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We are initiating coverage of Western Uranium & Vanadium Corp. (WUC) with a price objective of C$1.34 per share. This equates to downside of -29% from the most recent C$1.88 per share close. We recognize the many near-term, significant opportunities currently presented in front of the company however until some firm toll processing agreements get signed, or until an updated resource statement/economic projections get published (for the proposed Maverick CPP), we currently see the company stock as somewhat overvalued and reflecting strong industry fundamentals rather than internal fundamentals.
Ahead of any actual toll milling agreement for production at the White Mesa mill, we value the Sunday Mine Complex 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 NAV multiple of 0.80x, we derive an in-situ based price objective (12-months) of C$1.34 per share. Acknowledging what we see as an over-inflated share price, our price objective equates to downside of -29% from the most recent close of C$1.88 per share. Shares of Western Uranium & Vanadium currently trade at a 0.89x NAV multiple. For context, this multiple is on the higher end of our current uranium coverage list. Our US uranium coverage list current includes producers such as Ur-Energy (URG, currently at a P/NAV of 0.49x) and enCore Energy (EU, current P/NAV of 0.80x).
COMPANY OVERVIEW
Western Uranium & Vanadium is a junior exploration/development company with an asset base comprising an established uranium and vanadium resource spread over properties located in Colorado and Utah. Company 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 and infrastructure located in the United States.
WUC’s key property is the Sunday Mine Comple which is currently being mined (ore being stockpiled) with an eye to negotiate a toll milling agreement with Energy Fuel’s (UUUU) 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 somewhat overvalued. These specific unknows include:
Updated Resource Statement at the Sunday Mine Complex + PEA
Toll milling agreement with Energy Fuels with regards to White Mesa
Economics & financing plan for the proposed Maverick Central Processing Plant
HISTORY
Western Uranium & Vanadium Corp. was incorporated in 2006. On November 20, 2014 the company acquired a 100% interest in Pinon Ridge Mining LLC and completed a listing process (RTO) on the Canadian Securities Exchange (CSE). On September 16, 2015, Western completed its acquisition of Black Range Minerals Limited. The key conventional uranium assets today include the Sunday Mine complex, San Rafael, Sage and Hansen/Taylor Ranch. The company’s current property acreage extends over Colorado and Utah.
SUNDAY MINE COMPEX (SMC)
Located in Colorado’s San Miguel County, within the prolific Uravan Mineral Belt, the Sunday Mine Complex (SMC) is an advanced stage property with a significant drilling and production history. The SMC consists of approximately 233 contiguous unpatented mining claims that total about 3,748 acres. Mining and drilling occurred contemporaneously between the 1950’s through the mid 1980’s. From the 1980’s to the present, mining and drilling occurred sporadically, typically when uranium or vanadium prices were high. The most recent mining interval was between 2006-2009.
In terms of geology, 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). The Technical report suggests that the property has the potential to host in excess of 3.0M lbs of uranium-vanadium resource.
Exploration and development drilling on the property was contemporaneous with the mining. As per the 2015 Technical Report, the available database records show that at least 1,419 holes have been drilled on the property. This is known to be an incomplete list as an examination of the available maps and cross-sections show a number of holes which do not appear in the database. A best estimate for total distance drilled is about 850,100 ft (259,175 m). Historic exploration was conducted from the 1950s through to 2009 by surface and underground drilling, and by mine drifting. Energy Fuels didn’t conduct any exploration during its years of ownership, earlier this past summer the team at WUC began driving a drift (~2,700 feet in distance) to the Leonard & Clark deposit. As of this past summer, a total of 454 ft has been developed, including 362 ft of ramp footage. During the Q2/2024 period, the underground horizontal drilling program achieved 12,339 linear ft of drilling.
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).
Toll Milling: Discussions with Energy Fuels have begun in order to potentially schedule a milling run to begin sometime later in 2024 or in 2025 at the White Mesa mill, the only operational conventional uranium/vanadium mill in the US. Though initial discussion concerning delivery of mined material from the SMC have already begun, WUC is currently awaiting a Letter of Intent from Energy Fuels to understand the terms of this ore buying program. If a mutually beneficial arrangement can be established, WUC could pivot its current mining operations to begin deliveries of uranium/vanadium mined material in as little as 30 days at annualized quantities up to 250,000 lbs of uranium and 1.0M 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.
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.
As per Western’s involvement, the company submitted a Notice of Intent to the U.S. Bureau of Land Management (BLM) for which the BLM has given its approval for this mineral and groundwater exploration project. Following this approval, the company submitted an exploration permit application to Utah’s Division of Oil, Gas & Mining. Approval is expected in the months ahead. The Phase 1 drilling program is expected to commence later this year. Initially, groundwater monitoring wells will be installed at five drilling locations, reaching depths of approximately 1,000 ft. During the borehole completion process, mineralization will also be assessed and confirmed against historical drill data. This project will provide the baseline data needed for permitting application submission. Recall that the last drill program on site occurred between 2007-2009.
