##### 



Exhibit
99.3
 Responsibility for Financial Reporting
 To the Shareholders of Denison Mines Corp.,
      -s- E. Peter Farmer
    
    -s- James R. AndersonE. Peter Farmer
    
    James R. AndersonChief Executive Officer
    
    Executive Vice-President and Chief Financial Officer
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Auditors Report
 To The Shareholders of Denison Mines Corp.,
    PricewaterhouseCoopers LLP
  
 Comments by Auditors for U.S. Readers on Canada-U.S. Reporting Difference
  PricewaterhouseCoopers LLP
 
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DENISON MINES CORP.
 Restated (Note 3)December 31,
    
    September 30,2006
    
    2005ASSETSCurrentCash and equivalents
    
    $
    69,127
    
    
    $
    6,111Trade and other receivables
    
    
    8,964
    
    
    
    566Note receivable (Note 13)
    
    
    9,439
    
    
    
    Inventories (Note 5)
    
    
    21,553
    
    
    
    3,324Prepaid expenses and other
    
    
    786
    
    
    
    125109,869
    
    
    
    10,126Long-term investments (Notes 3 & 6)
    
    
    16,600
    
    
    
    3,814Property, plant and equipment, net (Notes 3 & 7)
    
    
    403,571
    
    
    
    6,767Restricted investments (Note 8)
    
    
    15,623
    
    
    
    12,882Goodwill and other intangibles (Notes 4 & 9)
    
    
    113,685
    
    
    
    625$
    659,348
    
    
    $
    34,214LIABILITIESCurrentAccounts payable and accrued liabilities
    
    $
    6,737
    
    
    $
    2,092Deferred revenue
    
    
    3,839
    
    
    
    3,773Current portion of long-term liabilities:Post-employment benefits (Note 10)
    
    
    343
    
    
    
    Reclamation and remediation obligations (Note 11)
    
    
    524
    
    
    
    Other long-term liabilities (Note 12)
    
    
    4,683
    
    
    
    1716,126
    
    
    
    5,882Provision for post-employment benefits (Note 10)
    
    
    3,628
    
    
    
    Reclamation and remediation obligations (Note 11)
    
    
    17,923
    
    
    
    12,935Other long-term liabilities (Note 12)
    
    
    9,489
    
    
    
    119Future income tax liability (Note 18)
    
    
    92,204
    
    
    
    390139,370
    
    
    
    19,326SHAREHOLDERS EQUITYShare capital (Note 14)Authorized: Unlimited number of common shares without par value
Issued and outstanding: 178,142,682 shares (September
30, 2005: 81,569,066 shares)
    
    
    548,069
    
    
    
    58,165Share purchase warrants (Note 15)
    
    
    11,733
    
    
    
    Contributed surplus (Notes 16 & 17)
    
    
    30,752
    
    
    
    1,803Deficit
    
    
    (62,078
    )
    
    
    (45,080
    )Cumulative translation adjustment
    
    
    (8,498
    )
    
    
    519,978
    
    
    
    14,888$
    659,348
    
    
    $
    34,214
  On Behalf of the Board of Directors:
 E. Peter Farmer
    
    
    
    Catherine J. G. StefanDirector
    
    
    
    Director
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DENISON MINES CORP.
 Fifteen Months
    
    Restated (Note 3)
    
    Restated (Note 3)Ended
    
    Year Ended
    
    Year EndedDecember 31,
    
    September 30,
    
    September 30,2006
    
    2005
    
    2004REVENUES
    
    $
    9,722
    
    
    $
    131
    
    
    $
    2,424EXPENSESOperating expenses
    
    
    7,023
    
    
    
    2,542
    
    
    
    3,177Sales royalties and capital taxes
    
    
    420
    
    
    
    
    
    
    
    Mineral property exploration
    
    
    14,790
    
    
    
    8,108
    
    
    
    2,540General and administrative
    
    
    11,379
    
    
    
    4,537
    
    
    
    3,443Write-down of mineral properties (Note 7)
    
    
    204
    
    
    
    1,761
    
    
    
    33,816
    
    
    
    16,948
    
    
    
    9,160Loss from operations
    
    
    (24,094
    )
    
    
    (16,817
    )
    
    
    (6,736
    )Net other income (Note 19)
    
    
    7,399
    
    
    
    5,757
    
    
    
    1,691Loss for the period before taxes
    
    
    (16,695
    )
    
    
    (11,060
    )
    
    
    (5,045
    )Income tax recovery (expense):Current
    
    
    
    
    
    
    
    
    
    
    Future
    
    
    (303
    )
    
    
    (390
    )
    
    
    Net loss for the period
    
    $
    (16,998
    )
    
    $
    (11,450
    )
    
    $
    (5,045
    )Deficit, beginning of period
    
    $
    (45,080
    )
    
    $
    (32,856
    )
    
    $
    (27,811
    )Retrospective effect of change in accounting policy
for stock-based compensation expense (Note 3)
    
    
    
    
    
    
    (774
    )
    
    
    Deficit, beginning of period as restated
    
    
    (45,080
    )
    
    
    (33,630
    )
    
    
    (27,811
    )Deficit, end of period
    
    $
    (62,078
    )
    
    $
    (45,080
    )
    
    $
    (32,856
    )Loss per share:Basic and diluted
    
    $
    (0.18
    )
    
    $
    (0.14
    )
    
    $
    (0.07
    )Weighted-average number of shares
outstanding (in thousands):Basic and diluted
    
    
    94,238
    
    
    
    80,575
    
    
    
    76,307
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DENISON MINES CORP.
 Fifteen Months
    
    Restated (Note 3)
    
    Restated (Note 3)Ended
    
    Year Ended
    
    Year EndedDecember 31,
    
    September 30,
    
    September 30,CASH PROVIDED BY (USED IN):
    
    2006
    
    2005
    
    2004OPERATING ACTIVITIESNet loss for the period
    
    $
    (16,998
    )
    
    $
    (11,450
    )
    
    $
    (5,045
    )Items not affecting cash:Amortization, depreciation and depletion
    
    
    850
    
    
    
    549
    
    
    
    543Stock-based compensation
    
    
    6,203
    
    
    
    1,180
    
    
    
    225Write-down of mineral properties
    
    
    204
    
    
    
    1,761
    
    
    
    Gain on timing and estimate revision of asset
retirement obligations
    
    
    (3,065
    )
    
    
    
    
    
    
    Net loss (gain) on sale of assets
    
    
    273
    
    
    
    (2,976
    )
    
    
    (59
    )Equity in loss of Fortress Minerals Corp.
    
    
    4,003
    
    
    
    1,493
    
    
    
    Dilution gain
    
    
    (7,167
    )
    
    
    (2,098
    )
    
    
    (549
    )Minority interest
    
    
    
    
    
    
    (917
    )
    
    
    (346
    )Change in future income taxes
    
    
    304
    
    
    
    390
    
    
    
    Net change in non-cash working capital
items (Note 21)
    
    
    (12,101
    )
    
    
    (124
    )
    
    
    1,862Net cash used in operating activities
    
    
    (27,494
    )
    
    
    (12,192
    )
    
    
    (3,369
    )INVESTING ACTIVITIESAcquisition of Denison Mines Inc., cash and
equivalents acquired, net of acquisition costs
    
    
    60,219
    
    
    
    
    
    
    
    Purchase of portfolio investments
    
    
    (634
    )
    
    
    (1,259
    )
    
    
    (892
    )Net proceeds from Fortress
    
    
    
    
    
    
    274
    
    
    
    977Subscription for Fortress common shares
    
    
    (1,524
    )
    
    
    
    
    
    
    1,209Expenditures on property, plant and equipment
    
    
    (11,253
    )
    
    
    (2,405
    )
    
    
    (2,144
    )Proceeds from sale of short-term investments
    
    
    
    
    
    
    4,029
    
    
    
    Proceeds from sale of land and equipment
    
    
    
    
    
    
    100
    
    
    
    64Increase in restricted investments
    
    
    (1,056
    )
    
    
    (458
    )
    
    
    (380
    )Net cash provided by (used in) investing activities
    
    
    45,752
    
    
    
    281
    
    
    
    (1,166
    )FINANCING ACTIVITIESDecrease in other long-term liabilities
    
    
    (21
    )
    
    
    (15
    )
    
    
    (14
    )Issuance of common shares for:Private placements
    
    
    42,526
    
    
    
    5,574
    
    
    
    12,409Exercise of stock options and warrants
    
    
    3,330
    
    
    
    418
    
    
    
    546Net cash provided by financing activities
    
    
    45,835
    
    
    
    5,977
    
    
    
    12,941Foreign exchange effect on cash and equivalents
    
    
    (1,077
    )
    
    
    
    
    
    
    Net increase (decrease) in cash and equivalents
    
    
    63,016
    
    
    
    (5,934
    )
    
    
    8,406Cash and equivalents, beginning of period
    
    
    6,111
    
    
    
    12,045
    
    
    
    3,639Cash and equivalents, end of period
    
    $
    69,127
    
    
    $
    6,111
    
    
    $
    12,045
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DENISON MINES CORP.
 1.
    
