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« When Bernanke Says All Is Well, It’s Time to Duck and Cover | Main | Mega Uranium Limited: Holding Gains! »
Friday
Mar202009

Denison Mines (DNN): Continues to Underperform

Denison Mines (DNN): Continues to Underperform


Denison Mines continues to suffer, regardless of jump in oil prices and a rally in the mainstream market and in other uranium stocks.

The stock fell dramatically further in the last two days as the company announced it was suspending some of its uranium mining operations as they were no longer profitable at current prices.

DNN will temporarily suspend production at its Sunday and Rim mines in the western United States, and will likely shut its White Mesa mill in May, once it produces the 500,000 pounds of uranium the company is under contract to produce in 2009.

Denison also announced a big $56.8 million loss, which is 30 cents a share, due to non-cash write-downs of $59 million brought on by falling commodity prices and weakness in the company's shares.

The management at DNN is doing the best they can in a bad situation though. There is no point in operation unprofitable mines, and the best thing to do is hold on for higher prices that would make the mines economical again.

The supply and demand factors haven’t changed for uranium, there is still a shortage over the coming years, however it may take some time for this to be reflected in the uranium spot price, uranium stocks and Denison.

Uranium was at $42.50 a pound this week, after trading as high as $136 a pound in 2007.

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Reader Comments (7)

this is a particularly puzzling company;they have the mines, the minerals, mills to process product, exploration rights in several african countries proven resources, and is a stakeholder in Uranium Participation Corp.;which endeavors in the buyingand selling ofuranium as a commodity. so, what's the problem here? i believe it's the unability of investors, utility companies, the government, and just the general inertia of the human outlook to not do anything until absolutely forced is dragging this company slowly to it's deathbed...many problems, time isthe solution

March 21, 2009 | Unregistered Commenterrichard mruz

who won the Queensland (Aus) election?

March 21, 2009 | Unregistered Commenterclive thompson

The issue for Denison is that it will likely trip the EBITDA covenants on its revolving credit line before the year is out. Denison has roughly $100 million outstanding on the revolver. If Denison breaches the covenant, the banks could theoretically accelerate the maturity on the debt. (i.e. the ticking time bomb.)

Denison will solve this problem, but they may has to sell key assets at fire sale prices to raise the cash.

March 21, 2009 | Unregistered CommenterRoger

I appreciate your comments and general outlook for DNN. i would like to better understand the current / future cash flow issues for DNN. and what is your current recommendation for the ability of DNN to weather this " storm " and be a viable / profitable operating company going fwd. or do u believe DNN has the ability to go into bankrupcy in the near future. if not, do you hve a 6 mnth or 1 yr forecast and related stock price forecast ?

March 21, 2009 | Unregistered CommenterP

I looked at the company's financial situation, specifically their balance sheet, and was surprised to find their cash and csah equivalents assets are very low, but their debt is high. With the deteriorating uranium price (altho the L/T price is stable), the creditors haved reason to be worried whether DNN will be able to continue making payments.

As investors, I would be seriously worried that this company will end up on the auction block. Royal Bank (canada) has issued a downgrade, with a target price of $0.50 CDN, which is a dramatic cut. Other investment firms have also lowered their target prices, but to around $0.90 CDN. A quick turn-around is highly unlikely.

I'm staying away from this company, as the risk factor is too high. And what other company wants to take on DNN's debt-load? Too bad, because it was a company that has been around for a long time. Is management responsible? I don't buy their reasons for failure, as the same reasons are being faced by all uranium companies. Better foresight would have helped. A couple of years ago, Denison was bought out by Uranium International. Maybe there is the problem.

March 21, 2009 | Unregistered CommenterBob G.

Hello people. You have all mentioned some pretty good points. I dont think IUC is the issue. In fact its to do with slow economics all together. Denison has a well rounded portfolio. It is much better than 90% of the other U companys out there. In fact I live just a couple of miles from there US operations. I am in the industry and know the deposits around and there economics. If Denison can ride this awful turbulance and survive they will continue to hold the monopoly on operations on the Colorado Plateau bringing ivestors awsome returns. They are the only one around here with a operational mill.. YES fully operational with a Vandadium circuit. If they can sure up more long term contracts for sale oef the milled product it will strick interest on the Colorado Plateau making it economic for all Industry related companys to raise capitol and continue on. The way I see it is Denison holds one hell of a portfolio. In fact for this area a very profitable one. We just need to see better market conditions and like I mentioned they need to survive the turbulance!

Gavin Harrison
Harrison Land Services

March 22, 2009 | Unregistered CommenterGavin

Denison has had some directors doing some insider trading recently. All buying stock at or near the recent bottom. Directors don't usually throw good money after bad. Anyone know what's happening?

April 8, 2009 | Unregistered CommenterA. Bowman

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