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    WUC   CA95985D1006

WESTERN URANIUM & VANADIUM CORP.

(WUC)
Delayed CANADIAN NATIONAL STOCK EXCHANGE  -  03:59 2022-06-24 pm EDT
1.290 CAD   +4.88%
05/31Western Uranium & Vanadium Completes Final Delivery on 2015 Supply Agreement
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05/31Western Uranium & Vanadium Corp. Completes Final Delivery on 2015 Supply Agreement
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05/20WESTERN URANIUM & VANADIUM CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)
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WESTERN URANIUM & VANADIUM CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/20/2022 | 04:44pm EDT

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, 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 consolidated interim 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. Effective September 16, 2015, Western completed its acquisition of Black Range Minerals Limited ("Black Range").

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.



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The Company has registered offices at 330 Bay Street, Suite 1400, Toronto, Ontario, Canada, M5H 2S8, and its common shares are listed on the CSE under the symbol "WUC" and are traded on the OTCQX Best Market under the symbol "WSTRF". Its principal business activity is the acquisition and development of uranium and vanadium resource properties in the states of Utah and Colorado in the United States of America ("United States").



Recent Developments


February 2021 Private Placement

On February 16, 2021, the Company closed on a non-brokered private placement of 3,250,000 units at a price of CAD $0.80 per unit. The aggregate gross proceeds raised in the private placement amounted to CAD $2,600,000. Each unit consisted of one common share of Western plus one common share purchase warrant of Western. Each warrant entitled the holder to purchase one common share at a price of CAD $1.20 per share for a period of three years following the closing date of the private placement. A total of 3,250,000 common shares and 3,250,000 warrants were issued in the private placement.

March 2021 Private Placement

On March 1, 2021, the Company closed on a non-brokered private placement of 3,125,000 units at a price of CAD $0.80 per unit. The aggregate gross proceeds raised in the private placement amounted to CAD $2,500,000. Each unit consisted of one common share and one common share purchase warrant. Each warrant entitled the holder to purchase one common share at a price of CAD $1.20 per share for a period of three years following the closing date of the private placement. A total of 3,125,000 common shares and 3,125,000 warrants were issued in the private placement.

December 2021 Private Placement

On December 17, 2021, the Company closed a non-brokered private placement of 372,966 units at a price of CAD $1.60 per unit. The aggregate gross proceeds raised in the private placement amounted to CAD $596,746 (USD $434,973 in net proceeds). Each unit consisted of one common share plus one warrant. Each warrant entitled the holder to purchase one common share at a price of CAD $2.50 per share for a period of three years following the closing date of the private placement. A total of 372,966 common shares and 372,966 warrants were issued in the private placement.

January 2022 Private Placement

On January 20, 2022, the Company closed on a non-brokered private placement of 2,495,575 units at a price of CAD $1.60 per unit. The aggregate gross proceeds raised in the private placement amounted to CAD $3,992,920. Each unit consisted of one common share of Western plus one common share purchase warrant of Western. Each warrant entitled the holder to purchase one common share at a price of CAD $2.50 per share for a period of three years following the closing date of the private placement. A total of 2,495,575 common shares and 2,495,575 warrants were issued in the private placement.

Bullen Property (Weld County)

The Bullen Property is an oil and gas property located in Weld County Colorado. The Company acquired this non-core property in 2015 in the Black Range Minerals Limited acquisition, and Black Range purchased the property in 2008 for its Keota Uranium Project.

In 2017, the Company signed a three year oil and gas lease which in 2020 was extended for an additional three year term or until the end of continuous operations. The consideration was in the form of upfront bonus payments and backend 3/16th production royalty payment. Additional right-of-way easement agreements were signed which allowed for the development of a pipeline. The lease agreement allows the Company to retain property rights to vanadium, uranium, and other mineral resources.

A 2019 lawsuit was filed in the Weld County District Court over the original Bullen Property deed language which was negotiated before the Company acquired Black Range by prior management and a bank representing the estate of the property owner. The Company settled with the plaintiffs by awarding the estate's beneficiaries a non-participating royalty interest of 1/8th for all hydrocarbon and non-hydrocarbon substances that are produced and sold from the property.



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In early 2020, Bison Oil & Gas traded this lease to Mallard Exploration ("Mallard"), Mallard subsequently filed an application with the Colorado Oil & Gas Conservation Commission ("COGCC") to update the permit to create a new pooled unit.

