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. The Sunday Mine Complex is
where the Company anticipates it would 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 ablation mining technologies (“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 Ablation 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 (“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 ($352,361 USD as of December 31, 2018) to Seller within 60 days of the first
commercial application of the Ablation technology. Western assumed this contingent payment obligation in connection with the Black
Range Transaction.
The
Ablation mining process is dramatically different from conventional mining techniques. Subject to regulatory approvals, the benefits
of Ablation are as follows:
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Mining,
crushing, and separation of waste from minerals (uranium and vanadium), used most effectively,
occurs underground (inside the mine). Under this approach the costs of moving material
to the surface are less as 85%-90% of the mined material remains underground and is never
brought outside the mine.
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Less
radiometric exposure throughout the process due to reduced waste rock on the surface
and after the milling process less tailings. Overall surface waste material is reduced
and the time duration of material handling is reduced.
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Lower
costs for transportation of post-ablated material from the mine site to the mill site
because 85-90% of the mined material would not be taken to the mill.
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Once
the ablated material reaches the mill, the acid consumption at the mill and power is
much less due to the lower quantity but more concentrated material moving through the
milling process.
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Ablation
mining technology can be used on legacy uranium stockpiles in the western United States. WUC would ablate these stockpiles, removing
85-90% of the uranium. This is an application through which ablation mining technology 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, Ablation 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. We have two full-time employees and one part-time
employee. 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 company for purposes of Industry Guide 7 of the U.S. Securities and Exchange Commission (“SEC”).
Industry Guide 7 states that mining companies like ours can be classified into three stages: exploration, development, or production.
Exploration stage includes all companies engaged in the search for mineral deposits, which are not in either the development or
production stage. In order to be classified as a development or production stage company, the Company must have already established
reserves. The Company has not established reserves for purposes of Industry Guide 7.
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 the Ablation mining technology.
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 (“Ablation”), 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 Ablation 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.
OUR
STRATEGY
Our vision is to become a leading uranium and vanadium developer
and producer. Our strategy is to build value for stockholders by advancing our projects towards production. The recent increase
in the price of vanadium has increased the relative importance of this resource to the Company. Hence, Western is increasingly
able to baseload mine production on the basis of price improvement in vanadium markets. Given the strong appreciation in the price
of vanadium, Western has planned a mine re-opening project at the Sunday Mine Complexes to identify high-grade vanadium ore, followed
by bulk sampling and sample deliveries to prospective customers for testing within their vanadium recovery processing plants. Thereafter,
Western would continue defining an increased vanadium resource. The Company holds an exclusive 25-year license to use Ablation,
a proven technology that we anticipate will improve the efficiency of the sandstone-hosted vanadium mining process. 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 Ablation 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 May 4, 2018, the Company completed a private placement of
909,622 units at a price of CAD $0.68 (USD $0.53) per unit for gross proceeds of CAD $618,543 (USD $481,560). Each unit consisted
of one common share and a warrant to purchase one-half of one common share. Each warrant is exercisable at a price of CAD $1.15
and expires two years from the date of issuance.
On July 27, 2018, the Company completed a private placement
of 2,525,526 units at a price of CAD $0.68 (USD $0.52) per unit for gross proceeds of CAD $1,717,358 (USD $1,319,096). Each unit
consisted of one common share and a warrant to purchase one-half of one common share. Each warrant is exercisable at a price of
CAD $1.15 and expires two years from the date of issuance.
On August 9, 2018, the Company completed a private placement
of 1,907,088 units at a price of CAD $0.68 (USD $0.52) per unit for gross proceeds of CAD $1,296,820 (USD $1,000,000). Each unit
consisted of one common share and a warrant to purchase one-half of one common share. Each warrant is exercisable at a price of
CAD $1.15 and expires two years from the date of issuance.
During
the year ended December 31, 2018, the Company issued an aggregate of 5,342,236 common shares in connection with these private
placements.
Uranium
Production
The
timing for commencement of production is uncertain. Western continues to position itself for flexibility with the goal of beginning
production as expeditiously as possible once market conditions for production of U308 and/or vanadium are favorable. There are
multiple variables that will drive the Company’s production strategy which will most likely be dependent upon the increase
of term uranium prices. In order to minimize costs, Western plans to commence production at the Sunday Mine Complex due to the
substantial existing infrastructure from years of previous production.
Vanadium
Production
In October 2018, Western announced plans to re-open the Sunday
Mine Complex for a vanadium evaluation. The current price continues to represent an attractive price level for Western vanadium
sales when coupled with the expectations of a continued tight vanadium market. Western is in discussions with a number of large
offshore companies who have existing facilities to recover vanadium. The worldwide shortage of vanadium is impacting many companies
around the world and thus making attractive offtake agreements increasingly available for ore production. When the Sunday Mine
Complex is opened, ore samples will be sent to the various interested parties for testing in their facilities with goal of negotiating
offtake agreements to base load commercial vanadium production.
As of April 1, 2019, Western has completed preliminary mine
planning and budgeting, evaluation of equipment and personnel requirements and availability, is pursuing project funding options,
and expanding vanadium marketing opportunities. The Sunday Mine Complex Vanadium Project will be commenced within weeks of satisfactory
project funding.
The primary project goals to be completed during the six to
nine months following commencement are: identification of high-grade vanadium zones measured by X-Ray Fluorescence (XRF), technology
and sample assay analysis, long-hole drilling and bulk sampling from the extensive underground mine workings of the Sunday Mine
Complex, expand resource estimates with new defined high-grade vanadium resource, delivery of samples to various vanadium processors
and end-users for analysis, and negotiation of vanadium term contracts to catalyze mine 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 (“PEA”).
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, recently announced production cuts by the largest uranium producer in world and the largest
uranium producer in North America have signaled a decrease in future supply. The section 232 petition that was filed with the United
States Department of Commerce has 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) supplies are being drawn down, and additional primary production
will be needed to meet long-term demand.
Once prices rise, it may be difficult for most suppliers to
respond in a timely manner, as it can require many years of permitting and development to bring new mines into production. These
lead times will put further upward pressure on prices.
Western has a competitive advantage, as our mining properties
are permitted and ready to be brought back into production.
Despite
current market uncertainty and depressed prices, we believe we have begun to see certain early signs of a market recovery; the
spot uranium price increased from $22 to almost $28 during 2018. Japanese utilities have restarted 5 nuclear reactors and have
a further 21 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 having more nuclear
capacity than any country except the USA and France by 2020. 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.
However, in the short- and medium-terms, market challenges remain.
The world continues to be oversupplied with uranium, mainly due to large quantities of secondary uranium supplies, high levels
of excess inventories, premature reactor shutdowns, delays in new reactor construction, and decreased demand due to Japanese reactors
remaining offline for longer than expected. In addition, there is a great deal of uncertainty in uranium prices regarding the timing
and level of the recovery, as fundamental, political, technical, and other factors could cause prices to be significantly above
or below currently expected ranges.
A Section 232 petition was filed on January 17, 2018, requesting
the initiation of a Section 232 investigation into whether uranium imports threaten to impair U.S. national security. On July 18,
2018, United States Department of Commerce (“Commerce”) announced the initiation of an investigation to study the national
security impact of uranium imports. By statute, Commerce must deliver a report to President Trump to meet a 270-day deadline, thereafter
the President has an additional 90 days to make a final determination. It does not appear that the U.S. government shutdown will
result in a deadline extension and the investigation will be completed and the report containing the findings and a proposed remedy
(if any) will be delivered to President Trump on or before April 15, 2019. Commerce has conducted site visits and is currently
evaluating the results of its extensive U.S. Front-End Nuclear Fuel Cycle Survey. While there is no guarantee as to outcome, we
believe the petition is compelling given the dynamics of uranium markets, the participation of state-owned and state-subsidized
entities which has caused the shutdown of nearly all U.S. uranium production. Further, the question of U.S. national security now
hinges upon the degree that counterparties in Russia, Kazakhstan, Uzbekistan, and China have infiltrated the U.S. nuclear fuel
cycle. A positive outcome would provide relief for the U.S. uranium industry whereby U.S. domestic uranium production would likely
be afforded the opportunity to be sold at a price above production cost and afford a profit. The Section 232 petition sought a
remedy effectively setting a quota reserving 25% of the U.S. nuclear market for U.S. uranium production. Western would be among
the handful of companies able to generate near-term U.S. uranium production and is able to scale-up production quickly by restarting
previously producing mines which are already permitted and developed.
OVERVIEW
OF THE URANIUM INDUSTRY
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, they 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 since 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 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 before moving upward in 2017
and completing the year at the higher year over year level of $22 per pound. Uranium prices continue to rebound in 2018 completing
the year at $28 per pound.
The
only significant commercial use for uranium is as a fuel for nuclear power plants for the generation of electricity. According
to the WNA, at the end of February 2018, there were 448 nuclear reactors operable worldwide, with annual requirements of about
143.3 million pounds of uranium.
From
the reports of leading investment banks, the macroeconomic conditions driving uranium prices are as follows:
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WNA reports 57 nuclear reactors under construction with most projects in China, India, Russia, and South Korea.
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The restart of Japan’s nuclear reactors – 5 in 2018 and 20 are in the process of being re-activated
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Decrease in primary supply due to leading producers shutting down mining operations that aren’t profitable at current pricing levels (Kazatomprom and Cameco)
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Decreasing secondary supplies (excess reserves and supplies generally held by governments and utilities).
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The U.S. Department of Commerce’s consideration of the Section 232 Uranium Investigation
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Increasing uncovered future uranium demand as nuclear utilities have decreased their contracting
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Across the ten banks and analysts most active in the sector,
a term structure of rising uranium spot prices which are significantly above today’s prices are forecast almost across the
board from 2019 to 2023. These increases are primarily due to two factors. The first is expected reduction in uranium production
due to the currently low prices. The second is continued growth in nuclear energy, fueled primarily by new plants with the greatest
number located in China, Russia, and India over the next 5 years. Further recommissioning of nuclear power plants in Japan will
add to the total. This should lead to excess reserves and inventories drying up, causing multiple analysts to project a shortage,
in the coming years, as historical contracts roll-off.
Based
upon recent uranium pricing forecasts from leading bankers, we believe that uranium prices will improve enough over the coming
years for Western to initiate production.
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, grid scale renewable energy storage, high performance 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.
In a research piece, BMO Capital Markets identified a structural
change in the vanadium markets. China, the largest vanadium producer in the world, has seen supply disrupted by environmental monitoring
and rules while domestic demand was increasing. During 2017, BMO observed ferrovanadium exports falling by 30% year over year and
projected that China would become a net importer of ferrovanadium. In 2018, this forecast was validated as China which had been
a net vanadium exporter 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 which resulted in the closing of dirty processes in which vanadium recovery
was a byproduct. These policy changes were very positive for vanadium prices pushing them to an all-time highs.
After
steelmaking, the second largest market for vanadium is that of catalysts and chemical applications. Significant new sources of
demand for vanadium are also expected to originate from vanadium redox flow batteries (VRFB).
The
current vanadium market price is $15.25 per pound as of March 29, 2019 which is a decrease from the December 31, 2018 price when
the price was $27.75 per pound. Both are significantly higher than the December 31, 2017 price of $9.70 per pound. As a result
of structural changes in the market, several market participants are reporting that vanadium demand exceeds vanadium supply and
the market is in deficit.
Given
the substantial appreciation in vanadium prices, the Company is moving forward to monetize its stand-alone vanadium resource rather
than as a by-product that provides a co-credit against uranium production.
COMPETITION
There
is global competition for uranium properties, capital, customers and the employment and retention of qualified personnel. We compete
with multiple exploration companies for both properties as well as skilled personnel. In the production and marketing of uranium,
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 will also compete with uranium from secondary supplies, including the sale of uranium inventory held
by the U.S. Department of Energy. In addition, there are numerous entities in the market that compete with us for properties and
operate in situ recovery (“ISR”) facilities. If we are unable to successfully compete for properties, capital, customers
or employees or with alternative uranium sources, it could have a material adverse effect on our 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. The market is currently in structural deficit which is projected to
continue for a period of years. 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.
ENVIRONMENTAL
CONSIDERATIONS AND PERMITTING
United
States
Uranium
extraction is regulated by the federal government, states and, in some cases, by Indian 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 current 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 US 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, 2018
of the mineral properties to be approximately $887,400.
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 $887,400
to satisfy such regulatory requirements.
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.
We
are not producing uranium or vanadium at this time. As a result, we currently have no sources of operating cash. 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 production, we may not be able to remain in business.
Until
we begin either uranium or vanadium production, we have no way to generate cash inflows unless we monetize certain of our assets
or obtain additional financing. We can provide no assurance that our properties will be placed into production or that we will
be able to continue to find, develop, acquire and finance additional reserves. 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 stockholders may
lose their entire investment.
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 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. Our long-term success will depend
ultimately on our ability to achieve and maintain profitability and to develop positive cash flow 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 flow and net losses, with
an accumulated deficit balance of $6.6 million and $4.5 million at December 31, 2018 and 2017, respectively. We have been reliant
on equity financings from the sale of our common shares and on debt financing in order to fund our operations. We do not expect
to achieve profitability or develop positive cash flow from operations in the near term. As a result of our limited financial
and operating history, including our significant negative cash flow and net losses to date, it may be difficult to evaluate our
future performance.
At
December 31, 2018 and December 31, 2017, we had a working capital balance (deficit) of $597,669 and $(444,125), respectively.
The continuation of the Company as a going concern is dependent upon our ability to obtain adequate additional financing which
we have successfully secured since inception. 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 Company’s independent auditor
has stated in its report that the consolidated financial statements for the two years ended December 31, 2018 were prepared assuming
that the Company would continue as a going concern. The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has incurred continuing losses from operations and is dependent
upon future sources of equity or debt financing in order to fund its operations. These conditions raise substantial doubt about
the Company’s ability to continue as a going concern. The 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, and their availability 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.
Our operations are capital intensive, and we will require
significant additional financing to acquire additional uranium/vanadium projects, continue with our exploration and begin pre-extraction
activities on our existing 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 acquiring additional
uranium/vanadium projects, continuing with our exploration and beginning pre-extraction activities which include assaying, drilling,
geological and geochemical analysis and mine construction costs. In the absence of such additional financing, we would not be able
to fund our operations, including continuing with our exploration and pre-extraction activities, which may result in delays, curtailment
or abandonment of any one or all of our uranium projects.
Uranium/vanadium exploration and pre-extraction programs
and mining activities are inherently subject to numerous significant risks and uncertainties, and actual results may differ significantly
from expectations or anticipated amounts. Furthermore, exploration programs conducted on our uranium/vanadium projects may not
result in the establishment of ore bodies that contain commercially recoverable uranium/vanadium.
Uranium/vanadium exploration and pre-extraction programs and
mining activities are inherently subject to numerous significant risks and uncertainties, many beyond our control, including, but
not limited to: (i) unanticipated ground and water conditions and adverse claims to water rights; (ii) unusual or unexpected geological
formations; (iii) metallurgical and other processing problems; (iv) the occurrence of unusual weather or operating conditions and
other force majeure events; (v) lower than expected ore grades; (vi) industrial accidents; (vii) delays in the receipt of or failure
to receive necessary government permits; (viii) delays in transportation; (ix) availability of contractors and labor; (x) government
permit restrictions and regulation restrictions; (xi) unavailability of materials and equipment; and (xii) the failure of equipment
or processes to operate in accordance with specifications or expectations. These risks and uncertainties could result in: delays,
reductions or stoppages in our mining activities; increased capital and/or extraction costs; damage to, or destruction of, our
mineral projects, extraction facilities or other properties; personal injuries; environmental damage; monetary losses; and legal
claims.
Success in uranium/vanadium exploration is dependent on many
factors, including, without limitation, the experience and capabilities of a company’s management, the availability of geological
expertise and the availability of sufficient funds to conduct the exploration program. Even if an exploration program is successful
and commercially recoverable uranium/vanadium is established, it may take a number of years from the initial phases of drilling
and identification of the mineralization until extraction is possible, during which time the economic feasibility of extraction
may change such that the uranium ceases to be economically recoverable. Uranium/vanadium exploration is frequently non-productive
due, for example, to poor exploration results or the inability to establish ore bodies that contain commercially recoverable uranium,
in which case the uranium project may be abandoned and written-off. Furthermore, we will not be able to benefit from our exploration
efforts and recover the expenditures that we incur on our exploration programs if we do not establish ore bodies that contain commercially
recoverable uranium/vanadium and develop these uranium/vanadium projects into profitable mining activities, and there is no assurance
that we will be successful in doing so for any of our uranium/vanadium projects.
Whether an ore body contains commercially recoverable uranium/vanadium
depends on many factors including, without limitation: (i) the particular attributes, including material changes to those attributes,
of the ore body such as size, grade, recovery rates and proximity to infrastructure; (ii) the market price of uranium, which may
be volatile; and (iii) government regulations and regulatory requirements including, without limitation, those relating to environmental
protection, permitting and land use, taxes, land tenure and transportation.
We
have established the existence of mineralized materials for uranium properties. We have not established proven or probable reserves,
as defined by the SEC under Industry Guide 7, through the completion of a “final” or “bankable” feasibility
study for any of our uranium properties. Furthermore, we have no current plans to establish proven or probable reserves for any
of our uranium properties as it doesn’t serve a business purpose at the present time.
We
may not be able to realize anticipated benefits of the Ablation process due to uncertainties associated with that process.
In
order to utilize Ablation technology to process uranium/vanadium bearing ore there are uncertainties that must be overcome which
include the uncertainty as to the evolution of the regulatory framework and technological considerations. Either may cause delays
in start-up, and/or increase costs, and may preclude the realization of the anticipated benefits of the Ablation process. Use
of Ablation represents an additional processing step, requiring additional equipment, support, material handling and a potential
increase in water usage requirements.
We
do not insure against all of the risks we face in our operations.