    NATURE OF OPERATIONS AND CHANGE OF YEAR ENDDenison Mines Corp. (formerly International Uranium Corporation) is incorporated under the
Business Corporations Act (Ontario) (OBCA). Denison Mines Corp. and its subsidiary companies
and joint ventures (collectively, the Company) are engaged in uranium mining and related
activities, including acquisition, exploration and development of uranium bearing properties,
extraction, processing, selling and reclamation. The environmental services division of the
Company provides mine decommissioning and decommissioned site monitoring services for third
parties.The Company has a 100% interest in the White Mesa mill located in Utah, United States and a
22.5% interest in the McClean Lake mill located in the Athabasca Basin of Saskatchewan, Canada.
The Company has interests in a number of nearby mines at both locations, as well as interests in
development and exploration projects located in Canada, the United States and Mongolia,
principally through joint ventures. Uranium, the Companys primary product, is produced in the
form of uranium oxide concentrates (U3O8) and sold to various customers
around the world for further processing. Vanadium, a co-product of some of the Companys mines
is also produced. The Company is also in the business of recycling uranium bearing waste
materials, referred to as alternate feed materials. The Company is also the manager of Uranium
Participation Corporation (UPC), a publicly-listed investment holding company formed to invest
substantially all of its assets in U3O8 and uranium hexafluoride
(UF6). The Company has no ownership interest in UPC but receives various fees for
management services and commissions from the purchase and sale of U3O8and
UF6 by UPC.In August 2006, the Company changed its fiscal year end from September 30 to December 31 to
align its reporting periods with that of its peers in the uranium industry. The Company has
elected to use a 15-month period ending December 31, 2006 for its audited consolidated financial
statements as permitted under Canadian securities regulation. References to 2006, 2005 and
2004 refer to the 15-month period ended December 31, 2006 and the years ended September 30,
2005 and September 30, 2004, respectively.2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThese consolidated financial statements have been prepared by management in U.S. dollars, unless
otherwise stated, in accordance with generally accepted accounting principles in Canada
(Canadian GAAP). All adjustments considered necessary by management for fair presentation
have been included in these financial statements. Differences between Canadian GAAP and those
generally accepted accounting principles and practices in the United States (U.S. GAAP) that
would have a significant impact on these financial statements are disclosed in Note 26.The principal accounting policies and practices under Canadian GAAP followed by the Company in
the preparation of these financial statements are summarized below:
 (a)
    
    Principles of ConsolidationThese consolidated financial statements include the accounts of Denison Mines Corp.
(formerly International Uranium Corporation), its subsidiaries and its share of assets,
liabilities, revenues and expenses of jointly-controlled companies and unincorporated
ventures proportionate to the Companys percentage ownership or participating interest. All
significant intercompany balances and transactions have been eliminated on consolidation.The Companys subsidiaries include Denison Mines Inc., Denison Mines Holdings Corp.
(formerly International Uranium Holdings Corporation), International Uranium (Bermuda I)
Ltd and the Gurvan Saihan Joint Venture. The Company exercises joint control over
substantially all of its interests in jointly-controlled companies and unincorporated joint
ventures through agreements which require that material changes to the operating, investing
and financing policies of such company or venture be approved by a percentage of the
participating interest sufficiently high enough to prevent any one participant from
exercising unilateral control.These financial statements also include the accounts of Fortress Minerals Corp. on a
consolidated basis for the periods from June 23, 2004 to September 30, 2004 and from October
1, 2004 to April 29, 2005. For the period from April 30, 2005 to September 30, 2005 and for
the fifteen month period ended December 31, 2006, the equity method has been applied.
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OwnershipInterestThrough majority owned subsidiariesArizona Strip
    
    
    100.00
    %Henry Mountains
    
    
    100.00
    %Colorado Plateau
    
    
    100.00
    %Sunday Mine
    
    
    100.00
    %Gurvan Saihan Joint Venture
    
    
    70.00
    %As interests in incorporated and unincorporated joint venturesMcClean Lake
    
    
    22.50
    %Midwest
    
    
    25.17
    %Mongolia  AREVA
    
    
    25.00
    %Moore Lake
    
    
    75.00
    %Waterfound
    
    
    15.32
    %Wheeler (1)
    
    
    40.00
    %Wolly (2)
    
    
    
    %
 (1)
    
    In October 2004, the Company entered into an option agreement with its joint venture
partners to earn a further 20% ownership interest in the project by funding
CDN$7,000,000 in exploration expenditures over the next 6 years. At December 31, 2006,
the Company has incurred a total of CDN$5,906,000 towards this option.(2)
    
    In October 2004, the Company entered into an option agreement with its joint
venture partners to earn a 22.5% ownership interest in the project by funding
CDN$5,000,000 in exploration expenditures over the next six years. At December 31,
2006, the Company has incurred a total of CDN$1,283,000 towards this option. Effective October 1, 2004, the Company prospectively adopted Canadian Institute of
Chartered Accountants (CICA) Accounting Guideline 15: Consolidation of Variable Interest
Entities (AcG 15) which expands upon existing accounting guidance contained in CICA
Handbook Section 1590: Subsidiaries (Section 1590) addressing the circumstances under
which a company should consolidate another entity in its financial statements. The
implementation of AcG 15 did not impact the Companys consolidated financial statements.(b)
    
    Use of EstimatesThe presentation of consolidated financial statements in conformity with Canadian GAAP
requires the Companys management to make estimates and assumptions that affect the amounts
reported in these financial statements and related note disclosures. Although the Company
regularly reviews the estimates and assumptions that affect these financial statements,
actual results may be materially different. Significant estimates and assumptions made by
management relate to the determination of economic lives, recoverability of and reclamation
obligations for property, plant and equipment and the evaluation of post-employment
benefits, future income taxes, contingent liabilities and stock-based compensation.(c)
    
    Foreign Currency TranslationAs of December 1, 2006, the Companys currency of measurement for its Canadian operations,
including those acquired under the business combination with Denison Mines Inc., is the
Canadian dollar. As the Companys reporting currency is the U.S. dollar, the Company
applies the current rate method for translation of the Companys net investment in its
Canadian operations. Assets and liabilities denominated in currencies other than the U.S.
dollar are translated at the exchange rate in effect at the balance sheet date. Revenues
and expenses denominated in currencies other than the U.S. dollar are translated at the
average rate in effect during the period. Translation gains and losses are recorded in the
cumulative translation adjustment account under shareholders equity which will be
recognized in the results of operations upon the substantial disposition, liquidation or
closure of the investment that gave rise to such amounts.Prior to December 1, 2006, the Companys primary currency of measurement and reporting was
the U.S. dollar. Monetary assets and liabilities denominated in currencies other than the
U.S. dollar were translated at the exchange rate in effect at the balance sheet date.
Non-monetary assets and liabilities denominated in currencies other than the U.S. dollar
were translated at the exchange rate in effect at the transaction date. Revenues and
expenses denominated in currencies other than the U.S. dollar were translated at the average
rate in effect during the period, with the exception of depreciation and amortization which
were translated at historical rates. Translation gains and losses were recorded in the
results of operations for the period.
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(d)
    
    Income TaxesIncome taxes are accounted for using the liability method of accounting for future income
taxes. Under this method, current income taxes are recognized for the estimated income
taxes payable for the current period. Future income tax assets and liabilities are
recognized based on temporary differences between the financial statement carrying values of
the existing assets and liabilities and their respective income tax bases using enacted or
substantively enacted tax rates expected to apply to taxable income during the years in
which the differences are expected to be recovered or settled. The recognition of future
income tax assets such as tax losses available for carry forward are limited to the amount
that is more likely than not to be realized. The Canadian federal large corporation tax
on capital is included in the provision for income taxes.(e)
    
    Flow-Through Common SharesThe Companys Canadian exploration activities have been financed in part through the
issuance of flow-through common shares whereby the tax benefits of the eligible exploration
expenditures incurred under this arrangement are renounced to the subscribers. In
accordance with Emerging Issues Committee (EIC) Abstract No. 146: Flow-Through Shares
applicable for flow-through financings initiated after March 19, 2004, the foregone tax
benefits to the Company are recognized by reducing the proceeds received from these
financings by the tax effects of the renunciation to the subscribers.(f)
    
    Cash and EquivalentsCash and equivalents consist of cash on deposit and highly-liquid, short-term money market
instruments which, on acquisition, have terms to maturity of three months or less. Cash and
equivalents which are subject to restrictions that prevent its use for current purposes are
classified as restricted investments.(g)
    
    InventoriesExpenditures, including depreciation, depletion and amortization of assets, incurred in the
mining and processing activities that will result in future concentrate production are
deferred and accumulated as ore in stockpiles and in-process and concentrate inventories.
These amounts are carried at the lower of average cost or net realizable value (NRV). NRV
is the difference between the estimated future concentrate price (net of selling costs) and
estimated costs to complete production into a saleable form.Stockpiles are comprised of coarse ore that has been extracted from the mine and is
available for further processing. Mining production costs are added to the stockpile as
incurred (including overburden removal and in-pit stripping costs) and removed from the
stockpile based upon the average cost per ton or tonne of ore produced from mines considered
to be in commercial production. The current portion of ore in stockpiles represents the
amount expected to be processed in the next twelve months.In-process and concentrate inventories include the cost of the ore removed from the
stockpile as well as production costs incurred to convert the ore into a saleable product.
Conversion costs typically include labor, chemical reagents and certain mill overhead
expenditures. Items are valued according to the first-in first-out method (FIFO) or at
weighted average cost, depending on the type of inventory or work-in-process.Mine and mill supplies are valued at the lower of average cost and replacement cost.(h)
    
    Long-Term InvestmentsPortfolio investments over which the Company does not exercise significant influence are
accounted for using the cost method. Impairments in value, other than those that are
temporary in nature, are charged to the results of operations.Investments in affiliates over which the Company exercises significant influence are
accounted for using the equity method, whereby the investment is initially recorded at cost
and adjusted to recognize the Companys share of earnings or losses, reduced by dividends
and distributions received.(i)
    
    Property, Plant and EquipmentPlant and equipmentProperty, plant and equipment are recorded at acquisition or production cost and carried net
of depreciation. Depreciation is calculated on a straight line or unit of production basis
as appropriate. Where a straight line methodology is used, the assets are depreciated to
their estimated residual value over a useful life which ranges from three to fifteen years
depending upon the asset type. Where a unit of production methodology is used, the assets
are depreciated to their estimated residual value over the useful life defined by
managements best estimate of recoverable reserves and resources in the current mine plan.
When assets
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are retired or sold, the resulting gains or losses are reflected in current earnings as a
component of other income or expense.Mining Property Acquisition, Exploration and Development CostsMineral property costs include acquisition costs relating to acquired mineral use rights and
are capitalized.Expenditures are expensed as incurred on mineral properties not sufficiently advanced
as to identify their development potential. At the point in time that a mineral property is
considered to be sufficiently advanced and development potential is identified, all further
expenditures for the current year and subsequent years are capitalized as incurred. These
costs will include further exploration, costs of maintaining the site until commercial
production, costs to initially delineate the ore body, costs for shaft sinking and access,
lateral development, drift development and infrastructure development. Such costs represent
the net expenditures incurred and capitalized as at the balance sheet date and do not
necessarily reflect present or future values.Once a development mineral property goes into commercial production, the property is
classified as Producing and the accumulated costs are amortized over the estimated
recoverable resources in the current mine plan using a unit of production basis. Commercial
production occurs when a property is substantially complete and ready for its intended use.Impairment of Long-Lived AssetsThe Company applies CICA Handbook Section 3063: Impairment of Long-Lived Assets which
provides standards for the recognition, measurement and disclosure of impairment of
long-lived assets including property, plant and equipment.Long-lived assets are assessed by management for impairment whenever events or changes in
circumstances indicate that the related carrying amounts may not be recoverable. The amount
of the impairment loss is determined as the excess of the carrying value of the asset over
its fair value and is charged to the results of operations. Fair value represents future
undiscounted cash flows from an area of interest, including estimates of selling price and
costs to develop and extract the mining asset.(j)
    
