##### 



Exhibit 99.3




---



##### 



Responsibility for Financial Statements
     -s- E. Peter Farmer
    
    -s- James R. AndersonE. Peter Farmer
    
    James R. AndersonChief Executive Officer
    
    Executive Vice-President andChief Financial Officer
  Managements Report on Internal Control over Financial Reporting
 Internal Control  Integrated Framework
 Changes to Internal Control over Financial Reporting
  -1-




---



##### 



Independent Auditors Report
 To the Shareholders of Denison Mines Corp.,
  Consolidated Financial Statements
    Internal Control over Financial Reporting
 Internal Control  Integrated Framework
  -2-




---



##### 



Chartered Accountants, Licensed Public Accountants
 Comments by Auditors on Canada  US Reporting Differences
  
 Chartered Accountants, Licensed Public Accountants
 -3-




---



##### 



DENISON MINES CORP.
 
 
 December 31,
    
    
    December 31,2007
    
    
    2006ASSETSCurrentCash and equivalents
    
    $
    19,680
    
    
    $
    69,127Trade and other receivables
    
    
    39,667
    
    
    
    8,964Note receivable (Note 22)
    
    
    455
    
    
    
    9,439Inventories (Note 5)
    
    
    30,921
    
    
    
    21,553Investments (Note 6)
    
    
    13,930
    
    
    
    Prepaid expenses and other
    
    
    1,492
    
    
    
    786106,145
    
    
    
    109,869Investments (Note 6)
    
    
    20,507
    
    
    
    16,600Property, plant and equipment, net (Note 7)
    
    
    727,823
    
    
    
    403,571Restricted investments (Note 8)
    
    
    17,797
    
    
    
    15,623Intangibles (Notes 4 & 9)
    
    
    6,979
    
    
    
    10,844Goodwill (Notes 4 & 10)
    
    
    122,330
    
    
    
    102,841$
    1,001,581
    
    
    $
    659,348LIABILITIESCurrentAccounts payable and accrued liabilities
    
    $
    22,642
    
    
    $
    6,737Deferred revenue
    
    
    
    
    
    
    3,839Current portion of long-term liabilities:Post-employment benefits (Note 11)
    
    
    404
    
    
    
    343Reclamation and remediation obligations (Note 12)
    
    
    565
    
    
    
    524Other long-term liabilities (Note 13)
    
    
    6,619
    
    
    
    4,68330,230
    
    
    
    16,126Deferred revenue
    
    
    2,359
    
    
    
    Provision for post-employment benefits (Note 11)
    
    
    4,030
    
    
    
    3,628Reclamation and remediation obligations (Note 12)
    
    
    19,824
    
    
    
    17,923Other long-term liabilities (Note 13)
    
    
    7,343
    
    
    
    9,489Future income tax liability (Note 14)
    
    
    141,525
    
    
    
    92,204205,311
    
    
    
    139,370SHAREHOLDERS EQUITYShare capital (Note 15)
    
    
    662,949
    
    
    
    548,069Share purchase warrants (Note 16)
    
    
    11,728
    
    
    
    11,733Contributed surplus (Notes 17 & 18)
    
    
    25,471
    
    
    
    30,752Deficit
    
    
    (14,834
    )
    
    
    (62,078
    )Accumulated other comprehensive incomeUnrealized gains on investments (note 19)
    
    
    18,100
    
    
    
    Cumulative foreign currency translation gain (loss)
    
    
    92,856
    
    
    
    (8,498
    )796,270
    
    
    
    519,978$
    1,001,581
    
    
    $
    659,348Issued and outstanding common shares (Note 15)
    
    
    189,731,635
    
    
    
    178,142,682
  On Behalf of the Board of Directors:
 E. Peter Farmer
    
    
    
    Catherine J. G.
StefanDirector
    
    
    
    Director
  -4-




---



##### 



DENISON MINES CORP.
 
 
 Fifteen Months
    
    Restated (Note 3)Year Ended
    
    Ended
    
    Year EndedDecember 31,
    
    December 31,
    
    September 30,2007
    
    2006
    
    2005REVENUES(Note 22)
    
    $
    76,764
    
    
    $
    9,722
    
    
    $
    131EXPENSESOperating expenses
    
    
    47,038
    
    
    
    7,023
    
    
    
    2,542Sales royalties and capital taxes
    
    
    2,301
    
    
    
    420
    
    
    
    Mineral property exploration
    
    
    20,963
    
    
    
    14,790
    
    
    
    8,108General and administrative
    
    
    13,469
    
    
    
    11,379
    
    
    
    4,537Write-down of mineral properties (Note 7)
    
    
    
    
    
    
    204
    
    
    
    1,76183,771
    
    
    
    33,816
    
    
    
    16,948Loss from operations
    
    
    (7,007
    )
    
    
    (24,094
    )
    
    
    (16,817
    )Other income, net (Note 20)
    
    
    41,627
    
    
    
    7,399
    
    
    
    5,757Income (loss) for the period before taxes
    
    
    34,620
    
    
    
    (16,695
    )
    
    
    (11,060
    )Income tax recovery (expense):Current
    
    
    (3,141
    )
    
    
    
    
    
    
    Future
    
    
    15,765
    
    
    
    (303
    )
    
    
    (390
    )Net income (loss) for the period
    
    $
    47,244
    
    
    $
    (16,998
    )
    
    $
    (11,450
    )Deficit, beginning of period
    
    $
    (62,078
    )
    
    $
    (45,080
    )
    
    $
    (32,856
    )Retrospective effect of change in accounting policy
for stock-based compensation expense (Note 3)
    
    
    
    
    
    
    
    
    
    
    (774
    )Deficit, beginning of period as restated
    
    
    (62,078
    )
    
    
    (45,080
    )
    
    
    (33,630
    )Deficit, end of period
    
    $
    (14,834
    )
    
    $
    (62,078
    )
    
    $
    (45,080
    )Net income (loss) for the period
    
    $
    47,244
    
    
    $
    (16,998
    )
    
    $
    (11,450
    )Change in unrealized gains in investments
    
    
    (6,742
    )
    
    
    
    
    
    
    Change in foreign currency translation
    
    
    101,354
    
    
    
    (8,498
    )
    
    
    Comprehensive income (loss)
    
    $
    141,856
    
    
    $
    (25,496
    )
    
    $
    (11,450
    )Net income (loss) per shareBasic
    
    $
    0.25
    
    
    $
    (0.18
    )
    
    $
    (0.14
    )Diluted
    
    $
    0.24
    
    
    $
    (0.18
    )
    
    $
    (0.14
    )Weighted-average number of shares
outstanding (in thousands)Basic
    
    
    188,722
    
    
    
    94,238
    
    
    
    80,575Diluted
    
    
    193,613
    
    
    
    94,238
    
    
    
    80,575
  -5-




---



##### 



DENISON MINES CORP.
 
 
 Fifteen Months
    
    Restated (Note 3)Year Ended
    
    Ended
    
    Year EndedDecember 31,
    
    December 31,
    
    September 30,CASH PROVIDED BY (USED IN):
    
    2007
    
    2006
    
    2005OPERATING ACTIVITIESNet income (loss) for the period
    
    $
    47,244
    
    
    $
    (16,998
    )
    
    $
    (11,450
    )Items not affecting cash:Depletion, depreciation, amortization and accretion
    
    
    13,386
    
    
    
    850
    
    
    
    549Stock-based compensation
    
    
    1,382
    
    
    
    6,203
    
    
    
    1,180Gain on timing and estimate revision of asset
retirement obligations
    
    
    
    
    
    
    (3,065
    )
    
    
    Equity loss of Fortress Minerals Corp.
    
    
    
    
    
    
    4,003
    
    
    
    1,493Dilution gain
    
    
    
    
    
    
    (7,167
    )
    
    
    (2,098
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    (917
    )Net (gain) loss on sale of assets
    
    
    (45,446
    )
    
    
    273
    
    
    
    (2,976
    )Mineral property write-downs
    
    
    
    
    
    
    204
    
    
    
    1,761Other non-cash
    
    
    2,425
    
    
    
    
    
    
    
    Change in future income taxes
    
    
    (15,765
    )
    
    
    304
    
    
    
    390Net change in non-cash working capital
items (Note 24)
    
    
    (26,310
    )
    
    
    (12,101
    )
    
    
    (124
    )Net cash used in operating activities
    
    
    (23,084
    )
    
    
    (27,494
    )
    
    
    (12,192
    )INVESTING ACTIVITIESAcquisition of businesses, net of cash and equivalents
acquired and acquisition costs (Note 4)
    
    
    (158,583
    )
    
    
    60,219
    
    
    
    Decrease in notes receivable
    
    
    9,778
    
    
    
    
    
    
    
    Purchase of long-term investments
    
    
    (1,458
    )
    
    
    (2,158
    )
    
    
    (1,259
    )Proceeds from sale of long-term investments
    
    
    52,870
    
    
    
    
    
    
    
    4,303Expenditures on property, plant and equipment
    
    
    (59,578
    )
    
    
    (11,253
    )
    
    
    (2,405
    )Proceeds from sale of property, plant and equipment
    
    
    33
    
    
    
    
    
    
    
    100Increase in restricted investments
    
    
    (1,531
    )
    
    
    (1,056
    )
    
    
    (458
    )Net cash provided by (used in) investing activities
    
    
    (158,469
    )
    
    
    45,752
    
    
    
    281FINANCING ACTIVITIESDecrease in other long-term liabilities
    
    
    (50
    )
    
    
    (21
    )
    
    
    (15
    )Issuance of common shares for cash:New share issues
    
    
    102,151
    
    
    
    42,526
    
    
    
    5,574Exercise of stock options and warrants
    
    
    5,114
    
    
    
    3,330
    
    
    
    418Net cash provided by financing activities
    
    
    107,215
    
    
    
    45,835
    
    
    
    5,977Foreign exchange effect on cash and equivalents
    
    
    24,891
    
    
    
    (1,077
    )
    
    
    Net increase (decrease) in cash and equivalents
    
    
    (49,447
    )
    
    
    63,016
    
    
    
    (5,934
    )Cash and equivalents, beginning of period
    
    
    69,127
    
    
    
    6,111
    
    
    
    12,045Cash and equivalents, end of period
    
    $
    19,680
    
    
    $
    69,127
    
    
    $
    6,111
   -6-




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##### 



DENISON MINES CORP.
 
