EX-99.1 2 a2018-09dmcfinancialsfili.htm CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT SEPTEMBER 30, 2018

Exhibit 99.1 INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited - Expressed in thousands of Canadian dollars (“CAD”) except for share amounts)
|  | At September 30 2018 |  | At December 31 2017 |  | At January 1 2017
ASSETS |  |  |  | Restated (note 3,4) |  | Restated (note 3,4)
Current |  |  |  |  |  |
Cash and cash equivalents (note 5) | $ | 21,470 | $ | 3,636 | $ | 15,894
Investments (note 8) |  | - |  | 37,807 |  | -
Trade and other receivables (note 6) |  | 4,169 |  | 4,791 |  | 3,226
Inventories (note 7) |  | 3,738 |  | 3,454 |  | 3,196
Prepaid expenses and other |  | 523 |  | 664 |  | 660
|  | 29,900 |  | 50,352 |  | 22,976
Non-Current |  |  |  |  |  |
Inventories-ore in stockpiles (note 7) |  | 2,098 |  | 2,098 |  | 2,098
Investments (note 8) |  | 5,145 |  | 7,359 |  | 5,049
Investments in associates (note 9) |  | 5,734 |  | 5,305 |  | 6,011
Restricted cash and investments (note 10) |  | 12,389 |  | 12,184 |  | 3,107
Property, plant and equipment (note 11) |  | 247,003 |  | 249,002 |  | 252,392
Total assets | $ | 302,269 | $ | 326,300 | $ | 291,633
LIABILITIES |  |  |  |  |  |
Current |  |  |  |  |  |
Accounts payable and accrued liabilities | $ | 5,166 | $ | 5,756 | $ | 5,561
Current portion of long-term liabilities: |  |  |  |  |  |
Deferred revenue (note 12) |  | 1,333 |  | 1,627 |  | -
Post-employment benefits (note 13) |  | 200 |  | 250 |  | 250
Reclamation obligations (note 14) |  | 856 |  | 819 |  | 1,088
Other liabilities (note 15) |  | - |  | 3,835 |  | 2,850
|  | 7,555 |  | 12,287 |  | 9,749
Non-Current |  |  |  |  |  |
Deferred revenue (note 12) |  | 36,805 |  | 37,025 |  | -
Post-employment benefits (note 13) |  | 2,104 |  | 2,115 |  | 2,209
Reclamation obligations (note 14) |  | 28,067 |  | 27,690 |  | 27,060
Other liabilities (note 15) |  | - |  | - |  | 845
Deferred income tax liability |  | 13,079 |  | 17,422 |  | 20,168
Total liabilities |  | 87,610 |  | 96,539 |  | 60,031
EQUITY |  |  |  |  |  |
Share capital (note 16) |  | 1,310,473 |  | 1,310,473 |  | 1,295,235
Share purchase warrants (note 17) |  | 435 |  | 435 |  | -
Contributed surplus (note 18) |  | 63,137 |  | 61,799 |  | 60,612
Deficit |  | (1,160,521) |  | (1,144,086) |  | (1,124,523)
Accumulated other comprehensive income (note 19) |  | 1,135 |  | 1,140 |  | 278
Total equity |  | 214,659 |  | 229,761 |  | 231,602
Total liabilities and equity | $ | 302,269 | $ | 326,300 | $ | 291,633
Issued and outstanding common shares (note 16) | 559,183,209 |  | 559,183,209 |  | 540,722,365
Commitments and contingencies (note 25) |  |  |  |  |  |
Subsequent events (note 26) |  |  |  |  |  |
The accompanying notes are integral to the condensed interim consolidated financial statements

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(Unaudited - Expressed in thousands of CAD dollars except for share and per share amounts)
|  | Three Months Ended September 30 |  | Nine Months Ended September 30
|  | 2018 |  | 2017 |  | 2018 |  | 2017
|  |  |  | Restated (note 3) |  |  |  | Restated (note 3, 4)
REVENUES (note 21) | $ | 3,729 | $ | 3,753 | $ | 11,406 | $ | 11,531
EXPENSES |  |  |  |  |  |  |  |
Operating expenses (note 20, 21) |  | (4,231) |  | (3,294) |  | (11,739) |  | (9,862)
Exploration and evaluation (note 21) |  | (3,894) |  | (5,447) |  | (14,018) |  | (14,432)
General and administrative (note 21) |  | (1,657) |  | (1,489) |  | (5,378) |  | (6,185)
Impairment reversal (note 21) |  | - |  | - |  | 11 |  | 331
Other income (expense) (note 20) |  | 664 |  | (1,137) |  | (2,654) |  | 112
|  | (9,118) |  | (11,367) |  | (33,778) |  | (30,036)
Loss before finance charges, equity accounting |  | (5,389) |  | (7,614) |  | (22,372) |  | (18,505)
Finance expense (note 20) |  | (981) |  | (1,136) |  | (2,670) |  | (3,077)
Equity share of income (loss) of associate (note 9) |  | 639 |  | 217 |  | 429 |  | (1,361)
Loss before taxes |  | (5,731) |  | (8,533) |  | (24,613) |  | (22,943)
Income tax recovery (note 23) |  |  |  |  |  |  |  |
Deferred |  | 1,847 |  | 906 |  | 8,178 |  | 5,322
Loss from continuing operations |  | (3,884) |  | (7,627) |  | (16,435) |  | (17,621)
Net loss from discontinued operations |  | - |  | - |  | - |  | (109)
Net loss for the period | $ | (3,884) | $ | (7,627) | $ | (16,435) | $ | (17,730)
Other comprehensive income (loss) (note 19): |  |  |  |  |  |  |  |
Items that may be reclassified to income (loss): |  |  |  |  |  |  |  |
Foreign currency translation change |  | 2 |  | 451 |  | (5) |  | 921
Comprehensive loss for the period | $ | (3,882) | $ | (7,176) | $ | (16,440) | $ | (16,809)
Basic and diluted net loss per share: |  |  |  |  |  |  |  |
All operations | $ | (0.01) | $ | (0.01) | $ | (0.03) | $ | (0.03)
Weighted-average number of shares outstanding (in thousands): |  |  |  |
Basic and diluted |  | 559,183 |  | 559,084 |  | 559,183 |  | 553,983
The accompanying notes are integral to the condensed interim consolidated financial statements

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited - Expressed in thousands of CAD dollars)
|  |  |  | Nine Months Ended September 30
|  |  |  |  |  | 2018 |  | 2017
|  |  |  |  |  | Restated (note 3, 4) |  | Restated (note 3, 4)
Share capital |  |  |  |  |  |  |  |
Balance-beginning of period |  |  |  |  | $ | 1,310,473 | $ | 1,295,235
Shares issued-net of issue costs |  |  |  |  |  | - |  | 18,871
Flow-through share premium |  |  |  |  |  | - |  | (3,835)
Share options exercised-cash |  |  |  |  |  | - |  | 20
Share options exercised-non cash |  |  |  |  |  | - |  | 18
Balance-end of period |  |  |  |  |  | 1,310,473 |  | 1,310,309
Share purchase warrants |  |  |  |  |  |  |  |
Balance-beginning of period |  |  |  |  |  | 435 |  | -
Warrants issued in connection with APG Arrangement |  |  |  | - |  | 435
Balance-end of period |  |  |  |  |  | 435 |  | 435
Contributed surplus |  |  |  |  |  |  |  |
Balance-beginning of period |  |  |  |  |  | 61,799 |  | 60,612
Share-based compensation expense |  |  |  |  |  | 1,338 |  | 941
Share options exercised-non cash |  |  |  |  |  | - |  | (18)
Balance-end of period |  |  |  |  |  | 63,137 |  | 61,535
Deficit |  |  |  |  |  |  |  |
Balance-beginning of period |  |  |  |  |  | (1,144,086) |  | (1,124,523)
Net loss |  |  |  |  |  | (16,435) |  | (17,730)
Balance-end of period |  |  |  |  |  | (1,160,521) |  | (1,142,253)
Accumulated other comprehensive income |  |  |  |  |  |  |  |
Balance-beginning of period |  |  |  |  |  | 1,140 |  | 278
Foreign currency translation |  |  |  |  |  | (5) |  | 921
Balance-end of period |  |  |  |  |  | 1,135 |  | 1,199
Total Equity |  |  |  |  |  |  |  |
Balance-beginning of period |  |  |  |  |  | 229,761 |  | 231,602
Balance-end of period |  |  |  |  | $ | 214,659 | $ | 231,225
The accompanying notes are integral to the condensed interim consolidated financial statements

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited - Expressed in thousands of CAD dollars)
|  |  |  | Nine Months Ended September 30
CASH PROVIDED BY (USED IN): |  |  |  |  |  | 2018 |  | 2017
|  |  |  |  |  |  |  | Restated (note 3, 4)
OPERATING ACTIVITIES |  |  |  |  |  |  |  |
Net loss for the period |  |  |  |  | $ | (16,435) | $ | (17,730)
Items not affecting cash and cash equivalents: |  |  |  |  |  |  |  |
Depletion, depreciation, amortization and accretion |  |  |  |  |  | 6,393 |  | 6,762
Impairment reversal |  |  |  |  |  | (11) |  | (331)
Share-based compensation (note 18) |  |  |  |  |  | 1,338 |  | 941
Recognition of deferred revenue (note 12) |  |  |  |  |  | (3,000) |  | (3,070)
Gain on extinguishment of toll milling liability (note 15, 20) |  |  |  | - |  | (899)
Loss on divestiture of Africa Mining Division |  |  |  | - |  | 109
Gains on property, plant and equipment disposals (note 20) |  |  |  | (117) |  | (27)
Losses (gains) on investments |  |  |  | 2,521 |  | (524)
Equity loss of associate (note 9) |  |  |  | 247 |  | 822
Dilution loss (gain) of associate (note 9) |  |  |  | (676) |  | 539
Deferred income tax recovery |  |  |  |  |  | (8,178) |  | (5,322)
Foreign exchange losses |  |  |  |  |  | - |  | 912
Other |  |  |  |  |  | - |  | 21
Deferred revenue cash receipts (note 12) |  |  |  |  |  | - |  | 39,980
Post-employment benefits (note 13) |  |  |  |  |  | (115) |  | (124)
Reclamation obligations (note 14) |  |  |  |  |  | (573) |  | (767)
Change in non-cash working capital items (note 20) |  |  |  |  |  | (142) |  | 6
Net cash provided by (used in) operating activities |  |  |  |  |  | (18,748) |  | 21,298
INVESTING ACTIVITIES |  |  |  |  |  |  |  |
Divestiture of asset group, net of cash and cash equivalents divested: |  |  |  |  |
Africa Mining Division |  |  |  |  |  | - |  | (109)
Sale of investments (note 8) |  |  |  |  |  | 37,500 |  | -
Purchase of investments (note 8) |  |  |  |  |  | - |  | (40,200)
Expenditures on property, plant and equipment (note 11) |  |  |  | (1,060) |  | (969)
Proceeds on sale of property, plant and equipment |  |  |  |  |  | 347 |  | 248
Increase in restricted cash and investments |  |  |  | (205) |  | (9,200)
Net cash provided by (used in) investing activities |  |  |  |  |  | 36,582 |  | (50,230)
FINANCING ACTIVITIES |  |  |  |  |  |  |  |
Repayment of debt obligations |  |  |  |  |  | - |  | (370)
Issuance of common shares for: |  |  |  |  |  |  |  |
New share issues-net of issue costs (note 16) |  |  |  |  |  | - |  | 18,871
Share options exercised (note 16) |  |  |  |  |  | - |  | 20
Net cash provided by financing activities |  |  |  |  |  | - |  | 18,521
Increase (decrease) in cash and cash equivalents |  |  |  |  |  | 17,834 |  | (10,411)
Cash and cash equivalents, beginning of period |  |  |  |  |  | 3,636 |  | 15,894
Cash and cash equivalents, end of period |  |  |  |  | $ | 21,470 | $ | 5,483
The accompanying notes are integral to the condensed interim consolidated financial statements

