Utah Rapidly Making a Mark for Uranium & Nuclear; Focus on Pegasus Resources & Western Uranium

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Uranium equities had a particularly strong showing last week, benefitting from renewed optimism on back of two key announcements: A) Executive Orders issued by the White House to quadruple US Nuclear capacity, and B) an additional five mining companies added to the Federal Permitting dashboard for fast track/streamlined permitting under the FAST-41 funding and authorization bill. On back of all of this recent momentum, we focus on the developments happening specifically in Utah, a State not only committed to re-starting uranium mining, but one with ambitious nuclear plans as well.

Since President Trump took office, a total of 25 projects have been earmarked for fast track/streamlined permitting. The latest batch of critical mineral projects was announced on May 23. To date, two uranium projects have been included to the Federal dashboard (La Jara Mesa and Roca Honda, both located in New Mexico). In response to the President’s Executive Order to increase domestic mineral production, under the FAST-41 legislation additional projects are expected to be included to the Permitting Council’s Federal Permitting Dashboard. Further permitting success was announced on May 27 when the Department of the Interior announced that it had approved Anfield Energy’s (AEC) Velvet-Wood uranium project, (located in San Juan County, Utah) following a less than 14 day review from the Bureau of Land Management.

• Mining Infrastructure in Utah – Located in Blanding Utah, Energy Fuel’s (UUU) White Mesa mill is the only operating conventional uranium mill. In Q4/2024, the mill produced over 157,000 lbs of uranium concentrate. That figure marked the highest production level from any site over any quarter in 2024. The mill has plenty of excess capacity and is actively looking for additional feedstock.  

• Nuclear Infrastructure Coming to Utah – As announced last week by Utah Governor Cox, the State has partnered with Valar Atomics in the hopes of completing a new nuclear test reactor at the San Rafael Energy Research Center by next year. Longer term, the State has signed an MOU with Intermountain Power Agency and EnergySolutions to find a site for a nuclear power plant. As part of Operation Gigawatt, Utah is committing to double its reliable energy production over the next 10 years. Nuclear power will play a key part of this ambitious goal.  

Whether with fully permitted or advanced stage projects, companies have been taking notice of the recent permitting accomplishments - on May 27, IsoEnergy (ISO) made the decision to begin various work programs on its past-producing Tony M uranium mine, located in Utah. Given the positive momentum in the sector and the string of recent successes from Utah based projects, we feel that its time to highlight some of the under-looked projects within the State. That said, we cast the spotlight on Western Uranium’s (WUC) San Rafael Project and Pegasus Resources’ (PEGA) Energy Sands and Jupiter Projects. We maintain our C$1.35 per share, 12-month price objective for WUC and our C$0.25 per share price objective for PEGA.

PEGASUS RESOURCES: FOCUS NOW SQUARELY ON THE PLANNED 2025 UTAH DRILLING CAMPAIGN:

The Pegasus Projects (Jupiter and Energy Sands) in Utah are located well within trucking distance of Energy Fuels’ White Mesa mill, located approximately 180km to the southeast or almost 140km due south to Anfield Energy’s Shootaring Canyon Mill. Both the Energy Sands Project (1,560 acres) and the Jupiter Project (960 acres) are located 3km from each other and adjacent to Western Uranium & Vanadium’s San Rafael deposit which currently hosts a global resource of over 5.2M lbs U3O8 and over 7.0M lbs V2O5. Recently increased to 75% ownership, one step remains for Pegasus to receive full (100%) ownership in Jupiter – the start of a maiden drilling program.

The planned 2025 drilling program represents the most significant campaign undertaken on site since the mid-1970s. The details will resemble the following:

Jupiter Project – A drilling total of 15,360ft was previously planned for, spread between 30 holes (500ft+ average depth per hole). These average depths are on par with the ~90 historic drill holes drilled in the 1970s in the northeast corner of section 15.

Energy Sands - A total of 3,200ft was previously planned for at Energy Sands. Spread between 18 holes, the 178ft average depth per hole is significant given that the historic drilling which occurred in the mid-1970s encompassed 19 holes with a single highlight drill hole reaching a maximum depth of “just” 160ft. Note that of the historical drill holes, uranium and vanadium mineralization was detected in four drillholes (IDs 75-1 to 75-6). Mineralization occurred at relatively shallow depths, none deeper than 17.5ft.

