Western Uranium & Vanadium Corp. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements The information disclosed in this annual report, and the information incorporated by reference herein, include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include, but are not limited to, statements regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements contained or incorporated by reference in this annual report are based on our current expectations and beliefs concerning future developments and their potential effects on us and speak only as of the date of each such statement. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in Item 1A, “Risk Factors,” and this Item 7 of this annual report. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. The following discussion should be read in conjunction with our audited consolidated annual financial statements and footnotes thereto contained in this annual report. Overview General Western Uranium & Vanadium Corp. (“Western” or the “Company”, formerly Western Uranium Corporation) was incorporated in December 2006 under the Ontario Business Corporations Act. 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 members’ interests of Pinon Ridge Mining LLC (“PRM”), a Delaware limited liability company. The transaction constituted a reverse takeover (“RTO”) of Western by PRM. Subsequent to obtaining appropriate shareholder approvals, the Company reconstituted its board of directors and senior management team. Effective September 16, 2015, Western completed its acquisition of Black Range Minerals Limited (“Black Range”). 37 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 declines, office/storage/shop and change buildings, and an extensive underground haulage development with several vent shafts complete with exhaust fans. These properties were formerly secured by a first priority interest collateralizing a $500,000 promissory note which was paid in full on August 31, 2018, and thus, the properties are now held free and clear of encumbrances. The Sunday Mine Complex is the Company’s core resource property and was assigned “Active” status effective June 2019. 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 options to purchase Western common shares to certain employees, directors, and consultants. 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. The Company has registered offices at 330 Bay Street, Suite 1400, Toronto, Ontario, Canada, M5H 2S8, and its common shares are listed on the CSE under the symbol “WUC” and are traded on the OTCQX Best Market under the symbol “WSTRF”. Its principal business activity is the acquisition and development of uranium and vanadium resource properties in the states of Utah and Colorado in the United States of America (“United States”). Recent Developments February 2021 Private Placement 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 amounted to CAD $2,600,000. Each unit consisted 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. March 2021 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 the private placement amounted to CAD $2,500,000. Each unit consisted of one common share and 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. December 2021 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 (USD $434,973 in net proceeds). Each unit consisted of one common share plus one 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. 38 Bullen Property (Weld County) The Bullen Property is an oil and gas property located in Weld County Colorado. The Company acquired this non-core property in 2015 in the Black Range Minerals Limited acquisition, and Black Range purchased the property in 2008 for its Keota Uranium Project. In 2017, the Company signed a three year oil and gas lease which in 2020 was extended for an additional three year term or until the end of continuous operations. The consideration was in the form of upfront bonus payments and backend 3/16 th production royalty payment. Additional right-of-way easement agreements were signed which allowed for the development of a pipeline. The lease agreement allows the Company to retain property rights to vanadium, uranium, and other mineral resources. A 2019 lawsuit was filed in the Weld County District Court over the original Bullen Property deed language which was negotiated before the Company acquired Black Range by prior management and a bank representing the estate of the property owner. The Company settled with the plaintiffs by awarding the estate’s beneficiaries a non-participating royalty interest of 1/8th for all hydrocarbon and non-hydrocarbon substances that are produced and sold from the property. In early 2020, Bison Oil & Gas traded this lease to Mallard Exploration (“Mallard”), Mallard subsequently filed an application with the Colorado Oil & Gas Conservation Commission (“COGCC”) to update the permit to create a new pooled unit. During 2021, the operator advanced through the oil well production stages: drilling was completed in the first quarter, wellfield completion/fracking was completed during the second quarter, drill out was completed in July, and flowback was