Denison posts first-quarter loss

Denison Mines (DEN-T) finished the first quarter of 2005 with a loss, the result of relatively slow delivery of uranium during the period.

Denison booked a loss of $1.4 million, or 6 per share, on $3.2 million in revenue in the quarter, as only 8% of its expected uranium sales took place during the previous three months. Based on existing contracts, the company is expecting to see roughly 30% of its annual sales in each of the three remaining quarters of 2005.

Denison expects total uranium sales to be down about 17% from last year, when it took in $31.3 million. In 2004, the company earned $2 million on revenue of $37.1 million, its environmental-services business unit having contributed a further $5.8 million to the top line. In 2003, Denison lost $3.1 million on revenues of $28.2 million.

During the quarter the company and investment house Sprott Securities launched Uranium Participation Corp. (U-T), which will hold and trade uranium oxide concentrate. Denison is managing the trading company under an initial 5-year contract at $400,000 per year plus a 1.5% commission on transactions and a sliding-scale management fee based on the value of assets under management (0.3% for the first $100 million and 0.2% for assets in excess of that amount).

The initial public offering of 18 million units was oversubscribed, permitting an over-allotment of 2 million units for gross proceeds of $100 million. Under the terms of the offering, a minimum of 85% of that will go to purchase uranium concentrate.

The units, priced at $5, were made up of a share and one-quarter of a purchase warrant. A full warrant can be exercised to buy one share at $6.25 until May 2007. Shares and warrants both trade on the Toronto Stock Exchange.

The company also received a new estimate of reserves at the Midwest uranium deposit in northern Saskatchewan, awaiting development to feed the mill at the McClean Lake mine, operated by Areva, parent company of Cogema Resources. The new estimate, by consulting firm Roscoe Postle Associates, puts proven and probable reserves at 345,500 tonnes grading 5.47% U3O8, 4.37% nickel and 0.34% cobalt.

A new resource estimate for McClean Lake is also in preparation; McClean produced about 2,700 tonnes of U3O8 last year and had reserves of 1.2 million tonnes grading 1.6% U3O8 at the end of 2003.

Denison has a 25.2% interest in Midwest. Areva owns 69.2% and OURD Canada, a consortium of Japanese electrical utilities, owns the rest. The three partners bought out the interest of Redstone Resources, now part of Newmont Mining (nem-n), at the end of 2004.