Exhibit 99.3
 Responsibility for Financial Statements
     Ron F. Hochstein
    
    James R. AndersonRon F. Hochstein
    
    James R. AndersonPresident and Chief 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




---



##### 



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




---



##### 



PricewaterhouseCoopers LLP
 Chartered Accountants, Licensed Public Accountants
  - 3 -




---



##### 



DENISON MINES CORP.
 December 31,
    
    
    December 31,2009
    
    
    2008ASSETSCurrentCash and cash equivalents
    
    $
    19,804
    
    
    $
    3,206Trade and other receivables (Note 3)
    
    
    13,773
    
    
    
    13,075Inventories (Note 4)
    
    
    52,216
    
    
    
    44,733Prepaid expenses and other
    
    
    1,607
    
    
    
    1,27587,400
    
    
    
    62,289Inventories  ore in stockpiles (Note 4)
    
    
    1,530
    
    
    
    5,016Investments (Note 5)
    
    
    10,605
    
    
    
    10,691Prepaid expenses and other
    
    
    287
    
    
    
    769Restricted cash and investments (Note 6)
    
    
    21,656
    
    
    
    21,286Property, plant and equipment, net (Note 7)
    
    
    691,039
    
    
    
    717,433Intangibles, net (Note 8)
    
    
    4,436
    
    
    
    4,978Goodwill (Note 9)
    
    
    51,028
    
    
    
    63,240$
    867,981
    
    
    $
    885,702LIABILITIESCurrentAccounts payable and accrued liabilities
    
    $
    9,508
    
    
    $
    23,787Current portion of long-term liabilities:Post-employment benefits (Note 10)
    
    
    380
    
    
    
    329Reclamation and remediation obligations (Note 11)
    
    
    752
    
    
    
    875Debt obligations (Note 12)
    
    
    869
    
    
    
    464Other long-term liabilities (Note 13)
    
    
    313
    
    
    
    2,17911,822
    
    
    
    27,634Deferred revenue
    
    
    3,187
    
    
    
    2,913Provision for post-employment benefits (Note 10)
    
    
    3,426
    
    
    
    3,028Reclamation and remediation obligations (Note 11)
    
    
    17,154
    
    
    
    18,471Debt obligations (Note 12)
    
    
    195
    
    
    
    100,059Other long-term liabilities (Note 13)
    
    
    1,051
    
    
    
    1,191Future income tax liability (Note 14)
    
    
    102,918
    
    
    
    124,054139,753
    
    
    
    277,350SHAREHOLDERS EQUITYShare capital (Note 15)
    
    
    849,488
    
    
    
    666,278Share purchase warrants (Note 16)
    
    
    5,830
    
    
    
    11,728Contributed surplus (Notes 17 and 19)
    
    
    39,922
    
    
    
    30,537Deficit
    
    
    (242,494
    )
    
    
    (95,482
    )Accumulated other comprehensive income (loss) (Note 19)
    
    
    75,482
    
    
    
    (4,709
    )728,228
    
    
    
    608,352$
    867,981
    
    
    $
    885,702Issued and outstanding common shares (Note 15)
    
    
    339,720,415
    
    
    
    197,295,415
  On Behalf of the Board of Directors:
 Ron F. Hochstein
    
    Catherine J. G. StefanDirector
    
    Director
   - 4 -




---



##### 



DENISON MINES CORP.
 Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,2009
    
    
    2008REVENUES(Note 21)
    
    $
    79,170
    
    
    $
    123,184EXPENSESOperating expenses (Note 20)
    
    
    98,145
    
    
    
    118,069Sales royalties and capital taxes
    
    
    1,675
    
    
    
    3,117Mineral property exploration
    
    
    10,120
    
    
    
    20,114General and administrative
    
    
    13,883
    
    
    
    14,754Stock option expense (Note 18)
    
    
    3,847
    
    
    
    6,062Mineral properties impairment (Note 7)
    
    
    100,000
    
    
    
    Intangibles impairment (Note 8)
    
    
    359
    
    
    
    Goodwill impairment (Note 9)
    
    
    22,136
    
    
    
    36,512250,165
    
    
    
    198,628Loss from operations
    
    
    (170,995
    )
    
    
    (75,444
    )Other income (expense), net (Note 20)
    
    
    (14,551
    )
    
    
    2,468Loss before taxes
    
    
    (185,546
    )
    
    
    (72,976
    )Income tax recovery (expense) (Note 14):Current
    
    
    1,691
    
    
    
    899Future
    
    
    36,843
    
    
    
    (8,571
    )Net loss for the year
    
    $
    (147,012
    )
    
    $
    (80,648
    )Net loss per shareBasic
    
    $
    (0.51
    )
    
    $
    (0.42
    )Diluted
    
    $
    (0.51
    )
    
    $
    (0.42
    )Weighted-average number of shares outstanding (in thousands)Basic
    
    
    286,421
    
    
    
    190,218Diluted
    
    
    286,421
    
    
    
    190,218
   - 5 -




---



##### 



DENISON MINES CORP.
 Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,2009
    
    
    2008Share capitalBalance at beginning of year
    
    $
    666,278
    
    
    $
    662,949New shares issued-net of issue costs
    
    
    185,034
    
    
    
    6,073New shares issued under stock option plans
    
    
    
    
    
    
    1,527Fair value of stock options exercised
    
    
    
    
    
    
    996Renunciation of flow-through share liabilities
    
    
    (1,824
    )
    
    
    (5,267
    )Balance at end of year
    
    $
    849,488
    
    
    $
    666,278Share purchase warrantsBalance at beginning of year
    
    $
    11,728
    
    
    $
    11,728Warrants expired
    
    
    (5,898
    )
    
    
    Balance at end of year
    
    $
    5,830
    
    
    $
    11,728Contributed surplusBalance at beginning of year
    
    $
    30,537
    
    
    $
    25,471Stock-based compensation expense
    
    
    3,847
    
    
    
    6,062Fair value of stock options exercised
    
    
    
    
    
    
    (996
    )Warrants expired
    
    
    5,898
    
    
    
    Warrants expired-tax effect
    
    
    (360
    )
    
    
    Balance at end of year
    
    $
    39,922
    
    
    $
    30,537Retained earnings (deficit)Balance at beginning of year
    
    $
    (95,482
    )
    
    $
    (14,834
    )Net loss for the year
    
    
    (147,012
    )
    
    
    (80,648
    )Balance at end of year
    
    $
    (242,494
    )
    
    $
    (95,482
    )Accumulated other comprehensive income (loss)Balance at beginning of year
    
    $
    (4,709
    )
    
    $
    110,956Unrealized gain (loss) on investments change-net of tax
    
    
    3,368
    
    
    
    (17,884
    )Foreign currency translation change
    
    
    76,823
    
    
    
    (97,781
    )Balance at end of year
    
    $
    75,482
    
    
    $
    (4,709
    )Total shareholders equity
    
    $
    728,228
    
    
    $
    608,352Comprehensive lossNet loss for the year
    
    $
    (147,012
    )
    
    $
    (80,648
    )Unrealized gain (loss) on investments change-net of tax
    
    
    3,368
    
    
    
    (17,884
    )Foreign currency translation change
    
    
    76,823
    
    
    
    (97,781
    )Comprehensive loss for the year
    
    $
    (66,821
    )
    
    $
    (196,313
    )
   - 6 -




---



##### 



DENISON MINES CORP.
 Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,2009
    
    
    2008CASH PROVIDED BY (USED IN):OPERATING ACTIVITIESNet loss for the year
    
    $
    (147,012
    )
    
    $
    (80,648
    )Items not affecting cash:Depletion, depreciation, amortization and accretion
    
    
    36,324
    
    
    
    39,588Investments impairment
    
    
    149
    
    
    
    12,952Mineral properties impairment
    
    
    100,000
    
    
    
    Intangibles impairment
    
    
    359
    
    
    
    Goodwill impairment
    
    
    22,136
    
    
    
    36,512Stock-based compensation
    
    
    3,847
    
    
    
    6,062Losses (gains) on asset disposals
    
    
    (5,679
    )
    
    
    (181
    )Losses (gains) on restricted investments
    
    
    809
    
    
    
    (1,176
    )Non-cash inventory adjustments
    
    
    4,290
    
    
    
    9,748Future income tax expense (recovery)
    
    
    (36,843
    )
    
    
    8,571Foreign exchange
    
    
    17,476
    
    
    
    (15,544
    )Net change in non-cash working capital
items (Note 20)
    
    
    (38,298
    )
    
    
    (24,648
    )Net cash used in operating activities
    
    
    (42,442
    )
    
    
    (8,764
    )INVESTING ACTIVITIESDecrease in notes receivable
    
    
    200
    
    
    
    274Purchase of investments
    
    
    (711
    )
    
    
    (13,376
    )Proceeds from sale of long-term investments
    
    
    11,128
    
    
    
    1,316Expenditures on property, plant and equipment
    
    
    (38,850
    )
    
    
    (101,227
    )Proceeds from sale of property, plant and equipment
    
    
    1,914
    
    
    
    4Increase in restricted cash and investments
    
    
    (797
    )
    
    
    (2,697
    )Net cash used in investing activities
    
    
    (27,116
    )
    
    
    (115,706
    )FINANCING ACTIVITIESIncrease (decrease) in debt obligations
    
    
    (99,620
    )
    
    
    99,547Issuance of common shares for cash:New share issues
    
    
    185,034
    
    
    
    6,073Exercise of stock options and warrants
    
    
    
    
    
    
    1,527Net cash provided by financing activities
    
    
    85,414
    
    
    
    107,147Net increase (decrease) in cash and cash equivalents
    
    
    15,856
    
    
    
    (17,323
    )Foreign exchange effect on cash and cash equivalents
    
    
    742
    
    
    
    849Cash and cash equivalents, beginning of year
    
    
    3,206
    
    
    
    19,680Cash and cash equivalents, end of year
    
    $
    19,804
    
    
    $
    3,206Cash and cash equivalents comprised of:Cash
    
    
    19,804
    
    
    
    3,206Cash equivalents
    
    
    
    
    
    
    $
    19,804
    
    
    $
    3,206Supplemental cash flow disclosure:Interest paid
    
    
    1,576
    
    
    
    2,514Income taxes paid
    
    
    450
    
    
    
    1,811
   - 7 -




---



##### 



DENISON MINES CORP.
 1.
    
    NATURE OF OPERATIONS
 Denison Mines Corp. (DMC) 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 processing uranium bearing waste materials, referred to as alternate feed
materials.
 Denison Mines Inc. (DMI), a subsidiary of DMC, 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.
 References to 2009 and 2008 refer to the year ended December 31, 2009 and the year ended
December 31, 2008 respectively.
 2.
    
