EX-99.2 3 d94074dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

 

LOGO

 

DENISON MINES CORP.

Condensed Interim Consolidated Financial Statements

for the three and nine months ending

September 30, 2015

DENISON MINES CORP.

Condensed Interim Consolidated Statements of Financial Position

(Unaudited—Expressed in thousands of U.S. dollars except for share amounts)

 

     At
September 30
2015		     At
December 31
2014		  

ASSETS

     

Current

     

Cash and cash equivalents (note 4)

    $ 7,061      $ 18,640   

Investments (note 7)

      7,527        4,381   

Trade and other receivables (note 5)

      8,140        9,411   

Inventories (note 6)

      2,280        2,240   

Prepaid expenses and other

      363        850   
  

 

 

    

 

 

  
     25,371        35,522   

Non-Current

     

Inventories-ore in stockpiles (note 6)

      1,572        1,760   

Investments (note 7)

      466        954   

Restricted cash and investments (note 8)

      2,212        2,068   

Property, plant and equipment (note 9)

      227,192        270,388   

Intangibles

      222        638   
  

 

 

    

 

 

  

Total assets

    $ 257,035      $ 311,330   
  

 

 

    

 

 

  

LIABILITIES

     

Current

     

Accounts payable and accrued liabilities

    $ 8,905      $ 10,050   

Current portion of long-term liabilities:

     

Post-employment benefits (note 10)

      225        259   

Reclamation obligations (note 11)

      614        706   

Debt obligations

      14        30   

Other liabilities (note 13)

      1,926        1,935   
  

 

 

    

 

 

  
     11,684        12,980   

Non-Current

     

Post-employment benefits (note 10)

      2,270        2,662   

Reclamation obligations (note 11)

      15,006        16,953   

Debt obligations

      —          9   

Other liabilities (note 13)

      694        841   

Deferred income tax liability

      17,457        21,826   
  

 

 

    

 

 

  

Total liabilities

      47,111        55,271   
  

 

 

    

 

 

  

EQUITY

     

Share capital (note 14)

      1,130,779        1,120,758   

Share purchase warrants (note 15)

      —          376   

Contributed surplus

      53,844        53,321   

Deficit

      (927,897 )      (892,537 ) 

Accumulated other comprehensive income (loss) (note 17)

      (46,802 )      (25,859 ) 
  

 

 

    

 

 

  

Total equity

      209,924        256,059   
  

 

 

    

 

 

  

Total liabilities and equity

    $ 257,035      $ 311,330   
  

 

 

    

 

 

  

Issued and outstanding common shares (note 14)

      518,438,669        505,868,894   
  

 

 

    

 

 

  

Subsequent events (note 23)

     

The accompanying notes are integral to the condensed interim consolidated financial statements

 

- 2 -

DENISON MINES CORP.

Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(Unaudited—Expressed in thousands of U.S. dollars except for share and per share amounts)

 

     Three Months Ended     Nine Months Ended  
     September 30     September 30     September 30     September 30  
     2015     2014     2015     2014  

REVENUES (note 19)

    $ 3,526      $ 2,351      $ 8,783      $ 6,883   
  

 

 

    

 

 

    

 

 

    

 

 

  

EXPENSES

         

Operating expenses (note 18)

      (2,701 )      (2,199 )      (7,069 )      (7,188 ) 

Mineral property exploration (note 19)

      (3,919 )      (3,429 )      (13,065 )      (13,614 ) 

General and administrative (note 19)

      (2,466 )      (1,535 )      (5,803 )      (6,041 ) 

Impairment-mineral properties

      —          —          —          (1,658 ) 

Foreign exchange income (expense)

      (16,294 )      1,487        (20,551 )      (8,566 ) 

Other income (expense) (note 18)

      64        (81 )      (539 )      561   
  

 

 

    

 

 

    

 

 

    

 

 

  
     (25,316 )      (5,757 )      (47,027 )      (36,506 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) before finance charges

      (21,790 )      (3,406 )      (38,244 )      (29,623 ) 

Finance income (expense) (note 18)

      (198 )      (128 )      (504 )      (133 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) before taxes

      (21,988 )      (3,534 )      (38,748 )      (29,756 ) 

Income tax recovery (expense) (note 21)

         

Current

      —          (5 )      —          (5 ) 

Deferred

      556        719        3,388        2,710   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss) for the period

    $ (21,432 )    $ (2,820 )    $ (35,360 )    $ (27,051 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Items that may be reclassified to income (loss):

         

Unrealized gain (loss) on investments-net of tax

      1        (1 )      1        9   

Foreign currency translation change

      (5,131 )      (13,864 )      (20,944 )      (8,770 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Comprehensive income (loss) for the period

    $ (26,562 )    $ (16,685 )    $ (56,303 )    $ (35,812 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss) per share:

         

Basic and diluted

    $ (0.04 )    $ (0.01 )    $ (0.07 )    $ (0.06 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Weighted-average number of shares outstanding (in thousands):

         

Basic and diluted

      518,439        500,921        511,740        490,731   
  

 

 

    

 

 

    

 

 

    

 

 

  

The accompanying notes are integral to the condensed interim consolidated financial statements

 

- 3 -

DENISON MINES CORP.

Condensed Interim Consolidated Statements of Changes in Equity

(Unaudited—Expressed in thousands of U.S. dollars)

 

     Nine Months Ended  
     September 30     September 30  
     2015     2014  

Share capital

     

Balance-beginning of period

    $ 1,120,758      $ 1,092,144   

Shares issued-net of issue costs

      11,318        12,849   

Flow-through share premium

      (2,028 )      (2,030 ) 

Shares issued on acquisition of Rockgate Capital Corp

      —          3,034   

Shares issued on acquisition of International Enexco Limited

      —          11,979   

Shares issued to settle payable and accrued liability obligations

      —          610   

Share options exercised-cash

      5        946   

Share options exercised-non cash

      4        525   

Share purchase warrants exercised-cash

      406        304   

Share purchase warrants exercised-non cash

      316        225   
  

 

 

    

 

 

  

Balance-end of period

      1,130,779        1,120,586   
  

 

 

    

 

 

  

Share purchase warrants

     