    Asset Retirement ObligationsThe Company applies CICA Handbook Section 3110: Asset Retirement Obligations which provides
standards for the recognition, measurement and disclosure of liabilities for asset
retirement obligations and the associated asset retirement costs.Asset retirement obligations, any statutory, contractual or other legal obligation related
to the retirement of tangible long-lived assets, are recognized when such obligations are
incurred, if a reasonable estimate of fair value can be determined. These obligations are
measured initially at fair value and the resulting costs are capitalized and added to the
carrying value of the related assets. In subsequent periods, the liability is adjusted for
the accretion of the discount and the expense is recorded in the income statement. Changes
in the amount or timing of the underlying future cash flows are immediately recognized as an
increase or decrease in the carrying amounts of the liability and related assets. These
costs are amortized to the results of operations over the life of the asset.The Companys activities are subject to numerous governmental laws and regulations.
Estimates of future reclamation liabilities for asset decommissioning and site restoration
are recognized in the period when such liabilities are incurred. These estimates are
updated on a periodic basis and are subject to changing laws, regulatory requirements,
changing technology and other factors which will be recognized when appropriate.
Liabilities related to site restoration include long-term treatment and monitoring costs and
incorporate total expected costs net of recoveries. Expenditures incurred to dismantle
facilities, restore and monitor closed resource properties are charged against the related
reclamation and remediation liability.(k)
    
    Goodwill and Other IntangiblesBusiness combinations are accounted for under the purchase method of accounting whereby
acquired assets and liabilities are recorded at fair value as of the date of acquisition.
The excess of the purchase price over the fair value is recorded as goodwill. The Company
evaluates the carrying amount of goodwill at least annually to determine whether events or
changes in circumstances indicate that such carrying amount may no longer be recoverable.
Any impairment as determined in accordance with CICA Handbook Section 3062: Goodwill and
Other Intangible Assets is charged to operations.(l)
    
    Post-Employment BenefitsThe Company assumed the obligation of a predecessor company to provide life insurance,
supplemental health care and dental benefits, excluding pensions, to its former Canadian
employees who retired on immediate pension from active service prior to 1997. The estimated
cost of providing these benefits was
 - 9 -




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##### 



actuarially determined using the projected benefits method and is recorded on the balance
sheet at its estimated present value. The interest cost on this unfunded liability is being
accreted over the remaining lives of this retiree group.(m)
    
    Fair ValuesThe carrying amounts for cash and equivalents, trade and other receivables, notes receivable
and accounts payable and accrued liabilities on the balance sheet approximate fair value
because of the limited term of these instruments. The fair value of other long-term
liabilities approximates book value unless otherwise disclosed. Fair value estimates are
made at the balance sheet date, based on relevant market data.(n)
    
    Revenue RecognitionRevenue from the sale of uranium concentrate to utility customers is recognized when title
to the product passes to the customer and delivery is effected by book transfer. Revenue
from alternate feed process milling is recognized as material is processed, in accordance
with the specifics of the applicable processing agreement. In general, the Company collects
a recycling fee for receipt of the material and/or receives the proceeds from the sale of
any uranium concentrate and other metals produced. Deferred revenues represent processing
proceeds received on delivery of materials but in advance of the required processing
activity.Revenue on decommissioning contracts is recognized using the percentage of completion
method, whereby sales, earnings and unbilled accounts receivable are recorded as related
costs are incurred. Earnings rates are adjusted periodically as a result of revisions to
projected contract revenues and estimated costs of completion. Losses, if any, are
recognized fully when first anticipated. Revenues from engineering services are recognized
as the services are provided in accordance with customer agreements.Management fees earned from UPC are recognized as earned on a monthly basis. Commission
revenue earned on acquisition or sale of U3O8and UF6 on
behalf of UPC is recognized on the date when title passes to UPC.Revenues are recognized only to the extent they are reasonably considered to be collectible.(o)
    
    Stock-Based CompensationEffective October 1, 2004, the Company retrospectively adopted, without restatement, the
amended standards of CICA Handbook Section 3870: Stock-Based Compensation and Other
Stock-Based Payments (Section 3870) which established standards for the recognition,
measurement and disclosure of stock-based compensation and other stock-based payments made
in exchange for goods and services.Section 3870 requires a fair value-based method of accounting for stock options granted to
employees, including directors, and to non-employees. The fair value of stock options
granted is recognized on a straight-line basis over the applicable vesting period as an
increase in stock-based compensation expense and the contributed surplus account. When such
stock options are exercised, the proceeds received by the Company, together with the
respective amount from contributed surplus, are credited to share capital.(p)
    
    Earnings (Loss) per ShareBasic earnings (loss) per share is computed by dividing net income (loss) for the period by
the weighted-average number of common shares outstanding for the period. The Company
follows the treasury stock method in the calculation of diluted earnings per share. Under
this method, the calculation of diluted earnings per share assumes that the proceeds to be
received from the exercise of in the money stock options and warrants are applied to
repurchase common shares at the average market price for the period. The calculation of
diluted loss per share does not make this assumption as the result would be anti-dilutive.(q)
    
    New Accounting StandardsCICA Handbook Section 1530: Comprehensive Income, effective for fiscal years beginning on or
after October 1, 2006, establishes standards for reporting comprehensive income, defined as
a change in value of net assets that is not due to owner activities, by introducing a new
requirement to temporarily present certain gains and losses outside of net income.CICA Handbook Section 3251: Equity, effective for fiscal years beginning on or after October
1, 2006, establishes standards for the presentation of equity and changes in equity during
the reporting period.CICA Handbook Section 3855: Financial Instruments  Recognition and Measurement, effective
for fiscal years beginning on or after October 1, 2006, establishes standards for the
recognition, classification and measurement of financial instruments including the
presentation of any resulting gains and losses. Assets classified as available-for-sale
securities will have revaluation gains and losses included in other
 - 10 -




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##### 



comprehensive income (and not included in the income statement) until such time as the asset
is disposed of or incurs a decline in fair value that is other than temporary. At such
time, any gains or losses will then be realized and reclassified to the income statement.
At December 31, 2006, the Company had certain long-term investments that would be classified
as available-for-sale securities under this new standard, and any unrealized gains and
losses would be included in comprehensive income.
   3.
    
    CHANGE IN ACCOUNTING POLICIES
 (a)
    
    Exploration ExpendituresIn 2006, the Company adopted the expensing of exploration expenditures on mineral properties
not sufficiently advanced to identify their development potential. Previously, the Company
had been capitalizing such exploration expenditures as incurred which is permitted under
Canadian GAAP, provided that these exploration expenditures have the characteristics of
property, plant and equipment and that capitalization is appropriate under the
circumstances.The primary purpose of this change in accounting policy is to align the accounting treatment
of exploration expenditures on mineral properties not sufficiently advanced to identify
their development potential, with those of the Companys producing peers in the resource
industry.The Company has adopted this change in accounting policy on a retrospective basis with
restatement of the comparative periods presented. This change has also been applied to the
Companys recognition of its investment in Fortress Minerals Corp.
 - 11 -




---



##### 



Results for the 2005 and 2004 periods have been restated to reflect this change in
accounting policy. The following table summarizes the effects of this change in accounting
policy:
 As Previously(in thousands)
    
    Reported
    
    Adjustment
    
    As RestatedBalance Sheet at September 30, 2005:Long-term investments
    
    $
    4,938
    
    
    $
    (1,124
    )
    
    $
    3,814Property, plant & equipment
    
    
    16,631
    
    
    
    (9,864
    )
    
    
    6,767Future income tax liability
    
    
    1,461
    
    
    
    (1,071
    )
    
    
    390Share capital
    
    
    56,146
    
    
    
    2,019
    
    
    
    58,165Deficit
    
    
    (33,144
    )
    
    
    (11,936
    )
    
    
    (45,080
    )2005 Statement of Operations and DeficitMineral property exploration
    
    
    98
    
    
    
    8,010
    
    
    
    8,108Write-down of mineral properties
    
    
    1,870
    
    
    
    (109
    )
    
    
    1,761Equity in loss of Fortress Minerals Corp.
    
    
    679
    
    
    
    814
    
    
    
    1,493Income tax expense
    
    
    27
    
    
    
    363
    
    
    
    390Net loss for the year
    
    
    (2,372
    )
    
    
    (9,078
    )
    
    
    (11,450
    )2004 Statement of Operations and DeficitMineral property exploration
    
    
    55
    
    
    
    2,485
    
    
    
    2,540Minority interest
    
    
    134
    
    
    
    212
    
    
    
    346Income tax expense (recovery)
    
    
    (585
    )
    
    
    585
    
    
    
    Net loss for the year
    
    
    (2,187
    )
    
    
    (2,858
    )
    
    
    (5,045
    )2005 Statement of Cash FlowsStock-based compensation
    
    
    948
    
    
    
    232
    
    
    
    1,180Write-down of mineral properties
    
    
    1,870
    
    
    
    (109
    )
    
    
    1,761Change in future income taxes
    
    
    27
    
    
    
    363
    
    
    
    390Equity in loss of Fortress Minerals Corp.
    
