Writedown costs Denison third-quarter profit

Denison Mines (DEN-T) posted a loss of $10.4 million (3 cents per share) for the third quarter, following a writedown of $11.5 million on unsuccessful offshore oil drilling in the Mediterranean Sea.

The company took in revenues of $14.2 million in the 3-month period, down from $19.6 million in the third quarter of 1997, when it earned $4.3 million. For the first nine months of 1998, Denison shows a loss of $6.2 million (2 cents per share) on revenue of $40.3 million. In the identical period of 1997, profits were $24.7 million on revenue of $56.5 million.

Falling production at the Prinos oil field in the northern Aegean Sea combined with low oil prices to hurt 1998 revenues. Denison says it will close down the field unless it sees “significant reductions” in operating costs.

At the McClean Lake uranium project in northern Saskatchewan, where Denison has a 22.5% interest, operator (and 70% owner) Cogema Resources suspended construction on the tailings management facility after inspections by the company and the Atomic Energy Control Board showed about 6 cubic metres of rock placed in an underground filter drain system did not meet construction specifications.

The AECB is reviewing Cogema’s inspection files to confirm that the filter drain system was built to standard. The system will pump waste water through underground drifts and raises, and then to the surface for treatment. Solid mine wastes are to be contained in the mine’s first open pit.

Production from McClean Lake is scheduled to start in the first quarter of 1999.

At Denison’s Elliot Lake properties, reclamation work is mainly complete, with the final tailings dam at the Stanrock mine in place. Denison’s closure obligations now consist largely of treating runoff water from tailings impoundments, with associated monitoring to ensure the dumps remain in compliance with regulations.