Denison Mines: Construction Start Announced at the Phoenix ISR Uranium Mine

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Earlier this morning on July 28, Denison Mines (DNN, DML) announced that full scale construction activities have commenced at the Phoenix ISR uranium mine, located in the eastern portion of the Athabasca Basin. This comes following site preparation, clearing and early works which began this past March. Given camp facilities which can accommodate a workforce of approximately 400, construction activity is expected to accelerate through the remainder of the summer months with the addition of a second shift. As previously announced, ISR uranium production is ultimately expected by mid-2028.

Denison Management has done quick work in the days since the Phoenix Project Final Investment Decision (FID) was announced this past February. Completing the site preparation activities has been an important milestone, setting the stage for today's announcement that official construction activities have now begun. Site civil work has progressed well during the early works program with +20% of overall site civil work estimated to be completed to date. Just as importantly, Denison has achieved near 100% completion of civil subgrade work for the process plant and wellfield areas. Of note is that along with the start of construction activities, the initiation of the perimeter freeze wall installation for Phase 1 of the mine has also begun.

PHOENIX TO BEGIN ISR PRODUCTION IN MID-2028 

Denison's nearly decade long journey with the Phoenix ISR Project has officially entered the construction phase. Following an expected two year construction period, ISR uranium production from Phoenix is expected in mid-2028. The Phoenix Project will become one of the more significant uranium mines globally, we estimate 56M lbs to be produced over a 10 year LOM. Longer term, we expect the Gryphon underground mine to begin production in 2034. Phoenix will be the first operating ISR mine located in the Athabasca Basin and it will be the first large-scale uranium mine brought on line since Cigar Lake began commercial operations in 2015. The mining and process infrastructure is depicted below:

PHOENIX CAPITAL COST UPDATE ANNOUNCED IN JANUARY

This past January, Denison provided an updated initial capital cost update for the Phoenix project. After accounting for increases in inflation, cost increases, and project refinements, the company now estimates the total post-FID initial capital estimate for the Project to be approximately $600M at a Class 2 cost estimate level of precision. When adjusting for inflation, updated initial capital costs have increased by 20% relative to the 2023 Phoenix Feasibility Study. Note that the updated capital cost estimate includes $65M in contingency funds and owners' reserves. Just as importantly, the construction timeline has been maintained at ~24 months.

A notable refinement to the 2023 Phoenix FS is the planned installation of large diameter wells throughout the Phase 1 mining area to enable each well to act as an injection or recovery well.  The 2023 Phoenix FS was based on approximately half of the wells in Phase 1 being large diameter and the other half being smaller diameter wells for injection only.  While this modification increases initial capital costs, it is expected to improve the operational flexibility of the wellfield, and optimize recovery rates. Though management continues to target initial production in mid-2028, we maintain our more conservative estimates (below) with commercial production achieved in mid-2029.

Note that this past spring, Denison completed transactions to sell 550,000 lbs of U3O8 in inventory, at a weighted price of $86.29 per lb. As of Q1/2026, the company holds 1.7M lbs in physical uranium and 145,926 lbs of uranium concentrates from its share of McClean Lake production. At the end of Q1/2026, 1.35M lbs of uranium were committed for deliveries between Q2/2026 and the Q2/2027. Including near-term commitments, Denison has contracted firm uranium sales commitments for nearly 8M lbs from its physical uranium holdings and expected future uranium production. Moreover, the company is in advanced negotiations for additional sales commitments of approximately 8M lbs, resulting in total contracted and advanced negotiation sales commitments of approximately 16M lbs. The large majority of contracted sales and those under advanced negotiation are contemplated to occur post-2028 during the expected mine life of Phoenix.

VALUATION & CONCLUSION

We maintain our positive view on the company and congratulate management on all the milestone achievements spanning nearly a decade (since the Phoenix ISR decision was taken) and culminating with the announcement of construction start. Using our LT U3O8 price of $100 per lb, we maintain our targeted NAV multiple of 1.40x. Factoring in recent corporate adjustments we maintain our 12-month price objective to C$5.50 per share (rounded). Our price objective equates to upside of +34% from the most recent close on July 27. Shares of Denison Mines currently trade at a 1.06x P/NAV multiple.