Exhibit 99.3





ANNUAL CONSOLIDATED FINANCIAL
STATEMENTS
 
 FOR THE YEAR ENDED DECEMBER 31,
2019












































ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS








Responsibility for Financial
Statements
 
 The
Company’s management is responsible for the integrity and
fairness of presentation of these consolidated financial
statements. The consolidated financial statements have been
prepared by management, in accordance with International Financial
Reporting Standards as issued by the International Accounting
Standards Board, for review by the Audit Committee and approval by
the Board of Directors.
 
 The preparation
of financial statements requires the selection of appropriate
accounting policies in accordance with International Financial
Reporting Standards and the use of estimates and judgements by
management to present fairly and consistently the consolidated
financial position of the Company. Estimates are necessary when
transactions affecting the current period cannot be finalized with
certainty until future information becomes available. In making
certain material estimates, the Company’s management has
relied on the judgement of independent specialists.
 
 The
Company’s management has developed and maintains a system of
internal accounting controls to ensure, on a reasonable and
cost-effective basis, that the financial information is timely
reported and is accurate and reliable in all material respects and
that the Company’s assets are appropriately accounted for and
adequately safeguarded.
 
 The consolidated
financial statements have been audited by PricewaterhouseCoopers
LLP, our independent auditor. Its report outlines the scope of its
examination and expresses its opinions on the consolidated
financial statements and internal control over financial
reporting.
 
 
 Original signed
by “David
D.Cates”

Original signed
by “Gabriel (Mac)
McDonald”David D.
Cates

Gabriel (Mac)
McDonaldPresident and
Chief Executive Officer

Vice-President
Finance and Chief Financial Officer
 
 
 March 5,
2020
 
 
 
 Management’s Report on Internal
Control over Financial Reporting
 
 The
Company’s management is responsible for establishing and
maintaining an adequate system of internal control over financial
reporting. Management conducted an evaluation of the effectiveness
of internal control over financial reporting based on the
Internal Control –
Integrated Framework, 2013 issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, management concluded that the Company’s internal
control over financial reporting was effective as of December 31,
2019.
 
 The effectiveness
of the Company’s internal control over financial reporting as
at December 31, 2019 has been audited by PricewaterhouseCoopers
LLP, our independent auditor, as stated in its report which appears
herein.
 
 
 Changes to Internal Control over
Financial Reporting
 
 There has not
been any change in the Company’s internal control over
financial reporting that occurred during 2019 that has materially
affected, or is reasonably likely to materially affect, the
Company’s internal control over financial
reporting.























Report of Independent Registered Public Accounting
Firm








To the Board of Directors and Shareholders of Denison Mines
Corp.





Opinions on the financial
statements and internal control over financial
reporting


We have audited
the accompanying consolidated statements of financial position of
Denison Mines Corp. and its subsidiaries (together, the Company) as
of December 31, 2019 and 2018, and the related consolidated
statements of income (loss) and comprehensive income (loss),
changes in equity and cash flow for the years then ended, including
the related notes (collectively referred to as the consolidated
financial statements). We also have audited the Company's internal
control over financial reporting as of December 31, 2019, based on
criteria established in Internal
Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO).





In our opinion,
the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the
Company as of December 31, 2019 and 2018, and its financial
performance and its cash flows for the years then ended in
conformity with International Financial Reporting Standards as
issued by the International Accounting Standards Board. Also in our
opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December
31, 2019, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the COSO.





Substantial doubt about the Company's ability
to continue as a going concern


The
accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in note 2 to the consolidated financial statements, the
Company has suffered recurring losses from operations and negative
cash outflows from operating activities that raise substantial
doubt about its ability to continue as a going concern.
Management’s plans in regard to these matters are also
described in note 2. The consolidated financial statements do not
include any adjustments that might result from the outcome of
this uncertainty.





Basis for
opinions


The Company's
management is responsible for these consolidated financial
statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting, included in the
accompanying Management's Report on Internal Control over Financial
Reporting. Our responsibility is to express opinions on the
Company’s consolidated financial statements and on the
Company's internal control over financial reporting based on our
audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.





We conducted our
audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error
or fraud, and whether effective internal control over financial
reporting was maintained in all material respects.








PricewaterhouseCoopers
LLP
 PwC Tower, 18
York Street, Suite 2600, Toronto, Ontario, Canada M5J
0B2
 T: +1 416
863 1133, F: +1 416 365 8215, www.pwc.com/ca
 
 “PwC” refers to
PricewaterhouseCoopers LLP, an Ontario limited liability
partnership.








Our audits of the
consolidated financial statements included performing procedures to
assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits
also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the
overall presentation of the consolidated financial statements. Our
audit of internal control over financial reporting included
obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide
a reasonable basis for our opinions.





Definition and limitations of
internal control over financial reporting


A company’s
internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of
the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.





Because of its
inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate.





(Signed) “PricewaterhouseCoopers LLP”





Chartered
Professional Accountants, Licensed Public Accountants





Toronto, Ontario,
Canada


March 5,
2020





We have served as
the Company's auditor since at least 1996. We have not been able to
determine the specific year we began serving as auditor of the
Company.























ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in
thousands of Canadian dollars (“CAD”) except for share
amounts)At December
31
2019

At December
31
2018ASSETSCurrentCash and cash
equivalents (note 6)


$
8,190
$
23,207Trade and other
receivables (note 7)



4,023

4,072Inventories (note
8)



3,352

3,584Prepaid expenses
and other



978

84316,543

31,706Non-CurrentInventories-ore
in stockpiles (note 8)



2,098

2,098Investments (note
9)



12,104

2,255Investment in
associate (note 10)



-

5,582Restricted cash
and investments (note 11)


11,994

12,255Property, plant
and equipment (note 12)



257,259

258,291Total
assets


$
299,998
$
312,187LIABILITIESCurrentAccounts payable
and accrued liabilities


$
7,930
$
5,554Current portion
of long-term liabilities:Deferred revenue
(note 13)



4,580

4,567Post-employment
benefits (note 14)



150

150Reclamation
obligations (note 15)



914

877Other liabilities
(note 16)



1,372

1,33714,946

12,485Non-CurrentDeferred revenue
(note 13)



31,741

33,160Post-employment
benefits (note 14)



2,108

2,145Reclamation
obligations (note 15)



31,598

29,187Other liabilities
(note 16)



532

-Deferred income
tax liability (note 17)



8,924

12,963Total
liabilities



89,849

89,940EQUITYShare capital
(note 18)



1,335,467

1,331,214Share purchase
warrants (note 19)



435

435Contributed
surplus



65,417

63,634Deficit



(1,192,304)

(1,174,163)Accumulated other
comprehensive income (note 21)



1,134

1,127Total
equity



210,149

222,247Total
liabilities and equity


$
299,998
$
312,187Issued and
outstanding common shares (note 18)


597,192,153

589,175,086Going concern
basis of accounting (note 2)Commitments
and contingencies (note 26)Subsequent
events (note 28)The accompanying
notes are an integral part of the consolidated financial
statements











On behalf of the Board of
Directors:


"Signed"
Catherine
J.G. Stefan
"Signed"
Brian D.
EdgarDirector
Director








1


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





Consolidated Statements of Income
(Loss) and Comprehensive Income (Loss)Year
Ended December 31(Expressed in
thousands of CAD dollars except for share and per share
amounts)

2019

2018REVENUES (note 23)




$
15,549
$
15,550EXPENSESOperating
expenses (note 22, 23)





(14,436)

(15,579)Exploration and
evaluation (note 23)





(15,238)

(15,457)General and
administrative (note 23)





(7,811)

(7,189)Impairment
expense (note 12)




-

(6,086)Other income
(expense) (note 22)





2,970

(6,234)(34,515)

(50,545)Loss
before finance charges, equity accounting





(18,966)

(34,995)Finance expense,
net (note 22)





(4,125)

(3,653)Equity share of
income (loss) of associate (note 10)





(426)

277Loss before
taxes





(23,517)

(38,371)Income tax
recovery (note 17):Deferred





5,376

8,294Net loss for the
period




$
(18,141)
$
(30,077)Other
comprehensive income (loss) (note 21):Items that may be
reclassified to loss:Foreign currency
translation change





7

(13)Comprehensive
loss for the period




$
(18,134)
$
(30,090)Basic and diluted
net loss per share




$
(0.03)
$
(0.05)Weighted-average
number of shares outstanding (in thousands):Basic and
diluted





590,343

564,976The accompanying
notes are an integral part of the consolidated financial
statements











2


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





Consolidated Statements of Changes in EquityYear
Ended December 31(Expressed in
thousands of CAD dollars)





2019

2018Share capital (note 18)Balance-beginning
of period




$
1,331,214
$
1,310,473Shares issued for
cash, net of issue costs





4,292

4,549Flow-through
share premium





(902)

(1,337)Shares issued on
acquisition of additional mineral property interests (note
12)

19

17,529Share options
exercised-cash





405

-Share options
exercised-fair value adjustment





140

-Share units
exercised-fair value adjustment





299

-Balance-end of
period





1,335,467

1,331,214Share purchase warrants (note 19)Balance-beginning
of period





435

435Balance-end of
period





435

435Contributed surplusBalance-beginning
of period





63,634

61,799Share-based
compensation expense (note 20)





2,222

1,835Share options
exercised-fair value adjustment





(140)

-Share units
exercised-fair value adjustment





(299)

-Balance-end of
period





65,417

63,634DeficitBalance-beginning
of period





(1,174,163)

(1,144,086)Net
loss





(18,141)

(30,077)Balance-end of
period





(1,192,304)

(1,174,163)Accumulated
other comprehensive income (note 21)Balance-beginning
of period





1,127

1,140Foreign currency
translation





7

(13)Balance-end of
period





1,134

1,127Total EquityBalance-beginning
of period




$
222,247
$
229,761Balance-end of
period




$
210,149
$
222,247The accompanying
notes are an integral part of the consolidated financial
statements








3


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS


Consolidated Statements of Cash FlowYear
Ended December 31(Expressed in
thousands of CAD dollars)



2019

2018CASH PROVIDED BY (USED IN):OPERATING ACTIVITIESNet loss for the
period


$
(18,141)
$
(30,077)Items not
affecting cash and cash equivalents:Depletion,
depreciation, amortization and accretion



8,711

8,585Impairment
expense (note 12)



-

6,086Share-based
compensation (note 20)



2,222

1,835Recognition of
deferred revenue (note 13)



(4,609)

(4,239)Losses on
reclamation obligation revisions (note 15)



845

369Gains on debt
obligation revisions (note 16)



(26)

-Losses on
property, plant and equipment disposals (note 22)


37

135Losses on
investments (note 22)



1,085

5,411Equity loss of
associate (note 10)



678

472Dilution gain of
associate (note 10)



(252)

(749)Gain on
deconsolidation of associate



(5,267)

-Non-cash
inventory adjustments and other



-

56Deferred income
tax recovery (note 17)



(5,376)

(8,294)Foreign exchange
losses (gains) (note 22)



(2)

1Post-employment
benefits (note 14)



(107)

(142)Reclamation
obligations (note 15)



(855)

(755)Change in
non-cash working capital items (note 22)



2,256

355Net
cash used in operating activities



(18,801)

(20,951)INVESTING ACTIVITIESDecrease
(increase) in loans receivable (note 7, 25)



250

(250)Sale of
investments (note 9)



-

37,500Purchase of
investments (note 9)



(511)

-Expenditures on
property, plant and equipment (note 12)



(929)

(1,567)Proceeds on sale
of property, plant and equipment


8

361Decrease
(increase) in restricted cash and investments

261

(71)Net
cash provided by (used in) investing activities



(921)

35,973FINANCING ACTIVITIESIssuance of debt
obligations (note 16)



670

-Repayment
of debt obligations (note 16)



(662)

-Issuance
of common shares for:New share
issues-net of issue costs (note 18)



4,292

4,549Share options
exercise proceeds (note 18)



405

-Net
cash provided by financing activities



4,705

4,549Increase
(decrease) in cash and cash equivalents



(15,017)

19,571Cash
and cash equivalents, beginning of period



23,207

3,636Cash
and cash equivalents, end of period


$
8,190
$
23,207Supplemental
cash flow disclosure (note 22)The accompanying
notes are an integral part of the consolidated financial
statements











4


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS




Notes to the consolidated financial statements for the years ended
December 31, 2019 and 2018(Expressed in CAD
dollars except for shares and per share amounts)





1.
 NATURE OF
OPERATIONS





Denison Mines
Corp. (“DMC”) and its subsidiary companies and joint
operations (collectively, “Denison” or the
“Company”) are engaged in uranium mining related
activities, which can include acquisition, exploration and
development of uranium properties, as well as the extraction,
processing and selling of uranium.





The Company has a
90.0% interest in the Wheeler River Joint Venture
(“WRJV”), a 66.57% interest in the Waterbury Lake
Uranium Limited Partnership (“WLULP”), a 22.5% interest
in the McClean Lake Joint Venture (“MLJV”) (which
includes the McClean Lake mill) and a 25.17% interest in the
Midwest Joint Venture (“MWJV”), each of which are
located in the eastern portion of the Athabasca Basin region in
northern Saskatchewan, Canada. The McClean Lake mill provides toll
milling services to the Cigar Lake Joint Venture
(“CLJV”) under the terms of a toll milling agreement
between the parties (see note 13). In addition, the Company has
varying ownership interests in a number of other development and
exploration projects located in Canada.





The Company
provides mine decommissioning and other services (collectively
“environmental services”) to third parties through its
Denison Closed Mines Group (formerly Denison Environmental
Services) and is also the manager of Uranium Participation
Corporation (“UPC”), a publicly-listed company formed
to invest substantially all of its assets in uranium oxide
concentrates (“U3O8“) and
uranium hexafluoride (“UF6”). The
Company has no ownership interest in UPC but receives fees for
management services and commissions from the purchase and sale of
U3O8 and
UF6 by
UPC.





DMC is
incorporated under the Business Corporations Act (Ontario) and
domiciled in Canada. The address of its registered head office is
40 University Avenue, Suite 1100, Toronto, Ontario, Canada, M5J
1T1.





References to
“2019” and “2018” refer to the year ended
December 31, 2019 and the year ended December 31, 2018
respectively.





2.
 GOING
CONCERN BASIS OF ACCOUNTING





These
consolidated financial statements have been prepared using
International Financial Reporting Standards (“IFRS”),
as issued by the International Accounting Standards Board
(“IASB”), on a going concern basis. These financial
statements do not reflect the adjustments to the carrying values of
assets and liabilities and the reported expenses and balance sheet
classifications that would be necessary if the Company ceases to
exist as a going concern in the normal course of operations. Such
adjustments could be material.





At December 31,
2019, the Company does not have sufficient liquidity on hand to
fund its operations for the next twelve months and will require
further financing to meet its financial obligations, execute its
plans and maintain rights under existing agreements.





