? DRMS 110d (Small Mine, DMO) Mine Permit M-97-032
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6. Hansen/Taylor Ranch
The Property
Within the Project area, Black Range has mining agreements, owns fee minerals,
holds options to purchase fee mineral rights, holds federal unpatented mining
claims and mineral leases with the State of Colorado, and has in place surface
access agreements, including:
- 1 x private Mineral Lease
- 1 x State Mineral Lease (UR3324)
- 1 x option to purchase 100% of the Hansen and Picnic Tree Deposits
- 108 Federal unpatented mining claims
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The Hansen/Taylor Ranch Project is currently being held as a property that is
exploratory in nature with no identified reserves. Neither exploration plans nor
a mining plan exist for the project. Black Range Minerals has not undertaken
development work at the property since groundwater well installation in 2013.
Power and water sources have not yet been formally assessed.
Notably a portion of the Hansen/Taylor deposit was in dispute during 2017. On
September 16, 2015, in connection with the Company's acquisition of Black Range,
the Company assumed an option and exploration agreement (the "Option and
Exploration Agreement") with STB Minerals, LLC, a Colorado limited liability
company ("STB"). The Option and Exploration Agreement gives the Company the
right to purchase 51% of the mineral rights of specific areas of the Hansen and
Picnic Tree deposits (for which the Company already holds 49% of the rights). If
the Company were to exercise its option under the Option and Exploration
Agreement, it would require the Company to (a) make a cash payment of $2,500,000
immediately upon exercise; (b) issue common shares to STB amounting to a value
of $3,750,000 immediately upon exercise; and (c) issue common shares to STB
amounting to a value of $3,750,000 on the date that is 180 days following
exercise. The Option and Exploration Agreement was scheduled to expire by its
terms on July 28, 2017 if not exercised.
The Option and Exploration Agreement provided an extension for an "event of
force majeure". Under this clause, the Company would receive an extension of the
period during which it could exercise its option if it experiences an
unreasonable delay outside its control that prevents it from exercising the
option. On May 10, 2017, the Company provided to STB a notice that it was
exercising the force majeure clause due to the delay by government regulators in
licensing the Company's Kinetic Separation and permitting mining at the Hansen
property. STB has contested the Company's finding that an event of force majeure
has occurred. Ongoing negotiations continued until September 21, 2017 when the
Company and STB agreed to settle the matter through the pre-established
arbitration mechanism. Prior to the commencement of arbitration, a settlement
was agreed to on February 28, 2018 through the execution of an Amendment of
Option and Exploration Agreement. As consideration, the Company paid STB a
$20,000 extension payment and granted STB the right to seek a bona fide written
offer over the remaining term, and agreed to the removal of the force majeure
clause from the agreement. The Company received an extension until July 28, 2019
and a right of first refusal to match any bona fide written offer. Hence the
Company already owned 49% of the resource property and retained an option to
purchase the 51% of the resource property that the Company did not already own
for the duration of the agreement. Further the Company believes the execution of
this agreement was without financial implications, and as such, the Company has
not made any adjustment to these consolidated financials related to this matter.
Prior to July 28, 2019, the Company decided not to exercise the option to
purchase the remaining 51% of the mineral rights of specific areas of the Hansen
and Picnic Tree deposits, and thus the option has expired unexercised.
Accessibility
The Project is located in Fremont County, in South Central Colorado
approximately 30 miles northwest of the city of Canon City. Canon City is the
closest population center, and had a population of 16,400 in 2010. The largest
metropolitan area in close proximity to the Project is Colorado Springs which is
located approximately 46 miles northeast of Canon City and has a population of
approximately 416,000. Figure 1 shows the locations of these population centers
with respect to the Project.
For ground travel, Canon City is best accessed from Denver/Colorado Springs via
I-25 south to State Highway 115 which intersects Highway 50 just east of Canon
City. For air travel, alternatives include the Colorado Springs Municipal
Airport (COS), which is a 16-gate facility served by 14 airlines and Denver's
International Airport (DEN), which is 149 miles from Canon City. There is a
small airport, Fremont County Airport (CNE), located in Canon City, which is
open to private flights. The property has access to grid power; however, no
source of industrial water has been identified yet.