 1.
    
    NATURE OF OPERATIONSDenison Mines Corp. is incorporated under the Business Corporations Act (Ontario) (OBCA).
Denison Mines Corp. and its subsidiary companies and joint ventures (collectively, the
Company) are engaged in uranium mining and related activities, including acquisition,
exploration and development of uranium bearing properties, extraction, processing, selling and
reclamation. The environmental services division of the Company provides mine decommissioning
and decommissioned site monitoring services for third parties.The Company has a 100% interest in the White Mesa mill located in Utah, United States and a
22.5% interest in the McClean Lake mill located in the Athabasca Basin of Saskatchewan, Canada.
The Company has interests in a number of nearby mines at both locations, as well as interests in
development and exploration projects located in Canada, the United States, Mongolia and Zambia,
some of which are operated through joint ventures and joint arrangements. Uranium, the
Companys primary product, is produced in the form of uranium oxide concentrates
(U3O8) and sold to various customers around the world for further
processing. Vanadium, a co-product of some of the Companys mines is also produced and is in
the form of vanadium pentoxide, or V2O5. The Company is also in the
business of recycling uranium bearing waste materials, referred to as alternate feed
materials.Denison Mines Inc. (DMI), a subsidiary of the Company is the manager of Uranium Participation
Corporation (UPC), a publicly-listed investment holding company formed to invest substantially
all of its assets in U3O8 and uranium hexafluoride (UF6).
The Company has no ownership interest in UPC but receives various fees for management services
and commissions from the purchase and sale of U3O8and UF6 by
UPC.In August 2006, the Company changed its fiscal year end from September 30 to December 31 to
align its reporting periods with that of its peers in the uranium industry. The Company had
elected to use a 15-month period ending December 31, 2006 for its audited consolidated financial
statements as permitted under Canadian securities regulation. References to 2007, 2006 and
2005 refer to the year ended December 31, 2007, the 15-month period ended December 31, 2006
and the year ended September 30, 2005 respectively.
 2.
    
    SUMMARY OF SIGNIFICANT MINING INTERESTS AND ACCOUNTING POLICIESBasis of PresentationThese consolidated financial statements have been prepared by management in U.S. dollars, unless
otherwise stated, in accordance with generally accepted accounting principles in Canada
(Canadian GAAP). All adjustments considered necessary by management for fair presentation
have been included in these financial statements. Differences between Canadian GAAP and those
generally accepted accounting principles and practices in the United States (U.S. GAAP) that
would have a significant impact on these financial statements are disclosed in Note 28.
 -7-




---



##### 



Significant Mining Interests
  OwnershipLocation
    
    InterestThrough majority owned subsidiariesArizona Strip
    
    USA
    
    100.00%Henry Mountains
    
    USA
    
    100.00%Colorado Plateau
    
    USA
    
    100.00%Sunday Mine
    
    USA
    
    100.00%Gurvan Saihan Joint Venture
    
    Mongolia
    
    70.00%Mutanga
    
    Zambia
    
    100.00%As interests in unincorporated joint ventures, or jointly controlled assetsMcClean Lake
    
    Canada
    
    22.50%Midwest
    
    Canada
    
    25.17%
 
 Significant Accounting Policies
  a)
    
    Principles of Consolidation
      (a)
    
    Use of Estimates
  (b)
    
    Foreign Currency Translation
  -8-




---



##### 



(c)
    
    Income Taxes
  (d)
    
    Flow-Through Common Shares
  (e)
    
    Cash and Equivalents
  (f)
    
    Inventories
     (g)
    
    Investments
   -9-




---



##### 



(h)
    
    Property, Plant and Equipment
 Plant and equipment
  Mineral Property Acquisition, Exploration and Development Costs
   .
 Impairment of Long-Lived Assets
   (i)
    
    Asset Retirement Obligations
    (j)
    
    Goodwill and Other Intangibles
  -10-




---



##### 



(k)
    
    Post-Employment Benefits
  (l)
    
    Fair Values
  (m)
    
    Revenue Recognition
    3 8 6
  (n)
    
    Stock-Based Compensation
   (o)
    
    Earnings (Loss) per Share
  (p)
    
    Financial Instruments  Recognition and Measurement
  -11-




---



##### 



Recent Pronouncements
  a)
    
    Accounting Standards Section 3031 Inventories provides guidance on the determination
of cost and its subsequent recognition as an expense, including any write-down to net
realizable value. It also provides guidance on the cost formulas that are used to assign
costs to inventories and is effective for the fiscal years beginning on or after January 1,
2008.b)
    
    Accounting Standards Section 3862 Financial Instruments  Disclosures requires
disclosures in the financial statements that will enable users to evaluate: the
significance of financial instruments for the companys financial positions and
performance; the nature and extent of risks arising from financial instruments to which the
company is exposed during the period and at the balance sheet date; and how the company
manages those risks. This accounting standard is effective for fiscal years beginning on
or after October 1, 2007.c)
    
    General Accounting Section 1535 Capital Disclosures requires the disclosure of both
qualitative and quantitative information that enable users to evaluate the companys
objectives, policies and processes for managing capital.d)
    
    Effective January 1, 2009, the Company will adopt Section 3064 Goodwill and intangible
assets which establishes revised standards for recognition, measurement, presentation and
disclosure of goodwill and intangible assets. Concurrent with the introduction of this
standard, the CICA withdrew EIC 27 Revenues and expenses during the pre-operating period.
As a result of the withdrawal of EIC 27, the Company will no longer be able to defer costs
and revenues incurred prior to commercial production at new mine operations.
 Comparative Numbers
  3.
    
    CHANGE IN ACCOUNTING POLICIESThe Company adopted the following new accounting standards effective January 1, 2007:
 a)
    
    CICA Handbook Section 1530: Comprehensive Income establishes standards for reporting
comprehensive income, defined as a change in value of net assets that is not due to owner
activities, by introducing a new requirement to temporarily present certain gains and
losses outside of net income. The impact of this new standard is discussed below in c);b)
    
    CICA Handbook Section 3251: Equity establishes standards for the presentation of
equity and changes in equity during the reporting period. The adoption of this new
standard by the Company did not have a material impact;c)
    
    CICA Handbook Section 3855: Financial Instruments  Recognition and Measurement
establishes standards for the recognition, classification and measurement of financial
instruments including the presentation of any resulting gains and losses. Assets
classified as available-for-sale securities have revaluation gains and losses included in
other comprehensive income (and not included in the income statement) until such time as
the asset is disposed of or incurs a decline in fair value that is other than temporary.
At such time, any gains or losses are then realized and reclassified to the income
statement. At December 31, 2006, the Company had certain long-term investments that would
be classified as available-for-sale securities under this new standard, and any unrealized
gains and losses would be included in comprehensive income; andd)
    
    CICA Handbook Section 1506: Accounting Changes (CICA 1506) effective for fiscal
years beginning on or after January 1, 2007 establishes standards and new disclosure
requirements for the reporting of changes in accounting policies and estimates and the
reporting of error corrections. CICA 1506 clarifies that a change in accounting policy can
be made only if it is a requirement under Canadian GAAP or if it provides reliable and more
relevant financial statement information. Voluntary changes in accounting policies require
retrospective application of prior period financial statements, unless the retrospective
effects of the changes are impracticable to determine, in which case the retrospective
application may be limited to the assets and liabilities of the earliest period
practicable, with a corresponding adjustment made to opening retained earnings.
 -12-




---



##### 



Exploration Expenditures
     As Previously(in thousands)
    
    Reported
    
    Adjustment
    
    As RestatedBalance Sheet at September 30, 2005:Long-term investments
    
    $
    4,938
    
    
    $
    (1,124
    )
    
    $
    3,814Property, plant & equipment
    
    
    16,631
    
    
    
    (9,864
    )
    
    
    6,767Future income tax liability
    
    
    1,461
    
    
    
    (1,071
    )
    
    
    390Share capital
    
    
    56,146
    
    
    
    2,019
    
    
    
    58,165Deficit
    
    
    (33,144
    )
    
    
    (11,936
    )
    
    
    (45,080
    )2005 Statement of Operations and DeficitMineral property exploration
    
    
    98
    
    
    
    8,010
    
    
    
    8,108Write-down of mineral properties
    
    
    1,870
    
    
    
    (109
    )
    
    
    1,761Equity in loss of Fortress Minerals Corp.
    
    
    679
    
    
    
    814
    
    
    
    1,493Income tax expense
    
    
    27
    
    
    
    363
    
    
    
    390Net loss for the year
    
    
    (2,372
    )
    
    
    (9,078
    )
    
    
    (11,450
    )2005 Statement of Cash FlowsStock-based compensation
    
    
    948
    
    
    
    232
    
    
    
    1,180Write-down of mineral properties
    
    
    1,870
    
    
    
    (109
    )
    
    
    1,761Change in future income taxes
    
    
    27
    
    
    
    363
    
    
    
    390Equity in loss of Fortress Minerals Corp.
    
    
    679
    
    
    
    814
    
    
    
    1,493Net cash used in operating activities
    
    
    (4,414
    )
    
    
    (7,778
    )
    
    
    (12,192
    )Expenditures on mineral properties
    
    
    (9,265
    )
    
    
    7,778
    
    
    
    (1,487
    )Net cash provided by (used in) investing
activities
    
    
    (7,497
    )
    
    
    7,778
    
    
    
    281
 
 Stock-Based Compensation
   -13-




---



##### 



4.
    