During 2019 and
early 2020, the Company was successful in raising funds through a
private placement and renegotiating the terms of the
Company’s credit facility as noted in note 28. However,
further additional sources of financing will be required in 2020 to
fund the Company’s planned operations, which includes the
strategic advancement of the Wheeler River uranium project. The
Company believes it will be able to raise additional financing
either through equity or debt financing, sale of equity investments
or other assets, or by selling a stream and/or royalty on the
Wheeler River project.





The Company is
actively pursuing access to different sources of funding and while
it has been successful in the past in obtaining financing for its
activities, there is no assurance that it will be able to obtain
adequate financing in the future. These events and conditions
indicate the existence of material uncertainties that may cast
substantial doubt as to the Company’s ability to continue as
a going concern.








5


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





3.
 STATEMENT
OF COMPLIANCE, ACCOUNTING POLICIES, ACCOUNTING CHANGES AND
COMPARATIVE NUMBERS





Statement
of Compliance





These
consolidated financial statements have been prepared in accordance
with IFRS as issued by the IASB.





These financial
statements were approved by the board of directors for issue on
March 5, 2020.





Significant
accounting policies





These
consolidated financial statements are presented in Canadian dollars
(“CAD”) and all financial information is presented in
CAD, unless otherwise noted.





The preparation
of the consolidated financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amount of assets, liabilities, revenue and expenses. Actual results
may vary from these estimates.





Estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognized in the period in which the
estimates are revised and in any future periods affected. The areas
involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the consolidated
financial statements are disclosed in note 4.





The significant
accounting policies used in the preparation of these consolidated
financial statements are described below:





A.
 Consolidation
principles





The financial
statements of the Company include the accounts of DMC, its
subsidiaries, its joint operations and its investments in
associates.





Subsidiaries





Subsidiaries are
all entities (including structured entities) over which the DMC
group of entities has control. The group controls an entity where
the group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control
is transferred to the group and are deconsolidated from the date
that control ceases. Intercompany transactions, balances and
unrealized gains and losses from intercompany transactions are
eliminated.





Joint
Operations





Joint operations
are contractual arrangements which involve joint control between
the parties. In the mining industry, these arrangements govern the
formation, ownership and ongoing operation and management of
various mineral property interests contributed to the joint
operation. A joint operation may or may not be structured through a
separate financial vehicle. The consolidated financial statements
of the Company include its share of the assets in such joint
operations, together with its share of the liabilities, revenues
and expenses arising jointly or otherwise from those operations.
All such amounts are measured in accordance with the terms of each
arrangement.





Investments
in associates





An associate is
an entity over which the Company has significant influence and is
neither a subsidiary, nor an interest in a joint operation.
Significant influence is the ability to participate in the
financial and operating policy decisions of the entity without
having control or joint control over those policies.





Associates are
accounted for using the equity method. Under this method, the
investment in associates is initially recorded at cost and adjusted
thereafter to record the Company’s share of post-acquisition
earnings or loss of the associate as if the associate had been
consolidated. The carrying value of the investment is also
increased or decreased to reflect the Company’s share of
capital transactions, including amounts recognized in other
comprehensive income, and for accounting changes that relate to
periods subsequent to the date of acquisition. Dilution gains or
losses arising from changes in the interest in investments in
associates are recognized in the statement of income or
loss.








6


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS


The Company
assesses at each period-end whether there is any objective evidence
that an investment in an associate is impaired. If impaired, the
carrying value of the Company's share of the underlying assets of
the associate is written down to its estimated recoverable amount,
being the higher of fair value less costs of disposal or value in
use, and charged to the statement of income or loss.





B.
 Foreign
currency translation





Functional
and presentation currency





Items included in
the financial statements of each entity in the DMC group are
measured using the currency of the primary economic environment in
which the entity operates (“the functional currency”).
Primary and secondary indicators are used to determine the
functional currency. Primary indicators include the currency that
mainly influences sales prices, labour, material and other costs.
Secondary indicators include the currency in which funds from
financing activities are generated and in which receipts from
operating activities are usually retained. Typically, the local
currency has been determined to be the functional currency of
Denison’s entities.





The financial
statements of entities that have a functional currency different
from the presentation currency of DMC (“foreign
operations”) are translated into Canadian dollars as follows:
assets and liabilities-at the closing rate at the date of the
statement of financial position, and income and expenses-at the
average rate of the period (as this is considered a reasonable
approximation to actual rates). All resulting changes are
recognized in other comprehensive income or loss as cumulative
foreign currency translation adjustments.





When the Company
disposes of its entire interest in a foreign operation, or loses
control, joint control, or significant influence over a foreign
operation, the foreign currency gains or losses accumulated in
other comprehensive income or loss related to the foreign operation
are recognized in the statement of income or loss as translational
foreign exchange gains or losses.





Transactions
and balances





Foreign currency
transactions are translated into an entity’s functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of foreign currency transactions and from the
translation at year-end exchange rates of monetary assets and
liabilities denominated in currencies other than an
operation’s functional currency are recognized in the
statement of income or loss as transactional foreign exchange gains
or losses.





C.
 Cash and
cash equivalents





Cash and cash
equivalents include cash on hand, deposits held with banks, and
other short-term highly liquid investments with original maturities
of three months or less which are subject to an insignificant risk
of changes in value.





D.
 Financial
instruments





Financial assets
and financial liabilities are recognized when the Company becomes a
party to the contractual provisions of a financial instrument.
Financial assets are derecognized when the rights to receive cash
flows from the assets have expired or have been transferred and the
Company has transferred substantially all risks and rewards of
ownership. Financial liabilities are derecognized when the
obligations specified in the contract are discharged, cancelled or
expire.





At initial
recognition, the Company classifies its financial instruments in
the following categories:





Financial
assets and liabilities at fair value through profit or loss
(“FVTPL”)





A financial asset
is classified in this category if it is a derivative instrument, an
equity instrument for which the Company has not made the
irrevocable election to classify as fair value through other
comprehensive income (“FVTOCI”), or a debt instrument
that is not held within a business model whose objective includes
holding the financial assets in order to collect contractual cash
flows that are solely payments of principal and interest.
Derivative financial liabilities and contingent consideration
liabilities related to business combinations are also classified in
this category. Financial instruments in this category are
recognized initially and subsequently at fair value. Transaction
costs are expensed in the statement of income or loss. Gains and
losses arising from changes in fair value are presented in the
statement of income or loss – within other income (expense) -
in the period in which they arise.








7


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





Financial
assets at amortized cost





A financial asset
is classified in this category if it is a debt instrument and / or
other similar asset that is held within a business model whose
objective is to hold the asset in order to collect the contractual
cash flows (i.e. principal and interest). Financial assets in this
category are initially recognized at fair value plus transaction
costs and subsequently measured at amortized cost using the
effective interest method less a provision for impairment. Interest
income is recorded in the statement of income or loss through
finance income.





Financial
liabilities at amortized cost





All financial
liabilities that are not recorded as FVTPL are classified in this
category and are initially recognized less a discount (when
material) to reduce the financial liabilities to fair value and
less any directly attributable transaction costs. Subsequently,
financial liabilities are measured at amortized cost using the
effective interest method. Interest expense is recorded in net
income through finance expense.





Refer to the
“Fair Value of Financial Instruments” section of note
25 for the Company’s classification of its financial assets
and liabilities within the fair value hierarchy.





E.
 Impairment
of financial assets





At each reporting
date, the Company assesses the expected credit losses associated
with its financial assets that are not carried at FVTPL. Expected
credit losses are calculated based on the difference between the
contractual cash flows and the cash flows that the Company expects
to receive, discounted, where applicable, based on the assets
original effective interest rate.





For “Trade
and other receivables”, the Company calculates expected
credit losses based on historical credit loss experience, adjusted
for forward-looking factors specific to debtors and the economic
environment. In recording an impairment loss, the carrying amount
of the asset is reduced by this computed amount either directly or
indirectly through the use of an allowance account.





F.
 Inventories





Expenditures,
including depreciation, depletion and amortization of production
assets, incurred in the mining and processing activities that will
result in future concentrate production are deferred and
accumulated as ore in stockpiles, in-process inventories and
concentrate inventories. These amounts are carried at the lower of
average costs or net realizable value (“NRV”). NRV is
calculated as the estimated future concentrate price (net of
selling costs) less the 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 and removed from the stockpile
based upon the average cost per 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, a pro-rata share of the amortization of the
associated mineral property, as well as production costs incurred
to process the ore into a saleable product. Processing costs
typically include labor, chemical reagents and directly
attributable mill overhead expenditures. Items are valued at
weighted average cost.





Materials and
other supplies held for use in the production of inventories are
carried at average cost and are not written down below that cost if
the finished products in which they will be incorporated are
expected to be sold at or above cost. However, when a decline in
the price of concentrates indicates that the cost of the finished
products exceeds NRV, the materials are written down to NRV. In
such circumstances, the replacement cost of the materials may be
the best available measure of their net realizable
value.





G.
 Property,
plant and equipment





Plant
and equipment





Plant and
equipment are recorded at acquisition or production cost and
carried net of depreciation and impairments. Cost includes
expenditures incurred by the Company that are directly attributable
to the acquisition of the asset. Subsequent costs are included in
the asset’s carrying amount or recognized as a separate
asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Company
and the cost can be measured reliably. The carrying amount of a
replaced asset is derecognized when replaced. Repairs and
maintenance costs are charged to the statement of income during the
period in which they are incurred.











8


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





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 an estimated
useful life which ranges from three to twenty 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 estimated mine
plan. When assets are retired or sold, the resulting gains or
losses are reflected in the statement of income or loss as a
component of other income or expense. The Company allocates the
amount initially recognized in respect of an item of plant and
equipment to its significant parts and depreciates separately each
such part over its useful life. Residual values, methods of
depreciation and useful lives of the assets are reviewed at least
annually and adjusted if appropriate.





Where
straight-line depreciation is utilized, the range of useful lives
for various asset classes is generally as follows:





Buildings
 15 - 20 years;


Production machinery and
equipment                        
           
           
           
        5 - 7 years;


Other
 3 – 5
years.





Mineral
property acquisition, exploration, evaluation and development
costs





Costs relating to
mineral and / or exploration rights acquired through a business
combination or asset acquisition are capitalized and reported as
part of “Property, plant and equipment”.





Exploration
expenditures are expensed as incurred.





Evaluation
expenditures are expensed as incurred, until an area of interest is
considered by management to be sufficiently advanced. Once this
determination is made, the area of interest is classified as an
“Advanced Evaluation Stage” mineral property, a
component of the Company’s mineral properties, and all
further non-exploration expenditures for the current and subsequent
periods are capitalized. These expenses can include further
evaluation expenditures such as mining method selection and
optimization, metallurgical sampling test work and costs to further
delineate the ore body to a higher confidence level.





Once commercial
and technical viability has been established for a property, the
property is classified as a “Development Stage” mineral
property and all further development costs are capitalized to the
asset. Further development costs include costs related to
constructing a mine, such as shaft sinking and access, lateral
development, drift development, engineering studies and
environmental permitting, infrastructure development and the costs
of maintaining the site until commercial production.





Such capital
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 stage 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.





Proceeds received
from the sale of an interest in a property are credited against the
carrying value of the property, with any difference recorded as a
gain or loss on sale.





Lease
assets (and lease obligations)





At the inception
of a contract, the Company assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease, if the
contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration. To assess
whether a contract conveys the right to control the use of an
identified asset, the Company assesses whether:


●
 the contract involves the use
of an identified asset – this may be specified explicitly or
implicitly and should be physically distinct or represent
substantially all of the capacity of a physically distinct asset.
If the supplier has a substantive substitution right, then the
asset is not identified;


●
 the Company has the right to
obtain substantially all of the economic benefits from the use of
the asset throughout the period of use; and


●
 the Company has the right to
direct the use of the asset. The Company has this right when it has
the decision-making rights that are most relevant to changing how
and for what purpose the asset is used. In rare cases where the
decision about how and for what purpose the asset is used is
predetermined, the Company has the right to direct the use of the
asset if either (a) the Company has the right to operate the asset;
or (b) the Company designed the asset in a way that predetermines
how and for what purpose it will be used.











9


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





If the contract
contains a lease, the Company accounts for the lease and non-lease
components separately. For the lease component, a right-of-use
asset and a corresponding lease liability are set-up at the date at
which the leased asset is available for use by the Company. The
right-of-use asset is depreciated over the shorter of the
asset’s useful life and the lease term on a straight-line
basis.





The lease
payments associated with the lease liability are discounted using
either the interest rate implicit in the lease, if available, or
the Company’s incremental borrowing rate. Each lease payment
is allocated between the liability and the finance cost (i.e.
accretion) so as to produce a constant rate of interest on the
remaining lease liability balance.





H.
 Impairment
of non-financial assets





Property, plant
and equipment assets are assessed at the end of each reporting
period to determine if there is any indication that the asset may
be impaired. If any such indication exists, an estimate of the
recoverable amount of the asset is made. For the purpose of
measuring recoverable amounts, assets are grouped at the lowest
level, or cash generating unit (“CGU”), for which there
are separately identifiable cash inflows. The recoverable amount is
the higher of an asset’s fair value less costs of disposal
and value in use (being the present value of the expected future
cash flows of the relevant asset or CGU, as determined by
management). An impairment loss is recognized for the amount by
which the CGU’s carrying amount exceeds its recoverable
amount.





Mineral property
assets are tested for impairment using the impairment indicators
under IFRS 6 “Exploration for and Evaluation of Mineral
Resources” up until the commercial and technical feasibility
for the property is established. From that point onwards, mineral
property assets are tested for impairment using the impairment
indicators of IAS 36 “Impairment of
Assets”.





I.
 Employee
benefits





Post-employment
benefit obligations





The 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 from active
service prior to 1997. The estimated cost of providing these
benefits is 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.
Experience gains and losses are being deferred as a component of
accumulated other comprehensive income or loss and are adjusted, as
required, on the obligations re-measurement date.





Stock-based
compensation





The Company uses
a fair value-based method of accounting for stock options to
employees and to non-employees. The fair value is determined using
the Black-Scholes option pricing model on the date of the grant.
The cost is recognized on a graded method basis, adjusted for
expected forfeitures, 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.





The Company also
has a share unit plan pursuant to which it may grant share units to
employees – the share units are equity-settled awards. The
Company determines the fair value of the awards on the date of
grant. The cost is recognized on a graded method basis, adjusted
for expected forfeitures, over the applicable vesting period, as an
increase in share-based compensation expense and the contributed
surplus account. When such share units are settled for common
shares, the applicable amounts of contributed surplus are credited
to share capital.