History
Uranium mineralization was discovered in the Tallahassee Creek District in 1954
by two groups of prospectors. Between 1954 and 1972, 16 small open pit and
underground mines were operated in the district. Discoveries, and most producing
mines and production were in the Tallahassee Creek Conglomerate, with one mine,
the Smaller Mine, producing from the Echo Park Formation. Exploration efforts
were minimal until Rampart Exploration Company (Rampart), under contract to
Cyprus, explored the Taylor Ranch area beginning in 1974 and discovered the
Hansen Uranium Deposit along with other uranium deposits in the district. Cyprus
took the Hansen and Picnic Tree deposits through a positive final feasibility
analysis in 1980 for an open-pit mining and conventional uranium milling
operation, and secured all necessary operating permits in 1981. The collapse of
the uranium market led to Cyprus abandoning the project which lay dormant until
Black Range Minerals began activities in late 2006.
Black Range Mineral's Taylor Ranch Project, CO, consists of a combination of
private, BLM and State Section minerals, and private, BLM and State Section
surface rights. Ownership of the private minerals and surface has mainly been by
local ranchers. Western Nuclear held a portion of the property briefly in 1968.
Cyprus gained control of mineral and surface rights during the period 1975-1978.
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In 1993, Cyprus sold their Tallahassee Creek holdings to Noah (Buddy) and Diane
Taylor who had managed ranching activities on the property. The Taylors were not
able to make the final payment to Cyprus and sold the southern portion of their
holdings which included the Hansen and Picnic Tree deposits to New Mexico and
Arizona Land (now NZ Minerals) in 1996 who, in 1998, sold the property to South
T-Bar Ranch, a subsidiary of Colorado developer Land Properties, while reserving
a 49% interest in the minerals.
This part of Cyprus' prior holdings was subdivided, mainly into 35-acre parcels.
Beginning in December 2006, through various purchases, leases and option
agreements, Black Range Minerals has obtained mineral rights to most of the
original Cyprus holdings.
Prior to the Hansen/Taylor Project being acquired by WUC, a mineral resource for
the Hansen/Taylor Ranch Project for Black Range Minerals Limited. Black Range
Reported a JORC compliant indicated uranium resources. This historic resource
estimate was originally reported to Black Range Minerals Limited by Tetra Tech
in four resource memos (collectively, the "Tetra Tech Reports"): 1) High Park
Kriging Resources - Taylor Ranch Uranium Project, April 25, 2008; 2) North
Hansen, Boyer Kriging Resources - Taylor Ranch Uranium Project, April 29, 2009;
3) Technical Memorandum - Boyer, Hansen and Picnic Tree Area Kriging Resources -
Taylor Ranch Uranium Project, August 24, 2009; and 4) Technical Memorandum -
Boyer, Hansen and Picnic Tree Area Kriging Resources - Taylor Ranch Uranium
Project (Updated 2010), August 12, 2010. These memos were originally prepared by
Rex Bryan of Tetra Tech, a qualified person under NI 43-101. The results
reported in the Tetra Tech Reports are historical estimates under NI 43-101.
However, the Company is not treating the historical estimate as current mineral
resources, and S-K 1300 does not permit such historic estimates to be disclosed
in Form 10-K annual reports.
The historic Black Range Minerals resource reported in the Tetra Tech Reports
uses JORC indicated and inferred resource categories and does not contain
reserves. There is no more recent data available on the Hansen/Taylor Project
resource than that of the Tetra Tech Reports. In order to disclose a resource
estimate as current, the Company would need to engage a qualified person (as
defined under 43-101 and S-K 1300) to produce a technical report compliant with
NI 43-101 and a feasibility study compliant with S-K 1300. The Company currently
does not intend to commission such a technical report or feasibility study.
Project Geology
The deposits that make up the Project are tabular sandstone deposits associated
with redox interfaces. The mineralisation is hosted in Tertiary sandstones
and/or clay bearing conglomerates within an extinct braided stream, fluvial
system or palaeochannel. Mineralisation occurred post sediment deposition when
oxygenated uraniferous groundwater moving through the host rocks came into
contact with redox interfaces, the resultant chemical change caused the
precipitation of uranium oxides. The most common cause of redox interfaces is
the presence of carbonaceous material that was deposited simultaneously with the
host sediments. In parts of the Project the palaeochannel has been covered by
Tertiary volcanic rocks and throughout the Project basement consists of
Pre-Cambrian plutonics and metamorphic rocks. The volcanic and Pre-Cambrian
rocks are believed to be the source of the uranium.