    ACQUISITIONSAcquisition of OmegaCorp Limited (Omega)In 2007, the Company acquired 154,250,060 common shares of Omega and initiated compulsory
acquisition proceedings for the remaining shares that it did not yet own. The cost of this
investment, which was settled in cash, was $167,204,000. The Company has determined that it
exercises control over Omega and is using the full consolidation method to account for this
investment effective August 1, 2007. Prior to this date, the investment was being accounted for
using the fair value method.The preliminary allocation of the purchase price for Omega is based on managements estimate of
the cost of the acquisition and is summarized below.
 OmegaFair ValueAugust 1,(in thousands)
    
    2007Cash and equivalents
    
    $
    8,621Trade and other receivables
    
    
    243Long-term investments
    
    
    3,022Property, plant and equipmentPlant and equipment
    
    
    199Mineral properties
    
    
    208,088Total assets
    
    
    220,173Accounts payable and accrued liabilities
    
    
    947Future income tax liability
    
    
    52,022Total liabilities
    
    
    52,969Net assets purchased
    
    $
    167,204
   Acquisition of Denison Mines Inc. (DMI)
    -14-




---



##### 



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




---



##### 



The allocation of the purchase price is based on managements estimate of the fair values after
giving effect to the Arrangement as summarized below:
 DMIFair ValueDecember 1,(in thousands)
    
    2006Cash and equivalents
    
    $
    63,634Other current assets
    
    
    25,067Long-term investments
    
    
    7,596Property, plant and equipmentPlant and equipment
    
    
    70,134Mineral properties
    
    
    325,618Restricted investments
    
    
    1,990IntangiblesUPC management contract
    
    
    6,463Goodwill
    
    
    105,915Total assets
    
    
    606,417Current liabilitiesAccount payable and accruals
    
    
    6,234Fair value of sales and toll milling contracts
    
    

    6,201Provision for post-employment benefits
    
    
    3,692Reclamation and remediation obligations
    
    
    7,888Other long-term liabilitiesFair value of sales and toll milling contracts
    
    

    9,520Other
    

    
    33Future income tax liability
    
    
    90,909Total liabilities
    
    
    124,477Net assets purchased
    
    $
    481,940
 The Arrangement has been accounted for under the purchase method with IUC as the acquirer for
accounting purposes. In making this determination, management considered the relative
shareholdings of the combined company, the premium paid by IUC to acquire DMI and the
composition of the board of directors and the executive management team.DMIs assets and liabilities were measured at their individual fair values as of December 1,
2006. In arriving at these fair values, management has made assumptions, estimates and
assessments at the time these financial statements were prepared. The company engaged
independent valuators to assist in the determination of the fair values of the significant
assets and liabilities acquired. The future income tax liability as a result of these fair
value adjustments has been estimated based on a statutory income tax rate of 31%.In 2007, the Company adjusted the fair value of the UPC management contract. The estimated
useful life of the contract was reduced to 8 years from 13 years and the associated discounted
cash flow stream was decreased by CDN$4,600,000. The fair value adjustment (net of future tax
effects) has been reclassified to goodwill. The intangible asset is being amortized over its
estimated life of 8 years (see note 9 and 10).
 5.
    
    INVENTORIES
 The inventories balance consists of:
 December 31,
    
    December 31,(in thousands)
    
    2007
    
    2006Uranium and vanadium concentrates
    
    $
    8,344
    
    
    $
    9,758Inventory of ore in stockpiles
    
    
    19,289
    
    
    
    8,817Mine and mill supplies
    
    
    3,288
    
    
    
    2,978$
    30,921
    
    
    $
    21,553
 -16-




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##### 



6.
    
    INVESTMENTS
 The investments balance consists of:
 December 31,
    
    January 1,
    
    December 31,(in thousands)
    
    2007
    
    2007
    
    2006Portfolio investmentsAt accounting cost (1)
    
    $
    16,234
    
    
    $
    10,249
    
    
    $
    10,249Excess of market value over cost
    
    
    18,203
    
    
    
    25,008
    
    
    
    Investments in affiliates (2)Fortress Minerals Corp.
    
    
    
    
    
    
    6,351
    
    
    
    6,351$
    34,437
    
    
    $
    41,608
    
    
    $
    16,600Investments:Current
    
    
    13,930
    
    
    
    
    
    
    
    Long-term
    
    
    20,507
    
    
    
    41,608
    
    
    
    16,600$
    34,437
    
    
    $
    41,608
    
    
    $
    16,600
 (1)
    
    For accounting purposes, effective January 1, 2007, portfolio investments are carried
at fair value on the balance sheet. The adjustments to fair value have been reflected in
other comprehensive income net of tax;(2)
    
    Investments in affiliates are those in which the Company exercises significant
influence. For accounting purposes, these investments are accounted for using the equity
method and are not carried at fair value.
 Portfolio investments
 At December 31, 2007, portfolio investments consist of common shares of six publicly-traded
companies (and options to acquire additional shares in two of them) at an accounting cost of
$16,234,000 (December 31, 2006: $10,249,000) and an aggregate market value of $34,437,000
(December 31, 2006: $35,257,000). The options entitle the Company to purchase an additional
7,500,000 common shares for a total exercise price of $1,362,000.During 2007, the Company acquired additional equity interests in portfolio investments at a cost
of $1,458,000 (2006: $634,000).During 2007, the Company sold 1,152,000 common shares of Energy Metals Corp (EMC) for cash
consideration of approximately CDN$18,754,000. The resulting gain has been included in net
other income in the statement of operations (see note 20). The Company no longer holds a common
share interest in EMC.
 Investments in affiliates
 At December 31, 2007, the Company held nil common shares (December 31, 2006: 30,598,750 common shares) of Fortress Minerals Corp. (Fortress), representing 0.0% (December 31, 2006: 44.39%)
of its issued and outstanding common shares.During 2007, the Company sold 30,598,750 common shares of Fortress for cash consideration of
approximately CDN$38,067,000. The resulting gain has been included in net other income in the
statement of operations (see note 20). The Company no longer holds a common share interest in
Fortress.During 2006, the Company participated in private placements to purchase 1,866,250 common shares
of Fortress at a total cost of $1,524,000 (CDN$1,745,000).The Companys investment in Fortress has been subject to varying degrees of ownership interest.
These financial statements include the accounts of Fortress Minerals Corp. on a consolidated
basis for the period from October 1, 2004 to April 29, 2005. For the period from April 30, 2005
to September 30, 2005, the fifteen month period ended December 31, 2006 and the six month period
ended June 30, 2007, the equity method was used. The equity method was discontinued subsequent
to June 30, 2007 and the appropriate portion of the cumulative equity accounting adjustments
were derecognized at the time of the common share sales and included in the gain referred to
above.In 2006, the Company recognized a dilution gain of $7,167,000 offset by a loss in equity of
$4,003,000 associated with its investment in Fortress.
 -17-




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##### 



7.
    
    PROPERTY, PLANT AND EQUIPMENT
 Property, plant and equipment consist of:
 December 31,
    
    December 31,(in thousands)
    
    2007
    
    2006Cost, net of write-downsPlant and equipmentMill and mining related
    
    $
    135,375
    
    
    $
    83,354Environmental services and other
    
    
    2,742
    
    
    
    1,662Mineral properties
    
    
    609,569
    
    
    
    326,334747,686
    
    
    
    411,350Accumulated depreciation and amortizationPlant and equipmentMill and mining related
    
    
    9,182
    
    
    
    6,326Environmental services and other
    
    
    843
    
    
    
    457Mineral properties
    
    
    9,838
    
    
    
    99619,863
    
    
    
    7,779Property, plant and equipment, net
    
    $
    727,823
    
    
    $
    403,571Net book valuePlant and equipmentMill and mining related
    
    $
    126,193
    
    
    $
    77,028Environmental services and other
    
    
    1,899
    
    
    
    1,205Mineral properties
    
    
    599,731
    
    
    
    325,338$
    727,823
    
    
    $
    403,571
 Plant and Equipment  Mill and Mining Related
 The Company has a 100% interest in the White Mesa mill located in Utah and mines located in
Arizona, Colorado and Utah. Mined ore from these mines will be processed at the White Mesa
mill.The Company has a 22.5% interest in the McClean Lake mill and mines located in the Athabasca
Basin of Saskatchewan, Canada. The McClean Lake mill achieved commercial production levels on
November 1, 1999 and has been constructed to process ore from the McClean Lake mine as well as
other deposits in the area. A toll milling agreement has been signed with the participants in
the Cigar Lake joint venture that provides for the processing of a substantial portion of the
future output of the Cigar Lake mine at the McClean Lake mill, for which the owners of the
McClean Lake mill will receive a toll milling fee and other benefits. In determining the
amortization rate for the McClean Lake mill, the amount to be amortized has been adjusted to
reflect Denisons expected share of future toll milling revenue.
 Plant and Equipment  Environmental Services and Other
 The environmental services division of the Company provides mine decommissioning and
decommissioned site monitoring services for third parties.
 Mineral Properties
 The Company has various interests in development and exploration projects located in Canada, the
U.S., Mongolia and Zambia which are held directly or through option or joint venture agreements.
The most significant of these interests are as follows:
 Canada
 The Company has a 22.5% interest in the McClean project and a 25.17% interest in the Midwest
project located in the Athabasca Basin of Saskatchewan, Canada. These projects are in the
development stage and were acquired by the Company in 2006, along with some other exploration
projects, as part of the DMI acquisition (see note 4).
 -18-




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##### 



Other significant mineral property interests that the Company has in Canada include:
 a)
    
    Moore Lake  the Company has a 75% interest in the project (located in the Athabasca
Basin) subject to a 2.5% net smelter return royalty;b)
    
    Wheeler River  in October 2004, the Company entered into an option agreement with its
joint venture partners to earn a further 20% ownership interest in the Wheeler project by
funding CDN$7,000,000 in exploration expenditures over the next 6 years. During 2007, the
Company fulfilled its obligations under the option agreement and increased its ownership
interest in the project from 40% to 60%; andc)
    
