UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________to ______________
Commission File Number 000-55626
WESTERN URANIUM & VANADIUM CORP.
(Exact Name of Registrant as Specified in Its Charter)
Ontario, Canada | | 98-1271843 |
(State or Other Jurisdiction of
Incorporation or Organization) | | (I.R.S. Employer Identification Number) |
330 Bay Street, Suite 1400 Toronto, Ontario, Canada | | M5H 2S8 |
(Address of Principal Executive Offices) | | (Zip Code) |
(Registrant’s Telephone Number, Including
Area Code)
Securities registered pursuant to Section
12(b) of the Act:
Title of each class | | Trading Symbol(s) | | Name of exchange on which registered |
N/A | | | | |
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions
of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer ☒ | Smaller reporting company ☒ |
| Emerging growth company ☒ |
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of May 17, 2024, 55,223,113 of the registrant’s
no par value common shares were outstanding.
WESTERN
URANIUM & VANADIUM CORP.
FORM
10-Q
TABLE
OF CONTENTS
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
WESTERN
URANIUM & VANADIUM CORP. AND SUBSIDIARIES
CONDENSED
INTERIM CONSOLIDATED BALANCE SHEETS
(Stated
in USD)
(Unaudited)
| |
As of | |
| |
March 31, 2024 | | |
December 31, 2023 | |
Assets | |
| | |
| |
Current assets: | |
| | |
| |
Cash and cash equivalents | |
$ | 11,526,118 | | |
$ | 9,217,585 | |
Restricted cash, current portion | |
| 75,075 | | |
| 75,075 | |
Prepaid expenses | |
| 252,751 | | |
| 382,314 | |
Marketable securities | |
| 566 | | |
| 385 | |
Other current assets | |
| 132,331 | | |
| 131,255 | |
Total current assets | |
| 11,986,841 | | |
| 9,806,614 | |
| |
| | | |
| | |
Restricted cash, net of current portion | |
| 676,442 | | |
| 676,369 | |
Property, plant & equipment and mineral properties, net | |
| 15,216,339 | | |
| 14,926,289 | |
Kinetic separation intellectual property | |
| 9,488,051 | | |
| 9,488,051 | |
| |
| | | |
| | |
Total assets | |
$ | 37,367,673 | | |
$ | 34,897,323 | |
| |
| | | |
| | |
Liabilities and Shareholders’ Equity | |
| | | |
| | |
| |
| | | |
| | |
Liabilities | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 734,255 | | |
$ | 761,123 | |
Reclamation liability, current portion | |
| 75,057 | | |
| 75,057 | |
Total current liabilities | |
| 809,312 | | |
| 836,180 | |
| |
| | | |
| | |
Reclamation liability, net of current portion | |
| 244,557 | | |
| 241,562 | |
Deferred tax liability | |
| 2,708,887 | | |
| 2,708,887 | |
Deferred contingent consideration | |
| 325,800 | | |
| 340,650 | |
| |
| | | |
| | |
Total liabilities | |
| 4,088,556 | | |
| 4,127,279 | |
| |
| | | |
| | |
Shareholders’ Equity | |
| | | |
| | |
Common shares, no par value, unlimited authorized shares, 55,223,419 and 50,002,395 shares issued as of March 31, 2024 and December 31, 2023, respectively, and 55,223,113 and 50,002,089 shares outstanding as of March 31, 2024 and December 31, 2023, respectively | |
| 54,790,230 | | |
| 49,661,910 | |
Treasury shares, 306 shares held in treasury as of March 31, 2024 and December 31, 2023 | |
| - | | |
| - | |
Accumulated deficit | |
| (21,294,745 | ) | |
| (18,817,857 | ) |
Accumulated other comprehensive loss | |
| (216,368 | ) | |
| (74,009 | ) |
Total shareholders’ equity | |
| 33,279,117 | | |
| 30,770,044 | |
Total liabilities and shareholders’ equity | |
$ | 37,367,673 | | |
$ | 34,897,323 | |
The
accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
WESTERN
URANIUM & VANADIUM CORP. AND SUBSIDIARIES
CONDENSED
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
(Stated
in USD)
(Unaudited)
| |
For the Three Months Ended March 31, | |
| |
2024 | | |
2023 | |
| |
| | |
| |
Revenues | |
$ | 54,273 | | |
$ | 165,975 | |
| |
| | | |
| | |
Expenses | |
| | | |
| | |
Mining expenditures | |
| 1,308,879 | | |
| 605,104 | |
Professional fees | |
| 112,690 | | |
| 87,096 | |
General and administrative | |
| 966,245 | | |
| 613,365 | |
Consulting fees | |
| 193,426 | | |
| 737 | |
Total operating expenses | |
| 2,581,240 | | |
| 1,306,302 | |
| |
| | | |
| | |
Operating loss | |
| (2,526,967 | ) | |
| (1,140,327 | ) |
| |
| | | |
| | |
Accretion and interest income, net | |
| (50,079 | ) | |
| (35,296 | ) |
Other income, net | |
| - | | |
| (1,500 | ) |
| |
| | | |
| | |
Net loss | |
| (2,476,888 | ) | |
| (1,103,531 | ) |
| |
| | | |
| | |
Other comprehensive (loss) income | |
| | | |
| | |
Foreign currency translation adjustment | |
| (142,359 | ) | |
| 6,314 | |
| |
| | | |
| | |
Comprehensive loss | |
$ | (2,619,247 | ) | |
$ | (1,097,217 | ) |
| |
| | | |
| | |
Net loss per share - basic and diluted | |
$ | (0.05 | ) | |
$ | (0.03 | ) |
| |
| | | |
| | |
Weighted average shares outstanding - basic and diluted | |
| 52,539,766 | | |
| 43,602,565 | |
The
accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
WESTERN
URANIUM & VANADIUM CORP. AND SUBSIDIARIES
CONDENSED
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Stated
in USD)
(Unaudited)
| |
Common Shares | | |
Treasury Shares | | |
Accumulated | | |
Accumulated Other Comprehensive | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Deficit | | |
Loss | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance as of January 1, 2024 | |
| 50,002,089 | | |
$ | 49,661,910 | | |
| 306 | | |
$ | - | | |
$ | (18,817,857 | ) | |
$ | (74,009 | ) | |
$ | 30,770,044 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (142,359 | ) | |
| (142,359 | ) |
Proceeds from the exercise of warrants | |
| 5,198,540 | | |
| 4,605,458 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,605,458 | |
Stock-based compensation - stock options | |
| - | | |
| 522,862 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 522,862 | |
Cashless exercise of stock options | |
| 22,484 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,476,888 | ) | |
| - | | |
| (2,476,888 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of March 31, 2024 | |
| 55,223,113 | | |
$ | 54,790,230 | | |
| 306 | | |
$ | - | | |
$ | (21,294,745 | ) | |
$ | (216,368 | ) | |
$ | 33,279,117 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of January 1, 2023 | |
| 43,602,565 | | |
$ | 43,394,303 | | |
| 306 | | |
$ | - | | |
$ | (13,875,263 | ) | |
$ | (261,132 | ) | |
| 29,257,908 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 6,314 | | |
| 6,314 | |
Stock-based compensation - stock options | |
| - | | |
| 252,742 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 252,742 | |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,103,531 | ) | |
| - | | |
| (1,103,531 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of March 31, 2023 | |
| 43,602,565 | | |
| 43,647,045 | | |
| 306 | | |
| - | | |
| (14,978,794 | ) | |
| (254,818 | ) | |
| 28,413,433 | |
The
accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
WESTERN
URANIUM & VANADIUM CORP. AND SUBSIDIARIES
CONDENSED
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated
in USD)
(Unaudited)
| |
For the Three Months Ended March 31, | |
| |
2024 | | |
2023 | |
Cash Flows Used In Operating Activities: | |
| | |
| |
Net loss | |
$ | (2,476,888 | ) | |
$ | (1,103,531 | ) |
Reconciliation of net loss to cash used in operating activities: | |
| | | |
| | |
Depreciation | |
| 113,319 | | |
| 43,618 | |
Accretion of reclamation liability | |
| 2,995 | | |
| 2,742 | |
Stock-based compensation | |
| 516,515 | | |
| 252,742 | |
Change in marketable securities | |
| (181 | ) | |
| 45 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Prepaid expenses and other current assets | |
| 128,487 | | |
| 186,676 | |
Accounts payable and accrued liabilities | |
| (26,868 | ) | |
| 9,334 | |
Deferred revenue | |
| - | | |
| (16,155 | ) |
Contingent consideration | |
| (14,850 | ) | |
| (5,385 | ) |
Net cash used in operating activities | |
| (1,757,471 | ) | |
| (629,914 | ) |
| |
| | | |
| | |
Cash Flows Used In Investing Activities | |
| | | |
| | |
Purchase of property, plant & equipment and mineral properties | |
| (403,369 | ) | |
| (623,623 | ) |
Net cash used in investing activities | |
| (403,369 | ) | |
| (623,623 | ) |
| |
| | | |
| | |
Cash Flows Provided By Financing Activities | |
| | | |
| | |
Proceeds from warrant exercises | |
| 4,605,458 | | |
| - | |
Net cash provided by financing activities | |
| 4,605,458 | | |
| - | |
| |
| | | |
| | |
Effect of foreign exchange rate on cash | |
| (136,012 | ) | |
| 6,314 | |
| |
| | | |
| | |
Net increase (decrease) in cash and cash equivalents and restricted cash | |
| 2,308,606 | | |
| (1,247,223 | ) |
| |
| | | |
| | |
Cash and cash equivalents and restricted cash - beginning | |
| 9,969,029 | | |
| 10,433,538 | |
| |
| | | |
| | |
Cash and cash equivalents and restricted cash - ending | |
$ | 12,277,635 | | |
$ | 9,186,315 | |
| |
| | | |
| | |
Cash and cash equivalents | |
$ | 11,526,118 | | |
$ | 8,434,891 | |
Restricted cash, current portion | |
| 75,075 | | |
| 75,057 | |
Restricted cash, noncurrent | |
| 676,442 | | |
| 676,367 | |
Total cash and cash equivalents and restricted cash | |
$ | 12,277,635 | | |
$ | 9,186,315 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information: | |
| | | |
| | |
Cash paid during the period for: | |
| | | |
| | |
Interest | |
$ | - | | |
$ | - | |
Income taxes | |
$ | - | | |
$ | - | |
The
accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
WESTERN
URANIUM & VANADIUM CORP. AND SUBSIDIARIES
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Stated in USD)
(Unaudited)
NOTE
1 – BUSINESS
Nature
of operations
Western
Uranium & Vanadium Corp. (“Western” or the “Company”) 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. Western is a Canadian
domestic issuer and Canadian reporting issuer.
