FOR: DENISON MINES LIMITED
TSE SYMBOL: DEN
JULY 27, 2000
Denison Reports Second Quarter Earnings
TORONTO, ONTARIO--Denison Mines Limited reported earnings of
$388,000 for the three months ended June 30, 2000. This compares
with earnings of $6,640,000 in the second quarter of 1999. Revenue
in the second quarter was $6,622,000, which included $4,467,000
from uranium sales, compared with $1,841,000 in the second quarter
of 1999. Earnings for the six months ending June 30 were
$1,600,000 ($0.01 per share) compared with $6,293,000 ($0.02 per
share) in the corresponding period of 1999. Earnings for the
second quarter of 1999 and the six months ending June 30, 1999
included a $6,067,000 reduction in the Company's provision for
decommissioning its Greek operations. EBITDA for the six months
ended June 30, 2000 was $9,782,000 compared with $6,377,000 for
the six months ended June 30, 1999.
As a result of new accounting rules, commencing in 2000, Denison's
earnings are calculated using theoretical tax rates without being
allowed to take into account the utilization of the existing
non-capital loss carry forwards and excess tax pools that are in
excess of $170 million. The net effect is that Denison is required
to deduct a tax expense in computing net earnings, which in the
second quarter was $344,000 ($1,179,000 year to date), in spite of
the fact that this amount is not payable. The benefit arising from
the use of existing tax pools is treated as an addition to
retained earnings.
Operations at the McClean Lake uranium facility are steadily
improving. Production in the second quarter increased to 27%
above the design capacity of 6 million pounds per year and unit
operating costs are declining. Environmental results, which have
been well within maximum regulatory limits, are consistently
improving. The optimal production rate in relation to our
long-term contract markets is being determined.
Uranium sales volumes in the second quarter and year to date are
20% and 28%, respectively of scheduled sales volumes for 2000.
Approximately 12% of uranium sales volume in 2000 is sensitive to
spot prices at the time of delivery and all such sales occurred in
the second quarter. Scheduled sales volumes for the third and
fourth quarter 2000 are 19% and 53%, respectively of the total
scheduled sales for 2000.
Although DES was profitable in the quarter, both revenue and
profit were significantly less than forecast. Proposals for two
new major projects have been submitted. No significant new
contracts were obtained during the quarter.
Royalty receipts from Ecuador continue to be received. Full
payment is now expected before the end of the first quarter 2001.
Denison is entering into a joint venture agreement with a private
company whereby Denison can earn a 50% working interest in up to
8,500 acres in an oil exploration joint venture in Saskatchewan.
At least seven separate prospects have been identified and Denison
has committed to pay 70% of the cost to drill one well on at least
two of these prospects following completion and interpretation of
a 3D seismic program. This commitment will cost approximately
$600,000. Drilling is expected to start in October 2000.
/T/
Consolidated Statement of Earnings (Unaudited)
(In thousands except per share data)
------------------------------------------------------------------------
Six Months Ended
Second Quarter June 30
--------------- ----------------
2000 1999 2000 1999
------- ------- ------- -------
Revenue $ 6,622 $1,841 $12,593 $ 2,186
------- ------- ------- -------
Operating and exploration costs 3,757 722 5,785 899
Interest expense 1,488 - 2,765 -
Decrease in provision for Greek
oil field decommissioning - (6,067) - (6,067)
General corporate expenses 608 715 1,227 1,528
Investment income (399) (211) (682) (531)
------- ------- ------- -------
5,454 (4,841) 9,095 (4,171)
------- ------- ------- -------
Earnings before income and
resource taxes 1,168 6,682 3,498 6,357
Income and resource taxes 780 42 1,898 64
------- ------- ------- -------
Net earnings for the period $ 388 $ 6,640 $ 1,600 $ 6,293
------- ------- ------- -------
------- ------- ------- -------
Net earnings per Common Share $ 0.01 $ 0.02 $ 0.01 $ 0.02
------- ------- ------- -------
------- ------- ------- -------
Consolidated Statement of Retained Earnings (Unaudited)
(In thousands)
------------------------------------------------------------------------
Six Months Ended
Second Quarter June 30
--------------- ----------------
2000 1999 2000 1999
------- ------- ------- -------
Net earning for the period $ 388 $ 6,640 1,600 $ 6,293
Benefit of utilizing previously
unrecognized future income tax
assets (note 1) 344 - 1,179 -
------- ------- ------- -------
732 6,640 2,779 6,293
Retained Earnings
- Beginning of Period 66,877 52,190 64,830 52,537
------- ------- ------- -------
Retained Earnings - End of Period $67,609 $58,830 $67,609 $58,830
------- ------- ------- -------
------- ------- ------- -------
Segmented Information (Unaudited)
(In thousands)
------------------------------------------------------------------------
Six Months Ended
Second Quarter June 30
--------------- ----------------
2000 1999 2000 1999
------- ------- ------- -------
Revenue
Mining $ 5,131 $ 1,841 $ 7,756 $ 2,186
Oil and gas 1,491 - 4,837 -
------- ------- ------- -------
$ 6,622 $ 1,841 $12,593 $ 2,186
------- ------- -------- -------
------- ------- -------- -------
Net earnings (loss)
Mining $ 1,037 $ 1,052 $ 1,295 $ 930
Oil and gas 1,488 6,109 4,987 6,399
Corporate and other (305) (521) (738) (1,036)
Interest expense (1,488) - (2,765) -
Federal and Saskatchewan
income taxes (344) - (1,179) -
------- ------ ------- -------
$ 388 $ 6,640 $ 1,600 $ 6,293
------- ------ ------- -------
------- ------ ------- -------
Consolidated Statement of Cash Flow (Unaudited)
(In thousands)
