FOR: DENISON MINES LIMITED
TSE SYMBOL: DEN
MARCH 6, 2002 - 16:25 EST
Denison Reports 2001 Earnings Of $0.01 Per Share
TORONTO, ONTARIO--Denison Mines Limited today reported earnings of
$4.7 million or $0.01 per share for the year ended December 31,
2001 on revenue of $31.8 million. This compares with earnings of
$9.0 million or $0.03 per share in 2000 on revenue of $39.8
million. Revenue and earnings in 2000 included $9.2 million (2001
- $1.5 million) from the Ecuador oil royalty and $1.2 million from
sales in 2000 of Greek oil produced prior to field shutdown in
1998.
Most of the achievements in 2001 will be reflected in the
Company's financial results in 2002 and beyond. These included
the acquisition of Innovative Energy Ltd. and a successful
drilling program in Alberta that have added significantly to the
Company's proven reserves and oil and gas production. New
facilities to process the production were completed at both
Countess and Knappen and a $3 million operating line of credit was
obtained at prime plus 0.5%. At McClean, mining of the Sue C pit
was completed with the recovery of over 33% more ore than
originally anticipated. The elimination of mine crews will reduce
McClean cash costs.
The Company had earnings of $4.2 million for the three months
ended December 31, 2001 on revenue of $16.6 million compared with
earnings of $5.8 million on revenue of $17.8 million in the fourth
quarter of 2000. Earnings and revenue in the fourth quarter of
2000 included $2.8 million from receipt of the Ecuador royalty,
which was fully paid out to Denison in the first quarter of 2001.
Uranium sales volumes in the fourth quarter of 2001 represented
60% of annual contracted volumes compared with 53% in the fourth
quarter of 2000.
Oil and Gas
Denison continued the expansion of its oil and gas activities
during the fourth quarter with the acquisition of all of the
shares of Innovative Energy Limited, which is described in note 2
of the accompanying unaudited interim financial statements, the
drilling of two successful oil wells at the Countess property, a
successful gas well at Knappen and the installation of processing
facilities at both Countess and Knappen. The two new oil wells
and the gas well at Knappen have been tied into their respective
processing facilities and production is currently being increased.
As a result of unanticipated delays in obtaining the necessary
regulatory approvals to transfer Innovative's wells and facilities
to Denison and recommence production, the operation of the two new
oil wells and the Knappen gas well was delayed until February
before entering sustained commercial production.
The Knappen well is currently producing one million cubic feet per
day and is being gradually increased to the planned rate of 2
million cubic feet per day. Denison's oil and gas production, at
a gas to oil ratio of 6:1, increased from 140 barrels of oil
equivalent (boe) per day at the start of the fourth quarter to an
average of 438 boe per day in December. Production is currently
at 650 boe per day and increasing.
Denison's share of proven oil and gas reserves is currently
estimated at about 1.9 million boe, an increase of 1.4 million boe
or 370% from proven reserves at the end of the third quarter 2001.
This is based on independent engineering reports plus an
additional 0.8 million boe from preliminary in-house estimations
of the reserves attributable to the three new wells. Final
reserve figures on these new wells will be determined after
sufficient production history has been obtained.
Mining
Denison's share of production from McClean Lake was 1,486,000
pounds of U3O8 during 2001, about 10% above nominal design
capacity.
Mining of the Sue C pit was completed on February 3, 2002 with all
of the ore stockpiled for feeding the mill into 2006. The
reserves of uranium actually recovered into the stockpile from Sue
C were 33% greater than had been expected from the original
surface drilling. As a consequence, Denison's share of uranium
reserves has been increased.
All of the low-grade special waste that was recovered during the
mining of the JEB and Sue C pits is now being disposed of in the
mined out Sue C pit. This work is expected to be completed by
early in the second quarter of 2002.
Work continues on evaluating the preferred mining methods and the
desired sequence for exploiting the Midwest, Sue A, B and E and
the McClean underground deposits to provide feed to the mill after
the current stockpiles are processed during 2006.
Denison Environmental Services
The five-year contract to monitor the five Rio Algom mine sites
and the 30-month contract to supervise the Hope Brook mine
closeout in Newfoundland provide a significant base load for DES
to actively pursue additional contracts in 2002.
Results of Operations
Revenue in the fourth quarter included $15.2 million (2000 - $14.5
million) from uranium sales, $1.0 million (2000 - $0.5) million
from environmental services and $0.3 million (2000 - $0.0) from
Canadian oil and gas operations. Oil and gas revenue in 2000
consisted of $2.8 million from the receipt of Ecuador royalty
income.