    SUMMARY OF SIGNIFICANT MINING INTERESTS AND ACCOUNTING POLICIES
 Basis of Presentation
 These consolidated financial statements have been prepared by management in U.S. dollars, unless
otherwise stated, in accordance with generally accepted accounting principles in Canada
(Canadian GAAP). All adjustments considered necessary by management for fair presentation
have been included in these financial statements. Differences between Canadian GAAP and those
generally accepted accounting principles and practices in the United States (U.S. GAAP) that
would have a significant impact on these financial statements are disclosed in Note 26.
 Significant Mining Interests
 The following table sets forth the Companys ownership of its significant mining interests that
have projects at the development stage within them as at December 31, 2009:
 OwnershipLocation
    
    InterestThrough majority owned subsidiariesArizona Strip
    
    USA
    
    
    100.00
    %Henry Mountains
    
    USA
    
    
    100.00
    %Colorado Plateau
    
    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 Joint Venture
    
    Canada
    
    
    22.50
    %Midwest Joint Venture
    
    Canada
    
    
    25.17
    %
  - 8 -




---



##### 



Significant Accounting Policies
 The principal accounting policies and practices under Canadian GAAP followed by the Company in
the preparation of these financial statements are summarized below:
 a)
    
    Principles of Consolidation
 These consolidated financial statements include the accounts of DMC, its subsidiaries and its
share of assets, liabilities, revenues and expenses of jointly-controlled companies and
unincorporated ventures proportionate to the Companys percentage ownership or participating
interest. All significant intercompany balances and transactions have been eliminated on
consolidation.
 The companies and ventures controlled by DMC are consolidated using the full consolidation
method. Control is defined as the direct or indirect power to govern a companys financing,
investing and strategic operating policies without co-operation of others in order to benefit
from its activities.
 The companies and ventures jointly controlled by DMC are consolidated using the proportionate
consolidation method. Joint control is deemed to exist when agreements exist that require that
material changes to the operating, investing and financing policies of such company or venture
be approved by a percentage of the participating interest sufficiently high enough to prevent
any one participant from exercising unilateral control.
 The companies and ventures in which DMC exercises significant influence over financial policy
and management (associates) are accounted for using the equity method. In determining whether
significant influence exists, the Company evaluates a number of criteria including the
percentage of voting interest held, and representation on the board of directors or in senior
management.
 Variable Interest Entities (VIEs) (which include, but are not limited to, special purpose
entities, trusts, partnerships and other legal structures) are consolidated by the Company if it
is the primary beneficiary who will absorb the majority of the entities expected losses and / or
expected residual returns.
 b)
    
    Use of Estimates
 The presentation of consolidated financial statements in conformity with Canadian GAAP requires
the Companys management to make estimates and assumptions that affect the amounts reported in
these financial statements and related note disclosures. Although the Company regularly reviews
the estimates and assumptions that affect these financial statements, actual results may be
materially different. Significant estimates and assumptions made by management relate to the
quantities and net realizable value of inventories, assumptions used in impairment testing and
valuation of long-lived assets, determination of reporting units and the valuation of reporting
units for goodwill determination, determination of economic lives, recoverability of and
reclamation obligations for property, plant and equipment and the evaluation of post-employment
benefits, future income taxes, contingent liabilities and stock-based compensation.
 c)
    
    Foreign Currency Translation
 The Companys currency of measurement for its Canadian operations is the Canadian dollar. As
the Companys reporting currency is the U.S. dollar, the Company applies the current rate method
for translation of the Companys net investment in its self sustaining Canadian operations.
Assets and liabilities denominated in currencies other than the U.S. dollar are translated at
the exchange rate in effect at the balance sheet date. Revenues and expenses denominated in
currencies other than the U.S. dollar are translated at the average rate in effect during the
period. Foreign currency translation gains and losses are recorded in accumulated other
comprehensive income which will be recognized in the results of operations upon the dilution or
other reduction in equity of the net investment.
 The Companys fully integrated subsidiaries are translated into US dollars using the temporal
method. Under this method, monetary assets and liabilities are translated at the year-end
exchange rate and all other assets and liabilities are translated at applicable historical
exchange rates. Revenue and expense items are translated at the rate of exchange in effect at
the date the transactions are recognized in income. Realized exchange gains and losses and
currency translation adjustments are included in the results of operations as a component of
Other income (expense). Foreign currency transactions are translated using the exchange rates
prevailing at the rate of exchange in effect at the date the transactions are recognized in
income. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation of monetary assets and liabilities denominated in foreign currencies are
included in the results of operations.
  - 9 -




---



##### 



d)
    
    Income Taxes
 Income taxes are accounted for using the liability method of accounting for future income taxes.
Under this method, current income taxes are recognized for the estimated income taxes payable
for the current period. Future income tax assets and liabilities are recognized based on
temporary differences between the financial statement carrying values of the existing assets and
liabilities and their respective income tax bases using enacted or substantively enacted tax
rates expected to apply to taxable income during the years in which the differences are expected
to be recovered or settled. The recognition of future income tax assets such as tax losses
available for carry forward are limited to the amount that is more likely than not to be
realized.
 e)
    
    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 tax benefits of the eligible exploration expenditures
incurred under this arrangement are renounced to the subscribers. The foregone tax benefits to
the Company are recognized by reducing the proceeds received from these financings by the tax
effects of the renunciation to the subscribers at the time of renunciation by the Company.
 f)
    
    Cash and Cash Equivalents
 Cash and cash equivalents consist of cash on deposit and highly-liquid, short-term money market
instruments which, on acquisition, have terms to maturity of three months or less. Cash and
cash equivalents which are subject to restrictions that prevent its use for current purposes are
classified as restricted cash and cash equivalents.
 g)
    
    Inventories
 Expenditures, including depreciation, depletion and amortization of assets, incurred in the
mining and processing activities that will result in future concentrate production are deferred
and accumulated as ore in stockpiles and in-process and concentrate inventories. These amounts
are carried at the lower of average cost or net realizable value (NRV). NRV is the difference
between the estimated future concentrate price (net of selling costs) and estimated costs to
complete production into a saleable form.
 Stockpiles are comprised of coarse ore that has been extracted from the mine and is available
for further processing. Mining production costs are added to the stockpile as incurred
(including overburden removal and in-pit stripping costs) and removed from the stockpile based
upon the average cost per ton or tonne of ore produced from mines considered to be in commercial
production. The current portion of ore in stockpiles represents the amount expected to be
processed in the next twelve months.
 In-process and concentrate inventories include the cost of the ore removed from the stockpile, 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
according to the first-in first-out method (FIFO) or at weighted average cost, depending on the
type of inventory or work-in-process.
 Mine and mill supplies are valued at the lower of average cost and net realizable value as
measured by replacement cost.
 h)
    
    Investments
 Equity investments over which the Company does not exercise significant influence are accounted
for as available for sale securities.
 Equity investments over which the Company exercises significant influence are accounted for
using the equity method, whereby the investment is initially recorded at cost and adjusted to
recognize the Companys share of earnings or losses, reduced by dividends and distributions
received.
 i)
    
    Property, Plant and Equipment
 Property, plant and equipment
 Property, plant and equipment are recorded at acquisition or production cost and carried net of
depreciation. Depreciation is calculated on a straight line or unit of production basis as
appropriate. Where a straight line methodology is used, the assets are depreciated to their
estimated residual value over an estimated useful life which ranges from three to fifteen years
depending upon the asset type. Where a unit of production
methodology is used, the assets are depreciated to their estimated residual value over the
useful life defined by managements best estimate of recoverable reserves and resources in the
current mine plan. When assets are retired or sold, the resulting gains or losses are reflected
in current earnings as a component of other income or expense.
  - 10 -




---



##### 



Mineral Property Acquisition, Exploration and Development Costs
 Mineral property costs include acquisition costs relating to acquired mineral use and
exploration rights and are capitalized.
 Exploration and development expenditures are expensed as incurred on mineral properties not
sufficiently advanced as to identify their development potential. At the point in time that a
mineral property is considered to be sufficiently advanced and development potential is
identified, all further expenditures for the current year and subsequent years are capitalized
as incurred. These costs will include further exploration, costs of maintaining the site until
commercial production, costs to initially delineate the ore body, costs for shaft sinking and
access, lateral development, drift development and infrastructure development. Such costs
represent the net expenditures incurred and capitalized as at the balance sheet date and do not
necessarily reflect present or future values.
 Once a development mineral property goes into commercial production, the property is classified
as Producing and the accumulated costs are amortized over the estimated recoverable resources
in the current mine plan using a unit of production basis. Commercial production occurs when a
property is substantially complete and ready for its intended use.
 Impairment of Long-Lived Assets
 Long-lived assets are assessed by management for impairment whenever events or changes in
circumstances indicate that the related carrying amounts may not be recoverable. To test
recoverability, the net book value of the long-lived asset is compared to the estimated
undiscounted future cash flows generated by their use and eventual disposal. Impairment is
measured as the excess of the carrying value over the fair value, determined principally by
discounting the estimated net future cash flows expected to be generated from the use and
eventual disposal of the related asset. In the event that the Company has insufficient
information about the long-lived asset to estimate future cash flows to test the recoverability
of the capitalized cost amounts, the Company will test for impairment by comparing the fair
value to the carrying amount without first performing a test for recoverability.
 j)
    
    Asset Retirement Obligations
 Asset retirement obligations, any statutory, contractual or other legal obligation related to
the retirement of tangible long-lived assets, are recognized when such obligations are incurred,
if a reasonable estimate of fair value can be determined. These obligations are measured
initially at fair value and the resulting costs are capitalized and added to the carrying value
of the related assets. In subsequent periods, the liability is adjusted for the accretion of
the discount and the expense is recorded in the income statement. Changes in the amount or
timing of the underlying future cash flows are immediately recognized as an increase or decrease
in the carrying amounts of the liability and related assets. These costs are amortized to the
results of operations over the life of the asset. Reductions in the amount of the liability are
first applied against the amount of the net reclamation asset on the books with any residual
value being recorded in the statement of operations.
 The Companys activities are subject to numerous governmental laws and regulations. Estimates
of future reclamation liabilities for asset decommissioning and site restoration are recognized
in the period when such liabilities are incurred. These estimates are updated on a periodic
basis and are subject to changing laws, regulatory requirements, changing technology and other
factors which will be recognized when appropriate. Liabilities related to site restoration
include long-term treatment and monitoring costs and incorporate total expected costs net of
recoveries. Expenditures incurred to dismantle facilities, restore and monitor closed resource
properties are charged against the related reclamation and remediation liability.
 k)
    
    Goodwill
 Business combinations are accounted for under the purchase method of accounting whereby acquired
assets and liabilities are recorded at fair value as of the date of acquisition. The excess of
the purchase price over the fair value is recorded as goodwill and allocated to the applicable
reporting unit. Goodwill is tested annually for impairment or more frequently if current events
or changes in circumstances indicate that the carrying value of the goodwill of a reporting unit
may exceed its fair value. A two-step impairment test is used to identify potential impairment
in goodwill and to measure the amount of goodwill impairment, if any. In the first step, the
fair value of a reporting unit is compared with its carrying value, including goodwill. When the
fair value of a reporting unit
exceeds its carrying amount, goodwill of the reporting unit is considered not to be impaired and
the second step of the impairment test is not undertaken. When the carrying amount of a
reporting unit exceeds its fair value, the fair value of the reporting units goodwill
(determined on the same basis as the value of goodwill is determined in a business combination)
is compared with its carrying amount to measure the amount of the impairment loss, if any. When
the carrying amount of reporting unit goodwill exceeds the fair value of the goodwill, an
impairment loss is recognized in an amount equal to the excess.
  - 11 -




---



##### 



l)
    
    Post-Employment Benefits
 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 on immediate pension from active service prior to 1997. The estimated
cost of providing these benefits was actuarially determined using the projected benefits method
and is recorded on the balance sheet at its estimated present value. The interest cost on this
unfunded liability is being accreted over the remaining lives of this retiree group.
 m)
    
    Revenue Recognition
 Revenue from the sale of mineral concentrates to customers is recognized when persuasive
evidence of an arrangement exists, delivery has occurred under the terms of the arrangement, the
price is fixed or determinable and collection is reasonably assured. For uranium, revenue is
typically recognized when delivery is effected by book transfer at the applicable uranium
storage facility. For vanadium related products, revenue is typically recognized at the time of
shipment to the customer.
 Revenue from alternate feed process milling is recognized as material is processed, in
accordance with the specifics of the applicable processing agreement. In general, the Company
collects a recycling fee for receipt of the material and/or receives the proceeds from the sale
of any uranium concentrate and other metals produced. Deferred revenues represent processing
proceeds received on delivery of materials but in advance of the required processing activity.
 Revenue on environmental service contracts is recognized using the percentage of completion
method, whereby sales, earnings and unbilled accounts receivable are recorded as related costs
are incurred. Earnings rates are adjusted periodically as a result of revisions to projected
contract revenues and estimated costs of completion. Losses, if any, are recognized fully when
first anticipated. Revenues from engineering services are recognized as the services are
provided in accordance with customer agreements.
 Management fees from UPC are recognized as management services are provided under the contract
on a monthly basis. Commission revenue earned on acquisition or sale of U3O8and UF6 on behalf of UPC is recognized on the date when title passes to or from
UPC.
 n)
    
    Stock-Based Compensation
 The Company uses a fair value-based method of accounting for stock options granted to employees,
including directors, and to non-employees. The fair value of stock options granted is
recognized on a straight-line basis over the applicable vesting period as an increase in
stock-based compensation expense and the contributed surplus account. When such stock options
are exercised, the proceeds received by the Company, together with the respective amount from
contributed surplus, are credited to share capital.
 o)
    
