exceed $30M or $0.09 per share.
Denison Mines assets include the Pinros and Pinros North Oil fields, in which Denison's share of production is about 8,500 barrels per day. The price they receive for the Pinros crude is about three to four dollars below Brent sea crude prices because it is heavier than the much preferred sweet light crude. However, IMO prices received by Denison today should be almost 60% to 70% higher than the same time last year. With little or no increase in overhead, the additional revenue goes straight to the bottom line.
Denison Mines also has interests in 2 Saskatchewan Uranium projects.
Denison has a 22.5% interest in the Mclean Lake Uranium Project. Production start up at Mclean Lake is expected to be in July 1997. I expect revenues from this mine to start to flow to Denison in Q4/97. Denison has a 19.5% interest in the Midwest Uranium deposit. Denison is currently seeking approvals for this project.
I do not know the production cost for the McLean Lake project, but with recent uranium selling prices at $16US per pound (as compared to about $8US last yr) the McLean project should be quite profitable.
However, Denison has its share of risks. Recently the Ontario Court of Justice ruled that Denison miscalculated the amount of royalties payable on its Greek oil production. This has resulted in about $5.7M US + interest (from 1993) payable to the royalty holder (Denison is appealing). Denison contends that it has sufficient cash to settle this liability. Denison is also responsible for decommisioning the Elliot Lake Uranium mine. Denison has provided a provision of about $40M which includes an estimate for perpetual care and maintenance. In June 1996 the federal environment assessment review panel submitted a report on Denison's decommissioning proposal. Final recommendations from the Federal Government is expected soon.
Recently Denison along with Inmet optioned the SAGAR, Quebec property from Virginia Gold mines (50% Virginia, 25% Inmet, 25% Denison). The SAGAR project is gold/uranium prospect. Boulder train samples on this property have ranged from 3.1 to 0.91 oz/ton Au, and 1.5% to 0.97% uranium.
With the stock at $0.30 and about 9 to 10 cents per share earnings, this stock IMO is very undervalued. How many oil/minining stocks do you know that can match Denison's earnings (about $30M per year) and still trade at 30cents. IMO, when the decommissioning issues and some of the liabilities are resolved, Denison, with todays earnings, should be trading above $1 per share.
One last comment, Bill James, has done a tremendous job in turning Denison around. However, about 6 months ago he left Denison as President and Chief Executive Officer, to become the President of Inmet. I think when this was anounced, the stock took a beating. It has languished since.
Jeff, I hope this helps. And yes you are right, 1997 should be an excellent year for Denison Mines.
Regards, Lalit |
