Item 1. Business
ITEM 1. BUSINESS
CORPORATE HISTORY
Western Uranium & Vanadium Corp. (formerly known
as Western Uranium Corporation) was incorporated in December 2006 under the Ontario Business Corporations Act and was formerly a non-listed
reporting issuer subject to the rules and regulations of the Ontario Securities Commission. On November 20, 2014, the Company completed
a listing process on the Canadian Securities Exchange (“CSE”). As part of that process, the Company acquired 100% of the issued
and outstanding shares of Pinon Ridge Mining LLC (“PRM”), a Delaware limited liability company. The transaction constituted
a reverse takeover of Western by PRM. After obtaining appropriate shareholder approvals, the Company subsequently reconstituted its board
of directors and senior management team.
On August 18, 2014, the Company closed on the purchase
of certain mining properties in Colorado and Utah from Energy Fuels Holding Corp. Assets purchased included both owned and leased lands
in Utah and Colorado and all represent properties that have been previously mined for uranium to varying degrees in the past. The acquisition
included the purchase of the Sunday Mine Complex. The Sunday Mine Complex is located in western San Miguel County, Colorado. The complex
consists of the following five individual mines: the Sunday mine, the Carnation mine, the Saint Jude mine, the West Sunday mine and the
Topaz mine. The operation of each of these mines requires a separate permit and all such permits have been obtained by Western and are
currently valid. In addition, each of the mines has good access to a paved highway, electric power to existing mine workings, office/storage/shop
and change buildings, and extensive underground haulage development with multiple vent shafts complete with exhaust fans. After the completion
of the 2019/2020 project, the Sunday Mine Complex was advanced such that it is operationally ready to re-start mining operations.
On September 16, 2015, Western completed its acquisition
of Black Range, an Australian company that was listed on the Australian Securities Exchange until the acquisition was completed. The
acquisition terms were pursuant to a definitive Merger Implementation Agreement entered into between Western and Black Range. Pursuant
to the agreement, Western acquired all of the issued shares of Black Range by way of Scheme of Arrangement (“the Scheme”)
under the Australian Corporation Act 2001 (Cth) (the “Black Range Transaction”), with Black Range shareholders being issued
common shares of Western on a 1 for 750 basis. On August 25, 2015, the Scheme was approved by the shareholders of Black Range and on
September 4, 2015, Black Range received approval by the Federal Court of Australia. In addition, Western issued to certain employees,
directors and consultants options to purchase Western common shares. Such stock options were intended to replace Black Range stock options
outstanding prior to the Black Range Transaction on the same 1 for 750 basis.
In connection with the Black Range Transaction, Western
acquired the net assets of Black Range. These net assets consist principally of interests in a large uranium resource located in Colorado
(the “Hansen-Taylor Complex”) and a 100% interest in a 25 year license for Kinetic Separation (“Kinetic Separation”,
formerly known as “Ablation”) and related patents from Ablation Technologies, LLC. The Hansen-Taylor Complex is principally
a sandstone-hosted deposit that was discovered in 1977.
Furthermore, related to Kinetic Separation in connection with the acquisition
of Black Range Minerals Ltd. (“Black Range”), the Company assumed a call option agreement between Black Range and Mr. George
Glasier. Prior to the Black Range Transaction, George Glasier, the Company’s CEO, who is also a director of the Company (“Seller”),
transferred his interest in a former joint venture with Ablation Technologies, LLC to Black Range. In connection with the transfer, Black
Range issued 25 million shares of Black Range common stock to Seller and committed to pay $500,000 AUD ($362,794 USD as of December 31,
2021) to Seller within 60 days of the first commercial application of the Kinetic Separation. Western assumed this contingent payment
obligation in connection with the Black Range Transaction.
The Kinetic Separation process is dramatically different
from conventional mining techniques. Subject to regulatory approvals for the use of Kinetic Separation, the benefits of Kinetic Separation
are as follows:
● Mining, crushing, and separation
of waste from minerals (uranium and vanadium), used most effectively, occurs underground
(inside the mine). Under this approach the costs of moving material to the surface are less
as 85%-90% of the mined material remains underground and is never brought outside the mine.