The
Company’s registered office is located 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 common shares began trading on the OTC
Pink Open Market, and on May 23, 2016, the Company’s common shares were approved for trading on the OTCQX Best Market under the
symbol “WSTRF”. The Company’s 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
September 16, 2015, Western completed its acquisition of Black Range Minerals Limited (“Black Range”). Under United States
Securities and Exchange Commission (“Commission”) rules, this transaction triggered the Company being deemed a United States
domestic issuer and losing its foreign private issuer exemption. On April 29, 2016, the Company filed a Form 10 registration statement
with the Commission after converting its basis of accounting from International Financial Reporting Standards (“IFRS”) to
generally accepted accounting principles in the United States (“U.S. GAAP”). On June 28, 2016, the Company’s registration
statement became effective and Western became a United States reporting issuer.
On
June 30, 2023, Western re-qualified as a foreign private issuer as that term is defined in Rule 3b-4(c) promulgated under the Securities
Exchange Act of 1934 (the “Exchange Act”). As a result, the Company may now utilize certain accommodations made to foreign
private issuers, including (1) an exemption from complying with the Commission’s proxy rules, (2) an exemption from the Company’s
insiders having to comply with the reporting and short-swing trading liability provisions of Section 16 under the Exchange Act, (3) the
ability to make periodic filings with the Commission on the Form 20-F and Form 6-K foreign issuer forms, and (4) the ability to offer
and sell unrestricted securities outside of the United States pursuant to Rule 903 of Regulation S. The Company plans to take advantage
of these accommodations. However, the Company currently has decided to voluntarily continue to file periodic reports with the Commission
using domestic issuer forms including filing annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form
8-K.
Note
2 – Liquidity and going concern
With
the exception of the quarter ended June 30, 2022, the Company has incurred losses from its operations. During the three months ended
March 31, 2024, the Company generated a net loss of $2,476,888. The Company expects to generate operating losses for the foreseeable
future as it incurs expenses to bring its mineral processing facility online and further expand mining operations. As of March 31, 2024,
the Company had an accumulated deficit of $21,294,745 and working capital of $11,177,529.
Since
inception, the Company has met its liquidity requirements principally through the issuance of notes and the sale of its common shares.
During the three months ended March 31, 2024, the Company received $4,605,458 in proceeds from the exercise of its common share warrants.
On December 12, 2023, the Company closed a non-brokered private placement of 5,215,828 units at a price of $1.02 (CAD $1.39) per unit.
The aggregate gross proceeds raised in the private placement amounted to $5,324,988 (CAD $7,250,000) and net proceeds amounted to $4,836,867
(CAD $6,588,089). During the year ended December 31, 2023, the Company received $1,004,044 in proceeds from the exercise of its common
share warrants.
The
Company’s ability to continue its planned operations and to pay its obligations when they become due is contingent upon the Company
obtaining additional financing. Management’s plans include seeking to procure additional funds through debt and equity financing,
to secure regulatory approval to fully utilize its kinetic separation (“Kinetic Separation”) technology, and to initiate
the processing of ore to generate operating cash flows.
WESTERN
URANIUM & VANADIUM CORP. AND SUBSIDIARIES
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Stated in USD)
(Unaudited)
Note
2 – Liquidity and going concern, continued
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. 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 condensed
interim consolidated financial statements. The accompanying condensed interim 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
The
accompanying condensed interim consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial
information and with the instructions to Form 10-Q and Rule 10 of Regulation S–X. Accordingly, they do not include all of the information
and notes required by U.S. GAAP for complete financial statements. However, in the opinion of management of the Company, all adjustments
necessary for a fair presentation of the financial position and operating results have been included in these condensed interim consolidated
financial statements. These condensed interim consolidated financial statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company’s Annual Report on Form 10–K for the fiscal year ended December 31,
2023, as filed with the SEC on April 16, 2024. The Company has voluntarily elected to file this Quarterly Report on Form 10-Q for the
quarter ended March 31, 2024 notwithstanding its foreign private issuer status. Operating results for the three months ended March 31,
2024 are not necessarily indicative of the results that may be expected for any subsequent quarters or for the year ending December 31,
2024.
The
accompanying condensed interim 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., Black Range Development Utah LLC and Maverick Strategic Minerals Corp. All inter-company transactions
and balances have been eliminated upon consolidation.
The
Company reports operating and financial results in a single segment based on the consolidated information used by the chief operating
decision maker (“CODM”) in evaluating the financial performance of its business and allocating resources. This single segment
reflects the Company’s core business: produce critical minerals. As the Company has one reportable segment, net loss, total assets and
working capital are equal to consolidated results.
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”), through the completion
of a “final” or “bankable” feasibility study for any of its uranium projects.
Exploration
Stage and Mineral Properties
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, disposal wells, and mine development, are expensed as incurred until such time proven or probable reserves are established
for that uranium project, after which subsequent expenditures relating to development activities for that particular project are capitalized
as incurred. Expenditures relating to mining and ore production while the Company is in the exploration stage and while the ore is stockpiled
underground are expensed as incurred.
WESTERN
URANIUM & VANADIUM CORP. AND SUBSIDIARIES
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Stated in USD)
(Unaudited)
Note
3 – SUMMARY OF Significant Accounting Policies, CONTINUED
Exploration
Stage and Mineral Properties, continued
Production
stage issuers, as defined in subpart 1300 of Regulation S-K, having engaged in material extraction of established mineral reserves on
at least one material property, 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 an exploration stage issuer, 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 mine development and extraction 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 condensed interim consolidated financial statements may not be directly
comparable to the financial statements of companies in the production stage. Western will not be eligible to become a production stage
issuer, and will remain an exploration stage issuer, until such time as mineral reserves are established on at least one material property.
Use
of Estimates
The
preparation of these condensed interim 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 condensed
interim consolidated financial statements of changes in such estimates in future periods could be significant. Significant areas requiring
management’s estimates and assumptions include the determination of the fair value of transactions involving common shares, assessment
of the useful life and evaluation for impairment of Kinetic Separation intellectual property, valuation and impairment assessments of
mineral properties and equipment, valuation of deferred contingent consideration, valuation of the reclamation liability and valuation
of stock-based compensation. 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. The functional currencies of the subsidiaries is the United
States dollar. Monetary assets and liabilities of these subsidiaries are translated at the exchange rates at the balance sheet date.
Transactions denominated in currencies other than the functional currency are recorded based on the exchange rates at the time of the
transaction. 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 condensed
interim consolidated balance sheets.
Segment
Information
The
Company identifies its operating segments in accordance with Accounting Standards Codification 280, Segment Reporting, or ASC 280. Operating
segments are defined as components of an enterprise about which separate discrete financial information is available for evaluation by
the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The
Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated
basis for the purposes of allocating resources. Accordingly, the Company has determined it operates and manages its business in a single
reportable operating segment.
WESTERN
URANIUM & VANADIUM CORP. AND SUBSIDIARIES
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Stated in USD)
(Unaudited)
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. There were no cash equivalents at March 31, 2024 and December 31, 2023.
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 other comprehensive (loss) income, 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 and Colorado. As these funds are not available
for general corporate purposes and secure the long term reclamation liability (see Note 4), they have been separately disclosed and classified
as long-term for the majority of the Company’s mines. As of March 31, 2024 and December 31, 2023, the Company has determined that
the Van 4 Mine is considered to be in reclamation. The Company recognized the Van 4 Mine’s reclamation liability and its restricted
cash in full on the Company’s condensed interim consolidated balance sheets as current.
Property,
Plant & Equipment and Mineral Properties, Net
Property,
plant and equipment is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method.
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 the FASB ASC 842, 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 based upon
production.
Fair
Values of Financial Instruments
The
carrying amounts of cash and cash equivalents, restricted cash – current portion, accounts payable and accrued liabilities 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 Company’s operating and financing activities are conducted
primarily in Canadian dollars, and as a result, the Company is subject to exposure to market risks from changes in foreign currency rates.
The carrying amount of restricted cash – net of current portion, approximates fair value as the accounts earn interest at market
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.
The
FASB 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).
WESTERN
URANIUM & VANADIUM CORP. AND SUBSIDIARIES
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Stated in USD)
(Unaudited)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Fair
Values of Financial Instruments, continued
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:
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 and inputs that are derived principally from or
corroborated by observable market data or correlation by other means.
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 March
31, 2024 | |
$ | 566 | | |
$ | - | | |
$ | - | |
| |
| | | |
| | | |
| | |
Marketable securities as of December 31, 2023 | |
$ | 385 | | |
$ | - | | |
$ | - | |
Stock-Based
Compensation
The
Company follows the FASB 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 fair value of the stock or the fair value of the service, whichever is more readily measurable. 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 consultants, this is
typically considered to be the vesting period of the award.
