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Denison Mines (DML, DNN) yesterday announced the completion of the inaugural In-Situ Recovery (ISR) field test program undertaken on the Midwest Project. A total of ten small diameter boreholes were drilled within the Midwest Main deposit primarily to evaluate site specific conditions for ISR Mining. The field test was successful in that the results provided for preliminary validation that the deposit does in fact possess the characteristics necessary for an ISR operation. After having successfully proven ISR amenability for the Phoenix deposit, Denison will attempt to re-create yet another ISR extraction site, now at Midwest. Combining know-how with Orano Canada will further provide a platform for future innovation in the Athabasca Basin. Midwest represents Denison’s third project evaluated for potential ISR mining in the Athabasca Basin. Underpinned by a 1.15x NAV8% valuation methodology, we maintain our C$5.35 per share price objective which equates to +66% upside from the most recent close.
The inaugural ISR field test program was designed to validate various deposit-specific characteristics of the Midwest Main deposit, and to collect a database of geotechnical, hydrogeological, and metallurgical data to further evaluate the ISR mining conditions present at the deposit. As per test specifics, ten small-diameter test wells were installed within the Midwest Main deposit during the program. Included was a four-well test pattern and six individual wells to test specific areas of the deposit for various characteristics. The test pattern included one injection well, one extraction well, a recharge well, and a monitoring well outfitted with a multi-channel vibrating wire piezometer. The six additional wells were drilled to their target depths and, as applicable, outfitted with well screens and/or pressure monitoring devices to facilitate hydrogeological testing. The test program measured pressure changes within the mineralized zone. The tests provided evidence of the deposit’s hydraulic conditions and is indicative of the potential for the movement of mining solution in an ISR mining operation.
Ultimately, the field test was successful in that both pump and injection wells validated hydraulic connectivity in the test wells within the mineralized zone. This was consistent with the initial Concept Study. Additionally, the field test demonstrated the effectiveness of permeability enhancement within two of the wells, while metallurgical samples were also collected for use in future testing to determine leaching characteristics.
The Midwest Project is 74.83% owned by Orano Canada Inc. (owner & operator) with Denison owning the balance. The property is approximately 1.0 km from the Points North Landing airstrip and about 25.0 kms west, by existing roads, from the McClean Lake Mill (77.5% owned by Orano Canada with Denison owning the balance). We continue for forecast initial production starting in late 2027 from Phoenix. Following the completion of a Feasibility Study last year, detailed engineering is currently being undertaken for the ISR operation.
Following the sale of 100,000 lbs of uranium from inventory (at $100/lb) this past April, Denison maintains currently maintain 2.3M lbs of uranium concentrate in inventory. A further 200,000 lbs are expected to be sold later this year as per a previously signed arrangement. Recall that the company initially purchased its physical uranium inventory in 2021 at an average cost of $29.65 per lb. Maintaining our LT uranium price target of $120/lb, we derive a NAV8% valuation and corresponding project sensitivities as displayed below.
While updating for the corporate changes, we maintain our 1.15x NAV8% valuation, resulting in a 12-month price objective of C$5.35 per fully diluted share, equating to +66% upside from the recent close. Denison shares currently trade at 0.69x discount to NAV.
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