Uranium project developer Denison Mines has announced a $75-million bought-deal funding initiative to fund the strategic acquisition of physical uranium that it intends to hold as a long-term investment to support the future financing of the Wheeler River uranium project, in Canada.
The company, which trades on the TSX and NYSE American, has entered into an agreement with Cantor Fitzgerald Canada Corporation as lead underwriter and sole book-runner, under which the underwriters have agreed to purchase 68.2-million units of the company at $1.10 apiece.
Net proceeds of the offering will be used to buy uranium on the spot market, with a target of accumulating about 2.5-million pounds of U3O8.
This will represent a sizeable portion of Denison's share of the C$290-million of initial capital costs for Wheeler River, in Saskatchewan.
“From a project finance standpoint, the physical uranium holdings could potentially de-risk the process by representing a meaningful source of collateral. Similarly, we expect that our future customers will value, as part of potential future discussions regarding off-take or long-term contracting arrangements, the fact that our company will already have a sizeable base of physical uranium before achieving first production from Wheeler River,” said president and CEO David Cates.
Denison completed a prefeasibility study (PFS) for the Wheeler River property during 2018. The PFS considers the potential economic merit of co-developing the Phoenix and Gryphon deposits. The high-grade Phoenix deposit is designed as an in-situ recovery mining operation, with associated processing to a finished product occurring at a plant to be built on site at Wheeler River. The Gryphon deposit is designed as an underground mining operation, using a conventional long hole mining approach with processing of mine production assumed at Denison’s 22.5%-owned McClean Lake mill.
Taken together, the project (on a 100% basis) is estimated to have mine production of 109.4-million pounds U3O8 over a 14-year mine life, with a base case pre-tax net present value of $1.31-billion, an internal rate of return of 38.7%, and initial pre-production capital expenditure of $322.5-million.
Denison's stock surged 14% on Monday.