Denison Mines Inc.

Denison Mines Inc.

March 08, 2005 07:00 ET

Denison Mines Reports Fourth Quarter Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: DENISON MINES INC.

TSX SYMBOL: DEN

MARCH 8, 2005 - 07:00 ET

Denison Mines Reports Fourth Quarter Results

TORONTO, ONTARIO--(CCNMatthews - March 7, 2005) - Denison Mines Inc.
(TSX:DEN) reports cash flow from operations for the three months ended
December 31, 2004 of $1,976,000 and $13,927,000 for the twelve months
ended December 31, 2004. This compares to cash flow from operations of
($2,672,000) for the three months ended December 31, 2003 and $8,000,000
for the twelve months ended December 31, 2003. On a per share basis,
cash flow from operations was $0.09 for the three months and $0.68 for
the twelve months ended December 31, 2004 compared to ($0.14) and $0.43
for the same periods in 2003.

Revenue was $9,826,000 and $37,124,000 for the three months and twelve
months ended December 31, 2004 respectively, compared with $9,155,000
and $28,175,000 for the comparable periods in 2003.

Consolidated net earnings was $3,565,000 or $0.16 per share for the
three month period and $1,993,000 or $0.10 per share for the year ended
December 31, 2004 compared with consolidated net losses of $904,000 or
$0.05 per share and $3,123, 000 or $0.17 per share for the same periods
in 2003. Included in the net earnings results is a future tax recovery
of $4,621,000 and $4,304,000 for the three months and twelve months
ended December 31, 2004, respectively.

Significant events in the fourth quarter include:

- Denison acquired a further 5.21% interest in the Midwest uranium
project in exchange for $1,258,000 in cash and 320,625 common shares
issued from the treasury, for total consideration of $3,775,000.

- Denison reached an agreement with Cogema Resources Inc. ("COGEMA") to
earn up to a 22.5% interest in the Wolly uranium exploration project by
spending up to $5 million over a six year period.

- Denison reached an agreement with the Wheeler River joint venture
partners to earn up to an additional 20% interest in the Wheeler River
uranium exploration project and thereby hold a 60% interest by spending
up to $7 million over six years.

- Denison issued 2,200,000 equity units at $9.25 per unit raising gross
proceeds of $20,350,000. Each unit consisted of one common share and
one-half of one transferable common share purchase warrant exercisable
for five years at an exercise price of $15.00.

- Denison issued 122,450 flow-through common shares at a price of $12.25
per share for proceeds of approximately $1,500,000.

- The Ontario Assessment Review Board released a decision confirming the
assessed values on Denison's Elliot Lake closed mine site supporting the
Company's position that the assessed values were $108,700 rather than in
excess of $62 million as asserted by the City of Elliot Lake.

- As a result of strong uranium sales and equity issues, the Company has
reduced its indebtedness to COGEMA to a nominal amount at December 31,
2004.



SEGMENTED INFORMATION(1)
---------------------------------------------------------------------
Three months ended Year ended
December 31 December 31
(unaudited-in thousands) 2004 2003 2004 2003
---------------------------------------------------------------------
Revenue
Uranium $ 8,123 $ 7,680 $ 31,327 $ 23,575
Environmental Services 1,703 1,475 5,797 4,600

---------------------------------------------------------------------
$ 9,826 $ 9,155 $ 37,124 $ 28,175
---------------------------------------------------------------------
Net Earnings (Loss)
Uranium (164) (374) 1,735 (618)
Environmental Services 475 348 570 592
Corporate and taxes 3,254 (878) (312) (3,097)
---------------------------------------------------------------------
$ 3,565 $ (904) $ 1,993 $ (3,123)
---------------------------------------------------------------------

(1) Following completion of a restructuring of Denison Energy Inc.
("Denison Energy") on March 8, 2004, the mining and environmental
services businesses of Denison Energy were transferred to Denison
Mines Inc. ("Denison" or the "Company"), pursuant to a plan of
arrangement effective on that date. To allow shareholders to
compare results going forward with historical results, Denison
has reported the operations of the mining and environment
services business as if the Company had owned these businesses
for the entire period covered by this report.


Uranium

Earnings (loss) from the uranium division totalled $(164,000) for the
three months and $1,735,000 for the year ended December 31, 2004
compared to $(374,000) and $(618,000) in the comparable periods in 2003.
The 2004 results were driven by higher sales volumes, and increased
pricing on uranium sales, partially offset by a reduction in the value
of the U.S. dollar relative to Canadian currency.

Sales of uranium in the fourth quarter represented approximately 28% of
the uranium sales for the year and deliveries for the year were 25%
above 2003, meeting the sales target for 2004. The Company delivers
uranium under a variety of contracts with various pricing formulas, the
timing and mix of which varies from quarter to quarter. The timing of
deliveries is at the selection of the customer.

The average realized Canadian dollar exchange rate relative to the US
dollar for the conversion of the US dollar proceeds from uranium sales
was $1.21 in the fourth quarter of 2004 versus $1.30 in the same period
in 2003. This reduced revenue and earnings in the quarter by $633,000
compared with that which would have been realized using the exchange
rate prevailing in 2003.

The McClean uranium facilities produced 1,521,000 pounds of uranium
during the three months ended December 31, 2004, of which Denison's
share was 342,000 pounds compared with 274,000 pounds in the same period
in 2003. Production from McClean for the year was 6,005,000, compared to
6,028,000 in 2003.

Spot uranium prices have been steadily increasing since January 1, 2001
when the price was US$7.10 per pound. The spot uranium price was
US$20.70 at December 31, 2004 compared to $14.50 at December 31, 2003
and has now reached US$21.75, an increase of over 300% from the start of
2001. Denison expects the escalation of prices to continue over the next
several years as excess inventories are consumed and the supply-demand
balance tightens. The increasing prices will be reflected in new sales
contracts required to replace existing long-term contracts expiring in
2005 and beyond.

In December, 2004, Denison acquired a further 5.21% interest in the
Midwest uranium project located in Northern Saskatchewan from Redstone
Resources Inc., a subsidiary of Newmont Mining Corporation. This
acquisition increased the Company's interest in this project to 25.17%
and added 1.7 million pounds to the Company's uranium reserve base,
bringing total reserves to over 13 million pounds. The consideration for
the acquisition of this increased interest was a total of $3.775
million, consisting of $1.258 million in cash and 320,625 of common
shares valued at $7.85.

In October, Denison announced an agreement to farm in on the Wolly
uranium exploration project in northern Saskatchewan. The Wolly property
surrounds the McClean Lake project and comprises 23,700 hectares.
Denison has the option to earn up to a 22.5% interest in the Wolly
project by spending up to $5 million in exploration costs over a six
year period.

In October, Denison also announced an agreement to earn up to an
additional 20% interest in the Wheeler River uranium exploration project
in northern Saskatchewan and thereby hold a 60% interest, by spending up
to $7 million in exploration costs over six years. Denison will also
become the operator on this project. The Wheeler River project comprises
over 12,000 hectares and is about 25 kilometres south of the McArthur
River uranium mine.

Uranium Exploration(1)

Denison, in conjunction with its Joint Venture partners, is performing
on-going uranium exploration on five high profile properties in the
prolific eastern part of the Athabasca basin, and is pleased to report
favourable results from McClean, and significant results from Midwest,
early in this winter's work.

Recent diamond drilling at the McClean Project by operator AREVA's
subsidiary, COGEMA Resources Inc. ("COGEMA") in the Bena Lake area,
located west of the Sue trend, has encountered several holes with
unconformity offsets of up to 25 metres associated with intense
alteration of the sandstone, structural disruptions and elevated
radioactivity. Although no economic mineralization has been located to
date, unconformity uranium targets are generally small and detailed
follow-up drilling is warranted.

At the Midwest Project, three kilometres north of the main Midwest
deposit, additional drilling is being conducted to follow up historic
drill hole MW-338 which intersected 8.24% U3O8 over 3.8 metres at the
unconformity. Drilling this year, by operator COGEMA, has intersected
significant unconformity-related uranium mineralization in drill holes
MW-659 and MW-660, two of three angle holes drilled on a section 60
metres southwest and on strike of drill hole MW-338. Recent hole MW-662,
drilled along section with drill hole MW-338 and designed to intersect
the unconformity 25 metres northwest of the known mineralization, also
intersected significant high-grade mineralization.



Hole From To Intersection Grade
No. metres metres metres % eU eU3O8 %
------ ------- ------- ------------ ---- --------
MW-659 229.20 236.30 7.10 5.30 6.25
MW-660 197.40 205.10 7.70 9.91 11.67
MW-662 215.70 233.40 17.70 0.97 1.14


All distance measurements are down hole lengths and may not represent
true widths. Grades have been determined by radiometric probing by
COGEMA personnel and are expressed as equivalent (e) U and (e) U3O8.
These estimates of grade are subject to validation by assay techniques
on split drill core. The high- grade sandstone-hosted intersections in
holes MW-659 and MW-660 are 40 metres apart at different elevations.
Therefore, the attitude of the mineralization is presently unknown and
no conclusions can be made as regards the continuity, orientation,
dimensions, or controls of the mineralization. The poor ice conditions
are hampering operations but drilling is continuing. A second drill is
scheduled to move on site within three weeks.

The Wolly uranium exploration project surrounds the McClean Mine, is
also operated by COGEMA, and has been intermittently explored since the
mid 1970's. Exploration in 2005 will focus on locating the eastern
extensions of the mineralized JEB conductive trend, where extensive
illite alteration in the sandstone, and elevated uranium in the
basement, indicate potential for both sandstone and basement-hosted
deposits near an operating mill.

A drilling program of four holes is also currently in progress by the
operator COGEMA on the Waterfound River uranium exploration project,
located west of the Midwest deposit.

The Wheeler River exploration project lies between Key Lake and the
McArthur River mine. Denison is the operator and is has initiated a
major 20,000 metre diamond drilling program over the next two years to
test a number of geological and geophysical targets.

(1) (This information is reported by William C. Kerr, Director, Resource
Evaluations, Denison Mines Inc., who is a qualified person as defined in
National Instrument 43-101 of the Canadian Securities Administrators.)

Environmental Services

Revenue from environmental services was $1,703,000 and $5,797,000 for
the three months and the year ended December 31, 2004 respectively
compared with $1,475,000 and $4,600,000 for the comparable periods in
2003. Earnings from the division were $475,000 for the quarter and
$570,000 for the year ended December 31, 2004 compared to $348,000 and
$592,000 for the comparable periods in 2003. Phase I of the contract to
provide demolition services at the Cluff Lake uranium mine site in
northern Saskatchewan was completed in the fourth quarter. Phase II of
the contract will be completed in the third quarter of 2005. DES is
finalizing a new six-year contract with Rio Algom to provide
environmental monitoring and maintenance at their closed mine sites in
Elliot Lake.

In November, 2004, the Ontario Assessment Review Board released a
decision confirming the assessed value on Denison's Elliot Lake closed
mine site supporting the Company's position that the assessed values
were $108,700 rather than in excess of $62 million as asserted by the
City of Elliot Lake. The City of Elliot Lake has sought leave to appeal
this decision.

Corporate Expenses

General corporate expenses totalled $3,371,000 in 2004 compared to
$2,300,000 in 2003. The primary reasons for the increase were Denison
Energy reorganization expenses which included severance costs and
employee bonuses related to successful completion of the reorganization
and bonuses related to corporate and individual performance for the 2004
year.

Liquidity

During the fourth quarter, Denison issued, by way of private placement,
2,200,000 common equity units at a price of $9.25 per unit for total
gross proceeds of $20,350,000. Each unit consisted of one common share
and one and one-half of one common share purchase warrant exercisable
for five years at $15.

Denison also issued 122,450 flow through common shares at a price of
$12.25 per share for proceeds of approximately $1,500,000. As a result
of financing and operative cash flow, Denison has been able to reduce
its loan from Cogema Resources Inc. to a nominal amount at December 31,
2004.

At December 31, 2004, Denison had the ability to redraw $31,600,000 from
the Cogema loan facility. In addition, Denison had cash resources of
$2,394,000 at December 31, 2004.

Corporate Objectives

In 2004, Denison set objectives as follows:

- Increase U3O8 sales by at least 25% and revenue by at least 35% over
2003 utilizing a portion of existing inventory.

- Expand uranium reserves by continued exploration and through
acquisition.

- Reduce the Cogema debt and refinance the balance and

- Increase financial resources by raising new equity.

The Company's performance against these objectives was as follows:

- Sales volumes in 2004 exceeded volumes sold in 2003 by 25% and 2004
revenue exceeded 2003 revenue by 33%. Revenue was slightly below the
target of 35% due to the strengthening of the Canadian dollar relative
to the U.S. dollar.

- Denison increased its reserves by 1.7 million pounds with the
acquisition of an additional interest in the Midwest project and
significantly increased its uranium exploration potential with the
agreements to join the Wolly joint venture and to increase its interest
in Wheeler River joint venture.

- The Cogema debt was reduced to a nominal amount through operating cash
flow and the proceeds of equity financings, which were used to prepay
the loan.

- The Company raised net proceeds of over $40 million through equity
issues during the year.

The Company has set the following objectives for 2005:

- Conserve inventory by reducing U3O8 sales by up to 17% below 2004
levels with a reduction in revenue of less than 10%;

- Increase uranium division earnings by at least 100%;

- Expand uranium reserves by spending $3,000,000 on exploration in 2005,
and through acquisitions;

- Complete the evaluation of the blind-boring/jet-boring mining
techniques to improve its economic viability;

- Evaluate the feasibility of producing the nickel and cobalt resources
associated with the uranium at Midwest; and

- Reduce general corporate expenses by at least 10%.

Conference Call

Denison is hosting a conference call on March 9, 2005 starting at 8:30
a.m. (Toronto time) to discuss the 2004 results. The webcast conference
call will be available live through a link on Denison's website
www.denisonmines.com. A recorded version of this conference call will be
available on Denison's website or by calling 416-695-5275 from
approximately two hours after the call until 5:00 p.m. on March 21, 2005.

