Current Technical Report In 2016, SRK Consulting conducted a preliminary independent assessment of the economic potential of the Wheeler River project and prepared an NI 43-101 technical report for the Company entitled the "Preliminary Economic Assessment for the Wheeler River Uranium Project, Saskatchewan, Canada" dated April 8, 2016 with an effective date of March 31, 2016, a copy of which is available under the Company's profile on SEDAR and EDGAR (the "PEA"). Ken Reipas, PEng, is the independent Qualified Person for the PEA for the purposes of the requirements of NI 43-101.
The assessment evaluated the co-development of the two separate deposits (Gryphon and Phoenix) with one production facility based on the mineral resource estimates for the Wheeler River property with an effective date of September 25th, 2015. For the Phoenix and Gryphon deposits combined, total Indicated mineral resources are estimated at 166,400 tonnes at an average grade of 19.14% U3
containing 70.2 million pounds of U3
. Total Inferred mineral resources are estimated at 842,600 tonnes at an average grade of 2.37% U3
containing 44.1 million pounds of U3
. Except as otherwise stated below, the following disclosure is summarized from the PEA.
Highlights of the PEA:
- Current uranium price: Base case scenario uses today's long term contract price for uranium of US$44 per pound of U3O8, leading to a pre-tax IRR of 20.4% and a pre-tax Net Present Value ("NPV") of CAD$513M (Denison's share CAD$308M);
- Exposure to rising uranium price: Strong profitability at today's price offers lower risk exposure to rising prices, as evidenced by a US$62.60 per pound U3O8 production case scenario resulting in a pre-tax IRR of 34.1% and pre-tax NPV of CAD$1,420M (Denison's share CAD$852M);
- Strategic development plan: Designed to minimize risk, generate higher up-front margins, and reduce initial capital funding requirements - by development of the conventionally mined basement hosted Gryphon deposit first, followed by the unconformity hosted Phoenix deposit;
- Existing infrastructure & reduced risk: Decreased project risk, capex, and schedule by utilizing existing infrastructure in the eastern Athabasca Basin (including excess milling capacity, provincial highways, and the provincial power grid), justifying an 8% discount rate, and leading to an initial project CAPEX of CAD$560M (Denison's share CAD$336M);
- Cash operating costs: The Gryphon deposit is expected to produce 40.7 million pounds U3O8, over a seven year mine life, at a cash operating cost of USD$14.28 per pound U3O8. The Phoenix deposit is expected to produce 64.0 million pounds U3O8, over a nine year mine life, at a cash operating cost of USD$22.15 per pound U3O8;
- Resource upside: Ability to incorporate potential mineral resource growth at the Gryphon deposit, as demonstrated by the high-grade intersections previously reported from the winter 2016 exploration program (not included in the PEA), including drill holes WR-641, with 3.9% eU3O8, over 9.2 metres, and WR-633D1, with 1.7% eU3O8 over 7.6 metres including 6.3% eU3O8 over 1.7 metres (see Denison news release dated March 10, 2016).
The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them to be categorized as mineral reserves, and there is no certainty that the preliminary economic assessment will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability. Additional definition drilling is required to improve the confidence in the existing mineral resources estimated for the Gryphon deposit, and is expected to be completed as the Company advances the project towards the completion of a Pre-Feasibility study ("PFS").
Property Description and Location
Denison has a 60% interest in the WRJV consisting of 19 mineral claims totaling 11,720 hectares in northern Saskatchewan. Denison has been the operator since November 10, 2004. The other partners are Cameco (30%) and JCU (10%). There are no back-in rights or royalties applicable to this property. Based on previous work submitted and approved by the province of Saskatchewan, title is secure until 2035.
As shown on the map provided above (Figure 1-0), the Wheeler River property is located along the eastern edge of the Athabasca Basin in northern Saskatchewan and is located approximately 35 km north-northeast of the Key Lake mill and 35 km southwest of the McArthur River uranium mine. The Wheeler River property is host to the Phoenix uranium deposit and the Gryphon uranium deposit, discovered in 2008 and 2014, respectively.
Accessibility, Climate, Infrastructure and Physiography
Access to the Wheeler River property is by road or air from Saskatoon. The property is well located with respect to all-weather roads and the provincial power grid. Vehicle access to the property is by the provincial highway system to the Key Lake mill then by the ore haul road between the Key Lake and McArthur River operations to the eastern part of the property. An older access road, the Fox Lake Road, between Key Lake and McArthur River, provides access to most of the northwestern side of the property. Gravel and sand roads and drill trails provide access by either four-wheel-drive or all-terrain-vehicle to the rest of the property.
The climate is typical of the continental sub-arctic region of northern Saskatchewan, with temperatures ranging from +32°C in summer to -45°C in winter. Winters are long and cold, with mean monthly temperatures below freezing for seven months of the year. Winter snow pack averages 70 cm to 90 cm. Freezing of surrounding lakes, in most years, begins in November and breakup occurs around the middle of May. The average frost-free period is approximately 90 days. Field operations are possible year round with the exception of limitations imposed by lakes and swamps during the periods of break-up and freeze-up.
