Denison Mines Corp (TSX: DML) is a uranium exploration and development company with interests focused on the Athabasca Basin region of northern Saskatchewan, Canada.

Key Updates:

• Reported Higher income from operations: During Q1FY22, the company reported its revenue of CAD 4.1 million, which is significantly higher than CAD 2.4 million in pcp. This was primarily driven by the inclusion of a revenue amounting CAD 2.4 million from McClean Lake mill processing due to the realization of high-grade Uranium Oxide.
  

• Updates on upcoming Operations: The company is focusing on new hydrogeologic test, which is expected to be completed during the 2022 along with the successful installation of the PQ wells. The group would further examine the test work in order to evaluate the current mineralization within the region.
  

• Impressive Working Capital Management: The company reported its quick ratio and current ratio of 2.12x and 2.20x, respectively, as compared to the industry median of 0.87x and 1.04x, respectively. This indicates that the company has enough short-term assets to fund its current liabilities.

• Lower Conversion Period on sequential basis: In Q1FY22, the company reported cash conversion period of 205.3 days, which has reduced from 212.1 days in Q4FY21. This indicates that the company is taking lower time to convert its investment to cash flows.

Risks associated with the investment:

The company is in its initial stage of operations and is yet to report stable revenue source, and continuation of the above trend would likely to dampen the upcoming performance.   

Q1FY22 Income Statement Highlights (Source: Company Report)

• DML announced Q1FY22 result, wherein the company posted its revenues of CAD 4.1 million, considerably higher than CAD 2.4 million in pcp.
• The company reported a surge in the other income of CAD 52.6 million, as compared to other loss of CAD 2.0 million in pcp. The quarter was marked by higher operating expense, increase in evaluation costs, and higher exploration expense. Income before net finance expense stood at CAD 43.2 million in Q1FY22, as compared to a loss of CAD 8.1 million in pcp.
• The quarter turned profitable and posted its net profit of CAD 42.6 million, as compared to a net loss of CAD 8.8 million in pcp, due to the above-mentioned reasons.

Stock Recommendation:

The company owns ~95% stake in the Wheeler River project, which ranks as the largest undeveloped high-grade uranium project in the infrastructure rich eastern portion of the Athabasca Basin region. Notably, the group reported the discovery of multiple new high-grade intercepts of unconformity-hosted uranium mineralization in the final three drill holes completed during the winter 2022 exploration program at Waterfound, which is encouraging. Moreover, cash and cash equivalents stood higher at CAD 65.2 million in Q1FY22, as compared to CAD 63.9 million in Q4FY21. The stock has generated positive returns of ~9% and ~17% in the last three months and nine months, respectively. Hence, considering scheduled tests and improved operational activities, we give a ‘Speculative Buy’ rating on the stock of DML at the last closing price of CAD 1.41 on May 13, 2022.

One-Year Technical Price Chart (as on May 13, 2022). Source: REFINITIV, Analysis by Kalkine Group 

*The reference data in this report has been partly sourced from REFINITIV

  Technical Analysis Summary

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