    
    679
    
    
    
    814
    
    
    
    1,493Net cash used in operating activities
    
    
    (4,414
    )
    
    
    (7,778
    )
    
    
    (12,192
    )Expenditures on mineral properties
    
    
    (9,265
    )
    
    
    7,778
    
    
    
    (1,487
    )Net cash provided by (used in) investing
activities
    
    
    (7,497
    )
    
    
    7,778
    
    
    
    2812004 Statement of Cash FlowsMinority interest
    
    
    (134
    )
    
    
    (212
    )
    
    
    (346
    )Change in future income taxes
    
    
    (585
    )
    
    
    585
    
    
    
    Net cash used in operating activities
    
    
    (884
    )
    
    
    (2,485
    )
    
    
    (3,369
    )Expenditures on mineral properties
    
    
    (4,187
    )
    
    
    2,485
    
    
    
    (1,702
    )Net cash used in investing activities
    
    
    (4,860
    )
    
    
    2,485
    
    
    
    (2,375
    )
 (b)
    
    Stock-Based CompensationEffective October 1, 2004, the Company adopted the amended standards of CICA Handbook
Section 3870 which establishes standards for the recognition, measurement and disclosure of
stock-based compensation and other stock-based payments made in exchange for goods and
services. It requires a fair value-based method of accounting for stock options granted to
employees, including directors, and to non-employees. Prior to October 1, 2004, the
application of the fair value-method of accounting was limited to stock options granted to
non-employees. The intrinsic value-based method of accounting was applied to stock options
granted to employees which did not result in additional stock-based compensation expense as
the exercise price was equal to the market price on the grant date. Pro forma disclosure of
net income (loss) and earnings (loss) per share had the fair value-method been applied to
stock options granted to employees was required.The Company has adopted the amendments to CICA Handbook Section 3870 on a retrospective
basis without restatement of periods prior to October 1, 2004. As a result, a cumulative
adjustment of $774,000 to opening deficit effective October 1, 2004 has been reported
separately on the consolidated statements of deficit. This adjustment represents the fair
value of stock options granted to employees of $738,000 during 2004 and $36,000 during 2003.
 - 12 -




---



##### 



4. BUSINESS COMBINATION AND NAME CHANGE
     DMI common shares outstanding
    
    
    30,552Exchange ratio
    
    
    2.88Common shares of IUC issued to DMI shareholders
    
    
    87,991Fair value per share of each IUC common share issued, in CAD$
    
    $
    5.74Fair value of common shares issued by the Company, in CAD$
    
    $
    505,069Canadian/U.S. dollar exchange rate
    
    
    1.1449Fair value of common shares issued by the Company
    
    $
    441,147Fair value of DMI share purchase warrants assumed by the Company (Note 15)
    
    
    11,744Fair value of DMI stock options assumed by the Company (Note 16)
    
    
    25,635Direct acquisition costs incurred by the Company
    
    
    3,414Purchase price
    
    $
    481,940
  - 13 -




---



##### 



DMIFair ValueDecember 1,(in thousands)
    
    2006Cash and equivalents
    
    $
    63,634Other current assets
    
    
    25,067Long-term investments
    
    
    7,596Property, plant and equipment
    
    
    395,752Restricted investments
    
    
    1,990Goodwill and other intangibles
    
    
    115,163Total assets
    
    
    609,202Current liabilities
    
    
    12,977Provision for post-employment benefits
    
    
    3,692Reclamation and remediation obligations
    
    
    7,888Other long-term liabilities
    
    
    9,553Future income tax liability
    
    
    93,152Total liabilities
    
    
    127,262Net assets purchased
    
    $
    481,940
   5. INVENTORIES
  December 31,
    
    September 30,(in thousands)
    
    2006
    
    2005Uranium and vanadium concentrates
    
    $
    9,758
    
    
    $
    2,042Inventory of ore in stockpiles
    
    
    8,817
    
    
    
    Mine and mill supplies
    
    
    2,978
    
    
    
    1,282$
    21,553
    
    
    $
    3,324
 6. LONG-TERM INVESTMENTS
  Restated (Note 3)December 31,
    
    September 30,2006
    
    2005Portfolio investments
    
    $
    10,249
    
    
    $
    2,152Investments in affiliatesFortress Minerals Corp.
    
    
    6,351
    
    
    
    1,662$
    16,600
    
    
    $
    3,814
 - 14 -




---



##### 



7. PROPERTY, PLANT AND EQUIPMENT
  Restated (Note 3)December 31,
    
    September 30,(in thousands)
    
    2006
    
    2005Cost, net of write-downsMill infrastructure, mines and equipment
    
    $
    216,686
    
    
    $
    9,253Development and exploration properties
    
    
    193,778
    
    
    
    3,549Environmental services and other
    
    
    1,126
    
    
    
    411,590
    
    
    
    12,802Accumulated depreciation and amortizationMill infrastructure, mines and equipment
    
    
    7,997
    
    
    
    6,035Development and exploration properties
    
    
    
    
    
    
    Environmental services and other
    
    
    22
    
    
    
    8,019
    
    
    
    6,035Property, plant and equipment, net
    
    $
    403,571
    
    
    $
    6,767Net book valueMill infrastructure, mines and equipment
    
    $
    208,689
    
    
    $
    3,218Development and exploration properties
    
    
    193,778
    
    
    
    3,549Environmental services and other
    
    
    1,104
    
    
    
    $
    403,571
    
    
    $
    6,767
 Mill Infrastructure, Mines and Equipment
   - 15 -




---



##### 



Development and Exploration Properties
      Environmental Services and Other
   8. RESTRICTED INVESTMENTS
  December 31,
    
    September 30,(in thousands)
    
    2006
    
    2005U.S. mill and mine reclamation
    
    $
    13,667
    
    
    $
    12,882Elliot Lake reclamation trust fund
    
    
    1,541
    
    
    
    Letter of credit collateral
    
    
    415
    
    
    
    $
    15,623
    
    
    $
    12,882
 U.S. Mill and Mine Reclamation
  Elliot Lake Reclamation Trust Fund
  - 16 -




---



##### 



Letter of Credit Collateral
  9. GOODWILL AND OTHER INTANGIBLES
  December 31,
    
    September 30,(in thousands)
    
    2006
    
    2005Goodwill, beginning of period
    
    $
    
    
    
    $
    Acquisition related additions
    
    
    104,682
    
    
    
    Foreign exchange
    
    
    (1,841
    )
    
    
    Goodwill, end of period
    
    $
    102,841
    
    
    $
    Goodwill, by business unit:McClean and Midwest joint ventures
    
    $
    102,841
    
    
    $
    
   December 31,
    
    September 30,(in thousands)
    
    2006
    
    2005Other intangibles, beginning of period
    
    $
    625
    
    
    $
    688Acquisition related additions
    
    
    10,481
    
    
    
    Amortization
    
    
    (78
    )
    
    
    (63
    )Foreign exchange
    
    
    (184
    )
    
    
    Other intangibles, end of period
    
    $
    10,844
    
    
    $
    625Other intangibles, by item:UPC management contract
    
    
    10,297
    
    
    
    Urizon technology licenses
    
    
    547
    
    
    
    625$
    10,844
    
    
    $
    625
   10. POST-EMPLOYMENT BENEFITS
  - 17 -




---



##### 



Discount rate
    
    
    5.25
    %Initial medical cost growth rate per annum
    
    
    12.00
    %Medical cost growth rate per annum decline to
    
    
    6.00
    %Year in which medical cost growth rate reaches its final level
    
    
    2011Dental cost growth rate per annum
    
    
    4.00
    %
  December 31,
    
    September 30,(in thousands)
    
    2006
    
    2005Liability, beginning of period
    
    $
    
    
    
    $
    Acquisition related additions
    
    
    4,041
    
    
    
    Benefits paid
    
    
    (16
    )
    
    
    Interest cost
    
    
    16
    
    
    
    Foreign exchange
    
    
    (70
    )
    
    
    Liability, end of period
    
    
    3,971
    
    
    $
    Post-employment benefits liability by duration:Current
    
    
    343
    
    
    $
    Non-current
    
    
    3,628
    
    
    
    $
    3,971
    
    
    $
    
 11. RECLAMATION AND REMEDIATION OBLIGATIONS
  December 31,
    
    September 30,(in thousands)
    
    2006
    
    2005Reclamation obligations, beginning of period
    
    $
    12,935
    
    
    $
    12,604Acquisition related additions
    
    
    8,360Accretion
    
    
    50
    
    
    
    Expenditures incurred
    
    
    (39
    )
    
    
    Liability adjustments
    
    
    (2,712
    )
    
    
    331Foreign exchange
    
    
    (147
    )
    
    
    Reclamation obligations, end of period
    
    $
    18,447
    
    
    $
    12,935Site restoration liability by location:U.S. Mill and Mines
    
    $
    10,223
    
    
    $
    12,935Elliot Lake
    
    
    6,956
    
    
    
    McLean Lake and Midwest Joint Ventures
    
    
    1,268
    
    
    
    $
    18,447
    
    
    $
    12,935Site restoration liability :Current
    
    $
    524
    
    
    $
    Non-current
    
    
    17,923
    
    
    
    12,935$
    18,447
    
    
    $
    12,935
 - 18 -




---



##### 



Site Restoration: U.S. Mill and MinesThe decommissioning and reclamation of the White Mesa mill and U.S. mines are subject to legal
and regulatory requirements. Estimates of the costs of reclamation are reviewed periodically by
the applicable regulatory authorities. The current estimate for the White Mesa mill and U.S.
mines are $8,194,000 and $2,029,000, respectively. The above accrual represents the companys
best estimate of the present value of future reclamation costs, discounted at 7.5%.Site Restoration: Elliot LakeThe Elliot Lake uranium mine was closed in 1992 and capital works to decommission this site were
completed in 1997. The remaining provision is for the estimated cost of monitoring the Tailings
Management Areas at the Company and Stanrock sites and for treatment of water discharged from
these areas. The Company conducts its activities at both sites pursuant to decommissioning
licenses issued by the Canadian Nuclear Safety Commission. The above accrual represents the
Companys best estimate of the present value of the total future reclamation cost based on
assumptions as to levels of treatment, which will be required in the future, discounted at 7.5%.Spending on restoration activities at the Elliot Lake site are funded from monies in the Elliot
Lake Reclamation Trust fund (Note 8).Site Restoration: McClean Lake Joint Venture and Midwest Joint VentureThe McClean Lake and Midwest operations are subject to environmental regulations as set out by
the Saskatchewan government and the Canadian Nuclear Safety Commission. Cost estimates of the
estimated future decommissioning and reclamation activities are prepared periodically and filed
with the applicable regulatory authorities for approval. The above accrual represents the
Companys best estimate of the present value of the future reclamation cost contemplated in
these cost estimates discounted at 7.5%.Under the Mineral Industry Environmental Protection Regulations (1996), the Company is required
to provide its pro-rata share of financial assurances to the province. The Company has provided
irrevocable standby letters of credit, from a chartered bank, in favour of Saskatchewan
Environment totalling CDN$8,064,000.12.
    