completed in August. By August 2021, each of the eight (8) Blue Teal Fed wells had commenced oil and gas production. The first royalty payment was made in January 2022 and monthly royalty payments have been received subsequently. These wells continue to rank among the top Colorado producing wells. Due to the success of the first 8 wells, the operator has decided to develop a second set of 8 wells within Western’s royalty area during 2022. During the years ended December 31, 2021 and 2020 the Company recognized aggregate revenue of $272,142 and $54,620, respectively, under these oil and gas lease arrangements. On January 31, 2022, the Company received $207,552 as payment for royalties recognized during the period August 2021 through December 2021. Kinetic Separation Licensing During 2016, the Company submitted documentation to the Colorado Department of Public Health and Environment (“CDPHE”) for a determination ruling regarding the type of license which may be required for the application of Kinetic Separation at the Sunday Mine Complex within the state of Colorado. During May and June of 2016, CDPHE held four public meetings in several cities in Colorado as part of the process. On July 22, 2016, CDPHE closed the comment period. In connection with this matter, the CDPHE consulted with the NRC. In response, the CDPHE received an advisory opinion, dated October 16, 2016, which did not contain support for the NRC’s opinion and with which the Company’s regulatory counsel does not agree. NRC’s advisory opinion recommended that Kinetic Separation should be regulated as a milling operation but did recognize that there may be exemptions to certain milling regulatory requirements because of the benign nature of the non-uranium bearing sands produced after Kinetic Separation is completed on uranium-bearing ores. On December 1, 2016, the CDPHE issued a determination that the proposed Kinetic Separation operations at the Sunday Mine Complex must be regulated by the CDPHE through a milling license. Beginning in 2017, the Company’s regulatory counsel prepared significant documentation in preparation for a prospective submission. On September 13, 2019, the Company’s regulatory counsel submitted a white paper to the NRC entitled “Recommendations on the Proper Legal and Policy Interpretation for Using Kinetic Separation Processes at Uranium Mine Sites.” On July 24, 2020, the NRC staff responded with a letter in support of the original conclusion. Western’s regulatory counsel has proposed alternatives. However, management has decided not to proceed at this time, given its present opportunity set. 39 Sunday Mine Complex Permitting Status On February 4, 2020, the Colorado DRMS sent a Notice of Hearing to Declare Termination of Mining Operations related to the status of the mining permits issued by the state of Colorado for the Sunday Mine Complex. At issue was the application of an unchallenged Colorado Court of Appeals Opinion for a separate mine (Van 4) with very different facts that are retroactively modifying DRMS rules and regulations. The Company maintains that it was timely in meeting existing rules and regulations. The hearing was scheduled to be held during several monthly MLRB Board meetings, but this matter was delayed several times. The permit hearing was held during the MLRB Board monthly meeting on July 22, 2020. At issue was the status of the five existing permits which comprise the Sunday Mine Complex. Due to COVID-19 restrictions, the hearing took place utilizing a virtual-only format. The Company prevailed in a 3-to-1 decision which acknowledged that the work completed at the Sunday Mine Complex under DRMS oversight was timely and sufficient for Western to maintain these permits. In a subsequent July 30, 2020 letter, the DRMS notified the Company that the status of the five permits (Sunday, West Sunday, St. Jude, Carnation, and Topaz) had been changed to “Active” status effective June 10, 2019, the original date on which the change of the status was approved. On August 23, 2020, the Company initiated a request for Temporary Cessation status for the Sunday Mine Complex as the mines had not been restarted within a 180-day window due to the direct and indirect impacts of the COVID-19 pandemic. Accordingly, a permit hearing was scheduled for October 21, 2020 to determine Temporary Cessation status. In a unanimous vote, the MLRB approved Temporary Cessation status for each of the five Sunday Mine Complex permits (Sunday, West Sunday, St. Jude, Carnation, and Topaz). On October 9, 2020, the MLRB issued a board order which finalized the findings of the July 22, 2020 permit hearing. On November 12, 2020, a coalition of environmental groups filed a lawsuit against the MLRB seeking a partial appeal of the July 22, 2020 decision by requesting termination of the Topaz mine permit. On December 15, 2020, the same coalition of environmental groups amended their complaint against the MLRB seeking a partial appeal of the October 21, 2020 decision requesting termination of the Topaz mine permit. The Company has joined with the MLRB in defense of their July 22, 