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 |
(Unaudited - Expressed in CAD dollars except for shares and per share amounts) |

1.
NATURE OF OPERATIONS
Denison Mines Corp. (“DMC”) and its subsidiary companies and joint arrangements (collectively, “Denison” or the “Company”) are engaged in uranium mining related activities, which can include acquisition, exploration and development of uranium bearing properties, extraction, processing and selling of uranium.
As at September 30, 2018, the Company has a 63.30% interest in the Wheeler River Joint Venture (“WRJV”) (see note 11 and 26), a 22.50% 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”), each of which are located in the eastern portion of the Athabasca Basin region in northern 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 (see note 12). In addition, the Company has varying ownership interests in a number of other development and exploration projects located in Canada.
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.
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, 2017. The Company’s presentation currency is Canadian dollars.
These financial statements were approved by the board of directors for issue on November 9, 2018.
3.
SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
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, 2017, except as described in the “Accounting Policy Changes – Adoption Impacts” and “New Accounting Policies” sections below.
Accounting Policy Changes – Adoption Impacts
The Company has made the following changes to its accounting policies and has adopted the following new accounting pronouncements:

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Foreign Currency Translation – Presentation Currency
The Company has changed its presentation currency from U.S. dollars (“USD”) to Canadian dollars (“CAD”) effective for reporting periods after January 1, 2018. The comparative periods have been restated to reflect the change in presentation currency. Refer to note 4 for more information.
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 is effective for periods beginning on or after January 1, 2018.
Denison reviewed its accounting policies for financial instruments and on adoption of IFRS 9 has elected not to measure any of its equity instruments using the fair value through other comprehensive income (“FVTOCI”) approach and will instead use the fair value through profit and loss (“FVTPL”) measurement method. Previously, under IAS 39, the Company had classified a subset of its equity instruments as “available for sale” and had recognized gains or losses on these investments in other comprehensive income (loss), similar to the FVTOCI approach under IFRS 9.
The Company adopted the provisions of IFRS 9 on January 1, 2018 and has applied the amendment retrospectively, through an adjustment to its opening equity as at January 1, 2017, reflecting a reclassification of the FVTOCI amount previously included in accumulated other comprehensive income (“AOCI”) to Deficit. Any subsequent changes in AOCI for changes in FVTOCI during fiscal 2017 have been reversed and reflected as a component of net income (loss) for the period. See note 4 for details.
International Financial Reporting Standard 15, Revenue from Contracts with Customers (“IFRS 15”)
IFRS 15 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.
The Company reviewed its revenue recognition policies related to its UPC management services and its DES care and maintenance services and concluded that no retrospective change in timing or measurement is required for adoption of IFRS 15.
In its review of toll milling revenue recognition and its arrangement with Anglo Pacific Group PLC and its subsidiaries (the “APG Arrangement” and “APG”, respectively – see note 12), the Company concluded that the adoption of IFRS 15 will require a change to the Company’s accounting policy for deferred revenue associated with the APG Arrangement. Previously, the Company amortized the net proceeds of the APG Arrangement into revenue, on a pro-rata basis, based on the actual cash receipts from toll milling received in the period as a percentage of the total remaining undiscounted cash receipts expected to be received over the life of the arrangement. IFRS 15 requires that the APG deferred revenue be separated into a revenue component and a financing component. The transaction price associated with the revenue component is considered “variable” consideration under the standard. The transaction price has initially been measured at the transaction date as the aggregate of the net proceeds from the APG Arrangement and the expected financing charges to be incurred over the contract life, and is subsequently remeasured as changes to the timing or volume of the toll milling production profile occur. Revenue is recognized into net income (loss) based on the average toll milling drawdown rate multipled by toll milling production during the period. The average toll milling drawdown rate is computed based on estimates of the transaction price over the life of the contract divided by the estimated toll milling production to be delivered over the life of the contract. Changes in the estimated average toll milling drawdown rate are required to be retroactively adjusted each period with a cumulative adjustment to revenue. The financing component, computed annually, is based upon the discount rate applicable to the APG Arrangement up-front fee received multiplied by the outstanding deferred revenue liability amount.
The Company adopted the provisions of IFRS 15 on January 1, 2018 and has applied the provisions of IFRS 15 on a full retrospective basis. This retrospective adoption has resulted in adjustments to increase revenues and finance expenses associated with the APG Arrangement, starting at the point in time of the APG Arrangement’s inception in February 2017, with the resulting net income (loss) impact being partly offset by changes in the deferred tax recoveries being recognized. See note 4 and 12 for details.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

New Accounting Policies
The Company has changed its accounting policies in its audited annual consolidated financial statements for the year ended December 31, 2017 for “Foreign currency translation”, “Financial instruments”, “Impairment of financial assets”, “Deferred revenue – toll milling” and “Revenue recognition” in light of the changes to its presentation currency and the adoption of IFRS 9 and 15. In addition, the Company has expanded its accounting policy for “Employee benefits – stock-based compensation” as a result of the new share unit plan approved by shareholders in May 2018. The new accounting policies are as follows:
(a)
Foreign currency translation
(i)
Functional and presentation currency
Items included in the financial statements of each entity in the DMC group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). Primary and secondary indicators are used to determine the functional currency. Primary indicators include the currency that mainly influences sales prices, labour, material and other costs. Secondary indicators include the currency in which funds from financing activities are generated and in which receipts from operating activities are usually retained. Typically, the local currency has been determined to be the functional currency of Denison’s entities.
The consolidated financial statements are presented in Canadian dollars, unless otherwise stated.
The financial statements of entities that have a functional currency different from the presentation currency of DMC (“foreign operations”) are translated into Canadian dollars as follows: assets and liabilities-at the closing rate at the date of the statement of financial position, and income and expenses-at the average rate of the period (as this is considered a reasonable approximation to actual rates). All resulting changes are recognized in other comprehensive income or loss as cumulative foreign currency translation adjustments.
When the Company disposes of its entire interest in a foreign operation, or loses control, joint control, or significant influence over a foreign operation, the foreign currency gains or losses accumulated in other comprehensive income or loss related to the foreign operation are recognized in the statement of income or loss as translational foreign exchange gains or losses.
(ii)
Transactions and balances
Foreign currency transactions are translated into an entity’s functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in currencies other than an operation’s functional currency are recognized in the statement of income or loss as transactional foreign exchange gains or losses.
(b) Financial instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognized when the obligation specified in the contract is discharged, cancelled or expires.
At initial recognition, the Company classifies its financial instruments in the following categories:
(i)
Financial assets and liabilities at fair value through profit or loss (“FVTPL”)
A financial asset is classified in this category if it is a derivative instrument, an equity instrument for which the Company has not made the irrevocable election to classify as fair value through other comprehensive income (“FVTOCI”), or a debt instrument that is not held within a business model whose objective includes holding the financial assets in order to collect contractual cash flows that are solely payments of principal and interest. Derivative financial liabilities and contingent consideration liabilities related to business combinations are also classified in this category. Financial instruments in this category are recognized initially and subsequently at fair value. Transaction costs are expensed in the statement of income or loss. Gains and losses arising from changes in fair value are presented in the statement of income or loss – within other income (expense) - in the period in which they arise.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(ii)
Financial assets at amortized cost
A financial asset is classified in this category if it is a debt instrument and / or other similar asset that is held within a business model whose objective is to hold the asset in order to collect the contractual cash flows (i.e. principal and interest). Financial assets in this category are initially recognized at fair value plus transaction costs and subsequently measured at amortized cost using the effective interest method less a provision for impairment. Interest income is recorded in net income through finance income.
(iii)
Financial liabilities at amortized cost
All financial liabilities that are not recorded as FVTPL are classified in this category and are initially recognized less a discount (when material) to reduce the financial liabilities to fair value and less any directly attributable transaction costs. Subsequently, financial liabilities are measured at amortized cost using the effective interest method. Interest expense is recorded in net income through finance expense.
The Company has designated its financial assets and liabilities as follows:
●
“Investments” are classified as FVTPL;
●
“Cash and cash equivalents”, “Trade and other receivables” and “Restricted cash and investments” are classified as financial assets at amortized cost; and
●
“Accounts payable and accrued liabilities” and “Debt obligations” are classified as financial liabilities at amortized cost.
(c)
Impairment of financial assets
At each reporting date, the Company assesses the expected credit losses associated with its financial assets that are not carried at FVTPL. Expected credit losses are calculated based on the difference between the contractual cash flows and the cash flows that the Company expects to receive, discounted, where applicable, based on the assets original effective interest rate.
For “Trade and other receivables”, the Company calculates expected credit losses based on historical credit loss experience, adjusted for forward-looking factors specific to debtors and the economic environment. In recording an impairment loss, the carrying amount of the asset is reduced by this computed amount either directly or indirectly through the use of an allowance account.
(d)
Revenue recognition
IFRS 15 supersedes IAS 18 Revenue and IAS 11 Construction Contracts, and applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards.
(i)
Revenue from toll milling services
Revenue from the pre-sale of toll milling arrangement cash flows will be recognized as the toll milling services are provided. At contract inception, the Company will estimate the expected transaction price of the toll milling services being sold based on available information and calculate an average per unit transaction price that applies over the life of the contract. This unit price will be used to draw-down the deferred revenue balance as the toll milling services occur. When changes occur to the timing, or volume of toll milling services, the per unit transaction price will adjusted to reflect the change (such review to be done annually, at a minimum), and a cumulative catch up adjustment will be made to reflect the updated rate. The upfront nature of the payments from toll milling pre-sale arrangements represents a significant financing component. As such, the Company will also recognize an accretion expense on the deferred revenue balance which will be recorded in net income through finance expense.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(ii)
Revenue from environmental services (i.e. DES)
Environmental service contracts represent a series of distinct performance obligations that are substantially the same and have the same pattern of transfer of control to the customer. The transaction price is estimated at contract inception and, is recognized over the life of the contract as control is transferred to the customer. Variable consideration, where applicable, is estimated at contract inception using either the expected value method or the most likely amount method. If it is highly probable that a subsequent reversal of revenue will not occur when the uncertainty has been resolved, the Company will recognize as revenue the estimated transaction price, including the estimate of the variable portion, upon transfer of control to the customer. Where it is determined that it is highly probable that a subsequent reversal of revenue will occur upon the resolution of the uncertainty, the variable portion of the transaction price will be constrained, and will not be recognized as revenue until the uncertainty has been resolved.
(iii)
Revenue from management services (i.e. UPC):
The management services arrangement with UPC represents a series of distinct performance obligations that are substantially the same and have the same pattern of transfer of control to the customer. The transaction price for the contract is estimated at contract inception and is recognized over the life of the contract as control is transferred to the customer as the services are provided. The variable consideration related to the net asset value (“NAV”)-based management fee was estimated at contract inception using the expected value method. It was determined that it is highly probable that a subsequent reversal of revenue would occur if the variable consideration was included in the transaction price, and as such, the variable portion of the transaction price will be measured and recognized when the uncertainty has been resolved (i.e. when the actual NAV has been calculated).
Commission revenue earned on acquisition or sale of U3O8 and UF6 on behalf of UPC (or other parties where Denison acts as an agent) is recognized when control of the related U3O8 or UF6 passes to the customer, which is the date when title of the U3O8 and UF6 passes.
(e)
Employee benefits
(i)
Share-based compensation
The Company uses a fair value-based method of accounting for share options to employees and to non-employees. The fair value is determined using the Black-Scholes option pricing model on the date of the grant. The cost is recognized on a graded method basis, adjusted for expected forfeitures, over the applicable vesting period as an increase in share-based compensation expense and the contributed surplus account. When such share options are exercised, the proceeds received by the Company, together with the respective amount from contributed surplus, are credited to share capital.
The Company also has a share unit plan pursuant to which it may grant share units to employees – the share units are equity-settled awards. The Company determines the fair value of the awards on the date of grant. The cost is recognized on a graded method basis, adjusted for expected forfeitures, over the applicable vesting period as an increase in share-based compensation expense and the contributed surplus account. When such share units are settled for common shares, the applicable amounts of contributed surplus are credited to share capital.
Accounting Standards Issued But Not Yet Effective
IFRS 16 Leases requires lessees to recognize assets and liabilities for most leases. Under current standards, the Company expenses most of its lease payments. Application of IFRS 16 is mandatory for reporting periods beginning on or after January 1, 2019. The Company expects the adoption of IFRS 16 to result in the following: a) increased reported assets and liabilities; b) increased depreciation and accretion expense and decreased lease expense within the statement of income (loss); and c) decreased cash outflows from operations and increased cash outflows from financing as lease payments will be recorded as financing outflows in the cash flow statement. Assessments of the magnitude of the above impacts of adopting the standard are ongoing.
Critical Accounting Estimates and Judgements
The preparation of consolidated financial statements in accordance with IFRS requires the use of certain critical accounting estimates and judgements that affect the amounts reported. It also requires management to exercise judgement in applying the Company’s accounting policies. These judgements and estimates are based on management’s best knowledge of the relevant facts and circumstances taking into account previous experience. Although the Company regularly reviews the estimates and judgements made that affect these financial statements, actual results may be materially different.
Management has made significant estimates and judgements in the current period related to the following items that are in addition to those included in the financial statements for the year ended December 31, 2017:

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(a)
Deferred Revenue – Toll Milling – Revenue Recognition
In February 2017, Denison closed the APG Arrangement and effectively monetized its right to receive specified future toll milling cash receipts from the MLJV related to the current toll milling agreement with the CLJV. In exchange, Denison received a net up-front payment of $39,980,000 which has been accounted for as a deferred revenue liability as at the transaction close date (see note 12).
Under IFRS 15, the Company is required to recognize a revenue component and a financing component as it draws down the deferred revenue associated with the APG Arrangement over the life of the specified toll milling production included in the APG Arrangement. In estimating both of these components, the Company is required to make assumptions relating to the future toll milling production volume associated with Cigar Lake Phase 1 and 2 ore reserves and resources (to end of mine life) and estimates of the annual timing of that production. Changes in these estimates affect the underlying production profile which in turn affects the average toll milling drawdown rate used to recognize revenue.
When the average toll milling drawdown rate is changed, the impact is reflected on a life-to-date production basis with a retroactive adjustment to revenue recorded in the current period. Going forward, each time the Company updates its estimates of the underlying production profile for the APG Arrangement (typically, in the first quarter of each year, in the absence of material publicly disclosed news relating to Cigar Lake uranium production), retroactive adjustments to revenue will be recorded in the period that the revised estimate is determined – such adjustments could, and most likely will, be material.
Comparative Numbers
Certain classifications of the comparative figures have been changed to conform to those used in the current period.
4.
CHANGE IN PRESENTATION CURRENCY AND ADOPTION OF NEW STANDARDS
Effective January 1, 2018, the Company changed its presentation currency to CAD from USD. This change in presentation currency was made to better reflect the Company’s current business activities, which are now predominantly focused in Canada following the disposal of the Company’s African and Asia mining segments in fiscal 2016 and 2015, respectively.
The consolidated financial statements for all periods presented in the interim financial statements are in CAD. The majority of the Company’s current entities, including all of its operating entities, have CAD as their functional currency so their functional currency financial statement amounts have been carried forward into the consolidated results. The financial statements of entities with a functional currency of USD have been translated into CAD in accordance with IAS 21, “The Effects of Changes in Foreign Exchange Rates”, as follows:
●
Assets and liabilities presented and previously reported in USD have been translated into CAD using period-end exchange rates of 1.3426 (January 1, 2017) and 1.2545 (December 31, 2017);
●
Consolidated statements of income and other comprehensive income have been translated using the applicable average foreign exchange rates prevailing during the reporting periods;
●
Investment in associates and shareholder’s equity balances have been translated using historical foreign exchange rates in effect on the date that transactions occurred; and
●
Resulting exchange differences have been recorded within the foreign currency translation reserve accounts.
The impact of the changes in presentation currency and the adoption of new accounting pronouncements (see note 3) on the consolidated financial statements is as follows:

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Financial Position – As at January 1, 2017

|  | Reported |  | Reported |  | IFRS |  | Restated
(in thousands) |  | USD |  | in CAD |  | Adoption |  | CAD
Assets |  |  |  |  |  |  |  |
Current | $ | 17,113 | $ | 22,976 | $ | - | $ | 22,976
Non-Current |  | 200,310 |  | 268,657 |  | - |  | 268,657
Total assets |  | 217,423 |  | 291,633 |  | - |  | 291,633
Liabilities |  |  |  |  |  |  |  |
Current | $ | 7,260 | $ | 9,749 | $ | - | $ | 9,749
Non-Current |  | 37,452 |  | 50,282 |  | - |  | 50,282
Total liabilities |  | 44,712 |  | 60,031 |  | - |  | 60,031
Equity |  |  |  |  |  |  |  |
Share capital | $ | 1,140,631 | $ | 1,295,235 | $ | - | $ | 1,295,235
Share purchase warrants |  | - |  | - |  | - |  | -
Contributed surplus |  | 54,306 |  | 60,612 |  | - |  | 60,612
Deficit |  |  |  |  |  |  |  |
Opening |  | (961,440) |  | (1,124,532) |  | 9 (1) |  | (1,124,523)
Accumulated other comprehensive income (loss) |  |  |  |  |  |  |  |
Cumulative foreign currency translation |  | (61,371) |  | (446) |  | - |  | (446)
Unamortized experience gain |  | 578 |  | 724 |  | - |  | 724
Unrealized gain on investments |  | 7 |  | 9 |  | (9) (1) |  | -
Total equity |  | 172,711 |  | 231,602 |  | - |  | 231,602
Total liabilities and equity | $ | 217,423 | $ | 291,633 | $ | - | $ | 291,633

(1)
Represents adjustments related to the adoption of IFRS 9 (see note 3).

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Financial Position – As at December 31, 2017

|  | Reported |  | Reported |  | IFRS |  | Restated
(in thousands) |  | USD |  | in CAD |  | Adoption |  | CAD
Assets |  |  |  |  |  |  |  |
Current | $ | 40,135 | $ | 50,352 | $ | - | $ | 50,352
Non-Current |  | 219,933 |  | 275,948 |  | - |  | 275,948
Total assets |  | 260,068 |  | 326,300 |  | - |  | 326,300
Liabilities |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Deferred revenue | $ | 2,498 | $ | 3,134 | $ | (1,507) (2) | $ | 1,627
All other current liabilities |  | 8,497 |  | 10,660 |  | - |  | 10,660
|  | 10,995 |  | 13,794 |  | (1,507) |  | 12,287
Non-Current |  |  |  |  |  |  |  |
Deferred revenue |  | 27,181 |  | 34,100 |  | 2,925 (2) |  | 37,025
Deferred income tax liability |  | 14,182 |  | 17,792 |  | (370) (3) |  | 17,422
All other non-current liabilies |  | 23,758 |  | 29,805 |  | - |  | 29,805
|  | 65,121 |  | 81,697 |  | 2,555 |  | 84,252
Total liabilities |  | 76,116 |  | 95,491 |  | 1,048 |  | 96,539
Equity |  |  |  |  |  |  |  |
Share capital | $ | 1,151,927 | $ | 1,310,473 | $ | - | $ | 1,310,473
Share purchase warrants |  | 333 |  | 435 |  | - |  | 435
Contributed surplus |  | 55,165 |  | 61,799 |  | - |  | 61,799
Deficit |  |  |  |  |  |  |  |
Opening |  | (961,440) |  | (1,124,532) |  | 9 (1) |  | (1,124,523)
Net income (loss) |  | (14,168) |  | (18,520) |  | 5 (1) |  |
|  |  |  |  |  | (1,418) (2) |  |
|  |  |  |  |  | 370 (3) |  | (19,563)
Accumulated other comprehensive income (loss) |  |  |  |  |  |  |  |
Cumulative foreign currency translation |  | (48,454) |  | 416 |  | - |  | 416
Unamortized experience gain |  | 578 |  | 724 |  | - |  | 724
Unrealized gain on investments |  | 11 |  | 14 |  | (14) (1) |  | -
Total equity |  | 183,952 |  | 230,809 |  | (1,048) |  | 229,761
Total liabilities and equity | $ | 260,068 | $ | 326,300 | $ | - | $ | 326,300

(1)
Represents adjustments related to the adoption of IFRS 9 (see note 3);
(2)
Represents adjustments related to the adoption of IFRS 15 (see note 3); and
(3)
Represents adjustments related to the tax impact of the adoption of IFRS 15 (see note 3).