Uranium sales in the fourth quarter of 2001 represented 60% of
2001 sales volume compared with 53% in the fourth quarter of 2000.
In 2002, sales volumes will continue to vary from quarter to
quarter depending on the timing of delivery requested on each
contract by our customers. The preliminary indications from
customers are that sales volumes will be 9% in the first quarter,
32% in the second quarter, 9% in the third quarter and 50 % in the
fourth quarter under long-term contracts with various pricing
terms.
Margins on uranium sales increased significantly as a result of an
increase in reserves recovered from the Sue C pit that reduced the
amortization rate for mining costs included in ore in stockpile
inventories and for processing facilities.
Revenues from Canadian oil and gas operations in the fourth
quarter were disappointing as regulatory delays restricted
production from the two new oil wells to 13 and 24 days
respectively. The two new wells and the Knappen gas field entered
into sustained commercial production in mid February 2002 when
regulatory approvals were obtained.
Increased oil and gas sales volumes will increase oil and gas
earnings in 2002.
Liquidity and Cash Resources
During 2001, operations generated cash flow of $4.2 million.
Repayments of $26.5 million in 2001 have been made on long-term
debt from uranium receipts. Borrowings have financed uranium
mining, processing, capital and interest expense. Borrowings also
include $2.3 million used to finance oil and gas capital spending.
Interest expense has been reduced as a result of lower interest
rates and prepayments of debt.
Capital expenditures in 2001 of $9.0 million include $7.8 million
for investments in Canadian oil and gas assets, with the balance
at the McClean uranium mine and Midwest uranium project. These
expenditures are in addition to the acquisition of Innovative
Energy Ltd. Cash and marketable securities have been utilized for
the Company's investment in oil and gas assets. As of December
31, 2001, the Company has the ability to redraw $10.8 million on
the Cogema facility for any purpose.
Except as discussed herein, risk factors, which may affect the
Company, are identified in the Company's annual Management's
Discussion and Analysis section included in the Company's 2000
annual report, and remain substantially unchanged.
/T/
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Conference Call
---------------
Denison is hosting a conference call on Thursday, March 7, 2002 starting
at 9:00 a.m. (Toronto time) to discuss the year-end results. The
webcast conference call will be available through a link on Denison's
website at www.denisonmines.com and a recorded version will be available
approximately two hours after the call until 5:00 p.m. on March 22, 2002.
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Consolidated Statements of Earnings
Denison Mines Limited
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Twelve months ended
(Unaudited - in thousands Fourth Quarter December 31
except per share data) 2001 2000 2001 2000
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Revenue $ 16,612 $ 17,768 $ 31,844 $ 39,813
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Expenses
Operating and exploration costs 11,031 11,327 20,708 21,444
Saskatchewan mineral royalties and
capital taxes 1,008 1,102 1,851 2,098
Interest expense 952 1,545 4,448 5,981
General corporate expenses 692 523 2,005 2,262
Investment income 132 (261) (382) (1,421)
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13,815 14,236 28,630 30,364
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Earnings before income taxes 2,797 3,532 3,214 9,449
Income tax expense (recovery) (1,396) (2,262) (1,504) 418
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Net earnings for the period $ 4,193 5,794 $ 4,718 $ 9,031
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Net earnings per Common Share:
- Basic $ 0.01 $ 0.02 $ 0.01 $ 0.03
- Diluted (note 6) $ 0.01 $ 0.02 $ 0.01 $ 0.03
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Consolidated Statements of Retained Earnings
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Twelve months ended
Fourth Quarter December 31
(Unaudited - in thousands) 2001 2000 2001 2000
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Retained earnings - beginning
of period $ 74,386 $ 68,067 $ 73,861 $ 64,830
Net earnings for the period 4,193 5,794 4,718 9,031
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Retained earnings - end of
period $ 78,579 $ 73,861 $ 78,579 $ 73,861
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The accompanying notes are an integral part of the consolidated
financial statements
Consolidated Statements of Cash Flow
Denison Mines Limited
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Twelve months ended
Fourth Quarter December 31
(Unaudited - in thousands) 2001 2000 2001 2000
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Operating Activities
Net earnings for the period $ 4,193 $ 5,794 $ 4,718 $ 9,031
Adjustment for:
Depletion and amortization 1,548 874 6,862 6,062
Loss (gain) on sale or write-down
of assets 645 71 514 (70)
Benefit of utilizing previously
unrecognized future income tax assets - (2,337) - -