Average annual total precipitation for the region is approximately 450 mm, of which 70% falls as rain, with more than half occurring from June to September. Snow may occur in all months but rarely falls in July or August. The prevailing wind direction is from the west with a mean speed of 12 km/hr.
La Ronge, roughly 170 km south of the project, is the nearest commercial/urban centre where most exploration supplies and services can be obtained. The operating Key Lake mill complex is approximately 35 km southwest of the property. Personnel working on the project commute by road from Saskatoon or by air to the Key Lake mill where they are picked up and transported to Wheeler by road.
Field operations are currently conducted from Denison's Wheeler River camp located centrally within the property. The camp provides accommodations for up to 35 exploration personnel. Fuel and miscellaneous supplies are stored in existing warehouse and tank facilities at the camp. The site generates its own power. Abundant water is available from the numerous lakes and rivers in the area.
The property is characterized by a relatively flat till plain with elevations ranging from 477 metres to 490 metres above sea level. Throughout the area, there is a distinctive north-easterly trend to landforms resulting from the passage of glacial ice from the northeast to the southwest. The topography and vegetation are typical of the taiga forested land common to the Athabasca Basin area of northern Saskatchewan. The area is covered with between 30 metres to 50 metres of overburden. The terrain is gently rolling and characterized by forested sand and dunes. Vegetation is dominated by black spruce and jack pine, with occasional small stands of white birches occurring in more productive and well-drained areas. Productive lichen growth is common to this boreal landscape mostly associated with mature coniferous stands and bogs.
Discovery and Delineation of the Phoenix Deposit
In the summer of 2008, as a direct result of the 2007 DC resistivity survey along the hanging wall of the quartzite ridge, two drill holes were located 600 metres apart along the same low resistivity trend. This drilling intersected a zone of characteristic sandstone alteration and uranium mineralization linked to unconformity-associated uranium deposits. All drill holes during the summer of 2008 intersected either uranium mineralization or very strong alteration close to mineralization.
Subsequent drilling programs conducted during 2009 and 2010 established significant milestones in the advancement of the project in terms of demonstrating continuity and extending the mineralized zone for a strike length of greater than 900 metres. An initial mineral resource estimate was completed at the end of 2010. Aggressive drilling programs in 2011 and 2012 successfully added additional mineral resources. In 2013, drilling was completed at the Phoenix deposit, but a large portion of the 2013 Wheeler River drilling program was also allocated to exploration of several other target areas on the property.
Some additional infill drilling was completed at the Phoenix deposit in early 2014, and this work was successful in extending some high grade mineralization into areas previously modeled as low grade. These results, combined with results from 2013 were the catalyst for an updated mineral resource estimate for the Phoenix deposit in June 2014.
Discovery and Delineation of the Gryphon Deposit
In March 2014, drill hole WR-556 resulted in discovery of the Gryphon deposit, intersecting uranium mineralization averaging 15.33% U3
over 4.0 metres in basement graphitic gneiss, 200 metres below the sub-Athabasca unconformity. The Gryphon deposit occurs on the KNorth trend, which exhibits numerous favourable exploration criteria including basement quartzite and graphitic gneisses, basement structures, reverse offsets of the unconformity, weak basement hosted mineralization near the unconformity, and anomalous sandstone geochemistry and alteration.
Historical holes ZK-04 and ZK-06 drilled in the late 1980s, along the K-North trend, targeted unconformity-related mineralization and intersected favourable sandstone structure and alteration as well as alteration and weak mineralization in the basement approximately 35 metres below the unconformity. Follow-up drilling campaigns attempted to locate unconformity mineralization up dip of the weak basement mineralization. Gryphon deposit discovery drill hole WR-556 was the first to evaluate the down dip projection of these intersections into the basement. Since the discovery hole at Gryphon, subsequent drilling campaigns in 2014 and 2015 were completed and an initial resource estimate was released in November 2015.
Geological Setting and Mineralization
The Wheeler River property located near the southeastern margin of the Athabasca Basin in the southwest part of the Churchill Structural Province of the Canadian Shield. The Athabasca Basin is a broad, closed, and elliptically shaped, cratonic basin with an area of 425 km (eastwest) by 225 km (north-south). The bedrock geology of the area consists of Archean and Paleoproterozoic gneisses unconformably overlain by up to 1,500 m of flat-lying, unmetamorphosed sandstones and conglomerates of the mid-Proterozoic Athabasca Group. The property is located near the transition zone between two prominent litho-structural domains within the Precambrian basement, the Mudjatik Domain to the west and the Wollaston Domain to the east. The Mudjatik Domain is characterized by elliptical domes of Archean granitoid orthogenesis separated by keels of metavolcanic and metasedimentary rocks, whereas the Wollaston Domain is characterized by tight to isoclinal, north-easterly trending, doubly plunging folds developed in Paleoproterozoic metasedimentary rocks of the Wollaston Supergroup, which overlie Archean granitoid orthogenesis identical to those of the Mudjatik Domain. The area is cut by a major northeast-striking fault system of Hudsonian Age. The faults occur predominantly in the basement rocks but often extend up into the Athabasca Group due to several periods of post-depositional movement.