● Less
radiometric exposure throughout the process due to reduced waste rock on the surface and
after the milling process less tailings. Overall surface waste material is reduced and the
time duration of material handling is reduced.
● Lower
costs for transportation of post-kinetically separated material because 85-90% of the mined
material would not need to be transported.
● Once
the kinetically separated material reaches the mill, the acid consumption at the mill and
power is much less due to the lower quantity and more concentrated material moving through
the milling process.
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Kinetic Separation can be used on legacy uranium stockpiles in the
western United States. WUC would kinetically separate these stockpiles, removing 85-90% of the uranium. This is an application through
which Kinetic Separation could positively contribute to the “greening of the environment”. According to a study there are
approximately 4,225 legacy uranium mines from the 1940-1970 period throughout the Western United States, most of which have waste stockpiles.
In the estimation of management, Kinetic Separation
mining allows the cost of production of uranium to be reduced by 44-53%.
Our common shares are listed on the Canadian Securities
Exchange, also known as the “CSE,” under the symbol “WUC”, and are also quoted in the United States on the OTCQX
Best Market under the symbol “WSTRF.” We are headquartered in Ontario, Canada with mining operations in the two U.S. states
of Utah and Colorado. The mailing address of our headquarters is 330 Bay Street, Suite 1400, Toronto, Ontario, M5H2S8, Canada, and the
telephone number is (970) 864-2125. Our corporate website is located at http://www.western-uranium.com/.
We are an “emerging growth company” as
that term is defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). The JOBS Act defines an “emerging
growth company” as one that had total annual gross revenues of less than $1,000,000,000 during the last fiscal year. Section 102(b)
(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a
class of securities registered under the Securities Exchange Act) are required to comply with the new or revised financial accounting
standard. The JOBS Act also provides that a company can elect to opt out of the extended transition period provided by Section 102(b)(1)
of the JOBS Act and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable.
Our wholly-owned subsidiaries are Western Uranium
Corp., Pinon Ridge Mining LLC, Black Range Minerals Limited, Black Range Copper Inc., Ranger Resources Inc., Black Range Minerals Inc.,
Black Range Minerals Colorado LLC, Black Range Minerals Wyoming LLC, Haggerty Resources LLC, Ranger Alaska LLC, Black Range Minerals
Utah LLC, Black Range Minerals Ablation Holdings Inc. and Black Range Development Utah LLC.
OUR COMPANY
Western is in the business of exploring, developing,
mining and production of its uranium and vanadium resource properties.
Western is an exploration stage issuer for purposes
of S-K 1300. Under S-K 1300, a mining company like ours can be classified as either an exploration stage issuer, a development stage
issuer or a production stage issuer. Exploration stage issuers are companies that are engaged in the search for mineral deposits, which
are not in either the development stage or the production stage. In order to be classified as a development stage issuer or a production
stage issuer, the Company must have already established mineral reserves. The Company has not established mineral reserves for purposes
of S-K 1300.
Our mineral properties are located in western Colorado
and eastern Utah and adjacent areas of the western United States. Our primary focus is bringing the fully permitted Sunday Mine Complex
into production, permitting the San Rafael Project and the commercialization of Kinetic Separation.
The Sunday Mine Complex is located in western San
Miguel County, Colorado. The complex consists of the following five individual mines: the Sunday mine, the Carnation mine, the Saint
Jude mine, the West Sunday mine and the Topaz mine. The operation of each of these mines requires a separate permit and all such permits
have been obtained by Western and are currently valid. In addition, each of the mines has good access to a paved highway, electric power
to existing mine workings, office/storage/shop and change buildings, and extensive underground haulage development with multiple vent
shafts complete with exhaust fans.
We have acquired a license for Kinetic Separation,
which provides a low cost, purely physical, method of separating uranium and vanadium mineralization from waste. No chemicals are added
in the process, yet very high mineral recoveries can be achieved with considerable mass reduction; facilitating the separation of a high-value,
high-grade ore product from a coarse-grained barren “clean sand” product.
Application of Kinetic Separation is expected to
have a very positive effect on the development of not only our Sunday Mine Complex, but also most of our and others’ deposits,
because it significantly reduces both capital and operating costs. Extensive test work has shown that from amenable sandstone-hosted
ore types, typically more than 90% of the mineralization can be separated into 10-20% of the initial sample mass.