Termination
benefits





The Company
recognizes termination benefits when it is demonstrably committed
to either terminating the employment of current employees according
to a detailed formal plan without possibility of withdrawal, or
providing benefits as a result of an offer made to encourage
voluntary termination. Benefits falling due more than twelve months
after the end of the reporting period are discounted to their
present value.











10


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS








J.
 Reclamation
provisions





Reclamation
provisions, which are legal and constructive obligations related to
the retirement of tangible long-lived assets, are recognized when
such obligations are incurred and a reasonable estimate of the
value can be determined. These obligations are measured initially
at the present value of expected cash flows using a pre-tax
discount rate reflecting risks specific to the liability 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 statement of income or loss. Changes in the amount
or timing of the underlying future cash flows or changes in the
discount rate are immediately recognized as an increase or decrease
in the carrying amounts of the related asset and liability. These
costs are amortized to the results of operations over the life of
the asset. Reductions in the amount of the liability are first
applied against the amount of the net reclamation asset with any
excess value being recorded in the statement of income or
loss.





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 liability.





K.
 Provisions





Provisions for
restructuring costs and legal claims, where applicable, are
recognized in liabilities when the Company has a present legal or
constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the
obligation, and the amount can be reliably estimated. Provisions
are measured at management’s best estimate of the expenditure
required to settle the obligation at the end of the reporting
period, and are discounted to present value where the impact of the
discount is material. The Company performs evaluations to identify
onerous contracts and, where applicable, records provisions for
such contracts.





L.
 Current
and deferred Income tax





Current income
tax payable is based on taxable income for the period. Taxable
income differs from income as reported in the statement of income
or loss because it excludes items of income or expense that are
taxable or deductible in other periods and it further excludes
items that are never taxable or deductible. The Company’s
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet
date.





Deferred income
taxes are accounted for using the balance sheet liability method.
Deferred income tax assets and liabilities are computed based on
temporary differences between the financial statement carrying
values of the existing assets and liabilities and their respective
income tax bases used in the computation of taxable income.
Computed deferred tax liabilities are generally recognized for all
taxable temporary differences and deferred tax assets are
recognized to the extent that it is probable that taxable income
will be available against which deductible temporary differences
can be utilized. Such assets and liabilities are not recognized if
the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable
income nor the accounting income. Deferred tax liabilities are
recognized for taxable temporary differences arising on investments
in subsidiaries and investments, and interests in joint ventures,
except where the Company is able to control the reversal of the
temporary differences and it is probable that the temporary
differences will not reverse in the foreseeable future. The
carrying amount of deferred tax assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable
that sufficient taxable earnings will be available to allow all or
part of the asset to be recovered.





Deferred tax is
calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset realized, based
on tax rates and tax laws that have been enacted or substantively
enacted by the balance sheet date. Deferred tax is charged or
credited to income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
recorded within equity.





Income tax assets
and liabilities are offset when there is a legally enforceable
right to offset the assets and liabilities and when they relate to
income taxes levied by the same tax authority on either the same
taxable entity or different taxable entities where there is an
intention to settle the balance on a net basis.











11


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





M.
 Flow-through
common shares





The
Company’s Canadian exploration activities have been financed
in part through the issuance of flow-through common shares, whereby
the Canadian income tax deductions relating to these expenditures
are claimable by the subscribers and not by the Company. The
proceeds from issuing flow-through shares are allocated between the
offering of shares and the sale of tax benefits. The allocation is
based on the difference (“premium”) between the quoted
price of the Company’s existing shares and the amount the
investor pays for the actual flow-through shares. A liability is
recognized for the premium when the shares are issued, and is
extinguished when the tax effect of the temporary differences,
resulting from the renunciation of the tax deduction to the
flow-through shareholders, is recorded - with the difference
between the liability and the value of the tax assets renounced
being recorded as a deferred tax expense. The tax effect of the
renunciation is recorded at the time the Company makes the
renunciation to its subscribers – which may differ from the
effective date of renunciation. If the flow-through shares are not
issued at a premium, a liability is not established, and on
renunciation the full value of the tax assets renounced is recorded
as a deferred tax expense.





N.
 Revenue
recognition





Revenue
from pre-sold toll milling services





Revenue from the
pre-sale of toll milling arrangement cash flows is recognized as
the toll milling services are provided. At contract inception, the
Company estimates the expected transaction price of the toll
milling services being sold based on available information and
calculates an average per unit transaction price that applies over
the life of the contract. This unit price is used to draw-down the
deferred revenue balance as the toll milling services occur. When
changes occur to the timing, or volume of toll milling services,
the per unit transaction price is adjusted to reflect the change
(such review to be done annually, at a minimum), and a cumulative
catch up adjustment is made to reflect the updated rate. The amount
of the upfront payment received from the toll milling pre-sale
arrangements includes a significant financing component due to the
longer term nature of such agreements. As such, the Company also
recognizes accretion expense on the deferred revenue balance which
is recorded in net income through “Finance expense,
net”.





Revenue
from environmental services (i.e. Closed Mines Group)





Environmental
service contracts represent a series of distinct performance
obligations that are substantially the same and have the same
pattern of transfer of control to the customer. The transaction
price is estimated at contract inception and is recognized over the
life of the contract as control is transferred to the customer.
Variable consideration, where applicable, is estimated at contract
inception using either the expected value method or the most likely
amount method. If it is highly probable that a subsequent reversal
of revenue will not occur when the uncertainty has been resolved,
the Company will recognize as revenue the estimated transaction
price, including the estimate of the variable portion, upon
transfer of control to the customer. Where it is determined that it
is highly probable that a subsequent reversal of revenue will occur
upon the resolution of the uncertainty, the variable portion of the
transaction price will be constrained, and will not be recognized
as revenue until the uncertainty has been resolved.





Revenue
from management services (i.e. UPC)





The management
services arrangement with UPC represents a series of distinct
performance obligations that are substantially the same and have
the same pattern of transfer of control to the customer. The
transaction price for the contract is estimated at contract
inception and is recognized over the life of the contract as
control is transferred to the customer as the services are
provided. The variable consideration related to the net asset value
(“NAV”) based management fee was estimated at contract
inception using the expected value method. It was determined that
it is highly probable that a subsequent reversal of revenue would
occur if the variable consideration was included in the transaction
price, and as such, the variable portion of the transaction price
will be measured and recognized when the uncertainty has been
resolved (i.e. when the actual NAV has been
calculated).





Commission
revenue earned on acquisition or sale of U3O8 and
UF6 on
behalf of UPC (or other parties where Denison acts as an agent) is
recognized when control of the related U3O8 or UF6 passes to the
customer, which is the date when title of the U3O8 and
UF6
passes to the customer.





Revenue
from spot sales of uranium





In a uranium
supply arrangement, the Company is contractually obligated to
provide uranium concentrates to the customer. Each delivery is
considered a separate performance obligation under the contract
– revenue is measured based on the transaction price
specified in the contract and the Company recognizes revenue when
control to the uranium has been transferred to the
customer.





12


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





Uranium can be
delivered either to the customer directly (physical deliveries) or
notionally under title within a uranium storage facility (notional
deliveries). For physical deliveries to customers, the terms in the
supply arrangement specify the location of delivery and revenue is
recognized when control transfers to the customer which is
generally when the uranium has been delivered and accepted by the
customer at that location. For notional deliveries at a uranium
storage facility, revenue is recognized on the date that the
Company specifies the storage facility to transfer title of a
contractually specified quantity of uranium to a customer’s
account at the storage facility.





O.
 Earnings
(loss) per share





Basic earnings
(loss) per share (“EPS”) is calculated by dividing the
net income or loss for the period attributable to equity owners of
DMC by the weighted average number of common shares outstanding
during the period.





Diluted EPS is
calculated by adjusting the weighted average number of common
shares outstanding for dilutive instruments. The number of shares
included with respect to options, warrants and similar instruments
is computed using the treasury stock method.





Accounting
changes for fiscal 2019





A.
 IFRS 16
Leases (“IFRS 16”)





On January 1,
2019, Denison adopted the provisions of IFRS 16 using the modified
retrospective approach. As such, comparative information has not
been restated and continues to be reported under International
Accounting Standard 17 Leases (“IAS 17”) and
International Financial Reporting Interpretation Committee 4
Determining Whether an Arrangement Contains a Lease (“IFRIC
4”). The transitional impact of the change in accounting
policy is disclosed in note 5 and additional disclosures related to
Denison’s IFRS 16 right-of-use assets, lease liabilities and
lease amounts recognized in net income or loss are disclosed in
notes 12, 16 and 22, respectively. Denison’s accounting
policy for leases is noted above within the accounting policy for
“Property, Plant and Equipment”.





Comparative
numbers





Certain
classifications of the comparative figures have been changed to
conform to those used in the current period.





4.
 CRITICAL
ACCOUNTING ESTIMATES AND JUDGEMENTS





The preparation
of consolidated financial statements in accordance with IFRS
requires the use of certain critical accounting estimates and
judgements that affect the amounts reported. It also requires
management to exercise judgement in applying the Company’s
accounting policies. These judgements and estimates are based on
management’s best knowledge of the relevant facts and
circumstances taking into account previous experience. Although the
Company regularly reviews the estimates and judgements made that
affect these financial statements, actual results may be materially
different.





Significant
estimates and judgements made by management relate to:





A.
 Determination
of a mineral property being sufficiently advanced





The Company
follows a policy of capitalizing non-exploration related
expenditures on properties it considers to be sufficiently
advanced. Once a mineral property is determined to be sufficiently
advanced, that determination is irrevocable and the capitalization
policy continues to apply over the life of the property. In
determining whether or not a mineral property is sufficiently
advanced, management considers a number of factors, including, but
not limited to: current uranium market conditions, the quality of
resources identified, access to the resource, the suitability of
the resource to current mining methods, ease of permitting,
confidence in the jurisdiction in which the resource is located and
mill processing complexity.





Many of these
factors are subject to risks and uncertainties that can support a
“sufficiently advanced” determination as at one point
in time but not support it at another. The final determination
requires significant judgment on the part of the Company’s
management and directly impacts the carrying value of the
Company’s mineral properties.











13


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





B.
 Mineral
property impairment reviews and impairment adjustments





Mineral
properties are tested for impairment when events or changes in
circumstances indicate that the carrying amount may not be
recoverable. When an indicator is identified, the Company
determines the recoverable amount of the property, which is the
higher of an asset’s fair value less costs of disposal or
value in use. An impairment loss is recognized if the carrying
value exceeds the recoverable amount. The recoverable amount of a
mineral property may be determined by reference to estimated future
operating results and discounted net cash flows, current market
valuations of similar properties or a combination of the above. In
undertaking this review, management of the Company is required to
make significant estimates of, amongst other things: reserve and
resource amounts, future production and sale volumes, forecast
commodity prices, future operating, capital and reclamation costs
to the end of the mine’s life and current market valuations
from observable market data which may not be directly comparable.
These estimates are subject to various risks and uncertainties,
which may ultimately have an effect on the expected recoverable
amount of a specific mineral property asset. Changes in these
estimates could have a material impact on the carrying value of the
mineral property amounts and the impairment losses
recognized.





C.
 Deferred
revenue – pre-sold toll milling: classification





In February 2017,
Denison closed an arrangement with Anglo Pacific Group PLC and its
subsidiaries (the “APG Arrangement” and
“APG” respectively – see note 13). Under the APG
Arrangement, Denison monetized its right to receive future toll
milling cash receipts from July 1, 2016 onwards from the MLJV under
the current toll milling agreement with the CLJV for an upfront
cash payment. The APG Arrangement consisted of a loan structure and
a stream arrangement. Significant judgement was required to
determine whether the APG Arrangement should be accounted for as a
financial obligation (i.e. debt) or deferred revenue.





Key factors that
support the deferred revenue conclusion reached by management
include, but are not limited to: a) Limited recourse loan structure
– amounts due to APG are generally repayable only to the
extent of Denison’s share of the toll milling revenues earned
by the MLJV from the processing of the first 215 million pounds of
U3O8 from the Cigar
Lake mine on or after July 1, 2016, under the terms of the current
Cigar Lake toll milling agreement; and b) No warranty of the future
rate of production - no warranty is provided by Denison to APG
regarding the future rate of production at the Cigar Lake mine and
/ or the McClean Lake mill, or the amount and / or collectability
of cash receipts to be received by the MLJV in respect of toll
milling of Cigar Lake ore.





D.
 Deferred
revenue – pre-sold toll milling: revenue
recognition





In February 2017,
Denison closed the APG Arrangement and effectively monetized its
right to receive specified future toll milling cash receipts from
the MLJV related to the current toll milling agreement with the
CLJV. In exchange, Denison received a net up-front payment of
$39,980,000 which has been accounted for as a deferred revenue
liability as at the transaction close date.





Under IFRS 15,
the Company is required to recognize a revenue component and a
financing component as it draws down the deferred revenue
associated with the APG Arrangement over the life of the specified
toll milling production included in the APG Arrangement. In
estimating both of these components, the Company is required to
make assumptions relating to the future toll milling production
volume associated with Cigar Lake Phase 1 and 2 ore reserves and
resources (to end of mine life) and estimates of the annual timing
of that production. Changes in these estimates affect the
underlying production profile, which in turn affects the average
toll milling drawdown rate used to recognize revenue.





When the average
toll milling drawdown rate is changed, the impact is reflected on a
life-to-date production basis with a retroactive adjustment to
revenue recorded in the current period. Going forward, each time
the Company updates its estimates of the underlying production
profile for the APG Arrangement (typically in the quarter that
information relating to Cigar Lake uranium resource updates and /
or production schedules becomes publicly available), retroactive
adjustments to revenue will be recorded in the period that the
revised estimate is determined – such adjustments, which are
non-cash in nature, could be material.





E.
 Deferred
tax assets and liabilities





Deferred tax
assets and liabilities are computed in respect of taxes that are
based on taxable profit. Taxable profit will often differ from
accounting profit and management may need to exercise judgement to
determine whether some taxes are income taxes (and subject to
deferred tax accounting) or operating expenses.











14


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





Deferred tax
assets and liabilities are measured using enacted or substantively
enacted tax rates expected to apply when the temporary differences
between accounting carrying values and tax basis are expected to be
recovered or settled. The determination of the ability of the
Company to utilize tax loss carry forwards and other deferred tax
assets to offset deferred tax liabilities requires management to
exercise judgment and make certain assumptions about the future
performance of the Company. Management is required to assess
whether it is “probable” that the Company will benefit
from these prior losses and other deferred tax assets. Changes in
economic conditions, commodity prices and other factors could
result in revisions to the estimates of the benefits to be realized
or the timing of utilizing the losses.