2020 and October 21, 2020 decisions. On May 5, 2021, the Plaintiff in the Topaz Appeal filed an opening brief with the Denver District Court seeking to overturn the July 22, 2020 and October 21, 2020 MLRB permit hearing decisions on the Topaz mine permit. The MLRB and the Company were to respond with an answer brief within 35 days on or before June 9, 2021, but instead sought a settlement. The judicial review process was delayed as extensions were put in place until August 20, 2021. A settlement was not reached and the MLRB and the Company submitted answer briefs on August 20, 2021. The Plaintiff submitted a reply brief on September 10, 2021. On March 1, 2022, the Denver District Court reversed the MLRB’s orders regarding the Topaz Mine and remanded the case back to MLRB for further proceedings consistent with its order. The Company and the MRLB have until April 19, 2022 to appeal the Denver District Court’s ruling. The Company is also working toward the completion of an updated Topaz mine Plan of Operations which is a separate federal requirement of the BLM for the conduct of mining activities on federal land. 40 Sunday Mine Complex Project 2021 Restart The project entailed the development of multiple SMC ore bodies. This year’s project involves a shift in the base of operations from the St. Jude Mine (2019) to the Sunday Mine (2021). Underground development began in August following mine ventilation, power upgrades, and increasing explosive capabilities. The first target was the extension of the drift (tunnel) 150 feet to reach the first surface exploration drill hole to access the GMG Ore Body (GMG). Early results were positive as drilling toward the GMG resulted in the location of ore-grade material within thirty feet of the existing mine workings. Notably, only limited exploration drilling has been done in this area due to the mountainous terrain on the surface above. As drifting proceeded, very high-grade ore continued to be intersected through the drift path and on both sides of the drift. As a result, the team shifted from development to mining. During the December 2021 to March 2022 period, over 3,000 tons of high-grade uranium/vanadium ore was mined from the drift. The mining contractor calculated grades based upon on site scintillometer readings. 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. Van 4 Mine Permitting Status A prior owner of the Van 4 mine had been granted a first Temporary Cessation from reclamation of the mine by the Colorado Mined Land Reclamation Board (“MLRB”) which was set to expire June 23, 2017. Prior to its expiration, PRM formally requested an extension through a second Temporary Cessation. PRM subsequently participated in a public process which culminated in a hearing on July 26, 2017. Prior to the hearing, three non-profit organizations who pursue environmental and conservation objectives filed a brief objecting to the extension. The MLRB board members voted to grant a second five-year Temporary Cessation for the Van 4 mine. Thereafter, the three objecting parties filed a lawsuit on September 18, 2017. The MLRB was named as the defendant and PRM was named as a party to the case due to the Colorado law requirement that any lawsuit filed after a hearing must include all of the parties in the proceeding. The plaintiff organizations are seeking for the court to set aside the board order granting a second five-year Temporary Cessation period to PRM for the Van 4 mine. The Colorado state Attorney General was defending this action in the Denver Colorado District Court. On May 8, 2018, the Denver Colorado District Court ruled in favor, whereby the additional five-year Temporary Cessation period was granted. The Plaintiffs appealed this ruling to the Colorado Court of Appeals, and on July 25, 2019, the ruling was reversed, ruling that the additional five-year Temporary Cessation period should not have been granted. The MLRB and the Colorado Attorney General advised Western that it will not make an additional appeal of the ruling. Further, the time period for an appeal has passed. The judge has subsequently issued an instruction for the MLRB to issue an order revoking the permit and putting the Van 4 mine into reclamation. On January 22, 2020, the MLRB held a hearing, and on March 2, 2020, the MLRB issued an order vacating the Van 4 Temporary Cessation, revoking the permit, and ordering commencement of final reclamation, which must be completed within five years. The Company commenced reclamation of the Van 4 mine, but progress has been delayed both by COVID-19 restrictions and countywide fire and open flame restrictions. The reclamation cost is fully covered by the reclamation bonds that have been posted with the state of Colorado. Our mining operations team has made significant progress on the reclamation as all surface structures have been disassembled and removed with the exception of the head frame. 