    OTHER LONG-TERM LIABILITIESOther long-term liabilities consists of:
 December 31,
    
    September 30,(in thousands)
    
    2006
    
    2005Long-term debt:Capital lease obligations
    
    $
    100
    
    
    $
    100Notes payable
    
    
    85
    
    
    
    36Unamortized fair value of sales and toll
milling contracts
    
    
    13,987
    
    
    
    $
    14,172
    
    
    $
    136Other long-term liabilities:Current
    
    
    4,683
    
    
    
    17Non-current
    
    
    9,489
    
    
    
    119$
    14,172
    
    
    $
    136
 Line of CreditA Canadian chartered bank has provided DMI with a credit facility pursuant to a credit agreement
dated effective November 2, 2005. The credit facility is a revolving CDN$500,000 facility with
a one year term (subject to renewals) collateralized by all present and future assets of DMI and
its subsidiaries. Interest under the credit facility is incurred based on bankers acceptances
plus 2% or the lenders prime rate plus 1%. To date, the Company has not incurred any
indebtedness under the facility.
 - 19 -




---



##### 



13.
    
    RELATED PARTY TRANSACTIONSThe Company is a party to a management services agreement with UPC. Under the terms of the
agreement, the Company will receive the following fees from UPC: a) a commission of 1.5% of the
gross value of any purchases or sales of U3O8and UF6 completed
at the request of the Board of Directors of UPC; b) a minimum annual management fee of
CDN$400,000 (plus reasonable out-of-pocket expenses) plus an additional fee of 0.3% per annum
based upon UPCs net asset value between CDN$100,000,000 and CDN$200,000,000 and 0.2% per annum
based upon UPCs net asset value in excess of CDN$200,000,000; c) a fee of CDN$200,000 upon the
completion of each equity financing where proceeds to UPC exceed CDN$20,000,000; d) a fee of
CDN$200,000 for each transaction or arrangement (other than the purchase or sale of
U3O8and UF6) of business where the gross value of such
transaction exceeds CDN$20,000,000 (an initiative); and e) an annual fee up to a maximum of
CDN$200,000, at the discretion of the Board of Directors of UPC, for on-going maintenance or
work associated with an initiative.The Company is also a party to a temporary revolving credit facility agreement with UPC (not to
exceed CDN$15,000,000). The current credit facility terminates on
May 10, 2007 and is
collateralized by the uranium investments of UPC. Interest under the credit facility is based
upon Canadian bank prime plus 1%. Standby fees also apply at a rate of 1% of the committed
facility amount. As at December 31, 2006, UPC had drawn CDN$11,000,000 under the facility.The following transactions were incurred with UPC during 2006:
 (in thousands)
    
    2006 (1)Fees earned from UPC included in revenue:Management fees, including out-of-pocket expenses
    
    $
    94Commission fees on purchase and sale of uranium
    
    
    336Fees earned from UPC included in other income:Loan interest under credit facility
    
    
    57Standby fee under credit facility
    
    
    3Total fees earned from UPC
    
    $
    490
 (1)
    
    Reflects fees earned for the one month period of December 2006 only.
 At December 31, 2006, accounts receivable includes $156,000 due from UPC with respect to the
fees indicated above and notes receivable includes $9,439,000 with respect to the loan drawdown
under the temporary credit facility.During 2006, the Company had the following additional related party transactions:
 a)
    
    incurred legal fees of $292,000 (2005: $77,000) with a law firm of which a partner is a
director of the Company;b)
    
    incurred management and administrative service fees of $237,000 (2005: $169,000) with a
company owned by the Chairman of the Company which provides corporate development, office
premises, secretarial and other services in Vancouver at a rate of CDN$18,000 per month
plus expenses. At December 31, 2006, an amount of $100,000 (September 30, 2005: $70,000)
was due to this company; andc)
    
    provided executive and administrative services to Fortress and charged an aggregate of
$112,000 (2005: $21,000) for such services. At December 31, 2006, an amount of $31,000
(September 30, 2005: $29,000) was due from Fortress relating to this agreement.
 14.
    
    SHARE CAPITAL
 a)
    
    Authorized: Unlimited number of common shares without par value
 - 20 -




---



##### 



b)
    
    Issued and Outstanding:
 Number of
    
    Restated (Note 3)Common Shares
    
    Amount(in thousands)
    
    (in thousands)Balance at September 30, 2004
    
    
    79,635
    
    
    $
    50,891Issued for cash:Flow-through private placement, net of issue costs of $227,470 (c)
    
    
    1,000
    
    
    
    5,574Exercise of stock options
    
    
    787
    
    
    
    418Issued for mineral property acquisition (d)
    
    
    147
    
    
    
    907Fair value of stock options exercised
    
    
    
    
    
    
    3751,934
    
    
    
    7,274Balance at September 30, 2005
    
    
    81,569
    
    
    $
    58,165Acquisition of Denison Mines Inc.
    
    
    87,991
    
    
    
    441,147Issued for cash:Private placement, net (c)
    
    
    6,000
    
    
    
    37,065Flow-through private placement, net (c)
    
    
    850
    
    
    
    5,461Exercise of stock options
    
    
    1,727
    
    
    
    3,305Exercise of share purchase warrants
    
    
    6
    
    
    
    26Fair value of stock options exercised
    
    
    
    
    
    
    2,889Fair value of share purchase warrants exercised
    
    
    
    
    
    
    1196,574
    
    
    
    489,904Balance at December 31, 2006
    
    
    178,143
    
    
    $
    548,069
 c)
    
    Private PlacementsIn December 2005, the Company completed a private placement of 850,000 flow-through common
shares at a price of CDN$7.75 per share for gross proceeds of $5,692,000 (CDN$6,587,500).
Share issue costs comprised of related expenses and finders fees totaling $231,000 were
incurred, resulting in net proceeds of $5,461,000 from the private placement. These funds
are restricted to eligible Canadian exploration expenditures and were renounced to the
subscribers in February 2006.In October 2005, the Company completed a private placement of 6,000,000 common shares at a
price of CDN$7.50 per share for gross proceeds of $38,011,000 (CDN$45,000,000). Share issue
costs comprised of related expenses and finders fees totaling $946,000 were incurred,
resulting in net proceeds of $37,065,000 from the private placement.In March 2005, the Company completed a private placement of 1,000,000 flow-through common
shares at a price of CDN$7.00 per share for gross proceeds of $5,802,000 (CDN$7,000,000).
Share issue costs comprised of related expenses and finders fees totaling $227,000 were
incurred, resulting in net proceeds of $5,575,000 from the private placement. These funds
are restricted to eligible Canadian exploration expenditures and were renounced to the
subscribers in February 2006.d)
    
    Mineral PropertyIn September 2005, the Company issued 147,000 common shares at a price of CDN$7.35 per share
for a total value of $907,000 (CDN$1,080,000) as part of the acquisition of a U.S. uranium
property. Subsequent to the 2006 year-end, an additional 103,000 shares were issued at a
value of $950,000.
 - 21 -




---



##### 



15.
    
    SHARE PURCHASE WARRANTSEffective December 1, 2006, the Company assumed the outstanding share purchase warrants of DMI
as a result of the Arrangement. As of that date, DMI had outstanding share purchase warrants to
purchase 1,099,051 and 2,225,000 common shares of DMI exercisable at prices of CDN$15.00 and
CDN$30.00 per share, respectively. Each warrant assumed is exercisable for 2.88 shares of the
Company. A continuity summary of the share purchase warrants of the Company is presented below:
 2006
    
    2005Weighted-
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    ExerciseNumber of
    
    Price per
    
    Number of
    
    Price perCommon
    
    Share
    
    Common
    
    ShareShares
    
    (CDN$)
    
    Shares
    
    (CDN$)Balance outstanding, beginning of period
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Share purchase warrants outstanding of Denison
Mines Inc. as of the acquisition date, adjusted by
2.88 ratio
    
    
    9,573,267
    
    
    
    8.69
    
    
    
    
    
    
    
    Exercised
    
    
    (5,760
    )
    
    
    5.21
    
    
    
    
    
    
    
    Balance outstanding, end of period
    
    
    9,567,507
    
    
    $
    8.70
    
    
    
    
    
    
    $
    Exercisable, end of period
    
    
    9,567,507
    
    
    $
    8.70
    
    
    
    
    
    
    $
    
  Exercise PriceNumber of
    
    per ShareCommon Shares
    
    (CDN $)
    
    Expiry Date3,159,507
    
    
    $
    5.21
    
    
    November 24, 20096,408,000
    
    
    $
    10.42
    
    
    March 1, 20119,567,507
    
    
    $
    8.70
 As of December 1, 2006, the fair value of these share purchase warrants assumed by the Company
to replace those of DMI totaled $11,744,000 (CDN$13,445,000) which has been included the
purchase price calculation for the Arrangement (Note 4). The calculation of this fair value of
$1.23 (CDN$1.40) per share assumed no exercise and was based on the weighted-average closing
price of each warrant series for the two days before, day of and two days after the day the
Arrangement was announced on September 18, 2006.A continuity summary of share purchase warrants is presented below:
 (in thousands)
    
    2006
    
    2005Balance, beginning of period
    
    $
    
    
    
    $
    Fair value of DMI share purchase warrants
assumed by the Company (Note 4)
    
    
    11,744
    
    
    
    Value of share purchase warrants transferred
to share capital upon exercise
    
    
    (11
    )
    
    
    Balance, end of period
    
    $
    11,733
    
    
    $
    
 16.
    