F.
 Reclamation
obligations





Asset retirement
obligations are recorded as a liability when the asset is initially
constructed or a constructive or legal obligation exists. The
valuation of the liability typically involves identifying costs to
be incurred in the future and discounting them to the present using
an appropriate discount rate for the liability. The determination
of future costs involves a number of estimates relating to timing,
type of costs, mine closure plans, and review of potential methods
and technical advancements. Furthermore, due to uncertainties
concerning environmental remediation, the ultimate cost of the
Company’s decommissioning liability could differ materially
from amounts provided. The estimate of the Company’s
obligation is subject to change due to amendments to applicable
laws and regulations and as new information concerning the
Company’s operations becomes available. The Company is not
able to determine the impact on its financial position, if any, of
environmental laws and regulations that may be enacted in the
future.





5.
 ADOPTION
OF NEW STANDARDS – IMPACT ON FINANCIAL
STATEMENTS





As noted above in
Note 3, Denison adopted the provisions of IFRS 16 on January 1,
2019 using the modified retrospective approach. On transition to
IFRS 16, the Company recognized an additional $944,000 of
right-of-use assets (reported within “Property, Plant and
Equipment” – see note 12) and an additional $944,000 of
lease liabilities (reported within “Other Liabilities”
– see note 16).





The underlying
lease payments have been discounted using the Company’s
incremental borrowing rate on January 1, 2019 of 8.50%. In
applying IFRS 16 for the first time, Denison has used the following
practical expedients permitted by the standard: a) leases with a
term of less than 12 months remaining at January 1, 2019 have been
accounted for as short-term leases; and b) initial direct costs for
the measurement of the right-of-use asset at the date of initial
application have been excluded.





A reconciliation
of Denison’s December 31, 2018 lease commitments to its
opening lease liabilities amount recognized under IFRS 16 is as
follows:





(in thousands of
CAD dollars)Operating lease
and other commitments per Denison’s December 31, 2018 annual
financial statements

$
1,259Adjustments to
IFRS 16:Recognition
exemption for short-term leases


(13)Other


(75)Lease liabilities
- undiscounted


1,171Present value
discount adjustment


(227)Lease liabilities
on transition to IFRS 16 at January 1, 2019

$
944





Under IFRS 16,
Denison has recognized assets and liabilities for certain lease
components which were expensed by the Company in the past. The
adoption of IFRS 16 has resulted in the Company reporting: a)
increased assets and liabilities; b) increased depreciation and
accretion expense and decreased lease expense within the statement
of income (loss); and c) decreased cash outflows from operations
and increased cash outflows from financing as lease payments are
recorded as financing outflows in the cash flow
statement.

















15


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS








6.
 CASH AND
CASH EQUIVALENTS





The cash and cash
equivalent balance consists of:





At December
31

At December
31(in
thousands)



2019

2018Cash


$
1,583
$
1,152Cash in MLJV and
MWJV



1,397

654Cash
equivalents



5,210

21,401$
8,190
$
23,207





Cash equivalents
consist of various investment savings account instruments and money
market funds, all of which are short term in nature, highly liquid
and readily convertible into cash.





7.
 TRADE AND
OTHER RECEIVABLES





The trade and
other receivables balance consists of:





At December
31

At December
31(in
thousands)



2019

2018Trade
receivables


$
2,608
$
2,952Receivables in
MLJV and MWJV



1,125

571Sales tax
receivables



92

98Sundry
receivables



198

201Loan receivable
(note 24)



-

250$
4,023
$
4,072





8.
 INVENTORIES





The inventories
balance consists of:





At December
31

At December
31(in
thousands)



2019

2018Uranium
concentrates


$
526
$
526Inventory of ore
in stockpiles



2,098

2,098Mine and mill
supplies in MLJV



2,826

3,058$
5,450
$
5,682Inventories-by
balance sheet presentation:Current


$
3,352
$
3,584Long term-ore in
stockpiles



2,098

2,098$
5,450
$
5,682





Long-term ore in
stockpile inventory represents an estimate of the amount of ore on
the stockpile in excess of the next twelve months of planned mill
production.





The uranium
concentrate inventory has a fair market value, excluding selling
costs, of $844,000 at December 31, 2019 ($1,011,000 - December 31,
2018).

















16


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





9.
 INVESTMENTS





The investments
balance consists of:





At December
31

At December
31(in
thousands)



2019

2018Investments:Equity
instruments


$
12,104
$
2,255$
12,104
$
2,255Investments-by
balance sheet presentation:Current


$
-
$
-Long-term



12,104

2,255$
12,104
$
2,255





The investments
continuity summary is as follows:





(in
thousands)



2019

2018Balance-January
1


$
2,255
$
45,166PurchasesEquity
instruments



511

-Sales /
redemptionsDebt instruments
– GIC redemption.



-

(37,500)Transfer from
investment in associates at fair value (note 10)

10,423

-Fair value loss
to profit and loss (note 22)



(1,085)

(5,411)Balance-December
31


$
12,104
$
2,255





At December 31,
2019, the Company holds equity instruments consisting of shares and
warrants in publicly-traded companies and no debt
instruments.





10.
 INVESTMENT
IN ASSOCIATE





The investment in
associate balance consists of:





At December
31

At December
31(in
thousands)



2019

2018Investment in
associate-by investee:GoviEx Uranium
Inc (“GoviEx”)


$
-
$
5,582$
-
$
5,582





A summary of the
investment in GoviEx is as follows:





(in thousands
except share amounts)



Number
of Common SharesBalance-January
1, 2018



65,144,021
$
5,305Equity share of
net loss



-

(472)Dilution
gain



-

749Balance-December
31, 2018



65,144,021
$
5,582Equity share of
net loss



-

(678)Dilution
gain



-

252Deconsolidation
of investment in GoviEx



-

(5,156)Balance-December
31, 2019



65,144,021
$
-











17


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





GoviEx is a
mineral resource company focused on the exploration and development
of its uranium properties located in Africa. GoviEx maintains a
head office located in Canada and is a public company listed on the
TSX Venture Exchange. At December 31, 2019, Denison holds an
approximate 15.39% interest in GoviEx based on publicly available
information (December 31, 2018: 16.21% and December 31, 2017:
18.72%) and has one director appointed to the GoviEx board of
directors.





Through the
voting power of its share ownership interest, its large warrant
holdings and its seat on the board of directors, Denison had the
ability to demonstrate significant influence over GoviEx and used
the equity method to account for this investment up to September
30, 2019. On October 1, 2019 (the deconsolidation date), Denison
discontinued use of the equity method based on a determination that
Denison’s influence over GoviEx was no longer demonstrable as
significant - due to the expiry of its warrant holdings and an
increased ownership interest in GoviEx’s main subsidiary by
the Government of Niger during GoviEx’s third quarter of
2019.





On the
deconsolidation date, Denison classified its equity investment in
GoviEx as FVTPL. As a result, Denison recognized a gain of
$5,267,000 which represents the excess of the fair value of the
investment on that date ($10,423,000) as compared to the
investment’s carrying value under the equity method
($5,156,000).





The following
table is a summary of the consolidated financial information of
GoviEx on a 100% basis, up to September 30, 2019, taking into
account adjustments made by Denison for equity accounting purposes
for fair value adjustments and differences in accounting policy.
Prior to the deconsolidation date, Denison recorded its equity
investment entries in GoviEx one quarter in arrears (due to the
information not yet being publicly available), adjusted for any
material publicly disclosed share issuance transactions that
occurred up to the quarter end date on which Denison is reporting.
A reconciliation of GoviEx’s summarized information to
Denison’s investment carrying value, for the period when
equity accounting was used, is also included.





At September
30

At December
31(in thousands of
USD dollars)



2019

2018Total current
assets


$
4,559
$
4,800Total non-current
assets



32,418

32,432Total current
liabilities



(8,222)

(8,315)Total net
assets


$
28,755
$
28,917Nine
Months
Ended

Twelve Months
Ended(in thousands of
USD dollars)



September 30,
2019

December 31,
2018Revenue


$
-
$
-Net
loss



(3,202)

(1,892)Comprehensive
loss



(3,202)

(1,892)








At September
30

At December
31(in
thousands)



2019

2018Reconciliation of
GoviEx net assets to Denison investment carrying
value:Net assets of
GoviEx – beginning of period - USD

$
28,917
$
23,604Share issue
proceeds



2,474

6,654Contributed
surplus change



86

74Share-based
payment reserve change



480

477Deficit
changesNet
loss



(3,202)

(1,892)Net assets of
GoviEx – end of period – USD


$
28,755
$
28,917Denison ownership
interest



15.39%

16.21%Denison share of
net assets of GoviEx



4,425

4,687Other
adjustments



(343)

(283)Investment in
GoviEx – USD



4,082

4,404At historical
exchange rate



1.2631

1.2675Investment in
GoviEx – end of period - CAD


$
5,156
$
5,582











18


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





11.
 RESTRICTED
CASH AND INVESTMENTS





The Company has
certain restricted cash and investments deposited to collateralize
a portion of its reclamation obligations. The restricted cash and
investments balance consists of:





At December
31

At December
31(in
thousands)



2019

2018Cash and cash
equivalents


$
2,859
$
85Investments



9,135

12,170$
11,994
$
12,255Restricted cash
and investments-by item:Elliot Lake
reclamation trust fund


$
2,859
$
3,120Letters of credit
facility pledged assets



9,000

9,000Letters of credit
additional collateral



135

135$
11,994
$
12,255





At December 31,
2019, investments consist of guaranteed investment certificates
with maturities of more than 90 days. At December 31, 2018,
investments consist of guaranteed investment certificates and term
deposits with maturities of more than 90 days.





Elliot
Lake reclamation trust fund





The Company has
the obligation to maintain its decommissioned Elliot Lake uranium
mine pursuant to a Reclamation Funding Agreement effective December
21, 1995 (“Agreement”) with the Governments of Canada
and Ontario. The Agreement, as further amended in February 1999,
requires the Company to maintain funds in the reclamation trust
fund equal to estimated reclamation spending for the succeeding six
calendar years, less interest expected to accrue on the funds
during the period. Withdrawals from this reclamation trust fund can
only be made with the approval of the Governments of Canada and
Ontario to fund Elliot Lake monitoring and site restoration
costs.





In 2019, the
Company deposited an additional $477,000 into the Elliot Lake
reclamation trust fund and withdrew $797,000. In 2018, the Company
deposited an additional $670,000 into the Elliot Lake reclamation
trust fund and withdrew $633,000.





Letters of
credit facility pledged assets





At December 31,
2019, the Company had on deposit $9,000,000 with the Bank of Nova
Scotia (“BNS”) as pledged restricted cash and
investments pursuant to its obligations under an amended and
extended letters of credit facility (see notes 13, 15 and 16). The
funds were initially deposited in 2017.





Letters of
credit additional collateral





At December 31,
2019, the Company had on deposit an additional $135,000 of cash
collateral with BNS in respect of the portion of its issued
reclamation letters of credit in excess of the collateral available
under its letters of credit facility (see notes 15 and
16).


























19


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





12.
 PROPERTY,
PLANT AND EQUIPMENT





The property,
plant and equipment (“PP&E”) continuity summary is
as follows:





Plant
and Equipment

Mineral

Total(in
thousands)

Owned

Right-of-Use

Properties

PP&ECost:Balance –
January 1, 2018
$
103,186
$
-
$
166,332
$
269,518Additions

173

-

18,923

19,096Disposals

(365)

-

-

(365)Impairment
expense

-

-

(6,086)

(6,086)Reclamation
adjustment (note 15)

436

-

-

436Recoveries

-

-

(222)

(222)Balance –
December 31, 2018
$
103,430
$
-
$
178,947
$
282,377Adoption of IFRS
16 (note 5)

-

944

-

944Additions

376

38

534

948Disposals

(104)

(76)

-

(180)Reclamation
adjustment (note 15)

885

-

-

885Balance
– December 31, 2019
$
104,587
$
906
$
179,481
$
284,974Accumulated
amortization, depreciation:Balance –
January 1, 2018
$
(20,516)
$
-
$
-
$
(20,516)Amortization

(189)

-

-

(189)Depreciation

(3,661)

-

-

(3,661)Disposals

91

-

-

91Reclamation
adjustment (note 15)

189

-

-

189Balance –
December 31, 2018
$
(24,086)
$
-
$
-
$
(24,086)Amortization

(212)

-

-

(212)Depreciation

(3,527)

(237)

-

(3,764)Disposals

95

40

-

135Reclamation
adjustment (note 15)

212

-

-

212Balance
– December 31, 2019
$
(27,518)
$
(197)
$
-
$
(27,715)Carrying
value:Balance –
December 31, 2018
$
79,344
$
-
$
178,947
$
258,291Balance –
December 31, 2019
$
77,069
$
709
$
179,481
$
257,259





Plant and
Equipment - Owned





The Company has a
22.5% interest in the McClean Lake mill through its ownership
interest in the MLJV. The carrying value of the mill, comprised of
various infrastructure, building and machinery assets, represents
$69,101,000, or 89.7%, of the December 2019 total carrying value
amount of owned PP&E assets.





A toll milling
agreement amongst the participants of the MLJV and the CLJV
provides for the processing of certain future output of the Cigar
Lake mine at the McClean Lake mill, for which the owners of the
McClean Lake mill receive a toll milling fee and other benefits
(Denison further has an agreement with APG reqarding the receipt of
certain toll milling fees it receives from this toll milling
agreement – see note 13). In determining the units of
production amortization rate for the McClean Lake mill, the amount
of production attributable to the mill assets has been adjusted to
include Denison’s expected share of mill feed related to the
CLJV toll milling contract. Milling activities in 2018 and 2019 at
the McClean Lake mill have been dedicated to processing and
packaging ore from the Cigar Lake mine.





Plant and
Equipment – Right-of-Use





In conjunction
with the adoption of IFRS 16, the Company has included the cost of
various right-of-use (“ROU”) assets within PP&E.
ROU assets consist of building, vehicle and office equipment
leases. The majority of the value is attributable to the building
lease assets which represent the Company’s office and
warehousing space located in Toronto and Saskatoon.











20


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS








Mineral
Properties





The Company has
various interests in development, evaluation and exploration
projects located in Canada which are held directly or through
option or various contractual agreements. The following projects,
all located in Saskatchewan, represent $162,378,000, or 90.5%, of
the carrying value amount of mineral property assets as at December
31, 2019:





a)
 Wheeler River - the Company
has a 90.0% interest in the project (includes the Phoenix and
Gryphon deposits);


b)
 Waterbury Lake - the Company
has a 66.57% interest in the project (includes the J Zone and
Huskie deposits) and also has a 2.0% net smelter return royalty on
the portion of the project it does not own;


c)
 Midwest - the Company has a
25.17% interest in the project (includes the Midwest Main and
Midwest A deposits);


d)
 Mann Lake - the Company has a
30.0% interest in the project;


e)
 Wolly - the Company has a
21.89% interest in the project;


f)
 Johnston Lake - the Company
has a 100% interest in the project; and


g)
 McClean Lake - the Company
has a 22.5% interest in the project (includes the Sue D, Sue E,
Caribou, McClean North and McClean South deposits).





