FOR: DENISON MINES LIMITED
TSE SYMBOL: DEN
APRIL 30, 2001 - 16:00 EDT
Denison Announces First Quarter Net Earnings Of $895,000
TORONTO, ONTARIO--Denison Mines Limited today announced net
earnings of $895,000 ($0.00 per share) on revenue of $4,787,000
for the three months ended March 31, 2001, compared with earnings
of $1,212,000 ($0.00 per share) on revenue of $5,971,000 in the
first quarter of 2000. The financial statements for the first
quarter of 2001 reflect improved results from both uranium
operations and environmental services. The first quarter of 2000
included revenue and earnings from Greece of $1,153,000 realized
on the final lifting of oil produced prior to shutdown in 1998.
Although this quarter marks an end to earnings arising from the
Ecuador royalty payments, we are working hard to replace oil and
gas revenue and earnings. We are participating in a horizontal
well with Flatland following the very encouraging vertical well
completed early in the year. We are also finalizing the
acquisition of new prospective acreage in Saskatchewan from
Flatland. Denison has engaged Jennings Capital Inc. to assist us
with the identification of other Canadian oil and gas assets.
Our plan to further reduce general corporate expenses is on track
for a 15% reduction in the year.
The first quarter report to shareholders follows.
Denison is hosting a conference call on Tuesday, May 1, 2001
starting at 9:00 a.m. (Toronto time) to discuss the year-end
results. The conference call will be web cast. www.ir-live.com. A
recording of the call will be available approximately two hours
after the call, through a link on Denison's web site
www.denisonmines.com.
OPERATIONAL REVIEW
Mining
McClean Lake Uranium
McClean Lake production in the first quarter of 2001 was 27% above
the nominal capacity of 6 million pounds per year. Denison's 22.5%
share of production was 430,000 pounds. Planned mill production in
2001 is at least 600,000 pounds per month. Uranium sales in the
first quarter represented approximately 9% of planned annual sales
volume.
Mining of the Sue C pit continued in the quarter. Mining of this
pit is expected to be complete by the end of 2001, providing
sufficient ore in stockpiles to feed the mill at nominal rates for
three to four years depending upon production rate. When mining is
completed, cash costs will be reduced, enabling faster debt
reduction.
Midwest Uranium Project
With an expected increase in uranium reserves at McClean Lake,
uncertainty of the timing and costs of Midwest development and in
order to eliminate the obligation to pay advance and future
royalties on production from Midwest, Denison decreased its
interest in Midwest from 25% to 19.96% effective March 31, 2001.
Cogema Resources Inc. also reduced its interest from 70.5% to
54.84%.
Denison Environmental Services
Denison Environmental Services was active in the decommissioning
of the Caland site near Atikokan in Ontario this quarter.
Preparations were also made for Denison Environmental Services to
begin operating and monitoring five decommissioned mine sites for
Rio Algom on April 1, 2001. The demand for used mining equipment
continued to be weak during the quarter and, as a result, asset
sales revenues declined.
Oil and Gas
During the quarter, one successful vertical oil well was drilled
by the Flatland joint venture in which the Company has earned a
50% interest. Additional horizontal drilling is planned for the
second quarter.
Denison has engaged a consultant to assist in the identification
of Canadian oil and gas assets appropriate for the Company to
acquire.
On March 27, 2001, the Court of Appeal in Greece heard the
Company's appeal of the lower court decision awarding further
severance to former unionized employees. The timing of a decision
is not known.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Revenue for the first three months of 2001 includes $2,698,000
(2000 - $2,479,000) from uranium sales, $529,000 (2000 - $146,000)
from Environmental Services, and $1,521,000 (2000 - $2,193,000)
from the Ecuador royalty. Oil and gas revenue in the first quarter
of 2000 included $1,153,000 from final sale of inventory in the
tanks produced before shutdown in 1998.
