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It may be time to take a closer look at Denison Mines.
This week, the company, which many consider the next potential takeover target, announced an aggressive budget for its 2014 exploration program. Beyond that, Ron Hochstein, Denison’s president and CEO, said that “[t]he 2014 exploration plan for the Athabasca Basin is one of the largest programs undertaken by Denison in several years.”
In the Athabasca Basin, Denison is most well known for the its flagship Wheeler River project, of which it owns 60 percent. The company’s 2014 exploration program includes roughly 60,000 meters of drilling across 13 different properties, the bulk of which Denison intends to focus on Wheeler River. The company plans on spending C$8 million on a 27,600-meter winter and summer drill program and geophysical surveying on the property. Drilling targets at Wheeler River include extensions of the high-grade Phoenix deposit as well as follow-up testing on the prospective on the 489 zone, Phoenix North and the K Zone.
Denison will also be working on several smaller drill programs on other projects, including Bell Lake, Moore Lake and Crawford Lake. Not on the company’s list for this program is development at the McClean and Midwest deposits, or SABRE R&D also, Zambia and Mongolia are seeing cutbacks as the company hones in on the higher-grade Canadian uranium assets.
In a research update for Denison, Cantor Fitzgerald analyst Rob Chang said he believes that despite being slated to end the year with less than $7 million in cash and likely needing to raise equity during the year (based on the current budget), “Denison’s exploration projects will continue to add value – most notably Wheeler River.”
Why Denison?
In a recent Raymond James industry note, the company listed Denison to outperform with a target price of $2. The firm sees Denison as a potential takeover target due to its “enviable mix of mill ownership and highly prospective ground in the Athabasca Basin”
With Denison’s position as the dominant landholder of all junior exploration companies working on projects in Canada’s prolific Athabasca Basin it is no wonder that Denison is gaining attention. Among Denison’s portfolio of properties, investors will find Wheeler River, is the world’s third highest grade uranium deposit, Waterbury Lake (which is 60-percent owned) that is an extension on the western end of Rio Tinto’s (NYSE:RIO) recent acquisition Roughrider.
Adding to its landholdings, Denison also has a 22.5 percent share of the most advanced conventional milling facility –McClean Lake – which is currently undergoing expansion, fully funded by the Cigar Lake joint venture. Denison will recived up to C$8 million per year in toll million revenues when Cigar Lake ores start getting processed through the McClean mill.
Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.