    Earnings (Loss) per Share
 Basic earnings (loss) per share is computed by dividing net income (loss) for the period by the
weighted-average number of common shares outstanding for the period. The Company follows the
treasury stock method in the calculation of diluted earnings per share. Under this method,
the calculation of diluted earnings per share assumes that the proceeds to be received from the
exercise of in the money stock options and warrants are applied to repurchase common shares at
the average market price for the period. The diluted loss per share is equal to the basic loss
per share due to the anti-dilutive effect of the stock options and other dilutive securities.
 p)
    
    Financial Instruments  Recognition and Measurement / Presentation and Disclosure
 Financial assets and financial liabilities are recognized on the Consolidated Balance Sheet when
the Company becomes a party to the contractual provisions of the financial instrument. All
financial instruments are required to be measured at fair value on initial recognition except
for certain financial instruments that arise in related party transactions. Measurement in
subsequent periods is dependent upon the classification of the financial instrument as
held-for-trading, available-for-sale, loans and receivables, held-to-maturity, or other
financial liabilities. The held-for-trading classification is applied when an entity is
trading in an instrument or alternatively the standard permits that any financial instrument
be irrevocably designated as held-for-trading. For financial instruments
classified as other than held-for-trading, transaction costs are added to the initial fair value
of the related financial instrument.
  - 12 -




---



##### 



Financial assets and financial liabilities classified as held-for-trading are measured at fair
value with changes in those fair values recognized on the Consolidated Statement of Operations.
Financial assets classified as available-for-sale are measured at fair value with changes in
those fair values recognized in other comprehensive income. Financial assets classified as
loans and receivables, held to maturity or other financial liabilities are measured at amortized
cost using the effective interest rate method of amortization. Where a financial asset
classified as held-to-maturity or available-for-sale has a loss in value which is considered to
be other than temporary, the loss is recognized in the results of operations.
 For financial instruments measured at amortized cost, transaction costs or fees, premiums or
discounts earned or incurred are recorded, at inception, net against the fair value of the
financial instrument. Interest expense is recorded using the effective interest method.
 The Company has implemented the following classifications:
 
    
    Cash and cash equivalents (including restricted cash and investments) are classified
as held-for-trading and any period change in fair value is recorded through the results
from operations.
 
    
    Trade and other receivables and Notes receivable are classified as loans and
receivables and are measured at amortized cost using the effective interest rate
method. Interest income is recorded in net income, as applicable.
 
    
    Investments are classified as available-for-sale and any period change in fair value
is recorded through other comprehensive income. Where the investment experiences an
other- than temporary decline in value, the loss is recognized in the results of
operations.
 
    
    Accounts payable and accrued liabilities and Debt obligations are classified as
other financial liabilities and are measured at amortized cost using the effective
interest rate method. Interest expense is recorded in other income, as applicable.
 New Accounting Standards Adopted
 The Company adopted the following new accounting standards issued by the CICA Handbook effective
January 1, 2009:
 a)
    
    CICA Handbook Section 3064 Goodwill and intangible assets which provides guidance on
the recognition, measurement, presentation and disclosure for goodwill and intangible
assets, other than the initial recognition of goodwill or intangible assets acquired in a
business combination. There was no impact to the Companys financial statements from
adopting this standard.
 b)
    
    In January 2009, the CICA issued EIC 173 Credit Risk and the Fair Value of Financial
Assets and Financial Liabilities which requires the entity to consider its own credit risk
as well as the credit risk of its counterparties when determining the fair value of
financial assets and liabilities, including derivative instruments. The standard is
effective for the Companys 2009 fiscal year, commencing January 1, 2009 and is required to
be applied retrospectively without restatement to prior periods. The adoption of this
pronouncement did not have a material impact on the valuation of the Companys financial
assets or financial liabilities.
 c)
    
    In March 2009, the CICA issued an EIC Abstract on Impairment Testing of Mineral
Exploration Properties, EIC 174. This abstract discusses the analysis recommended to be
performed to determine if there has been an impairment of mineral exploration properties.
The Company considered the recommendations discussed in the Abstract effective for fiscal
periods beginning January 1, 2009 when testing for impairment of mineral properties.
Adoption of this pronouncement did not have any material effect on the financial
statements.
 d)
    
    The CICA amended Section 3855 Financial Instruments to clarify that, upon
reclassification of a financial instrument out of the trading category, an assessment must
be completed to determine whether an embedded derivative is required to be bifurcated. In
addition, the amendment prohibits the reclassification of a financial instrument out of
trading when the derivative embedded in the financial instrument cannot be separately
measured from the host contract. The amendment is applicable to all reclassifications
occurring after July 1, 2009. Adoption of this standard did not have any material effect
on the financial statements.
 e)
    
    In August 2009, the CICA issued further amendments to Section 3855. The amendments
changed the definition of a loan such that certain debt securities may be classified as
loans if they do not have a quoted price in an active market and the Company does not have
the intent to sell the security immediately or in the near term. As a result, debt
securities classified as loans will be assessed for impairment using the incurred credit
loss model of Section 3025 to reduce the carrying value of a loan to its estimated
realizable amount.
  - 13 -




---



##### 



Loan impairment accounting requirements are also applied to held-to-maturity financial
assets as a result of the amendments. Debt securities that are classified as
available-for-sale continue to be written down to their fair value when the impairment is
considered to be other than temporary. However, the impairment loss can be reversed if the
fair value substantially increases and the increase can be objectively related to an event
occurring after the impairment loss was recognized. Adoption of this standard did not have
any material effect on the financial statements.
 f)
    
    In June 2009, the CICA amended Section 3862 Financial Instruments  Disclosures to
require enhanced disclosure about the fair value assessments of the financial instruments.
The new disclosures are based on a fair value hierarchy that categorizes financial
instruments measured at fair value at one of three levels according to the reliability of
the inputs used to estimate the fair values. The amendments apply to annual financial
statements for fiscal years ending after September 30, 2009. The Company has adopted these
disclosures effective in the December 31, 2009 annual financial statements (see note 24).
 Accounting Standards Issued but not yet Adopted
 The CICA has issued the following accounting standards effective for the fiscal years beginning
on or after January 1, 2010:
 a)
    
    CICA Handbook Section 1582 Business Combinations, Section 1601 Consolidated
Financial Statements and Section 1602 Non-Controlling Interests which replace the former
CICA 1581 Business Combinations and CICA 1600 Consolidated Financial Statements and
establish a new section for accounting for a non-controlling interest in a subsidiary.
These sections provide the Canadian equivalent to FASB Statements No. 141(R) Business
Combinations and No. 160 Non-Controlling Interests in Consolidated Financial Statements.
CICA 1582 is effective for business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period after January 1, 2011. CICA 1601
and CICA 1602 apply to interim and annual consolidated financial statements relating to
years beginning on or after January 1, 2011 although early adoption is permitted. CICA
1582, which replaces Handbook Section 1581, Business Combinations, establishes standards
for the measurement of a business combination and the recognition and measurement of assets
acquired and liabilities assumed. CICA 1601, which replaces Handbook Section 1600, carries
forward the existing Canadian guidance on aspects of the preparation of consolidated
financial statements subsequent to acquisition other than non-controlling interests. CICA
1602 establishes guidance for the treatment of non-controlling interests subsequent to
acquisition through a business combination.
 Comparative Numbers
 Certain classifications of the comparative figures have been changed to conform to those used in
the current period.
 3.
    
    TRADE AND OTHER RECEIVABLES
 The trade and other receivables balance consists of:
 December 31,
    
    
    December 31,(in thousands)
    
    2009
    
    
    2008Trade receivablesmineral concentrate sales
    
    $
    9,422
    
    
    $
    9,303Trade receivables-other
    
    
    2,114
    
    
    
    1,558Trade and other receivables in joint ventures
    
    
    928
    
    
    
    309GST and VAT receivables
    
    
    1,127
    
    
    
    1,379Sundry receivables
    
    
    182
    
    
    
    345Notes receivable
    
    
    
    
    
    
    181$
    13,773
    
    
    $
    13,075
  - 14 -




---



##### 



4.
    
    INVENTORIES
 The inventories balance consists of:
 December 31,
    
    
    December 31,(in thousands)
    
    2009
    
    
    2008Uranium concentrates and work-in-progress (1)
    
    $
    19,921
    
    
    $
    12,378Vanadium concentrates and work-in-progress (2)
    
    
    442
    
    
    
    4,445Inventory of ore in stockpiles
    
    
    28,366
    
    
    
    26,841Mine and mill supplies
    
    
    5,017
    
    
    
    6,085$
    53,746
    
    
    $
    49,749Inventoriesby duration:Current
    
    $
    52,216
    
    
    $
    44,733Long-termore in stockpiles
    
    
    1,530
    
    
    
    5,016$
    53,746
    
    
    $
    49,749
 (1)
    
    The Uranium concentrates and work-in-progress inventory is presented net of a write-down
of $5,910,000 as at December 31, 2009 and $nil as at December 31, 2008.(2)
    
    The Vanadium concentrates and work-in-progress inventory is presented net of a
write-down of $7,302,000 as at December 31, 2009 and $9,500,000 as at December 31, 2008. Operating expenses include write downs of $3,712,000 and $9,500,000 relating to the net
realizable value of the Companys uranium and vanadium inventories for the years ending December
31, 2009 and 2008 respectively.
 Long-term ore in stockpile inventory represents an estimate of the amount of pounds on the
stockpile in excess of the next twelve months of planned mill production.
 5.
    
    INVESTMENTS
 The investments balance consists of:
 December 31,
    
    
    December 31,(in thousands)
    
    2009
    
    
    2008InvestmentsAvailable for sale securities at fair value
    
    $
    10,605
    
    
    $
    10,691$
    10,605
    
    
    $
    10,691
 At December 31, 2009, investments consist of equity instruments of six publicly-traded companies
at a fair value of $10,605,000 (December 31, 2008: $10,691,000).
 Investment Sales
 During 2009, the Company sold equity interests in three public companies for cash consideration
of $11,128,000. The resulting gain has been included in net other income (expense) in the
statement of operations (see note 20).
 During 2008, the Company sold equity interests in four public companies for cash consideration
of $1,316,000. The resulting gain has been included in net other income (expense) in the
statement of operations (see note 20).
 Investment Purchases
 During 2009, the Company acquired additional equity interests in two public companies at a cost
of $711,000.
 During 2008, the Company acquired additional equity interests in three public companies at a
cost of $13,376,000. The largest purchase during 2008 was 5,465,000 units of Uranerz Energy
Corporation (Uranerz) for $13,329,000. Each unit is comprised of one common share and
one-half of one common share purchase warrant. Each whole warrant entitles the holder to
purchase one additional share of Uranerz for a period of 24 months (subject to acceleration
under certain conditions) at an exercise price of US$3.50 per share.
  - 15 -




---



##### 



Investment Impairments
 During 2009, the Company has taken impairment charges of $149,000 on its investments (Uranerz -
$119,000; Virginia Energy Resources Inc  $30,000).
 During 2008, due to the significant decline in the market value of the Companys investments
during the fourth quarter, the Company has taken impairment charges of $12,952,000 (Uranerz -
$7,602,000; Energy Metals Limited  $5,350,000) (see Note 20).
 6.
    
    RESTRICTED CASH AND INVESTMENTS
 The Company has certain restricted cash and investments deposited to collateralize its
reclamation obligations. The restricted cash and investments balance consists of:
 December 31,
    
    
    December 31,(in thousands)
    
    2009
    
    
    2008Cash
    
    $
    23
    
    
    $
    1Cash equivalents
    
    
    3,066
    
    
    
    1,232Investments
    
    
    18,567
    
    
    
    20,053$
    21,656
    
    
    $
    21,286Restricted cash and investments  by item:U.S. mill and mine reclamation
    
    $
    19,564
    
    
    $
    19,745Elliot Lake reclamation trust fund
    
    
    2,092
    
    
    
    1,541$
    21,656
    
    
    $
    21,286
 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 and the U.S, Bureau of Land Management for estimated reclamation costs
associated with the White Mesa mill and U.S. mining properties. In 2009, the Company has not
deposited any additional monies into its collateral account (2008: $2,123,000).
 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 2009, the Company withdrew $943,000
(CDN$1,034,000) (2008: $603,000 (CDN$643,000)) and deposited an additional $1,109,000
(CDN$1,352,000) into the Elliot Lake Reclamation Trust Fund (2008: $497,000 (CDN$530,000)).
  - 16 -




---



##### 



7.
    