    Wolly  In October 2004, the Company entered into an option agreement with its joint
venture partners to earn a 22.5% ownership interest in the Wolly project by funding
CDN$5,000,000 in exploration expenditures over the next six years. As at December 31,
2007, the Company has incurred a total of CDN$2,560,000 towards this option and has earned
a 6.5% ownership interest in the project under the phase-in ownership provisions of the
agreement.
 United States
 During 2007 and 2006, the Company commenced mining activities through the re-opening of some of
its U.S. mines in Colorado, Utah and Arizona which had been shut down since 1999.In March 2007, the Company acquired certain uranium deposits located in the Arizona Strip
district in northeastern Arizona for cash consideration of $5,500,000 (excluding deal costs)
plus a 1% royalty.In January 2007, the Company completed a mineral property acquisition in the Henry
Mountains district by issuing an additional 103,000 shares at a value of $947,000 (see note 15).
 Mongolia
 The Company has a 70% interest in and is the managing partner of the Gurvan Saihan Joint Venture
in Mongolia. The results of the Gurvan Saihan Joint Venture have been included in these
financial statements on a consolidated basis since the Company exercises control.During 2006, the Company recorded a write-down of mineral property acquisition costs totaling
$204,000 relating to certain of its Mongolian uranium properties due to exploration program
results that did not warrant further work. Many of these properties were grass roots
exploration prospects licensed in 2004 on the basis of favorable geology and radiometric
anomalies. The properties were aggressively explored in 2005 and 2006.During 2005, the Company recorded a write-down of mineral property acquisition costs of
$1,761,000 relating to a decision by Fortress not to pursue its option on the Shiveen Gol
Property, a precious/base metal property located in Mongolia.
 Zambia
 In August 2007, the Company acquired certain uranium deposits located in Zambia in conjunction
with its purchase of Omega. The deposits, which are part of the Mutanga project, have been
assigned a fair value of $208,088,000 (see note 4).
 8.
    
    RESTRICTED INVESTMENTS
 The Company has certain restricted investments deposited to collateralize its reclamation and
certain other obligations. The restricted investments balance consists of:
 December 31,
    
    December 31,(in thousands)
    
    2007
    
    2006U.S. mill and mine reclamation
    
    $
    15,849
    
    
    $
    13,667Elliot Lake reclamation trust fund
    
    
    1,948
    
    
    
    1,541Letter of credit collateral
    
    
    
    
    
    
    415$
    17,797
    
    
    $
    15,623
 U.S. Mill and Mine Reclamation
 The Company has cash and cash equivalents and fixed income securities as collateral for various
bonds posted in favour of the State of Utah and the applicable state regulatory agencies in
Colorado and Arizona for estimated reclamation costs associated with the White Mesa mill and
U.S. mining properties. In 2007, the Company deposited an additional $982,000 into its
collateral account.
 -19-




---



##### 



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 September 30, 1994 (Agreement) with the
Governments of Canada and Ontario. The Agreement requires the Company to deposit 90% of cash
flow, after deducting permitted expenses, into the Reclamation Trust Fund. A subsequent
amendment to the Agreement provides for the suspension of this obligation to deposit 90% of cash
flow into the Reclamation Trust Fund, provided funds are maintained 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 2007, the Company deposited an additional
CDN$552,000 into the Reclamation Trust Fund.
 Letter of Credit Collateral
 As at December 31, 2006, the Company had $415,000 of cash and cash equivalents restricted as
collateral for certain letters of credit associated with performance obligations under a
completed contract of its environmental services division. This obligation ended in 2007.
 9.
    
    INTANGIBLES
 A continuity summary of intangibles is presented below:
 December 31,
    
    December 31,(in thousands)
    
    2007
    
    2006Intangibles, beginning of period
    
    $
    10,844
    
    
    $
    625Acquisition related additions
    
    
    
    
    
    
    10,481Fair value allocation adjustments
    
    
    (4,279
    )
    
    
    Amortization
    
    
    (958
    )
    
    
    (78
    )Foreign exchange
    
    
    1,372
    
    
    
    (184
    )Intangibles, end of period
    
    $
    6,979
    
    
    $
    10,844Intangibles, by item:UPC management contract
    
    
    6,495
    
    
    
    10,297Urizon technology licenses
    
    
    484
    
    
    
    547$
    6,979
    
    
    $
    10,844
 UPC Management Contract
 The UPC management contract is associated with the acquisition of DMI (see note 4). The initial
fair value of $10,481,000 was determined using a discounted cash flow approach after taking into
account an appropriate discount rate. In 2007, the Company adjusted the fair value of the
contract by $4,279,000 and adjusted the estimated useful life of the contract to 8 years. The
contract is being amortized over its 8 year estimated useful life. The fair value adjustment
(net of future tax effects) has been reclassified to goodwill.
 Urizon Technology Licenses
 The Company has a 50% interest in a joint venture with Nuclear Fuel Services, Inc. (NFS) (the
Urizon joint venture) to pursue an alternate feed program for the White Mesa mill. NFS
contributed its technology license to the joint venture while the Company contributed $1,500,000
in cash together with its technology license. The accounts of Urizon have been included in the
Companys consolidated financial statements on a proportionate consolidation basis. The joint
venture has no cash flows arising from investing or financing activities.This Urizon technology license is being amortized over an estimated useful life of 12 years and
represents the Companys 50% interest in Urizons technology licenses.
 -20-




---



##### 



10.
    
    GOODWILL
 A continuity summary of goodwill is presented below:
 December 31,
    
    December 31,(in thousands)
    
    2007
    
    2006Goodwill, beginning of period
    
    $
    102,841
    
    
    $
    Acquisition related additions
    
    
    
    
    
    
    104,682Fair value allocation adjustments
    
    
    1,314
    
    
    
    Foreign exchange
    
    
    18,175
    
    
    
    (1,841
    )Goodwill, end of period
    
    $
    122,330
    
    
    $
    102,841Goodwill, by business unit:Canada mining segment
    
    $
    122,330
    
    
    $
    102,841
 The Companys acquisition of DMI was accounted for using the purchase method. The excess of the
purchase price over the fair value of the net assets acquired has been recorded as goodwill.
Under GAAP, goodwill is not amortized and is tested annually for impairment. The goodwill has
been allocated to the Companys Canadian mining segment.In 2007, the Company finalized the purchase price allocation associated with its acquisition of
DMI resulting in an increase in goodwill of $1,314,000.
 11.
    
    POST-EMPLOYMENT BENEFITS
 The Company provides post employment benefits for former Canadian employees who retired on
immediate pension prior to 1997. The post employment benefits provided include life insurance
and medical and dental benefits as set out in the applicable group policies but does not include
pensions. 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, 2005. 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
valuation are listed below.
 Discount rate
    
    
    5.25
    %Initial medical cost growth rate per annum
    
    
    12.00
    %Medical cost growth rate per annum decline to
    
    
    6.00
    %Year in which medical cost growth rate reaches its final level
    
    
    2011Dental cost growth rate per annum
    
    
    4.00
    %
 -21-




---



##### 



A continuity summary of post-employment benefits is presented below:
 December 31,
    
    December 31,(in thousands)
    
    2007
    
    2006Liability, beginning of period
    
    $
    3,971
    
    
    $
    Acquisition related additions
    
    
    
    
    
    
    4,041Benefits paid
    
    
    (432
    )
    
    
    (16
    )Interest cost
    
    
    215
    
    
    
    16Foreign exchange
    
    
    680
    
    
    
    (70
    )Liability, end of period
    
    $
    4,434
    
    
    $
    3,971Post-employment benefits liability by duration:Current
    
    $
    404
    
    
    $
    343Non-current
    
    
    4,030
    
    
    
    3,628$
    4,434
    
    
    $
    3,971
 12.
    
    RECLAMATION AND REMEDIATION OBLIGATIONSA continuity summary of reclamation and remediation obligations is presented below:
 December 31,
    
    December 31,(in thousands)
    
    2007
    
    2006Reclamation obligations, beginning of period
    
    $
    18,447
    
    
    $
    12,935Acquisition related additions
    
    
    
    
    
    
    8,360Accretion
    
    
    1,364
    
    
    
    50Expenditures incurred
    
    
    (436
    )
    
    
    (39
    )Liability adjustments
    
    
    (449
    )
    
    
    (2,712
    )Foreign exchange
    
    
    1,463
    
    
    
    (147
    )Reclamation obligations, end of period
    
    $
    20,389
    
    
    $
    18,447Site restoration liability by location:U.S. Mill and Mines
    
    $
    10,467
    
    
    $
    10,223Elliot Lake
    
    
    8,319
    
    
    
    6,956McClean Lake and Midwest Joint Ventures
    
    
    1,603
    
    
    
    1,268$
    20,389
    
    
    $
    18,447Site restoration liability :Current
    
    $
    565
    
    
    $
    524Non-current
    
    
    19,824
    
    
    
    17,923$
    20,389
    
    
    $
    18,447
 -22-




---



##### 



Site Restoration: U.S. Mill and MinesThe decommissioning and reclamation of the White Mesa mill and U.S. mines are subject to legal
and regulatory requirements. Estimates of the costs of reclamation are reviewed periodically by
the applicable regulatory authorities. The current estimate for the White Mesa mill and U.S.
mines are $8,809,000 and $1,658,000, respectively. The above accrual represents the companys
best estimate of the present value of future reclamation costs, discounted at 7.5%. The
undiscounted amount of estimated future reclamation costs is $14,801,000.Site Restoration: Elliot LakeThe Elliot Lake uranium mine was closed in 1992 and capital works to decommission this site were
completed in 1997. The remaining provision is for the estimated cost of monitoring the Tailings
Management Areas at the Company and Stanrock sites and for treatment of water discharged from
these areas. The Company conducts its activities at both sites pursuant to decommissioning
licenses issued by the Canadian Nuclear Safety Commission. The above accrual represents the
Companys best estimate of the present value of the total future reclamation cost based on
assumptions as to levels of treatment, which will be required in the future, discounted at 7.5%.
The undiscounted amount of estimated future reclamation costs is $25,372,000Spending on restoration activities at the Elliot Lake site are funded from monies in the Elliot
Lake Reclamation Trust fund (Note 8).Site Restoration: McClean Lake Joint Venture and Midwest Joint VentureThe McClean Lake and Midwest operations are subject to environmental regulations as set out by
the Saskatchewan government and the Canadian Nuclear Safety Commission. Cost estimates of the
estimated future decommissioning and reclamation activities are prepared periodically and filed
with the applicable regulatory authorities for approval. The above accrual represents the
Companys best estimate of the present value of the future reclamation cost contemplated in
these cost estimates discounted at 7.5%. The undiscounted amount of estimated future
reclamation costs is $17,245,000.Under the Mineral Industry Environmental Protection Regulations (1996), the Company is required
to provide its pro-rata share of financial assurances to the province. The Company has provided
irrevocable standby letters of credit, from a chartered bank, in favour of Saskatchewan
Environment totalling CDN$8,064,000.13.
    