41 Uranium Section 232 Investigation/Nuclear Fuel Working Group Process An investigation under Section 232 of the Trade Expansion Act of 1962 was undertaken by the DoC in 2018 to assess the impact to national security of the importation of the vast majority of uranium utilized by the approximately 100 operative civilian nuclear reactors within the United States. In response to the Section 232 report, the White House disseminated a Presidential Memoranda in July 2019. At that time, President Trump formed the Nuclear Fuel Working Group (“NFWG”) to find solutions for reviving and expanding domestic nuclear fuel production and reinvigorating recommendations. In April 2020, the DoE released the NFWG report entitled “Restoring America’s Competitive Nuclear Energy Advantage – A strategy to assure U.S. national security.” The report outlines a strategy for the reestablishment of critical capabilities and direct support to the front end of the U.S. domestic nuclear fuel cycle. The NFWG findings and recommendations presented are a positive outcome for U.S. uranium miners; however, the ultimate outcome and timing remains uncertain as the continuing process requires approvals and budget appropriation from Congress and implementation by U.S. government agencies. This remains an ongoing process where a number of bills were introduced in both the U.S. Senate and House to implement the key provisions of the NFWG report’s recommendations. In November 2020, after the U.S. election, the Senate Committee on Appropriations released its funding measures and allocations recommending the creation and funding of the American Uranium Reserve. In October 2020, the DoC extended the Russian Suspension Agreement for an additional 20 years until 2040. Existing categories of quotas on imports of Russian uranium into the U.S. were reduced by a graduated scale, and additional provisions were modified to eliminate loopholes. An extension of this agreement was among the NFWG’s recommendations. In further implementation of the report’s recommendations, the DoE made multiple investment awards to companies advancing new nuclear technologies. TerraPower and X-energy received awards to build demonstration models of their advanced reactor designs, and NuScale received support to deploy the first U.S. small modular reactor (“SMR”) plan comprised of 12 modules at the Idaho National Laboratory. The International Development Finance Corp. signed a letter of intent to finance NuScale’s development of 42 SMR modules in South Africa. In an acknowledgement of the future growth potential of new nuclear technologies, the U.S. government has increased its industry support to a level not seen in decades. This is being done to level the playing field versus state-sponsored foreign entities. In December 2020, U.S. Congress passed the “COVID-Relief and Omnibus Spending Bill,” which included $75 million for the establishment of a strategic U.S. Uranium Reserve. The Biden-Harris Administration has rolled the 2021 funding into its 2022 fiscal year budget to continue this initiative. The DoE continues to work on establishing the parameters of the program and in August 2021, the DoE put out a Request for Information (RFI) to obtain additional comments related to the establishment of the DoE’s Uranium Reserve program. 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 Also, recent follow through includes the July 2021 public release of the uranium Section 232 report which the DoC presented to President Trump in April 2019. The report concluded that uranium imports were “weakening our internal economy” and “threaten to impair the national security” and recommended immediate actions to “enable U.S. producers to recapture and sustain a market share of U.S. uranium consumption”. These actions were not taken in favor of the NFWG process. Due to the Russian invasion of Ukraine and strong market positions of Russia and the former Soviet Republics in nuclear fuel the term “energy security” has taken on increased urgency, as dependencies have impacted many free-market economies. With respect to the uranium market, the national security risks to the United States have been identified and reported under both the Section 232 Investigation and subsequently by the NFWG. In response to the Russian invasion, a number of U.S. Senators and Representatives have utilized the Uranium Reserve program as a basis for proposing a U.S. response to Russia’s invasion and reducing U.S. expenditures benefiting the Russian regime. Vanadium Section 232 Investigation In the United States, a petition for an investigation under Section 232 of the Trade Expansion Act of 1962 was requested by two domestic companies in November 2019. In June of 2020, the U.S. Secretary of Commerce, Wilbur Ross, initiated an investigation into whether the present quantities or circumstances of vanadium imports into the United States threaten to impair the national security. The Section 232 National Security Investigation of Imports of Vanadium was concluded, and a report was submitted to President Biden in February 2021. In July 2021, the report was made public. It concluded that vanadium imports “do not threaten to impair the national security as defined in Section 232,” but identified and recommended “several actions that would help to ensure reliable domestic sources of vanadium and lessen the potential for imports to threaten national security.” No action has been taken on these recommendations. 