During 2021, the operator advanced through the oil well production stages: drilling was completed in the first quarter, wellfield completion/fracking was completed during the second quarter, drill out was completed in July, and flowback was completed in August. By August 2021, each of the eight (8) Blue Teal Fed wells had commenced oil and gas production. The first royalty payment was made in January 2022 and monthly royalty payments have been received subsequently. These wells continue to rank among the top Colorado producing wells.

Due to the success of the first 8 wells, the operator has decided to develop a second set of 8 wells within Western's royalty area during 2022. During May 2022, the operator completed drilling all 8 of the new wells; the next oil well production stages will follow in the same sequence as the 2021 wellfield development.

During the three months ended March 31, 2022 and 2021 the Company recognized aggregate revenue of $156,226 and $16,155, respectively, under these oil and gas lease arrangements. On January 31, 2022, the operator of the Weld County Colorado oil and gas pooled trust issued the first cumulative royalty payment in the amount of $207,552 for August 2021 through December 2021 sales, which was recognized as income in the fourth quarter of 2021.



Kinetic Separation Licensing


During 2016, the Company submitted documentation to the Colorado Department of Public Health and Environment ("CDPHE") for a determination ruling regarding the type of license which may be required for the application of Kinetic Separation at the Sunday Mine Complex within the state of Colorado. During May and June of 2016, CDPHE held four public meetings in several cities in Colorado as part of the process. On July 22, 2016, CDPHE closed the comment period. In connection with this matter, the CDPHE consulted with the NRC. In response, the CDPHE received an advisory opinion, dated October 16, 2016, which did not contain support for the NRC's opinion and with which the Company's regulatory counsel does not agree. NRC's advisory opinion recommended that Kinetic Separation should be regulated as a milling operation but did recognize that there may be exemptions to certain milling regulatory requirements because of the benign nature of the non-uranium bearing sands produced after Kinetic Separation is completed on uranium-bearing ores. On December 1, 2016, the CDPHE issued a determination that the proposed Kinetic Separation operations at the Sunday Mine Complex must be regulated by the CDPHE through a milling license. Beginning in 2017, the Company's regulatory counsel prepared significant documentation in preparation for a prospective submission. On September 13, 2019, the Company's regulatory counsel submitted a white paper to the NRC entitled "Recommendations on the Proper Legal and Policy Interpretation for Using Kinetic Separation Processes at Uranium Mine Sites." On July 24, 2020, the NRC staff responded with a letter in support of the original conclusion. Western's regulatory counsel has proposed alternatives. However, management has decided not to proceed at this time, given its present opportunity set.