    OTHER LONG-TERM LIABILITIESOther long-term liabilities consist of:
 December 31,
    
    December 31,(in thousands)
    
    2007
    
    2006Long-term debt:Capital lease obligations
    
    $
    100
    
    
    $
    100Notes payable
    
    
    42
    
    
    
    85Unamortized fair value of sales and toll
milling contracts
    
    
    13,820
    
    
    
    13,987$
    13,962
    
    
    $
    14,172Other long-term liabilities:Current
    
    
    6,619
    
    
    
    4,683Non-current
    
    
    7,343
    
    
    
    9,489$
    13,962
    
    
    $
    14,172
 Long-Term Debt and Lines of CreditA Canadian chartered bank has provided DMI with a credit facility pursuant to a credit agreement
dated effective November 2, 2005. The credit facility is a revolving CDN$500,000 facility with
a one year term (subject to renewals) collateralized by all present and future assets of DMI and
its subsidiaries. Interest under the credit facility is incurred based on bankers acceptances
plus 2% or the lenders prime rate plus 1%. To date, the Company has not incurred any
indebtedness under the facility (see note 27).
 -23-




---



##### 



14.
    
    INCOME TAXESThe Company operates in multiple industries and jurisdictions, and the related income is subject
to varying rates of taxation. A reconciliation of the combined Canadian federal and provincial
income tax rate to the Companys effective rate of income tax is as follows:
 Restated (Note 3)(in thousands)
    
    2007
    
    2006
    
    2005Combined basic tax rate
    
    
    36
    %
    
    
    36
    %
    
    
    40
    %Income (loss) from operations before taxes
    
    $
    34,620
    
    
    $
    (16,695
    )
    
    $
    (11,060
    )Income tax expense (recovery) at basic tax rate
    
    
    12,465
    
    
    
    (6,010
    )
    
    
    (4,425
    )Non-deductible amounts
    
    
    796
    
    
    
    1,933
    
    
    
    994Non-taxable amounts
    
    
    (8,712
    )
    
    
    
    
    
    
    Flow through shares renounced
    
    
    
    
    
    
    4,036
    
    
    
    1,434Difference in foreign tax rates
    
    
    748
    
    
    
    (222
    )
    
    
    627Change in valuation allowance
    
    
    (6,133
    )
    
    
    337
    
    
    
    (149
    )Tax losses not tax benefited
    
    
    1,906
    
    
    
    
    
    
    
    Impact of legislative changes
    
    
    (10,797
    )
    
    
    
    
    
    
    Other
    
    
    (2,897
    )
    
    
    229
    
    
    
    1,909Tax expense (recovery) per consolidated
financial statements
    
    $
    (12,624
    )
    
    $
    303
    
    
    $
    390
 The tax effects of temporary differences resulting in future income tax assets and future income
tax liabilities are presented below:
 Restated (Note 3)December 31,
    
    December 31,
    
    September 30,(in thousands)
    
    2007
    
    2006
    
    2005Future income tax assets:Property, plant and equipment, net
    
    $
    9,755
    
    
    $
    2,277
    
    
    $
    1,074Intangibles
    
    
    106
    
    
    
    81
    
    
    
    50Deferred revenue
    
    
    944
    
    
    
    1,535
    
    
    
    1,509Post-employment benefits
    
    
    1,208
    
    
    
    1,255
    
    
    
    Reclamation and remediation obligations
    
    
    2,271
    
    
    
    2,162
    
    
    
    Other long-term liabilities
    
    
    3,732
    
    
    
    4,336
    
    
    
    Tax loss carryforwards
    
    
    1,735
    
    
    
    7,461
    
    
    
    4,846Other
    
    
    3,347
    
    
    
    1,482
    
    
    
    10623,098
    
    
    
    20,589
    
    
    
    7,585Future income tax liability:Inventory
    
    
    (3,492
    )
    
    
    (2,579
    )
    
    
    Long-term investments
    
    
    (4,517
    )
    
    
    (1,498
    )
    
    
    Property, plant and equipment, net
    
    
    (146,764
    )
    
    
    (95,149
    )
    
    
    Intangibles
    
    
    (1,770
    )
    
    
    (3,254
    )
    
    
    Reclamation and remediation obligations
    
    
    
    
    
    
    
    
    
    
    (421
    )Other
    
    
    
    
    
    
    (2,812
    )
    
    
    (390
    )Net future tax asset (liability)
    
    
    (133,445
    )
    
    
    (84,703
    )
    
    
    6,774Valuation allowance
    
    
    (8,080
    )
    
    
    (7,501
    )
    
    
    (7,164
    )Net future income tax assets (liabilities)
    
    $
    (141,525
    )
    
    $
    (92,204
    )
    
    $
    (390
    )
 Management believes that sufficient uncertainty exists regarding the realization of certain
future income tax assets and liabilities that a valuation allowance is required.
 -24-




---



##### 



At December 31, 2007, the Company had the following non-capital loss carry-forwards available
for tax purposes:
 AmountCountry
    
    (in thousands)
    
    ExpiryAustralia
    
    $
    5,288
    
    
    UnlimitedZambia
    
    $
    567
    
    
    
    2011-2012
 The tax benefit of the above Zambian non-capital loss carry-forwards has not been recognized in
the financial statements.15.
    
    SHARE CAPITALDenison 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)
    
    Shares
    
    AmountBalance at September 30, 2005
    
    
    81,569,066
    
    
    $
    58,165Issued for cash:New issue gross proceeds
    
    
    6,850,000
    
    
    
    43,703New issue gross issue costs
    
    
    
    
    
    
    (1,177
    )Exercise of stock options
    
    
    1,726,696
    
    
    
    3,305Exercise of share purchase warrants
    
    
    5,760
    
    
    
    26Acquisition of Denison Mines Inc.
    
    
    87,991,160
    
    
    
    441,147Fair value of stock options exercised
    
    
    
    
    
    
    2,889Fair value of share purchase warrants exercised
    
    
    
    
    
    
    1196,573,616
    
    
    
    489,904Balance at December 31, 2006
    
    
    178,142,682
    
    
    $
    548,069Issues for cashNew issue gross proceeds
    
    
    10,114,995
    
    
    
    105,419New issue gross issue costs
    
    
    
    
    
    
    (3,268
    )Exercise of stock options
    
    
    1,367,962
    
    
    
    5,102Exercise of share purchase warrants
    
    
    2,592
    
    
    
    12Issued for mineral property acquisition
    
    
    103,000
    
    
    
    947Fair value of stock options exercised
    
    
    
    
    
    
    6,663Fair value of share purchase warrants exercised
    
    
    
    
    
    
    5Other
    
    
    404
    
    
    
    11,588,953
    
    
    
    114,880Balance at December 31, 2007
    
    
    189,731,635
    
    
    $
    662,949
 New IssuesIn April 2007, the Company completed a private placement of 1,104,295 flow-through common shares
at a price of CDN$16.30 per share for gross proceeds of $15,572,000 (CDN$18,000,000). The
income tax benefits of this issue were renounced to the subscribers in February 2008.In January 2007, the Company completed a private placement of 9,010,700 common shares at a price
of CDN$11.75 per share for gross proceeds of $89,847,000 (CDN$105,876,000).In December 2005, the Company completed a private placement of 850,000 flow-through common
shares at a price of CDN$7.75 per share for gross proceeds of $5,692,000 (CDN$6,587,500). The
income tax benefits of this issue were renounced to the subscribers in February 2006.In October 2005, the Company completed a private placement of 6,000,000 common shares at a price
of CDN$7.50 per share for gross proceeds of $38,011,000 (CDN$45,000,000).
 -25-




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##### 



Acquisition Related IssuesIn January 2007, the Company issued 103,000 common shares at a price of CDN$10.81 per share for
a total value of $947,000 (CDN$1,113,000) as part of the acquisition of a U.S. uranium property
(see note 7).In December 2006, the Company issued 87,991,160 shares at a value of $441,147,000
(CDN$505,069,000) as part of the acquisition of DMI (see note 4).Flow-Through Share IssuesThe Company finances a portion of its exploration programs through the use of flow-through share
issuances. Income tax deductions relating to these expenditures are claimable by the investors
and not by the Company. As at December 31, 2007, the Company estimates that it has spent
CDN$10,207,000 of the CDN$18,000,000 April 2007 flow-through share issue obligation. The
Company renounced the tax benefit of this issue to subscribers in February 2008.16.
    