Restoration and Reclamation
During the fourth quarter of 2021, the Company received notice from the State of
Colorado that its surety release request on the Hansen Picnic Tree property had
been approved, and as such, this property is no longer subject to reclamation
treatment. As the property wasn't a current development priority, Western
completed reclamation on the property. The Company recorded a discontinuation of
the Hansen Picnic Tree property's present value of $44,793 during the fourth
quarter of 2021. On December 29, 2021, the Company moved the $154,936 restricted
cash deposit into its cash after receiving payment from the state of Colorado.
Permitting Status
The project currently has an exploration permit through the Colorado Division of
Reclamation, Mining and Safety as well as a Conditional Use Permit with the
Fremont County Planning and Zoning Department.
Basis of Disclosure
The scientific and technical information provided in this Form 10-K on the
Hansen/Taylor Ranch Project, as well all data and exploration information
reported in this Form 10-K on the Hansen/Taylor Ranch Project, is based on the
information reported in the Tetra Tech Reports.
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7. Bullen Property (Weld County)
The Property
The Bullen Property is a private land parcel located in Weld County Colorado and
is inclusive of 139 surface acres and 160 mineral acres. The property location
is Township 9 North, Range 60 West, 6th P.M., Section 34:NW/4.
Accessibility
The Bullen Property is accessible via Weld County roads year-round.
History
The Bullen Property is an oil and gas property located in Weld County Colorado.
The Company acquired this non-core property in 2015 in the Black Range Minerals
Limited acquisition. Black Range purchased the property in 2008 for its Keota
Uranium Project. This project ran from 2008 to 2013, and at its peak there were
five strategic interests which comprised approximately 3,300 acres in the Keota
Uranium District. After the project ceased, the Bullen Property was the only
acreage retained in Weld County by virtue of its outright ownership.
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In 2017, the Company signed a three year oil and gas lease which in 2020 was
extended for an additional three year term or the end of continuous operations.
The consideration was in the form of upfront bonus payments and backend
production royalty payments. Additional right-of-way easement agreements were
signed which allowed for the development of a pipeline. The lease agreement
allows the Company to retain property rights to vanadium, uranium, and other
mineral resources.
In early 2020 Bison Oil & Gas traded this lease to Mallard Exploration
("Mallard"), Mallard subsequently filed an application with the Colorado Oil &
Gas Conservation Commission (COGCC) to update the permitting to create a new
pooled unit.
In late 2020 Mallard began development of the pooled unit. By March 31, 2021,
the drilling portion of the project had been completed for the eight horizontal
wells named Blue Teal Fed. Seven wells were drilled to a 2.5 miles lateral
length and one well was drilled to a 3.0 mile lateral length. These DJ-Basin
wells target the Niobrara formation. During 2021, the operator completed all
well development stages and each of the eight (8) Blue Teal Fed wells commenced
oil and gas production by mid-August 2021. The first royalty payment was made in
January 2022 and monthly royalty payments have been received subsequently. These
wells continue to rank among the top Colorado producing wells. Due to the
success of the first 8 wells, the operator has decided to develop a second set
of 8 wells within Western's royalty area during 2022.
Project Geology
The Bullen Property is located within the Denver-Julesburg Basin ("D-J Basin")
which is inclusive of multiple oil and gas formations.
Permitting Status
Mallard's application with the Colorado Oil & Gas Conservation Commission
(COGCC) created a new order to establish a drilling and spacing unit and set the
maximum number of horizontal wells that may be drilled. The field rules were
approved on August 24, 2020 (COGCC Order No. 535-1325). This order pooled five
adjoining parcels into a 3,200 acre pooled unit ("Unit") and set the maximum
number of wells at 24. A total of 16 wells have been permitted in the Unit.
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32
OTHER
Ferris Haggerty
The Property
No leases or land use remain.
Accessibility
The reclamation project is accessible 4 to 6 months out of the year due to snow
and closed access. Take Wyoming Highway west from Encampment, Wyoming for
approximately 11 miles. Once across the divide, to the northeast there is a
pullout for Medicine Bow National Forest recreation. Follow 4 wheel drive route
412 (Continental Divide Trail) for approximately 5 miles to the Haggerty creek
watershed. Turn southwest onto a steep 4 wheel drive rout and travel for
approximately 1.5 miles until you are at the property.