Sunday Mine Complex Permitting Status

On February 4, 2020, the Colorado DRMS sent a Notice of Hearing to Declare Termination of Mining Operations related to the status of the mining permits issued by the state of Colorado for the Sunday Mine Complex. At issue was the application of an unchallenged Colorado Court of Appeals Opinion for a separate mine (Van 4) with very different facts that are retroactively modifying DRMS rules and regulations. The Company maintains that it was timely in meeting existing rules and regulations. The hearing was scheduled to be held during several monthly MLRB Board meetings, but this matter was delayed several times. The permit hearing was held during the MLRB Board monthly meeting on July 22, 2020. At issue was the status of the five existing permits which comprise the Sunday Mine Complex. Due to COVID-19 restrictions, the hearing took place utilizing a virtual-only format. The Company prevailed in a 3-to-1 decision which acknowledged that the work completed at the Sunday Mine Complex under DRMS oversight was timely and sufficient for Western to maintain these permits. In a subsequent July 30, 2020 letter, the DRMS notified the Company that the status of the five permits (Sunday, West Sunday, St. Jude, Carnation, and Topaz) had been changed to "Active" status effective June 10, 2019, the original date on which the change of the status was approved. On August 23, 2020, the Company initiated a request for Temporary Cessation status for the Sunday Mine Complex as the mines had not been restarted within a 180-day window due to the direct and indirect impacts of the COVID-19 pandemic. Accordingly, a permit hearing was scheduled for October 21, 2020 to determine Temporary Cessation status. In a unanimous vote, the MLRB approved Temporary Cessation status for each of the five Sunday Mine Complex permits (Sunday, West Sunday, St. Jude, Carnation, and Topaz). On October 9, 2020, the MLRB issued a board order which finalized the findings of the July 22, 2020 permit hearing. On November 12, 2020, a coalition of environmental groups filed a lawsuit against the MLRB seeking a partial appeal of the July 22, 2020 decision by requesting termination of the Topaz mine permit. On December 15, 2020, the same coalition of environmental groups amended their complaint against the MLRB seeking a partial appeal of the October 21, 2020 decision requesting termination of the Topaz mine permit. The Company has joined with the MLRB in defense of their July 22, 2020 and October 21, 2020 decisions. On May 5, 2021, the Plaintiff in the Topaz Appeal filed an opening brief with the Denver District Court seeking to overturn the July 22, 2020 and October 21, 2020 MLRB permit hearing decisions on the Topaz mine permit. The MLRB and the Company were to respond with an answer brief within 35 days on or before June 9, 2021, but instead sought a settlement. The judicial review process was delayed as extensions were put in place until August 20, 2021. A settlement was not reached and the MLRB and the Company submitted answer briefs on August 20, 2021. The Plaintiff submitted a reply brief on September 10, 2021. On March 1, 2022, the Denver District Court reversed the MLRB's orders regarding the Topaz Mine and remanded the case back to MLRB for further proceedings consistent with its order. The Company and the MLRB had until April 19, 2022 to appeal the Denver District Court's ruling. Neither the Company nor the MLRB appealed the Denver District Court ruling. Western anticipates receiving an MLRB board order of reclamation for the Topaz Mine in June/July 2022. The Company is continuing to work toward the completion of an updated Topaz Mine Plan of Operations which is a separate federal requirement of the BLM for the conduct of mining activities on federal land that has precluded the Company from commencing active mining operations at the Topaz Mine.



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Sunday Mine Complex Project 2021 Restart

The SMC project entailed the development of multiple SMC ore bodies and involves a shift in the base of operations from the St. Jude Mine (2019) to the Sunday Mine (2021). Underground development began in August following mine ventilation, power upgrades, and increasing explosive capabilities. The first target was the extension of the drift (tunnel) 150 feet to reach the first surface exploration drill hole to access the GMG Ore Body (GMG). Early results were positive as drilling toward the GMG resulted in the location of ore-grade material within thirty feet of the existing mine workings. Notably, only limited exploration drilling has been done in this area due to the mountainous terrain on the surface above. As drifting proceeded, very high-grade ore continued to be intersected through the drift path and on both sides of the drift. As a result, the team shifted from development to mining. From December 2021 to March 2022, over 3,000 tons of high-grade uranium/vanadium ore was mined from the drift. The mining contractor calculated grades based upon on site scintillometer readings.

At the end of March 2022, the mining contractor engaged by Western decided to retire from contract mining operations. As a result of this decision, Western will take over the mining operations and has acquired a full complement of mining equipment. The equipment is being prepared for operations and upgrades to mine ventilation, support buildings and infrastructure are underway. Further mine development and ore production is targeted for resumption in thesummer after upgrades are completed. Western's mining team will be expanded to facilitate mine development and full ore production.

Uranium Section 232 Investigation/Nuclear Fuel Working Group Process

An investigation under Section 232 of the Trade Expansion Act of 1962 was undertaken by the DoC in 2018 to assess the impact to national security of the importation of the vast majority of uranium utilized by the approximately 100 operative civilian nuclear reactors within the United States. In response to the Section 232 report, the White House disseminated a Presidential Memoranda in July 2019. At that time, President Trump formed the Nuclear Fuel Working Group ("NFWG") to find solutions for reviving and expanding domestic nuclear fuel production and reinvigorating recommendations.

In April 2020, the DoE released the NFWG report entitled "Restoring America's Competitive Nuclear Energy Advantage - A strategy to assure U.S. national security." The report outlines a strategy for the reestablishment of critical capabilities and direct support to the front end of the U.S. domestic nuclear fuel cycle. The NFWG findings and recommendations presented are a positive outcome for U.S. uranium miners; however, the ultimate outcome and timing remains uncertain as the continuing process requires approvals and budget appropriation from Congress and implementation by U.S. government agencies.