Net
Loss per Share
Basic
net loss per share is computed by dividing net loss by the weighted average number of common shares 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 net loss per share for each of the three months ended March 31, 2024 and 2023 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 Three Months Ended March 31, | |
| |
2024 | | |
2023 | |
Warrants to purchase
common shares | |
| 5,578,739 | | |
| 9,362,076 | |
Options to purchase common
shares | |
| 4,548,334 | | |
| 4,098,000 | |
Total potentially dilutive
securities | |
| 10,127,073 | | |
| 13,460,076 | |
WESTERN URANIUM &
VANADIUM CORP. AND SUBSIDIARIES
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Stated in USD)
(Unaudited)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Recent
Accounting Standards
In
November 2023, the FASB issued Accounting Standard Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements
to Reportable Segment Disclosures.” This ASU requires annual and interim disclosures about significant segment expenses that are
regularly provided to the CODM and included within each reported measure of segment profit or loss as well as the amount and composition
of other segment items. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal
years beginning after December 15, 2024. The Company is still evaluating the full extent of the potential impact of the adoption of ASU
2023-09, but believes it will not have a material impact on its condensed interim consolidated financial statements and disclosures.
In
December 2023, the FASB issued ASU 2023-09 – Improvements to Income Tax Disclosures, which enhances the transparency and decision
usefulness of income tax disclosures. The standard is effective for public companies for annual periods beginning after December 15,
2024. Early adoption is available. The Company is still evaluating the full extent of the potential impact of the adoption of ASU 2023-09,
but believes it will not have a material impact on its condensed interim consolidated financial statements and disclosures.
NOTE
4 – Property, plant & equipment and mineral properties, net AND Kinetic separation INTELLECTUAL PROPERTY
The Company’s mining properties acquired on
August 18, 2014 that the Company retains as of March 31, 2024 include: The 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 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 March 31, 2024 include: Hansen, North
Hansen and Hansen Picnic Tree located in Fremont and Teller Counties, Colorado. The Company also acquired the Keota project located in
Weld County, Colorado 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.
The
Company’s property, plant & equipment and mineral properties, net and kinetic separation intellectual property are:
| | Estimated Useful Lives | | As of March 31, 2024 | | | As of December 31, 2023 | |
Mineral properties | | N/A | | $ | 11,688,841 | | | $ | 11,688,841 | |
Mining equipment | | 5 years | | | 2,580,166 | | | | 2,345,055 | |
Vehicles | | 5 years | | | 746,462 | | | | 549,703 | |
Software | | 5 years | | | 9,120 | | | | - | |
Construction in progress | | N/A | | | 274,033 | | | | 312,384 | |
Land | | N/A | | | 351,957 | | | | 351,957 | |
Total property, plant & equipment and mineral properties | | | | $ | 15,650,579 | | | $ | 15,247,940 | |
Less: accumulated depreciation | | | | | 434,240 | | | | 321,651 | |
Property, plant & equipment and mineral properties, net | | | | $ | 15,216,339 | | | $ | 14,926,289 | |
| | | | | | | | | | |
Kinetic separation intellectual property | | | | $ | 9,488,051 | | | $ | 9,488,051 | |
WESTERN URANIUM &
VANADIUM CORP. AND SUBSIDIARIES
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Stated in USD)
(Unaudited)
NOTE
4 – PROPERTY, PLANT & EQUIPMENT AND MINERAL PROPERTIES, NET AND KINETIC SEPARATION INTELLECTUAL PROPERTY,
continued
Property,
plant & equipment and mineral properties, net
During
the three months ended March 31, 2024 and 2023, Western made purchases of $403,369 and $623,623, which principally consisted of mining
equipment and vehicles, to increase mining capacity and land for the mineral processing facility. During the three months ended March
31, 2024, depreciation expense was $113,319, which was included in mining expenditures on the Company’s condensed interim consolidated
statements of operations and other comprehensive loss. During the three months ended March 31, 2023, depreciation expense was $43,618,
which was included in mining expenditures on the Company’s condensed interim consolidated statements of operations and other comprehensive
loss.
Oil
and Gas Lease and Easement
In
2017, the Company entered into an oil and gas lease that became effective with respect to minerals and mineral rights owned by the Company
of approximately 160 surface acres of the Company’s property in Colorado. As consideration for entering into the lease, the lessee
has agreed to pay the Company a royalty from the lessee’s revenue attributed to oil and gas produced, saved, and sold attributable
to the net mineral interest. The Company has also received cash payments from the lessee related to the easement that the Company is
recognizing incrementally over the eight year term of the easement.
On
June 23, 2020, the operator elected to extend the oil and gas lease easement for three additional years through July 2023. This was done
to provide additional time in order to complete well construction and commence oil and gas production. During 2021, the operator completed
a first set of eight (8) wells which commenced oil and gas production by August 2021. During 2022, the operator completed a second set
of eight (8) wells which commenced oil and gas production by August 2022. All sixteen (16) wells remain in production and monthly royalty
payments will be ongoing in perpetuity as long as oil and/or gas are produced from the pooled unit containing these sixteen (16) wells.
During
the three months ended March 31, 2024 and 2023 the Company recognized aggregate revenue of $54,273 and $165,975, respectively, under
these oil and gas lease arrangements.
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 to be $751,517 and $751,444 as of March 31, 2024 and December 31, 2023, respectively.
The portion of the reclamation liability related to the Van 4 Mine, which is in reclamation as of March 31, 2024, and its related restricted
cash are included in current liabilities and current assets, respectively, at a value of $75,057. During the three months ended March
31, 2024, the Company’s internal mining operations team has been performing the reclamation work, and the State of Colorado has
not yet reduced the reclamation liability amount. The Company expects to begin incurring the reclamation liability after 2054 for all
mines that are not in reclamation and accordingly, has discounted the gross liabilities over their remaining lives using a discount rate
of 5.4%. The net discounted aggregated values as of March 31, 2024 and December 31, 2023 were $244,557 and $241,562, respectively. The
gross reclamation liabilities as of March 31, 2024 and December 31, 2023 are secured by financial warranties in the amount of $751,517
and $751,444, respectively.
WESTERN
URANIUM & VANADIUM CORP. AND SUBSIDIARIES
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Stated in USD)
(Unaudited)
NOTE
4 – PROPERTY, PLANT & EQUIPMENT AND MINERAL PROPERTIES, NET AND KINETIC SEPARATION INTELLECTUAL PROPERTY,
continued
Reclamation
Liabilities, continued
Reclamation
liability activity for the three months ended March 31, 2024 and 2023 consists of:
| |
For
the Three Months Ended March 31, | |
| |
2024 | | |
2023 | |
Beginning balance
at January 1 | |
$ | 316,619 | | |
$ | 300,276 | |
Accretion | |
| 2,995 | | |
| 2,742 | |
Ending Balance at March 31 | |
$ | 319,614 | | |
$ | 303,018 | |
Less: Reclamation liability,
current portion | |
| 75,057 | | |
| 75,057 | |
Reclamation liability, net
of current portion | |
$ | 244,557 | | |
$ | 227,961 | |
Topaz
Mine Permitting Status
In
November 2020 and December 2020, a coalition of environmental groups (the “Plaintiffs”) filed a complaint against the
Mined Land Reclamation Board (“MLRB”) seeking partial appeals of prior MLRB decisions, requesting the termination of the
Topaz Mine permit. The Company joined with the MLRB in defense of those decisions. On May 5, 2021, the Plaintiffs in the Topaz
Appeal filed an opening brief with the Denver District Court seeking to overturn the July 22, 2020 and October 21, 2020 MLRB permit
hearing decisions on the Topaz Mine permit. The MLRB and the Company sought a settlement with the Plaintiffs. A settlement was not
reached, and the MLRB and the Company submitted answer briefs on August 20, 2021. The Plaintiffs submitted a reply brief on
September 10, 2021. On March 1, 2022, the Denver District Court reversed the MLRB’s orders regarding the Topaz Mine and
remanded the case back to the MLRB for further proceedings consistent with its order. Subsequently on March 20, 2023, the MLRB
issued a board order for the Company to commence final reclamation, which upon completion will terminate mining operations at the
Topaz Mine. Reclamation commenced immediately at the Topaz Mine and is to be completed within five years by March 2028. The Company
is currently working toward the completion of an updated Topaz Mine Plan of Operations which is a separate federal requirement of
the Bureau of Land Management (“BLM”) for the conduct of mining activities on the federal land at the Topaz Mine and needed to re-permit the Topaz Mine with
Colorado’s DRMS. The review of Western’s most recent submission continues to be delayed due to staff turnover at the
BLM.
WESTERN
URANIUM & VANADIUM CORP. AND SUBSIDIARIES
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Stated in USD)
(Unaudited)
NOTE
4 – PROPERTY, PLANT & EQUIPMENT AND MINERAL PROPERTIES, NET AND KINETIC SEPARATION INTELLECTUAL PROPERTY,
continued
Kinetic
Separation Intellectual Property
The
Kinetic Separation intellectual property was acquired in Western’s acquisition of Black Range on September 16, 2015. Previously
Black Range acquired its Kinetic Separation assets in the dissolution of a joint venture on March 17, 2015, through the acquisition of
all the assets of the joint venture and received a 25-year license to utilize all of the patented and unpatented technology owned by
the joint venture. The technology license agreement for patents and unpatented technology became effective as of March 17, 2015, for
a period of 25 years, until March 16, 2040. There are no remaining license fee obligations, and there are no future royalties due under
the agreement. The Company has the right to sub-license the technology to third parties. The Company may not sell or assign the Kinetic
Separation license; however, the license could be transferred in the case of a sale of the Company. The Company has developed improvements
to Kinetic Separation during the term of the license agreement and retains ownership of, and may obtain patent protection on, any such
improvements developed by the Company.
