Tim Gabruch,

VP Commercial,

Denison Mines

Chief Commercial Officer,

Uranium Participation Corporation

“Phoenix is the highest-grade undeveloped uranium deposit in the world, with an average grade of 19.1% and 59.7 million pounds U3O8 in probable reserves (141,000 tonnes).”

Denison Mines has changed its focus over the years. Could you provide a summary of the company’s main milestones? Denison Mines was for many years a producer with uranium mines in Elliot Lake, Ontario, which came to an end in 1992. “Modern” Denison Mines was born through the merger with International Uranium Corp. in 2006. At that time, Denison had assets in Canada, the U.S., Africa and Mongolia, but gradually we sold our international assets and increased our portfolio in the Athabasca basin. In 2018, we increased our ownership in the Wheeler River project, going from 66% to 90%. Wheeler River is our flagship project today, and it consists of two high-grade uranium deposits, Phoenix and Gryphon.

Could you explain the potential for in-situ recovery (ISR) production at Phoenix? The geology of Phoenix and Gryphon are quite different. Largely situated in sandstone, Phoenix is the highest-grade undeveloped uranium deposit in the world, with an average grade of 19.1% and 59.7 million pounds U3O8 in probable reserves (141,000 tonnes). By comparison, Gryphon is located in more competent basement rock that underlies the Athabasca sandstone, with an average grade of 1.8% for 49.7 million pounds U3O8 in probable reserves (1,257,000 tonnes). Gryphon geology allows for relatively low cost conventional underground mining techniques but, as part of our 2018 pre-feasibility study for Wheeler River, Denison’s team selected the low-cost in-situ recovery (ISR) mining method for the development of Phoenix.

ISR is the most utilized uranium production method in the world but is typically applied in very low-grade sandstone-hosted deposits. While Phoenix is also largely hosted in sandstone, it is much higher grade and the geology is more complex. Since the PFS was released, we have conducted extensive field testing at Phoenix – including the installation of the first commercial scale ISR wells in the history of the Athabasca Basin. Our testing validated our PFS assumptions related to the permeability or hydraulic conductivity of the orebody. Recently an independent consulting firm with unique expertise in ISR mining operations, Petrotek Corporation, completed the development of a hydrogeologic model for Phoenix which demonstrated “proof of concept” for the application of ISR at Phoenix. This is important because it suggests that the lowest-cost mining method available for uranium ISR may now be applicable to certain deposits in the jurisdiction hosting the world’s highest-grade uranium deposits. It is a powerful combination. What are some of the cost and environmental advantages of ISR? Unlike large mines with high fixed costs like McArthur River, ISR mines typically have lower capital and operating costs, given the lack of large-scale infrastructure. There is no open pit or shaft to access the orebody underground, and no mechanical excavation or handling of waste rock to access the ore. Moreover, ISR allows for more flexibility to ramp up or reduce production levels.

Since ISR mining recovers the uranium from the host rock “in-situ”, the mining method also has some very positive environmental advantages. The PFS shows there is potential at Phoenix for ground freezing technology to be used together with ISR, so mining is expected to require little or no discharge of treated effluent to the environment. And, most importantly, there is no need to construct a conventional uranium mill or tailings management facility. What are the other assets of Denison Mines and how do you capitalize on these? Denison Mines is a unique uranium developer because we are not a single asset company. We have a diverse portfolio of assets in the Athabasca Basin, including a 22.5% ownership in the McClean Lake uranium mill, and we generate some cash from our management agreement with Uranium Participation Corp. and our Closed Mines group, which has profitable contracts with BHP. We also have interests in over 250,000 hectares of prospective exploration ground in the Athabasca Basin and various undeveloped uranium deposits at the McClean Lake, Midwest and Waterbury Lake projects. Denison has several joint venture partners, including important players in nuclear energy such as Orano and Korea Hydro Nuclear Power (KHNP). Can you explain the business of Uranium Participation Corporation (UPC), and what role Denison plays? UPC is an independent TSX-listed company (TSX: U) that invests in physical uranium and stores it at licensed facilities around the world. It is the largest company of its kind and provides investors with pure leverage to the uranium price, without being exposed to the typical mining or resource risk of the publicly listed uranium mining companies. Because the global uranium market is quite small and not very transparent, it is difficult for private investors to buy or sell physical uranium. UPC provides exposure to the physical uranium market and allows investors to speculate on future changes in the uranium price by trading the shares of UPC.

Denison earns a fee as the manager of the company, handling all administrative, financial, commercial and governance requirements of UPC, with ultimate authority over UPC’s decisions being held by a fully independent Board of Directors. How do you interpret the rise in uranium prices in H1 2020, and what can we expect down the line? After Fukushima, the market swung from a very competitive market to one of excess supply due to the sudden closure of more than 50 reactors in Japan. After years of growth in nuclear outside of Japan, supply-demand fundamentals have greatly improved, and we now find ourselves in a situation where demand is exceeding primary supply. Production for this year was expected to be around 140 million lbs U3O8, compared to a market with expected annual demand of 180-190 million lbs. Now, production in 2020 is expected to decrease even further to around 120 million lbs due to COVID-19-related curtailments, which has accelerated the draw-down of remaining market inventories. While Cigar Lake, and eventually McArthur River, will eventually come back into production, industry projections suggest that these supply sources will still not be enough to meet future demand and that new projects will be needed. Most of these new projects require significantly higher uranium prices (US$50-US$60/lb U3O8) to incentivize advancement, which is expected to help support higher uranium prices in the future. Denison is well positioned to take advantage of these market dynamics as ISR mining at Phoenix has the potential to produce the lowest operating costs in the industry – US$3.33/lb U3O8 according to the PFS. Do you perceive that coronavirus has brought a change in public perceptions toward nuclear energy? Due to the pandemic many regions have been given a break from persistent pollution. This phenomenon has caught people’s attention and caused many to rethink their views on cleaning up the environment. As a result, more people are recognizing the key role that nuclear energy must play as part of the energy mix needed to fight climate change. Over the past few months, the importance of nuclear power has been further highlighted as nuclear power operators have kept their promise to deliver clean, reliable, baseload power to supply critical infrastructure, including hospitals, during the pandemic, while also providing stable high value jobs.

Would you like to share some final thoughts? As the market turns – and we feel it is turning already – Denison is well positioned to bring Phoenix, the world’s highest-grade undeveloped uranium deposit, into production using the world’s lowest-cost uranium mining method (ISR). While many developers have the ability to build new uranium mines, few have the potential, like Denison, to compete with existing uranium mines in today’s market environment.