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OUR STRATEGY
Our vision is to become a leading uranium and vanadium developer and
producer. Our strategy is to build value for shareholders by advancing our projects towards scaled-up production. The increase in vanadium
price levels during 2017/2018 increased the relative importance of this resource to the Company. Hence, Western is increasingly able to
baseload mine production with vanadium as a co-product. As a result, during 2019 Western implemented a mine re-opening project at the
Sunday Mine Complex to identify high-grade vanadium ore, followed by bulk sampling and development drilling. Active mining was conducted
and the extracted ore was stockpiled underground in the mines. The project was continued in 2020 as multiple surface infrastructure projects
were completed to meet DRMS requirements. Completion of the DRMS prerequisites has enabled the newly mined and stockpiled underground
ore to be brought to the surface. Ore pad construction, the last of the surface projects, was completed; however, its final inspection
approvals were delayed until May 2020 due to the COVID-19 outbreak. The Company holds an exclusive 25-year license to use Kinetic Separation,
a proven technology that we anticipate will improve the efficiency of the mining from Western’s sandstone-hosted ore. The license
agreement was entered into on March 17, 2015 and expires on March 16, 2040. There are no remaining license fee obligations and there are
no future royalties due under the agreement. The Company has the right to sub-license the technology to third parties. The Company may
not sell or assign the Kinetic Separation license; however, it could be transferred in the sale of Western or the subsidiary holding the
license.
At any time we may have acquisition or partnering
opportunities in various stages of active review, including, for example, our engagement of consultants and advisors to analyze particular
opportunities, analysis of technical, financial and other confidential information, submission of indications of interest, participation
in preliminary discussions and negotiations, and involvement as a bidder in competitive processes.
Capital Raising
On February 16, 2021, the Company closed on a non-brokered private
placement of 3,250,000 units at a price of CAD $0.80 per unit. The aggregate gross proceeds raised in the private placement amount to
CAD $2,600,000.
Each unit consists of one common share of Western plus one common share
purchase warrant of Western. Each warrant entitled the holder to purchase one common share at a price of CAD $1.20 per share for a period
of three years following the closing date of the private placement. A total of 3,250,000 common shares and 3,250,000 warrants were issued
in the private placement.
On March 1, 2021, the Company closed on a non-brokered private placement
of 3,125,000 units at a price of CAD $0.80 per unit. The aggregate gross proceeds raised in this private placement amount to CAD $2,500,000.
Each unit consists of one common share plus one common share purchase
warrant. Each warrant entitled the holder to purchase one common share at a price of CAD $1.20 per share for a period of three years following
the closing date of the private placement. A total of 3,125,000 common shares and 3,125,000 warrants were issued in the private placement.
On December 17, 2021, the Company closed a non-brokered private placement
of 372,966 units at a price of CAD $1.60 per unit. The aggregate gross proceeds raised in the private placement amounted to CAD $596,746.
Each unit consists of one common share plus one common share purchase
warrant. Each warrant entitled the holder to purchase one common share at a price of CAD $2.50 per share for a period of three years following
the closing date of the private placement. A total of 372,966 common shares and 372,966 warrants were issued in the private placement.
On January 20, 2022, the Company closed a non-brokered private placement
of 2,495,575 units at a price of CAD $1.60 per unit. The aggregate gross proceeds raised in the private placement amounted to CAD $3,992,920.
Each unit consists of one common share plus one common share purchase
warrant. Each warrant entitled the holder to purchase one common share at a price of CAD $2.50 per share for a period of three years following
the closing date of the private placement. A total of 2,495,575 common shares and 2,495,575 warrants were issued in the private placement.
Uranium/Vanadium Production
Western historically positioned itself for operational flexibility
with the goal of beginning production as expeditiously as possible once market conditions for uranium and/or vanadium were favorable.
The 2018 vanadium price rally catalyzed the Sunday Mine Complex project. Western reinitiated active mining operations at the Sunday Mine
Complex project with its infrastructure and exploratory projects, which culminated in the commencement of production with the mining and
stockpiling of the extracted uranium/vanadium ore. The well maintained existing infrastructure from years of previous production allowed
the Company to quickly advance the mine to a production ready status. The mining team refocused on surface infrastructure projects required
by the DRMS. The impact of COVID-19 delayed a re-start beyond 180 days, thus in October 2020 the Sunday Mine Complex was put back into
Temporary Cessation.