Additional Information

Additional information on Denison is available on SEDAR at www.sedar.com
and on the Company's website at www.denisonmines.com.

About Denison

Denison Mines Inc. (www.denisonmines.com) is a uranium exploration,
development and production company whose principal assets are a 22.5%
interest in one of the world's largest uranium facilities at McClean
Lake in Northern Saskatchewan and its interest in the Midwest Project.
It is also engaged in mine decommissioning and environmental services
through its Denison Environmental Services division.

Some disclosures included in this release respecting production, capital
spending, development schedules, expenses, markets, and milling
arrangements represent forward-looking statements. Forward-looking
statements generally can be identified by the use of forward-looking
terminology such as "may", "will", "expect", "intent", "estimate",
"anticipate", "believe" or "continue" or the negative thereof or
variations thereon or similar terminology. Such statements are based on
assumptions and estimates related to future market conditions. These
statements involve risks and uncertainties relating to, among other
things, changes in commodity prices, unanticipated reserve and resource
grades, results of exploration activities, timeliness of government
approvals, economic risk, actual performance of plant, equipment and
processes relative to specifications and expectations and unanticipated
environmental impacts on operations. While management reviews the
reasonableness of its assumptions and estimates, unusual and
unanticipated events may occur which render them inaccurate. Under such
circumstances, future performance may differ materially from those
expressed or implied by the forward-looking statements.

DENISON MINES INC.

FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2004 AND 2003

Responsibility for Financial Reporting

To the Shareholders of Denison Mines Inc,

The Company's management is responsible for the integrity and fairness
of presentation of these consolidated financial statements. The
consolidated financial statements have been prepared by management, in
accordance with Canadian generally accepted accounting principles for
review by the Audit Committee and approval by the Board of Directors.

The preparation of financial statements requires the selection of
appropriate accounting policies in accordance with generally accepted
accounting principles and the use of estimates and judgments by
management to present fairly and consistently the consolidated financial
position of the Company. Estimates are necessary when transactions
affecting the current period cannot be finalized with certainty until
future information becomes available. In making certain material
estimates, the Company's management has relied on the judgement of
independent specialists. The Company's management is also responsible
for maintaining systems of internal accounting and administrative
controls of high quality, consistent with reasonable cost. Such systems
are designed to provide assurance that the financial information is
accurate and reliable in all material respects and that the Company's
assets are appropriately accounted for and adequately safeguarded. The
Company's management believes that such systems are operating
effectively and has relied on these systems of internal control in
preparing these financial statements.

PricewaterhouseCoopers LLP, Chartered Accountants, are independent
external auditors appointed by the shareholders to issue a report
regarding the consolidated financial statements of the Company.
PricewaterhouseCoopers' audit report outlines the extent and nature of
their examination and expresses their opinion on the consolidated
financial statements.

The Board of Directors of the Company is responsible for ensuring that
management fulfills its responsibilities for financial reporting and is
ultimately responsible for reviewing and approving the consolidated
financial statements and the accompanying management discussion and
analysis. The Board carries out this responsibility principally through
its Audit Committee, which is appointed annually and consists of three
Directors, none of whom are members of management.

The Audit Committee meets at least four times per year with management,
together with the independent auditors, to satisfy itself that
management and the independent auditors are each properly discharging
their responsibilities. The independent external auditors have full
access to the Audit Committee with and without management present. The
Committee, among other things, reviews matters related to the quality of
internal control, audit and financial reporting issues. The Audit
Committee reviews the consolidated financial statements and the
independent auditors' report, as well as any public disclosure document
that contains financial information, and reports its findings to the
Board of Directors, prior to the Board approving such information for
issuance to the shareholders. The Committee also considers, for review
by the Board and approval by the shareholders, the engagement or
reappointment of the Company's independent auditors.



(signed) (signed)

E. Peter Farmer James R. Anderson
President and Chief Executive Officer Executive Vice-President
and Chief Financial Officer

March 7, 2005


Auditors' Report

To The Shareholders of Denison Mines Inc,

We have audited the consolidated balance sheets of Denison Mines Inc. as
at December 31, 2004 and 2003 and the consolidated statements of
earnings, retained earnings and cash flows for the years then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly,
in all material respects, the financial position of the Company as at
December 31, 2004 and 2003 and the results of its operations and its
cash flows for the years then ended in accordance with Canadian
generally accepted accounting principles.



(signed)

PriceWaterhouseCoopers LLP

CHARTERED ACCOUNTANTS

Toronto, Canada
February 28, 2005



DENISON MINES INC.
CONSOLIDATED BALANCE SHEETS

---------------------------------------------------------------------
As at December 31
---------------------------------------------------------------------
(in thousands) 2004 2003
(Restated)
(Note 2)
---------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 2,394 $ 1,125
Accounts receivable 9,339 10,074
Inventories, prepaid expenses and other
assets (note 3) 13,913 16,557
---------------------------------------------------------------------
25,646 27,756
---------------------------------------------------------------------

Inventory of ore in stockpiles (note 3) 1,678 5,174
Property, plant and equipment (note 4) 104,212 105,674
Restricted cash and cash
equivalents (note 7) 1,414 1,558
Future income taxes (note 8) 1,872 -
---------------------------------------------------------------------
$ 134,822 $ 140,162
---------------------------------------------------------------------
---------------------------------------------------------------------

LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities $ 3,572 $ 2,355
Current portion of long term liabilities
Long-term debt (note 5) 128 7,454
Post-employment benefits (note 6) 400 400
Provision for reclamation (note 7) 500 625
---------------------------------------------------------------------
4,600 10,834
---------------------------------------------------------------------

Long-term debt (note 5) 167 39,578
Provision for post-employment benefits (note 6) 9,252 9,672
Provision for reclamation (note 7) 5,402 5,358
Future income taxes (note 8) - 3,200
---------------------------------------------------------------------
19,421 68,642
EQUITY
Divisional Equity - 71,520
Shareholders Equity (note 9)
Common stock 108,995 -
Warrants 2,754 -
Contributed surplus 1,118 -
Retained earnings 2,534 -
---------------------------------------------------------------------
$ 134,822 $ 140,162
---------------------------------------------------------------------
---------------------------------------------------------------------

Contingent liabilities and commitments (note 13)
The accompanying notes are an integral part of these financial
statements.



ON BEHALF OF THE BOARD OF DENISON MINES INC.

(signed) (signed)

Paul F. Little, Director E. Peter Farmer, Director


DENISON MINES INC.
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

---------------------------------------------------------------------
For the year end
December 31
---------------------------------------------------------------------
(in thousands) 2004 2003
(Restated)
(Note 2)
---------------------------------------------------------------------

Revenue $ 37,124 $ 28,175
---------------------------------------------------------------------

Expenses
Operating expense 30,221 23,268
Royalties and provincial capital tax 2,453 1,860
Exploration expense 368 307
General corporate expense 3,371 2,300
Stock option expense (note 10) 1,152 318
Interest expense (note 5) 1,777 2,766
Other expense (income) (note 11) (32) 479

---------------------------------------------------------------------
39,310 31,298
---------------------------------------------------------------------
Loss before income taxes (2,186) (3,123)
Income tax expense (recovery) (note 8)
Current 125 -
Future (4,304) -
---------------------------------------------------------------------
Earnings (loss) for the year 1,993 (3,123)
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings (loss) per common share (note 9)
-Basic and diluted $ 0.10 -

Pro forma earnings (loss) per common share
(note 9)
-Basic and diluted - $ (0.17)

---------------------------------------------------------------------
---------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.


DENISON MINES INC.
CONSOLIDATED STATEMENTS OF DIVISIONAL EQUITY AND DEFICIT

---------------------------------------------------------------------

---------------------------------------------------------------------
For the year ended
December 31
---------------------------------------------------------------------
(in thousands) 2004 2003
(Restated)
(Note 2)
---------------------------------------------------------------------
Divisional Equity (note 1):
As previously reported at beginning of year $ 68,757 $ 73,272
Change in accounting policy (note 2) 2,763 3,143
--------------------
As restated at beginning of year 71,520 76,415
Net earnings (loss) for the year - (3,123)
Net earnings (loss) to March 8, 2004 (541) -
Funding of other divisions of Denison Energy
Inc. - (1,772)
Funding of other divisions of Denison Energy
Inc. to March 8, 2004 (344) -
Reclassification of divisional equity to share
capital on March 8, 2004 (70,635) -

---------------------------------------------------------------------
Divisional Equity - end of year $ - $ 71,520
---------------------------------------------------------------------
---------------------------------------------------------------------

Retained earnings:
At March 9, 2004 $ - $ -
Net earnings (loss) from March 9, 2004
- December 31, 2004 2,534 -
---------------------------------------------------------------------
Retained earnings - at end of year $ 2,534 $ -
---------------------------------------------------------------------
---------------------------------------------------------------------

The accompanying notes are an integral part of these financial
statements.


DENISON MINES INC.
CONSOLIDATED STATEMENTS OF CASH FLOW

---------------------------------------------------------------------
For the Year Ended
December 31
---------------------------------------------------------------------
(in thousands) 2004 2003
(Restated)
(Note 2)
---------------------------------------------------------------------

Operating Activities
Net earnings (loss) for the year $ 1,993 $ (3,123)
Adjustments for non-cash items:
Depletion, amortization and reclamation 7,738 6,847
Drawdown of ore from stockpiles 4,359 4,854
Loss on sale or write-downs of assets - 8
Change in future taxes (4,304) -
Stock option expense 1,152 318
Changes in non-cash balances relating to
operations
Change in receivables, inventories, prepaids
and other assets 2,516 (369)
Change in accounts payable and accrued
liabilities 1,217 149
Other
Funding of post employment benefits (359) (333)
Funding of Elliot Lake Mine Reclamation Trust
Fund (385) (351)
---------------------------------------------------------------------
Net cash generated by operating activities 13,927 8,000
---------------------------------------------------------------------

Financing Activities
Additions to long-term debt 17,130 21,020
Repayments of long-term debt (63,867) (25,950)
Common share and warrant issues net of issue
costs 40,312 -
Interdivision funding for Denison Energy Inc.
up to March 8, 2004 (344) (2,058)
---------------------------------------------------------------------
(6,769) (6,988)
---------------------------------------------------------------------

Investing Activities
Additions to property, plant and equipment (5,889) (870)
Proceeds on sale of other assets - 143
---------------------------------------------------------------------
(5,889) (727)
---------------------------------------------------------------------
Increase in Cash and Cash Equivalents 1,269 285
---------------------------------------------------------------------
Cash and cash equivalents - beginning of year 1,125 840
---------------------------------------------------------------------
Cash and cash equivalents - end of year $ 2,394 $ 1,125
---------------------------------------------------------------------
---------------------------------------------------------------------

Supplemental Cash Flow Information
Payments for interest $ 1,763 $ 2,568
Payments for income and large corporation
taxes $ 120 $ -
---------------------------------------------------------------------
---------------------------------------------------------------------

The accompanying notes are an integral part of these financial
statements.

Denison Mines Inc
Notes to Consolidated Financial Statements


1. DENISON MINES INC.

Denison Mines Inc. ("Denison Mines" or "the Company") was incorporated
in September 2003. Effective March 8, 2004 Denison Mines acquired the
mining and environmental services divisions ("the Division") of its then
parent, Denison Energy Inc. (now Calfrac Well Services Inc.) ("Denison
Energy") as a result of the implementation of a plan of arrangement (the
"Denison Arrangement"), pursuant to section 182 of the Business
Corporations Act (Ontario) involving Denison Energy, Denison Mines,
Tenwest Uranium Limited ("Tenwest"), Denison Oil Corporation, Denison
Resources Inc., Denison Resources Partnership, Denison Mines Holding
Corporation and E. Peter Farmer. Denison Mines had no operations prior
to March 8, 2004. The acquisition by Denison Mines of the Division was
accounted for using the continuity of interests method and recorded at
book value. The comparative amounts are those of the Division.

Under the terms of the Denison Arrangement, Denison Mines acquired the
mining and environmental services assets of Denison Energy and its
subsidiary Tenwest and assumed all liabilities, including environmental
liabilities, related to the acquired assets. Pursuant to the Denison
Arrangement, each Denison Energy shareholder received in exchange for
each common share of Denison Energy held prior to the completion of the
Denison Arrangement, one common share of Denison Mines, 1/5 of the one
common share of Denison Oil (the parent of Denison Resources) and 1/21
of one new common share of Denison Energy. As a result on March 8, 2004,
18,670,769 shares of Denison Mines were issued and traded publicly on
the Toronto Stock Exchange under the symbol DEN.

The accompanying consolidated financial statements are prepared in
accordance with Canadian generally accepted accounting principles
("GAAP"). In the opinion of management, all adjustments considered
necessary for fair presentation have been included in these financial
statements. Comparative data presented in these financial statements
comprises the assets and liabilities of the Division as at December 31,
2003, and the revenues, expenses and cash flows of the Division for the
year ended December 31, 2003.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Mining activities include a 22.5% interest in the McClean Lake uranium
property and mill in northern Saskatchewan, where uranium production
reached commercial levels in November 1999, a 25.17% interest in the
Midwest uranium deposit, and mineral exploration, also located in
northern Saskatchewan. Environmental Services activities include mine
decommissioning services and monitoring of closed mine sites.

Basis of Preparation and Estimates

The consolidated financial statements have been prepared by management
in accordance with Canadian generally accepted accounting principles.
The preparation of financial statements in conformity with Canadian
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent liabilities as of the date of
the financial statements and the reported amounts of revenue and
expenses during the reporting period. The most significant estimates are
related to the economic lives and recoverability of mining assets, the
provisions for decommissioning and reclamation, post-employment
benefits, future income taxes and the evaluation of contingent
liabilities. Actual results could differ materially from those
estimates. The summary of significant accounting policies below
describes the accounting methods and practices that have been used in
the preparation of these consolidated financial statements.