Wheeler
River





In January 2017,
Denison Mines Inc.(“DMI”) executed an agreement
(“2017 WRJV Agreement”) with the partners of the WRJV
to increase its ownership in the WRJV from 60% up to approximately
66% by the end of fiscal 2018. Under the terms of the 2017 WRJV
Agreement, the partners agreed to allow for a one-time election by
Cameco Corp. (“Cameco”) to fund 50% of its ordinary 30%
share of the WRJV expenses for fiscal 2017 and 2018. The shortfall
in Cameco’s contribution was funded by DMI (with DMI funding
75% of the WRJV expenses) in exchange for a transfer of a portion
of Cameco’s interest in the WRJV. In 2017, DMI increased its
interest in the WRJV from 60% to 63.3% under the terms of the 2017
WRJV Agreement.





In September
2018, DMC announced an agreement (“2018 WRJV
Agreement”) with Cameco to acquire Cameco’s remaining
minority interest in the WRJV. On October 26, 2018, the 2018 WRJV
Agreement was completed and DMC acquired Cameco’s then 23.92%
remaining interest in the WRJV in exchange for the issuance of
24,615,000 common shares of DMC (note 18).





In conjunction
with the completion of the 2018 WRJV Agreement, the 2017 WRJV
Agreement was terminated. At that time, in accordance with the 2017
WRJV Agreement, DMI’s interest in the WRJV was increased from
63.3% to 66.08%. Combined, Denison’s interest in the WRJV is
90%.





Cameco’s
WRJV minority interest acquired by DMC via the 2018 WRJV Agreement
has been accounted for as an asset acquisition with share based
consideration. DMC has recorded a total acquisition value of
$17,688,000, including transaction costs of $457,000. The total
acquisition value includes $17,529,000 of share based consideration
which has been valued using Denison’s closing share price on
October 26, 2018 of $0.70 per share.





Waterbury
Lake





In 2018, the
Company increased its interest in the Waterbury Lake property from
64.22% to 65.92% and further increased it again in 2019 to 66.57%
under the terms of the dilution provisions in the agreements
governing the project (see note 24).





Hook
Carter





In November 2016,
Denison completed the purchase of an 80% interest in the
Hook-Carter property, located in the southwestern portion of the
Athabasca Basin region in northern Saskatchewan, from ALX Uranium
Corp (“ALX”), with ALX retaining a 20%
interest.





Under terms in
the agreement, Denison agreed to fund ALX’s share of the
first $12,000,000 in expenditures on the property. As at December
31, 2019, the Company has spent $6,712,000 towards ALX’s
carried interest on the project since its acquisition in November
2016 (December 31, 2018: $4,926,000).


Moon Lake
South
 
 In January 2016,
the Company entered into an option agreement with CanAlaska Uranium
Ltd (“CanAlaska”) to earn an interest in
CanAlaska’s Moon Lake South project located in the Athabasca
Basin in Saskatchewan.


21


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS


Under the terms
of the option, Denison can earn an initial 51% interest in the
project by spending $200,000 by December 31, 2017 and it can
increase its interest to 75% by spending an additional $500,000 by
December 31, 2020.





As at December
31, 2019, the Company has spent $579,000 under the option and has
earned a 51% interest in the project.





Moore Lake





In August 2016,
the Company completed an agreement to option its then 100% interest
in the Moore Lake property to Skyharbour Resources Ltd
(“Skyharbour”) in exchange for cash ($500,000 over 5
years), stock (4,500,000 common shares of Skyharbour) and
exploration spending commitments ($3,500,000 over 5 years). Denison
received 4,500,000 common shares of Skyharbour on
closing.





In August 2018,
Denison received the final $300,000 of cash consideration from
Skyharbour, completing all of the commitments required under the
option agreement. In conjunction with the final cash payment
received, Denison recognized a recovery of $212,000 as a reduction
of the remaining carrying value of the property, a gain on disposal
of $88,000 and transferred its 100% ownership interest in Moore
Lake to Skyharbour.





Under the terms
of the option agreement, Denison has various back-in rights to
re-acquire a 51% interest in the Moore Lake property. In August
2018, Skyharbour achieved the required $3,500,000 in expenditures
on the project to trigger the first stage buyback option, which
Denison elected not to exercise. Denison retains a second stage
buyback option on the property until a further $3,000,000 in
expenditures have been incurred on the project by
Skyharbour.





Under the terms
of the option agreement, Denison is also entitled to nominate a
member to Skyharbour’s Board of Directors for as long as
Denison maintains a minimum ownership position of 5%. As at
December 31, 2019, Denison’s ownership interest in Skyharbour
is approximately 7.17% (December 31, 2018: 8.49%).





Murphy
Lake





In November 2019,
Denison completed an agreement with Eros Resources Corp
(“Eros”) to acquire Eros’s minority interest in
the Murphy Lake project. Denison acquired Eros’s 17.42%
minority interest in Murphy Lake in exchange for the issuance of
32,262 common shares of DMC and the granting of a 1.5% net smelter
return royalty on the project. Denison’s interest in Murphy
Lake is now 100%.





Eros’s
minority interest acquired by Denison has been accounted for as an
asset acquisition with share based consideration. Denison has
recorded a total acquisition value of $40,000, which includes
transaction costs of $21,000 and $19,000 of share based
consideration which has been fair valued using Denison’s
closing share price on November 28, 2019 of $0.58 per
share





Other
Properties





In December 2018,
due to the Company’s then current intention to let various
claims on three of its Canadian properties lapse in the normal
course, the Company has recognized impairment charges of
$6,097,000. The impairment charge was recognized within the Mining
Segment. The remaining recoverable amount of these three properties
was estimated to be $1,208,000 which reflected the results of a
market-based fair value less costs of disposal assessment completed
using both observable and unobservable inputs, including market
valuations for recent uranium property transactions, the
Company’s proprietary data about its properties and
management’s interpretation of that data. The Company
classified its valuation within Level 3 of the fair value
hierarchy. A value in use calculation was not applicable as the
Company did not have any expected cash flows from using these
properties at this time.














22


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





13.  DEFERRED
REVENUE





The deferred
revenue balance consists of:





At December
31

At December
31(in
thousands)



2019

2018Deferred revenue
– pre-sold toll milling:CLJV Toll Milling
- APG


$
36,321
$
37,727$
36,321
$
37,727Deferred
revenue-by balance sheet presentation:Current


$
4,580
$
4,567Non-current



31,741

33,160$
36,321
$
37,727





The deferred
revenue liability continuity summary is as follows:





(in
thousands)



2019

2018Balance-January
1


$
37,727
$
38,652Revenue earned
during the period (note 23)



(4,609)

(4,239)Accretion



3,203

3,314Balance-December
31


$
36,321
$
37,727





Arrangement
with Anglo Pacific Group PLC





In February 2017,
Denison closed an arrangement with APG under which Denison received
an upfront payment of $43,500,000 in exchange for its right to
receive future toll milling cash receipts from the MLJV under the
current toll milling agreement with the CLJV from July 1, 2016
onwards. The up-front payment was based upon an estimate of the
gross toll milling cash receipts to be received by Denison
discounted at a rate of 8.50%.





The APG
Arrangement represents a contractual obligation of Denison to pay
onward to APG any cash proceeds of future toll milling revenue
earned by the Company related to the processing of the specified
Cigar Lake ore through the McClean Lake mill. At closing, the
Company made payments to APG of $3,520,000, representing the Cigar
Lake toll milling cash receipts received by Denison in respect of
toll milling activity for the period from July 1, 2016 through
January 31, 2017, and reflected those amounts as a reduction of the
initial upfront amount received, thereby reducing the initial
deferred revenue balance to $39,980,000 at the transaction
date.





In connection
with the closing of the APG Arrangement, Denison reimbursed APG for
USD$100,000 in due diligence costs and granted 1,673,077 share
purchase warrants to APG in satisfaction of a $435,000 arrangement
fee payable. The fair value of the warrants was determined using
the Black-Scholes option pricing model with the following
assumptions: risk-free rate of 0.91%, expected stock price
volatility of 51.47%, expected life of 3.0 years and expected
dividend yield of nil$. The warrants have an exercise price of
$1.27 per share and will be exercisable for a period of 3 years
from the date of closing of the financing (see note 19). In
addition, the terms of the BNS Letters of Credit Facility between
BNS and Denison were amended to reflect certain changes required to
facilitate an Intercreditor Agreement between APG, BNS and Denison
(see note 16).





In 2018, the
Company has recognized $4,239,000 of toll milling revenue from the
draw-down of deferred revenue, based on Cigar Lake toll milling
production of 18,018,000 pounds U3O8 (100% basis). The
drawdown in 2018 includes a cumulative decrease in revenue for
prior periods of $332,000 resulting from changes in estimates to
the toll milling drawdown rate in the first quarter of
2018.





In 2019, the
Company has recognized $4,609,000 of toll milling revenue from the
draw-down of deferred revenue, based on Cigar Lake toll milling
production of 18,012,000 pounds U3O8 (100% basis). The
drawdown in 2019 includes a cumulative increase in revenue for
prior periods of $26,000 resulting from changes in estimates to the
toll milling drawdown rate in the first quarter of
2019.





14.  POST-EMPLOYMENT
BENEFITS





The Company
provides post-employment benefits for former Canadian employees who
retired on immediate pension prior to 1997.





23


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





The
post-employment benefits provided include life insurance and
medical and dental benefits as set out in the applicable group
policies. No post-employment benefits are provided to employees
outside the employee group referenced above. The post-employment
benefit plan is not funded.





The effective
date of the most recent actuarial valuation of the accrued benefit
obligation is October 1, 2016. The amount accrued is based on
estimates provided by the plan administrator which are based on
past experience, limits on coverage as set out in the applicable
group policies and assumptions about future cost trends. The
significant assumptions used in the most recent valuation are
listed below:





●
 Discount rate of
3.10%;


●
 Medical cost increase trend
rates of 7.00% per year in 2017, grading down by 0.125% per year to
4.625% in 2036 and using a rate at 4.00% per year thereafter;
and


●
 Dental cost increase trend
rates of 4.00% per year for ten years, followed by 3.50% for the
next ten years and 3.00% per year thereafter.





The
post-employment benefits balance consists of:





At December
31

At December
31(in
thousands)



2019

2018Accrued benefit
obligation


$
2,258
$
2,295$
2,258
$
2,295Post-employment
benefits-by balance sheet presentation:Current


$
150
$
150Non-current



2,108

2,145$
2,258
$
2,295





The
post-employment benefits continuity summary is as
follows:





(in
thousands)



2019

2018Balance-January
1


$
2,295
$
2,365Accretion



70

72Benefits
paid



(107)

(142)Balance-December
31


$
2,258
$
2,295





15.  RECLAMATION
OBLIGATIONS





The reclamation
obligations balance consists of:





At December
31

At December
31(in
thousands)



2019

2018Reclamation
obligations-by item:Elliot
Lake


$
17,987
$
17,205McClean and
Midwest Joint Ventures



14,503

12,837Other



22

22$
32,512
$
30,064Reclamation
obligations-by balance sheet presentation:Current


$
914
$
877Non-current



31,598

29,187$
32,512
$
30,064











24


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





The reclamation
obligations continuity summary is as follows:





(in
thousands)



2019

2018Balance-January
1


$
30,064
$
28,509Accretion



1,361

1,316Expenditures
incurred



(855)

(755)Liability
adjustments-income statement (note 22)



845

369Liability
adjustments-balance sheet (note 12)



1,097

625Balance-December
31


$
32,512
$
30,064





Site
Restoration: Elliot Lake





The 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 Denison and Stanrock sites and for treatment of water
discharged from these areas. The Company conducts its activities at
both sites pursuant to licenses issued by the Canadian Nuclear
Safety Commission (“CNSC”). The above accrual
represents the Company’s best estimate of the present value
of the total future reclamation cost, based on assumptions as to
what levels of treatment will be required in the future, discounted
at 4.16% (2018: 4.53%). As at December 31, 2019, the undiscounted
amount of estimated future reclamation costs, in current year
dollars, is $31,604,000 (December 31, 2018: $32,957,000). Revisions
to the reclamation liability for Elliot Lake are recognized in the
income statement as there is no net reclamation asset associated
with this site.





Spending on
restoration activities at the Elliot Lake site is funded by the
Elliot Lake Reclamation Trust fund (see note 11).





Site
Restoration: McClean Lake Joint Venture and Midwest Joint
Venture





The McClean Lake
and Midwest operations are subject to environmental regulations as
set out by the Saskatchewan government and the CNSC. 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
4.16% (2018: 4.53%). As at December 31, 2019, the undiscounted
amount of estimated future reclamation costs, in current year
dollars, is $23,685,000 (December 31, 2018: $23,275,000). The
majority of the reclamation costs are expected to be incurred
between 2036 and 2054. Revisions to the reclamation liabilities for
McClean Lake and Midwest are recognized on the balance sheet as
adjustments to the net reclamation assets associated with the
sites.





Under the Mineral
Industry Environmental Protection Regulations (1996), the Company
is required to provide its pro-rata share of financial assurances
to the province of Saskatchewan based on periodic filings of
estimated reclamation plans and the associated undiscounted future
reclamation costs included therein. Accordingly, as at December 31,
2019, the Company has in place irrevocable standby letters of
credit, from a chartered bank, in favour of the Saskatchewan
Ministry of the Environment, totalling $24,135,000 which relate to
the most recently filed reclamation plan dated March
2016.














25


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





16.  OTHER
LIABILITIES





The other
liabilities balance consists of:





At December
31

At December
31(in
thousands)



2019

2018Debt
obligations:Lease
obligations


$
739
$
-Loan
obligations



263

-Flow-through
share premium obligation (note 18)



902

1,337$
1,904
$
1,337Other
liabilities-by balance sheet presentation:Current


$
1,372
$
1,337Non-current



532

-$
1,904
$
1,337





Debt
Obligations





At December 31,
2019, the Company’s debt obligations are comprised of lease
liabilities associated with the new accounting required under IFRS
16 and loan liabilities. The debt obligations continuity summary is
as follows:





Lease

Loan

Total
Debt(in
thousands)



Liabilitites

Liabilities

ObligationsBalance –
December 31, 2018


$
-
$
-
$
-Adoption of IFRS
16 (note 5)



944

-

944Accretion



76

-

76Additions



38

632

670Repayments



(293)

(369)

(662)Liability
adjustment gain (note 22)



(26)

-

(26)Balance
– December 31, 2019


$
739
$
263
$
1,002





Debt
Obligations – Scheduled Maturities





The following
table outlines the Company’s scheduled maturities of its debt
obligations at December 31, 2019:





Lease

Loan

Total
Debt(in thousands of
CAD dollars)



Liabilitites

Liabilities

ObligationsMaturity analysis
– contractual undiscounted cash flows:Next 12
months


$
235
$
235
$
470One to five
years



571

35

606More than five
years



93

-

93Total obligation
– end of period - undiscounted



899

270

1,169Present value
discount adjustment



(160)

(7)

(167)Total
obligation – end of period - discounted


$
739
$
263
$
1,002





Letters of
Credit Facility





In 2019, the
Company had a facility in place with BNS for credit of up to
$24,000,000 with a one year term and a maturity date of January 31,
2020 (the “2019 Facility”). Use of the 2019 Facility is
restricted to non-financial letters of credit in support of
reclamation obligations.