This remains an ongoing process where a number of bills were introduced in both the U.S. Senate and House to implement the key provisions of the NFWG report's recommendations. In November 2020, after the U.S. election, the Senate Committee on Appropriations released its funding measures and allocations recommending the creation and funding of the American Uranium Reserve. In October 2020, the DoC extended the Russian Suspension Agreement for an additional 20 years until 2040. Existing categories of quotas on imports of Russian uranium into the U.S. were reduced by a graduated scale, and additional provisions were modified to eliminate loopholes. An extension of this agreement was among the NFWG's recommendations. In further implementation of the report's recommendations, the DoE made multiple investment awards to companies advancing new nuclear technologies. TerraPower and X-energy received awards to build demonstration models of their advanced reactor designs, and NuScale received support to deploy the first U.S. small modular reactor ("SMR") plan comprised of 12 modules at the Idaho National Laboratory. The International Development Finance Corp. signed a letter of intent to finance NuScale's development of 42 SMR modules in South Africa. In an acknowledgement of the future growth potential of new nuclear technologies, the U.S. government has increased its industry support to a level not seen in decades. This is being done to level the playing field versus state-sponsored foreign entities.



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In December 2020, U.S. Congress passed the "COVID-Relief and Omnibus Spending Bill," which included $75 million for the establishment of a strategic U.S. Uranium Reserve. The Biden-Harris Administration has rolled the 2021 funding into its 2022 fiscal year budget to continue this initiative. In July 2021, the uranium Section 232 report was publicly released. The report concluded that uranium imports were "weakening our internal economy" and "threaten to impair the national security" and recommended immediate actions to "enable U.S. producers to recapture and sustain a market share of U.S. uranium consumption". The DoE continues to work on establishing the parameters of the program and in August 2021, the DoE put out a Request for Information (RFI) to obtain additional comments related to the establishment of the DoE's Uranium Reserve program. On October 13, 2021, Western submitted a response to the Request for Information: Establishment of the Uranium Reserve Program to the DoE's National Nuclear Security Administration.

The Russian invasion of Ukraine has fast tracked the Uranium Reserve Program. On May 5, 2022, the U.S. Secretary of Energy Jennifer Granholm's testified before the Senate Committee on Energy and Natural Resources that the DoE "would make direct purchases of domestically mined and converted uranium this calendar year to establish a strategic uranium reserve". Secretary Granholm's comments make clear that the U.S. is thinking larger. Granholm stated that "We should not be sending any money to Russia for any American energy or for any other reason," and "if we move away from Russia right away, we want to make sure we have the ability to continue to keep the fleet afloat." To accomplish this she further disclosed that the DoE is "developing a full-on uranium strategy that's going through the interagency process."

In February, Russia invaded Ukraine commencing a war between the two countries. Russia is a major global energy supplier and both countries are top ten uranium producers, and Russia is a global leader in nuclear fuel services. Thus, these actions caused a surge in energy prices. On the day prior to the invasion, the spot price of uranium was less than $44/lbs and it increased to a decade high peak of over $63/lbs, before subsequently declining below $50/lbs spot prices. Russia's invasion of Ukraine has called into question their role and future participation in the nuclear fuel cycle. Russia has been the target of unprecedented economic sanctions which have created bottlenecks of Russian exports, including nuclear fuel. In spite of a large global dependence, nuclear fuel purchasers are continuing to diversify away from Russian nuclear fuel. As a result of these new realities, the U.S. Congress is considering both sanctions and multiple pieces of legislation focusing on prohibiting the importation of Russian uranium and nuclear fuel, which is likely to benefit the U.S. domestic mining industry. Further, there remains the possibility that Russia might reverse-sanction the United States and not make nuclear fuel deliveries.

Vanadium Section 232 Investigation

In the United States, a petition for an investigation under Section 232 of the Trade Expansion Act of 1962 was requested by two domestic companies in November 2019. In June of 2020, the U.S. Secretary of Commerce, Wilbur Ross, initiated an investigation into whether the present quantities or circumstances of vanadium imports into the United States threaten to impair the national security. The Section 232 National Security Investigation of Imports of Vanadium was concluded, and a report was submitted to President Biden in February 2021. In July 2021, the report was made public. It concluded that vanadium imports "do not threaten to impair the national security as defined in Section 232," but identified and recommended "several actions that would help to ensure reliable domestic sources of vanadium and lessen the potential for imports to threaten national security." No action has been taken on these recommendations.