    STOCK OPTIONSOn November 20, 2006, the Companys shareholders approved amendments to the Companys
stock-based compensation plan (the Plan). The Plan, as amended, provides for the granting of
stock options up to 10% of
the issued and outstanding common shares at the time of grant, subject to a maximum of 20
million common shares. Previously, the Plan reserved for issuance a maximum of 10,700,000
common shares. As at December
 - 22 -




---



##### 



31, 2006, an aggregate of 9,258,000 options have been granted (less cancellations) since the
Plans inception in 1997.The purpose of the Plan is to attract, retain and motivate directors, officers, key employees
and consultants of the Company and to advance the interests of the Company by providing eligible
persons with the opportunity to acquire an increased proprietary interest in the Company. Under
the Plan, all stock options are granted at the discretion of the Companys board of directors,
including any vesting provisions if applicable. The term of any stock option granted may not
exceed ten years and the exercise price may not be lower than the closing price of the Companys
shares on the last trading day immediately preceding the date of grant. In general, stock
options granted under the Plan have a term of three years without vesting provisions, except for
grants to new employees which are subject to vesting provisions over a period of approximately
one year.Effective December 1, 2006, the Company assumed the outstanding stock options of DMI as a result
of the Arrangement. As of that date, DMI had outstanding fully-vested stock options to purchase
1,411,000 common shares of DMI exercisable at a weighted-average price of CDN$11.15 per share
with various expiry dates to October 4, 2016.A continuity summary of the stock options in terms of common shares of the Company granted under
the Plan is presented below:
 2006
    
    2005Weighted-
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    ExerciseNumber of
    
    Price per
    
    Number of
    
    Price perCommon
    
    Share
    
    Common
    
    ShareShares
    
    (CDN $)
    
    Shares
    
    (CDN $)Balance outstanding, beginning of period
    
    
    1,863,000
    
    
    $
    2.62
    
    
    
    1,940,000
    
    
    $
    0.85Stock options outstanding of Denison Mines Inc. as of
the acquisition date, adjusted by 2.88 ratio
    
    
    4,064,012
    
    
    
    3.87
    
    
    
    
    
    
    
    Granted
    
    
    2,458,000
    
    
    
    10.03
    
    
    
    710,000
    
    
    
    5.28Exercised
    
    
    (1,726,696
    )
    
    
    2.20
    
    
    
    (787,000
    )
    
    
    0.65Expired
    
    
    (10,000
    )
    
    
    5.27
    
    
    
    
    
    
    
    Balance outstanding, end of period
    
    
    6,648,316
    
    
    $
    6.23
    
    
    
    1,863,000
    
    
    $
    2.62Exercisable, end of period
    
    
    6,503,315
    
    
    $
    6.25
    
    
    
    1,863,000
    
    
    $
    2.62
 A summary of stock options outstanding and exercisable in terms of common shares of the Company
at December 31, 2006 is presented below:
 Weighted-Average
    
    AverageRange of Exercise
    
    Exercise Price
    
    RemainingNumber of
    
    Prices per Share
    
    per Share
    
    Contractual LifeCommon Shares
    
    (CDN $)
    
    (CDN $)
    
    (Years)752,200
    
    
    $
    4.27 to $  5.88
    
    
    $
    5.18
    
    
    
    1.672,150,000
    
    
    $
    7.53 to $10.78
    
    
    $
    10.72
    
    
    
    2.913,746,116
    (1)
    
    $
    1.88 to $  6.39
    
    
    $
    3.87
    
    
    
    8.576,648,316
    
    
    
    
    
    
    $
    6.23
    
    
    
    5.97
 (1)
    
    Balance of DMI stock options assumed by the Company as a result of the Arrangement
adjusted by 2.88 ratio
 Outstanding options expire between May 2007 and October 2016.
 - 23 -




---



##### 



The fair value of each option granted is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions:
 2006
    
    2005Risk-free interest rate
    
    
    3.90
    %
    
    
    2.90
    %Expected stock price volatility
    
    
    50
    %
    
    
    87
    %Expected life
    
    2 years
    
    
    2 yearsExpected dividend yield
    
    
    
    
    
    
    Weighted-average fair value per share under options granted
    
    $
    3.02
    
    
    $
    1.66
 Stock-based compensation has been recognized in the consolidated statement of operations as
follows:
 (in thousands)
    
    2006
    
    2005Mineral property exploration
    
    
    833
    
    
    
    232General and administrative
    
    
    5,370
    
    
    
    9486,203
    
    
    
    1,180
 The fair values of stock options with vesting provisions are amortized on a straight-line basis
as stock-based compensation expense over the applicable vesting periods. At December 31, 2006,
the Company had an additional $144,000 (September 30, 2005: Nil) in stock-based compensation
expense to be recognized periodically to November 2007.As of December 1, 2006, the fair value of the stock options assumed by the Company to replace
those of DMI totaled $25,635,000 (CDN$29,349,000) which has been included in the purchase price
calculation for the Arrangement (Note 4). The calculation of this fair value of $6.31
(CDN$7.22) per share was estimated as of December 1, 2006 using the Black-Scholes option pricing
model with the following weighted-average assumptions: risk-free interest rate of 3.90%,
expected stock price volatility of 50%, expected life of 3.75 to 4.93 years and expected
dividend yield of Nil.17.
    
    CONTRIBUTED SURPLUSA continuity summary of contributed surplus is presented below:
 (in thousands)
    
    2006
    
    2005Balance, beginning of period
    
    $
    1,803
    
    
    $
    224Retrospective effect of change in accounting
policy for stock-based compensation
    
    
    
    
    
    
    774Fair value of DMI stock options assumed by the
Company (Note 4)
    
    
    25,635
    
    
    
    Stock-based compensation as a result of
stock options granted
    
    
    6,203
    
    
    
    1,180Value of stock options transferred to share
capital upon exercise
    
    
    (2,889
    )
    
    
    (375
    )Balance, end of period
    
    $
    30,752
    
    
    $
    1,803
 - 24 -




---



##### 



18.
    
    INCOME TAXESThe Company operates in multiple industries and jurisdictions, and the related income is subject
to varying rates of taxation. A reconciliation of the combined Canadian federal and provincial
income tax rate to the Companys effective rate of income tax is as follows:
 Restated (Note 3)
    
    Restated (Note 3)(in thousands)
    
    2006
    
    2005
    
    2004Combined basic tax rate
    
    
    36
    %
    
    
    40
    %
    
    
    40
    %Income (loss) from operations before taxes
    
    $
    (16,695
    )
    
    $
    (11,060
    )
    
    $
    (5,045
    )Income tax recovery at combined basic tax rate
    
    
    (6,010
    )
    
    
    (4,425
    )
    
    
    (2,018
    )Non-temporary differences
    
    
    1,933
    
    
    
    994
    
    
    
    90Flow through shares renounced
    
    
    4,036
    
    
    
    1,434
    
    
    
    585Difference in foreign tax rates
    
    
    (222
    )
    
    
    627
    
    
    
    Change in valuation allowance
    
    
    337
    
    
    
    (149
    )
    
    
    874Other
    
    
    229
    
    
    
    1,908
    
    
    
    469Tax expense (recovery) per consolidated
financial statements
    
    $
    303
    
    
    $
    390
    
    
    $
    
 The tax effects of temporary differences resulting in future income tax assets and future income
tax liabilities are presented below:
 Restated (Note 3)
    
    Restated (Note 3)December 31,
    
    September 30,
    
    September 30,(in thousands)
    
    2006
    
    2005
    
    2004Future income tax assets:Property, plant and equipment
    
    $
    2,277
    
    
    $
    1,758
    
    
    $
    1,224Intangible assets
    
    
    81
    
    
    
    50
    
    
    
    Liabilities
    
    
    9,288
    
    
    
    1,088
    
    
    
    1,443Other
    
    
    8,943
    
    
    
    4,952
    
    
    
    5,79520,589
    
    
    
    7,848
    
    
    
    8,462Future income tax liability:Inventory
    
    
    (2,579
    )
    
    
    
    
    
    
    Investments
    
    
    (1,498
    )
    
    
    
    
    
    
    Property, plant and equipment
    
    
    (95,149
    )
    
    
    (684
    )
    
    
    (1,150
    )Intangibles
    
    
    (3,254
    )
    
    
    
    
    
    
    Other
    
    
    (2,812
    )
    
    
    (390
    )
    
    
    Net future tax asset (liability)
    
    
    (84,703
    )
    
    
    6,774
    
    
    
    7,312Valuation allowance
    
    
    (7,501
    )
    
    
    (7,164
    )
    
    
    (7,312
    )Net future income tax assets (liabilities)
    
    $
    (92,204
    )
    
    $
    (390
    )
    
    $
    
 Management believes that sufficient uncertainty exists regarding the realization of certain
future income tax assets and liabilities that a valuation allowance is required.At December 31, 2006, the Company had the following non-capital loss carry-forwards available
for tax purposes:
 AmountCountry
    
    (in thousands)
    
    
    ExpiryCanada
    
    $
    4,236
    
    
    
    2008-2026United States
    
    
    15,263
    
    
    
    2018-2026
 - 25 -




---



##### 



19.
    
    OTHER INCOME AND EXPENSESThe elements of net other income in the statement of operations is as follows:
 (in thousands)
    
    2006
    
    2005
    
    2004Net interest and other income
    
    $
    2,614
    
    
    $
    699
    
    
    $
    533Gain on foreign exchange
    
    
    1,915
    
    
    
    560
    
    
    
    242Gain (loss) on sale of land and equipment
    
    
    (24
    )
    
    
    100
    
    
    
    59Gain (loss) on sale of short-term investments
    
    
    
    
    
    
    2,939
    
    
    
    (38
    )Loss on sale of restricted investments
    
    
    (270
    )
    
    
    (63
    )
    
    
    Equity in loss of Fortress Minerals Corp.
    
    
    (4,003
    )
    
    
    (1,493
    )
    
    
    Dilution
gain on Fortress Minerals Corp. (note 6)
    
    
    7,167
    
    
    
    2,098
    
    
    
    549Minority interest
    
    
    
    
    
    
    917
    
    
    
    346Net other income
    
    $
    7,399
    
    
    $
    5,757
    
    
    $
    1,691
 20.
    