Changes in Accounting Policies

The Company has retroactively adopted the requirements of CICA 3110
"Asset Retirement Obligations" and has restated comparative figures to
reflect the adoption of the new standard. The impact of the change has
been to decrease the provision as at December 31, 2003 from $8,484,000
to $5,941,000, to create a related asset as at December 31, 2003 with
net book value of $554,000, and to increase the related charge to
earnings in the year ended December 31, 2003 by $380,000. The Company's
new accounting policy in this area is described below.

In 2004, the Company also adopted Accounting Guideline 13 "Hedging
Relationships" as described below. The Company had no hedging
relationships prior to 2004 and therefore there is no prior period
impact.

Consolidation Principles

These consolidated financial statements include the interests in the
McClean Lake and Midwest uranium joint ventures which are accounted for
using the proportionate consolidation method. Under this method, these
statements include the Company's proportionate share of assets,
liabilities, revenues and expenses.

Revenue Recognition

Mining revenue is recognized when title passes to the customer. Revenue
on decommissioning contracts is recognized using the percentage of
completion method, where sales, earnings and unbilled accounts
receivable are recorded as related costs are incurred. Earnings rates
are adjusted periodically as a result of revisions to projected contract
revenues and estimated costs of completion. Losses, if any, are
recognized fully when first anticipated.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and short-term investments
with original maturities not exceeding 90 days and are stated at cost,
which approximates market value.

Inventories

Uranium concentrates, assets purchased for resale, supplies and ore in
stockpiles are recorded at the lower of average cost and net realizable
value. Inventory of ore in stockpiles consists of actual costs of mining
waste rock and ore and is charged to production using the units of
production method.

Property, Plant and Equipment

Mining Property, Deferred Exploration and Development Costs

Exploration costs and property acquisition costs are expensed as
incurred unless it is determined that a project contains economically
recoverable reserves, in which case all such costs relating to that
project for the current and subsequent years are capitalized.
Pre-production costs, net of revenue during the start-up phase, are
capitalized as development costs until the project is capable of
sustained operations at commercial production levels. Capitalized mining
property, deferred exploration and development costs are amortized using
the unit of production method over the expected life of the mine after
commercial production levels are attained.

Mine Buildings, Plant and Equipment

Mine buildings, plant and equipment are recorded at cost. Mine
buildings, plant and equipment are amortized to estimated residual value
over the shorter of the life of the mine, or specific period that the
mill or other specific asset will be utilized, using the units of
production method. When assets are retired or sold, the resulting gains
or losses are reflected in current earnings.

Mining Property Evaluations

The carrying values of mining, exploration and development properties
and related mine buildings and equipment are periodically assessed by
management to determine whether the net recoverable amount exceeds the
carrying value of the project. Any unrecoverable amount is written off
against earnings. The net recoverable amount represents future
undiscounted cash flows determined using proven, probable and expected
reserves and estimated selling prices which reflect both historical
prices and expected future selling prices, less operating, capital,
financing and reclamation costs.

Other Property, Plant and Equipment

Other property, plant and equipment are amortized according to the
straight-line method based on their estimated useful lives, which range
from three to twenty years.

Capitalization of Interest

Net interest costs incurred during the development, construction and
start-up phase of major projects are capitalized.

Decommissioning and Site Restoration Cost

Denison Mines has adopted the requirements of CICA Handbook Section 3110
"Asset Retirement Obligations" in the preparation of these financial
statements, and has restated comparative figures. The standard requires
the recognition of a liability for future obligations for asset
decommissioning and site restoration in the period when the liability is
incurred. Liabilities related to site restoration include long-term
treatment and monitoring costs and incorporate total expected costs net
of recoveries. Such liabilities are initially measured at fair market
value and accreted to the full value of expected cash outflows by
charges to earnings over the life of the related asset. The equivalent
amount is added to the carrying value for the related asset and
amortized over the asset's useful life.

Expenditures incurred to dismantle facilities, restore and monitor
closed resource properties are charged against the related
decommissioning and site restoration liability.

Denison Mines' resource activities are subject to various governmental
laws and regulations related to the protection of the environment.
Denison Mines has made and continues to make expenditures in order to
comply with or exceed such laws and regulations. Denison Mines is
continuously updating its decommissioning and site restoration cost
estimates. Such estimates are, however, subject to changing laws,
regulatory requirements, changing technology and other factors which
will be recognized when applicable.

Post Employment Benefits

Denison Mines has assumed, with the approval of the former employees,
the obligation of Denison Energy to provide dental, supplemental health
care and life insurance benefits, but not pensions, to its former
Canadian Elliot Lake and corporate employees who retired on immediate
pension from active service prior to 1997. The estimated cost of
providing these benefits was actuarially determined using the projected
benefits method and is shown on the balance sheet at its estimated
present value. The most recent actuarial valuation of this obligation
was performed as of September 30, 2002. The interest cost on this
unfunded liability is being accreted, and the transitional surplus being
amortized, over the remaining lives of this retiree group.

Future Income Taxes

Denison Mines follows the liability method of accounting for future
income taxes. Under this method, current income taxes are recognized for
the estimated income taxes payable for the current period. Future income
tax assets and liabilities are determined based on temporary timing
differences between the financial reporting and tax bases of assets and
liabilities, and are measured using the substantively enacted tax rates
and laws that are expected to apply when the differences are expected to
reverse. The benefit of tax losses which are available to be carried
forward are recognized as assets to the extent that they are more likely
than not to be recoverable from future taxable income. The Canadian
federal large corporations tax on capital is included in the provision
for income taxes.

The income tax expense represents that incurred by Denison Mines since
acquisition of the Division on March 8, 2004, as taxes of the Division
prior to that date had been fully sheltered by deductions available to
Denison Energy.

Translation of Foreign Currencies

Transactions denominated in foreign currencies are translated into
Canadian dollars at the rate of exchange prevailing on the date of the
transaction. Monetary assets and liabilities denominated in foreign
currencies are translated into Canadian dollars at the period-end
exchange rate. Non-monetary assets and liabilities are translated at
approximate rates in effect at the dates of the transactions, as are
depletion and amortization which are translated at the same rate as the
related assets. Exchange gains and losses arising on settlement of
foreign exchange transactions are reported in the consolidated statement
of earnings at the date at which the transactions are settled.

Hedging Relationships

Denison Mines enters into foreign exchange forward contracts for risk
management purposes. Foreign exchange forward contracts are commitments
to sell foreign currencies on a specific date in the future at a fixed
rate. Denison Mines enters into such contracts for known or anticipated
transactions that will result in cash receipts in foreign currencies and
does not use any other derivative instruments.

Denison Mines is exposed to changes in the value of such contracts prior
to their settlement as a result of movements in the underlying foreign
exchange rates. Where such contracts meet the criteria for hedge
accounting set out in Accounting Guideline 13, changes in their values
resulting from exchange rate movements are not reflected in the
financial statements. Where such contracts do not meet the criteria for
hedge accounting, they are recorded at their fair value at the balance
sheet date, with changes in their value recognized in the consolidated
statement of earnings.

Stock Option Plans

Denison Mines accounts for stock-based transactions with directors,
officers and eligible employees using the fair-value based method. The
value of options granted is recognized over the applicable vesting
period as an increase in compensation expense and contributed surplus
within shareholders' equity. When such options are exercised, the
proceeds received by Denison Mines, together with the amount in
contributed surplus, is credited to common share capital.

Fair Values

The carrying amounts for cash and short-term deposits, accounts
receivable, inventories and prepaid expenses, accounts payable and
accrued liabilities on the balance sheets approximate fair value because
of the limited term of these instruments. The fair market value of
long-term debt approximates book value unless otherwise disclosed. Fair
value estimates are made at the balance sheet date, based on relevant
market information and information about the financial instrument.

Comparative Numbers

Certain classifications of the comparative figures have been changed to
conform to those used in the current period.

3. INVENTORIES, PREPAID EXPENSES AND OTHER ASSETS



---------------------------------------------------------------------
As At December 31
---------------------------------------------------------------------
(in thousands) 2004 2003
---------------------------------------------------------------------

Uranium concentrate $ 7,091 $ 10,094
Inventory of ore in stockpiles 6,216 10,007
Mine supplies and equipment for resale 1,362 1,305
Prepaid expenses and other assets 922 325
---------------------------------------------------------------------
15,591 21,731
Less: Non-current portion - Inventory of
ore in stockpiles 1,678 5,174
---------------------------------------------------------------------
Current portion inventories, prepaid expenses
and other assets $ 13,913 $ 16,557
---------------------------------------------------------------------
---------------------------------------------------------------------


Stockpiles include inventory from one open pit mining area at the
McClean Lake
minesite where mining was completed in February 2002. Ore from this
stockpile is sufficient to feed the mill, at current rates, through to
the second quarter of 2006.

4. PROPERTY, PLANT AND EQUIPMENT



---------------------------------------------------------------------
As at December 31
---------------------------------------------------------------------
(in thousands) 2004 2003
(Restated)
(Note 2)
---------------------------------------------------------------------

Mining
Cost $ 136,008 $ 131,337
Accumulated depletion and amortization 33,243 26,026
---------------------------------------------------------------------
Net 102,765 105,311

Environmental Services
Cost 1,838 620
Accumulated depletion and amortization 391 257
---------------------------------------------------------------------
Net 1,447 363

Total
Cost 137,846 131,957
Accumulated depletion and amortization 33,634 26,283
---------------------------------------------------------------------
Net $ 104,212 $ 105,674
---------------------------------------------------------------------
---------------------------------------------------------------------


Property, plant and equipment includes a 22.5% interest in the McClean
Lake mine and mill and a 25.17% interest in the Midwest uranium project,
both located in northern Saskatchewan. The McClean Lake mill achieved
commercial production levels on November 1, 1999 and has been
constructed to process ore from the McClean Lake mine as well as other
deposits. A toll milling agreement has been signed with the participants
in the Cigar Lake joint venture that provides for the processing of a
substantial portion of the future output of the Cigar Lake mine at the
McClean Lake mill, for which the owners of the McClean Lake mill will
receive a toll milling fee and other benefits. In determining the
amortization rate for the McClean Lake mill, the amount to be amortized
has been reduced by the Division's expected share of future toll milling
revenue.

Midwest Acquisition

On December 30, 2004, Denison Mines acquired an additional 5.21%
interest in the Midwest uranium project for total consideration of
$3,775,000, bringing its total interest in the project to 25.17%.
Substantially all of the consideration, consisting of cash of $1,258,000
and the issue of 320,625 common shares valued at $2,517,000, was
allocated to property, plant and equipment.

5. LONG-TERM DEBT



---------------------------------------------------------------------
As at December 31
---------------------------------------------------------------------
(in thousands) 2004 2003
---------------------------------------------------------------------

---------------------------------------------------------------------
McClean Lake loan $ - $ 47,032
Capital lease obligation 295 -
---------------------------------------------------------------------
295 47,032
Less: Current portion 128 7,454
---------------------------------------------------------------------
$ 167 $ 39,578
---------------------------------------------------------------------
---------------------------------------------------------------------


McClean Lake Loan

On December 31, 2004, a nominal amount (2003 - $47,032,000) was
outstanding on a loan from Cogema Resources Inc., arranged to finance
the Company's share of the costs of development and operation of the
McClean Lake mine and mill and Midwest uranium project. Denison Mines
has exercised its right to prepay portions of the loan facility and as
at December 31, 2004, has the ability under the terms of the loan
agreement to redraw $31,574,000 at an interest rate of Canadian bank
prime (4.25% at December 31, 2004) plus 1%. Interest of $1,763,000 (2003
- $2,568,000) was paid during the year on this loan facility. No
interest was capitalized in 2003 or 2004.

The loan agreement is currently scheduled to mature on December 31,
2005, but will be extended to December 31, 2010 if, prior to December
31, 2005, a production decision is made to develop the Midwest uranium
project. Any amounts outstanding under the loan are secured by Denison
Mines' 22.5% interest in the McClean Lake joint venture and Denison
Mines' 25.17% interest in the Midwest joint venture. Denison Mines'
share of net cash flow from McClean Lake uranium sales is dedicated to
the loan's repayment. Any principal balance outstanding at the maturity
date is repayable at 20% per annum.

Line of Credit

Denison Mines has a line of credit for $300,000 from a Canadian
Chartered Bank. This line of credit, repayable on demand, bears interest
at Canadian bank prime and is fully secured by a short-term deposit. As
at December 31, 2004, $26,000 was drawn against this line of credit to
secure corporate credit cards and other miscellaneous deposits.

Scheduled Maturities

The table below represents currently scheduled maturities of long-term
debt over the next 5 years.



---------------------------------------------------------------------
---------------------------------------------------------------------
Fiscal 2005 $ 128
Fiscal 2006 167
Thereafter -
---------------------------------------------------------------------
$ 295
---------------------------------------------------------------------
---------------------------------------------------------------------


6. POST EMPLOYMENT BENEFITS

The accrual for post employment benefits includes life insurance for
former Canadian employees who retired on immediate pension prior to
1997, together with the future cost of medical and dental benefits as
set out in the group policies. The amount accrued is based on estimates
provided by the plan administrator which are based on past experience,
limits on coverage included in the plan and other assumptions including
a growth in medical cost of up to 13% initially, decreasing over five
years to 8% per annum and a growth in dental costs of 6% per annum,
subject to limits set out in the group policies.

The post employment benefit plan is not funded.



---------------------------------------------------------------------
As At December 31
---------------------------------------------------------------------
(in thousands) 2004 2003
---------------------------------------------------------------------

Accrued benefit obligation - beginning of
year $ 5,716 $ 5,714
Benefits paid (359) (333)
Interest cost 332 335
Accrued benefit obligation - end of year 5,689 5,716
---------------------------------------------------------------------

Unamortized initial transitional surplus 3,963 4,356
---------------------------------------------------------------------
9,652 10,072
Less: Current portion included in accounts
payable 400 400
---------------------------------------------------------------------
$ 9,252 $ 9,672
---------------------------------------------------------------------
---------------------------------------------------------------------


The unamortized initial transitional surplus is being amortized over the
expected 12.5 year (as of September 2002) average life expectancy of
this retiree group.