Biden-Harris Administration Initiatives

The positive momentum has continued for the nuclear and uranium mining sector due to the Biden-Harris Administration's emphasis on climate change. The "Plan to Build a Modern Sustainable Infrastructure and an Equitable Clean Energy Future" emphasizes climate change solutions. Upon taking office, the Biden team immediately rejoined the Paris Agreement and continued its pursuit of campaign promises of investments in clean energy, creating jobs, producing clean electric power, and achieving carbon-pollution free energy in electricity generation by 2035. Since taking office, President Biden has given all agencies climate change initiatives and has started a climate change working group. The existing U.S. nuclear reactor fleet currently produces in excess of 50% of U.S. clean energy, and new, advanced nuclear technologies promise to generate additional clean energy. A White House national climate advisor told the media in a press briefing that the Biden-Harris Administration intends to seek a national clean energy standard that includes nuclear energy. The Company believes that nuclear energy will be increasingly able to compete on a level playing field with renewable energy technologies.



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There has been legislative advancement of implementation mechanisms including tax credits, subsidies, and/or U.S. utilities being required to produce an increasing proportion of electricity generation from clean energy power sources. President Biden's Build Back Better agenda has several components supportive of nuclear power generation. Already signed into law is the $1.2 trillion Infrastructure Investment and Jobs Act that provides the DoE funding to prevent the premature retirement of existing nuclear plants and invest in advanced nuclear projects. The separate $1.7 trillion Build Back Better Reconciliation Legislation, which has not yet made its way through the U.S. Congress, further addresses climate change through the inclusion of a zero-emission nuclear power production credit. If passed in its current form, beginning in 2022 qualified nuclear power facilities would be eligible to receive a base credit and a bonus credit if certain requirements are met.

President Biden attended the United Nations Climate Change Conference (COP26) in Glasgow, Scotland. His administration simultaneously released a proposed plan targeting the reduction of methane emissions. Many of the proposed initiatives from the Climate Summit target reduced utilization of fossil fuels and if implemented expand future opportunities for nuclear power generation, given its ability to provide baseload and carbon-free energy. To conclude the COP2, in a surprise announcement, the U.S. and China pledged to work together to slow global warming. This is significant because the U.S. and China represent the two countries with the largest CO2 emissions. They jointly pledged to take "enhanced climate actions" to meet the 2015 Paris Agreement temperature goal of limiting global warming to less than 1.5C.

The Harris-Biden Administration has shifted its focus toward the Russia/Ukraine conflict and the implementation of multiple rounds of sanctions, participating in the international response, and providing support. The DoE has been outspoken and is working hard at creating nuclear fuel solutions to address the current dependence and promote a geopolitical realignment of the nuclear fuel cycle away from Russia.

Strategic Acquisition of Physical Uranium

In May 2021, the Company executed a binding agreement to purchase 125,000 pounds of natural uranium concentrate at $32.16 per pound. In December 2021, the Company paid $4,020,000 in connection with its full prepayment of the purchase price for 125,000 pounds of natural uranium concentrate. This uranium concentrate was subsequently delivered under the terms of the uranium supply agreement in April 2022.

Uranium Supply Agreement Delivery

In April 2022, in satisfaction of the Year 5 delivery under its supply contract, the Company delivered 125,000 lbs of uranium concentrate from its prepaid uranium concentrate inventory. This delivery of uranium concentrate resulted in a sale of $7,130,000, at a price of $57.04 per pound. In May 2022, the Company received the cash proceeds from this sale.



Sprott Physical Uranium Trust


The Sprott Physical Uranium Trust (U.UN) (the "Trust") took over the former Uranium Participation Corp. (U.TO) and launched an at-the-market program (ATM) on August 17, 2021 to raise capital for the closed-ended trust. Since the inception of the ATM program, the Trust has bought significant quantities of uranium causing spot prices to increase. The New York Stock Exchange (NYSE) declined the U.S. listing application for the anticipated Sprott U.S. physical uranium trust vehicle. Sprott has stated that they do not have an intent to further pursue a listing on a US exchange "in the near term." Since the Trust was launched it has purchased in excess of 37 million pounds of uranium, and Sprott has grown the Canadian listed vehicle to ~ $3 billion.

Due to Sprott's success a clone physical uranium fund was launched on May 12, 2022. The ANU Energy OEIC Ltd fund raised over $75 million dollars in a private placement and has made its first uranium purchase. Kazatomprom, the world's largest producer of uranium is a strategic investor and uranium supplier to ANU Energy. Kazatomprom has made the first uranium delivery at Cameco's Port Hope conversion facility.



