UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
or
☐TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
______________to ______________
Commission File Number 000-55626
WESTERN URANIUM &
VANADIUM CORP.
(Exact Name of Registrant as Specified in Its Charter)
330 Bay Street, Suite 1400 Toronto, Ontario, Canada M5H 2S8
(Address of Principal Executive Offices) (Zip Code)
(Registrant’s Telephone Number, Including Area
Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of exchange on which registered
N/A
Securities registered pursuant to Section 12(g) of the Act:
Common Shares
(Title of Class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒
Note – Checking the box above will not
relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those
Sections.
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has
filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. ☐
Indicate by check mark whether the registrant is
a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 30, 2021, the aggregate market value of
the common shares held by non-affiliates of the registrant was $57,503,108.
As of April 13, 2022, 42,921,644 of the registrant’s no par value
common shares were outstanding.
WESTERN URANIUM & VANADIUM CORP.
FORM 10-K
TABLE OF CONTENTS
USE OF NAMES ii
CURRENCY ii
FORWARD-LOOKING STATEMENTS AND INTRODUCTION ii
GLOSSARY iv
GLOSSARY OF REGULATORY AGENCIES AND EXCHANGES v
PART I 1
ITEM 1. BUSINESS 1
ITEM 1A. RISK FACTORS 7
ITEM 1B. UNRESOLVED STAFF COMMENTS 16
ITEM 2. PROPERTIES 17
ITEM 3. LEGAL PROCEEDINGS 35
ITEM 4. MINE SAFETY DISCLOSURES 36
ITEM 6. [RESERVED] 37
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 48
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 48
ITEM 9A. CONTROLS AND PROCEDURES 48
ITEM 9B. OTHER INFORMATION. 49
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. 49
PART III 50
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 50
ITEM 11. EXECUTIVE COMPENSATION 52
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 56
PART IV – OTHER INFORMATION 57
ITEM 15. EXHIBITS, AND FINANCIAL STATEMENT SCHEDULES 57
SIGNATURES 59
i
USE OF NAMES
As used in this Form 10-K annual report, unless the context otherwise
requires, the terms “we,” “us,” “our,” “Western” and “WUC”, or the “Company”
refer to Western Uranium & Vanadium Corp., an Ontario Canadian corporation, and its subsidiaries.
CURRENCY
The accounts of the Company are reported in U.S.
dollars. Unless otherwise specified, all dollar amounts referenced in this Form 10-K annual report and the consolidated financial statements
are stated in U.S. dollars.
FORWARD-LOOKING
STATEMENTS AND INTRODUCTION
The statements contained in this document that are not purely historical
are “forward-looking statements.” Although we believe that the expectations reflected in such forward-looking statements,
including those regarding future operations, are reasonable, we can give no assurance that such expectations will prove to be correct. Forward-looking
statements are not guarantees of future performance and they involve various risks and uncertainties. Forward-looking statements
contained in this document include statements regarding our proposed services, market opportunities and acceptance, expectations for revenues,
cash flows and financial performance, and intentions for the future. Such forward-looking statements are included under Item
1. “Business” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of
Operations”. All forward-looking statements included in this document are made as of the date hereof, based on information
available to us as of such date, and we assume no obligation to update any forward-looking statement. It is important to note that
such statements may not prove to be accurate and that our actual results and future events could differ materially from those anticipated
in such statements. Among the factors that could cause actual results to differ materially from our expectations are those described
under Item 1. “Business,” Item 1A. “Risk Factors” and Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations”. All subsequent written and oral forward-looking statements attributable
to us or persons acting on our behalf are expressly qualified in their entirety by this section and other factors included elsewhere in
this document.
CAUTIONARY NOTE TO INVESTORS
CONCERNING DISCLOSURE OF MINERAL RESOURCES & RESERVES
We are deemed to be a U.S.
domestic issuer for United States Securities and Exchange Commission (“SEC”) purposes, most of our shareholders are U.S.
residents, and we are required to report our financial results under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).
However, because we are incorporated in Ontario, Canada and are also listed on the Canadian Securities Exchange, this Annual Report may
also contain or incorporate by reference certain disclosure that satisfies the additional requirements of Canadian securities laws that
differ from the requirements of U.S. securities laws.