In
general, where coverage is available and not prohibitively expensive relative to the perceived risk, we will maintain insurance
against such risk, subject to exclusions and limitations. We currently maintain insurance against certain risks including securities
and general commercial liability claims and certain physical assets used in our operations, subject to exclusions and limitations;
however, we do not maintain insurance to cover all of the potential risks and hazards associated with our operations. We may be
subject to liability for environmental, pollution or other hazards associated with our exploration, pre-extraction and extraction
activities, which we may not be insured against, which may exceed the limits of our insurance coverage or which we may elect not
to insure against because of high premiums or other reasons. Furthermore, we cannot provide assurance that any insurance coverage
we currently have will continue to be available at reasonable premiums or that such insurance will adequately cover any resulting
liability.
Our
inability to obtain financial surety would threaten our ability to continue in business.
Future
financial surety requirements to comply with federal and state environmental and remediation requirements and to secure necessary
licenses and approvals may increase significantly as future development and production occurs at certain of our sites in the United
States. The amount of the financial surety for each producing property is subject to annual review and revision by regulators.
We expect that the issuer of the financial surety instruments will require us to provide cash collateral for a significant amount
of the face amount of the bond to secure the obligation. In the event we are not able to raise, secure or generate sufficient
funds necessary to satisfy these requirements, we will be unable to develop our sites and bring them into production, which inability
will have a material adverse impact on our business and may negatively affect our ability to continue to operate.
Acquisitions
that we may make from time to time could have an adverse impact on us.
From
time to time, we examine opportunities to acquire additional mining assets and businesses. Any acquisition that we may choose
to complete may be of a significant size, may change the scale of our business and operations, and may expose us to new geographic,
political, operating, financial and geological risks. Our success in our acquisition activities depends on our ability to identify
suitable acquisition candidates, negotiate acceptable terms for any such acquisition, and integrate the acquired operations successfully
with those of our Company. Any acquisitions would be accompanied by risks which could have a material adverse effect on our business.
For example, there may be a significant change in commodity prices after we have committed to complete the transaction and established
the purchase price or exchange ratio; a material ore body may prove to be below expectations; we may have difficulty integrating
and assimilating the operations and personnel of any acquired companies, realizing anticipated synergies and maximizing the financial
and strategic position of the combined enterprise, and maintaining uniform standards, policies and controls across the organization;
the integration of the acquired business or assets may disrupt our ongoing business and our relationships with employees, customers,
suppliers and contractors; and the acquired business or assets may have unknown liabilities which may be significant. In the event
that we choose to raise debt capital to finance any such acquisition, our leverage will be increased. If we choose to use equity
as consideration for such acquisition, existing shareholders may suffer dilution. Alternatively, we may choose to finance any
such acquisition with our existing resources. There can be no assurance that we would be successful in overcoming these risks
or any other problems encountered in connection with such acquisitions.
The
uranium industry is subject to numerous stringent laws, regulations and standards, including environmental protection laws and
regulations. If any changes occur that would make these laws, regulations and standards more stringent, it may require capital
outlays in excess of those anticipated or cause substantial delays, which would have a material adverse effect on our operations.
Uranium
exploration and pre-extraction programs and mining activities are subject to numerous stringent laws, regulations and standards
at the federal, state, and local levels governing permitting, pre-extraction, extraction, exports, taxes, labor standards, occupational
health, waste disposal, protection and reclamation of the environment, protection of endangered and protected species, mine safety,
hazardous substances and other matters. Our compliance with these requirements requires significant financial and personnel resources.
The
laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the
United States or any other applicable jurisdiction, may change or be applied or interpreted in a manner which may also have a
material adverse effect on our operations. The actions, policies or regulations, or changes thereto, of any government body or
regulatory agency or special interest group, may also have a material adverse effect on our operations.
Uranium
exploration and pre-extraction programs and mining activities are subject to stringent environmental protection laws and regulations
at the federal, state, and local levels. These laws and regulations, which include permitting and reclamation requirements, regulate
emissions, water storage and discharges and disposal of hazardous wastes. Uranium mining activities are also subject to laws and
regulations which seek to maintain health and safety standards by regulating the design and use of mining methods. Various permits
from governmental and regulatory bodies are required for mining to commence or continue, and no assurance can be provided that
required permits will be received in a timely manner.
Our compliance costs including the posting of surety bonds associated
with environmental protection laws and regulations and health and safety standards have been significant to date and are expected
to increase in scale and scope as we expand our operations in the future. Furthermore, environmental protection laws and regulations
may become more stringent in the future, and compliance with such changes may require capital outlays in excess of those anticipated
or cause substantial delays, which would have a material adverse effect on our operations.
To
the best of our knowledge, our operations are in compliance, in all material respects, with all applicable laws, regulations and
standards. We may not be able or may elect not to insure against the risk of liability for violations of such laws, regulations
and standards, due to high insurance premiums or other reasons. Where coverage is available and not prohibitively expensive relative
to the perceived risk, we will maintain insurance against such risk, subject to exclusions and limitations. However, we cannot
provide any assurance that such insurance will continue to be available at reasonable premiums or that such insurance will be
adequate to cover any resulting liability.
We
may not be able to obtain, maintain or amend rights, authorizations, licenses, permits or consents required for our operations.
Our
exploration and mining activities are dependent upon the grant of appropriate rights, authorizations, licenses, permits and consents,
as well as continuation and amendment of these rights, authorizations, licenses, permits and consents already granted, which may
be granted for a defined period of time, or may not be granted or may be withdrawn or made subject to limitations. There can be
no assurance that all necessary rights, authorizations, licenses, permits and consents will be granted to us, or that authorizations,
licenses, permits and consents already granted will not be withdrawn or made subject to limitations.
Closure
and remediation costs for environmental liabilities may exceed the provisions we have made.
Natural
resource companies are required to close their operations and rehabilitate the lands in accordance with a variety of environmental
laws and regulations. Estimates of the total ultimate closure and rehabilitation costs for uranium operations are significant
and based principally on current legal and regulatory requirements and closure plans that may change materially. Any underestimated
or unanticipated rehabilitation costs could materially affect our financial position, results of operations and cash flows. Environmental
liabilities are accrued when they become known, are probable and can be reasonably estimated. Whenever a previously unrecognized
remediation liability becomes known, or a previously estimated reclamation cost is increased, the amount of that liability and
additional cost will be recorded at that time and could materially reduce our consolidated net income in the related period.
The
laws and regulations governing closure and remediation in a particular jurisdiction are subject to review at any time and may
be amended to impose additional requirements and conditions which may cause our provisions for environmental liabilities to be
underestimated and could materially affect our financial position or results of operations.
Major
nuclear incidents may have adverse effects on the nuclear and uranium industries.
The nuclear incident that occurred in Japan in March 2011 had
significant adverse effects on both the nuclear and uranium industries. If another nuclear incident were to occur, it may have
further adverse effects for both industries. Public opinion of nuclear power as a source of electricity generation may be adversely
affected, which may cause governments of certain countries to further increase regulation for the nuclear industry, reduce or
abandon current reliance on nuclear power or reduce or abandon existing plans for nuclear power expansion. Any one of these occurrences
has the potential to reduce current and/or future demand for nuclear power, resulting in lower demand for uranium and lower market
prices for uranium, adversely affecting the Company’s operations and prospects. Furthermore, the growth of the nuclear and
uranium industries is dependent on continuing and growing public support of nuclear power as a viable source of electricity generation.
The
marketability of uranium concentrates will be affected by numerous factors beyond our control which may result in our inability
to receive an adequate return on our invested capital.
The
marketability of uranium concentrates extracted by us will be affected by numerous factors beyond our control. These factors include
macroeconomic factors, fluctuations in the market price of uranium, governmental regulations, land tenure and use, regulations
concerning the importing and exporting of uranium and environmental protection regulations. The future effects of these factors
cannot be accurately predicted, but any one or a combination of these factors may result in our inability to receive an adequate
return on our invested capital.
The
only significant market for uranium is nuclear power plants world-wide, and there are a limited number of customers.
We
are dependent on a limited number of electric utilities that buy uranium for nuclear power plants. Because of the limited market
for uranium, a reduction in purchases of newly produced uranium by electric utilities for any reason (such as plant closings)
would adversely affect the viability of our business.
The
price of alternative energy sources affects the demand for and price of uranium.
The
attractiveness of uranium as an alternative fuel to generate electricity may be dependent on the relative prices of oil, gas,
coal and hydro-electricity and the possibility of developing other low-cost sources of energy. If the prices of alternative energy
sources decrease or new low-cost alternative energy sources are developed, the demand for uranium could decrease, which may result
in a decrease in the price of uranium.
The
title to our mineral property interests may be challenged.
Although
we have taken reasonable measures to ensure proper title to our interests in mineral properties and other assets, there is no
guarantee that the title to any of such interests will not be challenged. No assurance can be given that we will be able to secure
the grant or the renewal of existing mineral rights and tenures on terms satisfactory to us, or that governments in the jurisdictions
in which we operate will not revoke or significantly alter such rights or tenures or that such rights or tenures will not be challenged
or impugned by third parties, including local governments, aboriginal peoples or other claimants. Our mineral properties may be
subject to prior unregistered agreements, transfers or claims, and title may be affected by, among other things, undetected defects.
A successful challenge to the precise area and location of our claims could result in us being unable to operate on our properties
as permitted or being unable to enforce our rights with respect to our properties.
Due
to the nature of our business, we may be subject to legal proceedings which may divert management’s time and attention from
our business and result in substantial damage awards.
Due to the nature of our business, we may be subject to numerous
regulatory investigations, securities claims, civil claims, lawsuits and other proceedings in the ordinary course of our business.
The outcome of these lawsuits is uncertain and subject to inherent uncertainties, and the actual costs to be incurred will depend
upon many unknown factors. We may be forced to expend significant resources in the defense of these suits, and we may not prevail.
Defending against these and other lawsuits in the future may not only require us to incur significant legal fees and expenses,
may become time-consuming for us and detract from our ability to fully focus our internal resources on our business activities.
The results of any legal proceeding cannot be predicted with certainty due to the uncertainty inherent in litigation, the difficulty
of predicting decisions of regulators, judges and juries and the possibility that decisions may be reversed on appeal. There can
be no assurances that these matters will not have a material adverse effect on our business, financial position or operating results.
Competition
from better-capitalized companies affects prices and our ability to acquire both properties and personnel.
There
is global competition for uranium properties, capital, customers and the employment and retention of qualified personnel. In the
production and marketing of uranium, there are a number of producing entities, some of which are government controlled and all
of which are significantly larger and better capitalized than we are. Many of these organizations also have substantially greater
financial, technical, manufacturing and distribution resources than we have.
Our future uranium production will also compete with uranium
recovered from the de-enrichment of highly enriched uranium obtained from the dismantling of United States and Russian nuclear
weapons and imports to the United States of uranium from the former Soviet Union and from the sale of uranium inventory held by
the United States Department of Energy. In addition, there are numerous entities in the market that compete with us for properties
and are attempting to become licensed to operate ISR and/or underground mining facilities. If we are unable to successfully compete
for properties, capital, customers or employees or with alternative uranium sources, it could have a materially adverse effect
on our results of operations.
Because
we have limited capital, inherent mining risks pose a significant threat to us compared with our larger competitors.
Because
we have limited capital we may be unable to withstand significant losses that can result from inherent risks associated with mining,
including environmental hazards, industrial accidents, flooding, earthquake, interruptions due to weather conditions and other
acts of nature which larger competitors could withstand. Such risks could result in damage to or destruction of our infrastructure
and production facilities, as well as to adjacent properties, personal injury, environmental damage and processing and production
delays, causing monetary losses and possible legal liability. Our business could be harmed if we lose the services of our key
personnel.
Our
business and mineral exploration programs depend upon our ability to employ the services of geologists, engineers and other experts.
In operating our business and in order to continue our programs, we compete for the services of professionals with other mineral
exploration companies and businesses. In addition, several entities have expressed an interest in hiring certain of our employees.
Our ability to maintain and expand our business and continue our exploration programs may be impaired if we are unable to continue
to employ or engage those parties currently providing services and expertise to us or identify and engage other qualified personnel
to do so in their place. To retain key employees, we may face increased compensation costs, including potential new stock incentive
grants and there can be no assurance that the incentive measures we implement will be successful in helping us retain our key
personnel.
If
we fail to maintain proper and effective internal controls, our ability to produce accurate and timely consolidated financial
statements could be impaired, which could harm our operating results, our ability to operate our business and investors’
views of us.
Ensuring
that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate consolidated
financial statements on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently. Section
404 of the Sarbanes-Oxley Act requires public companies to conduct an annual review and evaluation of their internal controls.
The Company is in the process of reviewing its internal control over financial reporting in the interest of complying with Section
404 of the Sarbanes-Oxley Act. Our failure to maintain the effectiveness of our internal controls in accordance with the requirements
of the Sarbanes-Oxley Act could have a material adverse effect on our business. We could lose investor confidence in the accuracy
and completeness of our financial reports, which could have an adverse effect on the price of our common shares.
The
Company may be subject to certain tax consequences in its business, which may increase the cost of doing business.
The
Company may not be able to structure its acquisitions to result in tax-free treatment for the companies or their stockholders,
which could deter third parties from entering into certain business combinations with the Company or result in being taxed on
consideration received in a transaction.
Risks
Related to Our Stock
If
we are unable to raise additional capital, our business may fail and stockholders may lose their entire investment.
We
had $909,865and $427,020 in cash at December 31, 2018 and December 31, 2017, respectively. There can be no assurance that we will
be able to obtain additional capital after we exhaust our current cash. To the extent that we raise additional capital through
the sale of equity or convertible debt securities, the issuance of such securities would likely result in substantial dilution
to existing stockholders. If we borrow money, we will have to pay interest and may also have to agree to restrictions that limit
our operating flexibility.
If
additional capital is not available in sufficient amounts or on a timely basis, we will experience liquidity problems, and we
could face the need to significantly curtail current operations, change our planned business strategies and pursue other remedial
measures. Any curtailment of business operations would have a material negative effect on operating results, the value of our
outstanding stock is likely to fall, and our business may fail, causing our stockholders to lose their entire investment.
Shareholders
could be diluted if we were to use common shares to raise capital.
We
may need to seek additional capital to carry our business plan. This financing could involve one or more types of securities including
common shares, convertible debt or warrants to acquire common shares. These securities could be issued at or below the then prevailing
market price for our common shares. Any issuance of additional common shares could be dilutive to existing stockholders and could
adversely affect the market price of our common shares.
The
Company’s common shares may be traded infrequently and in low volumes, which may negatively affect the ability to sell
shares.
The Company’s common shares may trade infrequently and
in low volumes on both the CSE and OTCQX, meaning that the number of persons interested in purchasing our common shares at or near
bid prices at any given time may be relatively small or non-existent. This situation may be attributable to a number of factors,
including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors
and others in the investment community who can generate or influence sales volume, and that even if we came to the attention of
such institutionally oriented persons, they tend to be risk-averse in this environment and would be reluctant to follow an early
stage company such as ours or purchase or recommend the purchase of our shares until such time as we became more advanced and viable.
As a consequence, there may be periods of several days or more when trading activity in the Company’s shares is minimal or
non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support
continuous sales without an adverse effect on share price. The Company cannot give you any assurance that a broader
or more active public trading market for our common shares will develop or be sustained. Due to these conditions, we
can give you no assurance that you will be able to sell your shares at or near bid prices or at all if you need money or otherwise
desire to liquidate your shares. Further, institutional and other investors may have investment guidelines that restrict
or prohibit investing in securities traded in the over-the-counter market. These factors may have an adverse impact
on the trading and price of our securities, and could result in the loss by investors of all or part of their investment.
The
Company’s common share price may be volatile.
The
future trading price of the Company’s common shares may be volatile and may fluctuate substantially. The price of the common
shares may be higher or lower than the price you pay for your shares, depending on many factors, some of which are beyond the
Company’s control and may not be directly related to its operating performance. These factors include the following:
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price
and volume fluctuations in the overall stock market from time to time;
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significant
volatility in the market price and trading volume of securities of mineral exploration and mining companies;
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changes
in government regulations or regulatory policies with respect to mineral exploration and mining companies or in the status
of our regulatory approvals;
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actual
or anticipated changes in earnings or fluctuations in operating results;
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announcements
by us or by our competitors of acquisitions or of new products, commercial relationships or capital commitments;
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disruption
to our operations or those of other contractors critical to our operations;
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the
emergence of new competitors;
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commencement
of, or our involvement in, litigation;
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dilutive
issuances of our common shares or the incurrence of additional debt;
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adoption
of new or different accounting standards;
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general
economic conditions and trends and slow or negative growth of related markets;
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loss
of a major funding source; or
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departures
of key personnel.
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Due
to the continued potential volatility of the stock price, the Company may be the target of securities litigation in the future.
Securities litigation could result in substantial costs and divert management’s attention and resources from the business.
The
sale of shares by our directors and officers may adversely affect the market price for our shares.
Sales
of significant amounts of common shares held by our officers and directors, or the prospect of these sales, could adversely affect
the market price of our common shares. Management’s stock ownership may discourage a potential acquirer from making a tender
offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders
from realizing a premium over our stock price.
We
have never paid or declared any dividends on our common shares.
We
have never paid or declared any dividends on our common shares or preferred stock. Likewise, we do not anticipate paying, in the
near future, dividends or distributions on our common shares. Any future dividends on common shares will be declared at the discretion
of our board of directors and will depend, among other things, on our earnings, our financial requirements for future operations
and growth, and other facts as we may then deem appropriate.
Our
Chief Executive Officer is one of our largest stockholders, and as a result he can exert control over us and have actual or potential
interests that may diverge from yours.
George
Glasier, our CEO, beneficially owns, in the aggregate, about 19.8% of our common shares. As a result, Mr. Glasier might be able
to influence many matters requiring stockholder approval, including the election of directors and approval of mergers and other
significant corporate transactions. This concentration of ownership may have the effect of delaying, preventing or deterring a
change in control, and could deprive our stockholders of an opportunity to receive a premium for their common shares as part of
a sale of our company and may affect the market price of our stock.