Increase (decrease) in future income and
resource taxes (1,463) (19) (1,790) 183
Changes in non-cash working capital:
Decrease (increase) in receivables,
prepaids and inventories (5,516) 1,056 (5,296) 11,050
Increase (decrease) in accounts
payable, accrued liabilities and
taxes payable 3,758 (188) (49)(32,735)
Funding of post employment benefits (124) (127) (482) (442)
Funding of Elliot Lake mine reclamation (172) (510) (256) (631)
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Net cash generated by (used in)
operations 2,869 4,614 4,221 (7,552)
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Financing Activities
Additions to long-term debt 5,250 4,170 26,474 28,161
Repayments of long-term debt (2,726) (18,113) (25,521)(37,379)
Repayment of bank indebtedness from
Innovative Energy Ltd. acquisition (367) - (367) -
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2,157 (13,943) 586 (9,218)
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Investing Activities
Additions to property, plant and
equipment (3,652) (1,755) (9,017) (3,138)
Acquisition of Innovative Energy
Ltd. (note 2) (1,916) - (1,916) -
Sale (purchase) of marketable
securities (226) 321 2,678 2,095
Proceeds on sale of other assets 26 21 62 242
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(5,768) (1,413) (8,193) (801)
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Decrease in Cash and Cash Equivalents (742) (10,742) (3,386)(17,571)
Cash and Cash Equivalents - Beginning
of Period 2,919 16,305 5,563 23,134
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Cash and Cash Equivalents - End of
Period $ 2,177 $ 5,563 $ 2,177 $ 5,563
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The accompanying notes are an integral part of the consolidated
financial statements
Consolidated Balance Sheets
Denison Mines Limited
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December 31 December 31
(Unaudited - in thousands) 2001 2000
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ASSETS
Current Assets
Cash and cash equivalents $ 2,177 $ 5,563
Marketable securities - 2,841
Accounts receivable 13,651 13,885
Inventories and prepaid expenses (note 3) 14,214 9,978
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30,042 32,267
Inventory of ore in stockpiles (note 3) 13,413 11,743
Property, plant and equipment 129,978 122,368
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$ 173,433 $ 166,378
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LIABILITIES
Current Liabilities
Bank indebtedness $ 1,918 $ -
Accounts payable and accrued liabilities 9,721 8,757
Current income and resource taxes payable - 4
Current portion of long-term debt 11,961 11,086
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23,600 19,847
Long-term debt 51,700 51,622
Provision for post-employment benefits 10,476 11,033
Provision for Elliot Lake mine reclamation 6,232 6,313
Future income and resource taxes 983 2,773
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92,991 91,588
SHAREHOLDERS' EQUITY 80,442 74,790
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$ 173,433 $ 166,378
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Contingent Liability (note 5)
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"). Interim financial
statements do not include all information required by Canadian
GAAP for annual financial statements. In the opinion of
management, all adjustments considered necessary for fair
presentation have been included in these financial statements.
Audited financial statements for the year ended December 31, 2001
will be included in the Company's 2001 Annual Report. For further
information, the unaudited interim consolidated financial
statements and notes should be read in conjunction with Denison's
2000 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. Acquisition of Innovative Energy Ltd.
Effective November 8, 2001 the Company acquired 100% of Innovative
Energy Ltd. of Calgary. As a result of this acquisition, Denison
now owns 100% (previously 50%) of the Countess oil field and
Knappen gas field in southern Alberta and has acquired various
working and royalty interests in production in Alberta and
Saskatchewan and nearly 15,000 acres of prospective undeveloped
land for future evaluation and exploration. The acquisition has
been accounted for as a purchase and accordingly, these
consolidated financial statements include the financial position
as at December 31, 2001 and the results of operations from
November 8, 2001, the date of the acquisition. The net assets
acquired on November 8 from Innovative Energy Ltd. and the
consideration paid, were as follows:
/T/
Net assets acquired
-------------------
Assets (in thousands)
Current Assets $ 533
Oil and gas property, plant and equipment 5,597
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6,130
Liabilities
Bank indebtedness 2,285
Other current liabilities 913
Provision for site restoration 82
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3,280
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Net assets acquired $ 2,850
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Consideration
Cash $ 1,916
Non cash
Issue of 7,737,600 Common Shares net of |
