Faced with mounting losses and a battered share price, Toronto- based Denison Mines (TSE) may be forced to divest more of its non- uranium assets in order to meet future financial obligations. The company says it may need to sell some of its assets in order to help pay for future obligations, including the redemption of about $175-million worth of class B preferred shares next March.
“I know that you must be concerned about whether Denison will be able to continue paying dividends on its preferred shares and retract the preferred shares (series B) next March,” Chairman Helen Roman-Barber told disgruntled shareholders at the annual meeting.
She said the company faces the prospect that its oil and gas divestiture program, which is under way, may not provide sufficient funds to meet all of its financial obligations.
“Because of this, Denison is willing to sell other non-core assets, she explained to a large turnout of shareholders at the annual meeting.
The company has been seeking a buyer for its overseas oil and gas assets for more than a year, but may also have to shed additional interests that could include its 60% owned Quintette Coal and 60% owned Denison-Potacan Potash operation in New Brunswick.
Denison recently reported a first- quarter loss of $4.8 million (15 cents per share) compared with a profit of $1.4 million (11 cents per share) a year earlier. The marketplace has responded harshly by driving the price of Denison’s class B shares to a low of $1.20, down from a 52-week high of $5.40.
The major reasons for the lower results were weaker potash prices and a drop in potash production due to a 3-week strike earlier in the year.
Roman-Barber said the company’s first objective is to complete the sale of its remaining oil and gas assets in Greece, Egypt, Spain and Italy. Last November, Denison sold its Canadian oil and gas assets for $44.6 million, but stiff competition from other properties currently on the market has made the current sale a “difficult but not insurmountable task,” she said. Denison’s other recent asset sales included its 50% stake in Reiss Lime for $18 million, and the conditional sale of its coal interests, other than Quintette, for $25 million.
Despite the current profit slump, Roman-Barber said she remains confident that Denison “will be able to meet its financial obligations and will proceed to finance the development of its uranium properties in Saskatchewan and Australia.”
“Mining is a cyclical industry,” she said, “and my family and I have lived with all of the ups and downs that Denison has experienced during its 33-year history.”
She sees change occurring in the uranium business, and feels demand is likely to increase as Canada, France, Japan and a number of other countries add to their nuclear generating capacity.
President Jake Fowler said an underground test mining program has been completed at the high- grade, low-cost Midwest uranium project in Northern Saskatchewan. The data from that program are being used to develop a detailed feasibility report and an environmental impact study. “We expect to announce a production decision by the end of the year,” he said.
Initial results at Midwest indicate minable uranium reserves of more than 32 million lb. at an average grade of 126 lb. per ton, he added.
Meanwhile, the company has implemented a program to reduce uranium production at its Elliot Lake operations to an annual level of 2.7 million lb. per year, down from last year’s production of 4.5 million lb.
Denison has also declared a quarterly preferred share dividend, payable on June 15 to shareholders of record on June 8. The dividends amount to $0.61 for the preferred shares Series A and $0.59 for the preferred shares Series B.
Accordin t analyst a Prudential-Bach Securities Deniso mus continu t sel non-cor asset t mee it financia obligations The sa Denison’ option coul includ sellin it potas min i Ne Brunswic (value a $10 millio afte deb repayments o borrowin agains som o th company’ unencumbere oi an ga assets Thi woul provid fund t retrac th Serie preferre share unti buyer fo th asset ca b found mor drasti ste coul b sellin contro o Deniso t thir part wh woul b willin t hel refinance the company, the analysts say. Denison Mines (TSE) $000s except per-share items Quarter ended Mar. 31 1990 1989 Revenue $86,427 $95,951 Net earnings (loss) (4,771 ) 1,377
per share (0.15 ) (0.11)
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