Merger a possibility for Denison

The list of possible solutions to the financial problems facing Denison Mines (TSE) has been expanded to include a merger with another interested party, newly appointed President Bill James confirmed recently. James said he is having discussions with a number of companies that might benefit from future tax savings on a large pool of undepreciated capital costs estimated to be worth about $370 million. But he declined to name any of those involved.

Having gained a 4-week extension on a $150-million loan that was due Jan 2., James said Denison must begin selling off assets in order to pay off debt. “We are looking at every avenue,” he said.

Since he was named president of the uranium, potash, and oil and gas company last month, analysts have been anticipating a renewed effort to sell the company’s European oil and gas assets.

But as the Persian Gulf crisis has made it difficult for Denison to establish a base price for those assets, the company is looking at other alternatives in a bid to raise cash.

In an effort to trim costs, company insiders are expecting Denison to move out of its Toronto corporate offices in the Royal Bank’s south tower when the lease expires in June. At a cost of $60 per square ft., the offices that Denison shares with holding company affiliate Roman (TSE) are considered too expensive.

A company insider who asked not to be identified said he expects Denison to lay off about half the 70 employees who now work in the Toronto head office. But James declined to comment on either the likelihood of a move or staff reductions.

Meanwhile, analysts say companies most likely to be interested in Denison’s assets would be other uranium producers like Rio Algom (TSE) and Cameco.

According to one analyst, firms which are not already in the uranium business may be put off by reclamation costs associated the Denison’s Elliot Lake mines and development projects.


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