42 Biden-Harris Administration Initiatives The positive momentum has continued for the nuclear and uranium mining sector due to the Biden-Harris Administration’s emphasis on climate change. The “Plan to Build a Modern Sustainable Infrastructure and an Equitable Clean Energy Future” emphasizes climate change solutions. Upon taking office, the Biden team immediately rejoined the Paris Agreement and continued its pursuit of campaign promises of investments in clean energy, creating jobs, producing clean electric power, and achieving carbon-pollution free energy in electricity generation by 2035. Since taking office, President Biden has given all agencies climate change initiatives and has started a climate change working group. The existing U.S. nuclear reactor fleet currently produces in excess of 50% of U.S. clean energy, and new, advanced nuclear technologies promise to generate additional clean energy. A White House national climate advisor told the media in a press briefing that the Biden-Harris Administration intends to seek a national clean energy standard that includes nuclear energy. The Company believes that nuclear energy will be increasingly able to compete on a level playing field with renewable energy technologies. There has been legislative advancement of implementation mechanisms including tax credits, subsidies, and/or U.S. utilities being required to produce an increasing proportion of electricity generation from clean energy power sources. President Biden’s Build Back Better agenda has several components supportive of nuclear power generation. Already signed into law is the $1.2 trillion Infrastructure Investment and Jobs Act that provides the DoE funding to prevent the premature retirement of existing nuclear plants and invest in advanced nuclear projects. The separate $1.7 trillion Build Back Better Reconciliation Legislation, which has not yet made its way through the U.S. Congress, further addresses climate change through the inclusion of a zero-emission nuclear power production credit. If passed in its current form, beginning in 2022 qualified nuclear power facilities would be eligible to receive a base credit and a bonus credit if certain requirements are met. 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. To conclude the COP2, in a surprise announcement, the U.S. and China pledged to work together to slow global warming. This is significant because the U.S. and China represent the two countries with the largest CO2 emissions. They jointly pledged to take “enhanced climate actions” to meet the 2015 Paris Agreement temperature goal of limiting global warming to less than 1.5C. Strategic Acquisition of Physical Uranium On May 28, 2021, the Company executed a binding agreement to purchase 125,000 pounds of natural uranium concentrate at the market price. In December 2021, the Company paid $4,020,000 or $32.16 per pound, in connection with its full prepayment of the purchase price for 125,000 pounds of natural uranium concentrate. This uranium concentrate was delivered to the purchaser on April 13, 2022, pursuant to the terms of the aforementioned uranium concentrates supply agreement. Uranium Supply Agreement Delivery On April 13, 2022, in satisfaction of the Year 5 delivery under its supply contract, the Company delivered 125,000 lbs of uranium concentrate from its prepaid uranium concentrate inventory. This delivery of uranium concentrate resulted in a sale of $7,130,000, at a price of approximately $57 per pound. The Company expects to receive the cash from this sale in May 2022. Sprott Physical Uranium Trust 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 causing spot prices to increase. 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. COVID-19 The world has been, and continues to be, impacted by the novel coronavirus (“COVID-19”) pandemic. COVID-19, and measures to prevent its spread, impacted our business in a number of ways. The impact of these disruptions and the extent of their adverse impact on the Company’s financial and operating results will be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently unpredictable duration and severity of the impacts of COVID-19, and among other things, the impact of governmental actions imposed in response to COVID-19 and individuals’ and companies’ risk tolerance regarding health matters going forward and developing strain mutations. To date, COVID-19 has primarily caused Western delays in reporting, regulatory matters, and operations. Most notably, the Company initiated a request for Temporary Cessation status for the Sunday Mine Complex in August 2020 as the mines had not been restarted within the 180-day window due to the direct and indirect impacts of the COVID-19 pandemic. The Van 4 Mine reclamation process was delayed because of COVID-19 pandemic lockdowns. The need to observe quarantine periods also caused a limited loss of manpower and delay to the 2021 / 2022 Sunday Mine Complex project. The COVID-19 pandemic has also limited Western’s participation in industry and investor conference events during 2020 and 2021. The Company is continuing to monitor COVID-19and its subvariants, and the potential impact of the pandemic on the Company’s operations. 