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During 2020, COVID-19 induced mine closures began a rally in uranium
prices. In 2021, catalysts continued to provide positive signals for uranium miners and investors. This catalyzed the ongoing Sunday Mine
Complex project which commenced in July 2021. After completion of infrastructure work in this new area of the mine, exploration and development
of the GMG ore body was the first project phase. Drifting, continuous high-grade ore was intersected, which led to the mining and underground
stockpiling of over 3,000 tons of uranium/vanadium ore during the December 2021 to March 2022 period. At the end of March, the mining
contractor engaged by Western decided to retire from contract mining operations. As a result of this decision, Western will take over
the mining operations and has acquired a full complement of mining equipment. The equipment is being prepared for operations and upgrades
to mine ventilation, support buildings and infrastructure are underway. Further mine development and ore production is expected to resume
in early summer after upgrades are completed. Western’s mining team will be expanded to facilitate mine development and full ore
production.
Western believes that its mineral resources have a reasonable prospect
for economic extraction. However, the Company has not yet completed a preliminary economic assessment under NI 43-101 or a feasibility
study or preliminary feasibility study under S-K 1300 that would be needed to establish the existence of proven or probable reserves and
has instead allocated that capital to the aforementioned mining operations at the Sunday Mine Complex.
URANIUM MARKET OUTLOOK
World demand for clean, reliable, and affordable electricity is growing.
Given the expected construction of nuclear reactors and the expected growth of nuclear energy, we believe that the future for uranium
is positive. Further, 2020 production cuts in response to COVID-19 at peak sidelined approximately 50% of annual global uranium production.
In the United States implementation of the U.S. Uranium Reserve program and the Biden administration’s emphasis on climate change
have the potential to increase U.S. domestic uranium production and create economic pricing levels for U.S. domestic producers. We believe
these factors will provide the price levels needed to support the additional production and supply that will be required. Currently, excess
(secondary) inventory supplies are being drawn down, and additional primary production is forecast to be needed to fulfill the nuclear
fuel requirements of the growing global nuclear reactor fleet.
Once prices rise, it may be difficult for most suppliers
to respond in a timely manner, as it requires many years of permitting and development to bring new mines into production. These lead
times will put further upward pressure on prices. Thus, Western has a competitive advantage, as our mining properties are permitted and
ready to scale-up production on short notice.
As uranium prices have been depressed for about a
decade due to overproduction and reactor shutdowns subsequent to the impact of the 2011 Fukushima earthquake, investors are positioning
in response to early signs of a market recovery; the spot uranium price began 2020 at ~$24 and finished the year at ~$30, but had rebounded
to a short-term ~$34 high in response to COVID-19 production cuts. Japanese utilities have nuclear reactors in the process of restarting
(according to the World Nuclear Association (“WNA”)). According to data from the WNA, Chinese utilities continue to aggressively
build new reactors and buy uranium, with the goal of becoming the world leader in nuclear electricity generation. In total, according
to the WNA, there are about 50 new reactors under construction in 13 countries and in all there are about 160 reactors on order or being
planned, and over 300 more are proposed. It is projected that ~15 new nuclear reactors will be placed into service in 2021.
During the Trump Administration, the U.S. government focused on market distortions
caused by foreign state-owned enterprises and the economic and geopolitical influence lost by allowing Russia and China to take the lead
in nuclear power. In support of the world’s largest nuclear reactor fleet, the U.S. has begun implementing the recommendations of
the Nuclear Fuel Working Group (“NFWG”). The NFWG followed the uranium Section 232 investigation. The national strategic uranium
reserve was signed into law to stabilize the U.S. nuclear fuel cycle by supporting front-end domestic uranium mining. The U.S. Department
of Energy (“DoE”) is establishing program guidelines to initiate purchases of US$75 million of domestic uranium. During August
2021, DOE moved this initiative forward through the dissemination of a Request for Information. On October 13, 2021, Western submitted
a response to the Request for Information: Establishment of the Uranium Reserve Program to the DOE’s National Nuclear Security Administration.