MAVERICK MINERALS CENTRAL PROCESSING PLANT & SMC PROCESSING PLANT
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 completed 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.
Note as well that 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 will likely be designed for potential intake from third parties as well. All other details remain unknown at this point.
TIER 2 PIPELINE PROJECTS: HANSEN/TAYLOR RANCH & SAGE
The Hansen/Taylor Ranch Uranium project is located approximately 150km southwest of Denver in the Tallahassee Creek district of Colorado. The project spans an area of more than 13,500 acres. According to a 2014 JORC-compliant resource estimate, Western’s attributable resource includes an Indicated resource of 19.7M lbs grading 0.06% U3O8, along with an Inferred resource of 26.8M lbs at a grade of 0.06% U3O8. Comprising a total of eight deposits, the greater Tallahassee Uranium district (exhibit 6) boasts an Indicated resource of 39.4M lbs along with an Inferred resource of 51.0M lbs. This global resource figure exceeding 90.0M lbs makes the greater uranium project one of the largest within the United States. ASX-listed Global Uranium & Enrichment (GUE) owns five of the eight deposits which encompass the greater Tallahassee project. To date, more than 2,200 holes have been drilled in the district for more than 350,000m- this provides for a rich bank of exploration data. Though GUE has been drilling on their respective deposits this past year, Western has been dormant on the drilling front on both the Hansen and Taylor deposits.
The Sage Mine project is located in San Juan County, Utah, and San Miguel County, Colorado. The property consists of 94 unpatented claims covering approximately 1,942 acres. The historic Sage Mine ceased operating in 1982. The most recent NI43-101 Technical Report was prepared in 2011. Although the mine is partially permitted and bonded, further permitting would be required to advance any type of drilling campaign.
Note that management does not view either the Sage Mine project or Hansen/Taylor Ranch project as currently material properties.
RESOURCE ESTIMATE
Concerning the SMC, 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). The Technical Report suggests that the property has the potential to host in excess of 3.0M lbs of uranium-vanadium resource. Exploration and development drilling on the property was contemporaneous with the mining. As per the Technical Report, the available database records show that at least 1,419 holes have been drilled on the property. This is known to be an incomplete list as an examination of the available maps and cross-sections show a number of holes which do not appear in the database. A best estimate for total distance drilled is about 850,100 ft (259,175 m). Historic exploration was conducted from the 1950s through to 2009 by surface and underground drilling, and by mine drifting. Energy Fuels didn’t conduct any exploration during its years of ownership, earlier this past summer the team at WUC began driving a drift (approximately 2,700 feet in distance) to the Leonard & Clark deposit. As of this past summer, a total of 454 ft has been developed, including 362 ft of ramp footage. During the Q2/2024 period, the underground horizontal drilling program achieved 12,339 linear ft of drilling.
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.
PEER COMPARISONS
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 $32.79/lb. This figure is considerably higher than Laramide Resources’ (Churchrock Project) $3.97/lb and GTi Energy’s (Lo Herma) $1.42/lb. We note that Anfield Energy’s (Velvet Wood) equates to $28.12/lb is influenced by the current takeout offer from IsoEnergy, as announced on October 2, 2024.
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 $11.63 still ranks at the top of the peer list which averages $4.07/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 generally overvalued with the market already pricing in several aspirational items (the Maverick CPP, a toll-milling agreement with Energy Fuels and resource expansion) which have yet to become reality.
VALUATION
Ahead of any actual toll milling agreement for production at the White Mesa mill, 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 NAV multiple of 0.80x, we derive an in-situ based price objective (12-months) of C$1.34 per share. Acknowledging what we see as an over-inflated share price, our price objective equates to downside of -29% from the most recent close of C$1.88 per share. Shares of Western Uranium & Vanadium currently trade at a 0.89x NAV multiple. For context, this multiple is on the higher end of our current uranium coverage list. Our US uranium coverage list current includes producers such as Ur-Energy (URG, currently at a P/NAV of 0.49x) and enCore Energy (EU, current P/NAV of 0.80x).
Lastly, we acknowledge the possibility of co-production of vanadium resource however all is contingent on the signing of a uranium toll milling agreement. Any potential toll milling agreement will continue to be the overarching value driver.
CONCLUSION
We 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. Any positive news item on any of these fronts will warrant a thesis adjustment on our end however for the time being, we see shares in the company as overvalued. Shares in Western have benefitted largely from positive uranium sentiment which has carried the company of late. Concrete development milestones are now needed.
NEAR-TERM TIMELINE & POTENTIAL CATALYSTS
Updated Resource Statement at the Sunday Mine Complex + PEA
Toll milling agreement with Energy Fuels with regards to White Mesa
Economics & financing plan for the proposed Maverick Central Processing Plant
OWNERSHIP
Institutional ownership is dominated by ALPS Advisors Inc, MM Asset Management Inc and Vident Advisory LLC who combined own approximately 18.0%. Management and insiders currently own approximately 8.93%.