History
The Ferris-Haggerty Mine Site was one of the richest components of the Grand
Encampment Mining District in Carbon County, Wyoming. The site was first
exploited by Ed Haggerty, a prospector from Whitehaven, England, in 1897, when
he established the Rudefeha Mine on a rich deposit of copper ore. Haggerty was
backed by George Ferris and other investors, of whom all but Ferris dropped out.
The partners sold an interest to Willis George Emerson, who raised investment
funding for improvements to the mine. These facilities included a 16-mile
(26 km) aerial tramway from Grand Encampment over the Continental Divide to the
smelter in Encampment and a 4-mile (6.4 km) pipeline to the mine. The mine's
assets were eventually acquired by the North American Copper Company for $1
million. By 1904 the mine had produced $1.4 million in copper ore, and was sold
to the Penn-Wyoming Copper Company. However, even with copper prices peaking in
1907, the company had difficulty making a profit from the remove mine site. The
company was over-capitalized and under-insured, and was suffered devastating
fires at the mine site in March 1906 and May 1907 which halted production.
Business disputes and a fall in copper prices prevented re-opening of the mine
even after it was rebuilt. Machinery was salvaged after a foreclosure in 1913. A
total of $2 million in copper ore was extracted from the mine during its life.
Project Geology
The Deposit is a tabular injection of magmatic metal differentiation product at
the margins of an ultramafic intrusive of early Archean age (2.2 billion years
ago). This intrusive was injected into pre-existing high siliceous sandstones
and shales of massive thickness (+2,000 ft). Mineralization at the
Ferris-Haggarty mine consists of disseminated pyrite and chalcopyrite grains
that occur along bedding planes of the host quartzite. However, the massive ore
body mined at the Ferris-Haggarty was described by Spencer (1904) to lie along
quartzite-Schist contacts and to cross cut foliation. Based on the historic
description, the ore may have been remobilized from the host quartzite during
regional metamorphism and emplaced along the quartzite-schist contact by way of
permeable fractures. The impermeable hanging wall schist may have formed a
natural barrier to the ore solutions and produced an unusually rich ore body.
Restoration and Reclamation
Grass must grow on the drill pad disturbance areas from drilling which took
place in 2007. These drill pads are located at 10,000 feet above sea level on
the north face of a mountain on the Continental Divide.
During the first quarter of 2021, the Company received notice that its Ferris
Haggerty property was no longer considered to be subject to reclamation
treatment. On April 29, 2021, the Company moved the Ferris Haggerty $10,000
restricted cash deposit into its cash after receiving payment from the state of
Wyoming.
INFRASTRUCTURE
The Company's carrying value of property, plant and equipment is as follows:
The Company holds a license to use Kinetic Separation, a proven technology that
we anticipate will improve the efficiency of the sandstone hosted uranium mining
process, although there are some uncertainties about whether the anticipated
benefits will be realized. See Item 1, "Business - The Kinetic Separation
Process." Kinetic Separation is a low cost, purely physical method of uranium
and vanadium ore extraction. Kinetic Separation has been initially tested in
order to understand the hydro and mechanical separation processes. The Company
used a prototype Kinetic Separation test system to test several different
samples of uranium ore from the Sunday Mine Complex and the Hansen/Taylor Ranch
properties. In all cases, uranium ore that was entered into the Kinetic
Separation pilot test system appeared to concentrate most of the uranium into
the post kinetically separated material consisting of a fraction of the original
mass, leaving most of the post kinetically separated materials which did not
contain any uranium. The results of these tests have not yet been validated by a
qualified person.
33
During 2016, the Company submitted documentation to the Colorado Department of
Public Health and Environment ("CDPHE") for a determination ruling regarding the
type of license which may be required for the application of Kinetic Separation
at the Sunday Mine Complex within the state of Colorado. During May and June of
2016, CDPHE held four public meetings in several cities in Colorado as part of
the process. On July 22, 2016 CDPHE closed the comment period. In connection
with this matter, the CDPHE consulted with the NRC. In response, the CDPHE
received an advisory opinion dated October 16, 2016, which did not contain
support for the NRC's opinion and with which the Company's regulatory counsel
does not agree. NRC's advisory opinion recommended that Kinetic Separation
should be regulated as a milling operation but did recognize that there may be
exemptions to certain milling regulatory requirements because of the benign
nature of the non-uranium bearing sands produced after Kinetic Separation is
completed on uranium-bearing ores. On December 1, 2016, the CDPHE issued a
determination that the proposed Kinetic Separation operations at the Sunday Mine
must be regulated by the CDPHE through a milling license. Beginning in 2017 the
Company's regulatory counsel has prepared significant documentation in
preparation for a prospective submission. On September 13, 2019, the Company's
regulatory counsel submitted a whitepaper to the NRC entitled "Recommendations
on the Proper Legal and Policy Interpretation for Using Kinetic Separation
Processes at Uranium Mine Sites." On July 24, 2020, the NRC staff responded with
a letter in support of the original conclusion. Western's regulatory counsel has
proposed alternatives. However, management has decided not to proceed at this
time, given its present opportunity set.