Balance-beginning of period

      376        616   

Warrants issued on acquisition of International Enexco Limited

      —          61   

Warrants exercised

      (316 )      (225 ) 

Warrants expired

      (60 )      —     
  

 

 

    

 

 

  

Balance-end of period

      —          452   
  

 

 

    

 

 

  

Contributed surplus

     

Balance-beginning of period

      53,321        52,943   

Stock-based compensation expense

      467        620   

Share options issued on acquisition of International Enexco Limited

      —          102   

Share options exercised-non cash

      (4 )      (525 ) 

Warrants expired

      60        —     
  

 

 

    

 

 

  

Balance-end of period

      53,844        53,140   
  

 

 

    

 

 

  

Deficit

     

Balance-beginning of period

      (892,537 )      (860,834 ) 

Net loss

      (35,360 )      (27,051 ) 
  

 

 

    

 

 

  

Balance-end of period

      (927,897 )      (887,885 ) 
  

 

 

    

 

 

  

Accumulated other comprehensive income (loss)

     

Balance-beginning of period

      (25,859 )      (7,729 ) 

Unrealized gain (loss) on investments

      1        9   

Foreign currency translation realized in net income

      (10 )      —     

Foreign currency translation

      (20,934 )      (8,770 ) 
  

 

 

    

 

 

  

Balance-end of period

      (46,802 )      (16,490 ) 
  

 

 

    

 

 

  

Total Equity

     

Balance-beginning of period

    $ 256,059      $ 277,140   
  

 

 

    

 

 

  

Balance-end of period

    $ 209,924      $ 269,803   
  

 

 

    

 

 

  

The accompanying notes are integral to the condensed interim consolidated financial statements

 

- 4 -

DENISON MINES CORP.

Condensed Interim Consolidated Statements of Cash Flow

(Unaudited—Expressed in thousands of U.S. dollars)

 

     Nine Months Ended  

CASH PROVIDED BY (USED IN):

    September 30
2015		     September 30
2014		  

OPERATING ACTIVITIES

     

Net income (loss) for the period

    $ (35,360 )    $ (27,051 ) 

Items not affecting cash:

     

Depletion, depreciation, amortization and accretion

      2,511        1,554   

Impairment-mineral properties

      —          1,658   

Stock-based compensation

      467        620   

Losses (gains) on asset disposals

      (67 )      (449 ) 

Losses (gains) on investments and restricted investments

      423        (81 ) 

Deferred income tax expense (recovery)

      (3,388 )      (2,710 ) 

Foreign exchange

      20,551        8,566   

Change in non-cash working capital items (note 18)

      (138 )      1,146   
  

 

 

    

 

 

  

Net cash provided by (used in) operating activities

      (15,001 )      (16,747 ) 
  

 

 

    

 

 

  

INVESTING ACTIVITIES

     

Acquisition of assets, net of cash and cash equivalents acquired:

     

Rockgate Capital Corp

      —          (57 ) 

International Enexco Limited

      —          (141 ) 

Sale and maturity of investments

      4,033        9,529   

Purchase of investments

      (8,134 )      (184 ) 

Expenditures on property, plant and equipment

      (1,871 )      (733 ) 

Proceeds on sale of property, plant and equipment

      97        265   

Decrease (increase) in restricted cash and investments

      (442 )      (27 ) 
  

 

 

    

 

 

  

Net cash provided by (used in) investing activities

      (6,317 )      8,652   
  

 

 

    

 

 

  

FINANCING ACTIVITIES

     

Increase (decrease) in debt obligations

      (21 )      (45 ) 

Issuance of common shares for:

     

New share issues-net of issue costs

      11,318        12,849   

Share options exercised

      5        946   

Share purchase warrants exercised

      406        304   
  

 

 

    

 

 

  

Net cash provided by (used in) financing activities

      11,708        14,054   
  

 

 

    

 

 

  

Increase (decrease) in cash and cash equivalents

      (9,610 )      5,959   

Foreign exchange effect on cash and cash equivalents

      (1,969 )      (1,237 ) 

Cash and cash equivalents, beginning of period

      18,640        21,786   
  

 

 

    

 

 

  

Cash and cash equivalents, end of period

    $ 7,061      $ 26,508   
  

 

 

    

 

 

  

The accompanying notes are integral to the condensed interim consolidated financial statements

 

- 5 -

DENISON MINES CORP.

Notes to the Condensed Interim Consolidated Financial Statements for the nine months ended September 30, 2015

(Unaudited—Expressed in U.S. dollars except for shares and per share amounts)

 

1.

NATURE OF OPERATIONS

Denison Mines Corp. and its subsidiary companies and joint arrangements (collectively, the “Company”) are engaged in uranium mining and related activities, including acquisition, exploration and development of uranium bearing properties, extraction, processing and selling of uranium.

The Company has a 22.5% interest in the McClean Lake Joint Venture (“MLJV”) (which includes the McClean Lake mill) and a 25.17% interest in the Midwest Joint Venture (“MWJV”), both of which are located in the Athabasca Basin of Saskatchewan, Canada. The McClean Lake mill provides toll milling services to the Cigar Lake Joint Venture (“CLJV”) under the terms of a toll milling agreement between the parties. In addition, the Company has varying ownership interests in a number of development and exploration projects located in Canada, Mali, Namibia, Zambia and Mongolia.

The Company provides mine decommissioning and decommissioned site monitoring services to third parties through its Denison Environmental Services (“DES”) division and is also the manager of Uranium Participation Corporation (“UPC”), a publicly-listed investment holding company formed to invest substantially all of its assets in uranium oxide concentrates (“U3O8”) and uranium hexafluoride (“UF6”). The Company has no ownership interest in UPC but receives fees for management services and commissions from the purchase and sale of U3O8 and UF6 by UPC.

Denison Mines Corp. (“DMC”) is incorporated under the Business Corporations Act (Ontario) and domiciled in Canada. The address of its registered head office is 40 University Avenue, Suite 1100, Toronto, Ontario, Canada, M5J 1T1.

 

2.

BASIS OF PRESENTATION

These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. The condensed interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements for the year ended December 31, 2014.

The Company’s presentation currency is U.S. dollars.