Furthermore,
Mr. Glasier may have interests that diverge from those of other holders of our common shares. As a result, Mr. Glasier may vote
the shares he owns or controls or otherwise cause us to take actions that may conflict with your best interests as a stockholder,
which could adversely affect our results of operations and the trading price of our common shares. Through this control, Mr. Glasier
can control our management, affairs and all matters requiring stockholder approval, including the approval of significant corporate
transactions, a sale of our company, decisions about our capital structure and the composition of our Board of Directors.
ITEM
1B. UNRESOLVED STAFF COMMENTS
None
ITEM
2. PROPERTIES
Company
headquarters is maintained through a lease at 330 Bay Street, Suite 1400, Toronto, Ontario, Canada M5H 2S8.
An
operations facility is rented at 31617 Hwy 90 Road, Nucla, Colorado, USA 81424 which houses the ablation units and an office.
PROPERTIES
We
have no proven or probable reserves. However, as a company incorporated in Canada we have provided below resources qualifying
under National Instrument 43-101, for our Sunday Mines Complex and our San Rafael Uranium Project.
On
September 16, 2015, in connection with the Black Range Transaction, the Company acquired additional mineral properties. The mining
assets acquired through Black Range included assets in the states of Colorado, Wyoming and Alaska. None of these mining assets
are operational at this time. As these properties have not formally established proven or probable reserves, there may be greater
inherent uncertainty as to whether or not any mineralized material can be economically extracted as originally planned and anticipated.
The Company’s mining properties acquired on August 18,
2014 that the Company retains as of December 31, 2018, include: San Rafael Uranium Project located in Emery County, Utah; The Sunday
Mine Complex located in western San Miguel County, Colorado; The Van 4 Mine located in western Montrose County, Colorado; The Sage
Mine project located in San Juan County, Utah, and San Miguel County, Colorado USA, and the Dunn Project located in San Juan County,
Utah.
The Company’s mining properties acquired on September
16, 2015 that the Company retains as of December 31, 2018, include Hansen, North Hansen, High Park, Hansen Picnic Tree, and Taylor
Ranch, located in Fremont and Teller Counties, Colorado. The Company also acquired the Keota project located in Weld County, Colorado,
and Ferris Haggerty located in Carbon County, Wyoming.
The
near term plan for the Company’s resources is to mine initially at the Sunday Complex. The Sunday Mine Complex is an advanced
stage property with a significant drilling and production history. Mining and drilling occurred contemporaneously from the 1950’s
through the mid 1980’s. From the 1980’s to the present, mining and drilling occurred only sporadically, typically
when uranium or vanadium prices were high. The last mining interval was from 2006 to 2009, and based on the available records,
only in 2009 did any drilling take place since mid-1980. Past operators have generated abundant geologic and mining data and there
are open faces underground that show mineralized zones.
Near
term exploration is not needed because the underground infrastructure has been already developed.
The
Property
The Sunday Mine Complex
is located in western San Miguel County and is part of the Uravan Mineral Belt. The property is situated 25 miles north of Dove
Creek, Colorado, on the north flank of Disappointment Valley and portions of Big Gypsum Valley. Energy Fuels Resources (USA) Inc.
(“EFR”) acquired the property in June 2012 from Denison Mines Corp. The complex consists of five individual mines with
mine workings located along a two mile stretch of the southern side of Big Gypsum Valley, with underground workings extending generally
south, with associated vents and surface facilities. The mines are, from east to west: Sunday, Carnation, Saint Jude, West Sunday,
and Topaz. The mines were last actively mined from 2007 to 2009.
The
property consists of 221 unpatented claims on public land managed by the U.S. Bureau of Land Management (“BLM”) Tres Rios
Field Office, covering approximately 3,800 acres. The area covers parts of sections 10, 13, 14, 15, 23, 24, and 26 T44N
R18W, and sections 18, 19, 20, and 30 T44N R17W. Total annual BLM claim maintenance fee are approximately $34,255 due
September 1st each year. The property has access to grid power and has a natural underground source of water due to an aquifer.
As a mine that has produced in the recent past, the Sunday Mine Complex has a robust infrastructure. The roads are all-weather,
electric power is grid-tied, surface facility structures that meet Colorado State standards exist, and water is present. Neither
exploration plans nor a mining plan have been prepared for the project and each of the five associated mining permits are in Temporary
Cessation status.
GMG,
Sunshine, and Patsun claims (totaling twenty claims in the northeast portion of the property) carry a 12.5% royalty
on all ore produced.
Accessibility
The
property is best accessed from Colorado. Access from Colorado is via State Highway 141 east out of Naturita, CO for about 3.7
mi (6 km) until the 141/145 Highway junction, then about 22.4 mi (36 km) south on Hwy 141, then about 6.2 mi (10 km) northwest
on County Road 20R (Gypsum Valley Road). The State Highway 141 is a paved all-weather road and the County Road 20R is a gravel
road passable in all but the worst weather.
History
The
Sunday Mine Complex consists of six different mines. These are the Topaz, West Sunday, Sunday, St. Jude, Carnation, and the GMG.
The mines have had a number of owners and operators. Maps and documents made available to the author show that the following companies
have been involved in the all or parts of the property prior to WUC acquisition of the SMC in April 2014: Matterhorn Mining (1950’s-1960’s,
Climax Uranium 1960’s, Union Carbide Corporation (UCC) 1970’s-1980’s, Atlas Minerals (1980’s), Energy
Fuels Nuclear (early 1990’s), International Uranium Corp. (1990’s-2000’s), Denison Mines (USA) (2000’s),
and Energy Fuels (2010’s). The documents are incomplete as so this list may be as well. Since UCC days, the ownership has
been clear. In 1983 Union Carbide transferred its mineral interests to UMETCO, a wholly-owned subsidiary. For the sake of consistency,
the name Union Carbide will be used even if technically the ownership was UMETCO at the time.
Records
made available to the author by WUC and a search of public documents on-line indicates exploration drilling starting on the property
in the early 1950’s. Two Defense Minerals Exploration Administration (DMEA) reports, one on the Sunday area and the other
on the Topaz area, indicated some drilling and minor surface extraction had occurred by the mid 1950’s (DMEA, 1953 &
1956). Additionally, historic maps of the area show the Sunday mines in operation in the 1950’s (Denison Mines, 2008).
The
records & anecdotal evidence indicate that from the mid-1960’s until the early 1980’s, the SMC produced material
from relatively steady ongoing mining operations. These ceased in 1984 when Union Carbide closed their Uravan mill. Since then,
the property has been idle, with the exception of brief periods in the late 1980’s when UCC mined for a short time during
a spike in vanadium prices, in the mid-1990’s with International Uranium Corporation and another one in 2006-2009 when Denison
Mines extracted ore from the mine. During all three periods, the ore was processed at the White Mesa Mill located just south of
Blanding, UT.
Exploration
and development drilling on the property was contemporaneous with the mining. The available database records show that at least
1,419 holes have been drilled on the property. This is an incomplete list, as an examination of the available maps and cross-sections
show a number of holes that are not in the database. A best estimate for total distance drilled is about 850,100 ft (259,175 m).
Anecdotal evidence and some maps also give evidence that underground long holes (test holes drilled from the mine workings anywhere
from 50 ft (15 m) to 300 ft (91 m) long) were used extensively throughout the mined areas.
The 2-D digitized mine workings, done
by Denison Mines show extensive stopping and drifting within parts of the SMC. Generational mine maps indicate that more mine workings
exist than are shown in the digital database. A very conservative rough estimate of the linear mine workings based on the digital
database is in excess of 50,000 ft (15,244 m) with many stopes. Figure 6.2.1 shows the known drill hole and mine working locations.
Based
on the records and on field inspection, it is evident that the Property has a significant history of drill exploration and mine
development.
Anthony
R. Adkins, P. Geol., LLC was commissioned by Western Uranium & Vanadium to prepare an Independent Technical Report compliant
with the Canadian National Instrument 43-101 on the Sunday Mine Complex Uranium (SMC) Project, an advanced-stage uranium property.
The report was finalized on July 7, 2015 and filed on sedar.com on July 16, 2015.
The
report states that the Sunday Mine Complex has Measured and Indicated Resources of 203,217 tons grading at 0.25% U3O8 containing
1,007,803 lbs U3O8 and Inferred Resources of 264,604 tons grading at 0.36% containing 1,906,081 lbs U3O8. This Technical Report
resource is an historic estimate under NI 43-101. The historic mineral resource estimate was calculated by the area of influence
method, which is a common way for resources in the Uravan Mineral Belt to be estimated.
The
Sunday Mine Complex Technical Report filed by Western Uranium & Vanadium estimates mineral resources and not reserves. That
report does not use categories other than “mineral resources” and “mineral reserves”, and the Sunday Mine
Complex property was reported as having no reserve quality mineralization. There is no more recent or available data on the Sunday
Mine Complex project resource than that of the Western Uranium & Vanadium Technical Report from 2015. In order to disclose
the historic resource as current, the Company needs to have completed and filed an NI 43-101 technical report on sedar.com which
includes discussion on the reasonable prospect for economic extraction of the mineral resource. A qualified person (as understood
under NI 43-101) has not done sufficient work to classify the historical estimate as current mineral resources or mineral reserves,
and the Company is not treating the historical estimate as current mineral resources or mineral reserves. In order to upgrade
or verify the historical estimate provided by the Western Uranium & Vanadium Technical Report, the Company would have to engage
a qualified person to, among other things, take account of any exploration or other work on the Sunday Mine Complex since the
date of the historical estimate and otherwise produce a report under NI 43-101.
Project
Geology
Geologically,
the main hosts for uranium-vanadium mineralization in the Sunday Mine Complex are fluvial sandstone beds assigned to the upper
part of the Salt Wash Member of the Jurassic Morrison Formation, with minor production coming from conglomeratic sandstones assigned
to the lower portion of the Brushy Basin Member of the Morrison Formation. Mineralization from both members is present at the
property, with the mine production coming from the Salt Wash Member. Beds generally strike NW-SE and dip SW, with some exceptions
within fault bounded blocks adjacent to Big Gypsum Valley.
Restoration
and Reclamation
Each of the mines are permitted
separately with the DRMS and are considered to be in temporary cessation status. The mines and their permitted acres and reclamation
bonds are, from east to west, the Sunday (60 acres, $330,242), Carnation (9.8 acres, $40,245), Saint Jude (9.8 acres,
$61,022), West Sunday (12.1 acres, $85,036), and Topaz (30 acres, $99,893).
Permitting
Status
The
air permits for the site are currently being renewed with APCD. A Stormwater permit is in place with the WQCD and a Stormwater Management
Plan is in effect. However, a mine water treatment plant will need to be permitted for treating mine water, as there is currently
55 million gallons of water in the lower portion of the mine where most of the remaining resource is located. This will require
a discharge permit with the DWQC and revisions to the Plan of Operations, EPP, and one of the DRMS mine permits. Special Use Permits
are also in place with San Miguel County, which mainly address road maintenance and transportation issues with some limitations
in effect on when and how many trucks may be used for ore haulage to the mill.
Major
permits currently in place at the Sunday Complex include:
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●
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Sunday 112d
Mine Permit M-1977-285 (DRMS)
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St.
Jude 110d Mine Permit M-1978-039-HR (DRMS)
|
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West Sunday 112d
Mine Permit M-1981-021 (DRMS)
|
|
|
|
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Carnation
110d Mine Permit M-1977-416 (DRMS)
|
|
|
|
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Topaz
112d Mine Permit M-1980-055-HR (DRMS)
|
|
|
|
|
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West Sunday Plan
of Operations COC 52049 (BLM)
|
|
|
|
|
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Sunday,
St. Jude and Carnation Plan of Operations COC-53227 (BLM)
|
|
|
|
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●
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Resolution #1997-18
Mine Permit (San Miguel County)
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|
|
|
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Resolution
2007-34 Topaz and Sunday Expansion (San Miguel County)
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Resolution
2008-41 Increased Ore Haulage (San Miguel County)
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|
|
|
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Road
& Bridge Special Construction Permit (SCP) 06-14 (San Miguel County)
|
The
Property
The
San Rafael Uranium Project land position is comprised of a contiguous claim block covered by 136 BM unpatented federal lode mining
claims and 10 Hollie unpatented federal lode mining claims.
The
San Rafael Project is located in the historic Tidwell District about 10 miles west of Green River, Utah. Most of the property
is north of Interstate Highway 70 at the Hanksville exit.
Energy
Fuels became operator of the San Rafael Project when it acquired Magnum Minerals in June 2009. It consisted of two core uranium
deposits, the Deep Gold and the Down Yonder. In January 2011, EFR acquired the 10 Hollie claims from Titan Uranium. These claims
covered the eastern portion of the Deep Gold deposit, greatly increasing resources. WUC acquired the property from Energy Fuels
and currently holds the 146 claims in the project area.
The
San Rafael Uranium Project is currently being held as a property that is exploratory in nature with no identified reserves. Exploration
and mining plans have not been prepared for the project. Western Uranium & Vanadium Corp. has not yet undertaken any development
work at the property. Power and water sources have not yet been formally assessed.
Magnum’s
acquisition of the claims and some of the data Magnum purchased encumbers the claims. This includes a 2% Net Smelter Return royalty
to Uranium One, successor to Energy Metals for claims acquired by Magnum as earn-in to a JV, and a 2% net sales price royalty
to Kelly Dearth on the BM claims. There is no royalty on the Hollie claims.
The
unpatented claims are located on approximately 2,900 acres of land administered by the U.S. Bureau of Land Management in sections
13, 14, 23, 24, 25, 26, and 35, T21S, R14E, SLPM, Emery County, Utah. Holding cost $22,630 due to BLM for claim maintenance fees
prior to September 1 each year.
Accessibility
The
property is located on the eastern side of the San Rafael Swell in east-central Utah, approximately 140 air miles southeast of
Salt Lake City. The little desert community of Green River, Utah is located about ten miles to the east. In a general sense the
San Rafael Uranium Project property position lies within a wedge shaped area, roughly bound along its northeast edge by US Highway
6-50 and along its southeast edge by Interstate 70.
Concerning
additional local access features, U.S. Highway 6-50 crosses just north of the greater San Rafael Uranium Project area in a northwesterly
direction and is roughly paralleled by the regional railroad line. Access to the property is generally good year around, except
for periods of heavy snowstorms during December through February and increased monsoon rains and summer cloudburst storms during
August through October. Access for drilling and other exploration activity is excellent, except during occasional heavy rainy
periods which can create heavy flash flooding and roads mudding-up and becoming impassable.
History
The
Deep Gold deposit was originally discovered by Continental Oil Company (Conoco) and Pioneer Uravan geologists in the late 1960s
and 1970s to early 1980s, respectively. Exploration drilling was conducted just east of the core of the Tidwell Mineral Belt and
north-northeast of the Acerson Mineral Belt. The area containing the deposits was considered to contain highly prospective paleo
trunk stream channel trends. Some of the larger historic producing mines in the area were Atlas Minerals’ Snow, Probe, and
Lucky Mines. The deposit in the San Rafael Project is an open concordant, channel-controlled, sandstone-hosted, trend type, with
mineralization hosted in the upper sandstone sequence of the Salt Wash Member of the Upper Jurassic Morrison Formation.
In
addition to Conoco, Pioneer Uravan, and Atlas Minerals, the US Atomic Energy Commission (AEC) and other companies (Union Carbide,
Energy Fuels Nuclear, and others) conducted exploration drilling and mining in the area. Some of these companies performed historic
resource estimates on the Deep Gold deposits, but, they are not considered compliant with NI 43-101 standards. These resource
estimates are of historical importance, were generated by senior mining companies with significant uranium exploration and production
experience and are considered as relevant checks to this updated Technical Report.
Depth
to mineralization at the Deep Gold deposit in Section 23 averages 800 feet, with hole depths averaging approximately 1,000 feet.
Magnum purchased and otherwise acquired most of the available historic exploration data produced by the previous operators. A
100 hole, 100,000 foot drilling program is warranted to discover and define additional uranium resources. Total cost for this
work would be $US 1.3 million to $US 1.5 million, based on an all-inclusive cost of $US 15/foot.
The
Tidwell Mineral Belt and the San Rafael Uranium District have been the sites of considerable historic exploration drilling and
production, with over 4 million pounds of uranium and 5.4 million pounds of vanadium produced. Production from the Snow, immediately
up dip of the Deep Gold deposit, which produced for nine years, starting in March 1973 and ending in January, 1982 consisted of
650,292 pounds of U3O8 contained in 173,330 tons of material at an average grade of 0.188% U3O8 (Wilbanks, 1982).
O.
Jay Gatten, P. Geol., LLC was commissioned by Western Uranium & Vanadium to prepare an Independent Technical Report compliant
with the Canadian National Instrument 43-101 on the San Rafael Uranium Project (including the: Deep Gold Uranium Deposit and the
Down Yonder Uranium Deposit), an advanced-stage uranium property. The report was finalized on November 19, 2014 and filed on sedar.com
on November 20, 2015.
The
filed Technical Report states that the Deep Gold deposit of the San Rafael Project comprises a historic indicated uranium resource
of 475,000 tons grading at 0.25% U3O8 containing 2,415,300 lbs U3O8 and a historic inferred Mineral Resource of 92,350 tons grading
at 0.32% U3O8 containing 587,800 lbs U3O8. This Technical Report resource is an historic estimate under NI 43-101. The historic
mineral resource estimate was calculated by using polygonal and statistical methods. Both methods have been successfully applied in
the evaluation of resources at many prospects and operating mines within the Salt Wash sandstone uranium deposits.
The
San Rafael Uranium Project Technical Report filed by Western Uranium & Vanadium estimates mineral resources and not reserves.