McClean sales revenue in the first quarter of 2001 benefited from
higher U.S. exchange rates. Sales in the first quarter represent
approximately 9% of planned sales in 2001 under long-term
contracts. Readers are cautioned that sales volumes will vary from
quarter to quarter depending on which contracts deliveries are
made under and upon the timing of deliveries requested by
customers. Sales volumes in the remainder of the year are
currently forecast to be 23% in the second quarter, 19% in the
third quarter and 49% in the fourth quarter. Sales are made under
long-term contracts and approximately 17% of sales under long-term
contracts are sensitive to fluctuations in spot prices.
Segmented earnings for mining improved by $627,000 as a result of
lower milling costs at the McClean operation and reduced interest
expenses. Environmental Services benefited from higher levels of
decommissioning work in the quarter, which more than offset lower
asset sales revenues. Oil and gas earnings declined by $2.0
million partly as a result of the elimination of Greece oil
revenue. The Company has now earned its remaining entitlement to
the Ecuador oil royalty.
Income tax expense for the quarter declined by $837,000 as a
result of the Company's plan to shelter its 2001 earnings with
previously unrecognized future income tax benefits.
Liquidity and Cash Resources
During the quarter, operations generated cash flow of $4.5
million. Repayments of $11 million (2000 - $8.2 million) were made
on long-term debt from the collection of prior year uranium
receivables. Borrowings financed an increase in uranium
concentrate inventory of $4.8 million, mining costs and working
capital requirements at McClean.
Capital expenditures increased from $383,000 to $1,015,000,
principally as a result of the Flatland oil and gas drilling
program. Cash flow in the first quarter of 2000 was adversely
affected by payment of $12.6 million to pay the Oceanic lawsuit
award.
Cash and marketable securities declined $2.7 million to $5.7
million at March 31, reflecting a $3.0 million prepayment on the
Cogema debt facility. The Company now has the ability on 45 days'
notice to reborrow for any purpose $15.4 million, up from $12.1
million at December 31, 2000.
E. Peter Farmer
President and Chief Executive Officer
April 30, 2001
/T/
Consolidated Statements of Earnings
Denison Mines Limited
------------------------------------------------------------------------
Three months ended
March 31
(Unaudited - in thousands except per share data) 2001 2000
------------------------------------------------------------------------
Revenue $ 4,787 $ 5,971
------------------------------------------------------------------------
Expenses
Operating and exploration costs 2,032 2,028
Interest on long-term debt 1,245 1,277
General corporate expenses 521 619
Investment income (208) (283)
------------------------------------------------------------------------
3,590 3,641
------------------------------------------------------------------------
Earnings before income and resource 1,197 2,330
Income and resource taxes 302 1,118
------------------------------------------------------------------------
Net earnings for the period $ 895 $ 1,212
------------------------------------------------------------------------
------------------------------------------------------------------------
Net earnings per Common -- Basic $ 0.00 $ 0.00
-- Fully Diluted (note 4) $ 0.00 $ 0.00
------------------------------------------------------------------------
------------------------------------------------------------------------
Consolidated Statement of Retained Earnings
------------------------------------------------------------------------
Three months ended
March 31
(Unaudited in thousands) 2001 2000
------------------------------------------------------------------------
Retained earnings - beginning of period $73,861 $64,830
Net earnings for the period 895 1,212
------------------------------------------------------------------------
74,756 66,042
Benefit of utilizing previously unrecognized
future tax assets - 835
------------------------------------------------------------------------
Retained earnings - end of period $74,756 $66,877
------------------------------------------------------------------------
------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated
financial statements
Consolidated Statements of Cash Flow
Denison Mines Limited
------------------------------------------------------------------------
Three months ended
March 31
(Unaudited - in thousands) 2001 2000
------------------------------------------------------------------------
Operating Activities