These financial statements were approved by the board of directors for issue on November 5, 2015.

 

3.

SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies followed in these condensed interim consolidated financial statements are consistent with those applied in the Company’s audited annual consolidated financial statements for the year ended December 31, 2014.

Accounting Standards Issued But Not Yet Applied

The Company has not yet adopted the following new accounting pronouncements which are effective for fiscal periods of the Company beginning on or after January 1, 2016:

International Financial Reporting Standard 9, Financial Instruments (“IFRS 9”)

In July 2014, the IASB published the final version of IFRS 9 Financial Instruments (“IFRS 9”), which brings together the classification, measurement, impairment and hedge accounting phases of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 replaces the multiple classifications for financial assets in IAS 39 with a single principle based approach for determining the classification of financial assets based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. The final version of IFRS 9 is effective for periods beginning on or after January 1, 2018; however, it is available for early adoption.

The Company has not evaluated the impact of adopting this standard.

 

- 6 -

International Financial Reporting Standard 15, Revenue from Contracts with Customers (“IFRS 15”)

IFRS 15 deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognized when a customer obtains control of a good or service. The standard replaces IAS 18 “Revenue” and IAS 11“Construction Contracts” and related interpretations. The standard is effective for annual periods beginning on or after January 1, 2018 and earlier application is permitted.

The Company has not evaluated the impact of adopting this standard.

 

4.

CASH AND CASH EQUIVALENTS

The cash and cash equivalent balance consists of:

 

(in thousands)

    At
September 30
2015		      At
December 31
2014		  

Cash

    $ 2,855       $ 2,265   

Cash in MLJV and MWJV

      549         885   

Cash equivalents

      3,657         15,490   
  

 

 

     

 

 

  
   $ 7,061       $ 18,640   
  

 

 

     

 

 

  

 

5.

TRADE AND OTHER RECEIVABLES

The trade and other receivables balance consists of:

 

(in thousands)

    At
September 30
2015		      At
December 31
2014		  

Trade receivables-other

    $ 2,598       $ 2,138   

Receivables in MLJV and MWJV

      5,117         7,127   

Sales tax receivables

      271         131   

Sundry receivables

      154         15   
  

 

 

     

 

 

  
   $ 8,140       $ 9,411   
  

 

 

     

 

 

  

 

6.

INVENTORIES

The inventories balance consists of:

 

(in thousands)

    At
September 30
2015		      At
December 31
2014		  

Uranium concentrates and work-in-progress

    $ 399       $ 433   

Inventory of ore in stockpiles

      1,572         1,834   

Mine and mill supplies in MLJV

      1,881         1,733   
  

 

 

     

 

 

  
   $ 3,852       $ 4,000   
  

 

 

     

 

 

  

Inventories-by duration:

      

Current

    $ 2,280       $ 2,240   

Long-term-ore in stockpiles

      1,572         1,760   
  

 

 

     

 

 

  
   $ 3,852       $ 4,000   
  

 

 

     

 

 

  

 

- 7 -

7.

INVESTMENTS

The investments balance consists of:

 

(in thousands)

    At
September 30
2015		      At
December 31
2014		  

Investments:

      

Equity instruments-fair value through profit and loss

    $ 449       $ 932   

Equity instruments-available for sale

      17         22   

Debt instruments-fair value through profit and loss

      7,527         4,381   
  

 

 

     

 

 

  
   $ 7,993       $ 5,335   
  

 

 

     

 

 

  

Investments-by duration:

      

Current

    $ 7,527       $ 4,381   

Long-term

      466         954   
  

 

 

     

 

 

  
   $ 7,993       $ 5,335   
  

 

 

     

 

 

  

During the nine months ended September 30, 2015, the Company purchased debt instruments at a cost of $8,134,000. In addition, $4,029,000 of debt instruments matured and the proceeds were transferred to cash and equivalents.

 

8.

RESTRICTED CASH AND INVESTMENTS

The Company has certain restricted cash and investments deposited to collateralize a portion of its reclamation obligations. The restricted cash and investments balance consists of:

 

(in thousands)

    At
September 30
2015		      At
December 31
2014		  

Cash

    $ 166       $ 42   

Cash equivalents

      375         104   

Investments

      1,671         1,922   
  

 

 

     

 

 

  
   $ 2,212       $ 2,068   
  

 

 

     

 

 

  

Restricted cash and investments-by item:

      

Elliot Lake reclamation trust fund

    $ 2,212       $ 2,068   
  

 

 

     

 

 

  
   $ 2,212       $ 2,068   
  

 

 

     

 

 

  

Elliot Lake Reclamation Trust Fund

During the nine months ended September 30, 2015, the Company deposited an additional $832,000 (CAD$1,042,000) into the Elliot Lake Reclamation Trust Fund and withdrew $392,000 (CAD$492,000).

 

- 8 -

9.

PROPERTY, PLANT AND EQUIPMENT

The property, plant and equipment balance consists of:

 

(in thousands)

    At
September 30
2015		     At
December 31
2014		  

Plant and equipment:

     

Cost

    $ 73,459      $ 82,980   

Construction-in-progress

      4,775        6,960   

Accumulated depreciation

      (11,638 )      (12,205 ) 
  

 

 

    

 

 

  

Net book value

    $ 66,596      $ 77,735   
  

 

 

    

 

 

  

Mineral properties:

     

Cost

    $ 160,768      $ 192,851   

Accumulated amortization

      (172 )      (198 ) 
  

 

 

    

 

 

  

Net book value

    $ 160,596      $ 192,653   
  

 

 

    

 

 

  

Total net book value

    $ 227,192      $ 270,388   
  

 

 

    

 

 

  

The property, plant and equipment continuity summary is as follows:

 

(in thousands)    Cost     Accumulated
Amortization /
Depreciation		     Net
Book
Value		  

Plant and equipment:

       

Balance-December 31, 2014

    $ 89,940      $ (12,205 )    $ 77,735   

Additions

      542        —          542   

Amortization

      —          (62 )      (62 ) 

Depreciation

      —          (1,446 )      (1,446 ) 

Disposals

      (255 )      225        (30 ) 