On October 31, 2018, the
SEC adopted the Modernization of Property Disclosures for Mining Registrants (the “New Rule”), introducing significant changes
to the existing mining disclosure framework to better align it with international industry and regulatory practice, including Canadian
National Instrument 43-101 - Standards of Disclosure for Mineral Projects (“NI 43-101”), a rule developed by the
Canadian Securities Administrators (the “CSA”) that establishes standards for all public disclosure an issuer makes of scientific
and technical information concerning mineral projects. The New Rule was codified as 17 CFR Subpart 220.1300 and 229.601(b)(96) (collectively,
“S-K 1300”) and replaced SEC Industry Guide 7. Pursuant to the New Rule, issuers are required to comply with S-K 1300 as
of their annual reports for the first fiscal year beginning on or after January 1, 2021.
Unless otherwise indicated,
the following terms, when used in this Form 10-K annual report, have the meanings given them in S-K 1300. The applicable S-K 1300 definitions
are copied below.
S-K 1300 Terms and Definitions:
(1) A feasibility
study is more comprehensive, and with a higher degree of accuracy, than a pre-feasibility study, as defined in S-K 1300. It must contain
mining, infrastructure, and process designs completed with sufficient rigor to serve as the basis for an investment decision or to support
project financing.
(2) The confidence
level in the results of a feasibility study is higher than the confidence level in the results of a pre-feasibility study. Terms such
as full, final, comprehensive, bankable, or definitive feasibility study are equivalent to a feasibility study.
ii
● Qualified person is an individual who is:
(i) be either:
(iv) require or encourage continuing professional development;
(vi) provide a public list of members in good standing.
iii
GLOSSARY
The following defined technical
terms are used in this Annual Report:
● Assay: The testing of a metal or ore to determine its ingredients and quality.
● Copper: A red-brown metal, the chemical element of atomic number 29.
● Grade: Quantity or percentage of metal per unit weight of host rock.
● Host rock: The rock containing a mineral or an ore body.
iv
● Stope: An excavation in a mine from which ore is, or has been excavated.
GLOSSARY OF REGULATORY AGENCIES AND EXCHANGES
● APCD: Colorado Air Pollution Control Division
● DRMS: Colorado Division of Reclamation, Mining and Safety
● DEQ: Department of Environmental Quality.
● DWQ: The Utah Division of Water Quality.
● MLRB: Mined Land Reclamation Board of the state of Colorado.
● WQCD: Colorado Water Quality Control Division
v
PART I
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:
1
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.
2
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.
3
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.
4
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.
5
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.
6
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.
ITEM 1A.
RISK FACTORS
Risks Related to Our Business
Our business activities are subject to significant
risks, including those described below. Every investor or potential investor in our securities should carefully consider these risks.
If any of the described risks actually occurs, our business, financial position and results of operations could be materially adversely
affected. Such risks are not the only ones we face and additional risks and uncertainties not presently known to us or that we currently
deem immaterial may also affect our business.
Our ability to become a successful operating
mining company is contingent on whether we can continue to access adequate operating capital and can ultimately mine our properties at
a profit sufficient to finance further mining activities and to acquire and finance additional reserves, all in spite of potentially
significant fluctuations in the market prices of uranium and vanadium.
The Company has incurred continuing losses from its
operations and negative operating cash flows from operations, and as of December 31, 2021, the Company had an accumulated deficit of
$13,161,496 and working capital of $4,492,169.
The Company’s ability to continue its planned
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 technology and to initiate the processing of ore to generate operating cash flows.
If we cannot access additional sources of private or public capital,
partner with another company that has cash resources and/or find other means of generating revenue other than uranium or vanadium sales,
we may not be able to fully realize our planned operations.
Until we can produce and sell sufficient
amounts of uranium and/or vanadium, we will have no way to generate adequate cash inflows except by monetizing certain of our
assets, partnering with third parties that are better financed or obtaining additional financing of our own. We can provide no
assurance that our properties will produce saleable production or that we will be able to continue to find, develop, acquire and
finance additional mineral resources. If we cannot monetize certain existing assets, partner with another company that has cash
resources, find other means of generating revenue other than uranium or vanadium production and/or access additional sources of
private or public capital, we may not be able to remain in business and our shareholders may lose their entire investment.
7
Our ability to function as an operating mining company
will be dependent on our ability to mine our properties at a profit sufficient to finance further mining activities and for the acquisition
and development of additional properties. The volatility of uranium prices makes long-range planning uncertain and raising capital difficult.
Our ability to operate on a positive cash flow basis
will be dependent on mining sufficient quantities of uranium or vanadium at a profit sufficient to finance our operations and for the
acquisition and development of additional mining properties. Any profit will necessarily be dependent upon, and affected by, the long
and short term market prices of uranium and vanadium, which are subject to significant fluctuation. Uranium prices have been and will
continue to be affected by numerous factors beyond our control. These factors include the demand for nuclear power, political and economic
conditions in uranium producing and consuming countries, uranium supply from secondary sources and uranium production levels and costs
of production. A significant, sustained drop in uranium prices may make it impossible to operate our business at a level that will permit
us to cover our fixed costs or to remain in operation.