In January 2022, a summary of comments and responses was released, including next steps which involve following Congressional direction
and implementing the program. The Russia/Ukraine war, as discussed later, has highlighted the nuclear fuel supply chain risks and the
geopolitical risks of dependence on the direct and indirect sourcing of nuclear fuel from state owned enterprises in Russia and former
Soviet republics. This has emphasized the need and triggered increasing calls for the implementation of the Uranium Reserve Program.
Upon taking office, the Biden-Harris Administration
team immediately rejoined the Paris Climate Accord and continued its pursuit of climate change solutions. President Biden has reversed
a number of pro-fossil fuel energy policies, an approach which is expected to continue as the new administration has given all agencies
climate change initiatives and has already started a climate change working group. The Biden-Harris Administration continues to advance
a national clean energy standard that includes nuclear across multiple initiatives. U.S. utilities are expected to be required to produce
an increasing proportion of electricity generation from clean energy power sources. The administration has introduced the Infrastructure
Investment and Jobs Act which contains provisions that are supportive of nuclear power. President Biden attended the United Nations Climate
Change Conference (COP26) in Glasgow, Scotland. His administration simultaneously released a proposed plan targeting the reduction of
methane emissions. Many of the proposed initiatives from the Climate Summit target reduced utilization of fossil fuels and, if implemented,
expand future opportunities for nuclear power generation, given its ability to provide baseload and carbon-free energy. The Biden-Harris
Administration is continuing its efforts to move forward a number of stalled spending programs that contain support for the U.S. nuclear
industry.
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In response to the elimination of price controls implemented at the beginning
of 2022, anti-government protests erupted in Kazakhstan in early January. The President’s Cabinet resigned and was replaced, after
many arrests and deaths, curfews, and other emergency measures. After a swift crackdown on the unrest, order has largely been restored,
and changes have been implemented at multiple government controlled enterprises, including Kazatomprom, the world’s largest uranium
miner who is responsible for ~40% of global annual uranium production. At local uranium mines it has been reported that production has
not been affected, and the impacts to uranium and uranium equity prices which trended up in early January, reversed in the second half
of January. In February, Russia invaded Ukraine commencing a war between the two countries. Russia is a major global energy supplier and
both countries are top ten uranium producers and Russia is a global leader in nuclear fuel services. Thus, these actions caused a surge
in energy prices initially in oil and gas. On the day prior to the invasion, the spot price of uranium was $43.63/lbs and at the end of
March it had increased to $58.25/lbs. Russia has been the target of unprecedented economic sanctions which have created bottlenecks of
Russian exports, including nuclear fuel. In spite of a large global dependence, nuclear fuel purchasers are continuing to diversify away
from Russian nuclear fuel. There remains a very real possibility of a sanction or counter-sanction terminating the flow of nuclear fuel
from Russia to North America.
Uranium inventories have declined significantly during
the last two years. During 2020, this was caused by COVID-19 induced mine suspensions. During 2021, financial buyers further depleted
uranium inventories. Existing and new nuclear technologies are receiving unprecedented support on a global basis, as a baseload electricity
source with zero carbon emissions, thus expanding future nuclear fuel demand.
The Sprott Physical Uranium Trust (U.UN) (the “Trust”)
took over the former Uranium Participation Corp. (U.TO) and launched an at-the-market program (ATM) on August 17, 2021 to raise capital
for the closed-ended trust. Since the inception of the ATM program, the Trust has bought significant quantities of uranium contributing
to the increase in spot prices. It is anticipated that a Sprott U.S. vehicle will receive New York Stock Exchange (NYSE) approval and
be made available for investment during 2022. It is also likely that a comparable physical uranium holding vehicle will be launched in
affiliation with Kazatomprom, the world’s largest uranium miner.
A uranium global supply/demand imbalance had been projected by analysts
to impact uranium prices in coming years. In 2020 COVID-19 induced mine closures and in 2021 Sprott Physical Uranium Trust began purchasing
uranium, underscoring the imbalance. Both of these catalysts have depleted excess inventories and accelerated the timing of the supply/demand
impact. The nuclear industry is benefiting from many market and governmental catalysts raising investor expectations. Investors have become
well aware of constrained global uranium supplies, improved uranium demand fundamentals, the increasing pace of nuclear technology innovations,
and the global push for climate change solutions. However, in 2022 the Russian invasion of Ukraine has quickly driven the uranium market
strongly upward due to Russia’s dominant market position in the nuclear fuel cycle. Sanctions, phase-outs, and embargoes are being
considered by many countries, while the Russian Federation has considered export bans. Any of these actions would fundamentally alter
the dynamics of the nuclear fuel market as utilities shift buying away from Russia.