The
Kinetic Separation patent was filed on September 13, 2012 and granted on February 14, 2014 by the United States Patent Office. The patent
is effective for a period of 20 years until September 13, 2032. This patent is supported by two provisional patent applications. The
provisional patent applications expired after one year but were incorporated in the U.S. Patent by reference and claimed benefit prior
to their expirations. The status of the patent and two provisional patent applications has not changed subsequent to the 2014 patent
grant. The Company has the continued right to use any patented portion of the Kinetic Separation technology that enters the public domain
subsequent to the patent expiration.
The
Company anticipates Kinetic Separation will improve the efficiency of the mining and processing of the sandstone-hosted ore from Western’s
conventional mines through the separation of waste from mineral bearing-ore, potentially reducing transportation, mill processing, and
mill tailings costs. Kinetic Separation is not currently in use or being applied at any Company mines. The Company views Kinetic Separation
as a cost saving technology, which it will seek to incorporate into ore production subsequent to commencing scaled production levels.
There are also alternative applications, which the Company has explored.
NOTE
5 – Accounts Payable and Accrued Liabilities
Accounts
payable and accrued liabilities consisted of:
| |
As
of | |
| |
March
31, 2024 | | |
December
31, 2023 | |
Trade accounts
payable | |
$ | 504,935 | | |
$ | 562,831 | |
Accrued
liabilities | |
| 229,320 | | |
| 198,292 | |
Total
accounts payable and accrued liabilities | |
$ | 734,255 | | |
$ | 761,123 | |
WESTERN
URANIUM & VANADIUM CORP. AND SUBSIDIARIES
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Stated in USD)
(Unaudited)
NOTE
6 – SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS
Authorized
Capital
The
holders of the Company’s common shares are entitled to one vote per share. Holders of common shares are entitled to ratably receive
such dividends, if any, as may be declared by the board of directors, out of legally available funds. Upon the liquidation, dissolution,
or winding down of the Company, holders of common shares are entitled to share ratably in all assets of the Company that are legally
available for distribution. As of March 31, 2024 and December 31, 2023, an unlimited number of common shares were authorized for issuance.
Warrant
Exercises
During
the three months ended March 31, 2024, an aggregate of 5,198,540 warrants were exercised for total proceeds of $4,605,458 (CAD $6,238,248).
There were no warrant exercises during the three months ended March 31, 2023.
Incentive
Stock Option Plan
The
Company maintains an Incentive Stock Option Plan (the “Plan”) that permits the granting of stock options as incentive compensation.
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 March 31, 2024, a total of 55,223,113 common shares were outstanding.
As of March 31, 2024, the maximum number of stock options eligible to be issued under the Plan would be 5,522,311, and net of 4,548,334
options outstanding as of March 31, 2024, there remain 973,977 stock options available to be issued under the Plan.
Shareholder
Rights Plan
On
May 24, 2023, the Company adopted and on June 29, 2023, the shareholders approved a shareholder rights plan, which is designed to ensure
the fair treatment of shareholders in connection with any take-over bid for the Company and to provide the Board of Directors and shareholders
with sufficient time to fully consider any unsolicited takeover bid (the “Shareholder Rights Plan”). The Shareholder Rights
Plan also provides the Board of Directors with time to pursue, if appropriate, other alternatives to maximize shareholder value in the
event of a takeover bid.
Pursuant
to the terms of the Shareholder Rights Plan subject to a triggering event as defined in the Shareholder Rights Plan and as determined
by the Board of Directors, rights (the “Rights”) will be issued to holders of Common Shares at a rate of one Right for each
Share outstanding.
WESTERN
URANIUM & VANADIUM CORP. AND SUBSIDIARIES
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Stated in USD)
(Unaudited)
NOTE
6 – SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS, CONTINUED
Stock
Options
During the three-months ended March 31, 2024,
the Company issued 22,484 shares of common stock pursuant to the cashless exercise of 41,666 stock options with an exercise
price of $0.79 (CAD $1.03).
| |
Number
of Shares | | |
Weighted
Average Exercise Price | | |
Weighted
Average Contractual Life (Years) | | |
Intrinsic
Value | |
Outstanding – January 1, 2024 | |
| 4,917,666 | | |
$ | 1.22 | | |
| 3.85 | | |
$ | 214,875 | |
Granted | |
| - | | |
| - | | |
| | | |
| | |
Expired | |
| (327,666 | ) | |
| 1.66 | | |
| | | |
| | |
Exercised | |
| (41,666 | ) | |
| 0.79 | | |
| | | |
| | |
Outstanding – March
31, 2024 | |
| 4,548,334 | | |
$ | 1.19 | | |
| 3.89 | | |
$ | 758,349 | |
Exercisable – March
31, 2024 | |
| 3,531,662 | | |
$ | 1.18 | | |
| 3.40 | | |
$ | 608,192 | |
There
were no stock option granted during the three months ended March 31, 2024.
The
Company’s stock-based compensation expense related to stock options for the three months ended March 31, 2024 was $516,515, of
which $143,946 and $372,569 was included in mining expenditures and general and administrative expenses, respectively, on the Company’s
condensed interim consolidated statements of operations and other comprehensive loss. The Company’s stock-based compensation expense
related to stock options for the three months ended March 31, 2023 was $252,742, of which $41,330 and $211,412 was included in mining
expenditures and general and administrative expenses, respectively, on the Company’s condensed interim consolidated statements
of operations and other comprehensive loss. As of March 31, 2024, there was approximately $485,853 of unrecognized share-based compensation
for unvested stock option grants, which is expected to be recognized over a weighted average period of 0.59 years.
Warrants
| |
Number
of Shares | | |
Weighted
Average Exercise Price | | |
Weighted
Average Contractual Life (Years) | | |
Intrinsic
Value | |
| |
| | |
| | |
| | |
| |
Outstanding – January 1, 2024 | |
| 10,804,539 | | |
$ | 1.30 | | |
| 1.31 | | |
$ | 1,576,511 | |
Issued | |
| - | | |
| - | | |
| | | |
| | |
Exercised | |
| (5,198,540 | ) | |
| 0.89 | | |
| | | |
| | |
Expired/Forfeited | |
| (27,260 | ) | |
| 0.89 | | |
| | | |
| | |
Outstanding – March
31, 2024 | |
| 5,578,739 | | |
$ | 1.63 | | |
| 2.15 | | |
$ | - | |
Exercisable – March
31, 2024 | |
| 5,578,739 | | |
$ | 1.63 | | |
| 2.15 | | |
$ | - | |
WESTERN URANIUM &
VANADIUM CORP. AND SUBSIDIARIES
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Stated in USD)
(Unaudited)
Note
7 – Mining Expenditures
| |
For
the Three Months Ended March 31, | |
| |
2024 | | |
2023 | |
Mining costs | |
$ | 620,017 | | |
$ | 276,139 | |
Labor and related benefits | |
| 662,763 | | |
| 298,866 | |
Permits | |
| 26,099 | | |
| 27,946 | |
Royalties | |
| - | | |
| 2,153 | |
| |
$ | 1,308,879 | | |
$ | 605,104 | |
Joint
Venture
During
February 2024, PRM entered into a joint venture agreement with Rimrock Exploration and Development Inc. (“Rimrock”) to explore,
develop and mine (the “Mining Operations”) certain uranium and vanadium permitted mines and mining claims located in Colorado
and owned by Rimrock (the “JV”). Pursuant to the terms of the JV, Rimrock will contribute certain assets into the JV and
PRM will contribute $200,000 (the “Initial Contribution”) to be used to fund the Mining Operations. Thereafter, each party
will own a 50% interest in the assets of the JV. During the initial phase of the JV, Rimrock will be the operator and the permits and
licenses for the operator will remain in the name of Rimrock. The JV intends to sell the mined material to the Company under terms to
be determined. During the term of the JV, PRM will pay the costs of the Mining Operations and will be entitled to recover 50% of such
costs subsequent to the contribution of the full amount of the Initial Contribution. The JV will fund the recovery payments to be made
to PRM from the proceeds of the sale of mined material. On February 20, 2024, PRM funded $50,000 of the Initial Contribution, which was
expensed to mining expenditures within the condensed interim consolidated statements of operations and other comprehensive loss and reflected
within mining cost in the table above. Subsequently on April 11, 2024, PRM funded an additional $53,931 to the JV.
NOTE
8 – Related Party Transactions AND BALANCES
The
Company has transacted with related parties pursuant to service arrangements in the ordinary course of business, as follows:
Prior
to the acquisition of Black Range, Mr. George Glasier, the Company’s CEO, who is also a director of the Company (“Seller”),
transferred his interest in a former joint venture with Ablation Technologies, LLC to Black Range. In connection with the transfer, Black
Range issued 25 million shares of Black Range common stock to Seller and committed to pay $325,800 (AUD $500,000) to Seller within 60
days of the first commercial application of the Kinetic Separation technology. The Company assumed this contingent payment obligation
in connection with the acquisition of Black Range. At the date of the acquisition of Black Range, this contingent obligation was determined
to be probable. Since the deferred contingent consideration obligation is probable and the amount is estimable, the Company recorded
the deferred contingent consideration as an assumed liability in the amount of $325,800 and $340,650 as of March 31, 2024 and December
31, 2023, respectively.
The
Company has multiple lease arrangements with Silver Hawk Ltd., an entity which is owned by George Glasier and his wife Kathleen Glasier.
These leases, which are all on a month-to-month basis, are for the rental of office, workshop, warehouse and employee housing facilities.
The Company incurred rent expense of $23,525 and $17,925 in connection with these arrangements for the three months ended March 31, 2024
and 2023, respectively.