    PROPERTY, PLANT AND EQUIPMENT
 Property, plant and equipment consist of:
 December 31,
    
    
    December 31,(in thousands)
    
    2009
    
    
    2008Plant and equipment:Cost
    
    $
    172,675
    
    
    $
    144,526Construction-in-progress
    
    
    11,861
    
    
    
    27,884Accumulated depreciation
    
    
    (27,915
    )
    
    
    (18,084
    )$
    156,621
    
    
    $
    154,326Mineral properties:Cost
    
    $
    686,457
    
    
    $
    594,199Impairment
    
    
    (103,441
    )
    
    
    (3,441
    )Accumulated amortization
    
    
    (48,598
    )
    
    
    (27,651
    )$
    534,418
    
    
    $
    563,107Net book value
    
    $
    691,039
    
    
    $
    717,433Net book valuecontinuity summary:Opening
    
    $
    717,433
    
    
    $
    727,823Additions
    
    
    44,254
    
    
    
    104,857Depreciation and amortization
    
    
    (27,171
    )
    
    
    (30,866
    )Impairment
    
    
    (100,000
    )
    
    
    Write-down
    
    
    (382
    )
    
    
    Disposals
    
    
    (1,371
    )
    
    
    (19
    )Reclamation asset adjustment
    
    
    349
    
    
    
    139Foreign exchange
    
    
    57,927
    
    
    
    (84,501
    )$
    691,039
    
    
    $
    717,433
 Plant and Equipment  Mining
 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 is 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.
 During 2009, the Company recorded a write-down of $382,000 associated with the planned disposal
of certain of its mining equipment at its McClean Lake mining operation. The net book value of
the equipment, prior to the write-down, is $1,881,000. The write-down has been included in net
other income (expense) in the statement of operations.
 Plant and Equipment  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.
Amounts spent on development projects are capitalized as mineral property assets. Exploration
projects are expensed.
  - 17 -




---



##### 



The most significant of the Companys mineral property interests are as follows:
 Canada
 The Company has a 22.5% interest in the McClean Lake 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.
 Other significant mineral property interests that the Company has in Canada but which are not
yet in the development stage include:
 a)
    
    Wheeler River  the Company has a 60% interest in the project (located in the Athabasca
Basin);
 b)
    
    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;
 c)
    
    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. During 2009, the
Company fulfilled its obligations under the option agreement and increased its ownership
interest in the project to 22.5%; and
 d)
    
    Park Creek  In the first quarter of 2006, the Company entered into an option agreement
to earn up to a 75% interest in the Park Creek project. The Company is required to incur
exploration expenditures of CDN$2,800,000 over three years to earn an initial 49% interest
and a further CDN$3,000,000 over two years to earn an additional 26% interest. As at
December 31, 2009, the Company has incurred a total of CDN$3,785,000 towards the option and
has earned a 49% ownership interest in the project under the phase-in ownership provisions
of the agreement.
 United States
 The Company has 100% interests in various mines in the Colorado Plateau, Arizona Strip and Henry
Mountains mining districts located in Colorado, Arizona and Utah which are either in operations,
development or on standby.
 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.
 Zambia
 The Company has a 100% interest in the Mutanga project located in Zambia. In the third quarter
of 2009, the Company tested the Mutanga project mineral property for impairment as a result of
additional information becoming available concerning estimated mining recoveries within the
latest mine plan, increases in project cost estimates and also a decline in the long term
uranium price outlook. The carrying value of the project failed the stage one impairment test
based on the revised outlook. As a result, the Company undertook a stage two impairment test
and assessed the fair value of the Mutanga project by estimating the value of the projects
resource potential based on recently published market value comparables for companies operating
in a similar geographical area. The Company assessed the comparability of the market value data
by looking at the nature of the mineral properties held by the other companies including the
size, stage of exploration and development, forecast cost structure, estimated grade and
political stability of the country in which the projects are located to determine an appropriate
fair value.
 The Company recorded a pre-tax impairment charge of $100,000,000 representing the excess of
carrying value of the mineral property over the fair value derived during the stage two
impairment test. The impairment charge has been recorded in the Africa mining segment (see note
21). The Company also recorded a $30,000,000 future tax recovery as a result of the impairment
charge.
  - 18 -




---



##### 



8.
    
    INTANGIBLES
 Intangibles consist of:
 December 31,
    
    
    December 31,(in thousands)
    
    2009
    
    
    2008Cost
    
    $
    7,791
    
    
    $
    6,825Impairment
    
    
    (359
    )
    
    
    Accumulated amortization
    
    
    (2,996
    )
    
    
    (1,847
    )$
    4,436
    
    
    $
    4,978Net book value-by item:UPC management services agreementCost
    
    
    7,041
    
    
    
    6,075Accumulated amortization
    
    
    (2,605
    )
    
    
    (1,518
    )Urizon technology licencesCost
    
    
    750
    
    
    
    750Accumulated amortization and impairment
    
    
    (750
    )
    
    
    (329
    )$
    4,436
    
    
    $
    4,978Net book valuecontinuity summaryOpening
    
    $
    4,978
    
    
    $
    6,979Impairment
    
    
    (359
    )
    
    
    Amortization
    
    
    (855
    )
    
    
    (900
    )Foreign exchange
    
    
    672
    
    
    
    (1,101
    )$
    4,436
    
    
    $
    4,978
 UPC Management Services Agreement
 The UPC management services agreement is associated with the acquisition of DMI in 2006. 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 Licences
 The Company has a 50% interest in a joint venture with Nuclear Fuel Services, Inc. (NFS) (the
Urizon joint venture). The purpose of the joint venture is to pursue an alternate feed
program for the White Mesa mill which is focused on a portion of the U.S. Department of Energy
(DOE) excess uranium inventories. NFS contributed its technology licence to the joint venture
while the Company contributed $1,500,000 in cash together with its technology licence. 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 licence is being amortized over an estimated useful life of 12 years and
represents the Companys 50% interest in Urizons technology licences.
 As at December 31, 2009, the DOE material has not yet been processed and remains a component of
the DOE uranium management plan. Due to delays and uncertainty in the DOEs plans for the
management of this material and the fact that the Urizon program may not ultimately be the
chosen disposition option, the Company has recorded a pre-tax impairment charge of $359,000 in
2009 to adjust the carrying value of the Urizon Technology licence to $nil. The impairment
charge has been recorded in the U.S mining segment (see note 21).
  - 19 -




---



##### 



9.
    
    GOODWILL
 A continuity summary of goodwill is presented below:
 December 31,
    
    
    December 31,(in thousands)
    
    2009
    
    
    2008Goodwill, beginning of year
    
    $
    63,240
    
    
    $
    122,330Impairment charge
    
    
    (22,136
    )
    
    
    (36,512
    )Foreign exchange
    
    
    9,924
    
    
    
    (22,578
    )Goodwill, end of year
    
    $
    51,028
    
    
    $
    63,240Goodwill-by business unit:Canada mining segment
    
    $
    51,028
    
    
    $
    63,240
 The Companys acquisition of DMI in 2006 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 2009, based on managements revised outlook for its Canada mining segment, the Company
recorded an impairment charge of $22,136,000 representing the carrying value of the goodwill in
excess of fair value. Fair value was determined by using estimated future net cash flows which
included estimated recoverable reserves, future consensus prices, future foreign exchange rates
and estimated operating and capital costs.
 In 2008, the Company experienced adverse economic conditions and depressed uranium prices.
Based on managements revised outlook, the Company recorded an impairment charge of $36,512,000
representing the carrying value of the goodwill in excess of fair value. Fair value was
determined by using estimated future net cash flows which included estimated recoverable
reserves, future consensus prices, future foreign exchange rates and estimated operating and
capital costs.
 10.
    
    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
December 1, 2008. 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
    
    
    7.50
    %Initial medical cost growth rate per annum
    
    
    11.00
    %Medical cost growth rate per annum decline to
    
    
    5.00
    %Year in which medical cost growth rate reaches its final level
    
    
    2014Dental cost growth rate per annum
    
    
    4.00
    %
  - 20 -




---



##### 



Post-employment benefits consist of:
 December 31,
    
    
    December 31,(in thousands)
    
    2009
    
    
    2008Accrued benefit obligation
    
    $
    3,594
    
    
    $
    3,157Unamortized experience gain
    
    
    212
    
    
    
    200$
    3,806
    
    
    $
    3,357Post-employment benefits liability-by duration:Current
    
    $
    380
    
    
    $
    329Non-current
    
    
    3,426
    
    
    
    3,028$
    3,806
    
    
    $
    3,357Post-employment liabilitycontinuity summary:Opening
    
    $
    3,357
    
    
    $
    4,434Benefits paid
    
    
    (281
    )
    
    
    (338
    )Interest cost
    
    
    221
    
    
    
    194Amortization of experience gain
    
    
    (18
    )
    
    
    (127
    )Foreign exchange
    
    
    527
    
    
    
    (806
    )$
    3,806
    
    
    $
    3,357
 The unamortized experience gain is being amortized on a straight-line basis over the average
life expectancy of the retiree group of 10.7 years as per the December 1, 2008 actuarial
valuation.
 11.
    
    RECLAMATION AND REMEDIATION OBLIGATIONS
 Reclamation and remediation obligations consist of:
 December 31,
    
    
    December 31,(in thousands)
    
    2009
    
    
    2008Reclamation and remediation liability-by location:U.S. Mill and Mines
    
    $
    8,609
    
    
    $
    11,436Elliot Lake
    
    
    8,155
    
    
    
    6,734McLean Lake and Midwest Joint Ventures
    
    
    1,142
    
    
    
    1,176$
    17,906
    
    
    $
    19,346Reclamation and remediation liabilityby duration:Current
    
    $
    752
    
    
    $
    875Non-current
    
    
    17,154
    
    
    
    18,471$
    17,906
    
    
    $
    19,346Reclamation and remediation liability-continuity summary:Opening
    
    $
    19,346
    
    
    $
    20,389Accretion
    
    
    1,482
    
    
    
    1,996Expenditures incurred
    
    
    (1,051
    )
    
    
    (849
    )Liability
adjustments  income statement
    
    
    (3,478
    )
    
    
    (478
    )Liability adjustments  balance sheet
    
    
    350
    
    
    
    139Foreign exchange
    
    
    1,257
    
    
    
    (1,851
    )$
    17,906
    
    
    $
    19,346
  - 21 -




---



##### 



Site Restoration: U.S. Mill and Mines
 The 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 $6,054,000 (2008: $8,892,000) and $2,555,000 (2008: $2,544,000), respectively. The
above accrual represents the Companys best estimate of the present value of future reclamation
costs, discounted at rates ranging from 6.75% to 7.5%. The undiscounted amount of estimated
future reclamation costs is $28,033,000 (2008: $23,717,000). Reclamation costs are expected to
be incurred between 2012 and 2028.
 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 Company and Stanrock sites and for treatment of water discharged from
these areas. The Company conducts its activities at both sites pursuant to decommissioning
licences 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 7.0%.
The undiscounted amount of estimated future reclamation costs is $46,964,000 (CDN$49,358,000)
(2008: $39,020,000 (CDN$47,527,000)).
 Spending on restoration activities at the Elliot Lake site are funded from monies in the Elliot
Lake Reclamation Trust fund (Note 6).
 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 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 7.0%. The undiscounted amount of estimated future
reclamation costs is $20,421,000 (CDN$21,461,000) (2008: $14,035,000 (CDN$17,095,000)).
Reclamation costs are expected to be incurred between 2025 and 2055.
 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$9,698,000.
 12.
    