    SHARE PURCHASE WARRANTSA continuity summary of the issued and outstanding share purchase warrants in terms of common
shares of the Company and associated dollar amount is presented below:
 Weighted Average
    
    Number of
    
    FairExercise Price
    
    Common Shares
    
    Value(in thousands except share amounts)
    
    Per Share (CDN$)
    
    Issuable
    
    AmountBalance outstanding at September 30, 2005
    
    
    
    
    
    
    
    
    
    $
    Warrants assumed on acquisition of DMI
    
    
    8.69
    
    
    
    9,573,267
    
    
    
    11,744Warrants exercised
    
    
    5.21
    
    
    
    (5,760
    )
    
    
    (11
    )Balance outstanding at December 31, 2006
    
    
    8.70
    
    
    
    9,567,507
    
    
    $
    11,733Warrants exercised
    
    
    5.21
    
    
    
    (2,592
    )
    
    
    (5
    )Balance outstanding at December 31, 2007
    
    
    8.70
    
    
    
    9,564,915
    
    
    $
    11,728Balance exercisable at December 31, 2007
    
    
    8.70
    
    
    
    9,564,915
    
    
    $
    11,728Balance of common shares
issuable by warrant seriesNovember 2004 series (1)
    
    
    
    
    
    
    3,156,915
    
    
    
    5,898March 2006 series (2)
    
    
    
    
    
    
    6,408,000
    
    
    
    5,830Balance outstanding at December 31, 2007
    
    
    
    
    
    
    9,564,915
    
    
    $
    11,728
 (1)
    
    The November 2004 series has an effective exercise price of CDN$5.21 per issuable share
(CDN$15.00 per warrant adjusted for the 2.88 exchange ratio associated with the Denison and
IUC merger) and expires on November 24, 2009;(2)
    
    The March 2006 series has an effective exercise price of CDN$10.42 per issuable share
(CDN$30.00 per warrant adjusted for the 2.88 exchange ratio associated with the Denison and
IUC merger) and expires on March 1, 2011;
 17.
    
    CONTRIBUTED SURPLUSA continuity summary of contributed surplus is presented below:
 December 31,
    
    December 31,(in thousands)
    
    2007
    
    2006Balance, beginning of period
    
    $
    30,752
    
    
    $
    1,803Options assumed on acquisition of DMI
    
    
    
    
    
    
    25,635Stock-based compensation expense (note 18)
    
    
    1,382
    
    
    
    6,203Fair value of stock options exercised
    
    
    (6,663
    )
    
    
    (2,889
    )Balance, end of period
    
    $
    25,471
    
    
    $
    30,752
 -26-




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##### 



18.
    
    STOCK OPTIONSOn November 20, 2006, the Companys shareholders approved amendments to the Companys
stock-based compensation plan (the Plan). The Plan, as amended, provides for the granting of
stock options up to 10% of the issued and outstanding common shares at the time of grant,
subject to a maximum of 20 million common shares. As at December 31, 2007, an aggregate of
9,939,000 options have been granted (less cancellations) since the Plans inception in 1997.Under the Plan, all stock options are granted at the discretion of the Companys board of
directors, including any vesting provisions if applicable. The term of any stock option granted
may not exceed ten years and the exercise price may not be lower than the closing price of the
Companys shares on the last trading day immediately preceding the date of grant. In general,
the term of stock options granted under the Plan ranges from three to five years and vesting
occurs over a three year period.A continuity summary of the stock options of the Company granted under the Plan is presented
below:
 2007
    
    
    
    
    
    2006Weighted-
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    ExerciseNumber of
    
    Price per
    
    Number of
    
    Price perCommon
    
    Share
    
    Common
    
    ShareShares
    
    (CDN $)
    
    Shares
    
    (CDN $)Stock options outstanding, beginning of period
    
    
    6,648,316
    
    
    $
    6.23
    
    
    
    1,863,000
    
    
    $
    2.62Assumed on acquisition of DMI (1)
    
    
    
    
    
    
    
    
    
    
    4,064,012
    
    
    
    3.87Granted
    
    
    717,000
    
    
    
    11.19
    
    
    
    2,458,000
    
    
    
    10.03Exercised
    
    
    (1,367,962
    )
    
    
    4.21
    
    
    
    (1,726,696
    )
    
    
    2.20Expired
    
    
    (36,000
    )
    
    
    10.74
    
    
    
    (10,000
    )
    
    
    5.27Stock options outstanding, end of the period
    
    
    5,961,354
    
    
    $
    7.27
    
    
    
    6,648,316
    
    
    $
    6.23Stock options exercisable, end of period
    
    
    5,520,872
    
    
    $
    6.96
    
    
    
    6,503,315
    
    
    $
    6.25
 (1)
    
    The stock options assumed by the Company on the acquisition of DMI have been adjusted
to reflect the 2.88 exchange ratio (see note 4).
 A summary of stock options outstanding of the Company at December 31, 2007 is presented below:
 Weighted
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    AverageRemaining
    
    
    
    
    
    ExerciseRange of Exercise
    
    Contractual
    
    Number of
    
    Price perPrices per Share
    
    Life
    
    Common
    
    Share(CDN$)
    
    (Years)
    
    Shares
    
    (CDN $)Stock options outstanding$1.88 to $4.87
    
    
    6.48
    
    
    
    1,044,555
    
    
    $
    2.14$5.02 to $7.53
    
    
    7.28
    
    
    
    2,225,799
    
    
    
    5.29$10.08 to $15.30
    
    
    2.10
    
    
    
    2,691,000
    
    
    
    10.89Stock options outstanding, end of period
    
    
    4.80
    
    
    
    5,961,354
    
    
    $
    7.27
 Outstanding options expire between January 2008 and October 2016.
 -27-




---



##### 



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
for the year:
 2007
    
    2006Risk-free interest rate
    
    3.95% to 4.46%
    
    
    3.60%  4.18
    %Expected stock price volatility
    
    
    46.4%  63.0
    %
    
    
    48.3%  69.3
    %Expected life
    
    2.1  3.5 years
    
    2.0 yearsExpected dividend yield
    
    
    
    
    
    
    Fair value per share under options granted
    
    CDN$3.18  CDN$5.32
    
    CDN$1.87  CDN$3.19
 Stock-based compensation has been recognized in the consolidated statement of operations as
follows:
 (in thousands)
    
    2007
    
    2006Mineral property exploration
    
    $
    236
    
    
    $
    833General and administrative
    
    
    1,146
    
    
    
    5,370$
    1,382
    
    
    $
    6,203
 The fair values of stock options with vesting provisions are amortized on a straight-line basis
as stock-based compensation expense over the applicable vesting periods. At December 31, 2007,
the Company had an additional $1,130,000 in stock-based compensation expense to be recognized
periodically to August 2010.19.
    
    ACCUMULATED OTHER COMPREHENSIVE INCOMEA continuity summary of accumulated other comprehensive income is as follows:
 (in thousands)
    
    2007
    
    2006Cumulative foreign currency translation gain (loss)Balance, beginning of period
    
    $
    (8,498
    )
    
    $
    Change in foreign currency translation
    
    
    101,354
    
    
    
    (8,498
    )Balance, end of period
    
    
    92,856
    
    
    
    (8,498
    )Unrealized gains on investmentsBalance, beginning of period
    
    
    
    
    
    
    Unrealized gains as at January 1, 2007, net of tax (1)
    
    
    24,842
    
    
    
    Net increase (decrease) in unrealized gains, net of tax (2)
    
    
    (6,742
    )
    
    
    Balance, end of period
    
    
    18,100
    
    
    
    Accumulated other comprehensive income, end of period
    
    $
    110,956
    
    
    $
    (8,498
    )
 (1)
    
    Reflects the adoption of CICA Section 3855 on January 1, 2007.(2)
    
    Unrealized gains (losses) on investments deemed available-for-sale are included in
other comprehensive income (loss) until realized. When the investment is disposed of or
incurs a decline in value that is other than temporary, the gain (loss) is realized and
reclassified to the income statement. During 2007, approximately $16,836,000 of gains were
realized and reclassified to the income statement within Other income, net.
 -28-




---



##### 



20.
    
    OTHER INCOME, NETThe elements of other income, net in the statement of operations is as follows:
 (in thousands)
    
    2007
    
    2006
    
    2005Net interest and other income
    
    $
    5,665
    
    
    $
    2,614
    
    
    $
    699Gain (loss) on foreign exchange
    
    
    (9,671
    )
    
    
    1,915
    
    
    
    560Gain (loss) on sale of land and equipment
    
    
    (18
    )
    
    
    (24
    )
    
    
    100Gain on sale of portfolio investments (note 6)
    
    
    45,115
    
    
    
    
    
    
    
    2,939Gain (loss) on sale of restricted investments
    
    
    536
    
    
    
    (270
    )
    
    
    (63
    )Equity loss of affiliates (note 6)
    
    
    
    
    
    
    (4,003
    )
    
    
    (1,493
    )Dilution gain of affiliates (note 6)
    
    
    
    
    
    
    7,167
    
    
    
    2,098Minority interest
    
    
    
    
    
    
    
    
    
    
    917Other income, net
    
    $
    41,627
    
    
    $
    7,399
    
    
    $
    5,757
 21.
    
    SEGMENTED INFORMATIONBusiness SegmentsThe Company operates in 2 primary segments  the mining segment and the corporate and other
segment. The mining segment, which has been further subdivided by major geographic regions,
includes activities related to exploration, evaluation and development, mining, milling and the
sale of mineral concentrates. The corporate and other segment includes the results of the
Companys environmental services business, management fees and commission income earned from UPC
and general corporate expenses not allocated to the other segments.For 2007, business segment results were as follows:
 Canada
    
    U.S.A
    
    Africa
    
    Asia
    
    Corporate(in thousands)
    
    Mining
    
    Mining
    
    Mining
    
    Mining
    
    and Other
    
    TotalStatement of Operations:Revenues
    
    
    32,915
    
    
    
    34,736
    
    
    
    
    
    
    
    
    
    
    
    9,113
    
    
    
    76,764ExpensesOperating expenses
    
    
    27,012
    
    
    
    14,598
    
    
    
    
    
    
    
    
    
    
    
    5,428
    
    
    
    47,038Sales royalties and capital taxes
    
    
    2,215
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86
    
    
    
    2,301Mineral property exploration
    
    
    16,638
    
    
    
    126
    
    
    
    
    
    
    
    4,048
    
    
    
    151
    
    
    
    20,963General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,469
    
    
    
    13,46945,865
    
    
    
    14,724
    
    
    
    
    
    
    
    4,048
    
    
    
    19,134
    
    
    
    83,771Income (loss) from operations
    
    
    (12,950
    )
    
    
    20,012
    
    
    
    
    
    
    
    (4,048
    )
    
    
    (10,021
    )
    
    
    (7,007
    )Revenues  supplemental:Uranium concentrates
    
    
    32,915
    
    
    