43 Year Ended December 31, 2021 as Compared to the Year Ended December 31, 2020 The following table presents the Company’s financial results for the years ended December 31, 2021 and 2020. For the Years Ended December 31, 2021 2020 Revenue Lease and royalty revenue $ 272,142 $ 54,620 Expenses Mining expenditures 717,657 393,182 Professional fees 365,302 299,908 General and administrative 1,172,585 1,136,049 Consulting fees 29,543 39,137 Total operating expenses 2,285,087 1,868,276 Operating loss (2,012,945 ) (1,813,656 ) Accretion and interest (16,960 ) 13,338 Settlement expense 78,052 - Warrant modification expense - 639,012 Gain on forgiveness of debt - (73,116 ) Net loss (2,074,037 ) (2,392,890 ) Other Comprehensive income (expense) Foreign exchange gain (loss) 89,020 (110,860 ) Comprehensive Loss (1,985,017 ) (2,503,750 ) Net loss per share - basic and diluted $ (0.06 ) $ (0.08 ) Summary: Our consolidated net loss for the years ended December 31, 2021and 2020 was $2,074,037 and $2,392,890 or $0.06 and $0.08 per share, respectively. The principal components of these year over year changes are discussed below. Our comprehensive loss for the years ended December 31, 2021 and 2020 was $1,985,017 and $2,503,750, respectively. Revenue Our revenue for the years ended December 31, 2021 and 2020 was $272,142 and $54,620, respectively. This revenue resulted from lease revenue pursuant to a July 18, 2017 oil and gas lease agreement, which was extended for an additional three years in 2020 at a 150% increased rate. The February 2, 2018 pipeline easement, with the initial operator has terminated resulting in a decrease in this portion of revenue. The July 1, 2018 right-of-way agreement with the new operator was consistent between periods. The aforementioned revenue streams are derived from the Weld County oil and gas property. By August 2021, each of the eight (8) Blue Teal Fed wells had commenced oil and gas production. On January 31, 2022, the Company received $207,552 as payment for royalties recognized during the period August 2021 through December 2021. Mining Expenditures Mining expenditures for the year ended December 31, 2021 were $717,657 as compared to $393,182 for the year ended December 31, 2020. The increase in mining expenditures of $324,475, or 82.5% was principally attributable to mining expenditures related to restarting mining operations at the Company’s Sunday Mine Complex during the third quarter of 2021. 44 Professional Fees Professional fees for the year ended December 31, 2021 were $365,302 as compared to $299,908 for the year ended December 31, 2020. The increase in professional fees of $65,394, or 21.8% was due to a $61,197 increase in legal fees which was primarily attributable to the Form S-1 share registration process. General and Administrative General and administrative expenses for the year ended December 31, 2021 were $1,172,585 as compared to $1,136,049 for the year ended December 31, 2020. The increase in general and administrative expense of $36,536, or 3.2% is due to a $136,756 increase in in payroll expenses, and an increase of $36,760 in utilities expenses in connection with the Sunday Mine Complex project offset by a decrease of $212,796 of stock-based compensation. Consulting Fees Consulting fees for the year ended December 31, 2021 were $29,543 as compared to $39,137 for the year ended December 31, 2020. The decrease in consulting fees of $9,594, or 24.5% was principally due to the Company’s reduced utilization of consultants during the current period. Accretion and interest Accretion and interest for the year ended December 31, 2021 was $(16,960) as compared to $13,338 for the years ended December 31, 2020. The change of accretion and interest of $30,298 was due to the return of the Hansen Picnic Tree Financial Warrantee with interest. Warrant Modification Expense Warrant modification expense for the year ended December 31, 2021 was $0 as compared to $639,012 for the year ended December 31, 2020. The decrease in warrant modification expense relates to the Company’s decision on April 20, 2020 to extend warrants issued to investors during various 2018 private placements and amend the trigger price in the acceleration clause for each tranche of warrants, resulting in a warrant modification expense of $639,012 in 2020. Gain on Forgiveness of Debt Gain on forgiveness of debt for the year ended December 31, 2021 was $0 as compared to $73,116 for the year ended December 31, 2020. The gain on forgiveness of debt relates to the Company having its PPP Loan forgiven by the U.S. Small Business Association in December 2020. Foreign Exchange Foreign exchange gain (loss) for the year ended December 31, 2021 was $89,020 as compared to $(110,860) for the year ended December 31, 2020. The change of the foreign exchange gain (loss) of $199,880 is primarily due to a swing from a loss in 2020 to a gain in 2021 from holding cash balances in Canadian Dollars during a period when the currency appreciated and the translation gain from using United States Dollars as the reporting currency. 