The Company holds mineral properties as outlined below.
Pinon Ridge Properties
On August 18, 2014, the Company purchased mining assets from Energy Fuels
Holding Corp. in an arm's length transaction. The mining assets include both
owned and leased land in the states of Utah and Colorado. All of the mining
assets represent properties which have previously been mined to different
degrees for uranium. As some of the properties have not formally established
proven or probable reserves, there may be greater inherent uncertainty as to
whether or not any mineralized material can be economically extracted as
originally planned and anticipated.
The Company's mining properties acquired on August 18, 2014 which the Company
still retains as of December 31, 2020, 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 project located in San Juan County, Utah; and the Dunn
project located in San Juan and San Miguel counties, Colorado.
Black Range Properties
On September 16, 2015, in connection with the Black Range Transaction, the
Company acquired additional mineral properties. The mining assets acquired
through Black Range include leased land in the states of Colorado, Wyoming and
Alaska. None of these mining assets were operational at the date of acquisition.
As these properties have not formally established proven or probable reserves,
there may be greater inherent uncertainty as to whether or not any mineralized
material can be economically extracted as originally planned and anticipated.
The Company's mining properties acquired on September 16, 2015 which the Company
still retains as of December 31, 2020, include Hansen, North Hansen, High Park,
Hansen Picnic Tree, Taylor Ranch, located in Fremont County, Colorado. The
Company also acquired Keota located in Weld County, Wyoming.
In connection with the Black Range Transaction, Western assumed a mortgage
secured by land, building and improvements at 1450 North 7 Mile Road, Casper,
Wyoming, with interest payable at 8.00% and payable in monthly payments of
$11,085 with the final balance of $1,044,015 due as a balloon payment on January
16, 2016. The Company did not pay the mortgage on its due date. On May 26, 2016,
the Company executed agreements with the mortgage holder whereby in an equal
exchange the mortgage was exchanged for the land, building and improvements on
which it was secured, pursuant to which no further financial consideration is
required.
During the second quarter of 2016, the Company initiated actions to cancel its
coal mining leases in Alaska. In connection therewith, the Company notified the
state of Alaska of its intent to forfeit the posted bond in satisfaction of the
reclamation liabilities at the site. In response to the Company's notification,
the Company received notification that the state of Alaska was initiating
forfeiture of the Company's performance bond for reclamation. However, the
notice indicated an additional surety bond of $150,000 in excess of the $210,500
cash bond, which had been posted by the Company upon purchase of the property.
The Company and its advisors do not believe that it is obligated for this
additional amount of claimed reclamation obligation. The Company is working with
its legal counsel and the State of Alaska to resolve this matter. The Company
has not recorded an additional $150,000 obligation as the Company does not
expect, based on the advice of legal counsel, to be obligated to an amount
greater than that presently reflected in the reclamation liability. During the
year ended December 31, 2016, the Company adjusted the fair value of its
reclamation obligation and for the Alaska mine, accreted $183,510 to bring its
reclamation liability to face value. The portion of the reclamation liability
related to the Alaska mine, and its related restricted cash are included in
current liabilities, and current assets, respectively, at a value of $215,976
and $215,976. On January 20, 2017, the State of Alaska notified the Company that
its reclamation bond had been forfeited to be used to satisfy the reclamation
obligation. However, no amount had yet been determined in respect to the final
cost of the reclamation obligation.
34
As the properties are not in production, they are not covered by various types
of insurance including property and casualty, liability and umbrella coverage.
We have not experienced any material uninsured or under insured losses related
to our properties in the past and believe our approach sufficient given the
inactivity.
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WESTERN URANIUM & VANADIUM CORP. 