That report does not use categories other than “mineral resources” and “mineral reserves”, and the San
Rafael Uranium Project property was reported as having no reserve quality mineralization. There is no more recent or available
data on the San Rafael Uranium Project resource than that of the Western Uranium & Vanadium Technical Report from 2014. In
order to disclose the historic resource as current, the Company needs to have completed and filed an NI 43-101 technical report
on sedar.com which includes discussion on the reasonable prospect for economic extraction of the mineral resource. A qualified
person (as understood under NI 43-101) has not done sufficient work to classify the historical estimate as current mineral resources
or mineral reserves, and the Company is not treating the historical estimate as current mineral resources or mineral reserves.
In order to upgrade or verify the historical estimate provided by the Western Uranium & Vanadium Technical Report, the Company
would have to engage a qualified person to, among other things, take account of any exploration or other work on the San Rafael
Uranium Project since the date of the historical estimate and otherwise produce a report under NI 43-101.
Project
Geology
Geologically,
the main hosts for uranium-vanadium mineralization in the San Rafael Project are the fluvial sandstone beds assigned to the upper
part of the Salt Wash Member of the Jurassic Morrison Formation.
Restoration
and Reclamation
All
exploration permits have been terminated and all bonds released. An EA was completed by BLM in 2008 for drilling up to 150 holes.
A large area has been surveyed for cultural and paleontological resources which would expedite future exploration permits. No
mine permitting activities have yet occurred.
Permitting
Status
All
exploration permits have been terminated and all bonds released. An EA was completed by BLM in 2008 for drilling up to 150 holes.
A large area has been surveyed for cultural and paleontological resources which would expedite future exploration permits. No
mine permitting activities have yet occurred.
The
Property
On
July 1, 2014 PRM concluded a deal with EFR to acquire 44 contiguous unpatented mining claims on the Utah side of the Colorado-Utah
state line at the head of Summit Canyon at the south end of the Uravan Mineral Belt.
The 94 unpatented
claims are located on approximately 1,942 acres land administered by the U.S. Bureau of Land Management in sections 34 and 35,
T32S, R26E, SLPM, San Juan County, Utah and sections 25 and 26, T43N, R20W, NMPM, and sections 19, 29, 30, 31, and 32, T43N, R19W,
NMPM San Miguel County, Colorado. Holding cost is $14370 due to BLM for claim maintenance fees prior to September
1 each year. The property has access to grid power, however, no source of industrial water has yet been identified. The Sage
Mine Project is currently being held as a property that is exploratory in nature with no identified reserves. Exploration and
mining plans have not been prepared for the project. Western Uranium & Vanadium Corp. has not yet undertaken any development
work at the property.
Accessibility
The
Sage Plain Project property can be accessed from the north, south, and east on paved, all-weather county roads. The nearest towns
with stores, restaurants, lodging, and small industrial supply retailers are Monticello, Utah, 26 road miles to the west, and
Dove Creek, Colorado, 20 road miles to the southeast. Larger population centers with more supplies and services are available
farther away at Moab, Utah (61 road miles to the north) and Cortez, Colorado (54 road miles to the southeast).
U.S.
Highway 491 connects Monticello, Utah to Dove Creek and Cortez, Colorado. There are two routes north from this highway to the
project. At one mile west of the Colorado/Utah state line (16 miles east of Monticello or 10 miles west of Dove Creek), San Juan
County Road 370 goes north for 10 miles to the Calliham Mine portal site drive way. The mine portal is one-half mile east of Road
370, on a private road. An alternate route is to turn north on Colorado Highway 141(2 miles west of Dove Creek) for 9.5 miles
to Egnar, Colorado, then turn west on San Miguel County. Road H1 for 1.2 miles before intersecting San Juan County Road 370. Road
370 would be taken north for 4 miles to the Calliham Mine portal site driveway. Road H1 from Egnar would also be used if one was
traveling to the project on Highway 141 from farther north in Colorado, such as Naturita, Colorado (a total of 62 miles away).
History
The
property includes the historic producing Sage Mine and boarders the famous Deremo Mine and the Calliham Mine (combined
historic production of over 8 million lbs. U3O8 and 70 million lbs. V2O5). The uranium-vanadium deposits
occur in the upper and middle sandstones of the Salt Wash Member of the Morrison Formation.
WUC
is in possession of historic mine and drill maps. About 200 historic holes were drilled on the claims at the Sage Mine. A considerable,
but unknown amount of drilling occurred historically on the eastern (Colorado) part of the claims along the benches of Summit
and Bishop Canyons. Historic production from several small mines occurred on the Colorado claims (Red Ant, Black Spider, etc.).
The
Sage Mine was developed, operated, and permitted by Atlas Minerals in the 1970s. It closed in 1982 and was ultimately sold and
the permit transferred to Butt Mining Company under a Small Mine NOI. Jim Butt operated the mine for a short time in the early
1990s when vanadium prices were high; however, the mine has been idle since that time.
In
the fall of 2011, Colorado Plateau Partners drilled seven holes totaling 4,873 feet at the Sage Mine property to confirm historic
map data and explore for a possible east-west channel connecting the mine to a mineralized body to the west. The drilling was
successful in meeting the objectives of confirming the accuracy of the historic data and verifying a historically defined mineralized
body. One hole exploring a possible mineralized trend connecting the mine to the western mineralized body intercepted 2.0 feet
of 0.407% eU3O8. Another hole intercepted mineralization greater than 1.0 foot of 0.16% eU3O8.
Prior
to the WUC acquisition of the Sage Mine property, Energy Fuels, Colorado Plateau Partners (a Joint Venture between Energy Fuels
and Lynx-Royal) completed a NI 43-101 Technical Report on the Sage Plain Project (Technical Report on Colorado Plateau Partners
LLC (Energy Fuel Resources Corporation/Lynx-Royal JV) Sage Plain Project, San Juan County, Utah and San Miguel County, Colorado
by Douglas C. Peters, Certified Professional Geologist, Peters Geosciences Golden, Colorado December 16, 2011) (the “Sage
Mine Energy Fuels Technical Report”).
The
report stated that the Sage Mine portion of the Colorado Plateau Partners properties has resources in the combined Measured and
Indicated categories of ~100,000 tons containing 459,640 lbs U3O8 grading at 0.23%, plus Inferred Resources of
41,280 tons containing 122,265 lbs U3O8 grading at 0.15%. The Sage Mine Energy Fuels Technical Report resource is an historic
estimate under NI 43-101.
The
historic mineral resource estimate was calculated by a modified polygonal method. The Sage Mine area had drill spacing of 50-150
feet. At locations where drifting or stopping has removed portions of polygons, appropriate reductions to the resources assigned
in those polygons were made. Mining assumptions were used in determining a cutoff grade for the resource estimates. The minimum
mining thickness for this type of deposit is considered to be 2 feet. Uranium resource grades of 0.00% were used to dilute any
intercept less than 1 foot of to meet the 2 feet minimum.
The
Sage Mine Energy Fuels Technical Report filed by Colorado Plateau Partners estimates mineral resources and not reserves. That
report does not use categories other than “mineral resources” and “mineral reserves”, and the Sage Mine
property was reported as having no reserve quality mineralization. There is no more recent or available data on the Sage Mine
project resource than that of the Energy Fuels Technical Report from Colorado Plateau Partners. In order to disclose the historic
resource as current, the Company needs to have completed and filed an NI 43-101 technical report to sedar.com. A qualified person
(as understood under NI 43-101) has not done sufficient work to classify the historical estimate as current mineral resources
or mineral reserves, and the Company is not treating the historical estimate as current mineral resources or mineral reserves.
In order to upgrade or verify the historical estimate provided by the Sage Mine Energy Fuels Technical Report, the Company would
have to engage a qualified person to, among other things, take account of any exploration or other work on the Sage Mine since
the date of the historical estimate and otherwise produce a report under NI 43-101.
Energy
Fuels submitted an Exploration NOI to the BLM in March 2013 for the site thereby establishing a nominal permit for the facility.
Permitting for mine expansion was started in 2012, but was discontinued due to other priorities. This work included installing
3 monitoring wells around a proposed portable water treatment plant (exploration permit E/037/0188; bond $16,020) and conducting
baseline studies (archeology, biology, groundwater). Eight baseline groundwater sampling events have been completed, which will
allow for submittal of a complete groundwater discharge permit application to DWQ. The Sage Mine Energy Fuels Technical Report
resource provides an historic estimate. The Company has a high degree of confidence in the referenced NI 43-101 Technical Report
which references the Company’s Sage Project.
Other
than offsetting some of the historic drill holes and use of gamma logs where available, no verification of the historical data
has been conducted. No core is available at the present time from the earlier exploration or production work.
It
was Douglas C. Peter’s (author of the referenced NI 43-101 Technical Report) opinion that the uranium and vanadium data
from drilling in 2011 and from historical information on analyses and down hole probing were adequate for the purposes of that
technical report and for basic resource estimation using those data.
Project
Geology
The
Sage Plain and nearby Slick Rock and Dry Valley/East Canyon districts uranium vanadium deposits are a similar type to those elsewhere
in the Uravan Mineral Belt. The location and shape of mineralized deposits are largely controlled by the permeability of the host
sandstone. Most mineralization is in trends where Top Rim sandstones are thick, usually 40 feet or greater.
The
Sage Plain District appears to be a large channel of Top Rim sandstone which trends northeast, as one of the major trunk channels
that is fanning into distributaries in the southern portion of the Uravan Mineral Belt. The Calliham/Crain/Skidmore (Calliham
Mine) and Sage Mine deposits, as well as nearby Deremo and Wilson/Silverbell mines appear to be controlled by meandering within
this main channel.
The
Morrison sediments accumulated as oxidized detritus in the fluvial environment. During early burial and diagenesis, the through-flowing
ground water within the large, saturated pile of Salt Wash and Brushy Basin material remained oxidized, thereby transporting uranium
in solution. When the uranium-rich waters encountered the zones of trapped reduced waters, the uranium precipitated. Vanadium
may have been leached from the detrital iron-titanium mineral grains and subsequently deposited along with or prior to the uranium.
The
thickness, the gray color, and pyrite and carbon contents of sandstones, along with gray or green mudstone, were recognized by
early workers as significant and still serve as exploration guides. Much of the Top Rim sandstone in the Sage Plain Project area
exhibits these favorable features; therefore, portions of the property with only widely spaced drill holes hold potential. However,
without the historic drill data, it cannot be determined where sedimentary facies are located (e.g., channel sandstones thin and
pinch-out, or sandstone grades and interfingers into pink and red oxidized sandstone and overbank mudstones). Furthermore, locations
of interface zones of the oxidized and reduced environments are hard to predict. Until more historic data are obtained and/or
more drilling occurs on the property away from the historic mines, these outlying areas remain exploration targets.
Restoration
and Reclamation
An
exploration bond is posted with the Utah Division of Oil Gas and Mining for the amount of $31,149.
Permitting
Status
Although the mine is permitted (S/037/0058) and bonded ($31,149)
for reclamation with the Utah Division of Oil Gas and Mining, it is not permitted for mining. Because of its location on BLM managed
land, an Environmental Assessment will need to be prepared for the site by a third-party contractor once a Plan of Operations
is submitted for the mine operation. An amendment to the Small Mine Reclamation NOI will also be needed with Utah Division of
Oil Gas and Mining to allow for mine expansion.
Existing
permits include:
Small
Mine Reclamation permit with the Utah Division of Oil Gas and Mining.
Basis
of Disclosure
The
scientific and technical information provided in this Form 10-K on the Sage Mine, as well all data and exploration information
reported in this Form 10-K on the Sage Mine, is based on the information reported in the Sage Mine Energy Fuels Technical Report.
The
Property
The
11 unpatented claims are located on approximately 220 acres of land administered by the BLM in sections 14 and 15, T32S, R25E,
SLPM, San Juan County, Utah. Holding costs of the 11 claims will be $1,705 due to BLM before September 1 each year.
The
Dunn Project is currently being held as a property that is exploratory in nature with no identified reserves. Exploration and
mining plans have not been prepared for the project. Western Uranium & Vanadium Corp. has not yet undertaken any development
work at the property. Power and water sources have not yet been formally assessed.
Accessibility
The
property lies in Bear Trap Canyon, a tributary at the head of East Canyon. This is midway between the EFR Rim Mine and the
Calliham/Sage mine area. Access to the Dunn project is from West Summit Road (San Juan County Road 313), 10.8 miles north of the
junction with U.S. Highway 491. West Summit Road is a two-lane paved road that is well maintained year round. At 10.8 miles, a
graveled Class D County Road (unnamed), spurs off of West Summit Road, passes through the leased lands and terminates at the Dunn
Portal at approximately 2.1 miles from the spur. The nearest town to the Dunn project is Monticello, Utah which is approximately
65 miles away. The closest commercial airport facilities are located in Cortez, Colorado, approximately 65 miles to the southeast,
and Moab, Utah approximately 65 miles to the northwest; both airports have daily commercial flights to-and-from Denver International
Airport.
History
The
first discovery of uranium-vanadium mineralization within close proximity to the Dunn project was by Homestake Mining Company
in the late 1960s at what would eventually become the Wilson Mine 4 miles to the east. Mineralization associated with the Dunn
mine was discovered by Gulf Oil Corporation in the late 1960s, which was subsequently acquired by Homestake, followed by Atlas
Minerals in the 1970’s. Between 1975 and 1983 Atlas completed 243 drill holes at the Dunn project with an average total
depth of 724 feet. By 1981, Atlas had delineated a resource that could left the construction of a 3,825 foot decline. The decline
successfully reached the perimeter of delineated mineralization, but before any production-mining, Atlas ceased operations in
1983 when faced with financial setbacks that required them to divert funds.
In
July, 2013, Energy Fuels Resources acquired the Dunn Mine property from American Strategic Minerals Corporation and Kyle Kimmerle.
Project
Geology
The
Dunn project occurs on structurally unaffected terrain between the gently folded Boulder Knoll anticline to the southwest and
the more prominent salt-cored Lisbon Valley anticline to the northeast. The strata beneath the project are relatively flat, and
no major faults or folds are expected to disrupt bedding or unit contacts.
Uranium-vanadium
mineralization at the Dunn is hosted in the Salt Wash Member of the Jurassic Morrison formation which occurs at approximately
500 to 750 feet below the surface. The average depth to the mineralized sandstones within the Salt Wash Member is 650 feet from
the surface.
The
primary uranium mineral is uraninite with minor amounts of coffinite. The primary vanadium mineral is Montroseite.
Restoration
and Reclamation.
No
liabilities currently exist.
Permitting
Status
No
permits currently exist.
Basis
of Disclosure
The
scientific and technical information provided in this Form 10-K on the Dunn Project American Strategic Mineral Corporation is
based on information provided in a NI 43-101 Technical Report prepared by American Strategic Minerals Corporation (the previous
owner of the Dunn Project) entitled Technical Report on American Strategic Minerals Corporation’s Dunn Project, San Juan
County, Utah by Dr. David A. Gonzales, PhD, PG, Durango, Colorado March 23, 2012. Mr. Gonzales is a qualified person for purposes
of NI 43-101. However, none of the data, other exploration information or other results reported in that report are being incorporated
into this Form 10-K.
The
Property
Within
the Project area, Black Range has mining agreements, owns fee minerals, holds options to purchase fee mineral rights, holds federal
unpatented mining claims and mineral leases with the State of Colorado, and has in place surface access agreements, including:
-
1 x private Mineral Lease
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1 x State Mineral Lease (UR3324)
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2 x options to purchase 100% of the Hansen and Picnic Tree Deposits
-
108 Federal unpatented mining claims
The
Hansen/Taylor Ranch Project is currently being held as a property that is exploratory in nature with no identified reserves. Neither
exploration plans nor a mining plan exist for the project. Black Range Minerals has not undertaken development work at the property
since groundwater well installation in 2013. Power and water sources have not yet been formally assessed.
Notably a portion of the Hansen/Taylor deposit was in dispute
during 2017. On September 16, 2015, in connection with the Company’s acquisition of Black Range, the Company assumed an option
and exploration agreement (the “Option and Exploration Agreement”) with STB Minerals, LLC, a Colorado limited liability
company (“STB”). The Option and Exploration Agreement gives the Company the right to purchase 51% of the mineral rights
of specific areas of the Hansen and Picnic Tree deposits (for which the Company already holds 49% of the rights). If the Company
were to exercise its option under the Option and Exploration Agreement, it would require the Company to (a) make a cash payment
of $2,500,000 immediately upon exercise; (b) issue common shares to STB amounting to a value of $3,750,000 immediately upon exercise;
and (c) issue common shares to STB amounting to a value of $3,750,000 on the date that is 180 days following exercise. The Option
and Exploration Agreement was scheduled to expire by its terms on July 28, 2017 if not exercised.
The
Option and Exploration Agreement provided an extension for an “event of force majeure”. Under this clause, the
Company would receive an extension of the period during which it could exercise its option if it experiences an unreasonable delay
outside its control that prevents it from exercising the option. On May 10, 2017, the Company provided to STB a notice that
it was exercising the force majeure clause due to the delay by government regulators in licensing the Company’s ablation
technology and permitting mining at the Hansen property. STB has contested the Company’s finding that an event of force
majeure has occurred. Ongoing negotiations continued until September 21, 2017 when the Company and STB agreed to settle the matter
through the pre-established arbitration mechanism. Prior to the commencement of arbitration, a settlement was agreed to on February
28, 2018 through the execution of an Amendment of Option and Exploration Agreement. As consideration, the Company paid STB a $20,000
extension payment and granted STB the right to seek a bona fide written offer over the remaining term and agreed to the removal
of the force majeure clause from the agreement. The Company received an extension until July 28, 2019 and a right of first refusal
to match any bona fide written offer. Hence the Company already owns 49% of the resource property and retains an option to purchase
the 51% of the resource property that the Company does not already own for the duration of the agreement. Further the Company
believes the execution of this agreement is without financial implications, and as such, the Company has not made any adjustment
to these consolidated financials related to this matter.
Accessibility
The
Project is located in Fremont County, in South Central Colorado approximately 30 miles northwest of the city of Canon City. Canon
City is the closest population center and had a population of 16,400 in 2010. The largest metropolitan area in close proximity
to the Project is Colorado Springs which is located approximately 46 miles northeast of Canon City and has a population of approximately
416,000. Figure 1 shows the locations of these population centers with respect to the Project.
