Canada-based uranium exploration and development company Denison Mines (NYSE:DNN) stock rapidly spiked in recent months on the rising demand for uranium. The Biden administration's clean energy agenda, U.S. uranium reserves plan, combined with the global decarbonization and clean energy initiative has changed the landscape for nuclear power.
Nuclear energy is the oldest form of clean energy powering 20% of the U.S. and making up 55% of all U.S. clean energy production. While nuclear is clean, it is not renewable like solar or wind. However, it is more reliable. uranium prices have been rising and expected to continue rising in 2021. Denison is a developmental company that has yet to actually produce uranium but owns rich assets with the potential to go into production by 2024. Seasoned risk-tolerant speculators can monitor this micro-cap stock for opportunistic pullback levels if looking for exposure.
Denison Assets
The Company owns a 90% interest in the Wheeler River Uranium project is composed of Phoenix and Gryphon deposits. The Phoenix deposit has probable reserves of up to 59.7 million pounds of uranium (U308) with potential for in-situ leaching/recovery (ISR) mining. This is a low-cost extraction method that injects lixiviant solution into wells in the ores to dissolve the uranium which is collected and pumped to a processing plant.
The uranium is extracted, purified, concentrated, and dried to produce “yellowcake”. The Gryphon deposit has a probable reserve of 49.7 million pounds of uranium. The Company presentation uses a pre-tax net present value (NPV) ranging from $1.31 billion to a high case of $2.59 billion for the Wheeler River project assuming $44 per-pound to $65 per-pound of U3O8.
The Company estimates production of the Phoenix deposit to commence in 2024 assuming receipt of required regulatory approvals. The Company restarted the Environmental Assessment (EA) program on Nov. 9, 2020, needed to attain the Permitting and Feasibility Study (PFS). Denison also owns 80% interest in the Hook-Carter project in a junior venture (JV) with ALX Aluminum, a 66% interest in Waterbury and 26% interest in Midwest.
Advanced Nuclear Technologies
President Biden re-admitting the U.S. into the Paris Agreement was seen as a boon for nuclear energy. The Paris Accord pledges every nation to limit the rise of global warming to 1.5 degrees Celsius by the year 2100. As part of the U.S. government funding bill passed on Dec. 21, 2020, $75 million was allocated to begin the process for building a U.S. uranium reserve under a 10-year implementation plan. Biden wants to reclaim domestic uranium mining as part of building a clean energy supply chain in the U.S. Advanced nuclear is part of his critical clean energy technologies.
Bought-Deal Offerings Dilution
As with most junior miners, the problem of dilution comes into play. Denison completed a 51.35 million share bought-deal at $0.37 per-share in Q3 2020 on top of the Q1 2020 offering of $28.75 million shares at $0.20 per-share. As of October, Denison had 701.1 million fully diluted shares. On Feb. 11, 2021, Denison launched another bought-deal for $25 million for $0.91 per-share (27.5 million shares) also granting underwriters an option to purchase an additional 4.12 million common units. Proceeds will be used to fund EA program for the Wheeler River project. The shares nearly doubled to $1.80 in the following days after the news before selling back down to $1.15.
DNN Opportunistic Pullback Levels
Using the rifle charts on the monthly and weekly time frames provides a broad view of the landscape for DNN stock. The monthly rifle chart has a stochastic mini pup breakout that caused shares to spike through the upper Bollinger Bands (BBs) at $3.76 as the monthly 5-period moving average (MA) rises to $2.27. Shares have definitely gotten ahead of themselves after triggering the monthly market structure low (MSL) buy trigger above $2.35 and peaking near the $4.88 Fibonacci (fib) level.
The weekly rifle chart uptrend has been powered by the weekly stochastic mini pup which is stalling at the 90-band as reversion sets in. The at-the-market sell program has stalled the momentum as the weekly 5-period MA tries to catch up at $3.51. The sell program can provide opportunistic pullback levels at the $3.37 fib, $3.14 fib, $2.74 fib. $2.47 fib and the $2.19 fib. While the narrative has improved with a strong operating game plan, Energy Fuels will need to execute seamlessly in 2021 to justify the elevated price levels. Upside trajectories can range from the $5.09 fib upwards to the $9.31 fib.