The Energy Report

Source: Streetwise Reports   06/11/2019

With demand of vanadium expected to increase and U.S. uranium possibly getting a bump by White House action, this company could be in the driver’s seat with its U.S. projects.

In a video on Western Uranium & Vanadium Corp.’s (WUC:CSE; WSTRF:OTCQX) website, a grizzled miner named Trenton Davis guides a Jeep load of investors through miles of underground shafts inside the Sunday Mine Complex, which is located in San Miguel County, Colorado.

Davis’ tour of the mining underworld illuminates gaping “stopes”—he calls them “candy stores”—glittering room-sized bubbles carved in rock by the removal of intertwining veins of uranium and vanadium. And there is more of the rich ore in the offing, he proffers.

Davis has worked the Sunday Mining Complex for decades under a succession of owners, including Union Carbide. In fact, Davis was one of the two sub-contractors mining Sunday when Denison decided to shut it down due to low commodity prices in 2009. The complex has delivered thousands of tons of valuable minerals to market. Davis is now back in place working for the new owner, Western Uranium and Vanadium, which is a Toronto-based firm captained by another mining industry veteran, George Glasier.

In 2014, when uranium prices were hitting rock bottom, Western Uranium & Vanadium, in which Glasier owns a governing share, purchased a historically lucrative portfolio of mining properties in Colorado and Utah. The flagship property of the deal is the fully permitted Sunday Mining Complex—composed of five separate, fully permitted and developed mines: the Sunday, Carnation, Saint Jude, West Sunday and Topaz mines.

Glasier told Streetwise Reports, “The Sunday Complex mines are ready to go into production. The infrastructure is in place, so there are almost no capital costs to get going. We anticipate low production costs. Each of the mines is accessible by a paved highway. Each has electric power, office, storage and shop infrastructure, and, best of all, extensive underground haulage development served by vent shafts with exhaust fans.”

“The properties are now held free and clear of encumbrances as the final $500,000 promissory note was paid in full in August 2018,” Glasier said.

Vanadium is an elemental metal; in the Uravan Mineral Belt that spans Colorado and Utah, it is found in conjunction with uranium. Vanadium has high market demand as the catalytic component of super-strong steel for jet engines. And it has many other aerospace and industrial uses, such as for long-term energy storage in vanadium redox flow batteries.

Glasier explained, “One of the big uses for vanadium is rebar—a small quantity doubles the strength of construction steel. Last November, China changed its standards for rebar, which will boost demand. China is also building the largest vanadium battery in the world. Vanadium has real advantages over lithium, such as it does not catch fire! Further, vanadium doesn’t experience the degradation that lithium does in battery applications and thus has a longer life and can simultaneously charge and discharge.”

Analyst Colin Hamilton of BMO Capital Markets, in a March 2019 vanadium outlook report, wrote, “Vanadium was very much the commodity story of 2018. Having appreciated by over 700% in the preceding two years, from a November 2018 peak the price subsequently halved. We believe that 2019 will be a very telling one for the vanadium market as supply continues to struggle to respond to the demand shock originating from new Chinese rebar standards. Niobium substitution will play a role in this, but nevertheless we anticipate vanadium demand growth remaining strong for the next five years, with the supply response to this inhibited by stagnant Chinese output.”

Western Uranium and Vanadium’s chief geologist, Dr. Kaiwen Wu, is a prominent expert on mining conventional sandstone hosting vanadium/uranium deposits in the Colorado/Utah Mineral Belt.

Glasier said that after the Sunday and St. Jude mines are reopened this month (June 2019), vanadium ore samples will be delivered to vanadium processors and users around the world. Historically, the Sunday Mine Complex has yielded a 6-to-1 vanadium-to-uranium ratio. “I’ve met with over a dozen potential vanadium customers who are ready to sign offtake contracts when we go into production,” Glasier said.

And that brings us to the yellow cake. Noting that uranium prices recently rose to $30 pound before retreating into the mid-$20s, Glasier handicaps the future with a dose of common sense. He notes that uranium has the highest fuel energy density known to man: one gram of uranium equals 17,000 cubic feet of natural gas, 149 gallons of oil and one ton of goal.

Looking at all of the downsides of depletable fossil fuels, such as pollution, trade wars and hot wars, revitalizing the nuclear energy industry is a non-brainer for uranium bulls. U.S.-based reactors consume 50 million tons of uranium per year. China operates about 40 nuclear plants and is expanding its nuclear power industry. More than 50 reactors are under construction, worldwide.

Due to imbalances between international supplies and the demand for uranium, North American producers are currently caught in a cost-price trap. But nothing is forever. Glasier is bullish about the prospects of uranium in the long term as the nuclear industry reconfigures the markets. For the short term, he, like many North American miners, believes that the Section 232 uranium petition being considered by President Trump will result in a remedy that will put U.S. uranium producers on a level playing field. The Section 232 uranium report was delivered to President Trump on June 14, and he has a 90 day window—until July 14—to make his determination.

“Everybody’s waiting to see what the administration does. But I am optimistic that we will protect at least a quarter of the annual needs for the U.S. reactors, which pencils out to about 12 and a half million pounds for local sourcing. Right now, U.S. production is running at a 71-year low (since historical records began in 1949) as U.S. production is virtually shut down. If quotas are imposed, we are ready to move immediately into the uranium market.”

Glasier says that Western Uranium and Vanadium closed a private placement in April. “We raised $3 million; we were oversubscribed. This capital fully funds the plan that we announced back in November.” Glasier estimates the cost of drilling for vanadium samples during the next year to be less than $2.0 million.

He concluded, “If uranium prices don’t go up, we’ll continue to hold off on uranium production. But we intend to bank vanadium cash flows by the end of this year if we can acquire an economic vanadium supply agreement, which is a reasonable projection.”

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( Companies Mentioned: WUC:CSE; WSTRF:OTCQX,
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