    DEBT OBLIGATIONS
 Debt obligations consist of:
 At December 31,
    
    
    At December 31,(in thousands)
    
    2009
    
    
    2008Revolving line of credit
    
    $
    
    
    
    $
    99,998Notes payable and other financing
    
    
    1,064
    
    
    
    525$
    1,064
    
    
    $
    100,523Debt obligationsby duration:Current
    
    
    869
    
    
    
    464Non-current
    
    
    195
    
    
    
    100,059$
    1,064
    
    
    $
    100,523
 Revolving Line of Credit
 In July 2008, the Company put in place a $125,000,000 revolving term credit facility (the
facility) with the Bank of Nova Scotia. The facility is repayable in full on June 30, 2011.
 In the fourth quarter of 2009, the Company completed the renegotiation of the facility, reducing
the amount of the facility to $60,000,000 and amending the financial covenants. The revised
facility now contains three financial covenants, one based on maintaining a certain level of
tangible net worth, a second requiring a minimum current ratio to be maintained and the other
requiring the Company to reduce borrowings under the facility to $35,000,000 for a period of
time each quarter before drawing further amounts. The maturity date of the
amended facility remains the same as the original maturity date.
  - 22 -




---



##### 



The borrower under the facility is DMI and 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. In addition, each of
DMCs material U.S subsidiaries has provided an unlimited full recourse guarantee secured by a
pledge of all of its shares and a first-priority security interest in all of its present and
future personal property.
 Interest payable under the facility is bankers acceptance or LIBOR rate plus a margin or prime
rate plus a margin. The facility is subject to standby fees. The weighted average interest
rate paid by the Company during 2009 was 2.70% (2008  4.48%).
 As at December 31, 2009, the Company has no outstanding borrowings under the facility (December
31, 2008  $99,998,000). At December 31, 2009, approximately $9,228,000 of the facility is
being utilized as collateral for certain letters of credit and is not available to draw upon
(December 31, 2008  $6,645,000).
 The Company has deferred $1,186,000 (CDN$1,246,000) of incremental costs associated with the
set-up and subsequent amendment of the facility. These costs are being amortized over the three
year term of the facility. The unamortized portion of the asset is included in prepaid
expenses and other on the consolidated balance sheet.
 Scheduled Debt Obligation Maturities
 The table below represents currently scheduled maturities of debt obligations over the next 5
years
 (in thousands)2010
    
    $
    8692011
    
    
    612012
    
    
    612013
    
    
    582014
    
    
    152015 and thereafter
    
    
    
 13.
    
    OTHER LONG-TERM LIABILITIES
 Other long-term liabilities consist of:
 At December 31,
    
    
    At December 31,(in thousands)
    
    2009
    
    
    2008Unamortized fair value of sales contracts
    
    $
    313
    
    
    $
    2,429Unamortized fair value of toll milling contracts
    
    
    951
    
    
    
    821Other
    
    
    100
    
    
    
    120$
    1,364
    
    
    $
    3,370Other long-term liabilitiesby duration:Current
    
    
    313
    
    
    
    2,179Non-current
    
    
    1,051
    
    
    
    1,191$
    1,364
    
    
    $
    3,370
 Unamortized fair values of sales contracts are amortized to revenue as deliveries under the
applicable contracts are made.
  - 23 -




---



##### 



14.
    
    INCOME TAXES
 The 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:
 (in thousands)
    
    2009
    
    
    2008Combined basic tax rate
    
    
    33.0
    %
    
    
    33.5
    %Loss before taxes
    
    $
    (185,546
    )
    
    $
    (72,976
    )Income tax expense (recovery) at basic tax rate
    
    
    (61,230
    )
    
    
    (24,447
    )Non-deductible amounts
    
    
    12,569
    
    
    
    19,597Non-taxable amounts
    
    
    (3,936
    )
    
    
    (9,138
    )Previously unrecognized future tax assets
    
    
    (2,579
    )
    
    
    (5,267
    )Difference in foreign tax rates
    
    
    3,874
    
    
    
    504Change in valuation allowance
    
    
    15,557
    
    
    
    14,083Impact of legislative changes
    
    
    (2,292
    )
    
    
    10,738Other
    
    
    (497
    )
    
    
    1,602Tax expense (recovery) per consolidated
financial statements
    
    $
    (38,534
    )
    
    $
    7,672
 The tax effects of temporary differences resulting in future income tax assets and future income
tax liabilities are presented below:
 December 31,
    
    
    December 31,(in thousands)
    
    2009
    
    
    2008Future income tax assets:Inventory
    
    $
    2,500
    
    
    $
    3,515Property, plant and equipment, net
    
    
    9,277
    
    
    
    9,202Investments
    
    
    772
    
    
    
    1,220Deferred revenue
    
    
    1,302
    
    
    
    1,114Post-employment benefits
    
    
    1,015
    
    
    
    960Reclamation and remediation obligations
    
    
    5,994
    
    
    
    6,160Other long-term liabilities
    
    
    367
    
    
    
    890Tax loss carryforwards
    
    
    41,687
    
    
    
    12,566Other
    
    
    9,079
    
    
    
    4,94271,993
    
    
    
    40,569Future income tax liability:Inventory
    
    
    (918
    )
    
    
    (2,802
    )Long-term investments
    
    
    (143
    )
    
    
    (580
    )Property, plant and equipment, net
    
    
    (132,939
    )
    
    
    (136,754
    )Intangibles
    
    
    (1,182
    )
    
    
    (1,247
    )Other
    
    
    (1,688
    )
    
    
    (756
    )Future tax liabilities  net
    
    
    (64,877
    )
    
    
    (101,570
    )Valuation allowance
    
    
    (38,041
    )
    
    
    (22,484
    )Net future income tax liabilities
    
    $
    (102,918
    )
    
    $
    (124,054
    )
 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, 2009, the Company had the following non-capital loss carry-forwards available
for tax purposes:
 AmountCountry
    
    (in thousands)
    
    
    ExpiryAustralia
    
    $
    249
    
    
    UnlimitedCanada
    
    
    21,215
    
    
    2028-2029Mongolia
    
    
    417
    
    
    2010-2011United States
    
    
    83,406
    
    
    2026-2029Zambia
    
    
    5,618
    
    
    2011-2014
 The tax benefit of the above Australian, Canadian, Mongolian, United States and Zambian
non-capital loss carry-forwards has not been recognized in the financial statements.
 15.
    
    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)
    
    Shares
    
    
    AmountBalance at December 31, 2007
    
    
    189,731,635
    
    
    $
    662,949Issued for cash:New issue gross proceeds
    
    
    7,275,000
    
    
    
    6,469New issue gross issue costs
    
    
    
    
    
    
    (396
    )Exercise of stock options
    
    
    288,780
    
    
    
    1,527Renunciation of flow-through share liability
    
    
    
    
    
    
    (5,267
    )Fair value of stock options exercised
    
    
    
    
    
    
    9967,563,780
    
    
    
    3,329Balance at December 31, 2008
    
    
    197,295,415
    
    
    $
    666,278Issued for cash:New issue gross proceeds
    
    
    142,425,000
    
    
    
    193,646New issue gross issue costs
    
    
    
    
    
    
    (8,612
    )Renunciation of flow-through share liability
    
    
    
    
    
    
    (1,824
    )142,425,000
    
    
    
    183,210Balance at December 31, 2009
    
    
    339,720,415
    
    
    $
    849,488
 New Issues
 In June 2009, the Company completed an equity financing of 73,000,000 common shares at a price
of CDN$1.30 per share for gross proceeds of $82,522,000 (CDN$94,900,000). Of the 73,000,000
shares issued, 58,000,000 were issued to a subsidiary of Korea Electric Power Corporation
(KEPCO) and 15,000,000 shares were issued to entities affiliated with Lukas Lundin, a director
of the Company.
 In June 2009, the Company completed a bought deal financing of 40,000,000 common shares at a
price of CDN$2.05 per share for gross proceeds of $71,144,000 (CDN$82,000,000).
 In June 2009, the Company completed a private placement of 675,000 flow-through common shares at
a price of CDN$2.18 per share for gross proceeds of $1,297,000 (CDN$1,471,500). The income tax
benefits of this issue have been renounced to the subscriber in February 2010. The shares were
issued to a former director of the Company.
 In January 2009, the Company issued 28,750,000 common shares at a price of CDN$1.65 per share
for gross proceeds of $38,683,000 (CDN$47,437,500).
  - 25 -




---



##### 



In December 2008, the Company completed a private placement of 7,275,000 flow-through common shares at a price of CDN$1.10 per share for gross proceeds of $6,469,000 (CDN$8,002,500). The
income tax benefits of this issue were renounced to the subscribers in February 2009.
 Flow-Through Share Issues
 The 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, 2009, the Company has fully met its CDN$8,002,500 December 2008 flow-through
share obligation. The Company renounced the tax benefit of this issue to subscribers in
February 2009.
 As at December 31, 2009, the Company estimates that it has spent CDN$136,000 of its
CDN$1,471,500 June 2009 flow-through share obligation. The Company renounced the tax benefit of
this issue to its subscriber in February 2010.
 16.
    
    SHARE PURCHASE WARRANTS
 A 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 December 31, 2007
    
    
    8.70
    
    
    
    9,564,915
    
    
    $
    11,728Warrants exercised
    
    
    
    
    
    
    
    
    
    
    Warrants expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance outstanding at December 31, 2008
    
    
    8.70
    
    
    
    9,564,915
    
    
    $
    11,728Warrants exercised
    
    
    
    
    
    
    
    
    
    
    Warrants expired (2)
    
    
    5.21
    
    
    
    (3,156,915
    )
    
    
    (5,898
    )5.21
    
    
    
    (3,156,915
    )
    
    
    (5,898
    )Balance outstanding at December 31, 2009
    
    
    10.42
    
    
    
    6,408,000
    
    
    $
    5,830Balance exercisable at December 31, 2009
    
    
    10.42
    
    
    
    6,408,000
    
    
    $
    5,830Balance outstanding  by warrant seriesMarch 2006 series (1)
    
    
    
    
    
    
    6,408,000
    
    
    
    5,830Balance outstanding at December 31, 2009
    
    
    
    
    
    
    6,408,000
    
    
    $
    5,830
 (1)
    
    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.(2)
    
    The November 2004 series had 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 expired on November 24, 2009. Upon expiry in 2009, 3,156,915 (or 1,096,141
before adjusting for the exchange ratio) of the warrants expired unexercised. 17.
    
    CONTRIBUTED SURPLUS
 A continuity summary of contributed surplus is presented below:
 December 31,
    
    
    December 31,(in thousands)
    
    2009
    
    
    2008Balance, beginning of year
    
    $
    30,537
    
    
    $
    25,471Stock-based compensation expense (note 18)
    
    
    3,847
    
    
    
    6,062Fair value of stock options exercised
    
    
    
    
    
    
    (996
    )Warrant expiries
    
    
    5,898
    
    
    
    Warrant expiries-tax
    
    
    (360
    )
    
    
    Balance, end of year
    
    $
    39,922
    
    
    $
    30,537
  - 26 -




---



##### 



18.
    
