DNN Stock: Here’s Why Denison Mines Is Climbing

Denison Mines Corp (NYSEAMERICAN: DNN) is screaming for the top in the market this morning, gaining over 20% in the premarket hours. The gains come after the company announced positive results in terms of uranium mining exploration as well as funding that will allow it to continue its exploration efforts. Here’s what’s going on:

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Denison Mines Announces Positive Exploration Results

As mentioned above, one of the primary drivers of the movement we’re seeing in Denison Mines stock this morning has to do with recently reported results from a 2020 exploration and expansion program. 

The program focused on the area proximal to the high-grade Phoenix uranium deposit at the Wheeler River Uranium Project, a project that is 90% owned by DNN. 

In the release, the company said it drilled 19 holes with a total of 7,400 meters being drilled. All of these holes were located outside of the extents of the mineral resources currently defined at Phoenix. 

Importantly, the results of the program were highlighted by the intersection of high-grade uranium mineralization in Zone C. Importantly, no mineral resources are currently estimated in Zone C, so this is a pleasant surprise for investors. 

Here are the results:

  • WR-328D1. DNN said that over 5 meters 5.69% uranium was discovered at WR-328D1, which is located about 22 meters northeast of the historic mineralized hole WR-368. 
  • WR-767D1. Moreover, the company said that 8.84% uranium was found over 2.5 meters in WR-787D1, which is located about 35 meters to the northeast of WR-328D1. 

Importantly, DNN went on to say that the mineralization in WR-328D1 and WR-767D1 represent the best mineralized intersections returned to date from exploration drilling at Phoenix Zone C. 

Management Commentary

In a statement, Andy Yackulic, P. Geo., Director of  Exploration at DNN had the following to offer:

The grades and thicknesses of the mineralized intersections from the 2020 Phoenix Zone C drilling represent a significant upgrade compared to historical drilling at Zone C. With each successive hole at Zone C, Denison’s exploration team becomes more optimistic about the prospect of delineating an additional mineralized zone that could potentially be incorporated into future development plans for the Phoenix In-situ recovery (“ISR”) operation.

A New Deal Drives Crucial Funding

Beyond the exciting news of mineral deposits found in the Phoenix drilling zone C, the company also announced that it has raised funds needed to continue exploration and the extraction of uranium in the area. 

In fact, yesterday, DNN said it entered into agreements with Cantor Fitzgerald Canada and Haywood Securities as co-lead underwriters in joint book runners in a fund raise. Under the terms of the rais, the underwriters have agreed to purchase 27,473,000 units of the company at $0.91 per unit, bringing total gross proceeds to $25 million. 

Each unit in the deal consists of one common share and one half of one transferable common share purchase warrant of the company. The warrants are exercisable to acquire one common share at a price of $2 per Warrant Share for 24 months after issuance. 

What Analysts Think About DNN Stock

While there’s a lot of positive news coming out of Denison Mines at the moment, and investors are excited, analysts aren’t the biggest fans of the stock. At the moment, there are 4 analysts weighing in, 1 with a Buy rating and 3 with Hold ratings. There aren’t currently any analysts rating the stock a Sell. 

Price targets range from $0.78 per share to $0.98 per share with an average of $0.91 per share. 

Nonetheless, it’s important to remember that analyst opinions are largely outdated. There’s no way these opinions include any value from the news released over the past couple of days. As such, I’m expecting to see upgrades and price target increases from these analysts relatively soon. 

Risks to Consider Before Buying DNN Stock

If you’re considering buying DNN, you have to be willing to accept risk. That’s not only the case with Denison Mines stock, but with any investment you make as there’s no such thing as one that doesn’t come with risk. When it comes to DNN, the most significant risks to consider include:

  • Profitability. While Denison Mines is nearing the break-even point, the company still isn’t profitable. If things start to move in the other direction and the funds the company has in the bank aren’t enough to keep it afloat, the company may announce another capital raise, leading to further dilution of existing shareholder value. 
  • Mining Is Risky Business. Mining is a risky business. While explorations may produce results that lead companies to believe that there are vast resources, these explorations are wrong sometimes. At the end of the day, until the exploration turns into active mining in those areas, you never know what can happen. As such, an investment in DNN at the moment is a speculative one. 
  • Volatility. DNN stock is known for generating high levels of volatility. This high volatility makes entrance and exit decisions difficult and can result in significant short-term losses. 

Final Thoughts

While there are risks to consider before diving into DNN stock, you’ll be hard-pressed to find a risk free investment. Even saving money in a savings account comes with the risk of loss. 

Nonetheless, things seem to be going in the right direction for Denison Mines. Based on recent news, the company has found strong areas where uranium deposits exist, and now, with the announcement of the offering, it has the funding to continue exploring and mining activities at the Phoenix property. All in all, things are looking up for DNN stock and those that invest in it.