7. DECOMMISSIONING AND SITE RESTORATION



---------------------------------------------------------------------
As At December 31
---------------------------------------------------------------------
(in thousands) 2004 2003
(Restated)
(Note 2)
---------------------------------------------------------------------

Liability at beginning of year $ 5,983 $ 5,941
Accretion of liability 448 444
Spending (529) (402)
---------------------------------------------------------------------
Liability at end of year $ 5,902 $ 5,983
---------------------------------------------------------------------
---------------------------------------------------------------------

Liability comprised of:
Elliot Lake $ 4,914 $ 5,063
McClean Lake and Midwest Joint Ventures 988 920
---------------------------------------------------------------------
$ 5,902 $ 5,983
---------------------------------------------------------------------
---------------------------------------------------------------------


Reclamation Liability - Elliot Lake

Denison Mines closed its Elliot Lake uranium mine in 1992 and capital
works to decommission this site were completed in 1997. The remaining
provision is for the estimated cost of monitoring the Tailings
Management Areas at the Denison and Stanrock sites and for treatment of
water discharged from these areas. The Company conducts its activities
at both the Denison and Stanrock sites pursuant to decommissioning
licenses issued by the Canadian Nuclear Safety Commission. The above
accrual represents the Company's best estimate of the present value of
the total future reclamation cost based on assumptions as to levels of
treatment, which will be required in the future, discounted at 7.5%. The
financial effect of future changes, if any, in requirements, laws,
regulations and operating assumptions may be significant and will be
recognized if and when applicable.

Denison Mines has assumed Denison Energy's obligations pursuant to a
Reclamation Funding Agreement ("Agreement"), effective September 30,
1994, with the Governments of Canada and Ontario. This Agreement
requires Denison Energy to deposit 90% of cash flow, after deducting
permitted expenses, into the Reclamation Trust Fund. A subsequent
amendment to the Agreement provides for the suspension of this
obligation to deposit 90% of cash flow into the Reclamation Trust Fund,
provided funds are maintained in the Reclamation Trust Fund equal to
estimated reclamation spending for the succeeding six calendar years,
less interest expected to accrue on the funds during the period.
Withdrawals from this Reclamation Trust Fund can only be made with the
approval of the Governments of Canada and Ontario, to fund Elliot Lake
monitoring and site restoration costs. Denison Mines believes that the
current Reclamation Trust Fund balance, together with a deposit of
$315,000 made in February 2005, will be adequate to fund these costs
through to the end of 2010. The balance in the Reclamation Trust Fund
account comprises substantially all of the amount shown in the
consolidated balance sheet as "Restricted cash and cash equivalents" of
$1,414,000 (2003- $1,558,000).

Reclamation Liability - The McClean Lake Joint Venture and the Midwest
Joint Venture

The McClean Lake and Midwest operations are subject to environmental
regulations as set out by Saskatchewan Environment and the Canadian
Nuclear Safety Commission. As required by Saskatchewan Environment, the
operator of the McClean Lake and Midwest joint venture has arranged
Letters of Credit securing future decommissioning and reclamation
liabilities. Upon implementation of the plan of arrangement, Denison
Mines assumed Denison Energy's obligation to indemnify the operator for
its proportionate share of any loss incurred up to a maximum amount of
$8,066,000.

8. INCOME TAXES

The Division transferred to Denison Mines was not a separate taxable
entity prior to March 8, 2004. The following provides tax information
concerning the Division as if it had been a separate taxable entity up
to that date.

Denison Mines operates in two industrial and geographic segments, and
the related income is subject to varying rates of taxation. A
reconciliation of the combined Canadian federal and provincial income
tax rate to Denison Mines' effective rate of income tax is as follows:



---------------------------------------------------------------------
As at December 31
---------------------------------------------------------------------
(in thousands) 2004 2003
---------------------------------------------------------------------

Earnings (loss) before income taxes $ (2,186) $ (3,123)
Combined federal and provincial income t 36.12% 35.54%
----------------------
Computed income tax expense (recovery) (790) (1,110)

Increase in taxes resulting from utilization
of federal and provincial tax pools and loss
carry forwards not previously recognized by
Denison Energy - 1,110
Large corporations tax in excess of surtax 125 -
Permanent differences 858 -
Resource allowance and deductible mining taxes (469) -
Difference in future tax rates (63) -
March 8, 2004 reorganization adjustment (3,840) -
---------------------------------------------------------------------
Provision for (recovery of) income taxes $ (4,179) $ -
---------------------------------------------------------------------
---------------------------------------------------------------------

Provision for (recovery of) income taxes
comprised of:
Current tax expense $ 125 $ -
Future tax expense (recovery) (4,304) -
---------------------------------------------------------------------
$ (4,179) $ -
---------------------------------------------------------------------
---------------------------------------------------------------------


Denison Mines uses the asset and liability method of accounting for the
tax effect of temporary differences between the carrying amount and tax
bases of assets and liabilities. Temporary differences arise when the
realization of an asset or the settlement of a liability would give rise
to either an increase or decrease in the Division's income taxes payable
for the year or a later period.

The components of the Company's future tax asset (liability) are as
follows:



---------------------------------------------------------------------
As At December 31
---------------------------------------------------------------------
(in thousands) 2004 2003
---------------------------------------------------------------------

Depletion, depreciation and amortization $ (5,074) $ (7,550)
Post employment benefits 3,699 1,789
Reclamation and remediation costs 2,229 2,653
Other 1,018 (92)
---------------------------------------------------------------------

Future tax asset (liability), net of
valuation allowance of nil $ 1,872 $ (3,200)
---------------------------------------------------------------------
---------------------------------------------------------------------


9. COMMON STOCK, WARRANTS, CONTRIBUTED SURPLUS AND EARNINGS PER SHARE

Common Stock

---------------------------------------------------------------------
As At December 31
---------------------------------------------------------------------
(in thousands, except share numbers) 2004
---------------------------------------------------------------------
Shares $
---------------------------------------------------------------------

Common stock - beginning of year - -
Shares issued pursuant to:
Implementation of Denison Arrangement 18,670,769 $ 70,635
Common share and share purchase unit
financings
Proceeds - gross 5,312,393 36,856
Less: Issue Costs - gross, net of $768
in taxes (1,364)
Less: Value Allocated to Warrants (3,127)
Acquisition related
Midwest additional ownership interest 320,625 2,517
Stock option exercises
Proceeds - gross 17,501 95
Add: Transfer from contributed surplus 34
Warrant exercises
Proceeds - gross 561,550 2,976
Add: Transfer from warrants 373
---------------------------------------------------------------------
Common stock - end of year 24,882,838 $ 108,995
---------------------------------------------------------------------
---------------------------------------------------------------------


Implementation of Denison Arrangement

On March 8, 2004, following implementation of the Denison Arrangement,
Denison Mines had 18,670,769 Common Shares issued and outstanding (see
note 1).

Common share and purchase unit financings

On May 31, 2004, Denison Mines issued 2,353,000 units at a price of
$4.25 per unit (the "May 2004 Private Placement"). Each unit consisted
of one common share and one-half (1/2) of one common share purchase
warrant of the company. Total proceeds of this issue were $10,000,000
less pre-tax issue costs of $724,000.

On September 29, 2004, Denison Mines issued 636,943 common shares at a
price of $7.85 per share for gross proceeds of $5,000,000 less pre-tax
issue costs of $12,000.

On November 24, 2004, Denison Mines issued 2,200,000 units at a price of
$9.25 per unit (the "November 2004 Private Placement"). Each unit
consisted of one common share and one-half (1/2) of one common share
purchase warrant of the company. Total proceeds of this issues were
$20,350,000 less pre-tax issue costs of $1,338,000.

On November 30, 2004, Denison Mines issued 122,450 flow-through common
shares at a price of $12.25 per share for gross proceeds of $1,500,000
less pre-tax issue costs of $58,000.

Acquisition related

On December 30, 2004, Denison Mines issued 320,625 shares as part of the
consideration payable for the additional ownership it acquired in the
Midwest uranium project (see note 4).



Warrants

---------------------------------------------------------------------
As At December 31
---------------------------------------------------------------------
(in thousands, except share numbers) 2004
---------------------------------------------------------------------
Shares $
---------------------------------------------------------------------

Warrants - beginning of year - -
Warrants issued (and allocated fair value)
pursuant to:
May 2004 Private Placement 1,176,500 $ 781
November 2004 Private Placement 1,100,000 2,346
Warrants exercised (and allocated fair
value) during the year
May 2004 Private Placement (561,550) (373)

---------------------------------------------------------------------
Warrants - end of year 1,714,950 $ 2,754
---------------------------------------------------------------------
---------------------------------------------------------------------


As at December 31, 2004, Denison Mines has 1,714,950 Common Share
Warrants outstanding. Warrants outstanding under the May 2004 Private
Placement entitle the holder to acquire one common share of Denison
Mines at $5.30 and expire on December 1, 2005. Warrants outstanding
under the November 2004 Private Placement entitle the holder to acquire
one common share of Denison Mines at $15.00 and expire on November 24,
2009. The fair value of the warrants was calculated using the
Black-Scholes model using assumptions as described in note 10.



Contributed Surplus

---------------------------------------------------------------------
As At December 31
---------------------------------------------------------------------
(in thousands) 2004
---------------------------------------------------------------------

Contributed surplus - beginning of year $ -
Add: Stock option expense for the year 1,152
Less: Fair value of stock option exercises for the year (34)
---------------------------------------------------------------------
$ 1,118
---------------------------------------------------------------------
---------------------------------------------------------------------


Earnings Per Share

The calculation of basic earnings (loss) per share is based on the
weighed average number of shares outstanding during the year of
20,518,386.

The pro forma loss per share has been calculated using the number of
shares issued by Denison Mines on March 8, 2004 under the implementation
of the Denison Arrangment as the weighted average number of shares
outstanding for the fiscal 2003 year.

10. STOCK-BASED COMPENSATION

As a result of the implementation of the Denison Arrangement, no
directors or officers of the Company had any Company stock options as of
March 8, 2004. During the year, pursuant to its stock option plan
approved by shareholders on March 3, 2004, the Company granted options
to purchase Common Shares to its directors and officers and eligible
employees and certain service providers of the Company. The exercise
price of the options is set at the closing share price on the day before
the grant date. The options vest one-third at the date of grant,
one-third on the first anniversary date and one third at the second
anniversary date of the grant and are exercisable over ten years.

Stock option transactions for the year were as follows:



---------------------------------------------------------------------
As At December 31
---------------------------------------------------------------------
2004
---------------------------------------------------------------------
Shares Weighted
Average
Exercise
Price
---------------------------------------------------------------------
Options outstanding - beginning of year - -
Options granted 1,025,500 $ 5.87
Options exercised (17,501) $ 5.40
Options cancelled (10,000) $ 5.40
---------------------------------------------------------------------
Options outstanding - end of year 997,999 $ 5.88
---------------------------------------------------------------------
---------------------------------------------------------------------

An additional 1,984,500 shares, in addition to those currently
outstanding, are available for granting as options under this plan.


The total options outstanding and exercisable, by option price per
share, are as follows:

---------------------------------------------------------------------
As At December 31
---------------------------------------------------------------------
2004
---------------------------------------------------------------------
Options Options
Option Price per Share Outsanding Exercisable
---------------------------------------------------------------------
$ 5.40 762,999 246,526
$ 5.50 15,000 5,010
$ 5.75 100,000 33,400
$ 8.81 80,000 26,720
$ 9.70 40,000 13,360
---------------------------------------------------------------------
997,999 325,016
---------------------------------------------------------------------
---------------------------------------------------------------------

The Company determined compensation expense in connection with these
grants based on the fair values of the options at the grant dates
using the Black-Scholes option-pricing model using the following
assumptions:


Dividend yield - nil
Risk-free interest rate - 3.75% to 4.67%
Expected life of the options - 3-6 years
Expected volatility factor of future expected market prices - 40%


Total compensation expense regarding these options is $2,255,000 of
which $1,152,000 has been charged to earnings during the year with the
remainder to be amortized over the next 24 months.



11. OTHER EXPENSE (INCOME)

---------------------------------------------------------------------
As At December 31
---------------------------------------------------------------------
(in thousands) 2004 2003
---------------------------------------------------------------------

Interest income $ (115) $ (109)
Foreign exchange
Transactional 301 88
Derivative related (204) -
Other (14) -
---------------------------------------------------------------------
$ (32) $ 479
---------------------------------------------------------------------
---------------------------------------------------------------------


The derivative-related foreign exchange gain of $204,000 is unrealized
and represents the fair value at December 31, 2004 of outstanding
contracts for the forward sale of US$6,700,000 which will mature in
early 2005.

12. SEGMENTED FINANCIAL INFORMATION

Denison Mines operates in two primary segments - uranium and
environmental services. The uranium segment involves the exploration for
mining, milling and purchase and sale of uranium concentrate. The
environmental services segment consists of mine decommissioning services
and monitoring of decommissioned sites for third parties.