The
Company is obligated to pay Mr. Glasier for reimbursable expenses in the amount of $15,482 and $84,040, included within accounts payable
and accrued liabilities, as of March 31, 2024 and December 31, 2023, respectively.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking
Statements
The information disclosed in this quarterly report,
and the information incorporated by reference herein, include “forward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). Forward-looking statements include, but are not limited to, statements regarding our or our
management’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer
to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking
statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,”
“expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,”
“predict,” “project,” “should,” “would” and similar expressions may identify forward-looking
statements, but the absence of these words does not mean that a statement is not forward-looking.
The
forward-looking statements contained or incorporated by reference in this quarterly report are based on our current expectations and
beliefs concerning future developments and their potential effects on us and speak only as of the date of each such statement. There
can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve
a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance
to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include,
but are not limited to, those factors described in this Item 2 of Part I and Item 1A of Part II of this quarterly report. Should one
or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material
respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities
laws.
The
following discussion should be read in conjunction with our condensed interim consolidated financial statements and footnotes thereto
contained in this quarterly report.
Overview
General
Western
Uranium & Vanadium Corp. (“Western” or the “Company”, formerly Western Uranium Corporation) was incorporated
in December 2006 under the Ontario Business Corporations Act. On November 20, 2014, the Company completed a listing process on the Canadian
Securities Exchange (“CSE”). As part of that process, the Company acquired 100% of the members' interests of Pinon Ridge
Mining LLC (“PRM”), a Delaware limited liability company. The transaction constituted a reverse takeover (“RTO”)
of Western by PRM. Subsequent to obtaining appropriate shareholder approvals, the Company reconstituted its board of directors and senior
management team. Western is a Canadian domestic issuer and Canadian reporting issuer.
On
August 18, 2014, the Company closed on the purchase of certain mining properties in Colorado and Utah from Energy Fuels Holding Corp.
Assets purchased included both owned and leased lands in Utah and Colorado, and all represent properties that have been previously mined
for uranium to varying degrees in the past. The acquisition included the purchase of the Sunday Mine Complex. The Sunday Mine Complex
is located in western San Miguel County, Colorado. The complex consists of the following five individual mines: the Sunday mine, the
Carnation mine, the Saint Jude mine, the West Sunday mine and the Topaz Mine. The operation of each of these mines requires a separate
permit, and all such permits have been obtained by Western and are currently valid. In addition, each of the mines has good access to
a paved highway, electric power to existing declines, office/storage/shop and change buildings, and an extensive underground haulage
development with several vent shafts complete with exhaust fans. The Sunday Mine Complex is the Company’s core resource property
and in July 2021 was assigned “Active” status when mining operations were restarted.
On
September 16, 2015, Western completed its acquisition of Black Range, an Australian company that was listed on the Australian Securities
Exchange until the acquisition was completed. The acquisition terms were pursuant to a definitive Merger Implementation Agreement entered
into between Western and Black Range. Pursuant to the agreement, Western acquired all of the issued shares of Black Range by way of Scheme
of Arrangement (“the Scheme”) under the Australian Corporation Act 2001 (Cth) (the “Black Range Transaction”),
with Black Range shareholders being issued common shares of Western on a 1 for 750 basis. On August 25, 2015, the Scheme was approved
by the shareholders of Black Range, and on September 4, 2015, Black Range received approval by the Federal Court of Australia. In addition,
Western issued options to purchase Western common shares to certain employees, directors, and consultants. Such stock options were intended
to replace Black Range stock options outstanding prior to the Black Range Transaction on the same 1 for 750 basis.
Under
United States Securities and Exchange Commission (“Commission”) rules, the Black Range transaction triggered the Company
being deemed a United States domestic issuer and losing its foreign private issuer exemption. On April 29, 2016, the Company filed a
Form 10 registration statement with the Commission after shifting its basis of accounting from IFRS to U.S. GAAP. On June 28, 2016, the
Company’s registration statement became effective and Western became a United States reporting issuer.
On
June 30, 2023, Western re-qualified as a foreign private issuer as that term is defined in Rule 3b-4(c) promulgated under the Exchange
Act. As a result, the Company may now utilize certain accommodations made to foreign private issuers, including (1) an exemption from
complying with the Commission’s proxy rules, (2) an exemption from the Company’s insiders having to comply with the reporting
and short-swing trading liability provisions of Section 16 under the Exchange Act, (3) the ability to make periodic filings with the
Commission on the Form 20-F and Form 6-K foreign issuer forms, and (4) the ability to offer and sell unrestricted securities outside
of the United States pursuant to Rule 903 of Regulation S. The Company plans to take advantage of these accommodations. However, the
Company currently has decided to voluntarily continue to file periodic reports with the Commission using domestic issuer forms including
filing annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
The
Company has registered offices at 330 Bay Street, Suite 1400, Toronto, Ontario, Canada, M5H 2S8, and its common shares are listed on
the CSE under the symbol “WUC” and are traded on the OTCQX Best Market under the symbol “WSTRF”. Its principal
business activity is the acquisition and development of uranium and vanadium resource properties in the states of Utah and Colorado in
the United States of America (“United States”).
Recent
Developments
Bullen
Property (Weld County)
In
2017, the Company entered into an oil and gas lease that became effective with respect to minerals and mineral rights owned by the Company
of approximately 160 surface acres of the Company’s property in Colorado. As consideration for entering into the lease, the lessee
has agreed to pay the Company a royalty from the lessee’s revenue attributed to oil and gas produced, saved, and sold attributable
to the net mineral interest. The Company has also received cash payments from the lessee related to the easement that the Company is
recognizing incrementally over the eight year term of the easement.
On
June 23, 2020, the operator elected to extend the oil and gas lease easement for three additional years through July 2023. This was done
to provide additional time in order to complete well construction and commence oil and gas production. During 2021, the operator completed
a first set of eight (8) wells which commenced oil and gas production by August 2021. During 2022, the operator completed a second set
of eight (8) wells which commenced oil and gas production by August 2022. All sixteen (16) wells remain in production and monthly royalty
payments will be ongoing in perpetuity as long as oil and/or gas are produced from the pooled unit containing these sixteen (16) wells.
During
the three months ended March 31, 2024 and 2023, we recognized aggregate revenue of $54,273 and $165,975, respectively, under these
oil and gas lease arrangements.
Sunday
Mine Complex Project Update
Western
continues to ramp up operations to achieve its annualized production target of 1 million pounds of uranium and 6 million pounds of vanadium.
At the beginning of 2024, Western expanded the Sunday Mine Complex mining operations by deploying two alternating mining crews and two
alternating drilling teams who operate seven days a week. Following the expansion of infrastructure deeper into the West Sunday Mine,
the mining teams commenced driving a drift approximately 2,700 feet to the Leonard & Clark deposit. So far, the teams have drifted
approximately 317 feet and are now deploying a jumbo drill to increase progress.
The
drilling teams continue to define additional mining areas utilizing underground horizontal drilling. Between January 25th and March 31st,
the team has drilled a total of 8,170 linear feet with 43 long hole drill targets at three separate areas of the GMG deposit.
Nuclear
Fuel and Uranium Effect from the Russian Invasion of Ukraine
The
start of the Russia/Ukraine war created extraordinary volatility in uranium markets during the first half of 2022. At the peak, the
spot price was at an 11 year high. Prior to the invasion on February 24, 2022, uranium spot prices were in the $43 per pound range
and rose to slightly over $63 per pound by April 2022; an increase of approximately $20 per pound. Later in May 2022 and June 2022,
the spot price receded to $45 levels, before recovering to the $50 +/- per pound price level. This price level was maintained for an
extended period as the immediate ban/sanctions anticipated by investors of nuclear fuel and services from Russia couldn’t be
implemented.
Equity
markets followed the price action of physical uranium prices in speculation that governments worldwide would sanction and ban nuclear
fuel from Russia. This was in recognition of Russia’s dominant position in nuclear fuel services including 38% of world conversion
capacity and 46% of world enrichment capacity. The market position of Rosatom, Russia’s national nuclear company, was developed
through decades of government subsidies. However, because of the lack of replacement capacity in the global nuclear fuel cycle, Rosatom
has avoided sanctions.
Because
of the Ukraine invasion, new contracts are largely not being signed with Rosatom, but deliveries under existing contracts continue to
be made. Customer dependencies upon the Russian supply of uranium, conversion and enrichment are being addressed slowly by governments
as alternative suppliers are not currently available. However, a desire to stay away from bad actors and the threat of Russia weaponizing
energy exports or a Russian embargo has elicited responses. Worldwide, utilities have accelerated their contracting of non-Russian conversion
and enrichment services. New uranium supply agreements are being signed with western producers. In the United States, multiple new nuclear
funding programs have already been put in place and the language from the Department of Energy has only gotten stronger. The Secretary
of Energy recently declared: “The United States wants to be able to source its own fuel from ourselves and that’s why we
are developing a uranium strategy.”
In
January 2023, ban and sanction discussions intensified as Rosatom was shown to have become an active participant in the Ukraine war.
An article entitled “Russia’s nuclear entity aids war effort, leading to calls for sanctions” was published by the
Washington Post. Obtained documents show that the Rosatom state nuclear power conglomerate was supplying the Russian military with “components,
technology, and raw materials for missile fuel” to be used in the Ukraine war.
There has been significant legislative progress
favorable to increasing domestic uranium and nuclear fuel production in the United States. Before the U.S. Senate went on summer recess,
an amendment to establish a Nuclear Fuel Security Program was added to the National Defense Authorization Act (NDAA) on a 96-3 vote.
This amendment requires the Secretary of Energy to establish a Nuclear Fuel Security Program, expand the American Assured Fuel Supply
Program, establish a High-Assay Low-Enriched Uranium (HALEU) for Advanced Nuclear Reactor Demonstration Projects Program, submit a report
on a civil nuclear credit program, and to enhance programs to build workforce capacity to meet mission critical needs of the Department
of Energy (DOE). In advance of the United States putting in place a ban or sanctions on Russian uranium, the DOE continues to make preparations
for a Russian counter-sanction terminating the flow of nuclear fuel and services from Russia.