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Income (Loss) and Comprehensive Income (Loss) – nine months ended September 30, 2017

|  | Reported |  | Reported |  | IFRS |  | Restated
(in thousands) |  | USD |  | in CAD |  | Adoption |  | CAD
Revenues | $ | 7,929 | $ | 10,359 | $ | 1,172 (2) | $ | 11,531
Other income (expense) (3) |  | 121 |  | 112 |  | - (1) |  | 112
Finance income (expense) |  | (622) |  | (812) |  | (2,265) (2) |  | (3,077)
Deferred income tax recovery (expense) |  | 3,828 |  | 5,037 |  | 285 (2) |  | 5,322
Net loss for the period | $ | (12,927) | $ | (16,922) | $ | (808) | $ | (17,730)
Other comprehensive income (loss) |  |  |  |  |  |  |  |
Unrealized gain (loss) on investments |  | - |  | - |  | - (1) |  | -
Foreign currency translation change |  | 13,938 |  | 921 |  | - |  | 921
Comprehensive income (loss) for the period | $ | 1,011 | $ | (16,001) | $ | (808) | $ | (16,809)

(1)
Represents adjustments related to the adoption of IFRS 9;
(2)
Represents before tax and tax adjustments related to the adoption of IFRS 15; and
(3)
The amount reported separately as “Foreign exchange” has been grouped into “Other income (expense)” to be consistent with the presentation for fiscal 2018.
Consolidated Statement of Cash Flow – nine months ended September 30, 2017

|  | Reported |  | Reported |  | IFRS |  | Restated
(in thousands) |  | USD |  | in CAD |  | Adoption |  | CAD
Net cash provided by operating activities | $ | 15,857 |  | 21,298 |  | - |  | 21,298
Net cash used in investing activities |  | (37,472) |  | (50,230) |  | - |  | (50,230)
Net cash provided by financing activities |  | 13,689 |  | 18,521 |  | - |  | 18,521
Increase (decrease) in cash and equivalents |  | (7,926) |  | (10,411) |  | - |  | (10,411)
Foreign exchange effect on cash and equivalents |  | 481 |  | - |  | - |  | -
Cash and equivalents, beginning of period |  | 11,838 |  | 15,894 |  | - |  | 15,894
Cash and equivalents, end of period | $ | 4,393 | $ | 5,483 | $ | - | $ | 5,483

5.
CASH AND CASH EQUIVALENTS
The cash and cash equivalent balance consists of:

|  | At September 30 |  | At December 31 |  | At January 1
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2017
Cash | $ | 547 | $ | 2,717 | $ | 6,927
Cash in MLJV and MWJV |  | 581 |  | 913 |  | 1,557
Cash equivalents |  | 20,342 |  | 6 |  | 7,410
| $ | 21,470 | $ | 3,636 | $ | 15,894

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

6.
TRADE AND OTHER RECEIVABLES
The trade and other receivables balance consists of:

|  | At September 30 |  | At December 31 |  | At January 1
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2017
Trade receivables | $ | 3,570 | $ | 3,999 | $ | 2,406
Receivables in MLJV and MWJV |  | 335 |  | 640 |  | 783
Sales tax receivables |  | 165 |  | 84 |  | 23
Sundry receivables |  | 99 |  | 68 |  | 14
| $ | 4,169 | $ | 4,791 | $ | 3,226

7.
INVENTORIES
The inventories balance consists of:

|  | At September 30 |  | At December 31 |  | At January 1
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2017
Uranium concentrates and work-in-progress | $ | 526 | $ | 526 | $ | 526
Inventory of ore in stockpiles |  | 2,098 |  | 2,098 |  | 2,098
Mine and mill supplies in MLJV |  | 3,212 |  | 2,928 |  | 2,670
| $ | 5,836 | $ | 5,552 | $ | 5,294
Inventories-by balance sheet presentation: |  |  |  |  |  |
Current | $ | 3,738 | $ | 3,454 | $ | 3,196
Long-term-ore in stockpiles |  | 2,098 |  | 2,098 |  | 2,098
| $ | 5,836 | $ | 5,552 | $ | 5,294

8.
INVESTMENTS
The investments balance consists of:

|  | At September 30 |  | At December 31 |  | At January 1
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2017
Investments: |  |  |  |  |  |
Debt instruments | $ | - | $ | 37,807 | $ | -
Equity instruments |  | 5,145 |  | 7,359 |  | 5,049
| $ | 5,145 | $ | 45,166 | $ | 5,049
Investments-by balance sheet presentation: |  |  |  |  |  |
Current | $ | - | $ | 37,807 | $ | -
Long-term |  | 5,145 |  | 7,359 |  | 5,049
| $ | 5,145 | $ | 45,166 | $ | 5,049

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The investments continuity summary is as follows:

(in thousands of CAD dollars) |  |  |  | Nine Months Ended September 30, 2018 |  | Twelve Months Ended December 31, 2017
Balance-beginning of period |  |  | $ | 45,166 | $ | 5,049
Purchases |  |  |  |  |  |
Equity instruments |  |  |  | - |  | 200
Debt instruments |  |  |  | - |  | 40,000
Sales |  |  |  |  |  |
Debt instruments |  |  |  | (37,500) |  | (2,500)
Fair value changes through profit and loss |  |  |  | (2,521) |  | 2,417
Balance-end of period |  |  | $ | 5,145 | $ | 45,166

9.
INVESTMENT IN ASSOCIATES
The investment in associates balance consists of:

|  | At September 30 |  | At December 31 |  | At January 1
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2017
Investment in associates-by investee: |  |  |  |  |  |
GoviEx | $ | 5,734 | $ | 5,305 | $ | 6,011
| $ | 5,734 | $ | 5,305 | $ | 6,011

A summary of the investment in GoviEx is as follows:

(in thousands of CAD dollars except share amounts) |  |  |  | Number of Common Shares |  |
Balance-January 1, 2017 |  |  |  | 65,144,021 | $ | 6,011
Equity share of net income (loss) |  |  |  | - |  | (1,015)
Dilution gain (loss) |  |  |  | - |  | 309
Balance-December 31, 2017 |  |  |  | 65,144,021 | $ | 5,305
Equity share of net income (loss) |  |  |  | - |  | (247)
Dilution gain (loss) |  |  |  | - |  | 676
Balance-September 30, 2018 |  |  |  | 65,144,021 | $ | 5,734

GoviEx is a mineral resource company focused on the exploration and development of its uranium properties located in Africa. GoviEx maintains a head office located in Canada and is a public company listed on the TSX Venture Exchange. At September 30, 2018, Denison holds an approximate 16.49% interest in GoviEx based on publicly available information (December 31, 2017: 18.72%) and has one director appointed to the GoviEx board of directors. Through the extent of its share ownership interest and its seat on the board of directors, Denison has the ability to exercise significant influence over GoviEx and accordingly, is using the equity method to account for this investment.
The trading price of GoviEx on September 30, 2018 was $0.24 per share which corresponds to a quoted market value of $15,635,000 (December 31, 2017: $17,589,000) for the Company’s investment in GoviEx common shares.
The following table is a summary of the consolidated financial information of GoviEx on a 100% basis taking into account adjustments made by Denison for equity accounting purposes for fair value adjustments and differences in accounting policy. Denison records its equity investment entries in GoviEx one quarter in arrears (due to the information not yet being publicly available), adjusted for any material publicly disclosed share issuance transactions that have occurred. A reconciliation of GoviEx’s summarized information to Denison’s investment carrying value is also included.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

|  |  |  | At September 30 |  | At December 31
(in thousands of USD dollars) |  |  |  | 2018 |  | 2017
Total current assets |  |  | $ | 5,005 | $ | 6,978
Total non-current assets |  |  |  | 32,433 |  | 24,530
Total current liabilities |  |  |  | (8,584) |  | (7,792)
Total non-current liabilities |  |  |  | - |  | (112)
Total net assets |  |  | $ | 28,854 | $ | 23,604
|  |  |  | 9 Months Ended |  | 12 Months Ended
|  |  |  | September 30 |  | December 31
(in thousands of USD dollars) |  |  |  | 2018 |  | 2017
Revenue |  |  | $ | - | $ | -
Net income (loss) |  |  |  | (853) |  | (3,632)
Comprehensive income (loss) |  |  | $ | (853) | $ | (3,632)
(in thousands) |  |  |  |  |  |
Reconciliation of GoviEx net assets to Denison investment carrying value: |  |
Net assets of GoviEx-beginning of period-USD |  |  | $ | 23,604 | $ | 20,694
Share issue proceeds |  |  |  | 5,807 |  | 5,796
Contributed surplus change |  |  |  | 74 |  | -
Share-based payment reserve change |  |  |  | 222 |  | 746
Net loss |  |  |  | (853) |  | (3,632)
Net assets of GoviEx–end of period-USD |  |  | $ | 28,854 | $ | 23,604
Denison ownership interest |  |  |  | 16.49% |  | 18.72%
Denison share of net assets of GoviEx |  |  |  | 4,758 |  | 4,419
Other adjustments |  |  |  | (238) |  | (216)
Investment in GoviEx–USD |  |  |  | 4,520 |  | 4,203
At historical exchange rate |  |  |  | 1.27 |  | 1.26
Investment in GoviEx–CAD |  |  | $ | 5,734 | $ | 5,305