Business Segments



---------------------------------------------------------------------
For the Year Ended December 31, 2004
---------------------------------------------------------------------
Environmental
(in thousands) Uranium Services Corporate Total
---------------------------------------------------------------------

Revenue $ 31,327 $ 5,797 $ - $ 37,124
---------------------------------------------------------------------


Expenses
Operating expenses 24,994 5,227 - 30,221
Royalties and provincial
capital tax 2,453 - - 2,453
Exploration expense 368 - - 368
General corporate expense - - 3,371 3,371
Stock option expense - - 1,152 1,152
Interest expense 1,777 - - 1,777
Other expense (income) - - (32) (32)

---------------------------------------------------------------------
29,592 5,277 4,491 39,310
---------------------------------------------------------------------
Earnings (loss) before
income taxes 1,735 570 (4,491) (2,186)
Income tax expense (recovery)
Current - - 125 125
Future - - (4,304) (4,304)
---------------------------------------------------------------------
Earnings (loss) for the
year $ 1,735 $ 570 $ (312) $ 1,993
---------------------------------------------------------------------
---------------------------------------------------------------------



---------------------------------------------------------------------
For the Year Ended December 31, 2003
---------------------------------------------------------------------
Environmental
(in thousands) Uranium Services Corporate Total
---------------------------------------------------------------------
$ 23,575 $ 4,600 $ - $ 28,175
---------------------------------------------------------------------
Revenue

Expenses
Operating expense 19,260 4,008 - 23,268
Royalties and provincial
capital tax 1,860 - - 1,860
Exploration expense 307 - - 307
General corporate expense - - 2,300 2,300
Stock option expense - - 318 318
Interest expense 2,766 - - 2,766
Other expense (income) - - 479 479

---------------------------------------------------------------------
24,193 4,008 3,097 31,298
---------------------------------------------------------------------
Earnings (loss) before
income taxes (618) 592 (3,097) (3,123)
Income tax expense
Current - - - -
Future - - - -
---------------------------------------------------------------------
Earnings (loss) for the
year $ (618) $ 592 $ (3,097) $(3,123)
---------------------------------------------------------------------
---------------------------------------------------------------------


Geographic Segments

The following table sets forth revenue by geographic region based on
where title to the uranium concentrate passes in the case of uranium
segment revenue and the location of the customer in the case of
environmental services segment revenue. Property, plant and equipment is
all located in Canada.



---------------------------------------------------------------------
As At December 31
---------------------------------------------------------------------
(in thousands) 2004 2003
(Restated)
---------------------------------------------------------------------
Revenue
Canada 19,476 $ 5,257
United States 8,169 4,031
Rest of World 9,479 18,887
---------------------------------------------------------------------
$ 37,124 $ 28,175
---------------------------------------------------------------------
---------------------------------------------------------------------


Major Customers

Denison Mines relies on a small number of customers to purchase a
significant portion of its uranium concentrate product. During the year
ended December 31, 2004 and 2003, the aggregate revenue from customers
representing more than 10% of Denison Mines total revenues was $14,637
(39%) and $10,982 (39%), respectively. In 2004, three customers (2003 -
two customers) each accounted for more than 10% of the Company's gross
revenues.

13. CONTINGENT LIABILITIES AND COMMITMENTS

Contingent Liabilities

(a) McClean Lake Operating Licence

On June 4, 2004, the Federal Court of Appeal issued a unanimous decision
overturning a September 2002 decision of the Trial Division that quashed
the original McClean Lake facility operating license issued in 1999 on
the basis that the Canadian Environmental Assessment Act had not been
complied with. The Court of Appeal found that the facility's license was
properly issued. The plaintiff has sought leave to appeal this ruling to
the Supreme Court of Canada. Unless leave to appeal is granted, the
Federal Court of Appeal's decision removes any uncertainty about the
continued licensing of the McClean facilities. The Company believes that
there are no grounds on which the Supreme Court will grant leave to
appeal.

(b) Elliot Lake Property Tax Complaint

The City of Elliot Lake (the "City") filed complaints with the Ontario
Assessment Review Board (the "Board"), alleging that the Municipal
Property Assessment Corporation ("MPAC") had: (i) understated the
current value which the City is required to use in determining the
annual property taxes attributable to the tailings management areas at
the Company's decommissioned Elliot Lake mine site and those of other
closed uranium mines in Elliot Lake; and (ii) incorrectly categorized
these tailings management areas as vacant commercial land, rather than
occupied industrial land.

In November 2004, the Board determined that MPAC had used the correct
assessed values for the mines sites. However, the Board changed the
categorization of the tailings management area to commercial occupied
land as opposed to vacant commercial land. The result of the change in
categorization will be additional tax that the Company has estimated to
be about $5,000 per year.

The City of Elliot Lake has made an Application for Leave to Appeal the
above decision to the Divisional Court. The Company believes that the
City's Application for Leave is without merit and is unlikely to be
successful. The Company intends to oppose the Application. No hearing
date has been scheduled. The dollar value of any additional taxes
arising from this Appeal, in the event the City were to be successful on
its Application and on the Appeal itself, cannot be determined but could
be material. No provision has been made for such amounts.

(c) Blue Hill, Maine

The Company is a defendant in an action filed by the State of Maine
against Kerramerican, Inc., ("Kerramerican") a subsidiary of Noranda
Inc., Black Hawk Mining Ltd. ("Black Hawk") and the Company, regarding
potential liability for clean-up costs at a zinc mining site in the
state of Maine known as Blue Hill. In addition, Black Hawk and
Kerramerican have each asserted cross-claims against Denison for
contribution. Denison intends to defend these actions and to
counter-claim against Black Hawk and Kerramerican for indemnity.
Denison's activities at this site were limited to exploration that did
not involve the disposal of any waste and which occurred prior to 1964.
Mining activities at the site occurring between 1964 and 1970 were
conducted by Black Hawk, a public company in which Denison had a
financial interest but did not control. Black Hawk entered into a joint
venture with Kerramerican in 1970. Kerramerican was the operator of the
joint venture, built processing facilities and operated the mine until
it was closed in 1977. Kerramerican was responsible for the
decommissioning and reclamation of the site, which was completed in
1983. The site is now the source of some heavy metal contamination of
the ground water in the area and further reclamation work is required.

Denison Mines Limited, a predecessor company of Denison Energy Inc., has
an indemnity from Kerramerican and Black Hawk in an agreement among the
parties dated July 1, 1971. The Company has thoroughly examined this
issue and believes it has no liability related to the costs of any clean
up of the contamination and has made no provision for any costs other
than those incurred to date to investigate the matter. Furthermore, the
Company believes that, to the extent that there is liability and the
Company incurs legal fees, Kerramerican and Black Hawk are liable
therefore pursuant to the July 1, 1971 indemnity agreement.
Notwithstanding the Company's belief that it has no liability, future
litigation of the matter cannot be ruled out and as a result, the
Company cannot determine the outcome of this matter at this time.

(d) General Contingencies

The Company is involved in various other legal actions and claims in the
ordinary course of business. In the opinion of management, the aggregate
amount of any potential liability is not expected to have a material
adverse effect on the Company's financial position or results.

(e) Indemnities

Pursuant to the Denison Arrangement described in note 1, Denison Mines
has agreed to indemnify Denison Energy against any future liabilities it
may incur related to the assets or liabilities transferred to Denison
Mines on March 8, 2004.

Commitments

Denison Mine's commitments under operating leases, including a new
premise lease entered into in March 2005, for the next 5 years, are as
follows:



---------------------------------------------------------------------
---------------------------------------------------------------------
Fiscal 2005 $ 180
Fiscal 2006 170
Fiscal 2007 162
Fiscal 2008 155
Fiscal 2009 150
---------------------------------------------------------------------
$ 817
---------------------------------------------------------------------
---------------------------------------------------------------------


14. SUBSEQUENT EVENTS

On February 16, 2005, Denison Mines announced that it has agreed to
issue, by way of private placement, up to 184,000 flow-through common
shares priced at $21.75 per share for gross proceeds of approximately
$4,000,000. The private placement is scheduled to close on or about
March 10, 2005 and is subject to normal closing conditions. Proceeds of
the placement will be used to finance Denison Mines fiscal 2005 and 2006
exploration programs.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This management's discussion and analysis (MD&A) should be read in
conjunction with the Denison Mines Inc. consolidated financial
statements and Auditors' Report for the year ended December 31, 2004.
This MD&A is current as of March 7, 2005.

CAUTION REGARDING FORWARD-LOOKING INFORMATION

Some disclosures included in this MD&A respecting production, capital
spending, development schedules, expenses, markets, and milling
arrangements represent forward-looking statements. Forward-looking
statements generally can be identified by the use of forward-looking
terminology such as "may", "will", "expect", "intent", "estimate",
"anticipate", "believe" or "continue" or the negative thereof or
variations thereon or similar terminology. Such statements are based on
assumptions and estimates related to future market conditions. These
statements involve risks and uncertainties relating to, among other
things, changes in commodity prices, unanticipated reserve and resource
grades, results of exploration activities, timeliness of government
approvals, economic risk, actual performance of plant, equipment and
processes relative to specifications and expectations and unanticipated
environmental impacts on operations. While management reviews the
reasonableness of its assumptions and estimates, unusual and
unanticipated events may occur which render them inaccurate. Under such
circumstances, future performance may differ materially from those
expressed or implied by the forward-looking statements.

OVERVIEW

Denison Mines Inc. ("Denison") is primarily a uranium production and
exploration company and is also engaged in mine de-commissioning and
environmental services. Effective March 8, 2004 Denison Energy Inc.
("DEI") reorganized its businesses resulting in Denison acquiring all of
DEI's uranium and environmental services operations, assets and
liabilities. These mining division assets and liabilities constituted a
substantial part of DEI's total assets prior to the reorganization. With
the reorganization, Denison became one of only two Canadian publicly
traded companies that are primarily involved in the uranium mining and
production business. Denison's production is through its 22.5% ownership
of the McClean Lake joint venture which includes both uranium reserves
and the fifth largest uranium processing facility in the world. Denison
is also a 25.17% owner of the Midwest joint venture which also contains
substantial reserves of uranium. Denison is also carrying on substantial
exploration programs at several properties, including McClean Lake and
Midwest which have untapped resource potential, and at the Wheeler
River, Wolly and Waterfound uranium exploration projects.

Our Vision

Denison's position in the worldwide nuclear fuel industry and the
environmental services business in Canada will become increasingly
significant.

Our Mission

Denison's core business is the supply of uranium in concentrates (U3O8)
to utilities in North America and the Far East as fuel for nuclear power
reactors. Our mission is to expand upon our core business with
exploration for new uranium reserves on our existing properties, the
timely development of our uranium reserves in a socially,
environmentally and economically responsible way, and the acquisition of
new exploration properties, reserves and uranium production.

With the significantly improved health of the mining industry in North
America, Denison Environmental Services has a renewed focus to increase
its strategic alliance with others and utilize its expertise and
reputation in order to achieve significant growth.

Our success will be measured not only by our short-term economic
results, but also by the health and safety of our workplaces, the
environmental ramifications of our activities and the reputation we have
with our employees, customers and the communities in which we operate.
The continued improvement of all of these factors will result in a
continued increase in shareholder value.

Our Strategy

Denison's primary strategy to achieve its vision and mission is to
increase its reserves through exploration and, where appropriate,
acquisition.

Denison will seek to maintain and enhance its existing strategic
alliances with industry partners, such as Cogema, OURD and Cameco, to
increase its exploration and to market its production.

CORPORATE OBJECTIVES FOR 2005

- Conserve inventory by reducing U3O8 sales by up to 17% below 2004
levels with a reduction in revenue of less than 10%;

- Increase uranium division earnings by at least 100%;

- Expand uranium reserves by spending $3,000,000 on exploration in 2005,
and through acquisitions;

- Complete the evaluation of the blind-boring/jet-boring mining
techniques to improve its economic viability;

- Evaluate the feasibility of producing the nickel and cobalt resources
associated with the uranium at Midwest; and

- Reduce general corporate expenses by at least 10%.

URANIUM INDUSTRY CONDITIONS

Overview

The uranium market has been relying, to a large degree, on the drawdown
of commercial inventories to meet the large gap between mine production
and demand. These commercial inventories have a finite life so
substantial new mine production capacity is required to maintain the
supply-demand balance. This will require higher sustained uranium prices
to justify the extensive investment in time and money.

Uranium Demand

The only significant commercial use for uranium in the world is to fuel
nuclear power plants for the generation of electricity. Demand for
electricity world-wide continues to grow and nuclear is expected to play
an important part. Public opinion in many countries is now shifting
strongly in support of nuclear power.

The increased emphasis by the international community on reducing
greenhouse gases and concern for the damage caused by acid rain are
drawing increased interest in nuclear power generation, which produces
neither greenhouse gases nor acid rain. A number of countries have
formally recognized that the nuclear option is necessary if they are
going to meet their Kyoto Accord targets. Globally, nuclear power avoids
2.4 billion tonnes per year of CO2 which would be produced if the same
amount of electricity were produced from coal.

There are currently 440 nuclear reactors with a generating capacity of
365 GWe in operation in 31 different countries, generating about 16% of
the world's electricity requirements. There are 25 more reactors under
construction, and a further 37 reactors are planned, for which approvals
and funding are already in place. China, in particular, has an ambitious
nuclear power development program with its generating capacity expected
to grow from 7 GWe to 36 GWe by 2020.

Production costs of nuclear electricity in the United States have been
lower than other sources of electricity production for the past four
years and are continuing to fall. The most recent OECD comparative study
showed that nuclear was the preferred choice for new base line capacity
commissioned by 2010 in 7 of the 13 countries considering nuclear
energy, based on a 5% discount rate on capital.

Uranium consumption world-wide in 2003 was about 180 million pounds of
U3O8 and is expected to increase to 205 million pounds by 2013. The
demand for uranium is expected to grow by between 1% and 2% per year
over the next decade. This growth in consumption comes not only from the
construction of new reactors, but also from improving capacity factors,
up-rating of the generating capacity of existing plants, and the
extension of the licensed operating lives of the reactors.

Uranium Supply

Uranium is produced in 18 countries world-wide; however, more than 52%
of the total annual production in 2003 came from mines in Canada (30%)
and Australia.

After several years of consolidation among uranium producers, the four
largest producers accounted for over 56% of world production with Cameco
and Cogema alone accounting for over 35% of world production. Total
annual world-wide production in 2003 was approximately 92 million
pounds, which is equal to only 51% of world-wide requirements to fuel
nuclear reactors. The McClean Lake operation is one of the world's five
largest uranium producing facilities.

During the past several years, secondary sources of supply have been
required to fill the gap between demand and primary production. The
reduced availability of some of these sources will tighten the
supply-demand balance and therefore should lead to increasing uranium
prices.

During the 1990s, the republics of the former Soviet Union sold a large
quantity of uranium from their inventories. Russia is now a net
consumer, producing only part of its requirements. Consequently, this
source of supply is no longer available to international markets.