OVERVIEW OF THE URANIUM INDUSTRY
The only significant commercial use for uranium is as a fuel for nuclear
power plants for the generation of electricity. The global nuclear and uranium mining industries continue to benefit from the convergence
of multiple trends and increased public, political and government support due to coming new technologies, climate change initiatives,
and energy crisis shortages. These are resulting in extensions to operating lives, a large number of nuclear reactors under construction,
new builds, investments in next generation nuclear technology, and in Japan, increased urgency to re-start the nuclear reactor fleet.
The uranium market has historically been highly cyclical. In the prior
bull market, spot prices rose from $21 per pound in January 2005 to a high of $136 per pound in June 2007 in anticipation of sharply higher
projected demand as a result of a resurgence in nuclear power and the depletion of secondary supplies. Secondary supplies are inventories
of uranium not publicly available for sale, which are primarily held by utility companies and governments. The sharp price increase was
driven in part by high levels of buying by utility companies, which resulted in most utilities covering their requirements through 2009.
A decrease in near-term utility demand coupled with rising levels of supplies from producers and traders led to downward pressure on uranium
prices beginning in the third quarter of 2007. A rebound in uranium prices in conjunction with a recovery in commodities in 2010 was curtailed
by the Fukushima disaster in Japan.
Since the Fukushima disaster in 2011, uranium spot prices entered a
steady decline until June 2014, when they rebounded slightly and peaked again in March 2015 at $39 per pound. After that peak, prices
again began to fall steadily, reaching their lowest point of $18 per pound in November 2016. Prior to COVID-19, annual uranium production
was at its lowest in over a decade, creating a global supply deficit where production was only about two-thirds of consumption. In May
2020, after COVID-19 related production shutdowns, spot prices hit a $34 per pound price before declining to close the year at $30 per
pound. During 2021, market participation by the Sprott Physical Uranium Trust and other secondary market uranium buyers caused prices
to rise to $42.05 per pound at December 31, 2021. Uranium prices held these levels until Russia’s invasion of Ukraine caused uranium
markets to surge. Prior to the invasion on February 24, 2022, uranium spot prices were in the $43 per pound range and recently closed
at over $63 per pound; an increase of ~$20 per pound and an 11-year high.
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Based upon these pricing factors specific to the
uranium industry, we foresee a uranium pricing environment which in the coming years will allow Western to initiate full-scale production
in its best properties.
Vanadium
With the exception of the Hansen/Taylor Deposit,
most of the Company’s mining assets, including the Sunday Mine Complex, contain vanadium either as a stand-alone product or a co-product
to uranium.
Conventional and new vanadium applications include
steelmaking, aerospace, stationary energy storage, batteries, and chemicals.
When a very small amount of vanadium is added to steel, the hardening
effect greatly increases its strength. And while steelmaking accounts for roughly 90% of all vanadium currently consumed, it’s estimated
that vanadium is only used in about 9% of all steels today. After steelmaking, the second largest market for vanadium is that of catalysts
and chemical applications. A significant new source of demand for vanadium is from vanadium redox flow batteries (VRFB) as their adaptation
grows with the stationary storage market.
In 2018 there was structural change in the vanadium markets that caused
prices to spike. China, the largest vanadium producer in the world, had supply disrupted by environmental monitoring and rules while domestic
demand was increasing. China, which had been a net vanadium exporter, flipped and became a net vanadium importer. On the demand side,
China announced a new high strength rebar standard to increase earthquake resistance in February 2018 that became effective on November
1, 2018. On the supply side, in its efforts to fight pollution, Chinese environmental inspections resulted in the closing of dirty processes
in which vanadium was recovered as a byproduct. These policy changes caused a shortage and led to a surge in vanadium prices to all-time
highs during the fourth quarter of 2018. Vanadium closed on December 31, 2018 at $23.15, but owing to a Chinese extension in the implementation
of the new rebar standard, prices plunged to close on December 31, 2019 at $5.25. Notably, the substantial price appreciation in vanadium
delayed the adaptation of VRFB applications as these batteries were no longer considered to be cost competitive.
