| PROPERTY, PLANT & EQUIPMENT AND MINERAL PROPERTIES, NET AND KINETIC SEPARATION INTELLECTUAL PROPERTY | NOTE
4 – Property, plant & equipment
and mineral properties, net AND Kinetic separation INTELLECTUAL PROPERTY The Company’s mining properties acquired on August 18, 2014 that the Company retains as of June 30, 2024 include: The
San Rafael Uranium Project located in Emery County, Utah; The Sunday Mine Complex located in western San Miguel County, Colorado; The
Van 4 Mine located in western Montrose County, Colorado; The Sage Mine located in San Juan County, Utah, and San Miguel County, Colorado.
These mining properties include leased land in the states of Colorado and Utah. None of these mining properties were operational at the
date of acquisition. The Company’s mining properties acquired
on September 16, 2015 that the Company retains as of June 30, 2024 include: Hansen, North Hansen and Hansen Picnic Tree located in Fremont
and Teller Counties, Colorado. The Company also acquired the Keota project located in Weld County, Colorado and the Ferris Haggerty project
located in Carbon County, Wyoming. These mining assets include both owned and leased land in the states of Utah, Colorado, and Wyoming.
All of the mining assets represent properties which have previously been mined, to different degrees, for uranium. As the Company has not formally established proven
or probable reserves on any of its properties, there is inherent uncertainty as to whether or not any mineralized material can be economically
extracted as originally planned and anticipated. The Company’s property, plant & equipment
and mineral properties, net and kinetic separation intellectual property are: Estimated As of As of Mineral properties N/A $ 11,688,841 $ 11,688,841 Mining equipment 5 years 2,857,020 2,345,055 Vehicles 5 years 1,058,246 549,703 Software 5 years 9,120 - Construction in progress N/A 311,651 312,384 Land N/A 351,957 351,957 Total property, plant & equipment and mineral properties $ 16,276,835 $ 15,247,940 Less: accumulated depreciation 584,901 321,651 Property, plant & equipment and mineral properties, net $ 15,691,934 $ 14,926,289 Kinetic separation intellectual property $ 9,488,051 $ 9,488,051 Property, plant & equipment and mineral
properties, net During the six months ended June 30, 2024 and
2023, Western made purchases of $1,030,011 and $1,718,751, which principally consisted of mining equipment and vehicles to increase mining
capacity. For the three months ended June 30, 2024 and 2023, depreciation expense was $151,047 and $53,719, and for the six months ended
June 30, 2024 and 2023, depreciation expense was $264,366 and $97,337, respectively, which was included in mining expenditures on the
Company’s condensed interim consolidated statements of operations and other comprehensive loss. Oil and Gas Lease and Easement In 2017, 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 operator elected to extend
the oil and gas lease easement for three additional years through July 2023. This was done to provide additional time in order to complete
well construction and commence oil and gas production. During 2021, the operator completed a first set of eight (8) wells which commenced
oil and gas production by August 2021. During 2022, the operator completed a second set of eight (8) wells which commenced oil and gas
production by August 2022. All sixteen (16) wells remain in production and monthly royalty payments will be ongoing in perpetuity as
long as oil and/or gas are produced from the pooled unit containing these sixteen (16) wells. For the three months ended June 30, 2024 and
2023, the Company recognized aggregate revenue of $39,781 and $102,789, respectively, and for the six months ended June 30, 2024 and
2023, the Company recognized aggregate revenue of $94,054 and $268,764, respectively, under these oil and gas lease arrangements. Reclamation Liabilities 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 to
be $751,517 and $751,444 as of June 30, 2024 and December 31, 2023, respectively. The portion of the reclamation liability related to
the Van 4 Mine, which is in reclamation as of June 30, 2024, and its related restricted cash are included in current liabilities and
current assets, respectively, at a value of $75,057. During the six months ended June 30, 2024, the Company’s internal mining operations
team has been performing the reclamation work, and the State of Colorado has not yet reduced the reclamation liability amount. 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 June 30, 2024
and December 31, 2023 were $247,592 and $241,562, respectively. The gross reclamation liabilities as of June 30, 2024 and December 31,
2023 are secured by financial warranties in the amount of $751,517 and $751,444, respectively. Reclamation liability activity for the six months ended June 30, 2024
and 2023 consists of:
For the Six Months Ended