Recall that in March 2024, Pegasus announced the results from a sampling program conducted on site at the Energy Sands Project. Of 41 samples collected, 13 displayed uranium grades exceeding 1.0% with a notable sample being ESRS24-016 returning 18.8% U3O8 and ESRS24-007 returning 3.55%

HISTORIC DRILLING

Energy Sands Project - Historic drilling detected sandstone-hosted uranium and vanadium mineralization. Small scale mining was conducted between 1953-1956 by the Minerals Corporation of America in two isolated regions of the Energy Sands property. Total production amounted to 51.8 tons at a notable grade of 0.373% U3O8 and 1.10% V2O5.  Uranium mineralization on the project is hosted within the Salt Wash Member of the Jurassic Morrison Formation. Mineralization within the Tidwell Mineral Belt of the San Rafael Uranium District is oriented in a series of roughly northeast trends. Individual mineralized bodies are tabular to lenticular with the long axis aligned along the trend. This geological feature shapes the potential for resource exploration and development of economical uranium deposits.

Historical drilling conducted in the mid 1970s by Consolidated Monarch Metal Mines Ltd identified several near surface intercepts with high-grade uranium mineralization. The limited, near surface program was highlighted by the following intercepts:

The drilling summary included the fact that drill program calculations estimated approximately 1,168 tons of rock in place containing 15,350 lbs of vanadium and 43,230 lbs of uranium in a flat lying deposit at a depth of 9ft to 15ft below surface. These estimated tons were seen as readily available for mining. 

Jupiter Project - On July 3rd 2024 Pegasus announced that it had secured exclusive rights to the Jupiter Uranium Project, located just 3.0km north of the Energy Sands Project. The Jupiter Project encompasses 48 unpatented claims totaling 960 acres. The claims occur in the Bureau of Land Management, and access is obtained over a well-maintained service road which joins I-70 near Green River, Utah. Between 1972-1983, the Jupiter Project was held by Atlas Minerals. During this period, nearly 200 drill holes were drilled with the highest concentration (approximately 90 drill holes) occurring in the northeast corner of Section 15. The historical drill logs revealed promising results, with notable uranium intercepts. Atlas Minerals was advancing the project towards full-scale mining before the collapse of the uranium market in the early 1980s. Pegasus’ stake in Jupiter increased to 75% this past March as per satisfying the latest term from the earn-in agreement.  

CONCLUSION

In anticipation of an upcoming drilling campaign, we maintain our C$0.25 per share target which would equate to upside of +166% from the most recent close (May 27). As we await details/results from the upcoming drilling campaign, we acknowledge that positive high grade results can certainly surprise further to the upside while consequently, drilling a series of misses can easily lead to undershooting the target.        

Combined, Energy Sands and Jupiter encompass 2,520 acres situated adjacent to Western Uranium & Vanadium’s San Rafael deposit. Though we see these two properties as highly prospective, we highlight the following key points which when taken together, make the investment case into Pegasus Resources compelling on a risk/reward standpoint:

• Mining at the Energy Sands project in the mid 1950s resulted in small scale production of both uranium and vanadium (51.8 tons at a grade of 0.373% U3O8 and 1.10% V2O5).

• Historic shallowing drilling at Energy Sands is highlighted by a 2.5ft intercept grading 3.41% U3O8 with an additional drill hole encountering 2.5ft grading 2.16% U3O8.

• Jupiter is host to nearly 200 historic drill holes. Drilling was performed when the property was held by Atlas Minerals.

• Both Energy Sands and Jupiter are located adjacent to Western Uranium & Vanadium’s San Rafael deposit which currently hosts a global resource of over 5.2M lbs U3O8 and over 7.0M lbs V2O5.

• Successful exploration on Pegasus’ Utah properties may eventually lead to an economic resource in an area which has all the needed infrastructure for large scale mining and milling operations.

• Given close proximity to the White Mesa mill (180km), the Shootaring Canyon mill (140km) and the proposed Maverick mill (6km) there is excess milling capacity in the area (from White Mesa alone). Additional feedstock to White Mesa is needed.