For
ground travel, Canon City is best accessed from Denver/Colorado Springs via I-25 south to State Highway 115 which intersects Highway
50 just east of Canon City. For air travel, alternatives include the Colorado Springs Municipal Airport (COS), which is a 16-gate
facility served by 14 airlines and Denver’s International Airport (DEN), which is 149 miles from Canon City. There is a
small airport, Fremont County Airport (CNE), located in Canon City, which is open to private flights. The property has access
to grid power; however, no source of industrial water has been identified yet.
History
Uranium
mineralization was discovered in the Tallahassee Creek District in 1954 by two groups of prospectors. Between 1954 and 1972, 16
small open pit and underground mines were operated in the district. Discoveries, and most producing mines and production were
in the Tallahassee Creek Conglomerate, with one mine, the Smaller Mine, producing from the Echo Park Formation. Exploration efforts
were minimal until Rampart Exploration Company (Rampart), under contract to Cyprus, explored the Taylor Ranch area beginning in
1974 and discovered the Hansen Uranium Deposit along with other uranium deposits in the district. Cyprus took the Hansen and Picnic
Tree deposits through a positive final feasibility analysis in 1980 for an open-pit mining and conventional uranium milling operation,
and secured all necessary operating permits in 1981. The collapse of the uranium market led to Cyprus abandoning the project which
lay dormant until Black Range Minerals began activities in late 2006.
Black
Range Mineral’s Taylor Ranch Project, CO, consists of a combination of private, BLM and State Section minerals, and private,
BLM and State Section surface rights. Ownership of the private minerals and surface has mainly been by local ranchers. Western
Nuclear held a portion of the property briefly in 1968. Cyprus gained control of mineral and surface rights during the period
1975-1978.
In
1993, Cyprus sold their Tallahassee Creek holdings to Noah (Buddy) and Diane Taylor who had managed ranching activities on the
property. The Taylors were not able to make the final payment to Cyprus and sold the southern portion of their holdings which
included the Hansen and Picnic Tree deposits to New Mexico and Arizona Land (now NZ Minerals) in 1996 who, in 1998, sold the property
to South T-Bar Ranch, a subsidiary of Colorado developer Land Properties, while reserving a 49% interest in the minerals.
This
part of Cyprus’ prior holdings was subdivided, mainly into 35-acre parcels. Beginning in December 2006, through various
purchases, leases and option agreements, Black Range Minerals has obtained mineral rights to most of the original Cyprus holdings.
Prior
to the Hansen/Taylor Project being acquired by WUC, a mineral resource for the Hansen/Taylor Ranch Project for Black Range Minerals
Limited. Black Range Reported a JORC compliant indicated uranium resource of 29,730,000 tons grading at 0.063% U3O8 containing
37,480,000 lbs U3O8 and an inferred uranium resource of 43,681,000 tons grading at 0.058% U3O8 containing 50,443,000 lbs U3O8.
This historic resource estimate was originally reported to Black Range Minerals Limited by Tetra Tech in four resource memos (collectively,
the Tetra Tech Reports): 1) High Park Kriging Resources – Taylor Ranch Uranium Project, April 25, 2008; 2) North Hansen,
Boyer Kriging Resources – Taylor Ranch Uranium Project, April 29, 2009; 3) Technical Memorandum – Boyer, Hansen and
Picnic Tree Area Kriging Resources – Taylor Ranch Uranium Project, August 24, 2009; and 4) Technical Memorandum –
Boyer, Hansen and Picnic Tree Area Kriging Resources – Taylor Ranch Uranium Project (Updated 2010), August 12, 2010. These
memos were originally prepared by Rex Bryan of Tetra Tech, a qualified person under NI 43-101. The results reported in the Tetra
Tech Reports are historical estimates under NI 43-101.
There
is high confidence in the geologic interpretation of the historic Black Range Minerals resource provided in the Tetra Tech Reports.
The deposit is stratified and laterally consistent drill hole logging and surface mapping supports this conclusion. The data source
for geologic interpretation is primarily drill hole logs and surface mapping. The model currently assumes minimal post mineralization
faulting. Deposit domains were confined by corresponding geologic units. Continuity of geology is on a regional sedimentary scale
and is regular. Grade continuity is subject to deposition of carbonaceous material and oxidation reduction interfaces of palaeo-groundwater
carrying mobilized uranium. Commonly accepted multi-pass kriging methods were used to estimate the mineral resources. Uranium
domains were modeled using wireframe solids, resources were quantified outside the solids with drastically reduced search ranges.
Estimates were checked and compared to historic estimates. Blocks were sized as a tradeoff between mineralized shapes and general
mining selectivity. The block heights are four to six times the half foot sample collection but block lengths and widths are several
times smaller than the drill spacing in order to adequately fit the mineralized shapes. It is assumed that due to the soft sedimentary
nature of the mineral zone, good selectivity can be achieved.
The
historic Black Range Minerals resource reported in the Tetra Tech Reports uses JORC indicated and inferred resource categories
and does not contain reserves. That report does not use categories other than “mineral resources” and “mineral
reserves”. There are no more recent estimates or data available to WUC or Black Range Minerals. In order to verify this
estimate, the Company would need to prepare a NI 43-101 Technical Report to disclose the mineral resources as current. This would
involve, among other things verifying the results under NI 43-101 standards and potentially conducted new or additional analyses
under NI 43-101 standards, as well as taking into account any exploration or other work conducted on this property since the latest
of the Tetra Tech Reports. A qualified person (as defined under NI 43-101) has not completed sufficient work to classify this
historical estimate as current under that rule, and the Company is not treating this historical estimate as current.
Project
Geology
The
deposits that make up the Project are tabular sandstone deposits associated with redox interfaces. The mineralisation is hosted
in Tertiary sandstones and/or clay bearing conglomerates within an extinct braided stream, fluvial system or palaeo channel. Mineralisation
occurred post sediment deposition when oxygenated uraniferous groundwater moving through the host rocks came into contact with
redox interfaces, the resultant chemical change caused the precipitation of uranium oxides. The most common cause of redox interfaces
is the presence of carbonaceous material that was deposited simultaneously with the host sediments. In parts of the Project the
palaeochannel has been covered by Tertiary volcanic rocks and throughout the Project basement consists of Pre-Cambrian plutonics
and metamorphic rocks. The volcanic and Pre-Cambrian rocks are believed to be the source of the uranium.
Restoration
and Reclamation.
BRM
has a bond of $154,927 with the DRMS covering exploration activities for the project.
Permitting
Status
The
project currently has an exploration permit through the Colorado Division of Reclamation, Mining and Safety as well as a Conditional
Use Permit with the Fremont County Planning and Zoning Department.
Basis
of Disclosure
The
scientific and technical information provided in this Form 10-K on the Hansen/Taylor Ranch Project, as well all data and exploration
information reported in this Form 10-K on the Hansen/Taylor Ranch Project, is based on the information reported in the Tetra Tech
Reports.
Non
- Material Properties
The
Property
The
Van#4 is located in the Uravan Mineral Belt on Monogram Mesa in Montrose County, Colorado. The property had been held by Denison
and its predecessors for many years. The property consists of 80 unpatented mining claims covering the mine site and long-known
deposit to the east, plus two large claim groups to the north, east, and south with exploration potential.
The 80 unpatented
claims are located on approximately 1,900 acres land administered by the U.S. Bureau of Land Management in sections
27, 28, 29, 33, and 34, T48N, R17W, NMPM, and some in section 3, T47N, R17W, Montrose County, Colorado. The Holding costs of the
80 claims will be $12,400 due to BLM before September 1 each year. There are no royalties encumbering these
claims.
The
property includes the Van#4 shaft and associated surface facilities, which need renovation. The mine is connected to the Ura decline
on claims in Bull Canyon to the southwest, not owned by WUC. It has been on standby for many years. Denison completed reclamation
of two of the ventilation holes in 2008 and 2010. The property has access to grid power; however, no source of industrial water
has been identified yet. The Van 4 mine is currently being held as a property that is exploratory in nature. Exploration and mining
plans have not been prepared for the project and the mine permit is in Temporary Cessation status. Western Uranium & Vanadium
Corp. has not yet undertaken any development work at the property. Power and water sources have not yet been assessed.
Accessibility
The
Van#4 mine is accessible via Montrose County Roads year round.
History
The
Van#4 was initially permitted in the late 1970s and early 1980s by Union Carbide as part of a number of small mines named the
Thunderbolt Group. Energy Fuels Nuclear, Inc. (EFN) acquired the mine in 1984 and then transferred the mine and permits to International
Uranium Corporation (IUC) in 1997. IUC re-permitted the mine with DRMS (then known as the Division of Minerals and Geology) in
1999 because the previous permit had included other mines in the area that were not acquired by IUC. Mine Permit M-1997-032
with DRMS is currently in good standing and bonded for $75,057. Amendment AM-1, which incorporated the approved EPP, was issued
on May 30, 2012. The permit has been transferred over the years from IUC to Denison Mines (USA) Corp. to Energy Fuels Resources
(USA) Inc. and now to WUC by way of PRM.
Project
Geology
The
uranium-vanadium deposits occur in the upper and middle sandstones of the Salt Wash Member of the Morrison Formation. Deposits
in this part of the Uravan Mineral Belt have a moderate V2O5: U3O8 ratio. WUC is in possession of much historic mine
and drill data (former Union Carbide/Umetco property), as well as up-to-date mine maps. Denison drilled most recently
(summer 2008) 21 wide-spaced exploration holes in sections 27 and 34. All have been reclaimed and the permit terminated.
Restoration
and Reclamation.
There
is a reclamation bond held by the Colorado DRMS for $75,057.
Permitting
Status
Permit
compliance is currently limited to an annual stormwater inspection; stormwater improvement work was completed
in 2010 and 2012. The air permit with APCD was recently allowed to lapse, as the company does not have any immediate development
or operation plans for the mine. The mine does not have EPA approval for radon emissions; however, this approval may not be needed
to restart mining, as the life-of-mine production will likely be less than 100,000 tons. The DRMS mining permit was put into Temporary
Cessation in February, 2014. Existing major permits at the mine include:
|
●
|
BLM
Plan of Operations COC-62522 (same as DRMS Permit M-97-032)
|
|
|
|
|
●
|
DRMS
110d (Small Mine, DMO) Mine Permit M-97-032
|
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 include all of the
parties to 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 is defending this action which
is pending in the Denver Colorado District Court. As a party to this action neither the Company, nor its wholly owned subsidiary,
PRM has taken any action and is monitoring this lawsuit.
OTHER
Ferris
Haggerty
The
Property
A
reclamation liability remains at this Wyoming copper project. No leases or land use remain. The Ferris Haggarty project is a reclamation-only
project.
Accessibility
The
reclamation project is accessible 4 to 6 months out of the year due to snow and closed access. Take Wyoming Highway west from
Encampment, Wyoming for approximately 11 miles. Once across the divide, to the northeast there is a pullout for Medicine Bow National
Forest recreation. Follow 4 wheel drive route 412 (Continental Divide Trail) for approximately 5 miles to the Haggerty creek watershed.
Turn southwest onto a steep 4 wheel drive rout and travel for approximately 1.5 miles until you are at the property.
History
The Ferris-Haggerty
Mine Site was one of the richest components of the Grand Encampment Mining District in Carbon County, Wyoming.
The site was first exploited by Ed Haggerty, a prospector from Whitehaven, England, in 1897, when he established the Rudefeha
Mine on a rich deposit of copper ore. Haggerty was backed by George Ferris and other investors, of whom all but Ferris
dropped out. The partners sold an interest to Willis George Emerson, who raised investment funding for improvements to the mine.
These facilities included a 16-mile (26 km) aerial tramway from Grand Encampment over the Continental Divide to
the smelter in Encampment and a 4-mile (6.4 km) pipeline to the mine. The mine’s assets were eventually acquired by
the North American Copper Company for $1 million. By 1904 the mine had produced $1.4 million in copper ore and was sold to the
Penn-Wyoming Copper Company. However, even with copper prices peaking in 1907, the company had difficulty making a profit from
the remove mine site. The company was over-capitalized and under-insured and was suffered devastating fires at the mine site
in March 1906 and May 1907 which halted production. Business disputes and a fall in copper prices prevented re-opening of the
mine even after it was rebuilt. Machinery was salvaged after a foreclosure in 1913. A total of $2 million in copper
ore was extracted from the mine during its life.
Project
Geology
The
Deposit is a tabular injection of magmatic metal differentiation product at the margins of an ultramafic intrusive of early Archean
age (2.2 billion years ago). This intrusive was injected into pre-existing high siliceous sandstones and shales of massive thickness
(+2,000 ft). Mineralization at the Ferris-Haggarty mine consists of disseminated pyrite and chalcopyrite grains that occur along
bedding planes of the host quartzite. However, the massive ore body mined at the Ferris-Haggarty was described by Spencer (1904)
to lie along quartzite-Schist contacts and to cross cut foliation. Based on the historic description, the ore may have been remobilized
from the host quartzite during regional metamorphism and emplaced along the quartzite-schist contact by way of permeable fractures.
The impermeable hanging wall schist may have formed a natural barrier to the ore solutions and produced an unusually rich ore
body.
Restoration
and Reclamation
We
must get grass to grow on the drill pad disturbance areas from drilling which took place in 2007. These drill pads are located
at 10,000 feet above sea level on the north face of a mountain on the Continental Divide.
A
$10,000 reclamation bond remains with the Wyoming DEQ. Upon completing reclamation, the Company will receive the bond money back.
INFRASTRUCTURE
The
Company’s carrying value of property, plant and equipment is as follows:
IP
– Ablation - $9,488,051 The Company holds a license to use Ablation, a proven technology that we anticipate will improve
the efficiency of the sandstone hosted uranium mining process, although there are some uncertainties about whether the anticipated
benefits will be realized. See Item 1, “Business – The Ablation Process.” Ablation is a low cost, purely physical
method of uranium and vanadium ore extraction. Ablation has been initially tested in order to understand the hydro and mechanical
separation processes. The Company used a prototype Ablation test system to test several different samples of uranium ore from
the Sunday Mine Complex and the Hansen/Taylor Ranch properties. In all cases, uranium ore that was entered into the Ablation pilot
test system appeared to concentrate most of the uranium into the post ablated material consisting of a fraction of the original
mass, leaving most of the post ablated materials which did not contain any uranium. The results of these tests have not yet been
validated by a Competent Person.
During
2016, Western submitted documentation to the CDPHE for a determination ruling regarding the type of license which may be required
for the application of Ablation 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 United States Nuclear Regulatory Commission (“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 Western’s regulatory counsel does not agree. NRC’s advisory opinion recommends that Ablation should
be regulated as a milling operation but did recognize that there may be exemptions to certain milling regulatory requirements
due to the benign nature of the non-uranium bearing sands produced after Ablation is completed on uranium-bearing ores. On December
1, 2016, the CDPHE issued a determination that the proposed ablation operations at the Sunday Mine must be regulated by the CDPHE
through a milling license. The 2018 increase in the blended uranium/vanadium price has brought the Company closer to production.
Mineral
Properties $11,681,720 – The Company holds mineral properties as outlined below.
Pinon
Ridge Properties
On
August 18, 2014, the Company purchased mining assets from Energy Fuels Holding Corp. in an arm’s length transaction. The mining
assets include both owned and leased land in the states of Utah and Colorado. All of the mining assets represent properties which
have previously been mined to different degrees for uranium. As some of the properties have not formally established proven or
probable reserves, there may be greater inherent uncertainty as to whether or not any mineralized material can be economically
extracted as originally planned and anticipated.
The
Company’s mining properties acquired on August 18, 2014 which the Company still retains as of December 31, 2017, include:
San Rafael Uranium Project located in Emery County, Utah; The Sunday Mine Complex located in western San Miguel County, Colorado;
The Van 4 Mine located in western Montrose County, Colorado; The Sage Mine project located in San Juan County, Utah; and the Dunn
project located in San Juan and San Miguel counties, Colorado.
Black
Range Properties
On
September 16, 2015, in connection with the Black Range Transaction, the Company acquired additional mineral properties. The mining
assets acquired through Black Range include leased land in the states of Colorado, Wyoming and Alaska. None of these mining assets
were operational at the date of acquisition. As these properties have not formally established proven or probable reserves, there
may be greater inherent uncertainty as to whether or not any mineralized material can be economically extracted as originally
planned and anticipated.
The
Company’s mining properties acquired on September 16, 2015 which the Company still retains as of December 31, 2017, include
Hansen, North Hansen, High Park, Hansen Picnic Tree, Taylor Ranch, located in Fremont County, Colorado. The Company also acquired
Keota located in Weld County, Wyoming.
In
connection with the Black Range Transaction, Western assumed a mortgage secured by land, building and improvements at 1450 North
7 Mile Road, Casper, Wyoming, with interest payable at 8.00% and payable in monthly payments of $11,085 with the final balance
of $1,044,015 due as a balloon payment on January 16, 2016. The Company did not pay the mortgage on its due date. On May 26, 2016,
the Company executed agreements with the mortgage holder whereby in an equal exchange the mortgage was exchanged for the land,
building and improvements on which it was secured, pursuant to which no further financial consideration is required.
During
the second quarter of 2016, the Company initiated actions to cancel its coal mining leases in Alaska. In connection therewith,
the Company notified the state of Alaska of its intent to forfeit the posted bond in satisfaction of the reclamation liabilities
at the site. In response to the Company’s notification, the Company received notification that the state of Alaska was initiating
forfeiture of the Company’s performance bond for reclamation. However, the notice indicated an additional surety bond of
$150,000 in excess of the $210,500 cash bond, which had been posted by the Company upon purchase of the property. The Company
and its advisors do not believe that it is obligated for this additional amount of claimed reclamation obligation. The Company
is working with its legal counsel and the State of Alaska to resolve this matter. The Company has not recorded an additional $150,000
obligation as the Company does not expect, based on the advice of legal counsel, to be obligated to an amount greater than that
presently reflected in the reclamation liability. During the year ended December 31, 2016, the Company adjusted the fair value
of its reclamation obligation and for the Alaska mine, accreted $183,510 to bring its reclamation liability to face value. The
portion of the reclamation liability related to the Alaska mine, and its related restricted cash are included in current liabilities,
and current assets, respectively, at a value of $215,976 and $215,976. On January 20, 2017, the State of Alaska notified the Company
that its reclamation bond had been forfeited to be used to satisfy the reclamation obligation. However, no amount had yet been
determined in respect to the final cost of the reclamation obligation.