Reprocessing of uranium and plutonium is being utilized by some of the
utilities in Europe and Japan; however, this reprocessed material is not
expected to meet more than about 6% of world demand over the next 10
years. Reprocessing capacity expansion would require substantially
higher uranium prices to be justified.

Uranium from nuclear disarmament is expected to supply 10 to 12% of the
demand over the next 10 to 15 years. This material represents the
equivalent of one large mine, such as Cigar Lake or McArthur River, and
is essential for meeting world-wide demand.

Commercial inventories, while still significant, are rapidly being drawn
down at a rate of about 35-40 million pounds of U308 annually. While
these inventories may continue to be a secondary source to meet the
demand for a few more years, it will be at a reducing rate. With the
rapid rise in uranium spot prices and the tightening supply/demand
balance over the last few years, a move to increase the size of the
utilities' strategic inventories may well be expected.

As a result of these factors, new mines are required to meet the medium
and long-term market requirements. However, apart from the scheduled
Cigar Lake start-up, no large new mine is being proposed for
development. In fact, several mines have recently closed, or are
scheduled to close, as their ore reserves are depleted. Significant,
uncovered demand exists in the market from 2005 onward, resulting in the
tightening supply-demand balance putting upward pressure on uranium
prices. The rise in uranium prices has renewed interest in uranium
exploration after many years of low activity. There is a long lead time
necessary from the beginning of exploration to the discovery of a
commercial deposit to the completion of the regulatory approval and
construction of the facilities before new supply can enter the market.
The "fast track" development of McArthur River took 8 years from
discovery to production.

Uranium Spot Market

Spot market sales represented only approximately 12% of uranium demand
in 2004, with a similar quantity expected in 2005, in line with the
level in recent years. The spot price has steadily increased from
US$7.10 at December 31, 2000 to US$20.70 at December 31, 2004 and is
$21.75 at February 28, 2005. Several potential purchasers of spot
material have recently been unable to find willing suppliers. Spot
prices are expected to continue their upward trend, as excess
inventories are drawn down and the supply-demand balance tightens.

Uranium Exports - Government Regulations

The export of uranium is regulated by the Canadian federal government
which determines nuclear energy policy. Nuclear safeguard agreements are
required between the government of Canada and the government of a
country desiring to receive exports of Canadian uranium. Uranium exports
are required to have export licenses and permits granted by the CNSC and
the federal Department of Foreign Affairs and International Trade,
respectively, and such permits and licenses are obtained as required.
Domestic uranium supply contracts are not subject to federal review.



CONSOLIDATED RESULTS
---------------------------------------------------------------------

---------------------------------------------------------------------
For the Year Ended December 31, 2004
---------------------------------------------------------------------
(in thousands) Uranium Environmental Corporate Total
Services
---------------------------------------------------------------------
Revenue $ 31,327 $ 5,797 $ - $ 37,124
---------------------------------------------------------------------

Expenses
Operating expenses 24,994 5,227 - 30,221
Royalties and
provincial capital
tax 2,453 - - 2,453
Exploration expense 368 - - 368
General corporate
expense - - 3,371 3,371
Stock option expense - - 1,152 1,152
Interest expense 1,777 - - 1,777
Other expense (income) - - (32) (32)

---------------------------------------------------------------------
29,592 5,227 4,491 39,310
---------------------------------------------------------------------
Earnings (loss) before
income taxes 1,735 570 (4,491) (2,186)
Income tax expense
Current - - 125 125
Future - - (4,304) (4,304)
---------------------------------------------------------------------
Earnings (loss) for
the year $ 1,735 $ 570 $ (312) $ 1,993
---------------------------------------------------------------------
---------------------------------------------------------------------



---------------------------------------------------------------------
For the Year Ended December 31, 2003
---------------------------------------------------------------------
(in thousands) Uranium Environmental Corporate Total
Services
---------------------------------------------------------------------
Revenue $ 23,575 $ 4,600 $ - $ 28,175
---------------------------------------------------------------------

Expenses
Operating expense 19,260 4,008 - 23,268
Royalties and
provincial capital
tax 1,860 - - 1,860
Exploration expense 307 - - 307
General corporate
expense - - 2,300 2,300
Stock option expense - - 318 318
Interest expense 2,766 - - 2,766
Other expense (income) - - 479 479

---------------------------------------------------------------------
24,193 4,008 3,097 31,298
---------------------------------------------------------------------
Earnings (loss) before
income taxes (618) 592 (3,097) (3,123)
Income tax expense
Current - - - -
Future - - - -
---------------------------------------------------------------------
Earnings (loss) for
the year $ (618) $ 592 $(3,097) $ (3,123)
---------------------------------------------------------------------
---------------------------------------------------------------------


DISCUSSION OF CONSOLIDATED RESULTS

Consolidated revenue for the year ended December 31, 2004 was $37.1
million and the consolidated net income was $2.0 million. This compares
with revenues of $28.2 million and a consolidated net loss of $3.1
million for the year ended December 31, 2003.

Prior to the reorganization of DEI, the uranium and environmental
services divisions transferred to Denison were part of DEI and their
taxable income was sheltered by tax pools not previously recorded by
DEI. Accordingly no income tax expense or recovery has been recognized
relating to the results of the division prior to their transfer on March
8, 2004. As a result of the reorganization on March 8, 2004, Denison has
calculated that it will have a future tax liability of $3.2 million.
This amount is included in the Consolidated Balance Sheet at December
31, 2003.



Quarterly Consolidated Financial Results
---------------------------------------------------------------------
(in thousands, except per share amounts)
---------------------------------------------------------------------
Fiscal 2003
---------------------------------------------------------------------
Q1 Q2 Q3 Q4 TY
---------------------------------------------------------------------
Revenue 5,174 10,471 3,375 9,155 28,175
---------------------------------------------------------------------
Net earnings (loss) (456) (729) (1,034) (904) (3,123)
---------------------------------------------------------------------
-Per share ($0.02) ($0.04) ($0.06) ($0.05) ($0.17)
---------------------------------------------------------------------
Cash provided by
(used in) operations 5,778 5,222 (328) (2,672) 8,000
---------------------------------------------------------------------


Quarterly Consolidated Financial Results
---------------------------------------------------------------------
(in thousands, except per share amounts)
---------------------------------------------------------------------
Fiscal 2004
---------------------------------------------------------------------
Q1 Q2 Q3 Q4 TY
---------------------------------------------------------------------
Revenue 6,221 10,619 10,458 9,826 37,124
---------------------------------------------------------------------
Net earnings (loss) (773) (747) (52) 3,565 1,993
---------------------------------------------------------------------
-Per share ($0.04) ($0.04) - $0.16 $0.10
---------------------------------------------------------------------
Cash provided by
(used in) operations 5,363 4,381 2,207 1,976 13,927
---------------------------------------------------------------------


Results are discussed below, first for the uranium and environmental
services divisions, following which the corporate and other expense
items are discussed.

URANIUM DIVISION RESULTS

Denison's uranium division consists of its 22.5% interest in the
producing McClean Lake mine and mill operation and 25.17% interest in
the Midwest uranium property in Saskatchewan. In addition, Denison is
involved in uranium exploration as part of the above joint ventures and
as a participant in the Wheeler River, Wolly and Waterfound joint
ventures.

Results for 2004

The uranium division earnings were $1.7 million for the year ended
December 31, 2004. This compares to a loss of $0.6 million for the year
ended December 31, 2003. The stronger results in 2004 were driven by
higher sales volumes, and increased pricing on uranium sales, partially
offset by a reduction in the value of the U.S. dollar relative to
Canadian currency.

The McClean Lake Joint Venture produced 6,005,000 pounds of uranium
during the year ended December 31, 2004 compared with 6,028,000 pounds
in 2003. Denison's 22.5% share of production totalled 1,351,000 pounds
in 2004, compared with 1,356,000 pounds in 2003. In 2004, sales exceeded
production as Denison chose to reduce inventory to prudently take
advantage of increased prices. Denison's uranium sales are under eight
different long-term contracts with utilities in the United States and
the Far East. These contracts have various durations and contain a
variety of pricing formulas. In addition, Denison sold some uranium on a
spot basis.

The Canadian dollar appreciated relative to the US dollar such that the
average realized Canadian dollar exchange rate for the conversion of
U.S. dollar sales declined from $1.3730 in 2003 to $1.2874 for 2004.
Unit cash production costs increased by about $0.29 per pound.

In February 2002 the mining of the Sue C pit was completed and the ore
stockpiled. Denison's share of inventory in the ore stockpile at
December 31, 2004 was nearly 1.85 million pounds, sufficient to feed the
mill at current rates through to the second quarter 2006. This includes
a reduction in the estimate of ore in the stockpile of approximately 10%
resulting in a reduction in Denison's share of U3O8 in the stockpile by
about 290,000 pounds. Mine development plans for other deposits have
been approved by the McClean Lake Joint Venture and mining of the Sue A
and Sue E deposits will commence in 2005. At December 31, 2004 Denison
had sufficient uranium concentrate inventories to fill contracted
deliveries into the second quarter of 2005. In 2004, the average mill
feed grade was 1.86% U308 compared with 2.07% in 2003.

Denison pays a Saskatchewan basic uranium royalty of 4% of gross uranium
sales after receiving the benefit of a 1% Saskatchewan resource credit.
Denison also pays Saskatchewan capital taxes based on the greater of
3.6% of gross uranium sales and capital tax otherwise computed under the
act. The Saskatchewan government also imposes a tiered royalty which
ranges from 6% to 15% of gross uranium sales after recovery of mill and
mine capital allowances which approximate capital costs. Denison has not
paid tiered royalties in the past and has sufficient mill and mine
capital and expansion allowances available or anticipated to shelter it
from the tiered royalty at current uranium prices for many years.

Fourth Quarter Events

In the fourth quarter of 2004, several important events occurred.

Sales volumes in the quarter were about 28% of the full year's target
resulting in sales volumes for the full year meeting the target of a 25%
increase over 2003.

Denison announced an agreement to earn into the Wolly uranium
exploration project in northern Saskatchewan. The Wolly property
surrounds the McClean Lake project and comprises 23,700 hectares.
Denison has the option to acquire up to 22.5% interest in the Wolly
project by spending up to $5 million in exploration costs over the next
six years.

Denison also announced an agreement to acquire up to an additional 20%
interest in the Wheeler River uranium exploration project in northern
Saskatchewan and thereby hold a 60% interest, by spending $7 million in
explorations costs over the next six years.

In December, 2004, Denison purchased a further 5.21% interest in the
Midwest uranium project located in northern Saskatchewan from Redstone
Resources Inc., a subsidiary of Newmont Mining Corporation. This
acquisition increased the Company's interest in this project to 25.17%
and added 1.7 million pounds to the Company's uranium reserve base. The
consideration for the acquisition of this Midwest interest is a total of
$3.8 million consisting of $1.3 million in cash and 320,625 common
shares valued at $7.85 each at the time of the transaction.

In November, 2004, the Ontario Assessment Review Board released a
decision confirming the assessed values on Denison's Elliot Lake closed
mine site supporting the Company's position that the assessed values
were $108,700 rather than in excess of $62 million as asserted by the
City of Elliot Lake. The City of Elliot Lake has sought leave to appeal
this decision.

In November, Denison issued 2,200,000 equity units, consisting of one
common share and one-half warrant to purchase one common share raising
gross proceeds of $20,350,000 and issued 122,450 flow- through common
shares at a price of $12.25 per share, raising gross proceeds of
$1,500,000.

As a result of these issues, and operating cash flow from uranium sales,
Denison was able to reduce its loan with Cogema Resources to a nominal
amount at December 31, 2004.

2005 Outlook

Uranium sales volumes in 2005 are expected to be about 17% less than in
2004 to conserve inventory levels in the current rising market.
Expectations are that sales volumes will be skewed towards the second
half of the year.

Production for the McClean Lake Joint Venture is targeted for 6,000,000
pounds once again in 2005, of which Denison's share is about 1,350,000
pounds.

Uranium prices are expected to continue to strengthen and as a result
uranium margins are expected to be stronger than in 2004. However, U.S.
dollar exchange rates will partially offset this gain if the Canadian
dollar remains strong. A change of $1.00 per pound in the spot price of
uranium will affect 2005 cash flow by $0.44 million. A change of 3% in
the exchange rate of the Canadian dollar versus the U.S. dollar will
affect cash flow by about $0.78 million.

During 2004, Denison significantly increased its exploration activities.
It reached farm-in agreements to join the Wolly Joint Venture and to
increase its interest in the Wheeler River Joint Venture. In 2005,
Denison is expecting to spend approximately $3,000,000 in exploration
activities on its various properties including, Wheeler River, Wolly,
McClean Lake, Midwest and Waterfound.

In 2002 definitive agreements were signed enabling the Cigar Lake joint
venture to process its ore at the McClean Lake mill. All Cigar Lake ore
will be leached at the McClean Lake mill following which the pregnant
aqueous solution will be divided between the McClean Lake and Rabbit
Lake facilities for processing into uranium concentrates. It is
anticipated that toll milling will begin at McClean Lake in early 2007.

In 2005, Denison proposes to evaluate two mining technologies: blind
shaft mining (also called blind boring) and hydraulic borehole mining
(also known as jet boring). Both of these technologies involve drilling
an access hole through the sandstone and glacial overburden and
extracting the underlying ore material from surface. Briefly, blind
shaft mining uses a mechanical device (a reaming head) to cut material
and enlarge the mining cavity in the ore horizon, whereas hydraulic
borehole mining utilizes a high-pressure water jet. The primary purpose
of the evaluation is to improve the economics of these mining
technologies as a technique for recovering uranium ore, particularly
from smaller deposits. The test mining will commence in second quarter
of 2005.

DENISON ENVIRONMENTAL SERVICES DIVISION RESULTS

During the year ended December 31, 2004, Denison Environmental Services
("DES") provided services under its contract for environmental
monitoring and maintenance of the closed mine site of Rio Algom Ltd. at
Elliot Lake, under its contract for project management for the
decommissioning of the Hope Brook mine in Newfoundland, under its
contract to provide demolition services to the uranium mine site at
Cluff Lake, Saskatchewan and under its contract to operate the Kam Kotia
water treatment facilities. Several other small contracts were completed
during the year.