    32,210
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,125Environmental services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,723
    
    
    
    4,723Management fees and commissions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,390
    
    
    
    4,390Other
    
    
    
    
    
    
    2,526
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,52632,915
    
    
    
    34,736
    
    
    
    
    
    
    
    
    
    
    
    9,113
    
    
    
    76,764Long-lived assets:Property, plant and equipmentPlant and equipment
    
    
    86,810
    
    
    
    38,981
    
    
    
    314
    
    
    
    88
    
    
    
    1,899
    
    
    
    128,092Mineral properties
    
    
    369,066
    
    
    
    18,601
    
    
    
    209,694
    
    
    
    2,370
    
    
    
    
    
    
    
    599,731Intangibles
    
    
    
    
    
    
    484
    
    
    
    
    
    
    
    
    
    
    
    6,495
    
    
    
    6,979Goodwill
    
    
    122,330
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122,330578,206
    
    
    
    58,066
    
    
    
    210,008
    
    
    
    2,458
    
    
    
    8,394
    
    
    
    857,132
 -29-




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##### 



For 2006, business segment results were as follows:
 Canada
    
    U.S.A
    
    Africa
    
    Asia
    
    Corporate(in thousands)
    
    Mining
    
    Mining
    
    Mining
    
    Mining
    
    and Other
    
    TotalStatement of Operations:Revenues
    
    
    7,575
    
    
    
    1,492
    
    
    
    
    
    
    
    
    
    
    
    655
    
    
    
    9,722ExpensesOperating expenses
    
    
    5,860
    
    
    
    908
    
    
    
    
    
    
    
    
    
    
    
    255
    
    
    
    7,023Sales royalties and capital taxes
    
    
    414
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    420Mineral property exploration
    
    
    10,838
    
    
    
    
    
    
    
    
    
    
    
    3,939
    
    
    
    13
    
    
    
    14,790Mineral property write-downs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    204
    
    
    
    
    
    
    
    204General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,379
    
    
    
    11,37917,112
    
    
    
    908
    
    
    
    
    
    
    
    4,143
    
    
    
    11,653
    
    
    
    33,816Income (loss) from operations
    
    
    (9,537
    )
    
    
    584
    
    
    
    
    
    
    
    (4,143
    )
    
    
    (10,998
    )
    
    
    (24,094
    )Revenues  supplemental:Uranium concentrates
    
    
    7,575
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,575Environmental services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    221
    
    
    
    221Management fees and commissions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    430
    
    
    
    430Other
    
    
    
    
    
    
    1,492
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    1,4967,575
    
    
    
    1,492
    
    
    
    
    
    
    
    
    
    
    
    655
    
    
    
    9,722Long-lived assets:Property, plant and equipment
Plant and equipment
    
    
    68,203
    
    
    
    8,776
    
    
    
    
    
    
    
    49
    
    
    
    1,205
    
    
    
    78,233Mineral properties
    
    
    320,390
    
    
    
    4,738
    
    
    
    
    
    
    
    195
    
    
    
    15
    
    
    
    325,338Intangibles
    
    
    
    
    
    
    547
    
    
    
    
    
    
    
    
    
    
    
    10,297
    
    
    
    10,844Goodwill
    
    
    102,841
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,841491,434
    
    
    
    14,061
    
    
    
    
    
    
    
    244
    
    
    
    11,517
    
    
    
    517,246
 -30-




---



##### 



For 2005, business segment results were as follows:
 Canada
    
    U.S.A
    
    Africa
    
    Asia
    
    Corporate(in thousands)
    
    Mining
    
    Mining
    
    Mining
    
    Mining
    
    and Other
    
    TotalStatement of Operations:Revenues
    
    
    
    
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    131ExpensesOperating expenses
    
    
    
    
    
    
    2,477
    
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    2,542Mineral property exploration
    
    
    6,426
    
    
    
    
    
    
    
    
    
    
    
    1,682
    
    
    
    
    
    
    
    8,108Mineral property write-downs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,761
    
    
    
    
    
    
    
    1,761General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,537
    
    
    
    4,5376,426
    
    
    
    2,477
    
    
    
    
    
    
    
    3,443
    
    
    
    4,602
    
    
    
    16,948Loss from operations
    
    
    (6,426
    )
    
    
    (2,426
    )
    
    
    
    
    
    
    (3,443
    )
    
    
    (4,522
    )
    
    
    (16,817
    )Revenues  supplemental:Other
    
    
    
    
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    131
    
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    131Long-lived assets:Property, plant and equipmentPlant and equipment
    
    
    80
    
    
    
    2,966
    
    
    
    
    
    
    
    80
    
    
    
    92
    
    
    
    3,218Mineral properties
    
    
    936
    
    
    
    2,462
    
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    3,548Intangibles
    
    
    
    
    
    
    625
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6251,016
    
    
    
    6,053
    
    
    
    
    
    
    
    230
    
    
    
    92
    
    
    
    7,391
 Revenue ConcentrationThe Companys business is such that, at any given time, it sells its uranium and vanadium
concentrates to and enters into process milling arrangements and other services with a
relatively small number of customers. During 2007, three customers accounted for approximately
91% of total revenues. During 2006, two customers accounted for approximately 79% of total
revenues. During 2005, a process milling customer accounted for approximately 33% of total
revenues.22.
    
    RELATED PARTY TRANSACTIONSUranium Participation CorporationThe Company is a party to a management services agreement with UPC. Under the terms of the
agreement, the Company will receive the following fees from UPC: a) a commission of 1.5% of the
gross value of any purchases or sales of U3O8and UF6 completed
at the request of the Board of Directors of UPC; b) a minimum annual management fee of
CDN$400,000 (plus reasonable out-of-pocket expenses) plus an additional fee of 0.3% per annum
based upon UPCs net asset value between CDN$100,000,000 and CDN$200,000,000 and 0.2% per annum
based upon UPCs net asset value in excess of CDN$200,000,000; c) a fee of CDN$200,000 upon the
completion of each equity financing where proceeds to UPC exceed CDN$20,000,000; d) a fee of
CDN$200,000 for each transaction or arrangement (other than the purchase or sale of
U3O8and UF6) of business where the gross value of such
transaction exceeds CDN$20,000,000 (an initiative); and e) an annual fee up to a maximum of
CDN$200,000, at the discretion of the Board of Directors of UPC, for on-going maintenance or
work associated with an initiative.In accordance with the management services agreement, all uranium investments owned by UPC are
held in accounts with conversion facilities in the name of Denison Mines Inc. as manager for and
on behalf of UPC.The Company was also a party to a temporary revolving credit facility agreement with UPC (not to
exceed CDN$15,000,000). The credit facility terminated on the earlier of repayment or May 10,
2007 and was collateralized by the uranium investments of UPC. Interest under the credit
facility was based upon Canadian bank prime plus 1%. Standby fees also applied at a rate of 1%
of the committed facility amount. As at December 31, 2006, UPC had drawn CDN$11,000,000 under
the facility. The temporary credit facility was fully repaid and cancelled on April 10, 2007.In June 2007, the Company sold 75,000 pounds of U3O8 to UPC at a price of
$130.00 per pound for total consideration of $9,750,000.
 -31-




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##### 



The following transactions were incurred with UPC for the periods noted:
 (in thousands)
    
    2007
    
    2006 (1)RevenueUranium sales
    
    $
    9,750
    
    
    $
    Management fees (including expenses)
    
    
    2,301
    
    
    
    94Commission fees on purchase and sale of uranium
    
    
    2,089
    
    
    
    336Other income (expense):Loan interest under credit facility
    
    
    202
    
    
    
    57Standby fee under credit facility
    
    
    9
    
    
    
    3$
    14,351
    
    
    $
    490
 (1)
    
    The related party transactions for UPC reflect activity from December 1, 2006 to
December 31, 2006 only due to the acquisition of DMI.
 At December 31, 2007, accounts receivable includes $377,000 due from UPC with respect to the
fees indicated above.OtherDuring 2007, the Company had the following additional related party transactions:
 a)
    
    sold 16,562,500 shares of Fortress to a company associated with the Chairman of the
Company for gross proceeds of approximately CDN$20,703,000;b)
    
    incurred management and administrative service fees of $251,000 (2006: $237,000) with a
company owned by the Chairman of the Company which provides corporate development, office
premises, secretarial and other services in Vancouver at a rate of CDN$18,000 per month
plus expenses. At December 31, 2007, an amount of $9,000 (2006: $100,000) was due to this
company; andc)
    
    provided executive and administrative services to Fortress and charged an aggregate of
$69,000 (2006: $112,000) for such services. At December 31, 2007, no amount (2006:
$31,000) was due from Fortress relating to this agreement.
 23.
    
    JOINT VENTURE INTERESTSThe Company conducts a substantial portion of its production and exploration activities through
joint ventures. The joint ventures allocate production and exploration expenses to each joint
venture participant and the participant derives revenue directly from the sale of such product.
The Company records its proportionate share of assets, liabilities and operating costs of the
joint ventures.A summary of joint venture information is as follows:
 (in thousands)
    
    2007
    
    2006Operating expenses
    
    $
    26,179
    
    
    $
    5,799Mineral property exploration
    
    
    14,009
    
    
    
    8,850Mineral property write-downs
    
    
    
    
    
    
    186General and administrative
    
    
    63
    
    
    
    91Net other income
    
    
    (46
    )
    
    
    7Loss for the period before taxes
    
    
    40,205
    
    
    
    14,933Current assets
    
    
    21,044
    
    
    
    13,912Property, plant and equipment
Plant and equipment
    
    
    85,997
    
    
    
    67,492Mineral properties
    
    
    371,437
    
    
    
    319,015Intangibles
    
    
    484
    
    
    
    547Goodwill
    
    
    
    
    
    
    Current liabilities
    
    
    4,177
    
    
    
    3,133Long-term liabilities
    
    
    2,712
    
    
    
    2,226Net investment in joint ventures
    
    $
    472,073
    
    
    $
    395,607
 -32-




---



##### 



24.
    