The 2019 Facility
contains a covenant to maintain a level of tangible net worth
greater than or equal to the sum of $131,000,000 and a pledge of
$9,000,000 in restricted cash and investments as collateral for the
facility (see note 11). As additional security for the 2019
Facility, DMC has provided an unlimited full recourse guarantee and
a pledge of all of the shares of DMI. DMI has provided a
first-priority security interest in all present and future personal
property and an assignment of its rights and interests under all
material agreements relative to the McClean Lake and Midwest
projects. The 2019 Facility is subject to letter of credit fees of
2.40% (0.40% on the first $9,000,000) and standby fees of
0.75%.





26


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





At December 31,
2019, the Company was in compliance with its 2019 Facility
covenants and $24,000,000 of the 2019 Facility was being utilized
as collateral for certain letters of credit (December 31, 2018 -
$24,000,000). During 2019, the Company incurred letter of credit
and standby fees of $397,000 (2018 - $397,000).





In January 2020,
the Company has entered into an agreement with BNS to amend the
terms of the 2019 Facility to extend the maturity date to January
31, 2021 (see note 28).





17.  INCOME
TAXES





The income tax
recovery balance from continuing operations consists
of:





(in
thousands)



2019

2018Deferred income
tax:Origination of
temporary differences


$
4,940
$
4,520Tax
benefit-previously unrecognized tax assets



1,326

3,852Prior year over
(under) provision



(890)

(78)5,376

8,294Income tax
recovery


$
5,376
$
8,294





The Company
operates in multiple industries and jurisdictions, and the related
income is subject to varying rates of taxation. The combined
Canadian tax rate reflects the federal and provincial tax rates in
effect in Ontario, Canada for each applicable year. A
reconciliation of the combined Canadian tax rate to the
Company’s effective rate of income tax is as
follows:





(in
thousands)



2019

2018Loss before
taxes


$
(23,517)
$
(38,371)Combined Canadian
tax rate



26.50%

26.50%Income tax
recovery at combined rate



6,232

10,168Difference in tax
rates



2,048

7,573Non-deductible
amounts



(2,675)

(5,996)Non-taxable
amounts



2,362

1,439Previously
unrecognized deferred tax assets (1)



1,326

3,852Renunciation of
tax attributes-flow through shares



(403)

(1,589)Change in
deferred tax assets not recognized



(2,476)

(7,488)Change in tax
rates, legislation



(81)

-Prior year over
(under) provision



(890)

(78)Other



(67)

413Income tax
recovery


$
5,376
$
8,294





(1)
 The Company has recognized
certain previously unrecognized Canadian tax assets in 2019 and
2018 as a result of the renunciation of certain tax benefits to
subscribers pursuant to its November 2018 $5,000,000 and March 2017
$14,499,790 flow-through share offerings.





The deferred
income tax assets (liabilities) balance reported on the balance
sheet is comprised of the temporary differences as presented
below:





27


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS








At December
31

At December
31(in
thousands)



2019

2018Deferred income
tax assets:Property, plant
and equipment, net


$
387
$
381Post-employment
benefits



590

600Reclamation
obligations



9,561

8,798Tax loss carry
forwards



15,827

13,346Other



8,537

8,164Deferred income
tax assets-gross



34,902

31,289Set-off against
deferred income tax liabilities



(34,902)

(31,289)Deferred income
tax assets-per balance sheet


$
-
$
-Deferred income
tax liabilities:Inventory


$
(742)
$
(742)Property, plant
and equipment, net



(41,949)

(42,307)Other



(1,135)

(1,203)Deferred income
tax liabilities-gross



(43,826)

(44,252)Set-off of
deferred income tax assets



34,902

31,289Deferred income
tax liabilities-per balance sheet


$
(8,924)
$
(12,963)





The deferred
income tax liability continuity summary is as follows:





(in
thousands)



2019

2018Balance-January
1


$
(12,963)
$
(17,422)Recognized in
income (loss)



5,376

8,294Recognized in
other liabilities (flow-through shares)



(1,337)

(3,835)Balance-December
31


$
(8,924)
$
(12,963)





Management
believes that it is not probable that sufficient taxable profit
will be available in future years to allow the benefit of the
following deferred tax assets to be utilized:





At
December 31

At
December 31(in
thousands)



2019

2018Deferred income
tax assets not recognizedProperty, plant
and equipment


$
7,344
$
10,439Tax losses
– capital



66,783

66,527Tax losses
– operating



35,904

29,220Tax
credits



1,126

1,126Other deductible
temporary differences



1,571

2,220Deferred income
tax assets not recognized


$
112,728
$
109,532





The expiry dates
of the Company’s Canadian tax losses and credits is as
follows:





Expiry

At
December 31

At
December 31(in
thousands)

Date

2019

2018Tax losses -
gross

2025-2039
$
192,197
$
158,437Tax benefit at
tax rate of 26% - 27%



51,731

42,566Set-off against
deferred tax liabilities



(15,827)

(13,346)Total tax loss
assets not recognized


$
35,904
$
29,220Tax
credits

2025-2035

1,126

1,126Total tax credit
assets not recognized


$
1,126
$
1,126














28


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS








18.  SHARE
CAPITAL





Denison is
authorized to issue an unlimited number of common shares without
par value. A continuity summary of the issued and outstanding
common shares and the associated dollar amounts is presented
below:





Number
ofCommon(in thousands
except share amounts)
SharesBalance-January
1, 2018
559,183,209
$
1,310,473Issued for
cash:Share issue
proceeds
4,950,495

5,000Share issue
costs
-

(451)Acquisition-Wheeler River
additional interest (note 12)
24,615,000

17,231Acquisition-Wheeler River
additional interest–transaction costs (note 12)
426,382

298Flow-through
share premium liability (note 16)
-

(1,337)29,991,877

20,741Balance-December
31, 2018
589,175,086
$
1,331,214Issued for
cash:Share issue
proceeds
6,934,500

4,715Share issue
costs
-

(423)Share option
exercises
663,150

405Share option
exercises-fair value adjustment
-

140Share unit
exercises-fair value adjustment
433,333

299Acquisition-Murphy Lake
additional interest (note 12)
32,262

19Flow-through
share premium liability (note 16)
-

(902)Share
cancellations
(46,178)

-8,017,067

4,253Balance-December
31, 2019
597,192,153
$
1,335,467





Share
Issues





In November 2018,
Denison completed a private placement of 4,950,495 flow-through
common shares at a price of $1.01 per share for gross proceeds of
$5,000,000. The income tax benefits of this issue were renounced to
subscribers with an effective date of December 31, 2018. The
related flow-through share premium liabilities are included as a
component of other liabilities on the balance sheet at December 31,
2018 and were extinguished during 2019 (see note 16).





In December 2019,
Denison completed a private placement of 6,934,500 flow-through
common shares at a price of $0.68 per share for gross proceeds of
$4,715,460. The income tax benefits of this issue were renounced to
subscribers with an effective date of December 31, 2019. The
related flow-through share premium liabilities are included as a
component of other liabilities on the balance sheet at December 31,
2019 and will be extinguished during 2020 when the tax benefit is
renounced to the shareholders (see note 16).





Share
Cancellations





In February 2019,
46,178 shares were cancelled in connection with the January 2013
acquisition of JNR Resources Inc (“JNR”). JNR
shareholders were entitled to exchange their JNR shares for shares
of Denison in accordance with the share exchange ratio established
for the acquisition. In January 2019, this right expired and the
un-exchanged shares for which shareholders had not elected to
exercise their exchange rights were subsequently
cancelled.





Flow-Through
Share Issues





The Company
finances a portion of its exploration programs through the use of
flow-through share issuances. Canadian income tax deductions
relating to these expenditures are claimable by the investors and
not by the Company.





As at December
31, 2019, the Company has satisfied its obligation to spend
$5,000,000 on eligible exploration expenditures by the end of
fiscal 2019 as a result of the issuance of flow-through shares in
November 2018.





29


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS








The Company
renounced the income tax benefits of this issue in February 2019,
with an effective date of renunciation to its subscribers of
December 31, 2018. In conjunction with the renunciation, the
flow-through share premium liability at December 31, 2018 was
extinguished and recognized as part of the deferred tax recovery in
2019 (see note 17).





As at December
31, 2019, the Company estimates that it incurred $120,000 of
expenditures towards its obligation to spend $4,715,000 on eligible
exploration expenditures by the end of fiscal 2020 as a result of
the issuance of flow-through shares in December 2019.





19.  SHARE
PURCHASE WARRANTS





A continuity
summary of the issued and outstanding share purchase warrants in
terms of common shares of the Company and the associated dollar
amounts is presented below:





WeightedAverage

Number
ofExercise

Common

FairPrice
Per

Shares

Value(in
thousands except share amounts)

Share
(CAD)

Issuable

AmountBalance-December
31, 2018 and 2019
$
1.27

1,673,077
$
435Share purchase
warrants – by series:February 2017
warrants
$
1.27

1,673,077
$
435





The February 2017
warrants were issued in conjunction with the APG Arrangement (see
note 13) and they expired on February 14, 2020
unexercised.





20.  SHARE-BASED
COMPENSATION





The
Company’s share based compensation arrangements include share
options, restricted share units (“RSUs”) and
performance share units (“PSUs”).





A summary of
share based compensation expense recognized in the statement of
income (loss) is as follows:





(in
thousands)





2019

2018Share based
compensation expense for:Share
options




$
(776)
$
(1,051)RSUs





(1,043)

(337)PSUs





(403)

(447)Share
based compensation expense




$
(2,222)
$
(1,835)





At December 31,
2019, an additional $1,483,000 in share-based compensation expense
remains to be recognized up until April 2023.





Share
Options





The
Company’s stock-based compensation plan (the
“Plan”) provides for the granting of share options up
to 10% of the issued and outstanding common shares at the time of
grant, subject to a maximum of 39,670,000 common shares. As at
December 31, 2019, an aggregate of 21,900,093 options (December 31,
2018: 21,274,893) have been granted (less cancellations) since the
Plan’s inception in 1997.





Under the Plan,
all share options are granted at the discretion of the
Company’s board of directors, including any vesting
provisions if applicable. The term of any share 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, share
options granted under the Plan have five year terms and vesting
periods up to 24 months.





A continuity
summary of the share options of the Company granted under the Plan
for 2019 and 2018 is presented below:





30


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS








2019

2018Weighted



WeightedAverage



AverageExercise



ExerciseNumber
of
Common

Price
per
Share

Number
of
Common

Price
per
ShareShares

(CAD)

Shares

(CAD)Share options
outstanding – January 1

13,865,193
$
0.83

11,799,650
$
0.94Grants

3,005,000

0.67

3,427,543

0.61Exercises
(1)

(663,150)

0.61

-

-Expiries

(866,000)

1.81

(816,000)

1.30Forfeitures

(1,513,800)

0.79

(546,000)

0.90Share options
outstanding – December 31

13,827,243
$
0.75

13,865,193
$
0.83Share
options exercisable – December 31

9,747,721
$
0.80

7,439,950
$
0.93





(1)
 The weighted average share
price at the date of exercise was CAD$0.70.





A summary of the
Company’s share options outstanding at December 31, 2019 is
presented below:





Weighted



Weighted-Average



AverageRemaining



ExerciseRange of
Exercise




Contractual

Number
of

Price
perPrices per
Share




Life

Common

Share(CAD)




(Years)

Shares

(CAD)Stock options
outstanding$ 0.50 to $
0.74

3.08

7,390,643
$
0.63$ 0.75 to $
0.99




2.19

5,332,600

0.85$ 1.00 to $
1.39




0.19

1,104,000

1.09Stock options
outstanding - December 31, 2019

2.51

13,827,243
$
0.75





Options
outstanding at December 31, 2019 expire between March 2020 and
November 2024.





The fair value of
each option granted is estimated on the date of grant using the
Black-Scholes option pricing model. The following table outlines
the range of assumptions used in the model to determine the fair
value of options granted:





2019

2018Risk-free
interest rate

1.31% -
1.65%

2.02% -
2.12%Expected stock
price volatility

43.86% -
49.46%

43.17% -
48.39%Expected
life

3.4 to 3.5
years

3.4 to 3.5
yearsEstimated
forfeiture rate

2.82% -
3.12%

2.86% -
3.01%Expected dividend
yield

–

–Fair value
per option granted
CAD$0.19 -
CAD$0.26

CAD$0.22 -
CAD$0.23





The fair values
of share options with vesting provisions are amortized on a graded
method basis as share-based compensation expense over the
applicable vesting periods.





Share
Units





The Company has a
share unit plan which provides for the granting of share unit
awards to directors, officers and employees of the Company. The
maximum number of share units that are issuable under the share
unit plan is 15,000,000. Each share unit represents the right to
receive one common share from treasury, subject to the satisfaction
of various time and / or performance conditions.








31


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





Under the plan,
all share unit grants, vesting periods and performance conditions
therein are approved by the Company’s board of directors.
Share unit grants are either in the form of RSUs or PSUs. RSUs
granted in 2018 and 2019 vest ratably over a period of three years.
PSUs granted in 2018 vest ratably over a period of five years,
based upon the achievement of certain non-market performance
vesting conditions and PSUs granted in 2019 vest ratably over a
period of four years.