10.
RESTRICTED CASH AND INVESTMENTS
The restricted cash and investments balance consists of:

|  | At September 30 |  | At December 31 |  | At January 1
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2017
Cash and cash equivalents | $ | 219 | $ | 3,049 | $ | 372
Investments |  | 12,170 |  | 9,135 |  | 2,735
| $ | 12,389 | $ | 12,184 | $ | 3,107
Restricted cash and investments-by item: |  |  |  |  |  |
Elliot Lake reclamation trust fund | $ | 3,254 | $ | 3,049 | $ | 2,972
Letters of credit facility pledged assets |  | 9,000 |  | 9,000 |  | -
Letters of credit additional collateral |  | 135 |  | 135 |  | 135
| $ | 12,389 | $ | 12,184 | $ | 3,107

At September 30, 2018, cash equivalents consists of a term deposit with a maturity of 90 days or less while investments consist of guaranteed investment certificates and a term deposit with a maturity of more than 90 days.
Elliot Lake Reclamation Trust Fund
During the nine months ended September 30, 2018, the Company deposited an additional $670,000 into the Elliot Lake Reclamation Trust Fund and withdrew $499,000.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Letters of Credit Facility Pledged Assets
As at September 30, 2018, the Company had on deposit $9,000,000 with the Bank of Nova Scotia (“BNS”) as pledged restricted cash and investments pursuant to its obligations under an amended and extended letters of credit facility (see notes 14 and 15).
Letters of Credit Additional Collateral
As at September 30, 2018, the Company had on deposit an additional $135,000 of cash collateral with BNS in respect of the portion of its issued reclamation letters of credit in excess of the collateral available under its letters of credit facility (see notes 14 and 15).
11.
PROPERTY, PLANT AND EQUIPMENT
The property, plant and equipment balance consists of:

|  | At September 30 |  | At December 31 |  | At January 1
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2017
Plant and equipment: |  |  |  |  |  |
Cost | $ | 96,832 | $ | 96,762 | $ | 97,477
Construction-in-progress |  | 6,424 |  | 6,424 |  | 6,473
Accumulated depreciation |  | (23,271) |  | (20,516) |  | (16,930)
Net book value | $ | 79,985 | $ | 82,670 | $ | 87,020
Mineral properties: |  |  |  |  |  |
Cost | $ | 167,018 | $ | 166,332 | $ | 165,372
Net book value | $ | 167,018 | $ | 166,332 | $ | 165,372
Total net book value | $ | 247,003 | $ | 249,002 | $ | 252,392

The plant and equipment continuity summary is as follows:

|  |  |  | Accumulated |  |
|  |  |  | Amortization / |  | Net
(in thousands of CAD dollars) |  | Cost |  | Depreciation |  | Book Value
Plant and equipment: |  |  |  |  |  |
Balance-January 1, 2017 | $ | 103,950 | $ | (16,930) | $ | 87,020
Additions |  | 257 |  | - |  | 257
Amortization |  | - |  | (190) |  | (190)
Depreciation |  | - |  | (4,371) |  | (4,371)
Disposals |  | (806) |  | 785 |  | (21)
Reclamation adjustment (note 14) |  | (215) |  | 190 |  | (25)
Balance-December 31, 2017 | $ | 103,186 | $ | (20,516) | $ | 82,670
Additions |  | 163 |  | - |  | 163
Amortization |  | - |  | (142) |  | (142)
Depreciation (note 20) |  | - |  | (2,698) |  | (2,698)
Disposals |  | (93) |  | 85 |  | (8)
Balance-September 30, 2018 | $ | 103,256 | $ | (23,271) | $ | 79,985

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The mineral property continuity summary is as follows:

|  |  |  | Accumulated |  | Net
(in thousands of CAD dollars) |  | Cost |  | Amortization |  | Book Value
Mineral properties: |  |  |  |  |  |
Balance-January 1, 2017 | $ | 165,372 | $ | - | $ | 165,372
Additions |  | 829 |  | - |  | 829
Impairment reversal |  | 331 |  | - |  | 331
Recoveries |  | (200) |  | - |  | (200)
Balance-December 31, 2017 | $ | 166,332 | $ | - | $ | 166,332
Additions |  | 897 |  | - |  | 897
Impairment reversal |  | 11 |  | - |  | 11
Recoveries |  | (222) |  | - |  | (222)
Balance-September 30, 2018 | $ | 167,018 | $ | - | $ | 167,018

Mineral Properties
Canada Mining Segment
As at September 30, 2018, the Company has various interests in development, evaluation and exploration projects located in Canada which are either held directly or through option or various contractual agreements. Significant updates from the December 31, 2017 year-end are listed below.
Hook Carter
In November 2016, Denison completed the purchase of an 80% interest in the Hook-Carter property from ALX Uranium Corp (“ALX”). Under terms in the agreement, Denison has agreed to fund ALX’s share of the first $12,000,000 in expenditures and has also agreed to a work commitment of $3,000,000 over 3 years. Should Denison not meet this commitment, Denison’s interest in the property will decrease from 80% to 75% and ALX’s interest will increase from 20% to 25%.
As at September 30, 2018, the Company has spent $4,816,000 on the project, since acquisition, and has satisfied its work commitment condition in the Hook Carter purchase agreement.
Moore Lake
In August 2018, Denison received the final $300,000 cash option payment from Skyharbour Resources Ltd (“Skyharbour”) completing all of the commitments required under the August 2016 Moore Lake option agreement (“Moore Lake Agreement”). In conjunction with the final cash payment received, Denison has recognized a recovery of the carrying value of Moore Lake of $212,000, a gain on disposal of $88,000 and has transferred its 100% ownership interest in Moore Lake to Skyharbour. The Moore Lake Agreement is subject to certain buyback provisions in favour of Denison. To this point, Skyharbour has achieved the required $3,500,000 in expenditures on the project to trigger the first stage buyback option, which Denison has elected not to exercise. Denison retains a second stage buyback option on the property until a further $3,000,000 in expenditures have been incurred on the project by Skyharbour.
As at September 30, 2018, Denison’s ownership interest in Skyharbour is approximately 8.71% (December 31, 2017: 9.95%).
Waterbury Lake
In May 2018, the Company increased its interest in the Waterbury Lake property from 64.22% to 65.45% under the terms of the dilution provisions in the agreements governing the project (see note 22).
Wheeler River
In September 2018, Denison entered into an agreement with Cameco Corp. (“Cameco”) to increase its interest in the WRJV through the acquisition of Cameco’s remaining minority interest in the project. Under the terms of the agreement, and subject to the decision by JCU (Canada) Exploration Company Limited (“JCU”) to exercise certain rights of first refusal (“ROFR”) in its favor, Denison has agreed to acquire Cameco’s remaining interest in the WRJV (expected to be approximately 24% at the end of 2018) in exchange for the issuance of 24,615,000 common shares of Denison. Once issued, the shares will be subject to a six month escrow period during which time Cameco has agreed to not, directly or indirectly, transfer any of the shares with the prior written consent of Denison. The transfer of shares is also restricted for a further six month period, where Denison retains the right, under certain circumstances, to designate a purchaser upon notice from Cameco of the intent to transfer or sell all or a portion of the shares. The acquisition of Cameco’s minority interest will increase Denison’s interest in the WRJV to 90.00%, if JCU chooses not to exercise its ROFR rights. The transaction was completed on October 26, 2018 (see note 26).

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

12. DEFERRED REVENUE
The deferred revenue balance consists of:

|  | At September 30 |  | At December 31 |  | At January 1
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2017
Deferred revenue – toll milling | $ | 38,138 | $ | 38,652 | $ | -
| $ | 38,138 | $ | 38,652 | $ | -
Deferred revenue-by balance sheet presentation: |  |  |  |  |  |
Current | $ | 1,333 | $ | 1,627 | $ | -
Non-current |  | 36,805 |  | 37,025 |  | -
| $ | 38,138 | $ | 38,652 | $ | -

The deferred revenue liability continuity summary is as follows:

(in thousands of CAD dollars) |  |  |  | Nine Months Ended September 30, 2018 |  | Twelve Months Ended December 31, 2017
Balance-beginning of period |  |  | $ | 38,652 | $ | -
Proceeds of APG Arrangement, net |  |  |  |
Upfront proceeds |  | - |  | 43,500
Less: toll milling cash receipts from July 1, 2016 to January 31, 2017 | - |  | (3,520)
Revenue recognized during the period |  |  |  | (3,000) |  | (4,443)
Accretion |  |  |  | 2,486 |  | 3,115
Balance-end of period |  |  | $ | 38,138 | $ | 38,652

Arrangement with Anglo Pacific Group PLC
In February 2017, Denison closed an arrangement with APG under which Denison received an upfront payment of $43,500,000 in exchange for its right to receive specified future toll milling cash receipts from the MLJV under the current toll milling agreement with the CLJV from July 1, 2016 onwards. The up-front payment was based upon an estimate of the gross toll milling cash receipts to be received by Denison discounted at a rate of 8.50%.
The APG Arrangement represents a contractual obligation of Denison to pay onward to APG any cash proceeds of future toll milling revenue earned by the Company related to the processing of specified Cigar Lake ore through the McClean Lake mill. The Company has reflected payments made to APG of $3,520,000, representing the Cigar Lake toll milling cash receipts received by Denison in respect of toll milling activity for the period from July 1, 2016 through January 31, 2017, as a reduction of the initial upfront amount received and has reduced the initial deferred revenue balance to $39,980,000 at the transaction date.
In the nine months ended September 30, 2018, the Company has recognized $3,000,000 of toll milling revenue from the draw-down of deferred revenue, based on Cigar Lake toll milling production of 13,134,000 pounds U308 (100% basis). The drawdown for the nine months includes a retroactive $332,000 decrease in revenue resulting from changes in estimates to the toll milling drawdown rate in the first quarter of 2018.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

13. POST-EMPLOYMENT BENEFITS
The post-employment benefits balance consists of:

|  | At September 30 |  | At December 31 |  | At January 1
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2017
Accrued benefit obligation | $ | 2,304 | $ | 2,365 | $ | 2,459
| $ | 2,304 | $ | 2,365 | $ | 2,459
Post-employment benefits liability-by balance sheet presentation: |  |  |  |
Current | $ | 200 | $ | 250 | $ | 250
Non-current |  | 2,104 |  | 2,115 |  | 2,209
| $ | 2,304 | $ | 2,365 | $ | 2,459

The post-employment benefits continuity summary is as follows:

(in thousands of CAD dollars) |  |  |  | Nine Months Ended September 30, 2018 |  | Twelve Months Ended December 31, 2017
Balance-beginning of period |  |  | $ | 2,365 | $ | 2,459
Accretion |  |  |  | 54 |  | 74
Benefits paid |  |  |  | (115) |  | (168)
Balance-end of period |  |  | $ | 2,304 | $ | 2,365

14. RECLAMATION OBLIGATIONS
The reclamation obligations balance consists of:

|  | At September 30 |  | At December 31 |  | At January 1
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2017
Reclamation liability-by location: |  |  |  |  |  |
Elliot Lake | $ | 16,816 | $ | 16,771 | $ | 16,742
McClean and Midwest Joint Ventures |  | 12,085 |  | 11,716 |  | 11,384
Other |  | 22 |  | 22 |  | 22
| $ | 28,923 | $ | 28,509 | $ | 28,148
Reclamation and remediation liability-by balance sheet presentation: |  |  |  |
Current | $ | 856 | $ | 819 | $ | 1,088
Non-current |  | 28,067 |  | 27,690 |  | 27,060
| $ | 28,923 | $ | 28,509 | $ | 28,148

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The reclamation obligations continuity summary is as follows:

(in thousands of CAD dollars) |  |  |  | Nine Months Ended September 30,2018 |  | Twelve Months Ended December 31, 2017
Balance-beginning of period |  |  | $ | 28,509 | $ | 28,148
Accretion |  |  |  | 987 |  | 1,296
Expenditures incurred |  |  |  | (573) |  | (981)
Liability adjustments-income statement |  |  |  | - |  | 71
Liability adjustments-balance sheet (note 11) |  |  |  | - |  | (25)
Balance-end of period |  |  | $ | 28,923 | $ | 28,509

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 10).
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, 2018, the Company has provided irrevocable standby letters of credit, from a chartered bank, in favour of the Saskatchewan Ministry of Environment, totalling $24,135,000 which relate to the most recently filed reclamation plan dated March 2016.
15. OTHER LIABILITIES
The other liabilities balance consists of:

|  | At September 30 |  | At December 31 |  | At January 1
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2017
Debt obligations | $ | - | $ | - | $ | 370
Unamortized fair value of toll milling contracts |  | - |  | - |  | 905
Flow-through share premium obligation (note 16) |  | - |  | 3,835 |  | 2,420
| $ | - | $ | 3,835 | $ | 3,695
Other long-term liabilities-by balance sheet presentation: |  |  |  |
Current | $ | - | $ | 3,835 | $ | 2,850
Non-current |  | - |  | - |  | 845
| $ | - | $ | 3,835 | $ | 3,695

In February 2017, in conjunction with the APG Arrangement, the Company extinguished the remaining unamortized fair value of its toll milling contract liabilities and recognized a gain of $899,000 as a component of “Other income (expense)” – see note 20.
Letters of Credit Facility
In January and April 2018, the Company entered into amending agreements for the letters of credit facility with BNS (the “2018 facility”). Under the respective amendments, the maturity date of the 2018 facility has been extended to January 31, 2019 and the covenant to maintain a specified level of tangible net worth has been changed to $131,000,000 (from USD$150,000,000) in conjunction with the Company’s change in presentation currency. The 2018 facility continues to allow for credit to be extended to the Company for up to $24,000,000 and use of the facility continues to be restricted to non-financial letters of credit in support of reclamation obligations (see note 14). All other terms of the 2018 facility (pledged assets, security for the facility and letter of credit fees) remain unchanged from those of the 2017 facility.
At September 30, 2018, the Company is in compliance with its facility covenants and $24,000,000 (December 31, 2017: CAD$24,000,000) of the facility is being utilized as collateral for letters of credit issued in respect of the reclamation obligations for the MLJV and MWJV. During the nine months ended September 30, 2018, the Company incurred letter of credit fees of $297,000.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

16. 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:

| Number of |  |
| Common |  |
(in thousands of CAD dollars except share amounts) | Shares |  |
Balance-January 1, 2017 | 540,722,365 | $ | 1,295,235
Issued for cash: |  |  |
Share issue proceeds | 18,337,000 |  | 20,000
Share issue costs | - |  | (1,129)
Share option exercises | 128,873 |  | 90
Share option exercises-fair value adjustment | - |  | 112
Flow-through share premium liability | - |  | (3,835)
Share cancellations | (5,029) |  | -
| 18,460,844 |  | 15,238
Balance-December 31, 2017 and September 30, 2018 | 559,183,209 | $ | 1,310,473

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, 2018, the Company estimates that it has incurred $13,834,000 of its obligation to spend $14,499,790 on eligible exploration expenditures as a result of the issuance of Tranche A and Tranche B flow-through shares in March 2017. The Company renounced the income tax benefits of these issues in February 2018, with an effective date of renunciation to its subscribers of December 31, 2017. 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 15 and 23).
17. SHARE PURCHASE WARRANTS
A continuity summary of the issued and outstanding share purchase warrants in terms of common shares of the Company and the associated dollar amounts is presented below:

|  |  |  | Weighted |  |  |  |
|  |  |  | Average |  | Number of |  |
|  |  |  | Exercise |  | Common |  | Fair
|  |  |  | Price Per |  | Shares |  | Value
(in thousands of CAD dollars except share amounts) |  | Share (CAD) |  | Issuable |  | Amount
Balance-January 1, 2017 | $ | - |  | - | $ | -
February 2017 warrants issued |  | 1.27 |  | 1,673,077 |  | 435
Balance-December 31, 2017 and September 30, 2018 | $ | 1.27 |  | 1,673,077 | $ | 435

The February 2017 warrants were issued in conjunction with the APG Arrangement and expire on February 14, 2020.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

18. SHARE-BASED COMPENSATION
In May 2018, shareholders ratified and confirmed the Company’s new share unit plan and the grant of share units thereunder (further described below). As a result, the Company’s share based compensation arrangements now include restricted share units (“RSUs”) and performance share units (“PSUs”) in addition to stock options.
A summary of share based compensation expense recognized in the statement of income (loss) is as follows:

|  | Three Months Ended September 30 |  | Nine Months Ended September 30
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2018 |  | 2017
Share based compensation expense for: |  |  |  |  |  |  |  |
Stock options | $ | (221) | $ | (360) | $ | (815) | $ | (941)
RSUs |  | (103) |  | - |  | (225) |  | -
PSUs |  | (149) |  | - |  | (298) |  | -
Share based compensation expense | $ | (473) | $ | (360) | $ | (1,338) | $ | (941)

At September 30, 2018, an additional $2,121,000 in share-based compensation expense remains to be recognized up until April 2023.
Stock Options
A continuity summary of the stock options granted under the Company’s stock-based compensation plan is presented below:

|  |  |  |  |  |  |  |  | Weighted-
|  |  |  |  |  |  |  |  | Average
|  |  |  |  |  |  |  |  | Exercise
|  |  |  |  |  |  | Number of |  | Price per
|  |  |  |  |  |  | Common |  | Share
|  |  |  |  |  |  | Shares |  | (CAD)
Stock options outstanding – January 1, 2018 |  |  |  | 11,799,650 | $ | 0.94
Granted |  |  |  |  |  |  | 3,427,543 |  | 0.61
Expiries |  |  |  |  |  |  | (816,000) |  | 1.30
Forfeitures |  |  |  |  |  |  | (514,000) |  | 0.92
Stock options outstanding – September 30, 2018 |  |  |  | 13,897,193 | $ | 0.83
Stock options exercisable – September 30, 2018 |  |  |  | 7,446,450 | $ | 0.93

A summary of the Company’s stock options outstanding at September 30, 2018 is presented below:

|  |  |  |  | Weighted |  |  |  | Weighted-
|  |  |  |  | Average |  |  |  | Average
|  |  |  |  | Remaining |  |  |  | Exercise
Range of Exercise |  |  |  |  | Contractual |  | Number of |  | Price per
Prices per Share |  |  |  |  | Life |  | Common |  | Share
(CAD) |  |  |  |  | (Years) |  | Shares |  | (CAD)
Stock options outstanding |  |  |  |  |  |
$ 0.50 to $ 0.99 |  | 3.54 |  | 11,829,193 | $ | 0.74
$ 1.00 to $ 1.19 |  |  |  |  | 1.44 |  | 1,202,000 |  | 1.09
$ 1.20 to $ 1.39 |  |  |  |  | 0.60 |  | 11,000 |  | 1.33
$ 1.40 to $ 1.99 |  |  |  |  | 0.43 |  | 855,000 |  | 1.82
Stock options outstanding - end of period |  |  |  | 3.16 |  | 13,897,193 | $ | 0.83

Options outstanding at September 30, 2018 expire between March 2019 and September 2023.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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 assumptions used in the model to determine the fair value of options granted:

|  |  |  | Nine Months Ended
|  |  |  | September 30, 2018
Risk-free interest rate |  |  |  | 2.02% - 2.12%
Expected stock price volatility |  |  |  | 43.17% - 48.39%
Expected life |  |  |  | 3.4 to 3.5 years
Expected dividend yield |  |  |  | -
Fair value per share under options granted |  |  | CAD$0.22 – CAD$0.23

Share Units
The Company has a share unit plan which provides for the granting of share unit awards to directors, officers and employees of the Company. The maximum number of share units that are issuable under the share unit plan is 15,000,000. Each share unit represents the right to receive one common share from treasury, subject to the satisfaction of various time and / or performance conditions.
Under the plan, all share unit grants, vesting periods and performance conditions therein are approved by the Company’s board of directors. Share unit grants are either in the form of RSUs or PSUs. RSUs granted in 2018 vest ratably over a period of three years. PSUs granted in 2018 vest ratably over a period of five years, based upon the achievement of the performance vesting conditions.
A continuity summary of the RSUs of the Company granted under the share unit plan is presented below:

|  |  |  |  |  |  |  |  | Weighted-
|  |  |  |  |  |  |  |  | Average
|  |  |  |  |  |  | Number of |  | Fair Value
|  |  |  |  |  |  | Common |  | Per RSU
|  |  |  |  |  |  | Shares |  | (CAD)
RSUs outstanding – January 1, 2018 |  |  |  | - | $ | -
Granted |  |  |  |  |  |  | 1,299,432 |  | 0.65
Forfeitures |  |  |  | (99,000) |  | 0.65
RSUs outstanding – September 30, 2018 |  |  |  | 1,200,432 | $ | 0.65
RSUs vested – September 30, 2018 |  |  |  | - | $ | -