    STOCK OPTIONS
 The Companys stock-based compensation plan (the Plan) 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 20,000,000 common shares. As at December 31, 2009, an aggregate of 13,464,376
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:
 2009
    
    
    
    
    
    
    2008Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseNumber of
    
    
    Price per
    
    
    Number of
    
    
    Price perCommon
    
    
    Share
    
    
    Common
    
    
    ShareShares
    
    
    (CDN $)
    
    
    Shares
    
    
    (CDN $)Stock options outstanding,
beginning of year
    
    
    5,536,384
    
    
    $
    7.11
    
    
    
    5,961,354
    
    
    $
    7.27Granted
    
    
    5,491,500
    
    
    
    2.08
    
    
    
    3,093,000
    
    
    
    7.57Exercised
    
    
    
    
    
    
    
    
    
    
    (288,780
    )
    
    
    5.30Forfeitures  voluntary
    
    
    
    
    
    
    
    
    
    
    (2,415,490
    )
    
    
    8.49Expired
    
    
    (2,942,894
    )
    
    
    9.09
    
    
    
    (813,700
    )
    
    
    6.54Stock options outstanding, end of year
    
    
    8,084,990
    
    
    $
    2.97
    
    
    
    5,536,384
    
    
    $
    7.11Stock options exercisable, end of year
    
    
    4,962,689
    
    
    $
    3.32
    
    
    
    4,864,301
    
    
    $
    7.33
 A summary of stock options outstanding of the Company at December 31, 2009 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$1.37 to $4.99
    
    
    4.38
    
    
    
    6,609,675
    
    
    $
    2.07$5.00 to $9.99
    
    
    4.93
    
    
    
    1,107,639
    
    
    
    5.71$10.00 to $15.30
    
    
    0.57
    
    
    
    367,676
    
    
    
    10.97Stock options outstanding, end of year
    
    
    4.28
    
    
    
    8,084,990
    
    
    $
    2.97
 A summary of stock options outstanding of the Company at December 31, 2008 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$1.37 to $4.99
    
    
    5.42
    
    
    
    1,217,575
    
    
    $
    2.01$5.00 to $9.99
    
    
    5.99
    
    
    
    1,866,799
    
    
    
    5.49$10.00 to $15.30
    
    
    1.05
    
    
    
    2,452,010
    
    
    
    10.87Stock options outstanding, end of year
    
    
    3.68
    
    
    
    5,536,384
    
    
    $
    7.11
 Options outstanding at December 31, 2009 expire between January 2010 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:
 2009
    
    
    2008Risk-free interest rate
    
    
    1.78%  2.40
    %
    
    
    2.58%  3.29
    %Expected stock price volatility
    
    
    83.4%  89.6
    %
    
    
    52.2%  61.7
    %Expected life
    
    
    3.5 years
    
    
    
    2.1  3.5 yearsExpected forfeitures
    
    
    
    
    
    
    Expected dividend yield
    
    
    
    
    
    
    Fair value per share under options granted
    
    
    CDN$0.89  CDN$1.36
    
    
    
    CDN$0.63  CDN$4.49
 Stock-based compensation would be allocated as follows in the consolidated statement of
operations:
 (in thousands)
    
    2009
    
    
    2008Operating expenses
    
    $
    612
    
    
    $
    599Mineral property exploration
    
    
    148
    
    
    
    591General and administrative
    
    
    3,087
    
    
    
    4,872$
    3,847
    
    
    $
    6,062
 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. During 2008, 2,415,490
stock options were voluntarily forfeited with an associated fair value of $5,250,000 which has
been expensed. At December 31, 2009, the Company had an additional $3,557,000 in stock-based
compensation expense to be recognized periodically to February 2012.
 19.
    
    ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
 A continuity summary of accumulated other comprehensive income (loss) is as follows:
 (in thousands)
    
    2009
    
    
    2008Cumulative foreign currency translation gain (loss)Balance, beginning of year
    
    $
    (4,925
    )
    
    $
    92,856Change in foreign currency translation
    
    
    76,823
    
    
    
    (97,781
    )Balance, end of year
    
    
    71,898
    
    
    
    (4,925
    )Unrealized gains on investmentsBalance, beginning of year
    
    
    216
    
    
    
    18,100Net increase (decrease) in unrealized gains, net of tax (1)
    
    
    3,368
    
    
    
    (17,884
    )Balance, end of year
    
    
    3,584
    
    
    
    216Accumulated other comprehensive income (loss), end of year
    
    $
    75,482
    
    
    $
    (4,709
    )
 (1)
    
    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 2009, approximately $5,532,000 of gains from asset
disposals and $149,000 of other than temporary losses were realized and reclassified to the
income statement within Other income, net. During 2008, approximately $196,000 of gains
from asset disposals and $12,952,000 of other than temporary losses were realized and
reclassified to the income statement within Other income, net.  - 28 -




---



##### 



20.
    
    SUPPLEMENTAL FINANCIAL INFORMATION
 The elements of operating expenses in the statement of operations is as follows:
 (in thousands)
    
    2009
    
    
    2008Cost of goods sold  mineral concentrates
    
    $
    76,771
    
    
    $
    95,325Mining and development
    
    
    50,848
    
    
    
    98,739Less: absorption to stockpiles, mineral properties
    
    
    (48,200
    )
    
    
    (97,595
    )Mineral property amortization and stockpile
depletion
    
    
    38,738
    
    
    
    51,824Milling and conversion
    
    
    46,364
    
    
    
    64,193Less: absorption to concentrates
    
    
    (82,450
    )
    
    
    (112,187
    )Reclamation  accretion / adjustments
    
    
    (1,938
    )
    
    
    1,609Post-employment  accretion / adjustments
    
    
    203
    
    
    
    67Selling expenses
    
    
    1,357
    
    
    
    309Cost of services
    
    
    12,161
    
    
    
    6,037Inventory  non-cash adjustments
    
    
    4,291
    
    
    
    9,748Operating expenses
    
    $
    98,145
    
    
    $
    118,069
 The elements of other income (expense), net in the statement of operations is as follows:
 (in thousands)
    
    2009
    
    
    2008Interest income
    
    $
    785
    
    
    $
    1,160Interest expense
    
    
    (1,438
    )
    
    
    (2,652
    )Gains (losses) on:Foreign exchange
    
    
    (17,476
    )
    
    
    15,544Land, plant and equipment
    
    
    147
    
    
    
    125Investment disposals
    
    
    5,532
    
    
    
    196Investment other than temporary losses
    
    
    (149
    )
    
    
    (12,952
    )Restricted cash and investments 
fair value change
    
    
    (809
    )
    
    
    1,176Other
    
    
    (1,143
    )
    
    
    (129
    )Other income (expense), net
    
    $
    (14,551
    )
    
    $
    2,468
 The net change in non-cash working capital items in the statement of cash flows is as follows:
 (in thousands)
    
    2009
    
    
    2008Decrease (increase) in non-cash working capital items:Trade and other receivables
    
    $
    344
    
    
    $
    23,812Inventories
    
    
    (22,229
    )
    
    
    (51,099
    )Prepaid expenses and other current assets
    
    
    (284
    )
    
    
    136Accounts payable and accrued liabilities
    
    
    (15,071
    )
    
    
    3,136Reclamation and remediation obligations
    
    
    (1,051
    )
    
    
    (849
    )Deferred revenue
    
    
    274
    
    
    
    554Post-employment benefits
    
    
    (281
    )
    
    
    (338
    )Net change in non-cash working capital items
    
    $
    (38,298
    )
    
    
    (24,648
    )
  - 29 -




---



##### 



21.
    
    SEGMENTED INFORMATION
 Business Segments
 The Company operates in two primary segments  the mining segment and the services 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 services 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 2009, business segment results were as follows:
 Canada
    
    
    U.S.A
    
    
    Africa
    
    
    Asia
    
    
    Services(in thousands)
    
    Mining
    
    
    Mining
    
    
    Mining
    
    
    Mining
    
    
    and Other
    
    
    TotalStatement of Operations:Revenues
    
    
    26,211
    
    
    
    38,211
    
    
    
    
    
    
    
    
    
    
    
    14,748
    
    
    
    79,170ExpensesOperating expenses
    
    
    32,024
    
    
    
    53,908
    
    
    
    
    
    
    
    
    
    
    
    12,213
    
    
    
    98,145Sales royalties and capital taxes
    
    
    1,688
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )
    
    
    1,675Mineral property exploration
    
    
    7,726
    
    
    
    252
    
    
    
    2,054
    
    
    
    88
    
    
    
    
    
    
    
    10,120General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,883
    
    
    
    13,883Stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,847
    
    
    
    3,847Mineral property impairment
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    100,000Intangibles impairment
    
    
    
    
    
    
    359
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    359Goodwill impairment
    
    
    22,136
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,13663,574
    
    
    
    54,519
    
    
    
    102,054
    
    
    
    88
    
    
    
    29,930
    
    
    
    250,165Loss from operations
    
    
    (37,363
    )
    
    
    (16,308
    )
    
    
    (102,054
    )
    
    
    (88
    )
    
    
    (15,182
    )
    
    
    (170,995
    )Revenues  supplemental:Uranium concentrates
    
    
    26,211
    
    
    
    33,678
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59,889Vanadium related concentrates
    
    
    
    
    
    
    4,480
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,480Environmental services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,226
    
    
    
    12,226Management fees and commissions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,522
    
    
    
    2,522Alternate feed processing and other
    
    
    
    
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5326,211
    
    
    
    38,211
    
    
    
    
    
    
    
    
    
    
    
    14,748
    
    
    
    79,170Long-lived assets:Plant and equipmentCost
    
    
    98,248
    
    
    
    81,991
    
    
    
    940
    
    
    
    523
    
    
    
    2,834
    
    
    
    184,536Accumulated depreciation
    
    
    (5,481
    )
    
    
    (20,278
    )
    
    
    (372
    )
    
    
    (287
    )
    
    
    (1,497
    )
    
    
    (27,915
    )Mineral properties, net
    
    
    321,306
    
    
    
    78,765
    
    
    
    126,306
    
    
    
    8,041
    
    
    
    
    
    
    
    534,418Intangibles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,436
    
    
    
    4,436Goodwill
    
    
    51,028
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,028465,101
    
    
    
    140,478
    
    
    
    126,874
    
    
    
    8,277
    
    
    
    5,773
    
    
    
    746,503Capital additions:Property, plant and equipment
    
    
    4,674
    
    
    
    34,933
    
    
    
    2,975
    
    
    
    1,410
    
    
    
    262
    
    
    
    44,254
  - 30 -




---



##### 



For 2008, business segment results were as follows:
 Canada
    
    
    U.S.A
    
    
    Africa
    
    
    Asia
    
    
    Services(in thousands)
    
    Mining
    
    
    Mining
    
    
    Mining
    
    
    Mining
    
    
    and Other
    
    
    TotalStatement of Operations:Revenues
    
    
    52,698
    
    
    
    61,995
    
    
    
    
    
    
    
    
    
    
    
    8,491
    
    
    
    123,184ExpensesOperating expenses
    
    
    44,432
    
    
    
    67,612
    
    
    
    
    
    
    
    
    
    
    
    6,025
    
    
    
    118,069Sales royalties and capital taxes
    
    
    3,016
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101
    
    
    
    3,117Mineral property exploration
    
    
    11,953
    
    
    
    298
    
    
    
    3,079
    
    
    
    4,784
    
    
    
    
    
    
    
    20,114General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,754
    
    
    
    14,754Stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,062
    
    
    
    6,062Goodwill impairment
    
    
    36,512
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,51295,913
    
    
    
    67,910
    
    
    
    3,079
    
    
    
    4,784
    
    
    
    26,942
    
    
    
    198,628Loss from operations
    
    
    (43,215
    )
    
    
    (5,915
    )
    
    
    (3,079
    )
    
    
    (4,784
    )
    
    
    (18,451
    )
    
    
    (75,444
    )Revenues  supplemental:Uranium concentrates
    
    
    52,698
    
    
    
    61,890
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114,588Environmental services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,562
    
    
    
    5,562Management fees and commissions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,929
    
    
    
    2,929Alternate feed processing and other
    
    
    
    
    
    
    105
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10552,698
    
    
    
    61,995
    
    
    
    
    
    
    
    
    
    
    
    8,491
    
    
    
    123,184Long-lived assets:Plant and equipmentCost
    
    
    82,243
    
    
    
    86,233
    
    
    
    1,031
    
    
    
    464
    
    
    
    2,439
    
    
    
    172,410Accumulated depreciation
    
    
    (4,020
    )
    
    
    (12,374
    )
    
    
    (362
    )
    
    
    (182
    )
    
    
    (1,146
    )
    
    
    (18,084
    )Mineral properties, net
    
    
    289,637
    
    
    
    43,324
    
    
    
    223,456
    
    
    
    6,690
    
    
    
    
    
    
    
    563,107Intangibles
    
    
    
    
    
    
    422
    
    
    
    
    
    
    
    
    
    
    
    4,556
    
    
    
    4,978Goodwill
    
    
    63,240
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,240431,100
    
    
    
    117,605
    
    
    
    224,125
    
    
    
    6,972
    
    
    
    5,849
    
    
    
    785,651Capital additions:Property, plant and equipment
    
    
    14,756
    
    
    
    71,001
    
    
    
    14,394
    
    
    
    4,595
    
    
    
    111
    
    
    
    104,857
 Revenue Concentration
 The 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 2009, two customers in the mining segment
accounted for approximately 51% of total revenues. During 2008, four customers in the mining
segment accounted for approximately 68% of total revenues.
 22.
    