Foreign exchange

      (11,993 )      1,850        (10,143 ) 
  

 

 

    

 

 

    

 

 

  

Balance-September 30, 2015

    $ 78,234      $ (11,638 )    $ 66,596   
  

 

 

    

 

 

    

 

 

  

Mineral properties:

       

Balance-December 31, 2014

    $ 192,851      $ (198 )    $ 192,653   

Additions

      1,377        —          1,377   

Foreign exchange

      (33,460 )      26        (33,434 ) 
  

 

 

    

 

 

    

 

 

  

Balance-September 30, 2015

    $ 160,768      $ (172 )    $ 160,596   
  

 

 

    

 

 

    

 

 

  

Plant and Equipment – Mining

The Company has a 22.5% interest in the McClean Lake mill located in the Athabasca Basin of Saskatchewan, Canada. A toll milling agreement has been signed with the participants in the CLJV that provides for the processing of the future output of the Cigar Lake mine at the McClean Lake mill, for which the owners of the McClean Lake mill receive a toll milling fee and other benefits. In determining the amortization rate for the McClean Lake mill, the amount to be amortized has been adjusted to include Denison’s expected share of mill feed related to the CLJV toll milling contract.

Plant and Equipment – Services and Other

The environmental services division of the Company provides mine decommissioning and decommissioned site monitoring services for third parties.

Mineral Properties

The Company has various interests in development and exploration projects located in Canada, Mali, Namibia, Zambia and Mongolia which are held directly or through option or various contractual agreements.

 

- 9 -

Canada Mining Segment

In February 2015, SeqUr Exploration Inc. terminated its option to earn an interest in the Jasper Lake property.

In July 2015, the Company entered into a definitive arrangement agreement (the “Fission Arrangement”) to acquire all of the outstanding shares, options and warrants of Fission Uranium Corp (“FCU”). FCU’s principal uranium asset is its 100% owned Patterson Lake South project located in Saskatchewan, Canada. Completion of the Fission Arrangement was subject to Denison and FCU shareholder approval and the satisfaction of other customary conditions. In October 2015, Denison and Fission agreed to terminate the Fission Arrangement as the required FCU shareholder approval was not obtained. As at September 30, 2015, Denison has incurred $1,181,000 of transaction costs related to the Fission Arrangement which is included in “general and administrative expenses” in the consolidated statement of income (loss) (see note 23).

In September 2015, the Company increased its interest in the Waterbury Lake property to 61.55% under the terms of the dilution provisions in the agreements governing the project (see note 20).

Asia Mining Segment-Mongolia

In July 2015, the Company concluded its strategic review of alternatives for its interest in the Gurvan Saihan Joint Venture (“GSJV”) and entered into an agreement with Uranium Industry (“UI”), a Czech Republic entity, to dispose of its 85% interest in the GSJV for cash consideration of $20,000,000, payable upon the achievement of specified milestones and subject to various conditions on closing. The sale did not close as expected by September 8, as certain closing conditions were not met. As at September 30, 2015, Denison remained the owner of its 85% interest in the GSJV and continues to pursue the sale of its interest to UI.

 

10.

POST-EMPLOYMENT BENEFITS

The post-employment benefits balance consists of:

 

(in thousands)

    At
September 30
2015		      At
December 31
2014		  

Accrued benefit obligation

    $ 2,495       $ 2,921   
  

 

 

     

 

 

  
   $ 2,495       $ 2,921   
  

 

 

     

 

 

  

Post-employment benefits liability-by duration:

      

Current

    $ 225       $ 259   

Non-current

      2,270         2,662   
  

 

 

     

 

 

  
   $ 2,495       $ 2,921   
  

 

 

     

 

 

  

The post-employment benefits continuity summary is as follows:

 

(in thousands)       

Balance-December 31, 2014

    $ 2,921   

Benefits paid

      (120 ) 

Interest cost

      72   

Foreign exchange

      (378 ) 
  

 

 

  

Balance-September 30, 2015

    $ 2,495   
  

 

 

  

 

- 10 -

11.

RECLAMATION OBLIGATIONS

The reclamation obligations balance consists of:

 

(in thousands)    At
September 30
2015		      At
December 31
2014		  

Reclamation liability-by location:

      

Elliot Lake

    $ 9,817       $ 11,234   

McClean and Midwest Joint Ventures

      5,787         6,406   

Other

      16         19   
  

 

 

     

 

 

  
   $ 15,620       $ 17,659   
  

 

 

     

 

 

  

Reclamation and remediation liability-by duration:

      

Current

      614         706   

Non-current

      15,006         16,953   
  

 

 

     

 

 

  
   $ 15,620       $ 17,659   
  

 

 

     

 

 

  

The reclamation obligations continuity summary is as follows:

 

(in thousands)       

Balance-December 31, 2014

    $ 17,659   

Accretion

      636   

Expenditures incurred

      (350 ) 

Foreign exchange

      (2,325 ) 
  

 

 

  

Balance-September 30, 2015

    $ 15,620   
  

 

 

  

Site Restoration: Elliot Lake

Spending on restoration activities at the Elliot Lake site is funded from monies in the Elliot Lake Reclamation Trust fund (see note 8).

Site Restoration: McClean Lake Joint Venture and Midwest Joint Venture

Under the Mineral Industry Environmental Protection Regulations (1996), the Company is required to provide its pro-rata share of financial assurances to the province of Saskatchewan relating to future decommissioning and reclamation plans that have been filed and approved by the applicable regulatory authorities. As at September 30, 2015, the Company has provided irrevocable standby letters of credit, from a chartered bank, in favour of Saskatchewan Environment, totalling CAD$9,698,000 relating to an approved reclamation plan dated October 2009. An updated reclamation plan dated November 2014 has been submitted and is currently under review by the applicable regulatory authorities. Once approved, the Company expects to increase its pro-rata share of financial assurances to the province by CAD$12,748,000 to approximately CAD$22,446,000.

 

12.

DEBT FACILITIES

Line of Credit

The Company’s current credit facility has a maturity date of January 31, 2016 and allows for credit to be extended to the Company for up to CAD$24,000,000. Use of the facility is restricted to non-financial letters of credit in support of reclamation obligations (see note 11).