Net earnings for the period $ 895 $ 1,212
Adjustment for:
Depreciation, depletion and amortization 1,976 1,614
Loss (gain) on sale of assets 21 (141)
Benefit of utilizing previously unrecognized
future income tax assets - 835
Increase in future income and resource taxes 20 30
Changes in non-cash working capital:
Decrease (increase) in receivables,
prepaids and inventories 4,429 (1,869)
Decrease in accounts payable, accrued
liabilities and taxes payable (2,739) (10,128)
Funding of post employment benefits (119) (95)
Funding of Elliot Lake mine reclamation (8) (61)
------------------------------------------------------------------------
Net cash generated by (used in) operations 4,475 (8,603)
------------------------------------------------------------------------
Financing Activities
Borrowings on loan facilities 7,901 6,698
Repayments of loan facilities (14,079) (8,214)
------------------------------------------------------------------------
(6,178) (1,516)
------------------------------------------------------------------------
Investing Activities
Proceeds on sale of assets 2 141
Additions to property, plant and equipment (1,015) (383)
Sale of marketable securities 956 1,651
------------------------------------------------------------------------
(57) 1,409
------------------------------------------------------------------------
Decrease in Cash and Cash Equivalents (1,760) (8,710)
------------------------------------------------------------------------
Cash and Cash Equivalents-Beginning of Period 5,563 23,134
------------------------------------------------------------------------
Cash and Cash Equivalents- End of Period $ 3,803 $14,424
------------------------------------------------------------------------
------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated
financial statements
Consolidated Balance Sheets
Denison Mines Limited
------------------------------------------------------------------------
March 31 December 31
(Unaudited - in thousands) 2001 2000
------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 3,803 $ 5,563
Marketable securities 1,866 2,841
Accounts receivable 5,106 13,885
Inventories 11,088 7,479
Supplies and prepaid expenses 2,679 2,499
------------------------------------------------------------------------
24,542 32,267
Inventories 12,304 11,743
Property, plant and equipment 121,403 122,368
------------------------------------------------------------------------
$ 158,249 $ 166,378
------------------------------------------------------------------------
------------------------------------------------------------------------
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities $ 5,103 $ 7,480
Current income and resource taxes payable 919 1,281
Current portion of long-term debt 3,192 11,086
------------------------------------------------------------------------
9,214 19,847
Long-term debt 53,338 51,622
Provision for post-employment benefits 10,914 11,033
Provision for Elliot Lake mine reclamation 6,305 6,313
Future income and resource taxes 2,793 2,773
------------------------------------------------------------------------
82,564 91,588
------------------------------------------------------------------------
SHAREHOLDERS' EQUITY 75,685 74,790
------------------------------------------------------------------------
$ 158,249 $ 166,378
------------------------------------------------------------------------
------------------------------------------------------------------------
Contingent Liability (note 3)
The accompanying notes are an integral part of the consolidated
financial statements
/T/
Notes to Consolidated Financial Statements (Unaudited)
Denison Mines Limited
1. Basis of Presentation
The accompanying unaudited interim consolidated financial
statements are prepared in accordance with Canadian generally
accepted accounting principles ("GAAP").
While management believes that the disclosures presented are
adequate, these unaudited interim consolidated financial
statements and notes should be read in conjunction with Denison's
consolidated financial statements included in the Annual Report
for the year ended December 31, 2000.
The accounting policies and methods of application are consistent
with those used in the 2000 audited financial statements. Certain
prior year balances have been reclassified to conform with the
current year's basis of presentation.
2. Long-term Debt
As at March 31, the Company had made prepayments of $15,000,000
(December 31, 2000 - $12,000,000) on the McClean Lake loan
facility and had the ability to redraw $15,391,000 (December 31,
2000 - $12,131,000), upon 45 days notice, representing the amount
prepaid and interest savings.