45 Liquidity and Capital Resources The Company’s cash balance as of December 31, 2021 was $880,821. The Company’s cash position is highly dependent on its ability to raise capital through the issuance of debt and equity and its management of expenditures for mining development and for fulfillment of its public company reporting responsibilities. Management believes that in order to finance the development of the mining properties and Kinetic Separation, the Company will be required to raise additional capital by way of debt and/or equity. The Company could potentially require additional capital if the scope of the Sunday Mine Complex expands. This outlook is based on the Company’s current financial position and is subject to change if opportunities become available based on current exploration program results and/or external opportunities. Net cash used in operating activities Net cash used in operating activities was $6,154,665 for the year ended December 31, 2021, as compared with $1,513,626 for the year ended December 31, 2020. Of the $6,154,665 in net cash used in operating activities for the year ended December 31, 2021, $2,074,037 is derived from our net loss before non-cash adjustments. Changes in our operating assets and liabilities for the period primarily include an increase of $4,085,723 in prepaid uranium concentrate inventory, $269,606 in prepaid expenses and other current assets, an increase of $356,976 in accounts payable and accrued expenses, and a decrease of $64,620 in deferred revenue. Net cash used in investing activities Net cash used in investing activities was $65,000 for the year ended December 31, 2021, as compared with $0 for the year ended December 31, 2020.This capital expenditure relates to purchasing property and equipment for our mining operations. Net cash provided by financing activities Net cash provided by financing activities for the years ended December 31, 2021 and 2020 were $6,309,143 and $73,116, respectively. The Company completed three private placements during 2021 representing aggregate net proceeds of $4,304,279 and received $2,004,864 from the exercise of warrants during the year ended December 31, 2021. Reclamation Liability The Company’s mines are subject to certain asset retirement obligations, which the Company has recorded as reclamation liabilities. The reclamation liabilities of the United States mines are subject to legal and regulatory requirements, and 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 of the mineral properties as of December 31, 2021 and 2020, to be approximately $740,446 and $906,811, respectively. On March 2, 2020, the Colorado Mined Land Reclamation Board (“MLRB”) issued an order vacating the Van 4 Temporary Cessation, terminating mining operations and ordering commencement of final reclamation. The Company has begun the reclamation of the Van 4 Mine. The reclamation cost is fully covered by the reclamation bonds posted upon acquisition of the property. The Company adjusted the fair value of its reclamation obligation for the Van 4 Mine. The portion of the reclamation liability related to the Van 4 Mine and its related restricted cash are included in current liabilities and current assets, respectively, at a value of $75,057. The Company expects to begin incurring the reclamation liability after 2054 for all mines that are not in reclamation and accordingly, has discounted the gross liabilities over their remaining lives using a discount rate of 5.4%. The net discounted aggregated values as of December 31, 2021 and 2020 were $271,620 and $309,940, respectively. The gross reclamation liabilities as of December 31, 2021 and 2020 are secured by financial warranties in the amount of $740,446 and $906,811, respectively. During the first quarter of 2021, the Company received notice that its Ferris Haggerty property was no longer considered to be subject to reclamation treatment. The Company recorded a discontinuation of the Ferris Haggerty property’s present value of $2,669 during the first quarter 2021. On April 29, 2021, the Company moved the Ferris Haggerty $10,000 restricted cash deposit into its cash after receiving payment from the state of Wyoming. During the fourth quarter of 2021, the Company received notice that its Hansen Picnic Tree property was no longer considered to be subject to reclamation treatment. The Company recorded a discontinuation of the Hansen Picnic Tree property’s present value of $44,793 during the fourth quarter of 2021. On December 29, 2021, the Company moved the $154,936 restricted cash deposit into its cash after receiving payment from the state of Colorado. 