COVID-19


The world has been, and continues to be, impacted by the novel coronavirus ("COVID-19") pandemic. COVID-19, and measures to prevent its spread, impacted our business in a number of ways. The impact of these disruptions and the extent of their adverse impact on the Company's financial and operating results will be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently unpredictable duration and severity of the impacts of COVID-19, and among other things, the impact of governmental actions imposed in response to COVID-19 and individuals' and companies' risk tolerance regarding health matters going forward and developing strain mutations. To date, COVID-19 has primarily caused Western delays in reporting, regulatory matters, and operations. Most notably, the Company initiated a request for Temporary Cessation status for the Sunday Mine Complex in August 2020 as the mines had not been restarted within the 180-day window due to the direct and indirect impacts of the COVID-19 pandemic. The Van 4 Mine reclamation process was delayed because of COVID-19 pandemic lockdowns. The need to observe quarantine periods also caused a limited loss of manpower and delay to the 2021 / 2022 Sunday Mine Complex project. The COVID-19 pandemic has limited and continues to limit Western's participation in industry and investor conference events. The Company is continuing to monitor COVID-19 and its subvariants and the potential impact of the pandemic on the Company's operations.



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Results of Operations



                                             For the Three Months Ended March 31,
                                                 2022                     2021
Revenue
Lease and royalty revenue                $            156,226       $          16,155

Expenses
Mining expenditures                                   289,038                  47,859
Professional fees                                     136,060                  46,387
General and administrative                            863,062                 211,181
Consulting fees                                        39,512                       -
Total operating expenses                            1,327,672                 305,427

Operating loss                                     (1,171,446 )              (289,272 )

Accretion and interest                                  2,157                   2,342

Net loss                                           (1,173,603 )              (291,614 )

Other Comprehensive income
Foreign exchange gain                                  56,661                  44,964

Comprehensive Loss                                 (1,116,942 )              (246,650 )

Net loss per share - basic and diluted   $              (0.03 )     $           (0.01 )




Three Months Ended March 31, 2022 as Compared to the Three Months Ended March 31, 2021




Summary:



Our consolidated net loss for the three months ended March 31, 2022 and 2021 was $1,173,603 and $291,614 or $0.03 and $0.01 per share, respectively. The principal components of these year over year changes are discussed below.

Our comprehensive loss for the three months ended March 31, 2022 and 2021 was $1,116,942 and $246,650, respectively.



Revenue


Our revenue for the three months ended March 31, 2022 and 2021 was $156,226 and $16,155, respectively. This revenue resulted from lease revenue pursuant to a July 18, 2017 oil and gas lease agreement, which was extended for an additional three years in 2020 at a 150% increased rate. The February 2, 2018 pipeline easement, with the initial operator has terminated resulting in a decrease in this portion of revenue. The July 1, 2018 right-of-way agreement with the new operator was consistent between periods. On January 31, 2022, the operator of the Weld County Colorado oil and gas pooled trust issued the first cumulative royalty payment check in the amount of $207,552 for August 2021 through December 2021 sales which was recognized as income in the fourth quarter of 2021. Subsequently, in 2022, monthly royalty checks were disseminated for sales during each of the months in the first quarter.



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Mining Expenditures


Mining expenditures for the three months ended March 31, 2022 were $289,038 as compared to $47,859 for the three months ended March 31, 2021. The increase in mining expenditures of $241,179, or 504% was principally attributable to mining expenditures related to restarting mining operations at the Company's Sunday Mine Complex during the third quarter of 2021.



Professional Fees


Professional fees for the three months ended March 31, 2022 were $136,060 as compared to $46,387 for the three months ended March 31, 2021. The increase in professional fees of $89,673, or 193% was primarily due to a $63,585 increase in legal fees.




General and Administrative



General and administrative expenses for the three months ended March 31, 2022 were $863,062 as compared to $211,181 for the three months ended March 31, 2021. The increase in general and administrative expense of $651,881, or 309% is due to a $495,120 increase in stock-based compensation expense, $89,862 increase in payroll expenses, and an increase of $19,940 in utilities expenses from the Sunday Mine Complex project.