At September 30, 2015, the Company has no outstanding borrowings under the facility (December 31, 2014—$nil) and is in compliance with its facility covenants. At September 30, 2015, approximately CAD$9,698,000 (December 31, 2014: CAD$9,698,000) of the facility is being utilized as collateral for certain letters of credit. During the nine months ended September 30, 2015, the Company did not incur any interest under the facility but has incurred letter of credit and standby fees of $136,000 and $60,000, respectively.

 

- 11 -

13.

OTHER LIABILITIES

The other liabilities balance consists of:

 

(in thousands)

    At
September 30
2015		      At
December 31
2014		  

Unamortized fair value of toll milling contracts

    $ 732       $ 861   

Flow-through share premium obligation (note 14)

      1,888         1,915   
  

 

 

     

 

 

  
   $ 2,620       $ 2,776   
  

 

 

     

 

 

  

Other long-term liabilities-by duration:

      

Current

    $ 1,926       $ 1,935   

Non-current

      694         841   
  

 

 

     

 

 

  
   $ 2,620       $ 2,776   
  

 

 

     

 

 

  

 

14.

SHARE CAPITAL

Denison is authorized to issue an unlimited number of common shares without par value. A continuity summary of the issued and outstanding common shares and the associated dollar amounts is presented below:

 

(in thousands except share amounts)

    Number of
Common Shares		         

Balance at December 31, 2014

      505,868,894       $ 1,120,758   
  

 

 

     

 

 

  

Issued for cash:

      

Share issue proceeds

      12,000,000         12,069   

Share issue costs

      —           (751 ) 

Share options exercised

      7,100         5   

Share purchase warrants exercised

      562,675         406   

Share options exercised-fair value adjustment

      —           4   

Share purchase warrants exercised-fair value adjustment

      —           316   

Flow-through share premium liability

      —           (2,028 ) 
  

 

 

     

 

 

  
     12,569,775         10,021   
  

 

 

     

 

 

  

Balance at September 30, 2015

      518,438,669       $ 1,130,779   
  

 

 

     

 

 

  

New Issues

In May 2015, the Company completed a private placement of 12,000,000 flow-through common shares at a price of CAD$1.25 per share for gross proceeds of $12,069,000 (CAD$15,000,000). The income tax benefits of this issue will be renounced to subscribers with an effective date no later than December 31, 2015. The related flow-through share premium liability is included as a component of other liabilities on the balance sheet at September 30, 2015.

Flow-Through Share Issues

The Company finances a portion of its exploration programs through the use of flow-through share issuances. Canadian income tax deductions relating to these expenditures are claimable by the investors and not by the Company.

As at September 30, 2015, the Company estimates that it has satisfied its obligation to spend CAD$14,997,000 on eligible exploration expenditures as a result of the issuance of flow-through shares in August 2014. The Company renounced the income tax benefits of this issue in February 2015, with an effective date of renunciation to its subscribers of December 31, 2014. In conjunction with the renunciation, the flow-through share premium liability has been reversed and recognized as part of the deferred tax recovery (see notes 13 and 21).

 

- 12 -

As at September 30, 2015, the Company estimates that it has incurred CAD$373,000 of its obligation to spend CAD$15,000,000 on eligible exploration expenditures as a result of the issuance of flow-through shares in May 2015.

 

15.

WARRANTS

A continuity summary of the issued and outstanding share purchase warrants in terms of common shares of the Company and associated dollar amount is presented below:

 

(in thousands except share amounts)

    Weighted
Average
Exercise
Price Per
Share (CAD$)		      Number of
Common
Shares
Issuable		      Fair
Value
Amount		  

Balance outstanding at December 31, 2014

    $ 1.17         1,079,802       $ 376   

Warrants exercised

      0.84         (562,675 )       (316 ) 

Warrants expired

      1.54         (517,127 )       (60 ) 
  

 

 

     

 

 

     

 

 

  

Balance outstanding at September 30, 2015

    $ —           —           —     
  

 

 

     

 

 

     

 

 

  

 

16.

STOCK OPTIONS

A continuity summary of the stock options granted under the Company’s stock-based compensation plan is presented below:

 

     Number of
Common
Shares		      Weighted-
Average
Exercise
Price per
Share
(CAD$)		  

Stock options outstanding—beginning of period

      6,179,574       $ 1.80   

Granted

      1,645,000         1.09   

Exercised (1)

      (7,100 )       0.71   

Expiries

      (612,784 )       1.92   

Forfeitures

      (147,480 )       1.93   
  

 

 

     

 

 

  

Stock options outstanding—end of period

      7,057,210       $ 1.62   
  

 

 

     

 

 

  

Stock options exercisable—end of period

      4,834,210       $ 1.78   
  

 

 

     

 

 

  

 

  (1)

The weighted average share price at the date of exercise was CAD$1.07.

A summary of the Company’s stock options outstanding at September 30, 2015 is presented below:

 

Range of Exercise

Prices per Share

(CAD$)

    Weighted
Average
Remaining
Contractual
Life
(Years)		      Number of
Common
Shares		      Weighted-
Average
Exercise
Price per
Share
(CAD$)		  

Stock options outstanding

         

$ 0.38 to $ 2.49

      2.79         6,141,424       $ 1.32   

$ 2.50 to $ 4.99

      0.44         670,306         3.19   

$ 5.00 to $ 5.67

      0.63         245,480         5.02   
  

 

 

     

 

 

     

 

 

  

Stock options outstanding— end of period

      2.49         7,057,210       $ 1.62   
  

 

 

     

 

 

     

 

 

  

Options outstanding at September 30, 2015 expire between December 2015 and March 2020.

 

- 13 -

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model. The following table outlines the range of assumptions used in the model to determine the fair value of options granted:

 

     Nine Months Ended
September 30, 2015		  

Risk-free interest rate

      0.56% – 0.79%   

Expected stock price volatility

      46.96% – 47.00%   

Expected life

      3.6 years   

Estimated forfeiture rate

      3.40%   

Expected dividend yield

      —     

Fair value per share under options granted

      CAD$0.35 – CAD$0.39   

The fair values of stock options with vesting provisions are amortized on a graded method basis as stock-based compensation expense over the applicable vesting periods. Included in the statement of income (loss) is stock-based compensation of $136,000 and $467,000 for the three and nine months ended September 30, 2015 and $204,000 and $620,000 for the three and nine months ended September 30, 2014. At September 30, 2015, an additional $349,000 in stock-based compensation expense remains to be recognized up until March 2017.