As
the properties are not in production, they are not covered by various types of insurance including property and casualty, liability
and umbrella coverage. We have not experienced any material uninsured or under insured losses related to our properties in the
past and believe our approach sufficient given the inactivity.
On September 16, 2015, in connection with the Company’s
acquisition of Black Range, the Company assumed an option and exploration agreement (the “Option and Exploration Agreement”)
with STB Minerals, LLC, a Colorado limited liability company (“STB”). The Option and Exploration Agreement gives the
Company the right to purchase 51% of the mineral rights of specific areas of the Hansen and Picnic Tree deposits (for which the
Company already holds 49% of the rights). If the Company were to exercise its option under the Option and Exploration Agreement,
it would require the Company to (a) make a cash payment of $2,500,000 immediately upon exercise; (b) issue common shares to STB
amounting to a value of $3,750,000 immediately upon exercise; and (c) issue common shares to STB amounting to a value of $3,750,000
on the date that is 180 days following exercise. The Option and Exploration Agreement was scheduled to expire by its terms on July
28, 2017 if not exercised.
The
Option and Exploration Agreement provided an extension for an “event of force majeure”. Under this clause, the
Company would receive an extension of the period during which it could exercise its option if it experiences an unreasonable delay
outside its control that prevents it from exercising the option. On May 10, 2017, the Company provided to STB a notice that
it was exercising the force majeure clause due to the delay by government regulators in licensing the Company’s ablation
technology and permitting mining at the Hansen property. STB has contested the Company’s finding that an event of force
majeure has occurred. Ongoing negotiations continued until September 21, 2017 when the Company and STB agreed to settle the matter
through the pre-established arbitration mechanism. Prior to the commencement of arbitration, a settlement was agreed to on February
28, 2018 through the execution of an Amendment of Option and Exploration Agreement. As consideration, the Company paid STB a $20,000
extension payment and granted STB the right to seek a bona fide written offer over the remaining term and agreed to the removal
of the force majeure clause from the agreement. The Company received an extension until July 28, 2019 and a right of first refusal
to match any bona fide written offer. Hence the Company already owns 49% of the resource property and retains an option to purchase
the 51% of the resource property that the Company does not already own for the duration of the agreement. Further the Company
believes the execution of this agreement is without financial implications, and as such, the Company has not made any adjustment
to these consolidated financials related to this matter.
Disposal
of Mining Properties
In
July and October 2016, the Company elected not to renew leases relating to four projects that were obtained through either the
August 2014 acquisition from Energy Fuels Holding Corp. or the acquisition of Black Range Minerals. The decision to not renew
the four leases was based upon a number of factors, the most significant of which were the location of the projects, the development
stage of each product, and the amount of uranium and vanadium resources within each project. The forfeiture of these leases has
no material adverse impact on the fair value of the Company’s mining assets.
On
February 16, 2017, the Company’s Boyer Ranch Lease reached its expiration date and the Company elected not to negotiate
a renewal.
On
January 1, 2018 the Company’s Hansen Ranch Lease reached its expiration date and the Company elected not to negotiate a
renewal.
ITEM
3. LEGAL PROCEEDINGS
Other
than described below, management is not aware of any material legal proceedings that are pending or that have been threatened
against us or our subsidiaries or any of our respective properties, and none of our directors, officers, affiliates or record
or beneficial owners of more than 5% of our common shares, or any associate of any such director, officer, affiliate or shareholder,
is (i) a party adverse to us or any of our subsidiaries in any legal proceeding or (ii) has an adverse interest to us or any of
our subsidiaries in any legal proceeding.
The
Company is subject to periodic inspection by certain regulatory agencies for the purpose of determining compliance by the Company
with the conditions of its licenses. In the ordinary course of business, minor violations may occur; however, these are not expected
to result in material expenditures or have any other material adverse effect on the Company.
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 include all of the
parties to 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 is defending this action which
is pending in the Denver Colorado District Court. As a party to this action neither the Company, nor its wholly owned subsidiary,
PRM has taken any action and is monitoring this lawsuit.
ITEM
4. MINE SAFETY DISCLOSURES
Pursuant
to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”),
issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States, and that
is subject to regulation by the Federal Mine Safety and Health Administration under the Mine Safety and Health Act of 1977 (“Mine
Safety Act”), are required to disclose in their periodic reports filed with the SEC information regarding specified health
and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. As Western
Uranium does not operate any coal or other mines, no such disclosure is required.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
NOTE
1 – BUSINESS
Nature
of operations
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”).
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.” On April 22, 2016, the Company’s shares of common stock began trading on the
OTC Pink Open Market, and on May 23, 2016, the Company’s common stock was approved for the commencement of trading on the
OTCQX Best Market. 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”).
On
June 28, 2016, the Company’s registration statement became effective and Western became a United States reporting issuer.
Thereafter, the Company was approved for Depository Trust Company eligibility through the Depository Trust and Clearing Corporation,
which facilitates electronic book-entry delivery, settlement and depository services for shares in the United States.
On June 29, 2018, the shareholders of the Company approved
the name change of the Company from “Western Uranium Corporation” to “Western Uranium & Vanadium Corp.”
The name change became effective in Ontario, Canada on October 1, 2018; thereafter on October 4, 2018 Western’s shares started
trading under the new name on the CSE and OTCQX and the Company announced the name change by news release.
Note
2 – Liquidity and going concern
The
Company has incurred continuing losses from its operations and as of December 31, 2018, the Company had an accumulated deficit
of $6,584,342 and working capital of $597,669.
Since
inception, the Company has met its liquidity requirements principally through the issuance of notes and the sale of its shares
of common stock.
On May 4, 2018, the Company completed a private placement of
909,622 units at a price of CAD $0.68 (USD $0.53) per unit for gross proceeds of CAD $618,543 (USD $481,560). Each unit consisted
of one common share and a warrant to purchase one-half of one common share. Each warrant is exercisable at a price of CAD $1.15
and expires two years from the date of issuance.
On July 27, 2018, the Company completed a private placement
of 2,525,526 units at a price of CAD $0.68 (USD $0.52) per unit for gross proceeds of CAD $1,717,358 (USD $1,319,096). Each unit
consisted of one common share and a warrant to purchase one-half of one common share. Each warrant is exercisable at a price of
CAD $1.15 and expires two years from the date of issuance.
On August 9, 2018, the Company completed a private placement of 1,907,088 units at a price of CAD $0.68
(USD $0.52) per unit for gross proceeds of CAD $1,296,820 (USD $1,000,000). Each unit consisted of one common share and a warrant
to purchase one-half of one common share. Each warrant is exercisable at a price of CAD $1.15 and expires two years from the date
of issuance.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
2 – Liquidity and going concern
,
CONTINUED
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 ablation technology 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 these consolidated financial statements. The accompanying consolidated financial statements
do not include any adjustments that might result from the outcome of these uncertainties.
Note
3 – SUMMARY OF Significant Accounting Policies
Basis
of Presentation and Principles of Consolidation
These
consolidated financial statements are presented in United States dollars and have been prepared in accordance with United States
generally accepted accounting principles (“U.S. GAAP”).
The
accompanying consolidated financial statements include the accounts of Western and its wholly-owned subsidiaries, Western Uranium
Corp. (Utah), PRM, Black Range, 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. All significant inter-company transactions and balances
have been eliminated upon consolidation.
The
Company has established the existence of mineralized materials for certain uranium projects. The Company has not established proven
or probable reserves, as defined by the United States Securities and Exchange Commission (the “SEC”) under Industry
Guide 7, through the completion of a “final” or “bankable” feasibility study for any of its uranium projects.
Exploration
Stage
In
accordance with U.S. GAAP, expenditures relating to the acquisition of mineral rights are initially capitalized as incurred while
exploration and pre-extraction expenditures are expensed as incurred until such time the Company exits the Exploration Stage by
establishing proven or probable reserves. Expenditures relating to exploration activities such as drill programs to search for
additional mineralized materials are expensed as incurred. Expenditures relating to pre-extraction activities such as the construction
of mine wellfields, ion exchange facilities and disposal wells are expensed as incurred until such time proven or probable reserves
are established for that uranium project, after which subsequent expenditures relating to mine development activities for that
particular project are capitalized as incurred.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
3 – SUMMARY OF Significant Accounting Policies, Continued
Exploration
Stage, continued
Companies
in the Production Stage as defined under Industry Guide 7, having established proven and probable reserves and exited the Exploration
Stage, typically capitalize expenditures relating to ongoing development activities, with corresponding depletion calculated over
proven and probable reserves using the units-of-production method and allocated to future reporting periods to inventory and,
as that inventory is sold, to cost of goods sold. The Company is in the Exploration Stage which has resulted in the Company reporting
larger losses than if it had been in the Production Stage due to the expensing, instead of capitalizing, of expenditures relating
to ongoing mill and mine development activities. Additionally, there would be no corresponding amortization allocated to future
reporting periods of the Company since those costs would have been expensed previously, resulting in both lower inventory costs
and cost of goods sold and results of operations with higher gross profits and lower losses than if the Company had been in the
Production Stage. Any capitalized costs, such as expenditures relating to the acquisition of mineral rights, are depleted over
the estimated extraction life using the straight-line method. As a result, the Company’s consolidated financial statements
may not be directly comparable to the financial statements of companies in the Production Stage.
Use
of Estimates
The
preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and revenues and
expenses during the periods reported. By their nature, these estimates are subject to measurement uncertainty and the effects
on the financial statements of changes in such estimates in future periods could be significant. Significant areas requiring management’s
estimates and assumptions include determining the fair value of transactions involving common stock, assessment of the useful
life and evaluation for impairment of intangible assets, valuation and impairment assessments on mineral properties, deferred
contingent consideration, and the reclamation liability, valuation of stock-based compensation, valuation of available-for-sale
securities and valuation of long-term debt. Other areas requiring estimates include allocations of expenditures, depletion and
amortization of mineral rights and properties. Actual results could differ from those estimates.
Foreign
Currency Translation
The
reporting currency of the Company, including its subsidiaries, is the United States dollar. The financial statements of subsidiaries
located outside of the U.S. are measured in their functional currency, which is the local currency. The functional currency of
the parent (Western Uranium & Vanadium Corp. (Ontario)) is the Canadian dollar. Monetary assets and liabilities of these subsidiaries
are translated at the exchange rates at the balance sheet date. Income and expense items are translated using average monthly
exchange rates. Non-monetary assets are translated at their historical exchange rates. Translation adjustments are included in
accumulated other comprehensive loss in the consolidated balance sheets.
Segment
Information
The
Company determines its reporting units in accordance with FASB ASC 280, “
Segment Reporting
” (“ASC 280”).
The Company evaluates a reporting unit by first identifying its operating segments under ASC 280. The Company then evaluates each
operating segment to determine if it includes one or more components that constitute a business. If there are components within
an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must
be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating
segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated. The
Company has one operating segment and reporting unit. The Company operates in one reportable business segment; the Company is
in the business of exploring, developing, mining and the production of its uranium and vanadium resource properties, including
the utilization of the Company’s ablation technology in its mining processes. The Company is organized and operated as one
business. Management reviews its business as a single operating segment, using financial and other information rendered meaningful
only by the fact that such information is presented and reviewed in the aggregate.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Cash
and Cash Equivalents
The
Company considers all highly-liquid instruments with an original maturity of three months or less at the time of issuance to be
cash equivalents. As of December 31, 2018 and 2017, the Company had no cash equivalents.
Marketable
Securities
The
Company classifies its marketable securities as available-for-sale securities, which are carried at their fair value based on
the quoted market prices of the securities with unrealized gains and losses reported as accumulated comprehensive income (loss),
a separate component of shareholders’ equity. Realized gains and losses on available-for-sale securities are included in
net earnings in the period earned or incurred.
Restricted
Cash
Certain
cash balances are restricted as they relate to deposits with banks that have been assigned to state reclamation authorities in
the United States to secure various reclamation guarantees with respect to mineral properties in Utah, Alaska and Colorado. As
these funds are not available for general corporate purposes and secure the long term reclamation liability (see Note 6), they
have been separately disclosed and classified as long-term.
Revenue
Recognition
The
Company leases certain of its mineral properties for the exploration and production of oil and gas reserves. The Company accounts
for lease revenue in accordance with ASC 840 “Leases”. Lease payments received in advance are deferred and recognized
on a straight – line basis over the related lease term associated with the prepayment. Royalty payments are recognized as
revenues when received.
Fair
Values of Financial Instruments
The
carrying amounts of cash, restricted cash, accounts payable, accrued liabilities, and notes payable approximate their fair value
due to the short-term nature of these instruments. Marketable securities are adjusted to fair value at each balance sheet date
based on quoted prices which are considered level 1 inputs. The reclamation deposits, which are reflected in restricted cash on
the consolidated balance sheets, are deposits mainly invested in certificates of deposit at major financial institutions and their
fair values were estimated to approximate their carrying values. The Company’s operations and financing activities are conducted
primarily in United States dollars and as a result, the Company is not subject to significant exposure to market risks from changes
in foreign currency rates. The Company is exposed to credit risk through its cash and restricted cash, but mitigates this risk
by keeping these deposits at major financial institutions.
ASC
820 “Fair Value Measurements and Disclosures” provides the framework for measuring fair value. That framework provides
a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and
the lowest priority to unobservable inputs (level 3 measurements).
Fair
value is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer
a liability in an orderly transaction between market participants. Fair value is a market-based measurement that is determined
based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is
used to prioritize the inputs in measuring fair value as follows:
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Fair
Values of Financial Instruments
Level
1 Quoted prices in active markets for identical assets or liabilities.
Level
2 Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities
in markets that are not active, or other inputs that are observable, either directly or indirectly.
Level
3 Significant unobservable inputs that cannot be corroborated by market data.
The
fair value of the Company’s financial instruments are as follows:
|
|
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)
|
|
|
Quoted Prices for Similar Assets or Liabilities in Active Markets (Level 2)
|
|
|
Significant Unobservable Inputs
(Level 3)
|
|
Marketable securities as of December 31, 2018
|
|
$
|
4,781
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities as of December 31, 2017
|
|
$
|
3,123
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Mineral
Properties
Acquisition
costs of mineral properties are capitalized as incurred while exploration and pre-extraction expenditures are expensed as incurred
until such time the Company exits the Exploration Stage by establishing proven or probable reserves, as defined by the SEC under
Industry Guide 7, through the completion of a “final” or “bankable” feasibility study. Expenditures relating
to exploration activities are expensed as incurred and expenditures relating to pre-extraction activities are expensed as incurred
until such time proven or probable reserves are established for that project, after which subsequent expenditures relating to
development activities for that particular project are capitalized as incurred.
Where
proven and probable reserves have been established, the project’s capitalized expenditures are depleted over proven and
probable reserves upon commencement of production using the units-of-production method. Where proven and probable reserves have
not been established, such capitalized expenditures are depleted over the estimated production life upon commencement of extraction
using the straight-line method. The Company has not established proven or probable reserves for any of its projects.
The
carrying values of the mineral properties are assessed for impairment by management.
Impairment
of Long-Lived Assets
The
Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related
carrying amounts may not be recoverable. Impairment is considered to exist if the total estimated future cash flows on an undiscounted
basis are less than the carrying amount of the assets. An impairment loss is measured and recorded based on discounted estimated
future cash flows or upon an estimate of fair value that may be received in an exchange transaction. Future cash flows are estimated
based on estimated quantities of recoverable minerals, expected U3O8 prices (considering current and historical prices, trends
and related factors), production levels, operating costs of production and capital and restoration and reclamation costs, based
upon the projected remaining future uranium production from each project. The Company’s long-lived assets (which include
its mineral assets and ablation intellectual property) were acquired during the end of 2014 and in 2015 in arms-length transactions.
As of December 31, 2018, the Company evaluated the total estimated future cash flows on an undiscounted basis for its mineral
properties and ablation intellectual property and determined that no impairment was deemed to exist. Estimates and assumptions
used to assess recoverability of the Company’s long-lived assets and measure fair value of our uranium properties are subject
to risk uncertainty. Changes in these estimates and assumptions could result in the impairment of its long-lived assets. In estimating
future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent
of future cash flows from other asset groups.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Income
Taxes
The
Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income
taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of
taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of
the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected
to reverse.
The
Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than
not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation
of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s
opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates,
additional allowances or reversals of reserves may be necessary.
Tax
benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities.
The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized
upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s
tax returns that do not meet these recognition and measurement standards. As of December 31, 2018 and December 31, 2017, no liability
for unrecognized tax benefits was required to be reported.
The
Company’s policy for recording interest and penalties associated with tax audits is to record such items as a component
of general and administrative expense. There were no amounts accrued for penalties and interest for the years ended December 31,
2018 and 2017. The Company does not expect its uncertain tax position to change during the next twelve months. Management is currently
unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.
The
Company has identified its federal tax return and its state tax returns in Colorado and Utah as its “major” tax jurisdictions,
and such returns for the years 2014 through 2018 remain subject to examination.
The
Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017. The Tax Act reduced the U.S. federal corporate
tax rate from 35% to 21%. As December 31, 2017, the Company had made a reasonable estimate of the effects of the Tax Act. This
estimate incorporates assumptions made based upon the Company’s current interpretation of the Tax Act and may change as
the Company may receive additional clarification and implementation guidance and as the interpretation of the Tax Act evolves.