A continuity summary of the PSUs of the Company granted under the share unit plan is presented below:

|  |  |  |  |  |  |  |  | Weighted-
|  |  |  |  |  |  |  |  | Average
|  |  |  |  |  |  | Number of |  | Fair Value
|  |  |  |  |  |  | Common |  | Per PSU
|  |  |  |  |  |  | Shares |  | (CAD)
PSUs outstanding – January 1, 2018 |  |  |  | - | $ | -
Granted |  |  |  |  |  |  | 2,200,000 |  | 0.65
PSUs outstanding – September 30, 2018 |  |  |  | 2,200,000 | $ | 0.65
PSUs vested – September 30, 2018 |  |  |  | - | $ | -

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

19. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The accumulated other comprehensive income (loss) balance consists of:

|  | At September 30 |  | At December 31 |  | At January 1
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2017
Cumulative foreign currency translation | $ | 411 | $ | 416 | $ | (446)
Unamortized experience gain-post employment liability |  |  |  |
Gross |  | 983 |  | 983 |  | 983
Tax effect |  | (259) |  | (259) |  | (259)
| $ | 1,135 | $ | 1,140 | $ | 278

20. SUPPLEMENTAL FINANCIAL INFORMATION
The components of operating expenses from continuing operations are as follows:

|  | Three Months Ended September 30 |  | Nine Months Ended September 30
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2018 |  | 2017
Cost of goods and services sold: |  |  |  |  |  |  |  |
Operating overheads: |  |  |  |  |  |  |  |
Mining, other development expense | $ | (1,575) | $ | (294) | $ | (3,071) | $ | (589)
Milling, conversion expense |  | (530) |  | (665) |  | (2,395) |  | (2,902)
Less absorption: |  |  |  |  |  |  |  |
-Mineral properties |  | 12 |  | 12 |  | 36 |  | 36
Cost of services |  | (2,090) |  | (2,299) |  | (6,167) |  | (6,264)
Cost of goods and services sold |  | (4,183) |  | (3,246) |  | (11,597) |  | (9,719)
Reclamation asset amortization |  | (48) |  | (48) |  | (142) |  | (143)
Operating expenses | $ | (4,231) | $ | (3,294) | $ | (11,739) | $ | (9,862)

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

|  | Three Months Ended September 30 |  | Nine Months Ended September 30
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2018 |  | 2017
Gains (losses) on: |  |  |  |  |  |  |  |
Foreign exchange | $ | 1 | $ | (445) | $ | - | $ | (912)
Disposal of property, plant and equipment |  | 81 |  | 15 |  | 117 |  | 27
Investment fair value through profit (loss) |  | 654 |  | (565) |  | (2,521) |  | 524
Extinguishment of toll milling contract liability (note 15) |  | - |  | - |  | - |  | 899
Other |  | (72) |  | (142) |  | (250) |  | (426)
Other income (expense) | $ | 664 | $ | (1,137) | $ | (2,654) | $ | 112

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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

|  | Three Months Ended September 30 |  | Nine Months Ended September 30
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2018 |  | 2017
Interest income | $ | 195 | $ | 56 | $ | 857 | $ | 220
Interest expense |  | - |  | - |  | - |  | (4)
Accretion expense-deferred revenue |  | (829) |  | (849) |  | (2,486) |  | (2,265)
Accretion expense-reclamation obligations |  | (329) |  | (324) |  | (987) |  | (972)
Accretion expense-post-employment benefits |  | (18) |  | (19) |  | (54) |  | (56)
Finance income (expense) | $ | (981) | $ | (1,136) | $ | (2,670) | $ | (3,077)

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

|  | Three Months Ended September 30 |  | Nine Months Ended September 30
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2018 |  | 2017
Operating expenses |  |  |  |  |  |  |  |
Mining, other development expense | $ | - | $ | (2) | $ | (2) | $ | (6)
Milling, conversion expense |  | (529) |  | (665) |  | (2,395) |  | (2,902)
Cost of services |  | (54) |  | (73) |  | (177) |  | (231)
Exploration and evaluation |  | (31) |  | (29) |  | (93) |  | (90)
General and administrative |  | (9) |  | (11) |  | (31) |  | (33)
Depreciation expense-gross | $ | (623) | $ | (780) | $ | (2,698) | $ | (3,262)

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

|  | Three Months Ended September 30 |  | Nine Months Ended September 30
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2018 |  | 2017
Salaries and short-term employee benefits | $ | (1,984) | $ | (2,129) | $ | (6,324) | $ | (6,280)
Share-based compensation |  | (473) |  | (360) |  | (1,338) |  | (941)
Termination benefits |  | - |  | - |  | (19) |  | (17)
Employee benefits expense | $ | (2,457) | $ | (2,489) | $ | (7,681) | $ | (7,238)

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

|  |  |  | Nine Months Ended September 30
(in thousands of CAD dollars) |  |  |  |  |  | 2018 |  | 2017
Change in non-cash working capital items: |  |  |  |  |  |  |  |
Trade and other receivables |  |  |  |  | $ | 622 | $ | (854)
Inventories |  |  |  |  |  | (284) |  | (275)
Prepaid expenses and other assets |  |  |  |  |  | 115 |  | 23
Accounts payable and accrued liabilities |  |  |  |  |  | (595) |  | 1,112
Change in non-cash working capital items |  |  |  |  | $ | (142) | $ | 6

21. SEGMENTED INFORMATION
Business Segments
The Company operates in three primary segments – the Canada Mining segment, the Environmental Services segment and the Corporate and Other segment. The Canada Mining segment includes activities related to exploration, evaluation and development, mining, milling (including toll milling) and the sale of mineral concentrates. The Environmental Services segment includes the results of the Company’s environmental services business, DES. The Corporate and Other segment includes management fee income earned from UPC and general corporate expenses not allocated to the other segments. Management fee income has been included with general corporate expenses due to the shared infrastructure between the two activities.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended September 30, 2018, reportable segment results were as follows:

(in thousands of CAD dollars) |  |  | Canada Mining | DES | Corporate and Other | Continuing Operations
Statement of Operations: |  |  |  |  |  |
Revenues |  |  | 3,000 | 6,883 | 1,523 | 11,406
Expenses: |  |  |  |  |  |
Operating expenses |  |  | (5,572) | (5,971) | (196) | (11,739)
Exploration and evaluation |  |  | (14,018) | - | - | (14,018)
General and administrative |  |  | (17) | - | (5,361) | (5,378)
Impairment reversal |  | 11 | - | - | 11
|  |  | (19,596) | (5,971) | (5,557) | (31,124)
Segment income (loss) |  |  | (16,596) | 912 | (4,034) | (19,718)
Revenues – supplemental: |  |  |  |  |  |
Environmental services |  |  | - | 6,883 | - | 6,883
Management fees |  |  | - | - | 1,523 | 1,523
Toll milling services–deferred revenue |  |  | 3,000 | - | - | 3,000
|  |  | 3,000 | 6,883 | 1,523 | 11,406
Capital additions: |  |  |  |  |  |
Property, plant and equipment |  |  | 975 | 85 | - | 1,060
Long-lived assets: |  |  |  |  |  |
Plant and equipment |  |  |  |  |  |
Cost |  |  | 98,573 | 4,389 | 294 | 103,256
Accumulated depreciation |  |  | (20,231) | (2,870) | (170) | (23,271)
Mineral properties |  |  | 167,018 | - | - | 167,018
|  |  | 245,360 | 1,519 | 124 | 247,003

For the three months ended September 30, 2018, reportable segment results were as follows:

(in thousands of CAD dollars) |  |  | Canada Mining | DES | Corporate and Other | Continuing Operations
Statement of Operations: |  |  |  |  |  |
Revenues |  |  | 755 | 2,365 | 609 | 3,729
Expenses: |  |  |  |  |  |
Operating expenses |  |  | (2,141) | (2,051) | (39) | (4,231)
Exploration and evaluation |  |  | (3,894) | - | - | (3,894)
General and administrative |  |  | - | - | (1,657) | (1,657)
|  |  | (6,035) | (2,051) | (1,696) | (9,782)
Segment income (loss) |  |  | (5,280) | 314 | (1,087) | (6,053)
Revenues – supplemental: |  |  |  |  |  |
Environmental services |  |  | - | 2,365 | - | 2,365
Management fees |  |  | - | - | 609 | 609
Toll milling services–deferred revenue |  |  | 755 | - | - | 755
|  |  | 755 | 2,365 | 609 | 3,729

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended September 30, 2017, reportable segment results were as follows:

(in thousands of CAD dollars) |  |  | Canada Mining | DES | Corporate and Other | Continuing Operations
Statement of Operations: |  |  |  |  |  |
Revenues |  |  | 3,657 | 6,799 | 1,075 | 11,531
Expenses: |  |  |  |  |  |
Operating expenses |  |  | (3,598) | (6,079) | (185) | (9,862)
Exploration and evaluation |  |  | (14,432) | - | - | (14,432)
General and administrative |  |  | (16) | - | (6,169) | (6,185)
Impairment reversal |  |  | 331 | - | - | 331
|  |  | (17,715) | (6,079) | (6,354) | (30,148)
Segment income (loss) |  |  | (14,058) | 720 | (5,279) | (18,617)
Revenues – supplemental: |  |  |  |  |  |
Environmental services |  |  | - | 6,799 | - | 6,799
Management fees |  |  | - | - | 1,075 | 1,075
Toll milling services |  |  | 587 | - | - | 587
Toll milling services–deferred revenue |  |  | 3,070 | - | - | 3,070
|  |  | 3,657 | 6,799 | 1,075 | 11,531
Capital additions: |  |  |  |  |  |
Property, plant and equipment |  |  | 934 | 35 | - | 969
Long-lived assets: |  |  |  |  |  |
Plant and equipment |  |  |  |  |  |
Cost |  |  | 99,375 | 4,318 | 294 | 103,987
Accumulated depreciation |  |  | (17,457) | (2,653) | (129) | (20,239)
Mineral properties |  |  | 166,318 | - | - | 166,318
|  |  | 248,236 | 1,665 | 165 | 250,066

For the three months ended September 30, 2017, reportable segment results were as follows:

(in thousands of CAD dollars) |  |  | Canada Mining | DES | Corporate and Other | Continuing Operations
Statement of Operations: |  |  |  |  |  |
Revenues |  |  | 921 | 2,514 | 318 | 3,753
Expenses: |  |  |  |  |  |
Operating expenses |  |  | (995) | (2,258) | (41) | (3,294)
Exploration and evaluation |  |  | (5,447) | - | - | (5,447)
General and administrative |  |  | (1) | - | (1,488) | (1,489)
Impairment reversal |  |  | - | - | - | -
|  |  | (6,443) | (2,258) | (1,529) | (10,230)
Segment income (loss) |  |  | (5,522) | 256 | (1,211) | (6,477)
Revenues – supplemental: |  |  |  |  |  |
Environmental services |  |  | - | 2,514 | - | 2,514
Management fees |  |  | - | - | 318 | 318
Toll milling services–deferred revenue |  |  | 921 | - | - | 921
|  |  | 921 | 2,514 | 318 | 3753

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

22. RELATED PARTY TRANSACTIONS
Uranium Participation Corporation
The Company is a party to a management services agreement with UPC with an effective date of April 1, 2016 and a term of three years. Under the agreement, Denison receives the following management fees from UPC: a) a base fee of $400,000 per annum, payable in equal quarterly installments; b) a variable fee equal to (i) 0.3% per annum of UPC’s total assets in excess of $100 million and up to and including $500 million, and (ii) 0.2% per annum of UPC’s total assets in excess of $500 million; c) a fee, at the discretion of the Board, for on-going monitoring or work associated with a transaction or arrangement (other than a financing, or the acquisition of or sale of U3O8 or UF6); and d) a commission of 1.0% of the gross value of any purchases or sales of U3O8 or UF6 or gross interest fees payable to UPC in connection with any uranium loan arrangements.
The following transactions were incurred with UPC for the periods noted:

|  | Three Months Ended September 30 |  | Nine Months Ended September 30
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2018 |  | 2017
Management fees: |  |  |  |  |  |  |  |
Base and variable fees | $ | 481 | $ | 318 | $ | 1,250 | $ | 1,058
Commission and discretionary fees |  | 128 |  | - |  | 273 |  | 17
| $ | 609 | $ | 318 | $ | 1,523 | $ | 1,075

At September 30, 2018, accounts receivable includes $249,000 (December 31, 2017: $481,000) due from UPC with respect to the fees indicated above.
Korea Electric Power Corporation (“KEPCO”) and Korea Hydro & Nuclear Power (“KHNP”)
As at September 30, 2018, KEPCO, through its subsidiaries, holds 58,284,000 shares of Denison representing a share interest of approximately 10.42%. KHNP Canada Energy Ltd., a subsidiary of KEPCO’s subsidiary KHNP, is the holder of the majority of Denison’s shares and is also the majority member of Korea Waterbury Uranium Limited Partnership (“KWULP”). KWULP is a consortium of investors that holds the non-Denison owned interests in Waterbury Lake Uranium Corporation (“WLUC”) and Waterbury Lake Uranium Limited Partnership (“WLULP”), entities whose key asset is the Waterbury Lake property.
In May 2018, Denison funded a portion of the approved fiscal 2018 program for Waterbury Lake which has had the impact of further diluting KWULP’s interest in the WLULP. As a result, Denison earned an additional 1.23% interest in the WLULP, increasing Denison’s interest to 65.45%. The additional interest has been accounted for using an effective date of May 31, 2018 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 $818,000 (see note 26).
Other
During the nine months ended September 30, 2018, the Company incurred investor relations, administrative service fees and other expenses of $100,000 (September 30, 2017: $170,000) 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, 2018, an amount of $nil (December 31, 2017: $nil) was due to this company.
During the nine months ended September 30, 2018, the Company incurred office expenses and other expenses of $34,000 (September 30, 2017: $53,000) with Lundin S.A, a company which provided office and administration services to the former executive chairman, other directors and management of Denison. The agreement for these services was terminated effective September 30, 2018. At September 30, 2018, an amount of $nil (December 31, 2017: $nil) was due to this company.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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 September 30 |  | Nine Months Ended September 30
(in thousands of CAD dollars) |  | 2018 |  | 2017 |  | 2018 |  | 2017
Salaries and short-term employee benefits | $ | (422) | $ | (395) | $ | (1,275) | $ | (1,274)
Share-based compensation |  | (385) |  | (310) |  | (1,107) |  | (794)
Key management personnel compensation | $ | (807) | $ | (705) | $ | (2,382) | $ | (2,068)

23. INCOME TAXES
For the nine months ended September 30, 2018, Denison has recognized deferred tax recoveries of $8,178,000. The deferred tax recovery includes the recognition of previously unrecognized Canadian tax assets of $3,835,000 relating to the February 2018 renunciation of the tax benefits associated with the Company’s $14,500,000 flow-through share issue in March 2017.
24. 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 share and warrant 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. Warrants that do not trade in active markets have been valued using the Black-Scholes pricing model. Debt instruments have been valued using the effective interest rate for the period that the Company expects to hold the instrument and not the rate to maturity.
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.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The following table illustrates the classification of the Company’s financial assets within the fair value hierarchy as at September 30, 2018 and December 31, 2017:

|  |  |  |  |  | September 30 |  | December 31,
|  | Financial |  | Fair |  | 2018 |  | 2017
|  | Instrument |  | Value |  | Fair |  | Fair
(in thousands of CAD dollars) |  | Category(1) |  | Hierarchy |  | Value |  | Value
Financial Assets: |  |  |  |  |  |  |  |
Cash and equivalents |  | Category B |  |  | $ | 21,470 | $ | 3,636
Trade and other receivables |  |  |  |  |  |  |  |
Trade and other |  | Category B |  |  |  | 4,169 |  | 4,791
Investments |  |  |  |  |  |  |  |
Debt instruments |  | Category A |  | Level 2 |  | - |  | 37,807
Equity instruments-shares |  | Category A |  | Level 1 |  | 3,038 |  | 2,833
Equity instruments-warrants |  | Category A |  | Level 2 |  | 2,107 |  | 4,526
Restricted cash and equivalents |  |  |  |  |  |  |  |
Elliot Lake reclamation trust fund |  | Category B |  |  |  | 3,254 |  | 3,049
Credit facility pledged assets |  | Category B |  |  |  | 9,000 |  | 9,000
Reclamation letter of credit collateral |  | Category B |  |  |  | 135 |  | 135
|  |  |  |  | $ | 43,173 | $ | 65,777
Financial Liabilities: |  |  |  |  |  |  |  |
Account payable and accrued liabilities |  | Category C |  |  |  | 5,166 |  | 5,756
|  |  |  |  | $ | 5,166 | $ | 5,756

(1)
Financial instrument designations are as follows: Category A=Financial assets and liabilities at fair value through profit and loss; Category B=Financial assets at amortized cost; and Category C=Financial liabilities at amortized cost.
25. COMMITMENTS AND CONTINGENCIES
Specific Legal Matters
Mongolia Mining Division Sale – Arbitration Proceedings with Uranium Industry
In November 2015, the Company sold all of its mining assets and operations located in Mongolia to Uranium Industry a.s (“Uranium Industry”) pursuant to an amended and restated share purchase agreement (the “GSJV Agreement”). The primary assets at that time were the exploration licenses for the Hairhan, Haraat, Gurvan Saihan and Ulzit projects. As consideration for the sale per the GSJV Agreement, the Company received cash consideration of USD$1,250,000 prior to closing and the rights to receive additional contingent consideration of up to USD$12,000,000.
On September 20, 2016, the Mineral Resources Authority of Mongolia (“MRAM”) formally issued mining license certificates for all four projects, triggering Denison’s right to receive contingent consideration of USD$10,000,000 (collectively, the “Mining License Receivable”). The original due date for payment of the Mining License Receivable by Uranium Industry was November 16, 2016.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Under a subsequent extension agreement between Uranium Industry and the Company, the payment due date of the Mining License Receivable was extended from November 16, 2016 to July 16, 2017 (the “Extension Agreement”). As consideration for the extension, Uranium Industry agreed to pay interest on the Mining License Receivable amount at a rate of 5% per year, payable monthly up to July 16, 2017 and they also agreed to pay a $100,000 instalment amount towards the balance of the Mining License Receivable amount. The required payments were not made and Uranium Industry is in default of both the GSJV Agreement and the Extension Agreement.
On February 24, 2017, the Company served notice to Uranium Industry that it was in default of its obligations under the GSJV Agreement and the Extension Agreement and that the Mining License Receivable and all interest payable thereon are immediately due and payable.
On December 12, 2017, the Company filed a Request for Arbitration between the Company and Uranium Industry under the Arbitration Rules of the London Court of International Arbitration in conjunction with the default of Uranium Industry’s obligations under the GSJV and Extension agreements. A response and counterclaim was submitted by Uranium Industry on February 14, 2018 and on February 28, 2018 the members of the three person arbitration panel were appointed. As of the date hereof, arbitration proceedings are continuing.
26. SUBSEQUENT EVENTS
Acquisition of Cameco’s Minority Interest in the WRJV
JCU waived its ROFR rights in respect of the purchase and on October 26, 2018, Denison completed the previously announced acquisition of Cameco’s entire WRJV minority interest of 23.92% (see note 11), in exchange for the issuance of 24,615,000 shares of Denison. Denison’s ownership interest in the WRJV has now increased to 90%.
The acquisition will be accounted for as an asset acquisition with share based consideration. Using Denison’s closing share price on October 26, 2018 of $0.70 per share, the value of the Denison shares issued to acquire the additional WRJV interest is approximately $17,231,000.
Dilution of KWULP Interest in Waterbury Lake
On October 31, 2018, Denison funded a portion of the approved fiscal 2018 program for Waterbury Lake which has the impact of further diluting KWULP’s interest in the WLULP. As a result, Denison has earned an additional 0.47% interest in the WLULP, increasing Denison’s interest from 65.45% to 65.92%.
Private Placement of 4,950,495 Flow-Through Common Shares
On November 2, 2018, the Company announced it had entered into an agreement with Cantor Fitzgerald Canada Corporation, as a sole bookrunner and lead underwriter, on behalf of a syndicate of underwriters (together, the ‘Underwriters’), under which the Underwriters have agreed to purchase, on a ‘bought deal’ private placement basis, 4,950,495 common shares on a flow-through basis (the ‘Flow-Through Shares’) at a price of $1.01 per share for total gross proceeds of approximately $5,000,00. The Company also granted the Underwriters an option to increase the gross proceeds of the Offering by up to 10% (the ‘Underwriters’ Option’), exercisable in whole or in part at any time up to two business days prior to the closing date, which is expected to occur on or about November 23, 2018.