  

WESTERN URANIUM & VANADIUM: MILLS PLANNED FOR, DRILLING NEEDED INSTEAD

WUC’s key property is the Sunday Mine Complex (SMC) which is currently being mined (ore being stockpiled). An ore purchase agreement was signed recently with Energy Fuels (UUUU). Longer term, the company will be looking to develop the San Raphael complex as a second uranium production area while also providing in-house processing given the proposed Maverick Processing Plant.

Last month, Western Uranium & Vanadium announced that it had entered into an Ore Purchase Agreement with Energy Fuels. Though the details have been extremely minimal, what we know is that Western will plan to commence hauling ore towards the end of May, making deliveries to Energy Fuels’ White Mesa Mill. Stockpiling has been on-going at the Sunday Mine Complex (SMC) with at least four mines on the property currently/recently in production. What we do know is that the Ore Purchase Agreement has been signed for one year, for delivery of up to 25,000 short tons of uranium bearing ore.  As per pricing, all that was disclosed was that the purchase price will be calculated based on the uranium grade of each closed lot according to an agreed upon pricing schedule.  

SUNDAY MINE COMPLEX

The SMC hosts six different mines. These are the Topaz, West Sunday, Sunday, St. Jude, Carnation, and most recently, the GMG. These mines have had numerous owners dating back to the 1960s, some of which included Union Carbide Corporation, Atlas Minerals, International Uranium Corp and Denison Mines (DNN) and most recently, Energy Fuels (UUUU). The most recent historical SMC production was conducted by Denison Mines between 2007-2009 when production totaled 503,558 lbs of uranium along with 2.846M Kg of vanadium. Western Uranium & Vanadium acquired the SMC in 2014. Mining is currently underway at the Sunday, Carnation, St. Jude and West Sunday mines. Permitting for the Topaz mine will be contingent on modifying the current Plan of Operations. Management is currently determining the best way to proceed with the permitting of Topaz given the requirements needed from the Bureau of Land Management (BLM).

• Drilling: the primary objective is to define additional mining areas utilizing underground horizontal drilling. This alternative to surface drilling aims to identify new high-value targets for mine development and support an ore resource upgrade program, defining additional resources for a NI43-101 technical report. Of note is that both longhole and shorthole drilling efforts have already begun on mineralized areas encountered while drifting to the GMG ore body. GMG has been previously identified as having the potential to be the largest (in terms of grade and quantity) ore body from the entire Complex however the size and scope has yet to be quantified. 

• Production: The goal at the SMC is to achieve a daily ore production rate of 500 tons by 2025 – this would yield approximately 3,000 lbs of uranium per day and an annualized run-rate of 1.0M lbs of uranium production (along with an estimated 6.0M lbs of vanadium).

SAN RAFAEL

The San Rafael Uranium Project is located in Emery County, Utah and forms a single contiguous claim block covered by 146 unpatented federal lode mining claims. The history of the Project dates back to 1880 when the area was being sporadically mined for both uranium and vanadium. From 1948 to 1956, production increased rapidly to 60,584 tons having an average grade of 0.25% U3O8 and 0.44% V2O5. In 1954, the U.S. Atomic Energy Commission (AEC) drilled six deep holes in the center of the Tidwell Mineral Belt and intersected well mineralized material, with private industry subsequently continuing with deeper drilling and discovering larger deposits at depths exceeding 300 feet. Production gradually decreased until 1971 when all mining ceased in the San Rafael Uranium District.

The Down Yonder deposit was discovered by Conoco between 1968–1970. In 1972, another deposit was discovered and developed at about 600 feet, and the Snow shaft was sunk on it by Atlas Minerals in 1973. The Snow, along with the Probe, both of which were worked by Atlas until 1982, turned out to be two of the largest mines and biggest producers in the district. Snow produced 650,292 lbs of U3O8 at an average 20 grade of 0.188% U3O8 while the Probe produced 293,985 lbs of U3O8 at an average grade of 0.186% U3O8. Within the district itself, to date, in excess of 4.0M lbs of uranium and 5.4M lbs of vanadium have been produced from over fifty mines in the San Rafael Uranium District between a period between the 1950s-early 1980s. The two highlight deposits encompass the Deep Gold Uranium Deposit and the Down Yonder Uranium Deposit.  Following periods of ownership/involvement by Atlas, Union Carbide, Pioneer Uravan and EMC (among others), by 2007 Uranium One Inc purchased a package of uranium properties which included the Deep Gold deposit and the Shootaring Canyon uranium mill in Utah. Much of the property was subsequently acquired by Energy Fuels.  During the Q2/2024 quarter, Western submitted a Notice of Intent to the U.S. Bureau of Land Management that was approved for a mineral and groundwater exploration project.