Consulting Fees


Consulting fees for the three months ended March 31, 2022 were $39,512 as compared to $0 for the three months ended March 31, 2021. The increase in consulting fees of $39,512 was principally due to the Company's reduced utilization of consultants during the first quarter of 2021 due to COVID-19.



Accretion and Interest


Accretion and interest for the three month ended December 31, 2022 was $2,157 as compared to $2,342 for the three months ended March 31, 2021.



Foreign Exchange


Foreign exchange gain for the three months ended March 31, 2022 was a gain of $56,661 as compared to a gain of $44,964 for the three months ended March 31, 2021. The change of the foreign exchange gain of $11,697 is primarily due to from holding assets in Canadian Dollars during a period when the currency appreciated and the translation gain from using United States Dollars as the reporting currency.

Liquidity and Capital Resources

The Company's cash balance as of March 31, 2022 was $2,798,217. The Company's cash position is highly dependent on its ability to raise capital through the issuance of debt and equity and its management of expenditures for mining development and for fulfillment of its public company reporting responsibilities. Management believes that in order to finance the development of the mining properties and Kinetic Separation, the Company will be required to raise additional capital by way of debt and/or equity. Western could potentially require additional capital if the scope of Company's projects expands. This outlook is based on the Company's current financial position and is subject to change if opportunities become available based on current exploration program results and/or external opportunities.

Net cash used in operating activities

Net cash used in operating activities was $1,080,087 for the three months ended March 31, 2022, as compared with $283,482 for the three months ended March 31, 2021. Of the $1,080,087 in net cash used in operating activities for the three months ended March 31, 2022, $1,173,603 is derived from our net loss before non-cash adjustments. Changes in our operating assets and liabilities for the period primarily include an increase of $59,800 in prepaid expenses and other current assets, a decrease of $195,338 in accounts payable and accrued expenses, a decrease of $146,177 in subscription payable, and a decrease of $16,155 in deferred revenue.



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Net cash used in investing activities

Net cash used in investing activities was $369,900 for the three months ended March 31, 2022, as compared with $65,000 for the three months ended March 31, 2021. This capital expenditure relates to purchasing property and equipment for our mining operations.

Net cash provided by financing activities

Net cash provided by financing activities for the three months ended March 31, 2022 and 2021 were $3,353,728 and $3,869,306, respectively. The Company completed a private placement during the first quarter of 2022 representing aggregate net proceeds of $3,011,878 and received $341,850 from the exercise of warrants during the three months ended March 31, 2022.



Reclamation Liability


The Company's mines are subject to certain asset retirement obligations, which the Company has recorded as reclamation liabilities. The reclamation liabilities of the United States mines are subject to legal and regulatory requirements, and estimates of the costs of reclamation are reviewed periodically by the applicable regulatory authorities. The reclamation liability represents the Company's best estimate of the present value of future reclamation costs in connection with the mineral properties. The Company determined the gross reclamation liabilities of the mineral properties as of March 31, 2022 and December 31, 2021, to be approximately $740,446 and $740,446, respectively. On March 2, 2020, the Colorado Mined Land Reclamation Board ("MLRB") issued an order commencing final reclamation. The Company has begun the reclamation of the Van 4 Mine and the reclamation cost is fully covered by the reclamation bonds posted upon acquisition of the property. The Company adjusted the fair value of its reclamation obligation for the Van 4 Mine and moved the portion of the reclamation liability related to the Van 4 Mine and its related restricted cash into current liabilities and current assets, respectively, at a value of $75,057. The Company expects to begin incurring the reclamation liability after 2054 for all mines that are not in reclamation and accordingly, has discounted the gross liabilities over their remaining lives using a discount rate of 5.4%. The net discounted aggregated values as of March 31, 2022 and December 31, 2021 were $274,197 and $271,620, respectively. The gross reclamation liabilities as of March 31, 2022 and December 31, 2021 are secured by financial warranties in the amount of $740,446 and $740,446, respectively.

Oil and Gas Lease and Easement

The Company entered into an oil and gas lease that became effective with respect to minerals and mineral rights owned by the Company of approximately 160 surface acres of the Company's property in Colorado. As consideration for entering into the lease, the lessee has agreed to pay the Company a royalty from the lessee's revenue attributed to oil and gas produced, saved, and sold attributable to the net mineral interest. The Company has also received cash payments from the lessee related to the easement that the Company is recognizing incrementally over the eight year term of the easement.