A Section 232 National Security Investigation of Imports of Vanadium
was undertaken by the U.S. Department of Commerce (“DoC”) during 2020 and submitted to President Biden on February 22, 2021.
The President had 90 days to decide if he concurred with the findings and recommendations and determine whether to take an action to mitigate
the impairment of national security. No action was taken.
The vanadium market price was $8.70 per
pound as of December 31, 2021, which was an increase from the December 31, 2020 price of $7.10 per pound. In the first quarter of
2022, vanadium prices rallied with commodities closing at $12.10 on March 31, 2022.
COMPETITION
There is global competition for uranium/vanadium properties, ore processing
mills, capital, customers and the employment and retention of qualified personnel. We compete with multiple exploration companies for
all of these things. In the production and marketing of uranium and vanadium, there are a number of producing entities globally, some
of which are government controlled and several of which are significantly larger and better capitalized than we are. Several of these
organizations also have substantially greater financial, technical, manufacturing and distribution resources than we have.
Our future uranium production may also compete with uranium from secondary
supplies, including the sale of uranium inventory held by the DoE. At the current time, DoE uranium sales have been suspended. In addition,
there are numerous entities in the market that compete with us for properties and operate in-situ recovery (“ISR”) facilities.
In the event that there is not a buying program in place for uranium/vanadium
ore, the Company would need to arrange with a third party for conventional milling services. Because the number of mills permitted for
processing of uranium and vanadium is very limited, it may be difficult for us to gain access to a mill on favorable terms, or at all.
This could result in increased costs and/or significant delays in, interruption of, or cessation of the Company’s business activities.
The practice of selling uranium/vanadium ore without first processing into yellowcake (U3O8) or Vanadium Pentoxide (V2O5) would likely
generate lower revenues.
If we are unable to successfully compete for properties, mills, capital,
customers or employees or with alternative uranium sources, it could delay or prevent us from achieving our business objectives and could
have a material adverse effect on our financial condition and results of operations.
With respect to sales of uranium, the Company competes primarily based
on price. We will market uranium to utilities and commodity brokers. We are in direct competition with supplies available from various
sources worldwide. We believe we compete with multiple operating uranium companies.
With respect to sales of vanadium, the Company will compete primarily
based upon availability and secondarily on price. There will be direct competition with primary production, secondary production, and
co-production from various companies and processors worldwide as individual entities come online or increase production to address the
supply deficit.
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ENVIRONMENTAL CONSIDERATIONS AND PERMITTING
United States
Uranium extraction is regulated by the federal government, states and,
in some cases, by Native American tribes. Compliance with such regulation has a material effect on the economics of our operations and
the timing of project development. Our primary regulatory costs have been related to obtaining licenses and permits from federal and state
agencies before the commencement of production activities. The environmental regulatory requirements for the ISR industry are well established.
Many ISR projects have gone a full life cycle without any significant environmental impact. However, the process can make environmental
permitting difficult and timing unpredictable. Western does not plan to utilize an ISR mining process on its properties.
Mining Permits are disclosed on a per mine basis
in the “Properties” section, below.
Reclamation and Restoration Costs and Bonding
Requirements
At the conclusion of conventional mining, a site is decommissioned
and reclaimed. Reclamation involves removing evidence of surface disturbance. The reclamation liabilities of the U.S. mines are subject
to legal and regulatory requirements. Estimates of the costs of reclamation are reviewed periodically by the applicable regulatory authorities.
The reclamation liability represents the Company’s best estimate of the present value of future reclamation costs in connection
with the mineral properties. The Company determined the gross reclamation liabilities at December 31, 2021 of the mineral properties to
be approximately $740,446.
The Company is required by State regulatory agencies to obtain financial
surety relating to certain of its future restoration and reclamation obligations. The Company has provided performance bonds issued for
the benefit of the Company in the amount of $740,446 to satisfy such regulatory requirements.
EMPLOYEES
As of December 31, 2021, we had six full-time employees and one part-time
employee.