    SEGMENTED INFORMATION
 a)
    
    Geographic InformationThe following table sets forth revenue by geographic region based upon the location of the
mill involved in production activity in the case of uranium, vanadium and alternate feed
mill processing revenues and the location of the customer in the case of service and other
revenues. Geographic splits for property, plant and equipment and goodwill and other
intangibles (collectively long-lived assets) are based upon the location of the asset.
 (in thousands)
    
    2006
    
    2005
    
    2004Revenue:Canada
    
    $
    7,868
    
    
    $
    
    
    
    $
    United States
    
    
    1,496
    
    
    
    131
    
    
    
    2,424Rest of world
    
    
    358
    
    
    
    
    
    
    
    $
    9,722
    
    
    $
    131
    
    
    $
    2,424Total long-lived assets:Canada
    
    $
    502,596
    
    
    $
    936
    
    
    $
    354United States
    
    
    14,468
    
    
    
    6,305
    
    
    
    3,392Mongolia
    
    
    192
    
    
    
    151
    
    
    
    2,920$
    517,256
    
    
    $
    6,870
    
    
    $
    6,666
 b)
    
    Major CustomersThe Companys business is such that, at any given time, it sells its uranium and vanadium
concentrates to and enters into process milling arrangements and other services with a
relatively small number of customers. During 2006, two customers accounted for
approximately 79% of total revenues. During 2005, a process milling customer accounted for
approximately 33% of total revenues. During 2004, a vanadium customer accounted for
approximately 65% of total revenues.
 - 26 -




---



##### 



21.
    
    SUPPLEMENTAL CASH FLOW INFORMATION
 (in thousands)
    
    2006
    
    2005
    
    2004Changes in non-cash working capital items:Decrease (increase) in trade and other receivables
    
    $
    (7,175
    )
    
    $
    1,065
    
    
    $
    (742
    )Decrease in due from Urizon Joint Venture
    
    
    
    
    
    
    
    
    
    
    451Decrease (increase) in inventories
    
    
    (4,414
    )
    
    
    (2,134
    )
    
    
    572Decrease (increase) in other current assets
    
    
    (145
    )
    
    
    283
    
    
    
    (26
    )Increase (decrease) in accounts payable and
accrued liabilities
    
    
    (379
    )
    
    
    115
    
    
    
    (74
    )Increase (decrease) in reclamation obligations
    
    
    (39
    )
    
    
    331
    
    
    
    283Increase in deferred revenue
    
    
    67
    
    
    
    216
    
    
    
    1,398Funding of post-retirement benefits
    
    
    (16
    )
    
    
    
    
    
    
    Net change in non-cash working capital items
    
    $
    (12,101
    )
    
    
    (124
    )
    
    
    1,862
 22.
    
    COMMITMENTS AND CONTINGENCIESSpecific Legal MattersBlue Hill, MaineThe Company is a defendant in an action filed by the State of Maine against Kerramerican, Inc.,
(Kerramerican) a subsidiary of Noranda Inc., Black Hawk Mining Ltd. (Black Hawk) and the
Company, regarding potential liability for clean-up costs at a zinc mining site in the state of
Maine known as Blue Hill. In addition, Black Hawk and Kerramerican have each asserted
cross-claims against the Company for contribution. The Company is defending these actions and
has counter-claimed against Black Hawk and Kerramerican for indemnity. The activities of
Denison Mines Limited (DML), a predecessor to the Company, at this site consisted only of
limited exploration that did not involve the disposal of any waste and which occurred prior to
1964. Mining activities at the site occurring between 1964 and 1970 were conducted by Black
Hawk, a public company in which DML had a financial interest but did not control. Black Hawk
entered into a joint venture with Kerramerican in 1970. Kerramerican was the operator of the
joint venture, built processing facilities and operated the mine until it was closed in 1977.
Kerramerican was responsible for the decommissioning and reclamation of the site, which was
completed in 1983. The site is now the source of some heavy metal contamination of the ground
water in the area and further reclamation work is required.DML has an indemnity from Kerramerican and Black Hawk in an agreement among the parties dated
July 1, 1971. The Company has thoroughly examined this issue and believes it has no liability
related to the costs of any clean up of the contamination and has made no provision for any
costs other than those incurred to date to investigate the matter. Furthermore, the Company
believes that, to the extent that liability is determined, Kerramerican and Black Hawk are
liable therefore pursuant to the July 1, 1971 indemnity agreement. Notwithstanding the
Companys belief that it has no liability, future litigation of the matter cannot be ruled out
and as a result, the Company cannot determine the outcome of this matter at this time.
Kerramerican has entered into an agreement with the State of Maine and assumed liability
preserving its rights to pursue Black Hawk and Denison for their share of the liability.General Legal MattersThe Company is involved, from time to time, in various other legal actions and claims in the
ordinary course of business. In the opinion of management, the aggregate amount of any
potential liability is not expected to have a material adverse effect on the Companys financial
position or results.Third Party IndemnitiesThe Company has agreed to indemnify Calfrac Well Services against any future liabilities it may
incur related to the assets or liabilities transferred to the Company on March 8, 2004.Performance Bonds and Letters of CreditIn conjunction with various contracts, reclamation and other performance obligations, the
Company may be required to issue performance bonds and letters of credit as security to
creditors to guarantee the Companys performance. Any potential payments which might become due
under these items would be related to the Companys non-performance under the applicable
contract. As at December 31, 2006, the Company had outstanding bonds and letters of credit of
$21,955,000 of which $14,082,000 was collateralized by restricted cash (see note 8).
 - 27 -




---



##### 



OthersThe Company has detected some chloroform contamination at the White Mesa mill site that appears
to have resulted from the operation of a temporary laboratory facility that was located at the
site prior to and during the construction of the Mill facility, and septic drain fields that
were used for laboratory and sanitary wastes prior to construction of the Mills tailings cells.
In April 2003, the Company commenced an interim remedial program of pumping the
chloroform-contaminated water from the groundwater to the Mills tailings cells. This will
enable the Company to begin clean up of the contaminated areas and to take a further step
towards resolution of this outstanding issue. Although the investigations to date indicate that
this contamination appears to be contained in a manageable area, the scope and costs of final
remediation have not yet been determined and could be significant.The Company has committed to payments under various operating leases. The future minimum lease
payments are as follows:
 (in thousands)2007
    
    $
    2492008
    
    
    2112009
    
    
    1642010
    
    
    1302011
    
    
    1092012 and thereafter
    
    
    430
 23.
    
    SUBSEQUENT EVENTSOn January 9, 2007, Denison issued 9,010,700 common shares at a price of CDN$11.75 per share for
gross proceeds of CDN$105,875,725.On January 23, 2007, Denison lodged a bidders statement with the Australian Securities and
Investment Commission in connection with Denisons offer to acquire all of the issued and
outstanding shares of OmegaCorp Ltd., a company listed on the Australian Stock Exchange. The
cash offer of AUD$1.10 per share was scheduled to close on February 28, 2007 but was extended to
March 9, 2007 and subsequently extended to March 21, 2007. Approximately 29% of the common
shares of OmegaCorp were tendered by March 13, 2007.On February 26, 2007, Denison announced that it had applied for a listing of its common shares
on the American Stock Exchange. It is expected that the process will be completed by early
April, 2007.On March 6, 2007, Denison closed an agreement to acquire five uranium deposits located in the
Arizona Strip district in northeastern Arizona for cash consideration of $5,500,000 plus a 1%
royalty.24.
    
    FINANCIAL INSTRUMENTS
 a)
    
    Credit RiskFinancial instruments that potentially subject the Company to a concentration of credit risk
consist of cash and cash equivalents, accounts receivable, amounts due from the Urizon Joint
Venture, and restricted fixed income securities. The Company deposits cash and cash
equivalents with financial institutions it believes to be creditworthy, principally in money
market funds, which may at certain times, exceed federally insured levels. The Companys
restricted investments consist of investments in U.S. government bonds, commercial paper and
high-grade corporate bonds with maturities extending beyond 90 days. The Companys accounts
receivable are derived from customers primarily located in the United States. The Company
performs ongoing credit evaluation of its customers financial condition and, in most cases,
requires no collateral from its customers. The Company will maintain an allowance for
doubtful accounts receivable in those cases where the expected collectability of accounts
receivable is in question.b)
    
    Fair ValuesThe fair values of cash and cash equivalents, trade and other receivables and accounts
payable and accrued liabilities approximate their carrying values because of the short-term
nature of these instruments.The fair values of the Companys restricted investments in cash and cash equivalents, U.S.
government bonds, commercial paper and corporate bonds approximate carrying values.
 - 28 -




---



##### 



25.
    
    JOINT VENTURE INTERESTSThe Company conducts a substantial portion of its production and exploration activities through
joint ventures. The joint ventures allocate production and exploration expenses to each joint
venture participant and the participant derives revenue directly from the sale of such product.
The Company records its proportionate share of assets, liabilities and operating costs of the
joint ventures.A summary of joint venture information is as follows:
 (in thousands)
    
    2006
    
    2005Operating expenses
    
    $
    5,799
    
    
    $
    Mineral property exploration
    
    
    3,144
    
    
    
    General and administrative
    
    
    80
    
    
    
    66Net other income
    
    
    (4
    )
    
    
    Loss for the period before taxes
    
    
    9,019
    
    
    
    66Current assets
    
    
    14,516
    
    
    
    21Property, plant and equipment
    
    
    386,512
    
    
    
    Goodwill and other intangibles
    
    
    103,388
    
    
    
    625Current liabilities
    
    
    3,133
    
    
    
    4Long-term liabilities
    
    
    2,226
    
    
    
    99Net investment in joint ventures
    
    $
    499,057
    
    
    $
    543
 26.
    
