Denison Mines

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Denison Mines

  • Jonathan Kitay

    The purpose of this study is to valuate Denison Mines (DML). As Matt Anderson pointed out in the UEC discussion, it would be highly useful to have multiple company studies going on in multiple threads. Participation from all members is strongly encouraged. Before we begin,

    FULL DISCLOSURE: This study, along with the Fission Uranium discussion, are my FIRST attempts at valuating uranium mining companies. Since these are my first attempts, feedback from more advanced investors/speculators would be greatly appreciated.

    I will try to make this thread easy to follow by breaking up this study into categories. Some of the categories may include:

    • Management Team
    • Share Structure
    • Properties and Ownership
    • Location
    • Cost structure/Financing
    • Projected Growth
    • Valuation at various Uranium Prices

    If you have a category you would like to add, simply begin your post with it’s name so other members can quickly navigate. I’m hoping other members can take on some of these categories. I’m going to start with Management Team and Share Structure.

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  • Jonathan Kitay

    Management Team

    When it comes to management teams, I think we want to know three things:

    1)   Is the team an “exploration and development” team?

    2)   Do they have the ability to build a mine and have they done it before?

    3)   Are they investor friendly?

    My answer to question 1: Exploration and development companies find, build, and sometimes operate their own mines. This gives them the ability to build a small company into a big company, which is very attractive to investors. According to the corporate profile on the Denison Mines website, they are an exploration and development company, but are they an exploration and development team?

    My answer to question 2: I have not been around the resource space long enough to judge whether or not Denison’s management team has the ability build a mine. Consequently I had to rely on the company’s website for this information. Although the management team’s biographies do not definitively state that they have built mines before (other than Peter Longo ,VP Project Development), I am not concerned. First, the team clearly has impressive experience in finance within the resource space. Second, Lukas Lundin is the Executive Chairman. As Rick Rule often points out, you want to align yourself with those who are “serially successful.” The examples Rick always provides include Ross Beaty, Bob Quartermain, and Lukas Lundin. For me, that’s enough.

    My answer to question 3:  As I stated in the Fission Discussion, there are several ways to assess whether or not a management team is investor friendly. One way is to look at share structure and figure out if share dilution is low.

    Share Structure

    When it comes to share structure, I think we want to know two things:

    1)   How many fully diluted shares are there?

    2)   How many fully diluted shares are outstanding?

    Here is Denison Mines share structure according to the Second Quarter Report located on their website.

    Common Shares Issued and Outstanding (August 3, 2017):  559,084,402

    Stock Options Outstanding: 12,466,489

    Purchase Warrants Outstanding: 1,673,077

    Fully Diluted at (August 3, 2017):  573,223,968

    In Denison’s instance, share dilution is clearly not low, however, as I learned from Rick in the Fission Uranium discussion, “Shares outstanding are a minor distraction, money is made on the delta between market cap and value.” Therefore, going forward I will still monitor share structure but only to help calculate NPV.


    Another way to assess whether or not a management team is investor friendly is to find out if the management teams own more than 10% of the shares. My online research shows that most investors want management teams with at least 10% ownership as it’s desirable for management to have their own skin in the game. In the Denison example, I added up all the common shares owned by the management team and divided it by the fully diluted shares. This came to only 0.0025%.  As I learned from Rick in the Fission discussion, “if most of their position is owned shares, they have their own blood on the table, a healthy options position is OK, if not, then not.” In this instance, management owns way more options than common shares. I am not certain whether or not this is an issue or just a data point. Can somebody please clarify?

    For those interested, here is a summary of the management team’s ownership according to SEDI

    Lukas H. Lundin, Executive Chairman

    Common Shares: 1,048,883

    Options (Common Shares): 350,000

    David D. Cates, President and Chief Executive Officer

    Common Shares: 327,500

    Options (Common Shares): 2,809,350

    Mac McDonald, Vice President Finance & Chief Financial Officer

    Common Shares: 49,000

    Options (Common Shares): 1,864,200

    Michael J. Schoonderwoerd, Vice President Controller

    Common Shares: 4,864

    Options (Common Shares): 930,750

    Peter Longo, Vice President, Project Development

    Common Shares: 20,200

    Options (Common Shares): 1,173,450

    Dale Verran, Vice President, Exploration

    Common Shares: 8,811

    Options (Common Shares): 592,900

    Amanda Willett, Corporate Counsel and Corporate Secretary

    Common Shares: 0

    Options (Common Shares): 98,000

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