Uranium sales revenue for the quarter was $20,338,000. Sales from US production were 225,000 pounds U3O8 at an average price of $66.03 per pound. Sales of Canadian production were 98,000 pounds U3O8 at an average price of $49.91 per pound. Amortization of the fair value increment related to the DMI sales contracts totaled $528,000 for the quarter. Reported revenue is also impacted by the effect of foreign currency translation.

Uranium sales revenue in the 2008 period totaled $16,178,000 from the sale of 50,000 pounds U3O8 from US production at an average price of $90.25 per pound and the sale of 147,000 pounds U3O8 from Canadian production at an average sales price of $71.54 per pound and from amortization of the fair value increment related to the long-term sales contracts of DMI in the amount of $906,000.

Denison marketed its uranium from the McClean Lake joint venture jointly with AREVA Resources Canada Inc. (ARC) until the end of 2008. Commencing in 2009, Denison markets its share of McClean Lake production directly except for one joint contract under which it will deliver approximately 400,000 pounds in 2009 and 40,000 pounds in 2010, all of which is priced at 80% to 85% of the quoted spot price. This is the only remaining contract for Canadian production.

In addition to the contract noted above, the company currently has three other long-term contracts in place. One is for the sale of 17% of the White Mesa mill production up to a total of 6.5 million pounds with a minimum of 500,000 pounds in 2009, 750,000 pounds in 2010 and 1,000,000 pounds in 2011. The sales price is 95% of the published long-term price for the month prior to delivery with a floor price of $45.00. The second contract is for 20% of production from the White Mesa mill during the years 2012 to 2017 inclusive, but not less than 200,000 pounds per year. The price per pound under this contract is 95% of the long-term price at the time of delivery with an escalated floor price of $50.00 per pound. The third contract is for delivery of 1,000,000 pounds U3O8 over a period of five years beginning in 2011. The price under the contract is a combination of an escalated base price and published market price indicators at the time of delivery subject to escalated floors and ceilings.

Revenue from the environmental services division was $1,344,000 for the three months ended March 31, 2009 compared to $1,141,000 in the comparable 2008 period. Revenue from the management contract with Uranium Participation Corporation was $295,000 for the three months ended March 31, 2009 compared to $839,000 in the same period in 2008.

Uranium Production

The McClean Lake joint venture produced 745,000 pounds U3O8 for the three months ended March 31, 2009 compared with 591,000 pounds U3O8 for the three months ended March 31, 2008. Denison’s 22.5% share of production totaled 168,000 and 133,000 pounds respectively.

Unit production cash costs in Canada are driven primarily by production volumes as the majority of costs do not vary with volume. These fixed costs for the McClean operations total approximately CAD58 million per year so as production volumes increase, the cost per pound decreases. Reagent costs are in addition to this cost as are amortization, depletion and depreciation costs. Canadian production costs for the quarter were $48.70 (CAD60.61) per pound U3O8 including $24.58 (CAD30.59) per pound U3O8 for amortization, depletion and depreciation costs.

Inventory from Canadian production was 92,000 pounds U3O8 at March 31, 2009.

The company began processing conventional ore at the White Mesa mill on April 28, 2008. Production at the White Mesa mill from conventional ore was 308,000 pounds U3O8 for the three months ended March 31, 2009. The company also produced 131,000 pounds V2O5 in the quarter. Production costs for processing conventional ore in the quarter totaled $77.24 per pound U3O8 and vanadium equivalent including $44.29 per pound amortization, depletion and depreciation.

Inventory from US production was 245,000 pounds U3O8 and 1,353,000 pounds V2O5 at March 31, 2009.

Operating costs include a write-down of $1,224,000 relating to the net realizable value of the company’s vanadium inventory. Operating costs also include expenses relating to Denison’s environmental services division amounting to $1,354,000 in the three month period ended March 31, 2009 and $1,007,000 in the comparable period in 2008.

Outlook for 2009

Mining and Production


No open pit mining activities are projected in 2009 at McClean Lake in northern Saskatchewan. Mining of the Caribou deposit, which was originally expected to commence in 2009, has been delayed at least a year after a review of the project’s economics at current uranium prices. Test mining using the bore hole mining technique, that has been the subject of three years of development, will continue in 2009.

At March 31, 2009, the McClean Lake mill ore stockpile had approximately 330,000 tonnes of ore containing 5.7 million pounds U3O8 with the company’s share being 1.3 million pounds U3O8. Milling of the stockpiled ore from Sue E, Sue B and Sue A is ongoing and U3O8 production at McClean Lake in 2009 is expected to be 3,380,000 pounds U3O8, of which Denison’s share is 761,000 pounds.

Development of the Midwest project has been postponed due to the current economic climate, delays and uncertainties associated with the regulatory approval process, the increasing capital and operating cost and the current market for uranium. The regulatory process for the project, which has been ongoing since December 2005, will be continued through 2009, as well as the engineering for Midwest. This will enable the project to be advanced to the stage that it is ready to be developed quickly when the economic conditions improve. The status of the project will be reviewed every six months.


Three mines are operating on the Colorado Plateau with production from the Pandora, West Sunday and Beaver mines. Four mines remain on active care and maintenance including the Topaz, Rim and Sunday mines on the Colorado Plateau, and the Tony M mine in the Henry Mountains complex. The conditions of these mines are being maintained in a state to resume mining operations quickly when uranium prices improve or the company is able to obtain new sales contracts at prices sufficient to justify re-opening the mines. Production from the mines in operation is being hauled to Denison’s White Mesa mill. At March 31, 2009, a total of 81,000 tons remain on the stockpile at the mill, excluding alternate feed stockpiles.

At the company’s Arizona 1 mine on the Arizona Strip located in northeastern Arizona, the air quality permitting process is ongoing, but the company is unable to determine the length of time required to receive the permit. Once the permit is received, mine production should be able to commence within six months.

The White Mesa mill processed conventional ore for the first three months in 2009. In April, the mill was shut down for planned maintenance. The mill will process conventional ore for at least the month of May to produce enough uranium to meet the committed contract share of 500,000 pounds for 2009. The construction of the new $5.0 million alternate feed circuit is on schedule with start-up anticipated in June 2009.

Production from this circuit is anticipated to be up to 160,000 pounds in 2009. The company expects to produce 0.5 to 0.8 million pounds of U3O8 and 0.5 million pounds of V2O5 at the White Mesa mill in 2009.


The company expects to be in a position to sell 1.2 to 1.3 million pounds of U3O8 in 2009 including 0.5 to 0.6 million pounds from US production. It also anticipates selling 1.5 million pounds of vanadium. Subsequent to the quarter end, Denison sold 396,000 pounds V2O5 at an average price of $3.55 per pound V2O5.