    MATERIAL DIFFERENCES BETWEEN CANADIAN AND U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLESThe consolidated financial statements have been prepared in accordance with Canadian GAAP which
differ in certain material respects from those principles and practices that the Company would
have followed had its consolidated financial statements been prepared in accordance with U.S.
GAAP. Material differences between financial statement items under Canadian GAAP and the
amounts determined under U.S. GAAP are as follows:
 a)
    
    Cash and EquivalentsU.S. GAAP requires that funds raised through the issuance of flow-through shares be shown as
restricted cash and not be considered to be a component of cash and cash equivalents. In
addition, the restricted cash would be excluded from cash and cash equivalents in the
statement of cash flows and shown as a financing activity. At December 31, 2006 no funds
raised from the issue of flow-through shares remained (September 30, 2005: $4,128,000).b)
    
    Long-Term InvestmentsUnder Canadian GAAP, portfolio investments are carried at the lower of cost and estimated
fair market value. Under U.S. GAAP, portfolio investments that are classified as
available-for-sale securities are recorded at fair value and unrealized gains or losses are
excluded from earnings and recorded as other comprehensive income, a separate component of
shareholders equity.c)
    
    Plant and EquipmentUnder Canadian GAAP, the Companys surplus assets held for resale were depreciated to an
amount less than net realizable value. Under U.S. GAAP, assets held for resale are recorded
at the lower of cost or net realizable value and are not depreciated.d)
    
    Mineral PropertiesDuring 2006, the Company adopted the expensing of exploration expenditures on mineral
properties not sufficiently advanced to identify their development potential and adopted
this change in accounting policy on a retrospective basis with restatement of the
comparative periods presented. Previously, the Company had been capitalizing such
exploration expenditures as incurred which is permitted under Canadian GAAP. Under U.S.
GAAP, all exploration costs incurred before a commercially mineable deposit is established
must be expensed as incurred.
 - 29 -




---



##### 



e)
    
    Joint VenturesUnder Canadian GAAP, investments in jointly-controlled entities are permitted to be
accounted for using the proportionate consolidation method. Under U.S. GAAP, investments in
jointly-controlled entities are accounted for using the equity method. Although there are
material differences between these accounting methods, the Company relies on an
accommodation of the United States Securities and Exchange Commission (SEC) permitting the
Company to exclude the disclosure of such differences which affect only the display and
classification of financial statement items excluding shareholders equity and net income.f)
    
    GoodwillUnder Canadian GAAP, the Companys formation in 1997 through an amalgamation of IUC with
Thornbury Capital Corporation (Thornbury) has been accounted for as an acquisition of
Thornbury resulting in the recording of goodwill. Under U.S. GAAP, the transaction has been
accounted for as a recapitalization whereby the net monetary assets of Thornbury would be
recorded at fair value, except that no goodwill or other intangibles would be recorded. The
goodwill recorded under Canadian GAAP has been subsequently written off. As a result, the
deficit and share capital of the Company are both reduced under U.S. GAAP.g)
    
    LiabilitiesUnder U.S. GAAP, the sale of flow-through shares results in a liability being recognized for
the excess of the purchase price paid by the investors over the fair value of common shares
without the flow-through feature. The fair value of the shares is recorded as equity. When
the tax deductibility of the expenditures is renounced, the liability is reversed and a
future income tax liability is recorded for the amount of the benefits renounced to third
parties, resulting in an income tax expense.h)
    
    Dilution GainsUnder Canadian GAAP, gains on dilution of interests in a subsidiary or equity interest are
recognized in income in the period in which they occur. Under U.S. GAAP, the gain on
dilution is not recognized if it results from the sale of securities by a company in the
exploration stage and instead is accounted for as a capital transaction.i)
    
    Stock-Based CompensationUnder Canadian GAAP, the Company retrospectively adopted, without restatement, amended
standards requiring a fair value-based method of accounting for stock options granted to
employees, including directors, and non-employees effective October 1, 2004. Under U.S.
GAAP, the Company may continue to measure stock options granted to employees using the
intrinsic value-based method whereby stock-based compensation is measured as the excess of
the market price on the grant date over the exercise price. In order to remain consistent
with the adoption under Canadian GAAP, the Company has elected under U.S. GAAP to
retrospectively adopt the fair value-based method of accounting for stock options granted to
employees effective October 1, 2004. Under U.S. GAAP, such retrospective adoption requires
restatement of prior periods.j)
    
    Foreign Currency TranslationUnder Canadian GAAP, unrealized translation gains and losses as a result of translating
self-sustaining operations under the current rate method are accumulated in a cumulative
translation adjustment account as a separate component of shareholders equity. Under U.S.
GAAP, these unrealized translation gains and losses are shown as an adjustment to other
comprehensive income.
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##### 



The consolidated balance sheet items, adjusted to comply with U.S. GAAP, would be as follows:
 December 31, 2006Canadian
    
    
    
    
    
    
    
    
    
    U.S.GAAP
    
    
    
    
    
    Adjustments
    
    GAAPLong-term investments
    
    $
    16,600
    
    
    
    (b
    )
    
    $
    25,008
    
    
    $
    41,608Property, plant and equipment
    
    
    403,571
    
    
    
    (c
    )
    
    
    301
    
    
    
    403,872Future income tax liability
    
    
    92,204
    
    
    
    (b
    )
    
    
    1,838
    
    
    
    94,042Share capital
    
    
    548,069
    
    
    
    (f
    )
    
    
    (616
    )
    
    
    547,453Additional paid-in capital
    
    
    
    
    
    
    (h
    )
    
    
    9,814
    
    
    
    9,814Deficit
    
    
    (62,078
    )
    
    
    (b
    )
    
    
    2,162(c
    )
    
    
    301(f
    )
    
    
    616(h
    )
    
    
    (9,814
    )
    
    
    (68,813
    )Cumulative translation adjustment
    
    
    (8,498
    )
    
    
    (j
    )
    
    
    8,498
    
    
    
    Accumulated other comprehensive income
    
    
    
    
    
    
    (b
    )
    
    
    25,008(b
    )
    
    
    (4,000
    )(j
    )
    
    
    (8,498
    )
    
    
    12,510
 December 31, 2005 (restated)Canadian
    
    
    
    
    
    
    
    
    
    U.S.GAAP
    
    
    
    
    
    Adjustments
    
    GAAPCash and equivalents
    
    $
    6,111
    
    
    
    (a
    )
    
    $
    (4,128
    )
    
    $
    1,983Restricted cash
    
    
    
    
    
    
    (a
    )
    
    
    4,128
    
    
    
    4,128Long-term investments
    
    
    3,814
    
    
    
    (b
    )
    
    
    7,274
    
    
    
    11,088Property, plant & equipment
    
    
    6,747
    
    
    
    (c
    )
    
    
    301
    
    
    
    7,048Share capital
    
    
    58,165
    
    
    
    (f
    )
    
    
    (616
    )
    
    
    57,549Additional paid-in capital
    
    
    
    
    
    
    (h
    )
    
    
    2,647
    
    
    
    2,647Deficit
    
    
    (45,080
    )
    
    
    (c
    )
    
    
    301(f
    )
    
    
    616(h
    )
    
    
    (2,647
    )
    
    
    (46,810
    )Accumulated other comprehensive income
    
    
    
    
    
    
    (b
    )
    
    
    7,274
    
    
    
    7,274
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##### 



The consolidated statements of operations, adjusted to comply with U.S. GAAP, would be as
follows:
 2006
    
    2005
    
    2004Net loss for the period, Canadian GAAP
    
    
    
    
    
    $
    (16,998
    )
    
    $
    (11,450
    )
    
    $
    (5,045
    )Depreciation of assets held for resale
    
    
    (c
    )
    
    
    
    
    
    
    (31
    )
    
    
    (100
    )Adjust dilution gain from equity interests
    
    
    (h
    )
    
    
    (7,167
    )
    
    
    (2,098
    )
    
    
    (549
    )Retrospective adoption relating to
stock-based compensation
    
    
    (i
    )
    
    
    
    
    
    
    
    
    
    
    (738
    )Net loss for the period, U.S. GAAP
    
    
    
    
    
    
    (24,165
    )
    
    
    (13,579
    )
    
    
    (6,432
    )Unrealized gain on available-for-sale securities
    
    
    (b
    )
    
    
    17,735
    
    
    
    2,370
    
    
    
    3,974Cumulative translation adjustment
    
    
    (j
    )
    
    
    (8,498
    )
    
    
    
    
    
    
    Comprehensive loss, U.S. GAAP
    
    
    
    
    
    $
    (14,928
    )
    
    $
    (11,209
    )
    
    $
    (2,458
    )Basic and diluted net loss per share, U.S. GAAP
    
    
    
    
    
    $
    (0.26
    )
    
    $
    (0.17
    )
    
    $
    (0.08
    )
 The consolidated statements of cash flows, adjusted to comply with U.S. GAAP, would be as
follows:
 2006
    
    2005
    
    2004Net cash provided by (used in) financing
activities:Under Canadian GAAP
    
    
    
    
    
    $
    44,311
    
    
    $
    5,977
    
    
    $
    14,150Restricted cash from flow-through financings
    
    
    (a
    )
    
    
    
    
    
    
    (4,128
    )
    
    
    (3,840
    )Under U.S. GAAP
    
    
    
    
    
    $
    44,311
    
    
    $
    1,849
    
    
    $
    10,310
 Impact of New Accounting Pronouncements
 a)
    
    FASB Statement No. 154: Accounting Changes and Error Corrections (SFAS 154) effective
for 2006 addresses the accounting for and reporting of voluntary changes in accounting
principles and the reporting of error corrections by the restatement of previously issued
financial statements. SFAS 154 requires retrospective application of prior period
financial statements for changes in accounting principles unless the retrospective effects
of the changes are impracticable to determine, in which case the retrospective application
may be limited to the assets and liabilities of the earliest period practicable, with a
corresponding adjustment made to opening retained earnings. Prior to SFAS 154, accounting
changes were generally applied effective at the beginning of the year of change with any
prior years cumulative effects recorded as a charge against or credit to earnings in the
year of change.b)
    
    EITF 04-6: Accounting for Stripping Costs Incurred during Production in the Mining
Industry (EITF 04-6) effective for reporting periods beginning after December 15, 2006
which concludes that stripping costs incurred during the production phase be recorded as a
component of the cost of inventory produced. The Company has yet to complete its
evaluation of the impact of this pronouncement.c)
    
    FASB Statement No. 157: Fair Value Measurements (SFAS 157) effective for 2008
establishes a framework for measurement of fair value under generally accepted accounting
principles and expands the disclosure requirements covering fair value measurement. The
Company has yet to complete its evaluation of the impact of this pronouncement.d)
    
    FASB Interpretation No. 48: Accounting for Uncertainty in Income Taxes  An
Interpretation of FASB Statement No. 109 (FIN 48) effective for 2007 prescribes a
recognition threshold and measurement attribute including criteria for the subsequent
recognition, derecognition and measurement of uncertain tax positions for financial
statement purposes. FIN 48 also requires expanded disclosure with respect to uncertainty
in income tax assets and liabilities. The Company has yet to complete its evaluation of
the impact of this interpretation.
 - 32 -