------------------------------------------------------------------------
Six Months Ended
Second Quarter June 30
--------------- ----------------
2000 1999 2000 1999
------- ------- ------- -------
Operating Activities
Net earnings for the period $ 388 $ 6,640 $ 1,600 $ 6,293
Adjustments for non-cash items:
Depreciation, depletion and
amortization 1,905 11 3,519 20
Gain on sale of assets - (66) (141) (86)
Benefit of utilizing previously
unrecognized future income tax
assets (note 1) 344 - 1,179 -
Decrease in provision for Greek
oil field decommissioning - (6,067) - (6,067)
Increase (decrease) in taxes
payable after July 1, 2000 and
future income and resource taxes (23) 29 7 (31)
------- ------- ------- -------
2,614 547 6,164 129
Decrease (increase) in operating
working capital (6,777) 1,039 (18,865) (581)
Spending on Greek oil field
decommissioning costs - (4,325) - (8,957)
Spending on Elliot Lake
decommissioning and
reclamation costs (105) (900) (105) (900)
------- ------- ------- -------
Net cash used in operating
activities (4,268) (3,639) (12,806) (10,309)
------- ------- ------- -------
Financing Activities
Borrowings on loan facility 5,444 5,530 3,863 7,971
------- ------- ------- -------
Investing Activities
Proceeds on sale of assets 22 66 163 86
Additions to property, plant
and equipment (467) (6,728) (850) (10,629)
Sale (purchase) of marketable
securities 459 (1,473) 2,110 (1,473)
Decrease in restricted cash - 2,794 - 3,045
------- ------- ------- -------
14 (5,341) 1,423 (8,971)
------- ------- ------- -------
Increase (Decrease) in Cash
and Cash Equivalents 1,190 (3,450) (7,520) (11,309)
Cash and Short-term Deposits
- Beginning of Period 14,424 15,956 23,134 23,815
------- ------- ------- -------
Cash and Short-term Deposits
- End of Period $15,614 $12,506 $15,614 $12,506
------- ------- ------- -------
------- ------- ------- -------
Consolidated Balance Sheet (Unaudited)
(In thousands)
------------------------------------------------------------------------
June 30 December 31
2000 1999
--------- -----------
ASSETS
Cash and short-term deposits $ 15,614 $ 23,134
Marketable securities 2,826 4,936
Accounts receivable 6,415 24,586
Product inventory 6,324 261
Raw materials, supplies and prepaid expense 2,225 1,984
Net property, plant and equipment 141,358 145,289
--------- -----------
$ 174,762 $ 200,190
--------- -----------
--------- -----------
LIABILITIES
Accounts payable and accrued liabilities $ 7,945 $ 39,703
Current taxes payable 530 768
Income and resource taxes due after
July 1, 2000 4,050 3,941
Long-term debt 71,980 68,117
Provision for post-employment benefits 11,700 11,900
Provision for Elliot Lake mine
decommissioning and reclamation cost 7,439 7,544
Future income and resource taxes 2,580 2,458
--------- -----------
106,224 134,431
SHAREHOLDERS' EQUITY 68,538 65,759
--------- -----------
$ 174,762 $ 200,190
--------- -----------
--------- -----------
Notes to Consolidated Financial Statements (Unaudited)
1. As required by the new rules of the Canadian Institute of Chartered
Accountants ("CICA"), the Company has adopted the liability method of
accounting for income taxes effective January 1, 2000. The new CICA
rules require computation of the Federal and Saskatchewan income tax
provision using theoretical tax rates which currently apply without
being allowed to record and take advantage of the offsetting
reduction to taxable income as a result of utilizing previously
unrecognized tax deductions. As a result, year-to-date net earnings
have been reduced by $1,179,000. This additional expense, included
in income and resource taxes on the Consolidated Statement of
Earnings, does not increase liabilities, since the benefit of
utilizing these tax deductions is considered to be an adjustment to
asset values assigned at the time of the restructuring and therefore
$1,179,000 has been credited to Retained Earnings. Prior year results
have not been restated.
The net impact of the new CICA rules is that Denison has deducted a
tax expense in computing net earnings and earnings per share under
the new method when no actual tax liability exists corresponding to
this increased expense.
The Company now has in excess of $170 million of non capital losses
and capital cost allowances, together with substantial earned
depletion and net capital losses which can be carried forward to
shelter its future earnings from federal and provincial income taxes,
except in Ontario. The resulting benefit of these deductions will be
recognized in the future as an increase in Retained Earnings to
offset the tax expenses shown in earnings.
2. A Greek court has determined that further payments should be made to
227 of the former unionized employees of the Company's Prinos oil
operations where production ceased in November 1998. As many of the
employees were employed or received other compensation during 1999
that reduces the amount awarded to them, it is difficult to assess
the magnitude of the judgement, which could range up to $11 million.
An appeal has been filed and a hearing is scheduled for October 14,
2000. The closing of Greek operations was accepted as valid by the
Greek State in an agreement dated November 16, 1999 which was
subsequently ratified by the Greek Parliament. The results of an
appeal cannot be determined at this time. The Company has an accrual
of $1.8 million at June 30, 2000 to cover any remaining liabilities
in Greece.
3. As of July 26, 2000 the Company has 317,871,201 Common Shares issued
and outstanding. On a fully diluted basis, after giving effect to the
exercise of Common Share Purchase Warrants and stock options, the
Company would have 345,856,201 Common Shares issued.
/T/
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
Denison Mines Limited
E. Peter Farmer
President and Chief Executive Officer
(416) 979-1991 Ext. 231 |