Local geology comprises little-deformed late Paleoproterozoic to Mesoproterozoic Athabasca Group strata comprised of Manitou Falls Formation sandstones and conglomerates which unconformably overlie the crystalline basement and have a considerable thickness from 170 m over the quartzite ridge to at least 560 m on the western side of the Property. Basement rocks beneath the Phoenix and Gryphon deposits are part of the Wollaston Domain and are comprised of metasedimentary and granitoid gneisses. The metasedimentary rocks belong to the Wollaston Supergroup and include graphitic and non-graphitic pelitic and semipelitic gneisses, meta-quartzite, and rare calc-silicate rocks together with felsic and quartz feldspathic granitoid gneisses. Pegmatitic segregations and intrusions are common in all units with garnet, cordierite, and sillimanite occurring in the pelitic strata, indicating an upper amphibolite grade of metamorphism. Graphitic pelite and quartzite units appear to play important roles in the genesis of Athabasca Basin unconformity-type deposits. Thus the presence of extensive subcrop of both units: 18 km of quartzite and 152 line-km of conductors (assumed to be graphitic pelite), greatly enhances the economic potential of the Wheeler River property. The Wheeler River property is partially covered by lakes and muskeg, which overlie a complex succession of glacial deposits up to 130 metres in thickness. These include eskers and outwash sand plains, well-developed drumlins, till plains, and glaciofluvial plain deposits. The orientation of the drumlins reflects southwesterly ice flow.
The Phoenix deposit straddles the sub-Athabasca unconformity approximately 400 metres below surface and comprises three zones (A, B, C) which cover a strike length of 1.1 kilometres. The deposit comprises an exceptionally high grade core surrounded by a lower grade shell. The deposit is interpreted to be structurally-controlled by the WS shear, a prominent basement thrust fault which occurs footwall to a graphitic-pelite and hangingwall to a garnetiferous pelite and quartzite unit.
The Gryphon deposit occurs from 580 metres below surface and is centered approximately 220 metres below the sub-Athabasca unconformity within basement rocks. The Gryphon deposit, as currently defined, consists of a set of parallel, stacked, northeast plunging mineralized lenses that are broadly conformable with the basement stratigraphy. The deposit is approximately 450 metres along plunge, 80 metres across plunge and varies in thickness, between 2 and 20 metres, depending on the number of lenses present. Four groups of mineralized lenses have been interpreted to date, namely the A, B, C and D series, based on their position relative to the different basement stratigraphic units. The basement stratigraphy, which strikes northeast and dips moderately to the southeast, typically comprises of: (1) a hangingwall graphitic pelitic gneiss (Upper Graphite), (2) a Quartz-Pegmatite assemblage, (3) a thin graphitic pelitic gneiss (Lower Graphite), and (4) a footwall Basal Pegmatite unit. A major structure termed the G-Fault separates the Upper Graphite from the Quartz-Pegmatite assemblage. The A, B and C series lenses occur with the hangingwall and footwall to the Quartz-Pegmatite assemblage, respectively. The estimated mineral resources contained in the Gryphon deposit includes only the results from the A, B and C series lenses. The D series lenses, which occur within the Basal Pegmatite unit, were excluded from the initial resource estimate in September 2015 as insufficient drilling had been completed at the time of the resource estimate.
Deposit Types and Geological Model
Since discovery of the McArthur River deposit in 1988, the McArthur River exploration model has emphasized a different association between uranium mineralization and rock type compared to the earlier Key Lake exploration model. At McArthur River, one of the most significant rock types in the basement succession is a massive, homogenous, and competent quartzite. Mechanically, particularly compared to the adjacent layered members of the basement stratigraphy, the quartzite is extremely competent, and thus exerts an important control both in basement and post-Athabasca sandstone structural evolution. Both the footwall and hanging wall contacts of the quartzite unit, particularly where these contacts involve highly incompetent rocks such as graphitic pelite, are sites of major thrust and strike-slip faults.
Although these faults are loci for mineralization; the poor conductivity, low magnetic susceptibilities and low density values associated with the quartzite limits the effectiveness of airborne and ground geophysical methods in mapping these basement units especially when they are covered by hundreds of metres of sandstone. Another noteworthy characteristic of McArthur River type mineralization is the widespread presence of hydrothermal dravite, indicating boron addition into the overlying Athabasca sandstone. Thus, borehole geochemistry and drilling are the primary exploration methods.
Recently, basement-hosted deposits have become more recognized as a viable exploration target through the development of Eagle Point mine and the discovery of deposits such as Millenium, Triple R and Arrow. Exploration typically requires the recognition of significant fault zones within basement metasediments (often associated with graphite) with associated clay and geochemical alteration haloes.
Please see Annual Information Form
for futher information about the Wheeler Project and details of the Preliminary Economic Assessment.
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