 

17.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The accumulated other comprehensive income (loss) balance consists of:

 

(in thousands)    At
September 30
2015		      At
December 31
2014		  

Cumulative foreign currency translation

    $ (46,961 )     $ (26,017 ) 

Unamortized experience gain-post employment liability

      

Gross

      206         206   

Tax effect

      (56 )       (56 ) 

Unrealized gains (losses) on investments

      

Gross

      9         8   
  

 

 

     

 

 

  
   $ (46,802 )     $ (25,859 ) 
  

 

 

     

 

 

  

 

- 14 -

18.

SUPPLEMENTAL FINANCIAL INFORMATION

The components of operating expenses are as follows:

 

     Three Months Ended     Nine Months Ended  
     September 30     September 30     September 30     September 30  
(in thousands)    2015     2014     2015     2014  

Cost of goods and services sold:

         

Operating Overheads:

         

Mining, other development expense

    $ (253 )    $ (366 )    $ (1,026 )    $ (2,295 ) 

Milling, conversion expense

      (509 )      (9 )      (979 )      (32 ) 

Mill feed cost:

         

-Stockpile depletion

      —          (12 )      (24 )      (12 ) 

Less absorption:

         

-Stockpiles, mineral properties

      88        111        542        628   

-Concentrates

      —          13        24        13   

Cost of services

      (2,002 )      (1,932 )      (5,530 )      (5,479 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Cost of goods and services sold

      (2,676 )      (2,195 )      (6,993 )      (7,177 ) 

Reclamation asset amortization

      (20 )      (4 )      (62 )      (11 ) 

Selling expenses

      (5 )      —          (14 )      —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating expenses

    $ (2,701 )    $ (2,199 )    $ (7,069 )    $ (7,188 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

The components of other income (expense) are as follows:

 

     Three Months Ended     Nine Months Ended  
     September 30      September 30     September 30     September 30  
(in thousands)    2015      2014     2015     2014  

Gains (losses) on:

          

Disposal of property, plant and equipment

      —           —          67        449   

Disposal of equity investments

      —           (7 )      —          (7 ) 

Investment fair value through profit (loss)

      57         (31 )      (423 )      88   

Other

      7         (43 )      (183 )      31   
  

 

 

     

 

 

    

 

 

    

 

 

  

Other income (expense)

    $ 64       $ (81 )    $ (539 )    $ 561   
  

 

 

     

 

 

    

 

 

    

 

 

  

The components of finance income (expense) are as follows:

 

     Three Months Ended     Nine Months Ended  
     September 30     September 30     September 30     September 30  
(in thousands)    2015     2014     2015     2014  

Interest income

    $ 30      $ 84      $ 205      $ 500   

Interest expense

      (1 )      (1 )      (1 )      (2 ) 

Accretion expense-reclamation obligations

      (204 )      (183 )      (636 )      (545 ) 

Accretion expense-post-employment benefits

      (23 )      (28 )      (72 )      (86 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Finance income (expense)

    $ (198 )    $ (128 )    $ (504 )    $ (133 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

- 15 -

A summary of depreciation expense recognized in the statement of income (loss) is as follows:

 

     Three Months Ended     Nine Months Ended  
     September 30     September 30     September 30     September 30  
(in thousands)    2015     2014     2015     2014  

Operating expenses:

         

Mining, other development expense

    $ (44 )    $ (74 )    $ (160 )    $ (234 ) 

Milling, conversion expense

      (509 )      (2 )      (979 )      (4 ) 

Cost of services

      (66 )      (62 )      (193 )      (185 ) 

Mineral property exploration

      (26 )      (25 )      (78 )      (101 ) 

General and administrative

      (12 )      (16 )      (36 )      (50 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Depreciation expense-gross

    $ (657 )    $ (179 )    $ (1,446 )    $ (574 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

A summary of employee benefits expense recognized in the statement of income (loss) is as follows:

 

     Three Months Ended     Nine Months Ended  
     September 30     September 30     September 30     September 30  
(in thousands)    2015     2014     2015     2014  

Salaries and short-term employee benefits

    $ (1,724 )    $ (1,895 )    $ (5,578 )    $ (6,530 ) 

Share-based compensation

      (136 )      (204 )      (467 )      (620 ) 

Termination benefits

      (86 )      (94 )      (217 )      (310 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Employee benefits expense

    $ (1,946 )    $ (2,193 )    $ (6,262 )    $ (7,460 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

The change in non-cash working capital items in the consolidated statements of cash flows is as follows:

 

     Nine Months Ended  
     September 30     September 30  
(in thousands)    2015     2014  

Change in non-cash working capital items:

     

Trade and other receivables

    $ 107      $ (1,071 ) 

Inventories

      (388 )      7   

Prepaid expenses and other assets

      399        243   

Accounts payable and accrued liabilities

      214        1,726   

Post-employment benefits

      (120 )      (187 ) 

Reclamation obligations

      (350 )      428   
  

 

 

    

 

 

  

Change in non-cash working capital items

    $ (138 )    $ 1,146   
  

 

 

    

 

 

  

 

19.

SEGMENTED INFORMATION

Business Segments

The Company operates in two primary segments – the Mining segment and the Services and Other segment. The Mining segment, which has been further subdivided by major geographic regions, includes activities related to exploration, evaluation and development, mining, milling and the sale of mineral concentrates. The Services and Other segment includes the results of the Company’s environmental services business, management fees and commission income earned from UPC and general corporate expenses not allocated to the other segments.