A continuity
summary of the RSUs of the Company granted under the share unit
plan for 2019 and 2018 is presented below:





2019

2018Weighted



WeightedAverage



AverageNumber
of

Fair
Value

Number
of

Fair
ValueCommon

Per
RSU

Common

Per
RSUShares

(CAD)

Shares

(CAD)RSUs outstanding
– January 1

1,200,432
$
0.65

-
$
-Grants

1,927,000

0.73

1,299,432

0.65Exercises

(373,333)

0.70

-

-Forfeitures

-

-

(99,000)

0.65RSUs outstanding
– December 31

2,754,099
$
0.70

1,200,432
$
0.65RSUs
vested – December 31

303,810
$
0.65

-
$
-





A continuity
summary of the PSUs of the Company granted under the share unit
plan for 2019 and 2018 is presented below:





2019

2018Weighted



WeightedAverage



AverageNumber
of

Fair
Value

Number
of

Fair
ValueCommon

Per
PSU

Common

Per
PSUShares

(CAD)

Shares

(CAD)PSUs outstanding
– January 1

2,200,000
$
0.65

-
$
-Grants

240,000

0.69

2,200,000

0.65Exercises

(60,000)

0.65

-

-Forfeitures

(240,000)

0.65

-

-PSUs outstanding
– December 31

2,140,000
$
0.65

2,200,000
$
0.65PSUs
vested – December 31

380,000
$
0.65

-
$
-





21.  ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS)





The accumulated
other comprehensive income balance consists of:





At December
31

At December
31(in
thousands)



2019

2018Cumulative
foreign currency translation


$
410
$
403Unamortized
experience gain – post employment liabilityGross



983

983Tax
effect



(259)

(259)$
1,134
$
1,127














32


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS








22.  SUPPLEMENTAL
FINANCIAL INFORMATION





The components of
operating expenses are as follows:





(in
thousands)





2019

2018Cost of goods and
services sold:Operating
Overheads:Mining, other
development expense




$
(2,709)
$
(3,695)Milling,
conversion expense





(3,230)

(3,268)Less
absorption:- Mineral
properties





61

50Cost of
services





(8,346)

(8,420)Inventory-non
cash adjustments





-

(57)Cost of goods and
services sold





(14,224)

(15,390)Reclamation asset
amortization





(212)

(189)Operating
expenses




$
(14,436)
$
(15,579)





The components of
other income (expense) are as follows:





(in
thousands)





2019

2018Gains (losses)
on:Foreign
exchange




$
2
$
(1)Disposal of
property, plant and equipment





(37)

(135)Investment fair
value through profit (loss) (note 9)



(1,085)

(5,411)Deconsolidation
of investment in associate (note 10)



5,267

-Reclamation
obligation adjustments (note 15)



(845)

(369)Debt obligation
adjustments (note 16)



26

-Other





(358)

(318)Other
income (expense)




$
2,970
$
(6,234)





The components of
finance income (expense) are as follows:





(in
thousands)





2019

2018Interest
income




$
594
$
1,049Interest
expense





(9)

-Accretion
expense:Deferred revenue
(note 13)





(3,203)

(3,314)Post-employment
benefits (note 14)





(70)

(72)Reclamation
obligations (note 15)



(1,361)

(1,316)Debt
obligations (note 16)



(76)

-Finance
expense, net




$
(4,125)
$
(3,653)





A summary of
depreciation expense recognized in the statement of income (loss)
is as follows:





(in
thousands)





2019

2018Operating
expenses:Mining, other
development expense




$
(3)
$
(3)Milling,
conversion expense





(3,165)

(3,264)Cost of
services





(248)

(233)Exploration and
evaluation





(221)

(124)General and
administrative





(127)

(37)Depreciation
expense-gross (note 12)




$
(3,764)
$
(3,661)











33


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





A summary of
employee benefits expense recognized in the statement of income
(loss) is as follows:





(in
thousands)





2019

2018Salaries
and short-term employee benefits




$
(8,407)
$
(8,236)Share-based
compensation (note 20)





(2,222)

(1,835)Termination
benefits





(633)

(20)Employee
benefits expense-gross




$
(11,262)
$
(10,091)





A summary of
lease related amounts recognized in the statement of income (loss)
is as follows:





(in
thousands)







2019Accretion
expense on lease liabilities






$
(76)Expenses
relating to short-term leases







(5,146)Expenses
relating to non-short term low-value leases





(19)Lease
related expense-gross






$
(5,241)





The change in
non-cash working capital items in the consolidated statements of
cash flows is as follows:





(in
thousands)





2019

2018Change in
non-cash working capital items:Trade and other
receivables




$
(201)
$
968Inventories





232

(186)Prepaid expenses
and other assets





(160)

(213)Accounts payable
and accrued liabilities





2,385

(214)Change
in non-cash working capital items




$
2,256
$
355





The supplemental
cash flow disclosure required for the consolidated statements of
cash flows is as follows:





(in
thousands)





2019

2018Supplemental cash
flow disclosure:Interest
paid




$
(9)
$
-Income taxes
paid





-

-





23.  SEGMENTED
INFORMATION





Business
Segments





The Company
operates in three primary segments – the Mining segment, the
Environmental Services segment and the Corporate and Other segment.
The Mining segment includes activities related to exploration,
evaluation and development, mining, milling (including toll
milling) and the sale of mineral concentrates. The Environmental
Services segment includes the results of the Company’s
environmental services business, the Closed Mines Group. The
Corporate and Other segment includes management fee income earned
from UPC and general corporate expenses not allocated to the other
segments. Management fee income has been included with general
corporate expenses due to the shared infrastructure between the two
activities.








34


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





For the year
ended December 31, 2019, reportable segment results were as
follows:





(in
thousands)


Mining
Closed
Mines
Group
Corporate
and
Other
TotalStatement of Operations:Revenues


4,609
8,974
1,966
15,549Expenses:Operating
expenses


(6,090)
(8,346)
-
(14,436)Exploration and
evaluation


(15,238)
-
-
(15,238)General and
administrative


(17)
-
(7,794)
(7,811)(21,345)
(8,346)
(7,794)
(37,485)Segment income
(loss)


(16,736)
628
(5,828)
(21,936)Revenues – supplemental:Environmental
services


-
8,974
-
8,974Management
fees


-
-
1,966
1,966Toll milling
services–deferred revenue (note 13)

4,609
-
-
4,6094,609
8,974
1,966
15,549Capital additions:Property, plant
and equipment


637
273
38
948Long-lived assets:Plant and
equipmentCost


99,994
4,591
908
105,493Accumulated
depreciation


(24,349)
(3,062)
(304)
(27,715)Mineral
properties


179,481
-
-
179,481255,126
1,529
604
257,259











35


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





For the year
ended December 31, 2018, reportable segment results were as
follows:





(in
thousands)


Mining
Closed
Mines
Group
Corporate
and
Other
TotalStatement of Operations:Revenues


4,239
9,298
2,013
15,550Expenses:Operating
expenses


(7,159)
(8,211)
(209)
(15,579)Exploration and
evaluation


(15,457)
-
-
(15,457)General and
administrative


(17)
-
(7,172)
(7,189)Impairment
expense

(6,086)
-
-
(6,086)(28,719)
(8,211)
(7,381)
(44,311)Segment income
(loss)


(24,480)
1,087
(5,368)
(28,761)Revenues – supplemental:Environmental
services


-
9,298
-
9,298Management
fees


-
-
2,013
2,013Toll milling
services–deferred revenue (note 13)

4,239
-
-
4,2394,239
9,298
2,013
15,550Capital additions:Property, plant
and equipment


19,001
95
-
19,096Long-lived assets:Plant and
equipmentCost


98,737
4,399
294
103,430Accumulated
depreciation


(20,982)
(2,927)
(177)
(24,086)Mineral
properties


178,947
-
-
178,947256,702
1,472
117
258,291





Revenue
Concentration





The
Company’s business is such that, at any given time, it sells
its environmental and other services to a relatively small number
of customers. During 2019, one customer from the corporate and
other segment, three customers from the Closed Mines Group segment
and one customer from the mining segment accounted for
approximately 99% of total revenues consisting of 13%, 56% and 30%
respectively. During 2018, one customer from the corporate and
other segment, three customers from the Closed Mines Group segment
and one customer from the mining segment accounted for
approximately 97% of total revenues consisting of 13%, 57% and 27%
respectively.





Revenue
Commitments





Denison’s
revenue portfolio consists of short and long-term sales
commitments. The following table summarizes the expected future
revenue, by segment, based on the customer contract commitments and
information that exists as at December 31, 2019:





(in
thousands)
2020
2021
2022
2023
2024
There-
after
TotalRevenues – by Segment:MiningToll milling
services – APG Arrangement
4,580
4,580
4,580
4,580
4,580
42,299
65,199Closed Mines
GroupEnvironmental
services
7,933
4,819
-
-
-
-
12,752Corporate and
OtherManagement
fees
2,009
2,009
2,009
2,009
502
-
8,538Total
Revenue Commitments
14,522
11,408
6,589
6,589
5,082
42,299
86,489











36


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





With the
exception of the toll milling services related to the APG
Arrangement, the amounts in the table above represent the estimated
consideration that Denison will be entitled to receive when it
satisfies the remaining performance obligations in its customer
contracts. Various assumptions, consistent with past experience,
have been made where the quantity of the performance obligation may
vary.





The APG
Arrangement toll milling revenue commitment represents the
estimated non-cash amount of the revenue component of the
Company’s deferred revenue balance at December 31, 2019 (see
note 13). The difference between the total revenue commitment
amount above and the liability on the balance sheet represents the
cumulative remaining impact of discounting to the end of the APG
Arrangement contract.





24.
 RELATED
PARTY TRANSACTIONS





Uranium
Participation Corporation





The previous
management services agreement with UPC expired on March 31, 2019.
Effective April 1, 2019, a new management services agreement
(“MSA”) was entered into for a term of five years (the
“Term”). Under the MSA, Denison continues to receive
the following management fees from UPC, unchanged from the previous
agreement: a) a base fee of $400,000 per annum, payable in equal
quarterly installments; b) a variable fee equal to (i) 0.3% per
annum of UPC’s total assets in excess of $100 million and up
to and including $500 million, and (ii) 0.2% per annum of
UPC’s total assets in excess of $500 million; c) a fee, at
the discretion of the Board, for on-going monitoring or work
associated with a transaction or arrangement (other than a
financing, or the acquisition of or sale of U3O8 or UF6); and d) a
commission of 1.0% of the gross value of any purchases or sales of
U3O8 or UF6 or gross interest
fees payable to UPC in connection with any uranium loan
arrangements.





The MSA may be
terminated during the Term by Denison upon the provision of 180
days written notice. The MSA may be terminated during the Term by
UPC (i) in the event of a material breach, (ii) within 90 days of
certain events surrounding a change of both of the individuals
serving as Chief Executive Officer and Chief Financial Officer of
UPC, and / or a change of control of Denison, or (iii) upon the
provision of 30 days written notice and, subject to certain
exceptions, a cash payment to Denison of an amount equal to the
base and variable management fees that would otherwise be payable
to Denison (calculated based on UPC’s current uranium
holdings at the time of termination) for the lesser period of a)
three years, or b) the remaining term of the MSA.





The following
transactions were incurred with UPC for the periods
noted:





(in
thousands)





2019

2018Management
fees:Base and variable
fees




$
1,822
$
1,739Discretionary
fees





-

50Commission
fees





144

224$
1,966
$
2,013





At December 31,
2019, accounts receivable includes $236,000 (December 31, 2018:
$303,000) due from UPC with respect to the fees and transactions
indicated above.





Korea
Electric Power Corporation (“KEPCO”) and Korea Hydro
& Nuclear Power (“KHNP”)





In connection
with KEPCO’s investment in Denison in June 2009, KEPCO and
Denison were parties to a strategic relationship agreement. In
December 2016, Denison was notified that KEPCO’s indirect
ownership of Denison’s shares had been transferred from an
affiliate of KEPCO to an affiliate of KEPCO’s wholly-owned
subsidiary, KHNP. In September 2017, Denison and KHNP’s
affiliate entered into an amended and restated strategic
relationship agreement, in large part providing KHNP’s
affiliate with the same rights as those previously given to KEPCO
under the prior agreement, including entitling KHNP’s
affiliate to: (a) subscribe for additional common shares in
Denison’s future public equity offerings; (b) a right of
first opportunity if Denison intends to sell any of its substantial
assets; (c) a right to participate in certain purchases of
substantial assets which Denison proposes to acquire; and (d) a
right to nominate one director to Denison’s board so long as
its share interest in Denison is above 5.0%.





As at December
31, 2019, KEPCO, through its subsidiaries, holds 58,284,000 shares
of Denison representing a share interest of approximately 9.76%.
KHNP Canada Energy Ltd (“KHNP Canada”), a subsidiary of
KHNP, is the holder of the majority of Denison’s
shares.











37


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





KHNP Canada is
also the majority member of the Korea Waterbury Uranium Limited
Partnership (“KWULP”). KWULP is a consortium of
investors that holds the non-Denison owned interests in Waterbury
Lake Uranium Corporation (“WLUC”) and the WLULP,
entities whose key asset is the Waterbury Lake property. At
December 31, 2019, WLUC is owned by Denison (60%) and KWULP (40%)
while the WLULP is owned by Denison (66.57% - limited partner),
KWULP (33.41% - limited partner) and WLUC (0.02% - general
partner). When a spending program is approved, each participant is
required to fund these entities based upon its respective ownership
interest or be diluted accordingly. Spending program approval
requires 75% of the limited partners’ voting
interest.





In January 2014,
Denison agreed to allow KWULP to defer a decision regarding its
funding obligation to WLUC and WLULP until September 30, 2015 and
to not be immediately diluted as per the dilution provisions in the
relevant agreements (“Dilution Agreement”). Instead,
under the Dilution Agreement, dilution would be delayed until
September 30, 2015 and then applied in each subsequent period, if
applicable, in accordance with the original agreements. In
exchange, Denison received authorization to approve spending
programs on the property, up to an aggregate $10,000,000, until
September 30, 2016 without obtaining approval from 75% of the
voting interest. Under subsequent amendments, Denison and KWULP
have agreed to extend Denison’s authorization under the
Dilution Agreement to approve program spending up to an aggregate
$15,000,000 until December 31, 2020.





In 2018, Denison
funded 100% of the approved fiscal 2018 program for Waterbury Lake
and KWULP continued to dilute its interest in the WLULP. As a
result, Denison increased its interest in the WLULP from 64.22% to
65.92%, in two steps, which has been accounted for using effective
dates of May 31, 2018 and October 31, 2018. The increased ownership
interest resulted in Denison recording its increased pro-rata share
of the assets and liabilities of Waterbury Lake, the majority of
which relates to an addition to mineral property assets of
$1,141,000.





In 2019, Denison
funded 100% of the approved fiscal 2019 program for Waterbury Lake
and KWULP continued to dilute its interest in the WLULP. As a
result, Denison increased its interest in the WLULP from 65.92% to
66.57%, in two steps, which has been accounted for using effective
dates of May 31, 2019 and November 30, 2019. The increased
ownership interest resulted in Denison recording its increased
pro-rata share of the assets and liabilities of Waterbury Lake, the
majority of which relates to an addition to mineral property assets
of $448,000.





Other





In December 2018,
the Company lent $250,000 to GoviEx pursuant to a credit agreement
between the parties (see note 7). The loan was unsecured and bore
interest at 7.5% per annum. In April 2019, the loan was repaid in
full, together with interest thereon.





During 2019, the
Company incurred investor relations, administrative service fees
and certain pass-through expenses of $217,000 (2018: $209,000) with
Namdo Management Services Ltd, which shares a common director with
Denison. These services were incurred in the normal course of
operating a public company. At December 31, 2019, an amount of $nil
(December 31, 2018: $nil) was due to this company.