Results for 2004

Revenue from environmental services was $5.8 million for the year ended
December 31, 2004 compared to $4.6 million for 2003. Earnings from the
division were $0.6 million the year ended December 31, 2004 compared to
$0.6 million in 2003.

2005 Outlook

In 2005, it is expected that Denison will enter into a new contract with
Rio Algom, with a six-year term ending in 2011, increasing the scope of
work and the resulting revenue. The Rio Algom contract will continue to
provide a base, with any additional contracts assisting to generate
earnings. DES will also continue to operate the facilities at Kam Kotia
and will complete demolition services to the Cluff Lake mine site in
northern Saskatchewan. The work on phase I of the contract was completed
in the fourth quarter of 2004.

Denison was also awarded a contract in early 2005, for decommissioning
at the Bicroft mine/mill site in Ontario. Work has commenced and will be
completed early in the second quarter of 2005.

EXPENSES RELATED TO THE FORMER ELLIOT LAKE URANIUM MINE

As part of the Plan of Arrangement, Denison has assumed and accrued
certain liabilities of DEI in connection with the decommissioned Elliot
Lake uranium mine and the retirees from the Elliot Lake operations.

In 2004, Denison spent $0.5 million (2003 - $0.4 million) primarily on
monitoring and water treatment at the Elliot Lake tailings management
facility. In 2005, Denison expects to spend about $0.3 million on
monitoring and an additional $0.1 million on capital at the Stanrock
area. All spending is paid for from the Elliot Lake Reclamation Trust,
which had a balance of $1.4 million at December 31, 2004. This balance
together with a deposit to the trust account of $0.3 million made
subsequent to year end, with interest earned thereon, is expected to be
adequate to fund all monitoring and treatment costs through to December
31, 2010. Future expenditures will consist of ongoing site monitoring of
both the Denison and Stanrock Tailings Management Facilities including
treating the water runoff from the Stanrock property. This spending is
expected to decline marginally over the next few years. The balance of
the total provision for $4.9 million represents the estimated present
value of ongoing maintenance, monitoring and water treatment.

A group of retirees from Denison's Elliot Lake mine are entitled to
certain medical and dental benefits and life insurance. At December 31,
2004 the post employment benefits liability recorded in the consolidated
balance sheet was $9.7 million. The actuarial report on this liability
as of December 31, 2002 estimated that the actuarial liability is
approximately $5.7 million. The surplus of $4.0 million, net of interest
accreting on the unfunded $5.7 million liability, is being credited to
income over the 12.5 year average life expectancy (as of September 30,
2002) of this retiree group.

CORPORATE EXPENSES

General corporate expenses totalled $3.4 million for the year ended
December 31, 2004 compared to $2.3 million in 2003. The primary reasons
for the increase were Denison Energy reorganization expenses which
included severance costs and employee bonuses related to the successful
completion of the reorganization and bonuses related to the corporate
and individual performance for the 2004 year.

In addition, non-cash stock compensation expense relating to stock
options granted during the year to employees and directors as described
in the notes to the financial statements totalled $1.2 million in 2004
compared to $0.3 million in 2003.

INTEREST EXPENSE

Interest expense on the McClean loan was $1.8 million for the year ended
December 31, 2004 compared to $2.8 million in 2003. Interest expense is
expected to decline significantly in 2005 as a result of loan repayments
from uranium cash flow and proceeds from the equity financing used to
pre-pay the loan.

LIQUIDITY AND CASH RESOURCES

Cash Generated by Operations

The uranium division generated cash of $16.7 million from operations for
the year ended December 31, 2004 and environmental services generated
cash flow of $0.3 million from operations for the year ended December
31, 2004. Post employment benefits and funding of the Elliot Lake
reclamation trust required cash of $0.8 million. As a result, after
paying corporate administration expenses, consolidated cash flow
generated by operating activities was $13.9 million for the year ended
December 31, 2004. This compares to $8.0 million for the 2003 year.

Financing Activities

For the year ended December 31, 2004, net proceeds from the issue of
common equity totalled $40.3 million, $14.6 million was borrowed to fund
uranium production costs and capital at the McClean and Midwest mine
site, $0.3 million was borrowed for Environmental Services equipment and
$2.2 million was borrowed for general corporate purposes. Uranium sales
proceeds of $30.2 million were applied to reduce the Cogema loan during
the period. The Company also applied $33.6 million of the proceeds of
the common equity issue to prepay the Cogema loan.

Investing Activities

Capital expenditures in 2004 of $5.9 million included $3.8 million to
purchase an additional 5.21% interest in Midwest, $.7 million at McClean
primarily for pit development, exploration activities and mill capital,
$.2 million at Midwest for feasibility studies, and $1.2 million by the
DES division for demolition equipment.

Cash balances

At December 31, 2004 Denison had cash resources of $2.4 million and the
ability to redraw $31.6 million on the Cogema loan.

Debt

The outstanding balance under the loan facility from Cogema Resources
Inc. was nominal at December 31, 2004. However, at December 31, 2004 the
Company has the ability to redraw up to $31.6 million on this loan for
general corporate purposes upon giving 45 days' notice. The Company's
share of future cash flow from uranium sales is dedicated to the
repayment of any outstanding balance.

This loan is currently scheduled to mature on December 31, 2005 but will
be extended to December 31, 2010 if, prior to December 31, 2005, a
production decision is made to develop the Midwest uranium project. Any
principal balance outstanding at maturity is repayable at 20% per annum.

Share Capital

As of December 31, 2004, Denison had an aggregate of 24,882,838 Common
Shares issued and outstanding.

Reclamation Trust

At December 31, 2004 Denison had $1.4 million on deposit in the Elliot
Lake Reclamation Trust Fund. This amount together with interest earned
thereon and a deposit of $0.3 million subsequent to year end represents
estimated Elliot Lake reclamation spending to December 31, 2010.
Denison's ongoing obligations under its Reclamation Funding Agreement
with the Governments of Canada and Ontario are discussed in note 7 to
the Financial Statements of Denison Mines Inc. for the Years Ended
December 31, 2004 and 2003. In 2004, funding of the Trust was $.4
million, including interest earned on the Trust and future funding
requirements into the Reclamation Trust are expected to be less than $.4
million annually, plus any requirements for capital which are expected
to be minimal.

CRITICAL ACCCOUNTING POLICIES

The preparation of financial statements requires the selection of
appropriate Canadian accounting policies in accordance with generally
accepted accounting principles. To do so, management is required to make
various estimates and judgments to determine the amount reported for
assets, liabilities, revenues and expenses and the disclosure of
commitments and contingencies.

Management believes that the following are the more significant
accounting estimates used in preparing these consolidated financial
statements.

Depletion and amortization of property, plant and equipment in the
uranium division is primarily calculated on a unit of production basis.
This method allocates the cost of an asset to production cost based on
current period production in proportion to total anticipated production
from the facility. Mining costs are amortized based on total estimated
uranium in the ore body. The milling facility is being amortized based
on all the Company's reserves, which it is anticipated will be processed
through the mill. Mill costs to be amortized are reduced by anticipated
reimbursements of capital costs to be received from third parties
through toll milling arrangements. If Denison's actual reserves or
estimated amounts to be received from toll milling prove to be
significantly different from estimates, there could be a material
adjustment to the amounts of depreciation and amortization to be
recorded in the future.

Denison adopted CICA Handbook section 3110, Asset Retirement Obligations
in the first quarter of 2004, applied retroactively. Under the
accounting policy previously applied, the unit of production method was
used to accrue the reclamation liability over the project life. The new
standard requires that the fair value of the full decommissioning cost
of an asset be capitalized as part of property, plant and equipment when
the asset is initially constructed. In subsequent periods, Denison then
is required to recognize "interest" on the liability, to amortize the
capital costs in a rational and systematic manner, and to adjust the
carrying value of the asset and liability for changes in estimates of
the amount or timing of underlying future cash flows.

Denison has accrued, in accordance with CICA Handbook Section 3110, its
best estimate of the ongoing reclamation liability in connection with
the decommissioned Elliot Lake mine site and is currently accruing its
best estimate of the cost to decommission its other mining properties,
the McClean tailings management facility and the McClean mill. The costs
of decommissioning are subject to inflation and to government
regulations, which are subject to change and often not known until
mining is substantially complete. A significant change in either the
estimated costs of decommissioning or recoverable reserves may
materially change the amount of the reclamation liability accrual.

Denison assesses the carrying value of its property, plant and equipment
annually to determine that asset values can be recovered. Recoverability
is dependent on assumptions with respect to future commodity prices,
costs of production, replacement capital requirements, reserves and
mineral recovery factors. Significant changes in any of these factors
could result in a determination that impairment has occurred and a
charge would be required against earnings.

Denison has assumed an obligation to pay retiree medical and dental
benefits and life insurance as set out in a plan to a group of former
employees. Denison has made certain assumptions and will retain an
actuary at least once every three years to estimate the anticipated
costs related to this benefit plan. The actual cost to Denison of this
plan will be influenced by changes in health care practices and
actuarial factors. While the plan contains certain limits, changes in
assumptions could affect earnings.

Denison has recorded stock based compensation expense in accordance with
the CICA handbook section 3870, using the Black - Scholes option pricing
model, based on its best estimate of the expected life of the options,
the expected volatility factor of the share price, a risk-free rate of
return and expected dividend yield. The use of different assumptions
regarding these factors could have a significant impact on the amount of
stock-based compensation expense charged to income over time. Changes in
these estimates will only apply to future grants of options and the
amounts amortized over the vesting period of existing options should not
change as a result.

RISK FACTORS

There are a number of factors that could negatively affect Denison's
business and the value of Denison's common shares including the factors
listed below. The following information pertains to the outlook and
conditions currently known to Denison which could have a material impact
on the financial condition of Denison. This information, by its nature,
is not all-inclusive. It is not a guarantee that other factors will not
affect Denison in the future.

Volatility and Sensitivity to Prices and Costs

Since the majority of Denison's revenues are derived from the sale of
uranium, Denison's net earnings and operating cash flow are closely
related and sensitive to fluctuations in the long and short term market
price of U3O8. Historically, these prices have fluctuated and have been
and will continue to be affected by numerous factors beyond Denison's
control. Such factors include, among others: demand for nuclear power;
political and economic conditions in uranium producing and consuming
countries, such as Canada, the United States and Russia and other
republics of the former Soviet Union; reprocessing of used reactor fuel
and the re-enrichment of depleted uranium tails; sales of excess
civilian and military inventories (including from the dismantling of
nuclear weapons) by governments and industry participants; and
production levels and costs of production in countries such as Russia
and other former Soviet republics, Africa and Australia.

Although Denison employs various pricing mechanisms within its sales
contracts to manage its exposure to price fluctuations, there can be no
assurance that such a program will be successful.

Competition from Other Energy Sources and Public Acceptance of Nuclear
Energy

Nuclear energy competes with other sources of energy, including oil,
natural gas, coal and hydroelectricity. These other energy sources are
to some extent interchangeable with nuclear energy, particularly over
the longer term. Sustained lower prices of oil, natural gas, coal and
hydro-electricity may result in lower demand for uranium concentrates.
Technical advancements in renewable and other alternate forms of energy,
such as wind and solar power, could make these forms of energy more
commercially viable and put additional pressure on the demand for
nuclear concentrates. Furthermore, growth of the uranium and nuclear
power industry will depend upon continued and increased acceptance of
nuclear technology as a means of generating electricity. Because of
unique political, technological and environmental factors that affect
the nuclear industry, the industry is subject to public opinion risks
which could have an adverse impact on the demand for nuclear power and
increase the regulation of the nuclear power industry.

Uranium Industry Competition and International Trade Restrictions

The international uranium industry, including the supply of uranium
concentrates, is highly competitive. Denison markets uranium to
utilities in direct competition with supplies available from a
relatively small number of western world uranium mining companies, from
certain republics of the former Soviet Union and the People's Republic
of China, from excess inventories, including inventories made available
from decommissioning of nuclear weapons, from reprocessed uranium and
plutonium from used reactor fuel, and from the use of excess Russian
enrichment capacity to re-enrich depleted uranium tails held by European
enrichers in the form of UF6. The supply of uranium from Russia and from
certain republics of the former Soviet Union is, to some extent, impeded
by a number of international trade agreements and policies. These
agreements and any similar future agreements, governmental policies or
trade restrictions are beyond the control of Denison and may affect the
supply of uranium available in the United States and Europe, which are
the largest markets for uranium in the world.

Deregulation of the Electrical Utility Industry

Denison's future prospects are tied directly to those of the electrical
utility industry worldwide. Deregulation of the utility industry,
particularly in the United States and Europe, is expected to impact the
market for nuclear and other fuels for years to come, and may result in
the premature shutdown of nuclear reactors. Experience to date with
deregulation indicates that utilities are improving the performance of
their reactors and achieving record capacity factors. There can be no
assurance that this trend will continue.

Replacement of Reserves

McClean Lake reserves are currently Denison's principal source of
uranium concentrates. Unless the Midwest deposit is placed into
production or other reserves are discovered or extensions to existing
orebodies are found, Denison's sources of uranium concentrates will
decrease over time as reserves at the McClean Lake deposits are
depleted. The McClean Lake deposits are expected to be depleted by 2010
and the Midwest deposit, if developed, by 2018. There can be no
assurance that Denison's future exploration, development and acquisition
efforts will be successful in replenishing its reserves. In addition,
while Denison believes that the Midwest deposit will be put into
production, there can be no assurance that it will be.

Due to the unique nature of the deposits at McClean Lake and Midwest,
technical challenges exist involving groundwater, rock properties,
radiation protection and ore-handling and transport. Failure to resolve
technical challenges at McClean Lake or Midwest may have a material
adverse effect on Denison.