 

- 16 -

For the nine months ended September 30, 2015, business segment results were as follows:

 

(in thousands)    Canada
Mining		     Africa
Mining		     Asia
Mining		     Services
and Other		     Total  

Statement of Operations:

           

Revenues

      1,904        —          —          6,879        8,783   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Expenses:

           

Operating expenses

      (1,283 )      (241 )      (15 )      (5,530 )      (7,069 ) 

Mineral property exploration

      (12,007 )      (677 )      (381 )      —          (13,065 ) 

General and administrative

      (17 )      (471 )      (544 )      (4,771 )      (5,803 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     (13,307 )      (1,389 )      (940 )      (10,301 )      (25,937 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Segment income (loss)

      (11,403 )      (1,389 )      (940 )      (3,422 )      (17,154 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Revenues – supplemental:

           

Environmental services

      —          —          —          5,527        5,527   

Management fees and commissions

      —          —          —          1,352        1,352   

Toll milling services

      1,904        —          —          —          1,904   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     1,904        —          —          6,879        8,783   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Capital additions:

           

Property, plant and equipment

      982        318        186        433        1,919   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Long-lived assets:

           

Plant and equipment

           

Cost

      72,784        1,590        260        3,600        78,234   

Accumulated depreciation

      (8,346 )      (1,283 )      (168 )      (1,841 )      (11,638 ) 

Mineral properties

      126,382        28,090        6,124        —          160,596   

Intangibles

      —          —          —          222        222   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     190,820        28,397        6,216        1,981        227,414   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

For the three months ended September 30, 2015, business segment results were as follows:

 

(in thousands)    Canada
Mining		     Africa
Mining		     Asia
Mining		     Services
and Other		     Total  

Statement of Operations:

           

Revenues

      982        —          —          2,544        3,526   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Expenses:

           

Operating expenses

      (617 )      (79 )      (3 )      (2,002 )      (2,701 ) 

Mineral property exploration

      (3,753 )      (153 )      (13 )      —          (3,919 ) 

General and administrative

      (1 )      (131 )      (246 )      (2,088 )      (2,466 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     (4,371 )      (363 )      (262 )      (4,090 )      (9,086 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Segment income (loss)

      (3,389 )      (363 )      (262 )      (1,546 )      (5,560 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Revenues – supplemental:

           

Environmental services

      —          —          —          2,113        2,113   

Management fees and commissions

      —          —          —          431        431   

Toll milling services

      982        —          —          —          982   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     982        —          —          2,544        3,526   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

- 17 -

For the nine months ended September 30, 2014, business segment results were as follows:

 

(in thousands)    Canada
Mining		     Africa
Mining		     Asia
Mining		     Services
and Other		     Total  

Statement of Operations:

           

Revenues

      —          —          —          6,883        6,883   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Expenses:

           

Operating expenses

      (397 )      (1,312 )      —          (5,479 )      (7,188 ) 

Mineral property exploration

      (12,593 )      (689 )      (332 )      —          (13,614 ) 

General and administrative

      (11 )      (853 )      (746 )      (4,431 )      (6,041 ) 

Impairment–mineral properties (note 9)

      (1,658 )      —          —          —          (1,658 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     (14,659 )      (2,854 )      (1,078 )      (9,910 )      (28,501 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Segment income (loss)

      (14,659 )      (2,854 )      (1,078 )      (3,027 )      (21,618 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Revenues – supplemental:

           

Environmental services

      —          —          —          5,263        5,263   

Management fees and commissions

      —          —          —          1,620        1,620   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     —          —          —          6,883        6,883   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Capital additions:

           

Property, plant and equipment

      163        483        90        81        817   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Long-lived assets:

           

Plant and equipment

           

Cost

      83,030        2,364        348        3,813        89,555   

Accumulated depreciation

      (8,515 )      (1,737 )      (233 )      (1,912 )      (12,397 ) 

Mineral properties

      149,568        43,063        6,449        —          199,080   

Intangibles

      —          —          —          793        793   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     224,083        43,690        6,564        2,694        277,031   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

For the three months ended September 30, 2014, business segment results were as follows:

 

(in thousands)    Canada
Mining		     Africa
Mining		     Asia
Mining		     Services
and Other		     Total  

Statement of Operations:

           

Revenues

      —          —          —          2,351        2,351   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Expenses:

           

Operating expenses

      (140 )      (127 )      —          (1,932 )      (2,199 ) 

Mineral property exploration

      (3,099 )      (288 )      (42 )      —          (3,429 ) 

General and administrative

      (1 )      (246 )      (115 )      (1,173 )      (1,535 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     (3,240 )      (661 )      (157 )      (3,105 )      (7,163 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Segment income (loss)

      (3,240 )      (661 )      (157 )      (754 )      (4,812 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Revenues – supplemental:

           

Environmental services

      —          —          —          1,956        1,956   

Management fees and commissions

      —          —          —          395        395   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     —          —          —          2,351        2,351   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

 

- 18 -

Revenue Concentration

The Company’s business is such that, at any given time, it sells its environmental and other services to a relatively small number of customers. During the nine months ended September 30, 2015, two customers from the services and other segment and one customer from the mining segment accounted for approximately 84% of total revenues consisting of 46%, 22% and 16% individually. During the nine months ended September 30, 2014, four customers from the services and other segment accounted for approximately 96% of total revenues consisting of 52%, 23%, 11% and 10% individually.

 

20.

RELATED PARTY TRANSACTIONS

Uranium Participation Corporation

The following transactions were incurred with UPC for the periods noted:

 

     Three Months Ended      Nine Months Ended  
     September 30      September 30      September 30      September 30  
(in thousands)    2015      2014      2015      2014  

Revenue:

            

Management fees

    $ 431       $ 395       $ 1,330       $ 1,175   

Commission fees

      —           —           22         445   
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 431       $ 395       $ 1,352       $ 1,620   
  

 

 

     

 

 

     

 

 

     

 

 

  

At September 30, 2015, accounts receivable includes $161,000 (December 31, 2014: $123,000) due from UPC with respect to the fees and transactions indicated above.

Korea Electric Power Corporation (“KEPCO”)

As at September 30, 2015, KEPCO holds 58,284,000 shares of Denison representing a share interest of approximately 11.2%. KEPCO is also the majority member of the Korea Waterbury Uranium Limited Partnership (“KWULP”).