At present, the mineral resource for the entire San Rafael Project comprises an Indicated mineral resource of 758,050 tons grading 0.225% U3O8 containing 3.404M lbs U3O8 and an Inferred mineral resource of 453,800 tons grading 0.205% U3O8 containing 1.859M lbs U3O8. Most of the mineralization is seen at about 775-970 ft below the surface in the upper sandstone horizon of the Salt Wash Member of the Upper Jurassic Morrison formation. Though low-grade, past mining in the Tidwell Mineral Belt produced vanadium as a co-product.

CURRENT RESOURCE ESTIMATES HARDLY JUSTIFY THE CONSTRUCTION OF A PROCESSING PLANT

The main hosts for uranium-vanadium mineralization in the Sunday Mine Complex are fluvial sandstone beds assigned to the upper part of the Salt Wash Member of the Jurassic Morrison Formation. As per 2015 NI43-101 compliant Technical Report, The Sunday Mine Complex currently hosts just over 1.0M lbs U3O8 in the Measured & Indicated category (grading 0.25% U3O8) along with 1.9M lbs U3O8 in the Inferred category (grading 0.36% U3O8). At a global resource of just 2.9M lbs, we hardly see this as sufficient to justify the construction of a processing plant. The same logic goes for San Rafael with a global resource of 4.3M lbs. With an estimated price tag of ~$75M and at a proposed capacity of 1.0M lbs per year, we hardly see the need for such an endeavor as a good allocation of capital. This point is made that much more pertinent given the deposit’s close proximity ~180km to Energy Fuels White Mesa mill which is currently licensed for 2,000 tpd and up to 8.0M lbs annually. Needless to say, the White Mesa mill has more than enough excess capacity for additional intake. Additionally, the San Rafael deposit is also located ~140km from Anfield’s Shootaring Canyon Mill. Given the excess capacity available at the nearby White Mesa mill, we would prefer if the company would concentrate on drilling out the resource at San Rafael and the SMC rather than devote resource to purchasing land and pushing for the construction of the Maverick (or SMC) mill. Company-wide, the current resource estimate includes various NI43-101 compliant estimates along with one JORC compliant estimate for the Hansen/Taylor Ranch deposits. A resource for both uranium and vanadium content has been estimated.

VALUATION

We value the SMC at a $5.50/lb in-situ value and provide the corresponding in-situ sensitivities. Factoring in the other assets along with current corporate adjustments and a target NAV multiple of 0.80x, we maintain our in-situ based price objective (12-months) of C$1.35 per share (rounded).  This equates to a modest upside of +25% from the most recent close (May 27). Shares of Western Uranium & Vanadium currently trade at a 0.65x NAV multiple. For context, this multiple is near the levels from our US producer coverage list. For context, producers such as Ur-Energy (URG) currently trades at a P/NAV of 0.78x while enCore Energy (EU) currently trades at a P/NAV of 0.98x. Lastly, we acknowledge the possibility of co-production of vanadium resource however all is contingent on the signing of a uranium processing agreement (of which details have been minimal).

CONCLUSION

We continue to see Western Uranium & Vanadium as a company very much at the crossroads with plenty of ambitious plans on the horizon however in need of some concrete development milestones in the near term. These concrete development plans include actual economic projections for the proposed Maverick CPP, a possible PEA and some concrete resource growth at the SMC. Though we think the initiative to build the proposed Maverick mill is completely unnecessary, any positive news item on any of these fronts (or a change in strategy) will warrant a thesis adjustment on our end. Concrete development milestones (and corresponding details) are still needed.

Though a lot of opportunity presents itself to the company at present, numerous unknowns remain which lead to our conclusion that the current share price is close to being fully valued. These specific unknows include:

• Updated Resource Statement at the Sunday Mine Complex + Preliminary Economic Assessment (PEA).

• Processing/sales agreement details with Energy Fuels with regards to the Ore Purchase Agreement.

• Economics & financing plan for the proposed Maverick (or Mustang) Central Processing Plant (CPP).