    RELATED PARTY TRANSACTIONS
 Uranium Participation Corporation
 The 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 uranium 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 ofuranium) of business
where the gross value of such transaction exceeds CDN$20,000,000 (an initiative); 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; and f) a fee equal to 1.5% of the
gross value of any uranium held by UPC prior to the completion of any acquisition of at least
90% of the common shares of UPC.
  - 31 -




---



##### 



In accordance with the management services agreement, all uranium investments owned by UPC are
held in accounts with conversion facilities in the name of DMI as manager for and on behalf of
UPC.
 From time to time, the Company has also provided temporary revolving credit facilities to UPC
which generate interest and standby fee income and sold uranium concentrates to UPC.
 The following transactions were incurred with UPC for the periods noted:
 (in thousands)
    
    2009
    
    
    2008RevenueUranium sales (1)
    
    $
    
    
    
    $
    3,225Management fees (including expenses)
    
    
    1,541
    
    
    
    1,695Commission fees on purchase and sale of uranium
    
    
    981
    
    
    
    1,234$
    2,522
    
    
    $
    6,154
 (1)
    
    In 2008, the Company sold 50,000 pounds of U3O8to UPC at a price
of $64.50 per pound for total consideration of $3,225,000. At December 31, 2009, accounts receivable includes $165,000 (2008: $130,000) due from UPC
with respect to the fees and transactions indicated above.
 Korea Electric Power Corporation (KEPCO)
 In June 2009, Denison completed definitive agreements with KEPCO. The agreements included a
long-term offtake agreement which provides for the delivery to KEPCO of 20% of Denisons annual
U3O8 production (±10%) but not less than 350,000 pounds (±10%) per year
from 2010 to 2015 inclusive. KEPCO also purchased 58,000,000 common shares of Denison (see note
15) representing approximately 17% of the issued and outstanding capital at the time of
acquisition. Pursuant to a strategic relationship agreement, one representative from KEPCO has
been appointed to Denisons board of directors as of the date hereof.
 Other
 The Company has incurred management and administrative service fees of $53,000 (2008: $162,000)
with a company owned by the Chairman of the Company which provides corporate development, office
premises, secretarial and other services. At December 31, 2009, an amount of $nil (2008: $nil)
was due to this company.
 23.
    
    JOINT VENTURE INTERESTS
 The 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)
    
    2009
    
    
    2008Operating expenses
    
    $
    29,922
    
    
    $
    43,779Mineral property exploration
    
    
    7,616
    
    
    
    14,168General and administrative
    
    
    178
    
    
    
    214Impairment  intangibles
    
    
    359
    
    
    
    Net other expense (income)
    
    
    363
    
    
    
    (40
    )Loss for the year before taxes
    
    
    38,438
    
    
    
    58,121Current assets
    
    
    24,059
    
    
    
    15,718Plant and equipment
    
    
    92,343
    
    
    
    77,669Mineral properties
    
    
    329,323
    
    
    
    296,307Intangibles
    
    
    
    
    
    
    421Current liabilities
    
    
    (3,120
    )
    
    
    (4,176
    )Long-term liabilities
    
    
    (2,193
    )
    
    
    (2,096
    )Net investment in joint ventures
    
    $
    440,412
    
    
    $
    383,843
  - 32 -




---



##### 



24.
    
    CAPITAL MANAGEMENT AND FINANCIAL INSTRUMENT RISK
 Capital Management
 The Companys capital includes cash and shareholders equity. 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.
 Fair Values of Financial Instruments
 The Company examines the various financial instrument 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 carrying amount
of financial assets represents the maximum credit exposure. The Company trades only with
recognized, credit worthy third parties.
 The maximum exposure to credit risk at the reporting date is as follows:
 (in thousands)
    
    2009Cash and cash equivalents
    
    $
    19,804Trade and other receivables
    
    
    13,773Investments
    
    
    10,605Restricted cash and investments
    
    
    21,656$
    65,838
 (b)
    
    Liquidity Risk
 Liquidity risk is the risk that the Company will encounter difficulties in meeting obligations
associated with its financial liabilities and other contractual obligations. 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. 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 and its holdings of cash and cash equivalents.
 The maturities of the Companys financial liabilities are as follows:
 Within 1
    
    
    1 to 5(in thousands)
    
    Year
    
    
    YearsAccounts payable and accrued liabilities
    
    $
    9,508
    
    
    $
    Debt obligations (Note 13)
    
    
    869
    
    
    
    195$
    10,377
    
    
    $
    195
 (c)
    
    Currency Risk
 Foreign exchange risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in foreign exchange rates. The Company operates
internationally and is exposed to foreign exchange risk arising from various currency exposures.
Foreign exchange risk arises from assets and liabilities that are denominated in a currency that
is not the functional currency for the relevant subsidiary company.
 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.
  - 33 -




---



##### 



The sensitivity of the Companys operations and other comprehensive income due to changes in the
exchange rate between the Canadian dollar and its Zambian kwacha functional currencies and its
United States dollar reporting currency as at December 31, 2009 is summarized below:
 Change inChange in
    
    
    Comprehensive(in thousands)
    
    Net Income (1)
    
    
    Net Income (1)Canadian dollar10% increase in value
    
    $
    (16,048
    )
    
    $
    56,84610% decrease in value
    
    $
    16,048
    
    
    $
    (56,846
    )Zambian kwacha10% increase in value
    
    $
    (2,841
    )
    
    $
    (2,841
    )10% decrease in value
    
    $
    2,841
    
    
    $
    2,841
 (1)
    
    In the above table, positive (negative) values represent increases (decreases) in net
income and comprehensive net income respectively. (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 outstanding borrowings and short-term investments. The Company
monitors its exposure to interest rates and has not entered into any derivative contracts to
manage this risk. The weighted average interest rate paid by the Company during 2009 on its
outstanding borrowings was 2.70%.
 An increase in interest rates of 100 basis points (1 percent) would have increased the amount of
interest expense recorded in 2009 by approximately $456,000.
 (e)
    
    Price Risk
 The Company is exposed to equity price risk as a result of holding long-term investments in
other exploration and mining companies. The Company does not actively trade these investments.
 The sensitivity analyses below have been determined based on the exposure to commodity price
risk and equity price risk at December 31, 2009:
 Change inChange in
    
    
    Comprehensive(in thousands)
    
    Net Income (1)
    
    
    Net Income (1)Equity price risk10% increase in equity prices
    
    $
    
    
    
    $
    1,06010% decrease in equity prices
    
    $
    
    
    
    $
    (1,060
    )
 (1)
    
    In the above table, positive (negative) values represent increases (decreases) in net
income and comprehensive net income respectively. (f)
    
    Fair Value Estimation
 During 2009, CICA Handbook Section 3855 Financial Instruments was amended to require
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
available-for-sale securities) is based on quoted market prices at the balance sheet date. The
quoted marked price used to value financial assets held by the Company is the current bid price.
  - 34 -




---



##### 



The fair values of cash and cash equivalents, trade and other receivables and accounts payable
and accrued liabilities approximate their carrying values because of the short-term nature of
these instruments.
 The fair values of the Companys restricted cash and investments approximate carrying values.
 The fair value of the Companys debt obligations approximate their carrying value because over
75% of the total obligation is new debt entered into under current interest rate levels.
 The following table illustrates the classification of the Companys financial assets within the
fair value hierarchy as at December 31, 2009:
 Fair(in thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    ValueFinancial assets at fair value:Investments-Available for sale securities (1)
    
    $
    10,601
    
    
    $
    4
    
    
    $
    
    
    
    $
    10,605Restricted investments (2)
    
    
    18,567
    
    
    
    
    
    
    
    
    
    
    
    18,567
 (1)
    
    Classification designated as available-for-sale.(2)
    
    Classification designated as held-to-trading. See note 6 for amount of restricted
investments within restricted cash and investments asset amount. 25.
    
    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.
 Third Party Indemnities
 The Company has agreed to indemnify Calfrac Well Services against any future liabilities it may
incur related to the assets or liabilities transferred to the Company on March 8, 2004.
 Performance Bonds and Letters of 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, 2009, the Company had outstanding bonds and letters of credit of
$28,718,000 of which $19,564,000 is collateralized by restricted cash and equivalents (see note
6) and $9,228,000 is collateralized by a reduction in the Companys line of credit limit
available for general corporate purposes.
 Others
 The Company has committed to payments under various operating leases and other commitments. The
future minimum payments are as follows:
 (in thousands)2010
    
    $
    2,7312011
    
    
    5342012
    
    
    3482013
    
    
    1632014
    
    
    1592015 and thereafter
    
    
    132
  - 35 -




---



##### 



26.
    
    MATERIAL DIFFERENCES BETWEEN CANADIAN AND U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
 The consolidated financial statements have been prepared in accordance with Canadian GAAP which
differ in certain material respects from those principles and practices that the Company would
have followed had its consolidated financial statements been prepared in accordance with U.S.
GAAP. Material differences between financial statement items under Canadian GAAP and the
amounts determined under U.S. GAAP are as follows:
 a)
    
    Cash and Equivalents
 U.S. GAAP requires that funds raised through the issuance of flow-through shares be shown as
restricted cash and not be considered to be a component of cash and cash equivalents. In
addition, the restricted cash would be excluded from cash and cash equivalents in the statement
of cash flows and shown as a financing activity. At December 31, 2009 $1,177,000 of funds
raised from the issue of flow-through shares remained (December 31, 2008: $6,469,000).
 b)
    
    Mineral Properties and Inventory Valuation
 Under Canadian GAAP, the Company expenses exploration and development expenditures on mineral
properties not sufficiently advanced to identify their development potential. At the point in
time when management has concluded that the mineral property has sufficient development
potential, costs are accumulated and recorded as mineral property assets. Under U.S. GAAP and
practices prescribed by the SEC, all mine project related costs incurred before a commercially
mineable deposit is established are expensed as incurred. The U.S defines a commercially
mineable deposit as one with proven and probable reserves which are legally extractable and a
bankable feasibility study.
 The Company amortizes its mineral property assets on a units of production basis and includes
that amount in the valuation of work-in-progress and concentrate inventories. Since the value
of the Companys mineral property assets is less under U.S GAAP than Canadian GAAP, the amount
amortized to inventory is also less. As a result, the carrying value of inventory also tends to
be less to reflect the lower mineral property amortization cost.
 The lower carrying values for the Companys mineral properties and inventory under U.S GAAP
also result in lower impairment charges and net realizable value adjustments being recorded in a
particular period when compared to Canadian GAAP.
 c)
    
    Joint Ventures
 Under Canadian GAAP, investments in jointly-controlled entities are permitted to be accounted
for using the proportionate consolidation method. Under U.S. GAAP, investments in
jointly-controlled entities are accounted for using the equity method. Although there are
material differences between these accounting methods, the Company relies on an accommodation of
the United States Securities and Exchange Commission (SEC) permitting the Company to exclude
the disclosure of such differences which affect only the display and classification of financial
statement items excluding shareholders equity and net income.
 d)
    
    Goodwill
 Under Canadian GAAP, the Companys formation in 1997 through an amalgamation of IUC with
Thornbury Capital Corporation (Thornbury) has been accounted for as an acquisition of
Thornbury resulting in the recording of goodwill. Under U.S. GAAP, the transaction has been
accounted for as a recapitalization whereby the net monetary assets of Thornbury would be
recorded at fair value, except that no goodwill or other intangibles would be recorded. The
goodwill recorded under Canadian GAAP has been subsequently written off. As a result, the
deficit and share capital of the Company are both reduced under U.S. GAAP.
 e)
    
    Liabilities
 Under U.S. GAAP, the sale of flow-through shares results in a liability being recognized for the
excess of the purchase price paid by the investors over the fair value of common shares without
the flow-through feature. The fair value of the shares is recorded as equity. When the tax
deductibility of the expenditures is renounced, the liability is reversed and a future income
tax liability is recorded for the amount of the benefits renounced to third parties and an
income tax expense is recognized. Under Canadian GAAP, an adjustment to share capital is
recorded for recognized future tax liabilities related to the renunciation of flow-through share
expenditures.
  - 36 -