In accordance with SEC Staff Accounting Bulletin No. 118, the Company has finalized the accounting for the effects of the Tax
Act during the fourth quarter of 2018. Future adjustments made to the provisional effects will be reported as a component of income
tax expense in the reporting period in which any such adjustments are determined.
Restoration
and Remediation Costs (Asset Retirement Obligations)
Various
federal and state mining laws and regulations require the Company to reclaim the surface areas and restore underground water quality
for its mine projects to the pre-existing mine area average quality after the completion of mining.
Future
reclamation and remediation costs, which include extraction equipment removal and environmental remediation, are accrued at the
end of each period based on management’s best estimate of the costs expected to be incurred for each project. Such estimates are
determined by the Company’s engineering studies which consider the costs of future surface and groundwater activities, current
regulations, actual expenses incurred, and technology and industry standards.
In
accordance with ASC 410, Asset Retirement and Environmental Obligations, the Company capitalizes the measured fair value of asset
retirement obligations to mineral properties. The asset retirement obligations are accreted to an undiscounted value until the
time at which they are expected to be settled. The accretion expense is charged to earnings and the actual retirement costs are
recorded against the asset retirement obligations when incurred. Any difference between the recorded asset retirement obligations
and the actual retirement costs incurred will be recorded as a gain or loss in the period of settlement.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Restoration
and Remediation Costs (Asset Retirement Obligations), continued
At
each reporting period, the Company reviews the assumptions used to estimate the expected cash flows required to settle the
asset retirement obligations, including changes in estimated probabilities, amounts and timing of the settlement of the asset
retirement obligations, as well as changes in the legal obligation requirements at each of its mineral properties. Changes in
any one or more of these assumptions may cause revision of asset retirement obligations for the corresponding
assets.
Deferred
Financing Costs
Deferred
financing costs represent costs incurred in connection with the issuance of debt. Once the associated debt instrument is issued,
these costs would be recorded as a debt discount and amortized to interest expense using the effective interest method over the
term of the related debt instrument. Upon the abandonment of a pending financing transaction, the related deferred financing costs
would be charged to general and administrative expense.
The
Company may also issue warrants or other equity instruments in connection with the issuance of debt instruments. The equity instruments
are recorded at their relative fair market value on the date of issuance which results in a debt discount which is amortized to
interest expense using the effective interest method.
Stock-Based
Compensation
The
Company follows ASC 718, Compensation - Stock Compensation, which addresses the accounting for stock-based payment transactions,
requiring such transactions to be accounted for using the fair value method. Awards of shares for property or services are recorded
at the more readily measurable of the fair value of the stock and the fair value of the service. The Company uses the Black-Scholes
option-pricing model to determine the grant date fair value of stock-based awards under ASC 718. The fair value is charged to
earnings depending on the terms and conditions of the award, and the nature of the relationship of the recipient of the award
to the Company. The Company records the grant date fair value in line with the period over which it was earned. For employees
and management, this is typically considered to be the vesting period of the award. For consultants the fair value of the award
is recorded over the term of the service period, and unvested amounts are revalued at each reporting period over the service period.
The Company estimates the expected forfeitures and updates the valuation accordingly.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Loss
per Share
Basic
net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during
the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential
common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the
exercise of stock options and warrants (using the treasury stock method). The computation of basic net loss per share for the
years ended December 31, 2018 and 2017 excludes potentially dilutive securities. The computations of net loss per share for each
period presented is the same for both basic and fully diluted.
Potentially
dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because
the effect of their inclusion would have been anti-dilutive.
|
|
For the Years
Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Warrants to purchase shares of common stock
|
|
|
6,798,401
|
|
|
|
4,095,563
|
|
Options to purchase shares of common stock
|
|
|
2,416,664
|
|
|
|
1,846,996
|
|
Total potentially dilutive securities
|
|
|
9,215,065
|
|
|
|
5,942,559
|
|
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material
effect on the accompanying consolidated financial statements, other than those disclosed below.
In June 2016, the FASB issued ASU No. 2016-13,
"Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (“ASU
2016-13”). ASU 2016-13 replaces the incurred loss model with an expected loss model, which is referred to as the current
expected credit loss (CECL) model. The CECL model is applicable to the measurement of credit losses on financial assets measured
at amortized cost, including loan receivables, held-to-maturity debt securities, and reinsurance receivables. It also applies
to off-balance sheet credit exposures not accounted for as insurance (such as loan commitments, standby letters of credit, financial
guarantees, and other similar instruments) and net investments in leases recognized by a lessor. For public business entities
that meet the definition of an SEC filer, the standard will be effective for fiscal years beginning after Dec. 15, 2019, including
interim periods in those fiscal years. For debt securities with other-than-temporary impairment, the guidance will be applied
prospectively. Existing purchased credit impaired (PCI) assets will be grandfathered and classified as purchased credit deteriorated
(PCD) assets at the date of adoption. The asset will be grossed up for the allowance for expected credit losses for all PCD assets
at the date of adoption and will continue to recognize the noncredit discount in interest income based on the yield of such assets
as of the adoption date. Subsequent changes in expected credit losses will be recorded through the allowance. For all other assets
within the scope of CECL, a cumulative-effect adjustment will be recognized in retained earnings as of the beginning of the first
reporting period in which the guidance is effective. The Company does not believe ASU 2016-13 will have a material effect on its
consolidated financial statements.
In
August 2016 the FASB issued Topic ASU No. 2016-15 “Statement of Cash Flows (Topic 230) – Classification of Certain
Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 clarifies diversity in practice in how certain
cash receipts and cash payments are presented and classified in the statement of cash flows. The Company adopted ASU 2016-15 on
January 1, 2018 and it has not had a material impact on its consolidated statements of cash flows.
In
November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU
2016-18”). ASU 2016-18 amends the classification and presentation of changes in restricted cash or restricted cash equivalents
in the statement of cash flows. The Company adopted ASU 2016-18 on January 1, 2018 and it has not had a material impact on its
consolidated statements of cash flows.
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update “ASU” No.
2014-09, Revenue from Contracts with Customers (Topic 606) which was subsequently amended by ASU 2015-14, ASU 2016-08, ASU 2016-10,
ASU 2016-12, ASU 2016-20, and ASU 2017-13. These ASUs outline a single comprehensive model for entities to use in accounting for
revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific
guidance. The guidance includes a five-step framework that requires an entity to: (i) identify the contract(s) with a customer,
(ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction
price to the performance obligations in the contract, and (v) recognize revenue when the entity satisfies a performance obligation.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Recent
Accounting Pronouncements, continued
In
July 2015, the FASB deferred the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017.
A full retrospective or modified retrospective approach is required. The Company has adopted ASU No. 2014-09 effective January
1, 2018. The Company has elected to apply the modified retrospective method and there was no impact on the consolidated financial
statements. Accordingly, the new revenue standard has been applied prospectively in the Company’s consolidated financial
statements from January 1, 2018 forward and reported financial information for historical comparable periods will not be revised
and will continue to be reported under the accounting standards in effect during those historical periods. The Company performed
an analysis and determined that its revenues are not within the scope of ASC 606, and as such, the Company determined that its
methods of recognizing revenues have not been impacted by the new guidance.
In February 2018, the FASB issued ASU 2018-03, Technical Corrections
and Improvements to Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial
Liabilities (“ASU 2018-03”). ASU 2018-03 provided targeted improvements to address certain aspects of recognition,
measurement, presentation, and disclosure of financial instruments. Specifically, the amendments include clarifications related
to: measurement elections, transition requirements, and adjustments associated with equity securities without readily determinable
fair values; fair value measurement requirements for forward contracts and purchased options on equity securities; presentation
requirements for hybrid financial liabilities for which the fair value option has been elected; and measurement requirements for
liabilities denominated in a foreign currency for which the fair value option has been elected. The adoption of these amendments
did not have a material impact on the Company's consolidated financial statements.
In July 2018, the FASB issued ASU 2018-10 Leases (Topic 842),
Codification Improvements and ASU 2018-11 Leases (Topic 842), Targeted Improvements, to provide additional guidance for the adoption
of Topic 842. ASU 2018-10 clarifies certain provisions and correct unintended applications of the guidance such as the application
of implicit rate, lessee reassessment of lease classification, and certain transition adjustments that should be recognized to
earnings rather than to stockholders’ (deficit) equity. ASU 2018-11 provides an alternative transition method and practical
expedient for separating contract components for the adoption of Topic 842. In February 2016, the FASB issued ASU 2016-02 Leases
(Topic 842) which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating
leases with terms greater than 12 months. ASU 2018-11, ASU 2018-10, and ASU 2016-02 (collectively, “the new lease standards”)
are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company has evaluated the
effects of ASU 2018-10, and determined that there are no material impacts to the consolidated financial statements.
In August 2018, the FASB issued
ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value
Measurement (“ASU 2018-13”). The ASU was issued to improve the effectiveness of disclosures surrounding fair value
measurements. The ASU removes numerous disclosures from Topic 820 including; transfers between level 1 and 2 of the fair value
hierarchy, the policy for timing of transfers between levels, and the valuation process for level 3 fair value measurements. The
ASU also modified and added disclosure requirements in regards to changes in unrealized gains and losses included in other comprehensive
income, as well as the range and weighted average of unobservable inputs for level 3 fair value measurements. The ASU is effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted.
The guidance is not expected to have a significant impact on the Company's consolidated financial statements.
NOTE
4 - MINERAL ASSETS, ABLATION INTELLECTUAL PROPERTY AND OTHER PROPERTY
The
Company’s mining properties acquired on August 18, 2014 that the Company retains as of December 31, 2018, include: San Rafael
Uranium Project located in Emery County, Utah; The Sunday Mine Complex located in western San Miguel County, Colorado; The Van
4 Mine located in western Montrose County, Colorado; The Sage Mine project located in San Juan County, Utah, and San Miguel County,
Colorado. These mining properties include leased land in the states of Colorado and Utah. None of these mining properties were
operational at the date of acquisition.
The
Company’s mining properties acquired on September 16, 2015 that the Company retains as of December 31, 2018, include Hansen,
North Hansen, High Park, Hansen Picnic Tree, a nd Taylor Ranch, located in Fremont and Teller Counties, Colorado. The Company
also acquired the Keota project located in Weld County, Wyoming and the Ferris Haggerty project located in Carbon County Wyoming.
These mining assets include both owned and leased land in the states of Utah, Colorado and Wyoming. All of the mining assets represent
properties which have previously been mined to different degrees for uranium.
As
the Company has not formally established proven or probable reserves on any of its properties, there is inherent uncertainty as
to whether or not any mineralized material can be economically extracted as originally planned and anticipated.
On
September 16, 2015, in connection with the Company’s acquisition of Black Range, the Company assumed an option and exploration
agreement (the “Option and Exploration Agreement”) with STB Minerals, LLC, a Colorado limited liability company (“STB”).
The Option and Exploration Agreement gives the Company the right to purchase 51% of the mineral rights of specific areas of the
Hansen and Picnic Tree deposits (for which the Company already holds 49% of the rights). If the Company were to exercise its option
under the Option and Exploration Agreement, it would require the Company to (a) make a cash payment of $2,500,000 immediately
upon exercise; (b) issue shares of common stock to STB amounting to a value of $3,750,000 immediately upon exercise; and (c) issue
shares of common stock to STB amounting to a value of $3,750,000 on the date that is 180 days following exercise. The Option and
Exploration Agreement was scheduled to expire by its terms on July 28, 2017 if not exercised.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
NOTE
4 - MINERAL ASSETS, ABLATION INTELLECTUAL PROPERTY AND OTHER PROPERTY, CONTINUED
The
Option and Exploration Agreement provided an extension for an “event of force majeure”. Under this clause, the
Company would receive an extension of the period during which it could exercise its option if it experiences an unreasonable delay
outside its control that prevents it from exercising the option. On May 10, 2017, the Company provided to STB a notice that
it was exercising the force majeure clause due to the delay by government regulators in licensing the Company’s ablation
technology and permitting mining at the Hansen property. STB has contested the Company’s finding that an event of force
majeure has occurred. Ongoing negotiations continued until September 21, 2017 when the Company and STB agreed to settle the matter
through the pre-established arbitration mechanism. Prior to the commencement of arbitration, a settlement was agreed to on February
28, 2018 through the execution of an Amendment of Option and Exploration Agreement. As consideration, the Company paid STB a $20,000
extension payment and granted STB the right to seek a bona fide written offer over the remaining term, and agreed to the removal
of the force majeure clause from the agreement. The Company received an extension until July 28, 2019 and a right of first refusal
to match any bona fide written offer. Hence the Company already controls 49% of the resource property and retains an option to
purchase the 51% of the resource property that the Company does not already control for the duration of the agreement. Further
the Company believes the execution of this agreement is without financial implications, and as such, the Company has not made
any adjustment to these consolidated financials related to this matter.
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 include all of the
parties to the proceeding. The plaintiff organizations were 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 of PRM, whereby the additional
five-year temporary cessation period was granted.
The
Company’s mineral properties and ablation intellectual property are:
|
|
As of December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Mineral properties
|
|
$
|
11,681,720
|
|
|
$
|
11,645,218
|
|
Ablation intellectual property
|
|
$
|
9,488,051
|
|
|
$
|
9,488,051
|
|
Oil
and Gas Lease and Easement
On
July 18, 2017, an oil and gas lease 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 Company received
$120,000 during the third quarter of 2017. The lease will be in force for an initial term of three years and may be extended by
the lessee at 150% of the initial rate. The lessee has also agreed to pay the Company a royalty of 18.75% of the lessee’s
revenue attributed to oil and gas produced, saved, and sold attributable to the net mineral interest. The Company is recognizing
the initial payment incrementally over the term of the lease.
On
February 26, 2018, the Company entered into a further agreement with the same entity as the oil and gas lease to provide them
with an easement to an additional part of the Company’s property solely for the purposes of transporting the oil and gas
extracted via a pipeline. As consideration for the easement, the Company received $36,960 during the first quarter of 2018. The
Company is recognizing this payment incrementally over the eight year term of the easement.
During
the years ended December 31, 2018 and 2017 the Company recognized aggregate revenue of $48,245 and $20,000, respectively, under
these oil and gas lease arrangements.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
NOTE
4 - MINERAL ASSETS, ABLATION INTELLECTUAL PROPERTY AND OTHER PROPERTY, CONTINUED
Right-of-way
grant agreement
On
July 1, 2018, the Company entered into a right of way agreement with a third party, whereby, the Company has granted “right
of way” access to a portion of its mineral properties in exchange for an up front payment of $3,624. The Company is recognizing
this payment incrementally over the term of the right-of-way agreement.
Reclamation
Liabilities
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, 2018 and December 31, 2017,
to be approximately $889,030 and $820,434, respectively. During the years ended December 31, 2018 and 2017, the accretion of the
reclamation liabilities was $11,030 and $9,158, respectively. The Company expects to begin incurring the reclamation liability
after 2054 and accordingly, has discounted the gross liabilities over their remaining lives using a discount rate of 5.4% to net
discounted aggregated values as of December 31, 2018 and December 31, 2017 of $224,645 and $196,821, respectively. The gross reclamation
liabilities as of December 31, 2018 and 2017 are secured by certificates of deposit in the amount of $889,030 and $820,434, respectively.
On
April 11, 2018, the Company received notice from the Colorado Division of Reclamation, Mining and Safety (“CDRMS”)
in regard to its reclamation liability. CDRMS has recalculated the Company’s estimated future reclamation liability, which
would require the Company to increase its certificates of deposit that secure its reclamation liability by $68,517. The Company
had until June 8, 2018 to comply with or appeal the determination. On August 7, 2018, the Company paid CDRMS $68,517 in additional
reclamation bonds to satisfy their requirement.
Reclamation
liability activity for the years ended December 31, 2018 and 2017 consists of:
|
|
For the Years Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Beginning balance
|
|
$
|
196,821
|
|
|
$
|
403,639
|
|
Increase in reclamation liability required by CDRMS
|
|
|
16,794
|
|
|
|
-
|
|
Accretion
|
|
|
11,030
|
|
|
|
9,158
|
|
Write-off of Alaska reclamation liability
|
|
|
-
|
|
|
|
(215,976
|
)
|
Ending Balance
|
|
$
|
224,645
|
|
|
$
|
196,821
|
|
NOTE
5 - Accounts Payable and Accrued Liabilities
Accounts
payable and accrued liabilities consisted of:
|
|
As of
|
|
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
Trade accounts payable
|
|
$
|
326,250
|
|
|
$
|
453,618
|
|
Accrued liabilities
|
|
|
167,070
|
|
|
|
148,398
|
|
|
|
$
|
493,320
|
|
|
$
|
602,016
|
|
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
NOTE
6
- Notes Payable
EFHC
Note
On
August 18, 2014, in connection with the purchase of certain of the mineral properties, the Company entered into a note payable
with Energy Fuels Holding Corporation (“EFHC”) (the “EFHC Note”) for $500,000. The EFHC Note bears interest
at a rate of 3.0% per annum and is secured by a first priority interest in certain of the Company’s mineral properties.
On the date of the purchase, the Company recorded the EFHC Note net of a discount for interest of $73,971 at a rate of 4% per
annum, resulting in a total effective interest rate of 7% per annum. The discount is being amortized using the effective interest
method over the life of the loan. All principal on the EFHC Note was due and payable on August 18, 2018 and interest on the EFHC
Note was due and payable annually beginning August 18, 2015. Prior to the original August 18, 2018 maturity, the Company and EFHC
modified the EFHC Note to extend the maturity date to September 4, 2018. On August 31, 2018, the Company paid the EFHC Note in
full.
Notes
Payable Summary
Notes
payable consisted of:
|
|
Principal
|
|
|
Discount
|
|
|
Balance,
Net of
Discount
|
|
|
Current
|
|
|
Non-Current
|
|
December 31, 2017
|
|
$
|
500,000
|
|
|
$
|
12,550
|
|
|
$
|
487,450
|
|
|
$
|
487,450
|
|
|
$
|
-
|
|
As
of December 31, 2018, there were no notes payable outstanding.
