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Denison one to watch this year after new Gryphon discovery

Last updated: 19:02 14 Jan 2015 GMT, First published: 20:02 14 Jan 2015 GMT

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Denison Mines (TSE:DML) has announced its 2015 business plans as well as some management changes after its CEO Ron Hochstein was recently appointed president and CEO of Lundin Gold.

"We believe Denison is an excellent investment for one seeking at least some CF, an option on higher uranium prices, and the potential for high grade uranium exploration success," said Dundee Capital Markets analyst, David A. Talbot, who has a buy recommendation and C$2.10 target price on Denison.

Notably, the start up of its Cigar Lake joint venture is expected to pay dividends through both toll mill revenue and the synergies to allow for its own minor uranium production and sales this year.

Dundee's Talbot also noted the "sizeable" 2015 exploration budget for the Athabasca Basin, with a focus on it new Gryphon discovery. "We believe the Gryphon basement discovery could become one of the better deposits found in recent years. This project alone would be a company maker if it was in any other junior uranium developer," he said.

Denison is planning to spend $18.1 million on exploration this year, with nearly $16 million of that going towards the Athabasca Basin. It also has cash of $26.5 million and investments of $4.5 million, and appears to be well funded, Dundee said.

Perhaps most importantly, Denison, in its statement released after market close Tuesday, announced new management appointments that are expected to ease chief executive Hochstein's workload after being appointed CEO of Lundin Gold, which acquired the Fruta del Norte gold project for US$240 million in December.

VP and CFO David Cates has been appointed president, and will remain CFO, while Hochstein surprisingly also remains CEO. Dundee said it has long been expected that Hochstein would step down or reduce his responsibilities since the Lundin deal was announced.

"Losing Ron would have been a disappointment to us and many shareholders as he's a uranium CEO," said Talbot.

"We are pleased to see him maintain his chief decision making role, albeit expect to see the more day-to-day operations being downloaded to the new President."

Cigar Lake, which is a joint venture between Cameco, Areva, Idemitsu and Denison, is expected to produce between 6 to 8 million pounds of uranium in 2015, slightly below Dundee's estimate, but allowing for no material impact to the firm's Denison model.

Denison also holds a majority interest in the Phoenix deposit, which is the world's highest grade resource, and could still grow, highlighted Talbot. "Being located on the west side of the basin, near infrastructure, excellent size and grade make this project arguably the best un-mined uranium resource in the Athabasca Basin and perhaps the world. 

"On grade it ranks well above the rest especially its high grade core of 59.9 MM lbs at 43.24% U3O8. That's $33,000/t rock even at today's ~$35/lb uranium price."

The Phoenix deposit, however, is likely to take a back seat to the new Gryphon discovery, said Dundee, particularly in this market. The capital markets firm expects Denison's stock to move on positive Gryphon drill results.

Shares were trading at C$1.04 on Wednesday, down some 4.6 percent. In the past 12 months, the stock has fallen around 23 percent.

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