---



##### 



f)
    
    Dilution Gains
 Under Canadian GAAP, gains on dilution of interests in a subsidiary or equity interest are
recognized in income in the period in which they occur. Under U.S. GAAP, the gain on dilution
is not recognized if it results from the sale of securities by a company in the exploration
stage and instead is accounted for as a capital transaction.
 The consolidated balance sheet items, adjusted to comply with U.S. GAAP, would be as follows:
 December 31, 2009Canadian
    
    
    
    
    
    
    U.S.GAAP
    
    
    Adjustments
    
    
    GAAPCash and cash equivalents
    
    $
    19,804
    (a)
    
    $
    (1,177
    )
    
    $
    18,627Inventories
    
    
    52,216
    (b)
    
    
    (3
    )
    
    
    52,213Restricted cash and investments
    
    
    21,656
    (a)
    
    
    1,177
    
    
    
    22,833Property, plant and equipment
    
    
    691,039
    (b)
    
    
    (86,377
    )
    
    
    604,662Accounts payable and accrued liabilities
    
    
    9,508
    (e)
    
    
    39
    
    
    
    9,547Future income tax liability
    
    
    102,918
    (b)
    
    
    3,328
    
    
    
    106,246Share capital
    
    
    849,488
    (d)
    
    
    (616
    )(e)
    
    
    (39
    )
    
    
    848,833Additional paid-in capital
    
    
    
    (f)
    
    
    9,814
    
    
    
    9,814Deficit
    
    
    (242,494
    )(b)
    
    
    (86,019
    )(b)
    
    
    (3,328
    )(d)
    
    
    616(f)
    
    
    (9,814
    )
    
    
    (341,039
    )Accumulated other comprehensive income
    
    
    75,482
    (b)
    
    
    (362
    )
    
    
    75,120
 December 31, 2008Canadian
    
    
    
    
    
    
    U.S.GAAP
    
    
    Adjustments
    
    
    GAAPCash and cash equivalents
    
    $
    3,206
    (a)
    
    $
    (6,469
    )
    
    $
    (3,263
    )Inventories
    
    
    44,733
    (b)
    
    
    (909
    )
    
    
    43,824Property, plant and equipment
    
    
    717,433
    (b)
    
    
    (62,270
    )
    
    
    655,163Restricted cash and investments
    
    
    21,286
    (a)
    
    
    6,469
    
    
    
    27,755Accounts payable and accrued liabilities
    
    
    23,787
    (e)
    
    
    1,682
    
    
    
    25,469Future income tax liability
    
    
    124,054
    (b)
    
    
    (1,373
    )
    
    
    122,681Share capital
    
    
    666,278
    (d)
    
    
    (616
    )(e)
    
    
    (1,682
    )
    
    
    663,980Additional paid-in capital
    
    
    
    (f)
    
    
    9,814
    
    
    
    9,814Deficit
    
    
    (95,482
    )(b)
    
    
    (63,746
    )(b)
    
    
    1,373(d)
    
    
    616(f)
    
    
    (9,814
    )
    
    
    (167,053
    )Accumulated other comprehensive loss
    
    
    (4,709
    )(b)
    
    
    567
    
    
    
    (4,142
    )
  - 37 -




---



##### 



The consolidated statements of operations and deficit and comprehensive income, adjusted to
comply with U.S. GAAP, would be as follows:
 2009
    
    
    2008Net loss for the year, Canadian GAAP
    
    
    
    $
    (147,012
    )
    
    $
    (80,648
    )Adjustments to U.S. GAAP:Mineral property capitalized amounts
    
    (b)
    
    
    (40,896
    )
    
    
    (46,739
    )Mineral property impairment amounts
    
    (b)
    
    
    17,717
    
    
    
    Inventory valuation
    
    (b)
    
    
    906
    
    
    
    (909
    )Tax effect of above adjustments
    
    (b)
    
    
    (4,701
    )
    
    
    (3,248
    )Net loss for the year, U.S. GAAP
    
    
    
    $
    (173,986
    )
    
    $
    (131,544
    )Deficit, beginning of year, U.S. GAAP
    
    
    
    $
    (167,053
    )
    
    $
    (35,509
    )Deficit, end of year, U.S. GAAP
    
    
    
    $
    (341,039
    )
    
    $
    (167,053
    )Comprehensive income, U.S. GAAPNet loss for the year, U.S. GAAP
    
    
    
    $
    (173,986
    )
    
    $
    (131,544
    )Unrealized gain (loss) on available-for-sale securities
    
    
    
    
    3,368
    
    
    
    (17,884
    )Cumulative foreign currency translation gain (loss)
    
    
    
    
    75,894
    
    
    
    (96,868
    )Comprehensive loss, U.S. GAAP
    
    
    
    
    (94,724
    )
    
    
    (246,296
    )Basic net loss per share, U.S. GAAP
    
    
    
    $
    (0.61
    )
    
    $
    (0.69
    )Diluted net loss per share, U.S. GAAP
    
    
    
    $
    (0.61
    )
    
    $
    (0.69
    )
 The consolidated statements of cash flows, adjusted to comply with U.S. GAAP, would be as
follows:
 2009
    
    
    2008Net cash used in operating activities:Under Canadian GAAP
    
    
    
    $
    (42,442
    )
    
    $
    (8,764
    )Adjustment for capitalized mineral property amounts
    
    (b)
    
    
    (25,104
    )
    
    
    (62,837
    )Under U.S. GAAP
    
    
    
    $
    (67,546
    )
    
    $
    (71,601
    )Net cash used in investing activities:Under Canadian GAAP
    
    
    
    $
    (27,116
    )
    
    $
    (115,706
    )Adjustment for capitalized mineral property amounts
    
    (b)
    
    
    25,104
    
    
    
    62,837Under U.S. GAAP
    
    
    
    $
    (2,012
    )
    
    $
    (52,869
    )Net cash
provided by (used in) financing activities:Under Canadian GAAP
    
    
    
    $
    85,414
    
    
    $
    107,147Restricted cash from flow-through financings
    
    (a)
    
    
    (1,177
    )
    
    
    (6,469
    )Under U.S. GAAP
    
    
    
    $
    84,237
    
    
    $
    100,678
 Accounting Changes:
 Accounting changes implemented in 2009
 a)
    
    Codification of US GAAP  On July 1, 2009, the Financial Accounting Standards Boards
(FASB) Codification of US GAAP was launched as the sole source of authoritative
non-governmental US GAAP. The Accounting Standards Codification (ASC) is not intended to
change US GAAP, but rather reorganize existing guidance by accounting topic to allow easier
identification of applicable standards. We have updated any references to US GAAP to
reflect the Codification.
  - 38 -




---



##### 



b)
    
    Measuring Fair Value of Liabilities  In August 2009, the FASB issued Accounting
Standards Update (ASU) 2009-05, Measuring Fair Value of Liabilities which is effective
prospectively for interim periods beginning after August 1, 2009, with early adoption
permitted. Existing guidance required that the fair value of liabilities be measured under
the assumption that the liability is transferred to a market participant. ASU 2009-05
provides further clarification that fair value measurement of a liability should assume
transfer to a market participant as of the measurement date without settlement with the
counterparty. Therefore, the fair value of the liability shall reflect non-performance
risk, including but not limited to a reporting entitys own credit risk. The Company has
adopted ASU 2009-05 in the fourth quarter of 2009. The adoption has not had a material
impact on the Companys financial statements.
 c)
    
    Disclosure about Derivative Instruments and Hedging Activities  New disclosure
requirements for derivative instruments and hedging activities was issued by the FASB in
March 2008. Under this new guidance, entities are required to provide enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative instruments
and related hedged items are accounted for, and (c) how derivative instruments and related
hedged items affect an entitys financial position, financial performance and cash flows.
This standard was adopted by the Company in 2009 but has not had any impact on its
disclosures as the Company does not currently use derivative instruments or engage in
hedging activities.
 d)
    
    Business Combinations  Under the new guidance effective for business combinations
consummated after December 31, 2008, business acquisitions are accounted for under the
acquisition method, as opposed to the purchase method.
 The more significant changes to our accounting for business combinations that will result
from applying the acquisition method include: (i) the definition of a business is broadened
to include some development stage entities, and therefore more acquisitions may be accounted
for as business combinations rather than asset acquisitions; (ii) the measurement date for
equity interests issued by the acquirer is the acquisition date instead of a few days before
and after terms are agreed to and announced, which may significantly change the amount
recorded for the acquired business if share prices differ from the agreement and
announcement date to the acquisition date; (iii) all future adjustments to income tax
estimates will be recorded to income tax expense, whereas under the previous requirements,
certain changes in income tax estimates were recorded to goodwill; (iv) acquisition-related
costs of the acquirer, including investment banking fees, legal fees, accounting fees,
valuation fees, and other professional or consulting fees will be expensed as incurred,
whereas under the previous guidance these costs were capitalized as part of the business
combination; (v) the assets acquired and liabilities assumed as part of a business
combination, whether full, partial or step acquisition, result in all assets and liabilities
recorded at 100% of fair value, whereas under the previous requirements only the controlling
interests portion was recorded at fair value; (vi) recognition of a bargain purchase gain
when the fair value of the identifiable assets exceeds the purchase price, whereas under the
previous guidance, the net book value of the identifiable assets would have been adjusted
downward; and (vii) the non-controlling interest will be recorded at its share of fair value
of net assets acquired, including its share of goodwill, whereas under previous guidance the
non-controlling interest is recorded at its share of carrying value of net assets acquired
with no goodwill being allocated.
 The Company has adopted the new business combination guidance in 2009. The adoption of this
standard did not have an impact on the Companys financial statements.
  - 39 -




---



##### 



e)
    
    Non-controlling Interests in Consolidated Financial Statements  In 2009, the Company
adopted the provisions for non-controlling interests issued by the FASB in December 2007.
Under the new guidance, non-controlling interests are measured at 100% of the fair value of
assets acquired and liabilities assumed. Prior to the effective date of the new guidance,
non-controlling interests were measured at book value. For presentation and disclosure
purposes, non-controlling interests are now classified as a separate component of equity.
In addition, the new guidance changes the manner in which increases/decreases in ownership
percentages are accounted for. Changes in ownership percentages are recorded as equity
transactions and no gain or loss is recognized as long as the parent retains control of the
subsidiary. When a parent company deconsolidates a subsidiary but retains a non-controlling
interest, the non-controlling interest is re-measured at fair value on the date control is
lost and a gain or loss is recognized at that time. Further, accumulated losses
attributable to the non-controlling interests are no longer limited to the original
carrying amount, and therefore non-controlling interests could have a negative carrying balance. The adoption of
this standard did not have an impact on the Companys financial statements.
 f)
    
    Employers Disclosures about Post Retirement Benefit Plan Assets  In December 2008,
the FASB issued guidance on employers disclosures about their post retirement benefit plan
assets. The objectives of the disclosures about plan assets in an employers defined
benefit pension or other post retirement plan are to provide users of financial statements
with an understanding of: (i) how investment allocation decisions are made, including the
factors that are pertinent to an understanding of investment policies and strategies; (ii)
the major categories of plan assets; (iii) the inputs and valuation techniques used to
measure the fair value of plan assets; (iv) the effect of fair value measurements using
significant unobservable inputs (Level 3) on changes in plan assets for the period; (v)
significant concentrations of risk within plan assets. The adoption of this standard did
not have an impact on the Companys disclosures as the Companys post-retirement benefit
liabilities are not funded (see note 10).
  a)
    
    Amendments to Accounting for VIEs  In the second quarter of 2009, the FASB issued an
amendment to its guidance on Variable Interest Entities (VIE). Although not effective
until first quarter 2010, this new guidance makes significant changes to the model for
determining who should consolidate a VIE by specifically eliminating the quantitative
approach to determining the primary beneficiary. The amendment requires the use of a
qualitative approach to determine the primary beneficiary, based on the power to direct
activities of the VIE that most significantly impact its economic performance and an
obligation to absorb losses or to receive benefits of the VIE. If the power is shared,
then no party is the primary beneficiary. This amendment is not expected to have an impact
on the Company.
  - 40 -