UNITED STATES BAN OF RUSSIAN URANIUM:
In response to Russia’s war in Ukraine, the United States legislature passed the Prohibiting Russian Uranium Imports Act (H.R. 1042)
to ban Russian uranium imports into the U.S. Unanimous passage of The Prohibiting Russian Uranium Imports Act (H.R. 1042) in April 2024
by the U.S. Senate followed the U.S. House of Representatives' passage of the bill in December 2023. Subsequently, on May 13, 2024, President
Biden signed this legislation into law. The ban will now go into effect 90 days after its enactment and will be phased in under Department
of Energy conditional waivers before becoming a complete ban on January 1, 2028. Importantly, the enactment of a Russian ban releases
funding to support the American nuclear supply chain. Through nuclear energy diplomacy, Russia’s control of the global nuclear fuel
supply chain extends to many countries. However, as the United States has the world’s largest civilian nuclear reactor fleet, it
has now taken steps to reduce its reliance on state-sponsored Russian nuclear fuel.
RUSSIAN RESPONSE TO URANIUM BAN:
On May 14, 2024, the day following the ban enactment, Bloomberg reported that Russia had responded with TENEX issuing force majeure notices
to U.S. utility customers. TENEX is the subsidiary of Rosatom, the state nuclear energy corporation, and the entity through which U.S.
counterparties contract for Russian uranium product imports into the United States.
The TENEX force majeure notices require U.S. customers
to secure waivers within 60 days that exempt them from the new U.S. Russian uranium ban or risk being moved to the back of the line for
uranium deliveries if they are granted a waiver later. TENEX’s notice is based on their intention to honor their contracts, but
they acknowledge this could be overridden by the Kremlin.
This Russian uranium ban is scheduled to go into
effect in 90 days. It allows for the granting of conditional waivers through 2027. The TENEX notice sets a 60 day deadline for U.S. utilities
to secure a waiver exemption. The DOE has targeted a 30 day period to establish the conditions and process through which waivers could
be granted. The U.S. legislative intentions were to deprive Russia of the revenue associated with U.S. purchases of Russian nuclear fuel
and counter Russia’s control of the global nuclear fuel cycle by flooding U.S. and international markets with state-supported Russian
uranium and services.
We continue to believe the shift away from Russia/Rosatom will be a
major catalyst in the realignment of nuclear fuel markets which will benefit western producers. We anticipate this process will culminate
in tremendous support for the U.S. nuclear fuel industry. As a result, we have been and will continue to accelerate the advancement of
our operational strategy in anticipation of increasing uranium price levels that will reward near-term scaled-up production.
Nuclear
Fuel and Uranium Market Conditions
During the three months ended March 31, 2024,
the spot uranium price decreased - $3.25 from $91.00 to $87.75. However this follows an extremely strong period in the market where spot
uranium prices have reacted to supply/demand constraints and geopolitical risks. Since July 2023, spot uranium increased from the approximately
$50/lbs level to over $100/lbs in January 2024, before settling back into approximately the $90 level. The events of 2022 have set in
motion uranium market and nuclear fuel opportunities for the next decade and beyond. There are positive catalysts across multiple levels
of the nuclear fuel and uranium markets. Underlying fundamentals are the strongest in decades. This is attributable to multiple factors,
including climate change, energy security, supply chain and energy scarcity initiatives. The supply/demand imbalance has flipped from
a market with excess supply into a market with excess future demand. With the reduced availability of secondary supplies, utilities have
begun adding multi-year contracts with mining companies for primary supply. The drivers expanding the demand for nuclear fuel include
non-nuclear nations adding nuclear power generation, nuclear nations expanding fleets and/or extending lives of existing reactors, idled
nuclear reactors being redeployed, the reversal of phase-outs and shutdowns, and the deployment of advanced reactors / SMRs. However,
the challenge is in meeting increasing demand simultaneously with supply constraints from the world’s largest suppliers. We believe
uranium equity prices will continue to strengthen and reflect the underlying positive fundamentals in the nuclear/uranium sector. Most
notably during the quarter, multiple market analysts have flagged low availability of mobile secondary inventories. We believe the continued
draw down of inventories to be a market catalyst of the recent uptick in uranium prices.
Positive
nuclear energy news has continued to highlight the global growth of future nuclear electricity generation which will drive increased
nuclear fuel demand. In terms of future supply, utility contracting has continued into 2023, and some uranium mining companies are moving
toward restarting production. However, due to the lead time needed for future uranium production, we are entering a phase where the supply-demand
fundamentals are in a deep multi-year structural supply deficit. The future is not clear as we believe that most miners are waiting for
higher price levels before making start-up commitments and utilities are waiting to understand how regulations and geopolitics will modify
their future access to Russian uranium and conversion and enrichment services.
Nuclear
Fuel Supply Chain Concentration Risks
Russia’s
invasion of Ukraine and the ensuing global energy crisis has focused attention on security of supply and supply chain risks. This has
caused most of the world to re-evaluate their dependence upon nuclear fuel exported by Russia. In spite of the dominant market position
of Rosatom, future deliveries potentially could be at risk due to sanctions, legislation, or a Russian embargo. Customer dependence upon
the Russian supply of uranium, conversion and enrichment are being addressed slowly by governments as alternative suppliers are not currently
available. Since last quarter both Urenco and Orano have announced that they will invest to expand their uranium enrichment capacity
respectively in the United States and France, which represents a shift away from Russia. Utilities are demonstrating their desire for
increased security of their nuclear fuel supply chains. Kazakhstan is also a concern because the world’s largest uranium producing
country has an unguarded and the second longest continuous land border in the world shared with Russia. The potential exists for Russia
to exert influence over Kazakhstan. Additionally, Kazatomprom is currently working toward putting large long-term contracts in place
with China. This supply is needed for China to fulfill its 15 year plan to deploy 150 new nuclear reactors. China National Nuclear Corp.
(CNNC) has recently opened a uranium trading hub /warehouse facility, on the China / Kazakhstan border, with the capacity to store 60
million pounds of uranium. It has become evident that the nuclear fuel supply chain has become increasingly concentrated and interconnected
in this very small area of the world. Expanding Kazakhstan uranium exports to Russia and China significantly reduces future supply for
Western nuclear fuel buyers.
In late July 2023, soldiers of Niger’s
presidential guard deposed from power President Mohamed Bazoum; and replaced him with a military junta. This is significant because the
new government is opposed to Western interests and has escalated anti-French rhetoric, while seeking support from Russia and its Wagner
mercenary group. Uranium is Niger’s main export and this small West African country holds the 7th largest uranium resource in the
world and was producing about 5% of global production. Orano, the French state-backed nuclear energy company has significant operations
in the country that were impacted. The Junta has initiated multiple actions that are counter to French interests. Most importantly, Niger’s
Junta has threatened the export of uranium to France which has serious implications because France acquires 20% of its natural uranium
from Niger. Subsequently, French President Macron has visited Kazakhstan and Uzbekistan, both former Soviet Republics, citing the vast
potential for further cooperation in regard to nuclear power. Under pressure from the government of Niger, a U.S. delegation is presenting
detailed plans for shuttering two American bases and withdrawing all troops from the country. This is occurring as the Junta has signed
a new military agreement with Russia, and brought Russian military instructors into the country in April 2024. During May 2024 in a joint
statement, Niger and the U.S. announced that no later than September 2024 all U.S. military troops will be withdrawn from Niger.
This conflict also has the potential to impact
future global uranium supply. Multiple uranium mine development projects in the country continue to proceed despite the evacuation of
many foreign nationals and difficulties receiving supplies. Re-establishing political stability is likely a prerequisite to these companies
receiving the funding packages needed to cover the significant development costs of the respective projects. Notably the Junta, has provided
notice to a foreign mining company that it must commence mining operations at its Niger uranium project by July 3, 2024 or risk of revocation
of its mining permit.
During
October 2023, geopolitical instabilities spread further to the Middle East after a Hamas attack on Israel triggered a counterattack by
Israel on Hamas in the Gaza strip. This additional hot spot further increases volatility in the world and destabilizes the Middle East
region that is highly influential on global energy prices.
Utah
Mineral Processing Plant
In January 2023, the Company issued news releases
announcing that it has begun site and facility design and permitting on a property acquired in Green River, Emery County, Utah to build
a state-of-the-art minerals processing plant (the “Maverick Minerals Processing Plant”). This facility will be designed to
recover uranium, vanadium and cobalt both from conventional materials mined from Company mines and materials produced by other mining
companies. Selecting and acquiring the processing site has taken over one year to find a location with the road, power and water infrastructure
required. The processing plant will utilize the latest processing technology, including Western’s patented Kinetic Separation process.
These technology advancements will result in lower overall capital and processing costs. This processing plant is expected to have a cost
of approximately $75 million. After permitting and construction, the processing of uranium and vanadium materials is expected to commence
in late 2027. The facility will be designed to recover cobalt, a metal essential in battery technology and electric vehicles. Within the
state of Utah, there are numerous occurrences of cobalt which may be economical to mine, if a processing facility were available.