On June 23, 2020, the same entity as discussed above elected to extend the oil and gas lease easement for three additional years, commencing on the date the lease would have previously expired. During 2021, the operator completed all well development stages and each of the eight (8) Blue Teal Fed wells commenced oil and gas production by mid-August 2021.

During the years ended March 31, 2022 and 2021 the Company recognized aggregate revenue of $156,226 and $16,155, respectively, under these oil and gas lease arrangements. On January 31, 2022, the operator of the Weld County Colorado oil and gas pooled trust issued the first cumulative royalty payment check in the amount of $207,552 for August 2021 through December 2021 sales which was recognized as income in the fourth quarter of 2021. Subsequently, in 2022, monthly royalty checks were received for sales during each of the months in the first quarter.




Related Party Transactions



The Company has transacted with related parties pursuant to service arrangements in the ordinary course of business, as follows:

Prior to the acquisition of Black Range, Mr. George Glasier, the Company's CEO, who is also a director of the Company ("Seller"), transferred his interest in a former joint venture with Ablation Technologies, LLC to Black Range. In connection with the transfer, Black Range issued 25 million shares of Black Range common stock to Seller and committed to pay AUD $500,000 (USD $374,499 as of March 31, 2022) to Seller within 60 days of the first commercial application of the Kinetic Separation technology. Western assumed this contingent payment obligation in connection with the acquisition of Black Range. At the date of the acquisition of Black Range, this contingent obligation was determined to be probable. Since the deferred contingent consideration obligation is probable and the amount is estimable, the Company recorded the deferred contingent consideration as an assumed liability in the amount of $374,499 and $362,794 as of March 31, 2022 and December 31, 2021, respectively.



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Going Concern


The Company has incurred continuing losses from its operations and as of March 31, 2022, the Company had an accumulated deficit of $14,335,099 and working capital of $6,849,079.

Since inception, the Company has met its liquidity requirements principally through the issuance of notes and the sale of its common shares. On January 20, 2022, the Company closed on a non-brokered private placement of 2,495,575 units at a price of CAD $1.60 per unit. The aggregate gross proceeds raised in the private placement amounted to CAD $3,992,920 (USD $3,011,878 in net proceeds). During the three months ended March 31, 2022, the Company received $341,850 in proceeds from the exercise of warrants.

The Company's ability to continue its operations and to pay its obligations when they become due is contingent upon the Company obtaining additional financing. Management's plans include seeking to procure additional funds through debt and equity financings, to secure regulatory approval to fully utilize its Kinetic Separation and to initiate the processing of ore to generate operating cash flows.

There are no assurances that the Company will be able to raise capital on terms acceptable to the Company or at all, or that cash flows generated from its operations will be sufficient to meet its current operating costs and required debt service. If the Company is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its planned product development, which could harm its financial condition and operating results, or it may not be able to continue to fund its ongoing operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern to sustain operations for at least one year from the issuance of the accompanying financial statements. The accompanying condensed 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, 2022, there were no off-balance sheet transactions. The Company has not entered into any specialized financial agreements to minimize its investment risk, currency risk or commodity risk.

Critical Accounting Estimates and Policies

The preparation of these condensed 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 consolidated financial statements and reported amounts of expenses during the reporting period.

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the end of the reporting period, that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, include, but are not limited to, the following: fair value of transactions involving common shares, assessment of the useful life and evaluation for impairment of intangible assets, valuation and impairment assessments on mineral properties, deferred contingent consideration, the reclamation liability, valuation of stock-based compensation, valuation of available-for-sale securities and valuation of long-term debt, HST and asset retirement obligations. Other areas requiring estimates include allocations of expenditures, depletion and amortization of mineral rights and properties

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Financials (USD)
Sales 2021 0,27 M - -
Net income 2021 -2,07 M - -
Net cash 2021 0,88 M - -
P/E ratio 2021 -33,2x
Yield 2021 -
Capitalization 43,3 M 43,3 M -
EV / Sales 2020 461x
EV / Sales 2021 209x
Nbr of Employees -
Free-Float 80,2%
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Managers and Directors
George E. L. Glasier President, Chief Executive Officer & Director
Robert Klein Chief Financial Officer
Bryan Murphy Chairman
Michael Rutter Vice President-Operations
Andrew Wilder Non-Executive Director
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