Denison share price drops as A,B dividends withheld

The preferred series A and B shares of Denison Mines (TSE) took a heavy beating recently after the company said it would not pay out scheduled dividends on both sets of shares. On Aug. 20, the first working day after the decision was announced, Denison’s preferred B shares gave up $7.87 to close at $7.87 while the preferred A shares lost $4.75 before closing at $7.50.

According to Chairman Helen Roman-Barber, the decision not to declare the dividends as scheduled Sept. 15, was made unavoidable by the company’s recent financial results.

During the three months ended June 30, Denison reported a net loss of $97.1 million or $1.58 per share compared with net earnings of $7.9 million or 1 cents per share the same period last year.

That brought Denison’s net losses for the first six months of 1990 to $101.8 million or $1.73 per share compared with net earnings of $9.3 million or a loss of 10 cents per share in the corresponding period last year. (Per-share earnings are calculated after payment of preferred share dividends.)

Contributing to those losses, the company said, was an $80-million writedown on the value of Denison’s oil interests in Italy, which are currently up for sale. “The writedown resulted from a ceiling test that determined cost recovery on the basis of the price of oil received on June 30,” said Chairman Helen Roman-Barber.

As the Middle East crisis has driven the price of oil up to US$28 per barrel from US$17 per barrel since June 30, the test does not provide an estimate of the fair economic value of the Italian properties, Roman-Barber said.

According to Denison, weak potash prices and a $4.2-million pretax provision to cover the cost of downsizing Denison’s Elliot Lake, Ont., uranium operations also contributed to its first-half losses.

Most of Denison’s oil production decline occurred in Greece, but Roman-Barber predicted that a portion of the reduced production volume would be recovered in the second half of 1990 due to growing output from oil operations in Egypt.

Revenues during the second quarter declined to $84.2 million from $98.5 million in the corresponding period last year. Six-month revenues also declined to $170.6 million from $194.4 million in 1989.

Denison Mines (TSE) $000s except per-share items 3 months ended June 30 1990 1989 Revenue $84,175 $98,479 Net earnings (loss) (97,084 ) 7,967

Per share (1.58 ) 0.01 6 months ended June 30 1990 1989 Revenue $170,602 $194,430 Net earnings (loss) (101,855 ) 9,344

Per share (1.73 ) (0.10)