Denison Mines granted fresh 10-year licence for Saskatchewan uranium operations
Canadian uranium miner Denison Mines (TSX:DML) (NYSE MKT:DNN) said Wednesday the Canadian Nuclear Safety Commission (CNSC) has granted the firm a 10-year licence for its 22.5%-owned McClean Lake operations in northern Saskatchewan.
The permit renewal comes only a year after the Toronto-based miner and its joint venture partners obtained regulatory approval from the CNSC to hike annual uranium production capacity from 13 million to 24 million pounds.
"We are quite familiar with the CNSC's rigorous processes, having worked closely with the CNSC for many years in regards to our own reclaimed mine sites in Elliot Lake,” Denison's President and CEO David Cates said in the statement.
Permit renewal comes only a year after Denison and its joint venture partners obtained regulatory approval from the CNSC to hike annual uranium production capacity.
The McClean Lake operations, located in the uranium-rich Athabasca Basin, are owned by the McClean Lake Joint Venture, a partnership between AREVA Resources Canada (70%), Denison (22.5%) and OURD Canada (7.5%). They include several uranium deposits as well as the McClean Lake mill, which is currently operating and processing ore from the Cigar Lake mine under a toll milling agreement.
The uranium mill is one of the most technologically advanced of its kind currently in operation, and is the only facility in the world designed to process high-grade uranium ore without dilution.
The 2011 Fukushima nuclear disaster left a dark cloud hanging over the uranium market for years. Even while new plants were underway outside of Japan, the country’s long absence from the market bred negative sentiment that in turn took a toll on uranium prices.
Before the meltdown at the Fukushima Daiichi nuclear plant, about 30% of Japan's power was nuclear generated and prices for the commodity were hovering around $73 a pound.
Right after uranium prices began falling to hit a 17-year low of below $18 per pound in December last year. Then, against expectations, the price started to turn. When top supplier Kazakhstan announced in the second week of January that it was cutting output by 5.2 million pounds, equal to 3% of global production, the rally seemed justified.
By February 10 the price had climbed more than 50% from its December low and they are currently trading at around $21 per pound.
The steady recovery hasn’t boosted miners shares jus yet. Denison’s stock lost 6.7% of its value last month, meaning that year-to-date it has fallen by about 20%.
That performance is not so bad when compared to Cameco’s (TSX:CCO) (NYSE:CCJ), the world’s No. 1 listed uranium producer. The Saskatchewan-based miner was down around 5% last month and has fallen a bit over 15% so far this year.
Unlike Cameco, Denison doesn’t have operating mines, which makes it something of a leveraged bet on uranium's future.
That’s why, according to analyst Reuben Gregg Brewer, when investors are down on the outlook for uranium or uranium prices falter, Denison stock is going to fall harder, he wrote last month.
Rob Chang, Managing Director and Head of Metals & Mining – Canada at Cantor Fitzgerald, is more optimistic. In a note Wednesday, he wrote that the company’s future look bright and so his firm maintained their “Buy” recommendation with a $1.75/share target price.
In the last eight months, Denison has achieved key milestones: it reached a deal to grow its stake in the Wheeler River uranium project to 66%, raised $63.5 million in capital and released a series of drill results from its early 2017 drill program that not only confirm the high-grade nature of the project, but also underscore its potential to become an important actor in the market.