Evaluating our future performance may be difficult
since we have a limited financial and operating history, with significant negative cash flow and an accumulated deficit to date. Furthermore,
there is no assurance that we will be successful in securing additional sources of capital sufficient to support our planned operations.
As such, substantial doubt exists as to whether our cash resources and working capital will be sufficient to fund our planned operations
over the next twelve months. Our long-term success will depend ultimately on our ability to raise additional capital, to achieve and
maintain operational profitability and to develop positive cash flows from our mining activities.
As more fully described within this annual report,
we acquired our first mineral properties in November of 2014. To date, we have been acquiring additional mineral properties and raising
capital. We hold uranium projects in various stages of exploration in the states of Colorado and Utah.
As more fully described under “Liquidity and Capital Resources”
of Item 7. “Management’s Discussion and Analysis of Financial Condition and Result of Operations”, we have a history
of significant negative cash flows and net losses, with an accumulated deficit balance of $13.2 million and $11.1 million at December
31, 2021 and 2020, respectively. We have been reliant on royalty revenues and equity financings from the sale of our common shares in
order to fund our operations. We do not expect to achieve profitability or develop positive cash flows from operations in the near term.
As a result of our limited financial and operating history, including our significant negative cash flows and net losses to date, it
may be difficult to evaluate our future performance.
At December 31, 2021 and 2020, we had working capital
of $4,492,169 and $162,375, respectively. The continuation of the Company as a going concern is dependent upon our ability to obtain
adequate additional financing. However, there is no assurance that we will be successful in securing any form of additional financing
in the future; therefore, substantial doubt exists as to whether our cash resources and working capital will be sufficient to enable the
Company to continue its operations over the next twelve months. The consolidated financial statements for the two years ended December
31, 2021were prepared assuming that the Company would continue as a going concern. These consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Our reliance on equity and debt financings is expected to continue
for the foreseeable future. The availability of such funds whenever such additional financing is required, will be dependent on many factors
beyond our control, including, but not limited to, the market price of uranium, the continuing public support of nuclear power as a viable
source of electricity generation, the volatility in the global financial markets affecting our stock price and the status of the worldwide
economy, any one of which may cause significant challenges in our ability to access additional financing, including access to the equity
and credit markets. We may also be required to seek other forms of financing, such as asset divestitures or joint venture arrangements
to continue advancing our uranium projects, which would depend entirely on finding a suitable third party willing to enter into such an
arrangement, typically involving an assignment of a percentage interest in the mineral project.
Our long-term success, including the recoverability
of the carrying values of our assets and our ability to acquire additional uranium projects and continue with exploration and pre-extraction
activities and mining activities on our existing uranium projects, will depend ultimately on our ability to achieve and maintain profitability
and positive cash flow from our operations by establishing ore bodies that contain commercially recoverable uranium and to develop these
into profitable mining activities. The economic viability of our mining activities has many risks and uncertainties. These include, but
are not limited to: (i) a significant, prolonged decrease in the market price of uranium; (ii) difficulty in marketing and/or selling
uranium concentrates; (iii) significantly higher than expected capital costs to construct the mine and/or processing plant; (iv) significantly
higher than expected extraction costs; (v) significantly lower than expected uranium extraction; (vi) significant delays, reductions
or stoppages of uranium extraction activities; and (vi) the introduction of significantly more stringent regulatory laws and regulations.
Our mining activities may change as a result of any one or more of these risks and uncertainties and there is no assurance that any ore
body that we extract mineralized materials from will result in achieving and maintaining profitability and developing positive cash flow.
8
Our operations are capital intensive, and
we will require significant additional financing to continue production at the Sunday Mine Complex, continue exploration and begin pre-extraction
activities on our other existing uranium/vanadium projects, and acquire additional uranium/vanadium projects.
Our operations are capital intensive and future
capital expenditures are expected to be substantial. We will require significant additional financing to fund our operations, including
continuing production at the Sunday Mine Complex, continuing exploration on our other existing projects and beginning pre-extraction
activities on those projects, which include assaying, drilling, geological and geochemical analysis and mine construction costs, and
acquiring additional uranium/vanadium projects. In the absence of such additional financing, we would not be able to fund our operations,
which may result in delays, curtailment or abandonment of any one or all of our uranium projects.