Decommissioning and Reclamation

Environmental regulators are increasingly requiring financial assurances
that the costs of decommissioning and reclaiming sites are borne by the
parties involved, and not by government. Decommissioning plans for these
properties have been filed with regulators. These regulators have
accepted the decommissioning plans in concept, not upon a detailed
performance forecast, which has not yet been generated. As Denison's
properties approach or go into decommissioning, further regulatory
review of the decommissioning plans may result in additional
decommissioning requirements, associated costs and the requirement to
provide additional financial assurances. It is not possible to predict
what level of decommissioning and reclamation (and financial assurances
relating thereto) may be required in the future by regulators.

Dependence on Limited Number of Customers

Denison's principal business relates to the production and sale of
uranium concentrates. Denison will rely heavily on a small number of
customers to purchase a significant portion of its production of uranium
concentrates. For instance, in 2004, approximately 39% of Denison's U3O8
deliveries were to three customers. The loss of any of Denison's largest
customers or curtailment of purchases by such customers could have a
material adverse effect on Denison's financial condition and results of
operations.

Technical Obsolescence

Requirements for Denison's products and services may be affected by
technological changes in nuclear reactors and used fuel processing.
These technological changes could reduce the demand for uranium or
reduce the value of Denison's environmental services to potential
customers. In addition, Denison's competitors may adopt technological
advancements that give them an advantage over Denison.

Imprecision of Reserve and Resource Estimates

Uranium reserve and resource figures are estimates and no assurances can
be given that the indicated levels of uranium will be produced or that
Denison will receive the uranium price assumed in determining its
reserves and resources. Such estimates are expressions of judgment based
on knowledge, mining experience, analysis of drilling results and
industry practices. Valid estimates made at a given time may
significantly change when new information becomes available. While
Denison believes that its reserve and resource estimates are well
established and reflect management's best estimates, by their nature,
reserve and resource estimates are imprecise and depend, to a certain
extent, upon statistical inferences which may ultimately prove
unreliable. Furthermore, uranium market price fluctuations, as well as
increased capital or production costs or reduced recovery rates, may
render ore reserves and resources containing lower grades of
mineralization uneconomic and may ultimately result in a restatement of
reserves and resources. The evaluation of reserves or resources is
always influenced by economic and technological factors, which may
change over time.

Production Estimates

Denison prepares estimates of future production for particular
operations. No assurance can be given that production estimates will be
achieved. Failure to achieve production estimates could have an adverse
impact on Denison's future cash flows, earnings, results of operations
and financial condition. These production estimates are based on, among
other things, the following factors: the accuracy of reserve estimates;
the accuracy of assumptions regarding ground conditions and physical
characteristics of ores, such as hardness and presence or absence of
particular metallurgical characteristics; and the accuracy of estimated
rates and costs of mining and processing.

Denison's actual production may vary from estimates for a variety of
reasons, including, among others: actual ore mined varying from
estimates of grade, tonnage, dilution and metallurgical and other
characteristics; short-term operating factors relating to the ore
reserves, such as the need for sequential development of orebodies and
the processing of new or different ore grades; risk and hazards
associated with mining; natural phenomena, such as inclement weather
conditions, underground floods, earthquakes, pit wall failures and
cave-ins; and unexpected labour shortages or strikes.

Mining and Insurance

Denison's business is capital intensive and subject to a number of risks
and hazards, including environmental pollution, accidents or spills,
industrial and transportation accidents, labour disputes, changes in the
regulatory environment, natural phenomena (such as inclement weather
conditions, earthquakes, pit wall failures and cave-ins) and
encountering unusual or unexpected geological conditions. Many of the
foregoing risks and hazards could result in damage to, or destruction
of, Denison's mineral properties or processing facilities, personal
injury or death, environmental damage, delays in or interruption of or
cessation of production from Denison's mines or processing facilities or
in its exploration or development activities, delay in or inability to
receive regulatory approvals to transport its uranium concentrates, or
costs, monetary losses and potential legal liability and adverse
governmental action. In addition, due to the radioactive nature of the
materials handled in uranium mining and processing, additional costs and
risks are incurred by Denison on a regular and ongoing basis.

Although Denison maintains insurance to cover some of these risks and
hazards in amounts it believes to be reasonable, such insurance may not
provide adequate coverage in the event of certain circumstances. No
assurance can be given that such insurance will continue to be
available, that it will be available at economically feasible premiums
or that it will provide sufficient coverage for losses related to these
or other risks and hazards.

Denison may be subject to liability or sustain loss for certain risks
and hazards against which it cannot insure or which it may reasonably
elect not to insure because of the cost. This lack of insurance coverage
could result in material economic harm to Denison.

Nature of Exploration and Development

Exploration for and development of mineral properties is speculative,
and involves significant uncertainties and financial risks which even a
combination of careful evaluation, experience and knowledge may not
eliminate. While the discovery of an orebody may result in substantial
rewards, few properties which are explored are commercially mineable or
ultimately developed into producing mines. Major expenses may be
required to establish reserves by drilling, constructing mining and
processing facilities at a site, developing metallurgical processes and
extracting uranium from ore. It is impossible to ensure that the current
exploration and development programs of Denison will result in
profitable commercial mining operations or replacement of current
production at existing mining operations with new reserves.

Denison's ability to sustain or increase its present levels of uranium
production is dependent in part on the successful development of new
orebodies and/or expansion of existing mining operations. The economic
feasibility of development projects is based upon many factors,
including, among others: the accuracy of reserve estimates;
metallurgical recoveries; capital and operating costs of such projects;
government regulations relating to prices, taxes, royalties,
infrastructure, land tenure, land use, importing and exporting, and
environmental protection; and uranium prices, which are highly cyclical.
Development projects are also subject to the successful completion of
feasibility studies, issuance of necessary governmental permits and
availability of adequate financing.

Development projects have no operating history upon which to base
estimates of future cash flow. Denison's estimates of reserves and
resources and cash operating costs are, to a large extent, based upon
detailed geological and engineering analysis. Denison also conducts
feasibility studies which derive estimates of capital and operating
costs based upon many factors, including, among others: anticipated
tonnage and grades of ore to be mined and processed; the configuration
of the orebody; ground and mining conditions; expected recovery rates of
the uranium from the ore; alternate mining methods including the test
mining underway at McClean and anticipated environmental and regulatory
compliance costs.

It is possible that actual costs and economic returns of current and new
mining operations may differ materially from Denison's best estimates.
It is not unusual in the mining industry for new mining operations to
experience unexpected problems during the start-up phase and to require
more capital than anticipated.

Governmental Regulation and Policy Risks

Uranium mining, processing and transport in Canada are subject to
extensive laws and regulations. Such regulations relate to production,
development, exploration, exports, imports, taxes and royalties, labour
standards, occupational health, waste disposal, protection and
remediation of the environment, mine decommissioning and reclamation,
mine safety, toxic substances, transportation safety and emergency
response, and other matters. Compliance with such laws and regulations
has increased the costs of exploring, drilling, developing,
constructing, operating and closing Denison's mines and processing
facilities. It is possible that, in the future, the costs, delays and
other effects associated with such laws and regulations may impact
Denison's decision as to whether to operate existing mines, or, with
respect to exploration and development properties, whether to proceed
with exploration or development, or that such laws and regulations may
result in Denison incurring significant costs to remediate or
decommission properties that do not comply with applicable environmental
standards at such time. Denison expends significant financial and
managerial resources to comply with such laws and regulations. Denison
anticipates it will have to continue to do so as the historic trend
toward stricter government regulation may continue. Since legal
requirements are frequently changing and subject to interpretation,
Denison is unable to predict the ultimate cost of compliance with these
requirements or their effect on operations. Furthermore, future changes
in governments, regulations and policies, such as those affecting
Denison's mining operations, uranium refining and conversion operations,
and uranium transport, could materially and adversely affect Denison's
results of operations and financial condition in a particular period or
its long term business prospects.

Failure to comply with applicable laws, regulations and permitting
requirements may result in enforcement actions. These actions may result
in orders issued by regulatory or judicial authorities causing
operations to cease or be curtailed, and may include corrective measures
requiring capital expenditures, installation of additional equipment or
remedial actions. Companies engaged in uranium exploration operations
may be required to compensate others who suffer loss or damage by reason
of such activities and may have civil or criminal fines or penalties
imposed for violations of applicable laws or regulations.

Worldwide demand for uranium is directly tied to the demand for
electricity produced by the nuclear power industry, which is also
subject to extensive government regulation and policies. The development
of mines and related facilities is contingent upon governmental
approvals which are complex and time consuming to obtain and which,
depending upon the location of the project, involve multiple
governmental agencies. The duration and success of such approvals are
subject to many variables outside Denison's control. The governments of
Canada and the province of Saskatchewan have issued their approvals with
respect to the development of Denison's properties. Any significant
delays in obtaining or renewing such permits or licenses in the future
could have a material adverse effect on Denison.

Environmental Risks

Denison has expended significant financial and managerial resources to
comply with environmental protection laws, regulations and permitting
requirements, and anticipates that it will be required to continue to do
so in the future as the historical trend toward stricter environmental
regulation may continue. The uranium industry is subject to not only
worker health, safety and environmental risks associated with all mining
businesses, including potential liabilities to third parties for
environmental damage, but also to additional risks uniquely associated
with uranium mining and processing. The possibility of more stringent
regulations exists in the areas of worker health and safety, the
disposition of wastes, the decommissioning and reclamation of mining and
processing sites, and other environmental matters each of which could
have a material adverse effect on the costs or the viability of a
particular project.

Denison's facilities operate under various operating and environmental
permits, licenses and approvals that contain conditions that must be met
and Denison's right to continue operating its facilities is, in a number
of instances, dependent upon compliance with such conditions. Failure to
meet any such condition could have a material adverse affect on
Denison's financial condition or results of operations.

Credit Risk

Denison's sales of uranium product concentrates and environmental
services expose Denison to the risk of non-payment. Denison manages this
risk by monitoring the creditworthiness of its customers and requiring
pre-payment or other forms of payment security from customers with an
unacceptable level of credit risk.

Although Denison seeks to manage its credit risk exposure, there can be
no assurance that Denison will be successful and that some of Denison's
customers will not fail to pay for the uranium purchased or the
environmental services provided.

Currency Fluctuations

Denison's earnings and operating cash flow is also affected by changes
in the US/Canadian dollar exchange rate since most of its revenues are
denominated in US dollars and most of its costs are denominated in
Canadian dollars. Accordingly, increases in the value of the Canadian
dollar against the US dollar will negatively impact Denison's earnings.

Dependence on Key Personnel

Denison's success will largely depend on the efforts and abilities of
certain senior officers and key employees. Certain of these individuals
have significant experience in the uranium industry. The number of
individuals with significant experience in this industry is small. While
Denison does not foresee any reason why such officers and key employees
will not remain with Denison, if for any reason they do not, Denison
could be adversely affected. Denison has not purchased key man life
insurance for any of these individuals.

Conflicts of Interest

Some of the directors of Denison are also directors of other companies
that are similarly engaged in the business of acquiring, exploring and
developing natural resource properties. Such associations may give rise
to conflicts of interest from time to time. The directors of Denison are
required by law to act honestly and in good faith with a view to the
best interests of Denison, to disclose any interest which they may have
in any project or opportunity of Denison, and to abstain from voting on
such matter. Conflicts of interest which arise will be subject to and
governed by the procedures prescribed by the Business Corporation Act
(Ontario).

Reliance on COGEMA as Operator

As COGEMA is the operator and majority owner of the McClean Lake and
Midwest properties, Denison is and will be, to a certain extent,
dependent on COGEMA for the nature and timing of activities related to
these properties, and may be unable to direct or control such activities.

Commitments Related to Loan Agreement with COGEMA

Under a loan agreement, most of the funds necessary for Denison's share
of costs of the McClean Lake and Midwest properties were borrowed from
COGEMA. As at December 31, 2004, the balance of this loan was nominal,
however Denison has the ability to reborrow on this loan. This loan is
secured by Denison's interest in the McClean Lake facility and the
Midwest project, which together, represents a majority of Denison's
operating assets. Any balance on this loan, including both principal and
interest, is to be repaid from the proceeds of the sale of uranium
through the joint marketing company of COGEMA and Denison. Consequently,
these funds will not be available to Denison for the future development
of its business.

Indemnities

As part of the Denison Arrangement, Denison agreed to assume all debts,
liabilities and obligations relating to Denison Energy's mining business
before the date of the arrangement. In addition, Denison agreed to
provide certain indemnities in favour of Denison Energy for certain
claims and losses relating to matters with respect to Denison Energy's
mining business prior to the date of the arrangement, to breaches by
Denison of certain of its agreements, covenants, representations and
warranties in the agreements governing the Denison Arrangement, and to
damages caused by breaches by Denison Energy of its representations and
warranties in certain agreements related to the Denison Arrangement.
Denison cannot predict the outcome or the ultimate impact of any legal
or regulatory proceeding against Denison or affecting the business of
Denison and cannot predict the potential liabilities associated with the
indemnities provided in favour of Denison Energy. Consequently, there
can be no assurance that the legal or regulatory proceedings referred to
in this AIF or any that may arise in the future will be resolved without
a material adverse effect on the business, financial condition, results
of operation or cash flows of Denison.

ADDITIONAL INFORMATION

Additional information related to Denison Mines Inc., including the
Consolidated Financial Statements of Denison for the Years ended
December 31, 2004 and 2003 and the Company's Annual Information Form for
2004 are available at www.denisonmines.com and on Sedar at www.sedar.com.

Additional information about Denison can also be obtained by contacting
the Corporate Secretary at:



Until March 17, 2005 After March 17, 2005

Denison Mines Inc. Denison Mines Inc.
40 Dundas Street West 595 Bay Street
Suite 320 Suite 402
Toronto, Ontario Toronto, Ontario
M5G 2C2 M5G 2C2

Telephone 416-979-1991 Extension 366
Fax 416-979-5893


-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Denison Mines Inc.
    E. Peter Farmer
    President and Chief Executive Officer
    (416) 979-1991 Extension 231
    or
    Denison Mines Inc.
    James R. Anderson
    Executive Vice President and Chief Financial Officer
    (416) 979-1991 Extension 372
    www.denisonmines.com