46 Oil and Gas Lease and Easement The Company entered into an oil and gas lease that became effective with respect to minerals and mineral rights owned by the Company of approximately 160 surface acres of the Company’s property in Colorado. As consideration for entering into the lease, the lessee has agreed to pay the Company a royalty from the lessee’s revenue attributed to oil and gas produced, saved, and sold attributable to the net mineral interest. The Company has also received cash payments from the lessee related to the easement that the Company is recognizing incrementally over the eight year term of the easement. On June 23, 2020, the same entity as discussed above elected to extend the oil and gas lease easement for three additional years, commencing on the date the lease would have previously expired. During 2021, the operator completed all well development stages and each of the eight (8) Blue Teal Fed wells commenced oil and gas production by mid-August 2021. During the years ended December 31, 2021 and 2020 the Company recognized aggregate revenue of $272,142 and $54,620, respectively, under these oil and gas lease arrangements. On January 31, 2022, the Company received $207,552 as payment for royalties recognized during the period August 2021 through December 2021. Related Party Transactions The Company has transacted with related parties pursuant to service arrangements in the ordinary course of business, as follows: Prior to the acquisition of Black Range, Mr. 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 AUD $500,000 (USD $362,794 as of December 31, 2021) to Seller within 60 days of the first commercial application of the Kinetic Separation technology. Western assumed this contingent payment obligation in connection with the acquisition of Black Range. At the date of the acquisition of Black Range, this contingent obligation was determined to be probable. Since the deferred contingent consideration obligation is probable and the amount is estimable, the Company recorded the deferred contingent consideration as an assumed liability in the amount of $362,794 and $392,086 as of December 31, 2021 and 2020, respectively. Going Concern The Company has incurred continuing losses from its operations and as of December 31, 2021, the Company had an accumulated deficit of $13,161,496 and working capital of $4,492,169. Since inception, the Company has met its liquidity requirements principally through the issuance of notes and the sale of its common shares. 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 amounted to CAD $2,600,000 (USD $1,950,509 in net proceeds). 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 the private placement amounted to CAD $2,500,000 (USD $1,918,797 in net proceeds). On December 17, 2021, the Company closed on 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 (USD $434,973 in net proceeds). During the year ended December 31, 2021, the Company received $2,004,864 in proceeds from the exercise of warrants. The Company’s ability to continue its operations and to pay its obligations when they become due is contingent upon the Company obtaining additional financing. Management’s plans include seeking to procure additional funds through debt and equity financings, to secure regulatory approval to fully utilize its Kinetic Separation and to initiate the processing of ore to generate operating cash flows. There are no assurances that the Company will be able to raise capital on terms acceptable to the Company or at all, or that cash flows generated from its operations will be sufficient to meet its current operating costs and required debt service. If the Company is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its planned product development, which could harm its financial condition and operating results, or it may not be able to continue to fund its ongoing operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern to sustain operations for at least one year from the issuance of the accompanying financial statements. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. 47 Off Balance Sheet Arrangements As of December 31, 2021, there were no off-balance sheet transactions. The Company has not entered into any specialized financial agreements to minimize its investment risk, currency risk or commodity risk. Critical Accounting Estimates and Policies The preparation of these consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Significant assumptions about the future and other sources of estimation uncertainty that management has made at the end of the reporting period, that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, include, but are not limited to, the following: fair value of transactions involving common shares, assessment of the useful life and evaluation for impairment of intangible assets, valuation and impairment assessments on mineral properties, deferred contingent consideration, the reclamation liability, valuation of stock-based compensation, valuation of available-for-sale securities and valuation of long-term debt, HST and asset retirement obligations. Other areas requiring estimates include allocations of expenditures, depletion and amortization of mineral rights and properties. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This information appears following Item 17 of this report and is included herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.