3. Contingent Liability
In November 1998, production ceased at the Company's former Prinos
oil and gas operation, offshore Greece, and employees received
severance pay averaging 16 months' wages. All operating facilities
were subsequently transferred to the Greek state pursuant to an
amendment to the concession agreement ratified by the Greek
parliament in 1999, pursuant to which the wells, production
platform and processing facilities associated with the oil and gas
operation were transferred to the Greek State in consideration of
the Greek State assuming all of the Consortium's remaining
decommissioning liabilities. A group of former employees sued the
Greek operating company with the objective of seeking both
reinstatement and further termination pay. In early 2000, a Greek
court determined the termination of the employees was invalid and
abusive, and that further payments should be made to 227 of the
former employees. 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
judgment that could result in payments to former employees of up
to $13 million. An appeal of the award was heard on March 27,
2001. Timing of a decision is unknown and the results of the
appeal cannot be determined at this time. The Company has an
accrual of $1.3 million at March 31, 2001 to cover any remaining
liabilities in Greece.
4. Capital Stock
As of April 30, 2001, the Company has 317,871,195 Common Shares
issued and outstanding and 10,999,992 Common Share Purchase
Warrants outstanding. Between December 31, 2000 and April 30,
2001, 200,000 Common Share Purchase Options were issued and as a
result on April 30, 2001 11,395,000 options were outstanding and
exercisable at prices ranging from $0.12 to $0.39 per Common
Share. If all Common Share Purchase Warrants and stock options had
been exercised on April 30, 2001, the Company would have
340,266,187 Common Shares issued.
/T/
5. Segmented Financial Information
------------------------------------------------------------------------
Three months ended
March 31
(Unaudited - in thousands) 2001 2000
------------------------------------------------------------------------
Revenue
Mining $ 2,698 $ 2,479
Environmental services 529 146
Oil and gas - Ecuador 1,521 2,193
- Greece - 1,153
- Canada 39 -
------------------------------------------------------------------------
4,787 5,971
------------------------------------------------------------------------
Operating and Exploration Costs
Mining 1,484 1,833
Environmental services 527 348
Oil and gas 21 (153)
------------------------------------------------------------------------
2,032 2,028
Interest on long-term debt - mining 1,197 1,277
Resource taxes - mining 207 186
------------------------------------------------------------------------
3,436 3,491
------------------------------------------------------------------------
Segment Earnings
Mining (190) (817)
Environmental services 2 (202)
Oil and gas 1,539 3,499
------------------------------------------------------------------------
1,351 2,480
------------------------------------------------------------------------
General corporate expenses 521 619
Interest on other long-term debt 48 -
Investment income (208) (283)
Income tax expenses 95 932
------------------------------------------------------------------------
Net earnings $ 895 $ 1,212
------------------------------------------------------------------------
------------------------------------------------------------------------
General Shareholder Information
Denison Mines Limited
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.
Common Share Purchase Warrants
Each warrant entitles the holder to purchase one
Common Share at $0.55 per share. They are not
listed for trading and carry no voting rights. Denison
Mines Limited is the transfer agent for these
securities.
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
Computershare Trust Company of Canada
100 University Avenue
Toronto, Ontario, Canada
M5J 2Y1
Shares are transferable at Computershare's offices in
Halifax, Montreal, Toronto, Winnipeg, Calgary and
Vancouver.
For information relating to share holdings, lost
certificates, estate transfers, etc., or to eliminate
duplicate mailings of shareholder material, contact
Computershare at 416-263-9701.
Offices
Corporate
Denison Mines Limited
Atrium on Bay
320 - 40 Dundas Street West
Toronto, ON M5G 2C2
Telephone: 416-979-1991
Telefax: 416-979-5893
Website: www.denisonmines.com
Environmental Services
Denison Environmental Services, a division of
Denison Mines Limited
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@denisonmines.com.
/T/
NOTE REGARDING FORWARD-LOOKING INFORMATION
Some disclosures included in the 2001 first quarter 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. The
Management's Discussion and Analysis Section above should be read
in conjunction with the corresponding section of the Company's
2000 Annual Report.
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
Denison Mines Limited
E. Peter Farmer
President and Chief Executive Officer
(416) 979-1991 Extension 231
pfarmer@denisonmines.com
www.denisonmines.com |