2024 2023
Beginning balance at January 1 $ 316,619 $ 300,276
Accretion 6,030 5,544
Ending Balance at June 30 $ 322,649 $ 305,820
Less: Reclamation liability, current portion 75,057 75,057
Reclamation liability, net of current portion $ 247,592 $ 230,763 Topaz Mine Permitting Status In November 2020 and December 2020, a coalition
of environmental groups (the “Plaintiffs”) filed a complaint against the Mined Land Reclamation Board (“MLRB”)
seeking partial appeals of prior MLRB decisions, requesting the termination of the Topaz Mine permit. The Company joined with the MLRB
in defense of those decisions. On May 5, 2021, the Plaintiffs 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
sought a settlement with the Plaintiffs. A settlement was not reached, and the MLRB and the Company submitted answer briefs on August
20, 2021. The Plaintiffs 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 the MLRB for further proceedings consistent with its order. Subsequently
on March 20, 2023, the MLRB issued a board order for the Company to commence final reclamation, which upon completion will terminate
mining operations at the Topaz Mine. Reclamation commenced immediately at the Topaz Mine and is to be completed within five years by
March 2028. The Company has been working toward the completion
of an updated Topaz Mine Plan of Operations (“Topaz Mine Plan”), which is a separate federal requirement of the Bureau of
Land Management (“BLM”) for the conduct of mining activities on the federal land at the Topaz Mine. This is a prerequisite
to re-permit the Topaz Mine with Colorado’s DRMS. In connection with the Topaz Mine Plan, an environmental assessment was prepared
by an outside consultant and submitted to the BLM on June 24, 2024. The BLM issued a letter to the Company on August 2, 2024 advising
that the application for the Topaz Mine Plan had run past the allowed evaluation period and was cancelled. A new federal law called the
Fiscal Responsibility Act of 2023 was enacted that creates a one year time limit for BLM reviews. Under the transitional rules, the Topaz
project was not eligible for an extension due to its duration. However, the project can be resubmitted and be picked-up where it was left
off. The re-scoping process will need to be repeated to start the one year time clock. The Company is making a determination as to the
best means and timing to resubmit its application. Kinetic Separation Intellectual Property The Kinetic Separation intellectual property
was acquired in Western’s acquisition of Black Range on September 16, 2015. Previously Black Range acquired its Kinetic Separation
assets in the dissolution of a joint venture on March 17, 2015, through the acquisition of all the assets of the joint venture and received
a 25-year license to utilize all of the patented and unpatented technology owned by the joint venture. The technology license agreement
for patents and unpatented technology became effective as of March 17, 2015, for a period of 25 years, until March 16, 2040. There are
no remaining license fee obligations, and there are no future royalties due under the agreement. The Company has the right to sub-license
the technology to third parties. The Company may not sell or assign the Kinetic Separation license; however, the license could be transferred
in the case of a sale of the Company. The Company has developed improvements to Kinetic Separation during the term of the license agreement
and retains ownership of, and may obtain patent protection on, any such improvements developed by the Company. The Kinetic Separation patent was filed on September
13, 2012 and granted on February 14, 2014 by the United States Patent Office. The patent is effective for a period of 20 years until
September 13, 2032. This patent is supported by two provisional patent applications. The provisional patent applications expired after
one year but were incorporated in the U.S. Patent by reference and claimed benefit prior to their expirations. The status of the patent
and two provisional patent applications has not changed subsequent to the 2014 patent grant. The Company has the continued right to use
any patented portion of the Kinetic Separation technology that enters the public domain subsequent to the patent expiration. The Company anticipates Kinetic Separation will
improve the efficiency of the mining and processing of the sandstone-hosted ore from Western’s conventional mines through the separation
of waste from mineral bearing-ore, potentially reducing transportation, mill processing, and mill tailings costs. Kinetic Separation
is not currently in use or being applied at any Company mines. The Company views Kinetic Separation as a cost saving technology, which
it will seek to incorporate into ore production subsequent to commencing scaled production levels. There are also alternative applications,
which the Company has explored. |