In January 2014, Denison agreed to allow its partner in the Waterbury Lake project, KWULP, to defer its funding obligations to Waterbury Lake Uranium Corporation (“WLUC”) and Waterbury Lake Uranium Limited Partnership (“WLULP”) until September 30, 2015 and not be diluted as per the dilution provisions in the relevant agreements in exchange for allowing Denison to authorize spending programs without obtaining the approval of 75% of the voting interest. As at September 30, 2015, KWULP had a deferred funding obligation to WLUC and WLULP of CAD$1,826,000.

KWULP has notified Denison that it has elected to dilute its interest in the Waterbury Lake project and that it will not fund its deferred funding obligation to WLUC and WLULP. As a result, Denison is entitled to an additional 1.55% interest in the Waterbury Lake project and Denison will continue to be able to authorize funding programs without obtaining the approval of 75% of the voting interest up to September 30, 2016. The acquisition of the additional 1.55% in Waterbury Lake has been accounted for using an effective date of September 30, 2015 and has resulted in Denison recording its increased pro-rata share of the net assets of Waterbury Lake, the majority of which relates to an addition to mineral property assets of $835,000.

Other

During the nine months ended September 30, 2015, the Company incurred investor relations, administrative service fees and other expenses of $138,000 (September 30, 2014: $42,000) with Namdo Management Services Ltd, which shares a common director with Denison. These services were incurred in the normal course of operating a public company. At September 30, 2015, an amount of $nil (December 31, 2014: $nil) was due to this company.

During the nine months ended September 30, 2015, the Company incurred legal fees of $445,000 (September 30, 2014: $273,000) with Cassels Brock & Blackwell, LLP, a law firm of which a member of Denison’s Board of Directors is a partner. In the current year, the services and associated costs are mainly related to the transaction with Fission Uranium Corp (see note 9). In the nine months of the prior year, the services and associated costs were mainly related to the acquisition of International Enexco Ltd. and internal re-organization activities done by the Company. At September 30, 2015, an amount of $177,000 (December 31, 2014: $1,000) is due to this legal firm.

 

- 19 -

Executive services of $33,000 and $61,000 were provided by the Company during the three and nine months ended September 30, 2014 to Lundin Gold Inc. No similar services were provided during 2015. At September 30, 2015, an amount of $nil (December 31, 2014: $44,000) was due to Denison.

Compensation of Key Management Personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. Key management personnel include the Company’s executive officers, vice-presidents and members of its Board of Directors.

The following compensation was awarded to key management personnel:

 

     Three Months Ended      Nine Months Ended  
     September 30      September 30      September 30      September 30  
(in thousands)    2015      2014      2015      2014  

Salaries and short-term employee benefits

    $ (307 )     $ (315 )     $ (1,123 )     $ (1,294 ) 

Share-based compensation

      (89 )       (129 )       (296 )       (396 ) 

Termination benefits

      —           —           —           (158 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Key management personnel compensation

    $ (396 )     $ (444 )     $ (1,419 )     $ (1,848 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

 

21.

INCOME TAXES

For the nine months ended September 30, 2015, Denison has recognized deferred tax recoveries of $3,388,000. The deferred tax recovery includes the recognition of previously unrecognized Canadian tax assets of $3,200,000 relating to the February 2015 renunciation of the tax benefits associated with the Company’s CAD$14,997,000 flow-through share issue in August 2014.

 

22.

FAIR VALUE OF FINANCIAL INSTRUMENTS

IFRS requires disclosures about the inputs to fair value measurements, including their classification within a hierarchy that prioritizes the inputs to fair value measurement. The three levels of the fair value hierarchy are:

 

  •  

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

 

  •  

Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

 

  •  

Level 3 – Inputs that are not based on observable market data.

The fair value of financial instruments which trade in active markets (such as equity instruments) is based on quoted market prices at the balance sheet date. The quoted market price used to value financial assets held by the Company is the current closing price.

Except as otherwise disclosed, the fair values of cash and cash equivalents, trade and other receivables, accounts payable and accrued liabilities, restricted cash and cash equivalents and debt obligations approximate their carrying values as a result of the short-term nature of the instruments, or the variable interest rate associated with the instruments, or the fixed interest rate of the instruments being similar to market rates.

 

- 20 -

The following table illustrates the classification of the Company’s financial assets within the fair value hierarchy as at September 30, 2015 and December 31, 2014:

 

(in thousands)    Financial
Instrument
Category(1)		      Fair
Value
Hierarchy		      September 30
2015 Fair
Value		      December 31,
2014 Fair
Value		  

Financial Assets:

            

Cash and equivalents

      Category D          $ 7,061       $ 18,640   

Trade and other receivables

      Category D            8,140         9,411   

Investments

            

Equity instruments

      Category A         Level 1         430         916   

Equity instruments

      Category A         Level 2         17         16   

Equity instruments

      Category B         Level 1         19         22   

Debt instruments

      Category A         Level 1         7,527         4,381   

Restricted cash and equivalents

            

Elliot Lake reclamation trust fund

      Category C            2,212         2,068   
        

 

 

     

 

 

  
         $ 25,406       $ 35,454   
        

 

 

     

 

 

  

Financial Liabilities:

            

Account payable and accrued liabilities

      Category E            8,905         10,050   

Debt obligations

      Category E            14         39   
        

 

 

     

 

 

  
         $ 8,919       $ 10,089   
        

 

 

     

 

 

  

 

  (1)

Financial instrument designations are as follows: Category A=Financial assets and liabilities at fair value through profit and loss; Category B=Available for sale investments; Category C=Held to maturity investments; Category D=Loans and receivables; and Category E=Financial liabilities at amortized cost.

 

23.

SUBSEQUENT EVENTS

Termination of Arrangement Agreement with Fission

In October 2015, Denison and Fission terminated the previously announced Fission Arrangement pursuant to which Denison and Fission were to combine their respective businesses by way of a court-approved plan of arrangement. At the deadline for submission of proxies on Friday October 9, 2015, Denison’s shareholders strongly supported the Fission Arrangement. While a majority of the Fission shares voted were in favour of the Fission Arrangement, the required two-thirds approval was not obtained. As a result of the termination of the Fission Arrangement, neither Fission nor Denison held their respective shareholders meetings which were scheduled for October 14, 2015.

 

- 21 -