The development of the Maverick Minerals Processing
Plant in Green River, Utah, has advanced considerably. In the second quarter, the land acquisition was completed and in the third quarter
the project design and permitting activities commenced with the engagement of a full team of consulting firms, chosen for their expertise
in engineering / mill design, permit preparation, environmental, hydrology, and air quality. Site evaluation work was undertaken and a
preliminary plant and property site plan was compiled for the location of monitor wells, meteorological towers, buildings, processing
circuits, tailings and evaporation ponds, roads/infrastructure and ore storage facilities. At a pre-application permitting meeting in
November 2023, the Company and its consultants met onsite with local officials. During the first five months of 2024, additional progress
has been made. The baseline data required for submission of the permitting application continues to be collected from the onsite meteorological
towers. A final plant and animal study was completed. This study confirmed the site is clear of endangered plant life that is only observable
during the Spring growing season. Additional consulting commitments have been made to advance the licensing and development with Precision
Systems Engineering (PSE), a leading engineering, and design consulting firm headquartered in Sandy, Utah. PSE is targeting to release
the preliminary engineering design and cost estimate in June 2024 for a 500 ton per day mill.
Joint
Venture with Rimrock Exploration and Development Inc.
Western has entered into a joint venture with
Rimrock Exploration and Development Inc. (“Rimrock”), a private company which owns two fully permitted, developed, and past
producing uranium mines in Colorado. Western will fund mining operations and initially Rimrock will be the operator. Upon the payment
of the initial contribution, each party will own a 50% interest in the assets of the joint venture. Western has already funded more than
half of the initial contribution. These mines access shallow uranium deposits where mined material is available at depths of 60 and 120
feet. The joint venture will sell the mined material to Western under terms to be determined. The mines do not have a technical report
but are anticipated to provide marginal production to supplement Western’s Sunday Mine Complex production.
Uranium/Vanadium
Buying Program
Energy Fuels has announced that it expects to
offer an ore buying program and that it plans to be able to schedule a milling run to begin in late 2024 or early 2025 at the White Mesa
Mill, the only operational conventional uranium/vanadium mill in the United States. Western and Energy Fuels have had initial discussions
regarding the delivery of mined material from the Sunday Mine Complex. If a mutually beneficial arrangement can be established, Western
could pivot its current mining operations to begin deliveries of uranium/vanadium mined material in as little as 30 days at annualized
quantities up to 250,000 pounds of uranium and 1,000,000 pounds of vanadium.
Results
of Operations
The
following table presents the Company’s financial results for the three months ended March 31, 2024 and 2023.
| |
For the Three Months Ended March 31, | |
| |
2024 | | |
2023 | |
| |
| | |
| |
Revenues | |
$ | 54,273 | | |
$ | 165,975 | |
| |
| | | |
| | |
Expenses | |
| | | |
| | |
Mining expenditures | |
| 1,308,879 | | |
| 605,104 | |
Professional fees | |
| 112,690 | | |
| 87,096 | |
General and administrative | |
| 966,245 | | |
| 613,365 | |
Consulting fees | |
| 193,426 | | |
| 737 | |
Total operating expenses | |
| 2,581,240 | | |
| 1,306,302 | |
Operating loss | |
| (2,526,967 | ) | |
| (1,140,327 | ) |
| |
| | | |
| | |
Accretion and interest income, net | |
| (50,079 | ) | |
| (35,296 | ) |
Other income, net | |
| - | | |
| (1,500 | ) |
| |
| | | |
| | |
Net loss | |
| (2,476,888 | ) | |
| (1,103,531 | ) |
| |
| | | |
| | |
Other comprehensive (loss) income | |
| | | |
| | |
Foreign currency translation adjustment | |
| (142,359 | ) | |
| 6,314 | |
| |
| | | |
| | |
Comprehensive loss | |
$ | (2,619,247 | ) | |
$ | (1,097,217 | ) |
Summary:
Our
condensed consolidated net loss for the three months ended March 31, 2024 and 2023 was $2,476,888 and $1,103,531, respectively. The
principal components of these year over year changes are discussed below.
Our
comprehensive loss for the three months ended March 31, 2024 and 2023 was $2,619,247 and $1,097,217, respectively.
Revenues
Our revenue for the three months ended March 31,
2024 and 2023 was $54,273 and $165,975, respectively. The decrease in revenues of $111,702, or 67% was primarily related to lower prices
and lower production volumes from the oil and gas wells during the three months ended March 31, 2024 as compared to the three months ended
March 31, 2023.
Mining
Expenditures
Mining
expenditures for the three months ended March 31, 2024 were $1,308,879 as compared to $605,104 for the three months ended March 31,
2023. The increase in mining expenditures of $703,775, or 116% was principally attributable to scaling up mining activities at the
Company’s Sunday Mine Complex which involved the hiring of additional mining personnel, increased mining services and supplies
costs, and increased maintenance and depreciation costs for mining equipment and vehicles placed into service.
Professional
Fees
Professional
fees for the three months ended March 31, 2024 were $112,690 as compared to $87,096 for the three months ended March 31, 2023. The
increase in professional fees of $25,594, or 29% was due to increased accounting and legal costs recognized in the current
period.
General
and Administrative
General
and administrative expenses for the three months ended March 31, 2024 were $966,245 as compared to $613,365 for the three months
ended March 31, 2023. The increase in general and administrative expense of $352,880, or 58% is primarily due to an increase in
non-cash stock-based compensation expense and an increase in payroll expense.
Consulting
fees
Consulting
fees for the three months ended March 31, 2024 were $193,426 as compared to $737 for the three months ended March 31, 2023. The
increase in consulting fees of $192,689 was principally due to the increased use of consultants for the Maverick Minerals Processing
Plant to prepare the permitting application.
Accretion
and interest income, net
Accretion and interest income, net for the three
months ended March 31, 2024 was $50,079 as compared to $35,296 for the three months ended March 31, 2023. The increase in interest income,
net of $14,783, or 42% was principally attributable to higher interest rates earned and larger invested cash balances during the three
months ended March 31, 2024 as compared to the three months ended March 31, 2023.
Other
income, net
Other
income, net for the three months ended March 31, 2024 was $0 as compared to $1,500 for the three months ended March 31, 2023. The change
was principally attributable to a gain on the sale of used vehicles during the three months ended March 31, 2023.
Foreign
currency translation adjustment
Foreign
currency translation adjustment for the three months ended March 31, 2024 was a loss of $142,359 as compared to a gain of $6,314 for
the three months ended March 31, 2023. The change in foreign exchange is primarily due to the strengthening of the USD against the CAD.
Liquidity
and Capital Resources
Our
cash and cash equivalents and restricted cash balance as of March 31, 2024 was $12,277,635. Our cash position is highly dependent on
our ability to raise capital through the issuance of debt and equity and our management of expenditures for mining development and for
fulfillment of our public company reporting responsibilities. Our management believes that in order to finance the development of the
mining properties and Kinetic Separation, to secure regulatory licenses and to construct the Maverick Minerals Processing Plant for the
processing of uranium and vanadium, we will be required to raise additional capital by way of debt and/or equity. We will also require
additional working capital to continue to scale-up its mining operations at the Sunday Mine Complex. This outlook is based on our current
financial position and is subject to change if opportunities become available based on current exploration program results and/or external
opportunities.
Net
cash used in operating activities
Net
cash used in operating activities was $1,757,471 for the three months ended March 31, 2024, as compared with $629,914 for the three
months ended March 31, 2023. The increase of $1,127,557 in cash used in operating activities was principally driven by an increase
in net loss of $1,373,357, which includes a $333,501 increase in non-cash items including depreciation, accretion of reclamation
liability, stock-based compensation and change in marketable securities offset by a decrease of $87,701 in working capital
adjustments, primarily related to changes in prepaid expenses and other current assets, accounts payable and accrued liabilities and
contingent consideration.
Net
cash used in investing activities
Net
cash used in investing activities was $403,369 for the three months ended March 31, 2024, as compared with $623,623 for the three months
ended March 31, 2023. The decrease in cash used in investing activities of $220,254 was principally due to reduced acquisitions of mining
equipment and vehicles in the current quarter, as compared to greater acquisitions of equipment in the initial scale up of mining capacity
during the three months ended March 31, 2023.
Net
cash provided by financing activities
Net cash provided by financing activities for
the three months ended March 31, 2024 and 2023 were $4,605,458 and $0, respectively. The increase in cash provided by financing activities
of $4,605,458 was due to proceeds of $4,605,458 from the exercise of warrants during the three months ended March 31, 2024.
Reclamation
Liability
Our
mines are subject to certain asset retirement obligations, which we have 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 our best estimate of the
present value of future reclamation costs in connection with the mineral properties. We determined the gross reclamation liabilities
of the mineral properties to be $751,517 and $751,444, as of March 31, 2024 and December 31, 2023, respectively. The portion of the
reclamation liability related to the Van 4 Mine, which is in reclamation as of March 31, 2024, and its related restricted cash are
included in current liabilities and current assets, respectively, at a value of $75,075. During the three months ended March 31,
2024, the Company’s internal mining operations team has been performing the reclamation work, and the State of Colorado has
not yet reduced the reclamation liability amount. The Company expects to begin incurring the reclamation liability after 2054 for
all mines that are not in reclamation and accordingly, has discounted the gross liabilities over their remaining lives using a
discount rate of 5.4%. The net discounted aggregated values as of March 31, 2024 and December 31, 2023 were $244,557 and $241,562,
respectively. The gross reclamation liabilities as of March 31, 2024 and December 31, 2023 are secured by financial warranties in
the amount of $751,517 and $751,444, respectively.
Oil
and Gas Lease and Easement
We
entered into an oil and gas lease that became effective with respect to minerals and mineral rights owned by us of approximately 160
surface acres of our property in Colorado. As consideration for entering into the lease, the lessee has agreed to pay us a royalty from
the lessee’s revenue attributed to oil and gas produced, saved, and sold attributable to the net mineral interest. We have also
received cash payments from the lessee related to the easement that we are recognizing incrementally over the eight year term of the
easement.
On
June 23, 2020, the same entity as discussed above elected to extend the oil and gas lease easement for three additional years, commencing
on the date the lease would have previously expired. During 2021, the operator completed a first set of eight (8) wells which commenced
oil and gas production by August 2021. During 2022, the operator completed a second set of eight (8) wells which commenced oil and gas
production by August 2022. Monthly royalty payments are ongoing on the sixteen (16) wells.