The
Company’s total interest expense, net, consisted of:
|
|
For the Years Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Interest expense, notes payable
|
|
$
|
13,830
|
|
|
$
|
17,162
|
|
Amortization of discount on notes payable
|
|
|
12,550
|
|
|
|
34,771
|
|
Accretion of reclamation liabilities
|
|
|
11,030
|
|
|
|
9,158
|
|
Other interest expense
|
|
|
-
|
|
|
|
1,074
|
|
Interest income
|
|
|
(1,286
|
)
|
|
|
(1,933
|
)
|
Interest expense, net
|
|
$
|
36,124
|
|
|
$
|
60,232
|
|
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
NOTE
7 - COMMITMENTS
Consulting
Agreement with Executive Chairman
On
July 28, 2017, Russell Fryer was appointed the Company’s Executive Chairman. On November 13, 2017, the Company entered into
a consulting agreement with an affiliate of Mr. Fryer. The agreement became effective on July 28, 2017 and, pursuant to its terms,
expires on December 31, 2018. The agreement may be terminated by either party with 90 days’ notice. The agreement provides
for compensation of $15,000 per month and an annual bonus at the discretion of the Board of Directors. Pursuant to the agreement,
if a change of control occurs wherein the consideration in such change of control is more than USD $2.00 per share, the Company
is required to pay a lump sum in the amount of $350,000. On January 29, 2018, the Company provided the requisite 90-day notification
to terminate the consulting agreement, effective April 30, 2018. On May 1, 2018, following the termination of this consulting
contract, Mr. Fryer resigned as director and executive chairman of the Board of Directors.
Vanadium
Joint Venture
On
June 1, 2018, the Company signed a letter agreement with Battery Mineral Resource Nevada, Inc. (“BMR”) to form a joint
venture for vanadium development at the Sage Mine.
Pursuant
to the agreement, BMR will underwrite the cost of scoping, engineering and technical studies during the due diligence period to
prepare for commencing pre-production work for resumption of production. Subsequent to the due diligence work program, BMR has
the option to enter into a definitive joint venture agreement which will trigger an additional buy-in payment to the Company.
Thereafter BMR and the Company will divide joint venture expenditures 50/50 and divide vanadium offtake 65/35 and uranium offtake
10/90. The higher percentage of vanadium offtake for BMR aligns with its rechargeable battery and energy storage mandate. The
agreed deal structure compensates the Company for the differential in the offtake percentage. The agreement provides BMR an additional
period to exercise a short-term option to purchase the entire Sage Mine Project. BMR also retains the right to not proceed beyond
due diligence.
Since
the agreement was signed during the first week of June, vanadium prices have risen from over $14 per pound to over $18 per pound.
Consequently, rather than pursuing a joint venture, BMR provided notification of their desire to exercise the purchase option.
Both parties were working toward the completion of a definitive agreement for the Sage Mine Project. On September 13, 2018, the
Company and BMR mutually terminated the letter agreement and ceased negotiations.
Supply
Contract
In
December 2015, the Company signed a uranium concentrates supply agreement with a major U.S. utility for delivery commencing in
2018 and continuing for a five year period through 2022. As the Company is not currently in production, a partial assignment agreement
was put in place whereby the assignee accepted the Company’s right to the Year 1 delivery of 125,000 pounds of natural uranium
concentrates. The delivery was made on May 1, 2018 and the assignee was paid the full consideration under the agreement. The Company
did not recognize any gain or loss on this transaction. A partial assignment agreement was put in place whereby the assignee accepted
the Company’s right to the Year 2 delivery of 125,000 pounds of natural uranium concentrates. The delivery will be made and the
assignee will be paid the full consideration under the agreement. The Company will not recognize any gain or loss on this transaction.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
NOTE
8 - SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS
Authorized
Capital
The
holders of the Company’s common stock are entitled to one vote per share. Holders of common stock are entitled to receive
ratably such dividends, if any, as may be declared by the Board of Directors out of legally available funds. Upon the liquidation,
dissolution, or winding up of the Company, holders of common stock are entitled to share rateably in all assets of the Company
that are legally available for distribution. As of December 31, 2018 and 2017, an unlimited number of common shares were authorized
for issuance.
Shares
issued for Accounts Payable
On
February 7, 2017, the Company issued 53,788 shares of its common stock in exchange for approximately $83,338 of its accounts payable
outstanding with certain creditors.
On
May 4, 2018, the Company issued 60,832 shares of its common stock in exchange for approximately $32,251 of its accounts payable
outstanding with certain creditors.
Private
Placement
On
March 31, 2017, the Company completed a private placement of 634,424 units at a price of CAD $1.75 (USD $1.35) per unit for gross
proceeds of CAD $1,110,263 (USD $835,805) and net proceeds of CAD $1,066,223 (USD $801,160). Each unit consisted of one share
of the Company’s common stock and a warrant for the purchase of one share of the Company’s common stock. Each warrant
is immediately exercisable at a price of CAD $3.25 and expires five years from the date of issuance.
On
September 15, 2017, the Company completed a private placement of 509,763 units at a price of CAD $0.90 (USD $0.74) per unit for
gross proceeds of CAD $458,787 (USD $376,022) and net proceeds of CAD $418,880 (USD $343,105). Each unit consisted of one share
of common stock and one warrant. Each warrant is immediately exercisable at a price of CAD $1.40 and expires five years from the
date of issuance. The Company also issued broker warrants to purchase 21,751 shares of common stock at a price of CAD $1.40 per
common share, which expire two years from the date of issuance.
On
December 29, 2017, the Company completed a private placement of 426,334 units at a price of CAD $0.90 (USD $0.72) per unit for
gross proceeds of CAD $383,071 (USD $305,918) and net proceeds of CAD $367,059 (USD $293,131). Each unit consisted of one share
of common stock and a warrant to purchase one half of one share of common stock. Each warrant is immediately exercisable at a
price of CAD $1.50 and expires two years from the date of issuance. The Company also issued broker warrants to purchase 9,310
shares of common stock at a price of CAD $1.50 per common share, which expire two years from the date of issuance.
On May 4, 2018, the Company completed a private placement of
909,622 units at a price of CAD $0.68 (USD $0.53) per unit for gross proceeds of CAD $618,543 (USD $481,560). The Company paid
USD $8,794 in offering costs and received net proceeds of USD $457,608. Each unit consisted of one share of common stock and a
warrant to purchase one-half of one share of common stock. Each warrant is exercisable at a price of CAD $1.15 and expires two
years from the date of issuance.
On July 27, 2018, the Company completed a private placement
of 2,525,526 units at a price of CAD $0.68 (USD $0.52) per unit for gross proceeds of CAD $1,717,358 (USD $1,319,096). The Company
paid USD $46,886 in offering costs and received net proceeds of USD $1,272,210. Each unit consisted of one share of common stock
and a warrant to purchase one-half of one share of common stock. Each warrant is exercisable at a price of CAD $1.15 and expires
two years from the date of issuance.
On August 9, 2018, the Company completed a private placement of 1,907,088 units at a price of CAD $0.68
(USD $0.52) per unit for gross proceeds of CAD $1,296,820 (USD $1,000,000). The Company paid USD $26,487 in offering costs and
received net proceeds of USD $973,513. Each unit consisted of one share of common stock and a warrant to purchase one-half of one
share of common stock. Each warrant is exercisable at a price of CAD $1.15 and expires two years from the date of issuance.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
NOTE
8 - SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS, CONTINUED
Incentive
Stock Option Plan
The
Company maintains an Incentive Stock Option Plan (the “Plan”) that permits the granting of stock options as incentive
compensation. Shareholders of the Company approved the Plan on June 30, 2008 and amendments to the Plan on June 20, 2013, and
the Board of Directors approved additional changes to the Plan on September 12, 2015.
The
purpose of the Plan is to attract, retain and motivate directors, management, staff and consultants by providing them with the
opportunity, through stock options, to acquire a proprietary interest in the Company and benefit from its growth.
The
Plan provides that the aggregate number of common shares for which stock options may be granted will not exceed 10% of the issued
and outstanding common shares at the time stock options are granted. As of December 31, 2018, a total of 25,976,837 common shares
were outstanding, and at that date the maximum number of stock options eligible for issue under the Plan was 2,597,684.
On
October 6, 2017, the Company granted options under the Plan for the purchase of an aggregate of 825,000 shares of common stock
to five individuals consisting of directors and officers of the Company. The options have a five year term, an exercise price
of CAD $1.60 (USD $1.28 as of December 31, 2018), and vest equally in thirds commencing initially on the date of grant and thereafter
on October 31, 2017, and March 31, 2018.
On
February 8, 2018, the Company granted options under the plan for the purchase of an aggregate of 100,000 shares of common stock
to a director. The options have an exercise price of CAD $1.00 (US $0.73 as of December 31, 2018) and vest one half on the date
of grant and one half on December 31, 2018. One half of the options expire on January 31, 2023 and the remaining options expire
on December 31, 2023.
On
September 24, 2018, the Company granted options under the plan for the purchase of an aggregate of 983,000 shares of common stock
to several officers, directors, and consultants. The options have an exercise price of CAD $2.15 (US $1.58 as of December 31,
2018) and vest equally in three installments on the date of grant, on October 31, 2018, and on March 31, 2019. One third of the
options expire on September 24, 2023, one third expire on October 31, 2023, and the remaining one third expire on March 31, 2024.
Stock
Options
|
|
Number of Shares
|
|
|
Weighted Average Exercise Price (USD)
|
|
|
Weighted Average Contractual Life (years)
|
|
|
Weighted Average Grant Date Fair Value (USD)
|
|
|
Intrinsic Value
(USD)
|
|
Outstanding - January 1, 2018
|
|
|
1,846,996
|
|
|
$
|
1.92
|
|
|
|
|
|
|
$
|
0.42
|
|
|
|
|
|
Granted
|
|
|
1,083,000
|
|
|
$
|
1.50
|
|
|
|
|
|
|
$
|
0.50
|
|
|
|
|
|
Expired, forfeited, or cancelled
|
|
|
(513,332
|
)
|
|
$
|
2.01
|
|
|
|
|
|
|
$
|
0.24
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - December 31, 2018
|
|
|
2,416,664
|
|
|
$
|
1.67
|
|
|
|
3.73
|
|
|
$
|
0.48
|
|
|
$
|
38,705
|
|
Exercisable - December 31, 2018
|
|
|
2,088,997
|
|
|
$
|
1.68
|
|
|
|
3.57
|
|
|
$
|
0.47
|
|
|
$
|
38,705
|
|
The
Company’s stock based compensation expense related to stock options for the years ended December 31, 2018 and 2017 was $410,088
and $209,435, respectively. As of December 31, 2018, the Company had $432,080 in unamortized stock option expense, which will
be amortized over a period of 0.25 years.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
NOTE
8 - SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS, CONTINUED
Stock
Options, continued
The
Company utilized the Black-Scholes option pricing model to determine the fair value of these stock options, using the assumptions
as outlined below.
|
|
February 8,
2018
|
|
|
September 24,
2018
|
|
Stock Price
|
|
|
CAD $0.52
|
|
|
|
CAD $2.14
|
|
Exercise Price
|
|
|
CAD $1.00
|
|
|
|
CAD $2.15
|
|
Number of Options Granted
|
|
|
100,000
|
|
|
|
983,000
|
|
Dividend Yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected Volatility
|
|
|
49
|
%
|
|
|
49
|
%
|
Weighted Average Risk-Free Interest Rate
|
|
|
1.64
|
%
|
|
|
2.94
|
%
|
Expected life (in years)
|
|
|
2.50
- 3.00
|
|
|
|
2.50-3.00
|
|
Warrants
|
|
Number of Shares
|
|
|
Weighted Average Exercise Price (USD)
|
|
|
Weighted Average Contractual Life (years)
|
|
|
Intrinsic Value (USD)
|
|
Outstanding, January 1, 2018
|
|
|
4,095,563
|
|
|
$
|
2.27
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
2,766,107
|
|
|
$
|
0.84
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(63,269
|
)
|
|
$
|
0.98
|
|
|
|
|
|
|
|
|
|
Outstanding - December 31, 2018
|
|
|
6,798,401
|
|
|
$
|
1.49
|
|
|
|
2.30
|
|
|
$
|
739,929
|
|
Exercisable - December 31, 2018
|
|
|
6,798,401
|
|
|
$
|
1.49
|
|
|
|
2.30
|
|
|
$
|
739,929
|
|
Note
9 - Mining Expenditures
|
|
For the Year Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Permits
|
|
$
|
142,148
|
|
|
$
|
132,183
|
|
Maintenance
|
|
|
19,879
|
|
|
|
8,706
|
|
Contract Labor
|
|
|
11,050
|
|
|
|
8,575
|
|
Royalties
|
|
|
4,638
|
|
|
|
5,260
|
|
|
|
$
|
177,715
|
|
|
$
|
154,724
|
|
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
NOTE
10 - Related Party Transactions (Including Key Management Compensation)
The
Company has transacted with related parties pursuant to service arrangements in the ordinary course of business, as follows:
On
April 1, 2017, the Company entered into a consulting agreement with a United States limited liability company owned by a person
who was a director. The consulting agreement is to provide assistance with capital raising activities and other financial, advisory,
and consulting services for the period April 1, 2017 through June 30, 2017. At June 30, 2017 and the last day of each month thereafter,
the agreement may be extended by the Company on a month-to-month basis with seven days’ notice. The agreement has a monthly
fee of $15,000. Pursuant to the consulting agreement, if the Company completes a merger with a third party introduced by this
director whereby more than 50% of the Company’s then outstanding shares are transferred to that third party, the Company
is required to pay a lump sum in an amount of $350,000 to this entity. On January 29, 2018, the Company provided the requisite
90-day notification to terminate the consulting agreement, effective April 30, 2018, upon which date the agreement was terminated.
On May 1, 2018, upon termination of the agreement, this director resigned his positions as director and as executive chairman.
Prior
to the acquisition of Black Range, Mr. George Glasier, the Company’s CEO, who is also a director, 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 $352,361 as of December 31, 2018)
to Seller within 60 days of the first commercial application of the ablation 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 estimable, the
Company recorded the deferred contingent consideration as an assumed liability in the amount of $352,361 and $390,350 as of December
31, 2018 and 2017, respectively.
Note
11 – Income Taxes
The
tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities
are as follows:
|
|
As of December 31,
|
|
Deferred tax assets:
|
|
2018
|
|
|
2017
|
|
Net operating loss carryovers
|
|
$
|
4,114,419
|
|
|
$
|
3,651,732
|
|
Marketable securities
|
|
|
15,060
|
|
|
|
15,471
|
|
Accrued expenses
|
|
|
39,871
|
|
|
|
44,059
|
|
Deferred tax assets, gross
|
|
|
4,169,350
|
|
|
|
3,711,262
|
|
|
|
|
|
|
|
|
|
|
Less: valuation allowance
|
|
|
(1,962,122
|
)
|
|
|
(1,512,585
|
)
|
Deferred tax assets, net
|
|
|
2,207,228
|
|
|
|
2,198,677
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
(4,916,114
|
)
|
|
|
(4,907,564
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax assets (liabilities), net
|
|
$
|
(2,708,887
|
)
|
|
$
|
(2,708,887
|
)
|
The
change in the Company’s valuation allowance is as follows:
|
|
For the Years Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Beginning of year
|
|
$
|
1,512,585
|
|
|
$
|
1,578,784
|
|
Increase (decrease) in valuation allowance
|
|
|
449,537
|
|
|
|
(66,199
|
)
|
End of year
|
|
$
|
1,962,122
|
|
|
$
|
1,512,585
|
|
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
11 – Income Taxes, CONTINUED
A
reconciliation of the provision for income taxes with the amounts computed by applying the statutory Federal income tax rate to
income from operations before the provision for income taxes is as follows:
|
|
For the Years Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
U.S. federal statutory rate
|
|
|
(21.0
|
)%
|
|
|
(34.0
|
)%
|
State and foreign taxes
|
|
|
(3.8
|
)%
|
|
|
(3.2
|
)%
|
Permanent differences
|
|
|
|
|
|
|
|
|
Non-deductible expenses
|
|
|
5.2
|
%
|
|
|
2.9
|
%
|
Valuation allowance
|
|
|
22.0
|
%
|
|
|
(3.7
|
)%
|
Change in federal tax rate
|
|
|
0
|
%
|
|
|
(33.3
|
)%
|
True-up of prior year deferred tax assets
|
|
|
(2.4
|
)%
|
|
|
(4.1
|
)%
|
Effective income tax rate
|
|
|
0
|
%
|
|
|
(75.4
|
)%
|
The
Company has net operating loss carryovers of approximately $16,590,041 for federal and state income tax purposes, which begin
to expire in 2026. The ultimate realization of the net operating loss is dependent upon future taxable income, if any, of the
Company. Based on losses from inception, the Company determined that as of December 31, 2018 it is more likely than not that the
Company will not realize benefits from the deferred tax assets. The Company will not record income tax benefits in the financial
statements until it is determined that it is more likely than not that the Company will generate sufficient taxable income to
realize the deferred income tax assets. As a result of the analysis, the Company determined that a valuation allowance against
the deferred tax assets was required of $1,962,122 and $1,512,585 as of December 31, 2018 and 2017, respectively.
Internal
Revenue Code (“IRC”) Section 382 imposes limitations on the use of net operating loss carryovers when the stock ownership
of one or more 5% stockholders (stockholders owning 5% or more of the Company’s outstanding capital stock) has increased
on a cumulative basis over a period of three years by more than 50 percentage points. Management cannot control the ownership
changes occurring. Accordingly, there is a risk of an ownership change beyond the control of the Company that could trigger a
limitation of the use of the loss carryover. The Company has analyzed the issuances of shares of common stock during the years
ended December 31, 2018 and 2017 and does not believe such change of control occurred. If such ownership change under IRC section
382 had occurred, such change would substantially limit the Company’s ability in the future to utilize its net operating
loss carryforwards
.
F-23