Western Uranium & Vanadium Corp: Ore Purchase Agreement Signed with Energy Fuels...Any Details ?

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Western Uranium & Vanadium yesterday announced that it had entered into an Ore Purchase Agreement with Energy Fuels (UUUU). 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, located near Blanding, Utah. This Ore Purchase Agreement has been long awaited however the lack of concrete details (pertaining to actual volumes and potential pricing) is frustrating. Much like the company’s proposed Maverick CPP, potentially very material press releases with few accompanying details are increasingly becoming the norm from Western. Owing to the lack of detail, the market reaction to the announcement was muted as shares were +0.0% on back of the news.

We continue to value the Sunday Mine Complex at a $5.50/lb in-situ value. Factoring in the other portfolio assets along with current corporate adjustments and a NAV multiple of 0.80x, we maintain our in-situ based price objective (12-months) of C$1.34 per share. Our price objective equates to +46% upside from the most recent close.

VERY FEW DETAILS ON THE ORE PURCHASE AGREEMENT

Western Uranium & Vanadium yesterday announced that it had entered into an Ore Purchase Agreement with Energy Fuels (UUUU). 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, located near Blanding, Utah. 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. Nothing else to see here folks.

ADDITIONAL QUESTIONS REMAIN

Western’s key property is the Sunday Mine Complex (SMC) which is currently being mined (ore being stockpiled). The ultimate goal was always to sign some sort of processing agreement with Energy Fuel’s White Mesa mill. 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. 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 White Mesa Processing Plant.

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

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).

ONE (OR TWO?) MINERAL PROCESSING PLANTS IN DEVELOPMENT ?

Since 2023, the development of the proposed Maverick Minerals Processing plant has progressed on multiple fronts. If built, the plant would be located in Emery County, Utah just four miles from the San Rafael Deposit. The land acquisition for the plant was finalized in Q2/2023 while the permitting initiatives and plant design began in Q3/2023. Since the beginning of 2024, the baseline data required for submission for the permitting applications has been on-going with data being collected from the onsite meteorological towers. A final plant and animal study was since completed. The study confirmed that the site is clear of endangered plant life that is only observable during the spring growing season. Additional consulting commitments were made to advance the licensing and development with Precision Systems Engineering (PSE), a leading engineering, and design consulting firm headquartered in Sandy, Utah. A preliminary engineering design and cost estimate for a 500 ton per day mill is expected to be released later this year or in early 2025. Using a patented kinetic separation process, the benefits are seen in terms of cost savings and operational efficiency. As espoused by management, the kinetic separation process leads to savings in both transportation and processing seeing as up to 90% less material is needed to process the same amount of material as from a conventional mill. In addition to lower power consumption and increased output, economic recoverable resources are expected to be higher due to the use of lower cut-off grades. The plant design parameters continue to target annualized uranium production of 1.0M lbs of U3O8 with a potential expansion to as much as 3.0M lbs per year. Though the cost estimate has yet to be released, a ballpark figure is currently around the $75.0M range.

As announced on October 15, 2024, Western closed the acquisition of a second property purchase. This latest purchase (for $830,000) was for a 900 acre property located in Montrose County, Colorado. Located 25 miles from the Sunday Mine Complex, this property marks a second proposed processing plant. If built, this plant would take the entire mined feedstock from the SMC, thus making toll milling via the White Mesa Mill redundant. Both Maverick and this latest SMC plant proposal (aka Mustang) will likely be designed for potential intake from third parties as well. All other details remain unknown at this point.

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 IsoEnergy’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.

TRADING AT HIGHER EV/LB MULTIPLES VERSUS PEERS

When compared to flagship projects from US focused, non-production peers, on an EV/lb basis, Western trades at one of the higher multiples, partly due to the relatively limited nature of the current SMC global resource of “just” 2.9M lbs. That said, Western comes out at the top of the valuation spectrum at $15.69/lb, a figure well ahead of both producing and non-producing peers. This figure is considerably higher than Laramide Resources’ (Churchrock Project) $3.20/lb and GTi Energy’s (Lo Herma) $1.07/lb.

This high EV/lb metric is further seen when extending the resource to include all tier-1 projects. In Western’s case, tier-1 would include the Sunday Mine Complex along with San Rafael, thus increasing the resource (all categories) to 8.2M lbs. In any case, Western’s Tier-1 EV/lb of $5.57 still ranks at the top of the peer list which averages $2.21/lb.

The high EV/lb multiple is not only a function of Western’s rather limited tier 1 global resource but we would argue that the company is aggressively valued with the market already pricing in several aspirational items (the Maverick CPP, the Mustang CPP and resource expansion) which have yet to become reality.

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$1.34 per share. This equates to a modest upside of +46% from the most recent close (April 14). Shares of Western Uranium & Vanadium currently trade at a 0.55x 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 0.57x while enCore Energy (EU) currently trades at a P/NAV of 0.55x). 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 badly needed.