    SUPPLEMENTAL CASH FLOW INFORMATION
 (in thousands)
    
    2007
    
    2006
    
    2005Changes in non-cash working capital items:Decrease (increase) in trade and other receivables
    
    $
    (28,443
    )
    
    $
    (7,175
    )
    
    $
    1,065Decrease (increase) in inventories
    
    
    (9,468
    )
    
    
    (4,414
    )
    
    
    (2,134
    )Decrease (increase) in other current assets
    
    
    (687
    )
    
    
    (145
    )
    
    
    283Increase (decrease) in accounts payable and
accrued liabilities
    
    
    14,636
    
    
    
    (379
    )
    
    
    115Increase (decrease) in reclamation obligations
    
    
    (436
    )
    
    
    (39
    )
    
    
    331Increase (decrease) in deferred revenue
    
    
    (1,480
    )
    
    
    67
    
    
    
    216Funding of post-retirement benefits
    
    
    (432
    )
    
    
    (16
    )
    
    
    Net change in non-cash working capital items
    
    $
    (26,310
    )
    
    
    (12,101
    )
    
    
    (124
    )
 25.
    
    FINANCIAL INSTRUMENTS
 Credit Risk
  Fair Values
   26.
    
    COMMITMENTS AND CONTINGENCIES
 General Legal Matters
  Third Party Indemnities
  Performance Bonds and Letters of Credit
  -33-




---



##### 



Others
  (in thousands)2008
    
    $
    7672009
    
    
    5022010
    
    
    4722011
    
    
    3872012
    
    
    2562013 and thereafter
    
    
    369
 27.
    
    SUBSEQUENT EVENTS
  28.
    
    MATERIAL DIFFERENCES BETWEEN CANADIAN AND U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  a)
    
    Cash and Equivalents
  b)
    
    Long-Term Investments
  c)
    
    Plant and Equipment
  d)
    
    Mineral Properties
  e)
    
    Joint Ventures
  -34-




---



##### 



f)
    
    Goodwill
  g)
    
    Liabilities
  h)
    
    Dilution Gains
  i)
    
    Foreign Currency Translation
   December 31, 2007Canadian
    
    
    
    
    
    
    
    
    
    U.S.GAAP
    
    
    
    
    
    Adjustments
    
    GAAPCash and cash equivalents
    
    $
    19,680
    
    
    
    (a
    )
    
    $
    (7,862
    )
    
    $
    11,818Property, plant and equipment
    
    
    727,823
    
    
    
    (d
    )
    
    
    (16,444
    )
    
    
    711,379Restricted investments
    
    
    17,797
    
    
    
    (a
    )
    
    
    7,862
    
    
    
    25,659Accounts payable and accrued liabilities
    
    
    22,642
    
    
    
    (g
    )
    
    
    3,114
    
    
    
    25,756Future income tax liability
    
    
    141,525
    
    
    
    (d
    )
    
    
    (4,621
    )
    
    
    136,904Share capital
    
    
    662,949
    
    
    
    (f
    )
    
    
    (616
    )(g
    )
    
    
    (3,114
    )
    
    
    659,219Additional paid-in capital
    
    
    
    
    
    
    (h
    )
    
    
    9,814
    
    
    
    9,814Deficit
    
    
    (14,834
    )
    
    
    (d
    )
    
    
    (16,098
    )(d
    )
    
    
    4,621(f
    )
    
    
    616(h
    )
    
    
    (9,814
    )
    
    
    (35,509
    )Accumulated other comprehensive income
    
    
    110,956
    
    
    
    (d
    )
    
    
    (346
    )
    
    
    110,610
 -35-




---



##### 



December 31, 2006Canadian
    
    
    
    
    
    
    
    
    
    U.S.GAAP
    
    
    
    
    
    Adjustments
    
    GAAPInvestments
    
    $
    16,600
    
    
    
    (b
    )
    
    $
    25,008
    
    
    $
    41,608Property, plant & equipment
    
    
    403,571
    
    
    
    (c
    )
    
    
    301
    
    
    
    403,872Future income tax liability
    
    
    92,204
    
    
    
    (b
    )
    
    
    1,838
    
    
    
    94,042Share capital
    
    
    548,069
    
    
    
    (f
    )
    
    
    (616
    )
    
    
    547,453Additional paid-in capital
    
    
    
    
    
    
    (h
    )
    
    
    9,814
    
    
    
    9,814Deficit
    
    
    (62,078
    )
    
    
    (b
    )
    
    
    2,162(c
    )
    
    
    301(f
    )
    
    
    616(h
    )
    
    
    (9,814
    )
    
    
    (68,813
    )Cumulative translation adjustment
    
    
    (8,498
    )
    
    
    (i
    )
    
    
    8,498
    
    
    
    Accumulated other comprehensive income
    
    
    
    
    
    
    (b
    )
    
    
    25,008(b
    )
    
    
    (4,000
    )
    
    
    
    (i
    )
    
    
    (8,498
    )
    
    
    12,510
  2007
    
    2006
    
    2005Net income (loss) for the period, Canadian
GAAP
    
    
    
    
    
    $
    47,244
    
    
    $
    (16,998
    )
    
    $
    (11,450
    )Depreciation of assets held for resale
    
    
    (c
    )
    
    
    (301
    )
    
    
    
    
    
    
    (31
    )Adjust capitalized mineral property
amounts, net of tax of $4,621
    
    
    (d
    )
    
    
    (11,477
    )
    
    
    
    
    
    
    Adjust dilution gain from equity interests
    
    
    (h
    )
    
    
    
    
    
    
    (7,167
    )
    
    
    (2,098
    )Net income (loss) for the period, U.S. GAAP
    
    
    
    
    
    $
    35,466
    
    
    $
    (24,165
    )
    
    $
    (13,579
    )Comprehensive income, U.S. GAAPNet income (loss) for the period, U.S.
GAAP
    
    
    
    
    
    $
    35,466
    
    
    $
    (24,165
    )
    
    $
    (13,579
    )Unrealized gain on available-for-sale
securities
    
    
    (b
    )
    
    
    (6,742
    )
    
    
    17,735
    
    
    
    2,370Cumulative foreign currency translation
adjustment
    
    
    (i
    )
    
    
    104,842
    
    
    
    (8,498
    )
    
    
    Comprehensive income (loss), U.S. GAAP
    
    
    
    
    
    
    133,566
    
    
    
    (14,928
    )
    
    
    (11,209
    )Basic net income (loss) per share, U.S. GAAP
    
    
    
    
    
    $
    0.19
    
    
    $
    (0.26
    )
    
    $
    (0.17
    )Diluted net Income (loss) per share, U.S. GAAP
    
    
    
    
    
    $
    0.18
    
    
    $
    (0.26
    )
    
    $
    (0.17
    )
 -36-




---



##### 



2007
    
    2006
    
    2005Net cash provided by (used in)
operating activities:Under Canadian GAAP
    
    
    
    
    
    $
    (23,084
    )
    
    $
    (27,494
    )
    
    $
    (12,192
    )Adjustment for capitalized mineral
property amounts
    
    
    (d
    )
    
    
    (11,477
    )
    
    
    
    
    
    
    Under U.S. GAAP
    
    
    
    
    
    $
    (34,561
    )
    
    $
    (27,494
    )
    
    $
    (12,192
    )Net cash provided by (used in)
investing activities:Under Canadian GAAP
    
    
    
    
    
    $
    (158,469
    )
    
    $
    45,752
    
    
    $
    281Adjustment for capitalized mineral
property amounts
    
    
    (d
    )
    
    
    11,477
    
    
    
    
    
    
    
    Under U.S. GAAP
    
    
    
    
    
    $
    (146,992
    )
    
    $
    45,752
    
    
    $
    281Net cash provided by (used in) financing
activities:Under Canadian GAAP
    
    
    
    
    
    $
    107,215
    
    
    $
    45,835
    
    
    $
    5,977Restricted cash from flow-through
financings
    
    
    (a
    )
    
    
    (7,862
    )
    
    
    
    
    
    
    (4,128
    )Under U.S. GAAP
    
    
    
    
    
    $
    99,353
    
    
    $
    45,835
    
    
    $
    1,849
  
 a)
    
    FASB Statement No. 157: Fair Value Measurements (SFAS 157) effective for 2008
establishes a framework for measurement of fair value under generally accepted accounting
principles and expands the disclosure requirements covering fair value measurement. In
February 2008, the FASB amended SFAS 157 to exclude leasing transactions and to delay the
effective date by one year for non financial assets and liabilities that are recognized or
disclosed at fair value in the financial statements on a non recurring basis. The Company
is in the process of determining the effect, if any, the adoption of SFAS 157 will have on
its financial statements.b)
    
    FASB Statement No. 159: The Fair Value Option for Financial Assets and Financial
Liabilities  Including an Amendment of FASB Statement No. 115 (SFAS 159) allows an
entity to choose to measure many financial instruments and certain other items at fair
value, with subsequent changes in fair value being recognized as unrealized gains or losses
in the income statement in the period in which the change occurred. The Statement is
effective for fiscal years beginning on or after November 15, 2007. The Company does not
expect a material affect on its financial results as a result of adopting this standard.c)
    
    FASB Statement No. 160: Noncontrolling Interests in Consolidated Financial Statements
 an amendment of ARB No. 51 (SFAS 160) and FASB Statement No. 141R: Business
Combinations (SFAS 141R) are both effective for annual periods beginning after December
15, 2008. SFAS 160 requires that third party ownership interests in subsidiaries be
presented separately in the equity section of the balance sheet. In addition, the income
attributable to the noncontrolling interest will now be included in consolidated net income
and will be deducted separately at the bottom of the income statement. SFAS 141R requires
that most identifiable assets, liabilities (including obligations for contingent
consideration), noncontrolling interests and goodwill be recorded at full fair value.
Also, for step acquisitions, the acquirer will be required to re-measure its noncontrolling
equity investment in the acquiree at fair value as of the date control is obtained and
recognize any gain or loss in income. The Company has yet to complete its evaluation of the
impact of these pronouncements. -37-