Under the oil and gas lease and easement arrangements,
during the three months ended March 31, 2024 and 2023, we recognized aggregate revenue of $54,273 and $165,975, respectively.
Related
Party Transactions
We
have transacted with related parties pursuant to service arrangements in the ordinary course of business, as follows:
Prior
to the acquisition of Black Range, Mr. George Glasier, the Company’s CEO, who is also a director of the Company (“Seller”),
transferred his interest in a former joint venture with Ablation Technologies, LLC to Black Range. In connection with the transfer, Black
Range issued 25 million shares of Black Range common stock to Seller and committed to pay AUD $500,000 (USD $325,800 as of March 31,
2024) to Seller within 60 days of the first commercial application of the Kinetic Separation technology. We assumed this contingent payment
obligation in connection with the acquisition of Black Range. At the date of the acquisition of Black Range, this contingent obligation
was determined to be probable. Since the deferred contingent consideration obligation is probable and the amount is estimable, we recorded
the deferred contingent consideration as an assumed liability in the amount of $325,800 and $340,650 as of March 31, 2024 and December
31, 2023, respectively.
We
have multiple lease arrangements with Silver Hawk Ltd., an entity which is owned by George Glasier and his wife Kathleen Glasier. These
leases, which are all on a month-to-month basis, are for the rental of office, workshop, warehouse and employee housing facilities. We
incurred rent expense of $23,525 and $17,925 in connection with these arrangements for the three months ended March 31, 2024 and 2023,
respectively.
We
are obligated to pay Mr. Glasier for reimbursable expenses in the amount of $15,482 and $84,040, included within accounts payable and
accrued liabilities, as of March 31, 2024 and December 31, 2023, respectively.
Going
Concern
With
the exception of the quarter ended June 30, 2022, we had incurred losses from our operations and as of March 31, 2024, had an accumulated
deficit of $21,294,745 and working capital of $11,177,529.
Since
inception, we have met our liquidity requirements principally through the issuance of notes, the sale of our common shares and from limited
revenue sources. During the three months ended March 31, 2024, we received $4,605,458 in proceeds from the exercise of its common share
warrants. On December 12, 2023, we closed a non-brokered private placement of 5,215,828 units at a price of CAD $1.39 per unit. The aggregate
gross proceeds raised in the private placement amounted to CAD $7,250,000 (USD $4,836,867 in net proceeds). During the year ended December
31, 2023, we received $1,004,044 in proceeds from the exercise of its common share warrants.
Our ability to continue our operations and to
pay our obligations when they become due is contingent upon us obtaining additional financing. Management’s plans include seeking
to procure additional funds through debt and equity financings, to secure regulatory approval licenses to fully utilize our Kinetic Separation,
to construct Maverick Minerals Processing Plant for the processing of uranium and vanadium and to incorporate Kinetic Separation in the
processing uranium and vanadium bearing materials to generate operating cash flows. We will need additional capital to continue ongoing
mining operations by our in-house mining team at the Sunday Mine Complex while simultaneously permitting and constructing a processing
plant.
There are no assurances that we will be able to
raise capital on terms acceptable to us or at all, or that cash flows generated from its operations will be sufficient to meet our current
operating costs and required debt service. If we are unable to obtain sufficient amounts of additional capital, we may be required to
reduce the scope of our planned product development, which could harm our financial condition and operating results, or we may not be
able to continue to fund our ongoing operations. These conditions raise substantial doubt about our ability to continue as a going concern
to sustain operations for at least one year from the issuance of the accompanying financial statements. The accompanying consolidated
financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Off
Balance Sheet Arrangements
As
of March 31, 2024, there were no off-balance sheet transactions. We have not entered into any specialized financial agreements to minimize
our investment risk, currency risk or commodity risk.
Critical
Accounting Estimates and Policies
The
preparation of these condensed interim consolidated financial statements requires management to make certain estimates, judgments and
assumptions that affect the reported amounts of assets and liabilities at the date of the condensed interim consolidated financial statements
and reported amounts of expenses during the reporting period.
Significant
assumptions about the future and other sources of estimation uncertainty that management has made at the end of the reporting
period, that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual
results differ from assumptions made, include, but are not limited to, the following: fair value of transactions involving common
shares, assessment of the useful life and evaluation for impairment of intangible assets, valuation and impairment assessments on
mineral properties, deferred contingent consideration, the reclamation liability, valuation of stock-based compensation and valuation of long-term debt, HST and asset retirement obligations. Other areas requiring
estimates include allocations of expenditures, depletion and amortization of mineral rights and properties.
Item
3. Quantitative and Qualitative Disclosures About Market Risk
Not
applicable.
Item
4. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
As
of the end of the period covered by this report, our principal executive officer and principal financial officer evaluated the effectiveness
of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on their evaluation
of our disclosure controls and procedures, our principal executive officer and principal financial officer concluded that our disclosure
controls and procedures were not effective as of March 31, 2024, to ensure that information required to be disclosed by the Company in
the reports that we file or submit under the Exchange Act is (a) recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms and (b) accumulated and communicated to management, including our principal executive officer
and principal financial officer, as appropriate to allow for timely decisions regarding required disclosure.
Description
of Material Weakness
Management
has concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2024, due to the failure
to report disclosures on a timely basis.
Remediation
of Material Weakness
Management
has developed a plan and related timeline for the Company to design a set of control procedures and the related required documentation
thereof in order to address this material weakness. However, its implementation was delayed as a decline in commodity prices caused the
Company to pursue aggressive cost cutting and de-staffing which has increasingly concentrated duties on the remaining staff. Until the
Company has the proper staff in place, it likely will not be able to remediate its material weaknesses.
Changes
in Internal Control over Financial Reporting
There
have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph
(d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during the Company’s first fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART
II – OTHER INFORMATION
Item
1. Legal Proceedings
In
the opinion of management, we are not involved in any claims, legal actions or regulatory proceedings as of March 31, 2024, the ultimate
disposition of which would have a material adverse effect on our condensed interim consolidated financial position, results of operations,
or cash flows.
Item
1a. Risk Factors
In
addition to the other information set forth in this Form 10-Q, including under the heading “Forward-Looking Statements”,
the risks and uncertainties which could adversely affect our business, financial condition, results of operations and future growth prospects
that we believe are most important for you to consider are discussed in “Part I, Item 1A—Risk Factors” of our Annual
Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 16, 2024. The risks described in our Annual Report
on Form 10-K for the year ended December 31, 2023 are not the only risks we face. Additional risks and uncertainties not presently known
to us or that we presently deem less significant may also impair our business operations. There are no material changes to the Risk Factors
described in our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
During the three months ended March 31, 2024, we received $4,605,458
in proceeds from the exercise of an aggregate of 5,198,540 common share warrants. Most of the warrants had been issued previously in a
private placement that closed on February 16, 2021, and were therefore scheduled to expire on February 16, 2024. The warrants were exercised,
and the underlying common shares were purchased, in private transactions that were exempt from registration pursuant to Section 4(a)(2)
of the Securities Act and Rule 506(b) of Regulation D thereunder.
Item
3. Defaults Upon Senior Securities
None.
Item
4. Mine Safety Disclosures
For
Western, safety is a core value, and we strive for superior performance. Our health and safety management system, which includes detailed
standards and procedures for safe production, addresses topics such as employee training, risk management, workplace inspection, emergency
response, accident investigation, and program auditing. In addition to strong leadership and involvement from all levels of the organization,
these programs and procedures form the cornerstone of safety at Western, ensuring that employees are provided a safe and healthy environment
and are intended to reduce workplace accidents, incidents and losses, comply with all mining-related regulations and provide support
for both regulators and the industry to improve mine safety.
The
operation of our U.S. based mine is subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under
the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). MSHA inspects our mine on a regular basis and issues various
citations and orders when it believes a violation has occurred under the Mine Act Following passage of The Mine Improvement and New Emergency
Response Act of 2006, MSHA significantly increased the number of citations and orders charged against mining operations. The dollar penalties
assessed for citations issued has also increased in recent years.
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. Western went into active mining operations at the
Sunday Mine Complex during 2021. During the quarter ended March 31, 2024, Mine Safety and Health Administration (MSHA) mine inspections
have not yielded any disclosures required by Section 1503(a) of the Dodd-Frank Act.”
Item
5. Other Information
None.
Item 6. Exhibits
| * | Previously filed as an exhibit to the Company’s Form 10
registration statement filed on April 29, 2016 and incorporated herein by reference. |
| ** | Previously filed as an exhibit to the Company’s Form 10-Q
Quarterly Report for the three and six months ended June 30, 2023 filed on August 18, 2023 and incorporated herein by reference. |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
WESTERN
URANIUM & VANADIUM CORP. |
|
|
|
Date: May
20, 2024 |
By: |
/s/
George Glasier |
|
|
George
Glasier
Chief
Executive Officer and President |
|
|
|
Date: May
20, 2024 |
By: |
/s/
Robert Klein |
|
|
Robert
Klein |
|
|
Chief
Financial Officer |
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In connection with the Quarterly Report on Form 10-Q of Western Uranium
& Vanadium Corp. (the “Company”) for the quarter ended March 31, 2024 as filed with the Securities and Exchange Commission
on the date hereof (the “Report”), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
The following disclosures are provided
pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) and Item 104 of Regulation S-K, which
require certain disclosures by companies required to file periodic reports under the Securities Exchange Act of 1934, as amended, that
operate mines regulated under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”).
The below table reflects citations and orders issued to
us by MSHA during the three months ended March 31, 2024.
Additional information about the Act and MSHA references used in the table follows.