During 2018, the
Company incurred office and certain pass-through expenses of
$81,000 with Lundin S.A, a company which provided office,
administration and other services to the former executive chairman,
other directors and management of Denison. The agreement for the
office and administration services was terminated effective
September 30, 2018.





Compensation
of Key Management Personnel





Key management
personnel are those persons having authority and responsibility for
planning, directing and controlling the activities of the Company,
directly or indirectly. Key management personnel includes the
Company’s executive officers, vice-presidents and members of
its Board of Directors.





The following
compensation was awarded to key management personnel:





(in
thousands)





2019

2018Salaries and
short-term employee benefits




$
(2,024)
$
(1,759)Share-based
compensation





(1,881)

(1,522)Termination
benefits





(481)

-Key
management personnel compensation




$
(4,386)
$
(3,281)











38


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS








25.  CAPITAL
MANAGEMENT AND FINANCIAL RISK





Capital
Management





The
Company’s capital includes cash, cash equivalents,
investments in debt instruments, investments in equity instruments
and the current portion of debt obligations. The Company’s
primary objective with respect to its capital management is to
ensure that it has sufficient capital to maintain its ongoing
operations, to provide returns for shareholders and benefits for
other stakeholders and to pursue growth opportunities (refer to
Denison’s Going Concern disclosure in note 2).





Planning, annual
budgeting and controls over major investment decisions are the
primary tools used to manage the Company’s capital. The
Company’s cash is managed centrally and disbursed to the
various business units based on a system of internal controls that
require review and approval of significant expenditures by the
Company’s key decision makers. For example, under the
Company’s delegation of authority guidelines, significant
debt obligations require the approval of both the CEO and the CFO
before they are entered into.





The Company
currently manages its capital by ongoing monitoring and review of
its net cash and investment position, as well as its operating
plans for the current and future periods. The Company’s net
cash and investment position is summarized below:





At December
31

At December
31(in
thousands)



2019

2018Net cash and
investments:Cash and cash
equivalents


$
8,190
$
23,207Investments



12,104

2,255Debt
obligations-current (note 16)



(470)

-Net cash and
investments


$
19,824
$
25,462





Financial
Risk





The Company
examines the various financial risks to which it is exposed and
assesses the impact and likelihood of those risks. These risks may
include credit risk, liquidity risk, currency risk, interest rate
risk and price risk.





(a)
 Credit
Risk





Credit risk is
the risk of loss due to a counterparty’s inability to meet
its obligations under a financial instrument that will result in a
financial loss to the Company. The Company believes that the
carrying amount of its cash and cash equivalents, trade and other
receivables, investments in debt instruments and restricted cash
and investments represents its maximum credit
exposure.





The maximum
exposure to credit risk at the reporting dates is as
follows:





At
December 31

At
December 31(in
thousands)



2019

2018Cash and cash
equivalents


$
8,190
$
23,027Trade and other
receivables



4,023

4,072Investments in
debt instruments



-

-Restricted cash
and investments



11,994

12,255$
24,207
$
39,354





The Company
limits cash and cash equivalents, investment in debt instruments
and restricted cash and investment risk by dealing with credit
worthy financial institutions. The majority of the Company’s
normal course trade and other receivables balance relates to a
small number of customers whom have established credit worthiness
with the Company through past dealings.





(b)
 Liquidity
Risk





Liquidity risk is
the risk that the Company will encounter difficulties in meeting
obligations associated with its financial liabilities as they
become due (refer to Denison’s Going Concern disclosure in
note 2). The Company has in place a planning and budgeting process
to help determine the funds required to support the Company’s
normal operating requirements on an ongoing basis.





39


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





The Company
ensures that there is sufficient committed capital to meet its
short-term business requirements, taking into account its
anticipated cash flows from operations, its holdings of cash and
cash equivalents, its financial covenants and its access to credit
and capital markets, if required.





The maturities of
the Company’s financial liabilities at December 31, 2019 are
as follows:





(in
thousands)



Within
1
Year

1
to 5
YearsAccounts payable
and accrued liabilities


$
7,930
$
-Debt obligations
(note 16)



470

606$
8,400
$
606





(c)
 Currency
Risk





Foreign exchange
risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in foreign
exchange rates. As at December 31, 2019, the Company predominantly
operates in Canada and incurs the majority of its operating and
capital costs in Canadian dollars. Some small foreign exchange risk
exists from assets and liabilities that are denominated in a
currency that is not the functional currency for the relevant
subsidiary company but the risk is minimal.





Currently, the
Company does not have any foreign exchange hedge programs in place
and manages its operational foreign exchange requirements through
spot purchases in the foreign exchange markets.





(d)
 Interest
Rate Risk





Interest rate
risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market
interest rates. The Company is exposed to interest rate risk on its
liabilities through its outstanding borrowings and on its assets
through its investments in debt instruments. The Company monitors
its exposure to interest rates and has not entered into any
derivative contracts to manage this risk.





(e)
 Price
Risk





The Company is
exposed to equity price risk on its investments in equity
instruments of other exploration and mining companies. The
sensitivity analysis below illustrates the impact of equity price
risk on the equity investments held by the Company at December 31,
2019:





Change
innet
income(in
thousands)





(loss)Equity price
risk10% increase in
equity prices




$
1,21610% decrease in
equity prices





(1,216)





Fair Value
of Financial Instruments





IFRS requires
disclosures about the inputs to fair value measurements, including
their classification within a hierarchy that prioritizes the inputs
to fair value measurement. The three levels of the fair value
hierarchy are:





●
 Level 1 - Unadjusted quoted
prices in active markets for identical assets or
liabilities;


●
 Level 2 - Inputs other than
quoted prices that are observable for the asset or liability either
directly or indirectly; and


●
 Level 3 - Inputs that are not
based on observable market data.





The fair value of
financial instruments which trade in active markets, such as share
and warrant equity instruments, is based on quoted market prices at
the balance sheet date. The quoted market price used to value
financial assets held by the Company is the current closing price.
Warrants that do not trade in active markets have been valued using
the Black-Scholes pricing model. Debt instruments have been valued
using the effective interest rate for the period that the Company
expects to hold the instrument and not the rate to
maturity.








40


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





Except as
otherwise disclosed, the fair values of cash and cash equivalents,
trade and other receivables, accounts payable and accrued
liabilities, restricted cash and cash equivalents and debt
obligations approximate their carrying values as a result of the
short-term nature of the instruments, the variable interest rate
associated with the instruments or the fixed interest rate of the
instruments being similar to market rates.





During 2019,
there were no transfers between levels 1, 2 and 3 and there were no
changes in valuation techniques, however, the Company did change
its method of accounting for its GoviEx investment from the equity
method to FVTPL in the fourth quarter of 2019.





The following
table illustrates the classification of the Company’s
financial assets within the fair value hierarchy as at December 31,
2019 and December 31, 2018:





Financial

Fair

December
31,

December
31,Instrument

Value

2019

2018(in
thousands)

Category(1)

Hierarchy

Fair
Value

Fair
ValueFinancial
Assets:Cash and
equivalents

Category
B


$
8,190
$
23,207Trade and other
receivables

Category
B



4,023

4,072InvestmentsDebt
instruments-GICs

Category
A

Level
2

-

-Equity
instruments-shares

Category
A

Level
1

11,971

2,007Equity
instruments-warrants

Category
A

Level
2

133

248Restricted
cash and equivalentsElliot Lake
reclamation trust fund

Category
B



2,859

3,120Credit
facility pledged assets

Category
B



9,000

9,000Reclamation
letter of credit collateral

Category
B



135

135$
36,311
$
41,789Financial
Liabilities:Account
payable and accrued liabilities

Category
C



7,930

5,554Debt
obligations

Category
C



1,002

-$
8,932
$
5,554





(1)
 Financial instrument
designations are as follows: Category A=Financial assets and
liabilities at fair value through profit and loss; Category
B=Financial assets at amortized cost; and Category C=Financial
liabilities at amortized cost.





26.  COMMITMENTS
AND CONTINGENCIES





General
Legal Matters





The Company is
involved, from time to time, in various 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.





Specific
Legal Matters





Mongolia
Mining Division Sale – Arbitration Proceedings with Uranium
Industry a.s





In November 2015,
the Company sold all of its mining assets and operations located in
Mongolia to Uranium Industry a.s (“UI”) pursuant to an
amended and restated share purchase agreement (the “GSJV
Agreement”). The primary assets at that time were the
exploration licenses for the Hairhan, Haraat, Gurvan Saihan and
Ulzit projects. As consideration for the sale per the GSJV
Agreement, the Company received cash consideration of USD$1,250,000
prior to closing and the rights to receive additional contingent
consideration of up to USD$12,000,000.





On September 20,
2016, the Mineral Resources Authority of Mongolia
(“MRAM”) formally issued mining license certificates
for all four projects, triggering Denison’s right to receive
contingent consideration of USD$10,000,000 (collectively, the
“Mining License Receivable”). The original due date for
payment of the Mining License Receivable by UI was November 16,
2016.








41


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS











Under an
extension agreement between UI and the Company, the payment due
date of the Mining License Receivable was extended from November
16, 2016 to July 16, 2017 (the “Extension Agreement”).
As consideration for the extension, UI agreed to pay interest on
the Mining License Receivable amount at a rate of 5% per year,
payable monthly up to July 16, 2017 and they also agreed to pay a
USD$100,000 instalment amount towards the balance of the Mining
License Receivable amount. The required payments were not
made.





On February 24,
2017, the Company served notice to UI that it was in default of its
obligations under the GSJV Agreement and the Extension Agreement
and that the Mining License Receivable and all interest payable
thereon are immediately due and payable. On December 12, 2017, the
Company filed a Request for Arbitration between the Company and UI
under the Arbitration Rules of the London Court of International
Arbitration in conjunction with the default of UI’s
obligations under the GSJV and Extension agreements. The three
person arbitration panel was appointed on February 28, 2018.
Hearings in front of the arbitration panel were held in December
2019, and all anticipated formal submissions to the panel have been
made by each party. The arbitration panel’s findings are
expected to be issued in 2020.





Performance
Bonds and Letters of Credit





In 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, 2019, the Company had: (a) outstanding letters of
credit of $24,135,000 for reclamation obligations of which
$24,000,000 is collateralized by the Company’s 2018 credit
facility (see note 16) and the remainder is collateralized by cash
(see note 11); and (b) outstanding performance bonds of $790,000 as
security for various contractual performance
obligations.





27.  INTEREST
IN OTHER ENTITIES





The significant
subsidiaries, associates and joint operations of the Company at
December 31, 2019 are listed below. The table also includes
information related to key contractual arrangements associated with
the Company’s mineral property interests that comprise 90.5%
of the December 31, 2019 carrying value of its Mineral Property
assets (see note 13). The company does not have any accounting
joint ventures as defined by IFRS 11.





December
December
FiscalPlace
31,
2019
31,
2018
2019Of
Ownership
Ownership
Participating
AccountingBusiness
Interest (1)
Interest (1)
Interest (2)
MethodSubsidiariesDenison Mines
Inc.

Canada
100.00%
100.00%
N/A
ConsolidationDenison AB
Holdings Corp.

Canada
100.00%
100.00%
N/A
ConsolidationDenison
Waterbury Corp

Canada
100.00%
100.00%
N/A
Consolidation9373721
Canada Inc.

Canada
100.00%
100.00%
N/A
ConsolidationDenison Mines
(Bermuda) I Ltd

Bermuda
100.00%
100.00%
N/A
ConsolidationAssociatesGoviEx
Uranium Inc.

Africa
See
Below
16.21%
N/A
FVTPL/Equity
MethodJoint OperationsWaterbury Lake
Uranium Corp

Canada
60.00%
60.00%
100%
Voting Share (3)Waterbury Lake
Uranium LP

Canada
66.57%
65.92%
100%
Voting Share (3)Key Contractual ArrangementsWheeler River
Joint Venture

Canada
90.00%
90.00%
90.00%
Denison Share (3)Midwest Joint
Venture

Canada
25.17%
25.17%
25.17%
Denison Share (3)Mann Lake
Joint Venture

Canada
30.00%
30.00%
N/A (4)
Denison Share (3)Wolly Joint
Venture

Canada
21.89%
21.89%
N/A (4)
Denison Share (3)McClean Lake
Joint Venture

Canada
22.50%
22.50%
22.50%
Denison Share (3)





(1)
 Ownership Interest represents
Denison’s percentage equity / voting interest in the entity
or contractual arrangement;


(2)
 Participating interest
represents Denison’s percentage funding contribution to the
particular joint operation or contractual arrangement. This
percentage can differ from ownership interest in instances where
other parties to the arrangement have carried interests, they are
earning-in to the arrangement, or they are diluting their interest
in the arrangement (provided the arrangement has dilution
provisions therein);


(3)
 Denison Share is where
Denison accounts for its share of assets, liabilities, revenues and
expenses in accordance with the specific terms within the
contractual arrangement. – this can be by using either its
ownership interest (i.e. Voting Share) or its participating
interest (i.e. Funding Share), depending on the arrangement terms.
The Voting Share and Funding Share approaches produce the same
accounting result when the Company’s ownership interest and
participating interests are equal;


(4)
 The participating interest
for 2019 for these arrangements is shown as Not Applicable as there
were no approved spending programs carried out during fiscal
2019.








42


ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS





At December 31,
2019, Denison is using the FVTPL accounting method to account for
its investment in GoviEx – at December 31, 2018, it was using
the equity method (see note 10). Accordingly, at December 31, 2019,
GoviEx is not classified as an “associate” and the
Company’s 15.39% ownership in the Company is not disclosed in
the table above.





WLUC and WLULP
were acquired by Denison as part of the Fission Energy Corp
acquisition in April 2013. Denison uses its equity interest to
account for its share of assets, liabilities, revenues and expenses
for these joint operations. In 2019, Denison funded 100% of the
activities in these joint operations pursuant to the terms of an
agreement that allows it to approve spending for the WLULP without
having the required 75% of the voting interest (see note
24).





28.  SUBSEQUENT
EVENTS





Bank of
Nova Scotia Credit Facility Renewal





On January 29,
2020, the Company entered into an amending agreement with BNS to
extend the maturity date of the 2019 Facility (see note 16). Under
the facility amendment, the maturity date has been extended to
January 31, 2021 (the “2020 Facility”). All other
terms of the 2020 Facility (tangible net worth covenant, pledged
cash, investments amounts and security for the facility) remain
unchanged from those of the 2019 Facility, and the Company
continues to have access to credit up to $24,000,000 the use of
which is restricted to non-financial letters of credit in support
of reclamation obligations.





The 2020 Facility
remains subject to letter of credit and standby fees of 2.40%
(0.40% on the first $9,000,000) and 0.75%
respectively.
































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