Item 1. Business
Corporate Organization
Uranium Energy Corp. was incorporated under
the laws of the State of Nevada on May 16, 2003 under the name “Carlin Gold Inc.” During 2004, we changed our business
operations and focus from precious metals exploration to uranium exploration in the United States. On January 24, 2005, we completed
a reverse stock split of our common stock on the basis of one share for each two outstanding shares and amended our Articles of
Incorporation to change our name to ‘Uranium Energy Corp.’. Effective February 28, 2006, we completed a forward stock
split of our common stock on the basis of 1.5 shares for each outstanding share and amended our Articles of Incorporation to increase
our authorized capital from 75,000,000 shares of common stock with a par value of $0.001 per share to 750,000,000 shares of common
stock with a par value of $0.001 per share. In June 2007, we changed our fiscal year end from December 31 to July 31 (in each instance
our “Fiscal” year now).
On December 31, 2007, we incorporated a wholly-owned
subsidiary, UEC Resources Ltd., under the laws of the Province of British Columbia, Canada. Effective December 18, 2009, we acquired
a 100% interest in the South Texas Mining Venture, L.L.P., a Texas limited liability partnership, from each of URN Resources Inc.,
a subsidiary of Uranium One Inc., and Everest Exploration, Inc. On September 3, 2010, we incorporated a wholly-owned subsidiary,
UEC Paraguay Corp., under the laws of the State of Nevada. Effective May 24, 2011, we acquired a 100% in interest in Piedra Rica
Mining S.A., a private company incorporated in Paraguay. Effective September 9, 2011, we acquired a 100% interest in Concentric
Energy Corp., a private company incorporated in the State of Nevada. Effective March 30, 2012, we acquired a 100% interest in Cue
Resources Ltd., a formerly publicly-traded company incorporated in the Province of British Columbia, Canada. Effective March 4,
2016, we acquired 100% interest in JDL Resources Inc., a private company incorporated in Cayman Islands. Effective July 7, 2017,
we acquired 100% interest in CIC Resources (Paraguay) Inc., a private company incorporated in Cayman Islands.
Our principal offices are located at 500 North
Shoreline Boulevard, Suite 800N, Corpus Christi, Texas 78401 and 1030 West Georgia Street, Suite 1830, Vancouver, British Columbia,
Canada V6E 2Y3.
General Business
We are pre-dominantly engaged in uranium mining
and related activities, including exploration, pre-extraction, extraction and processing, on uranium projects located in the United
States and Paraguay. We utilize in-situ recovery (“ISR”) mining where possible which we believe, when compared to conventional
open pit or underground mining, requires lower capital and operating expenditures with a shorter lead time to extraction and a
reduced impact on the environment. We do not expect, however, to utilize ISR mining for all of our mineral rights in which case
we would expect to rely on conventional open pit and/or underground mining techniques. We have one uranium mine located in the
State of Texas, the Palangana Mine, which utilizes ISR mining and commenced extraction of uranium oxide (“U
3
O
8
”),
or yellowcake, in November 2010. We have one uranium processing facility located in the State of Texas, the Hobson Processing Facility,
which processes material from the Palangana Mine into drums of U
3
O
8
, our only sales product and source of
revenue, for shipping to a third-party storage and sales facility. Since commencement of uranium extraction from the Palangana
Mine in November 2010 to July 31, 2017, the Hobson Processing Facility has processed 580,100 pounds of U
3
O
8
.
At July 31, 2017, we had no uranium supply or “off-take” agreements in place.
Our fully-licensed and 100%-owned Hobson Processing
Facility forms the basis for our regional operating strategy in the State of Texas, specifically the South Texas Uranium Belt where
we utilize ISR mining. We utilize a “hub-and-spoke” strategy whereby the Hobson Processing Facility acts as the central
processing site (the “hub”) for our Palangana Mine and future satellite uranium mining activities, such as our Burke
Hollow and Goliad Projects, located within the South Texas Uranium Belt (the “spokes”). The Hobson Processing Facility
has a physical capacity to process uranium-loaded resins up to a total of two million pounds of U
3
O
8
annually
and is licensed to process up to one million pounds of U
3
O
8
annually.
At July 31, 2017, we hold certain mineral rights
in various stages in the States of Arizona, Colorado, New Mexico, Texas and Wyoming and in the Republic of Paraguay, many of which
are located in historically successful mining areas and have been the subject of past exploration and pre-extraction activities
by other mining companies. We do not expect, however, to utilize ISR mining for all of our mineral rights in which case we would
expect to rely on conventional open pit and/or underground mining techniques.
Our operating and strategic framework is based
on expanding our uranium extraction activities, which includes advancing certain uranium projects with established mineralized
materials towards uranium extraction, and establishing additional mineralized materials on our existing uranium projects or through
acquisition of additional uranium projects.
During Fiscal 2017, we continued to operate
the Palangana Mine at a reduced pace since implementing our strategic plan in September 2013, to align our operations to a weak
uranium market in a challenging post-Fukushima environment. This strategy has included the deferral of major pre-extraction expenditures
and remaining in a state of operational readiness in anticipation of a recovery in uranium prices.
During Fiscal 2017, we made significant advancements
in various aspects of its operations including:
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completed a registered offering of 17,330,836 units at a price of $1.50 per unit for gross proceeds
of $25,996,254;
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completed
the acquisition of the Alto Paraná Titanium Project through the exercise of an option in accordance with a Share Purchase
and Option Agreement effective March 4, 2016
;
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continued to advance permitting activities at the Burke Hollow Project and received a Mine Area
Permit from Texas Commission on Environmental Quality and Aquifer Exemption Approval from Environmental Protection Agency;
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completed 103 exploration holes totaling 44,480 feet with an average depth of 432 feet at the Burke
Hollow Project;
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entered into a Share Purchase Agreement to acquire the fully permitted Reno Creek Project in Wyoming,
which was subsequently completed in August 2017; and
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achieved inclusion in the Russell 3000® Index.
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We recently acquired an undivided 100% interest
in five concession blocks in the Alto Paraná Project, a 174,200-acre property located in Paraguay. The Alto Paraná
Project is atypically high in titanium values when compared to most beach sand deposits. We propose to further develop the Project
to eventually produce high quality titanium slag for use as feedstock in chloride process titanium dioxide pigment manufacture.
Uranium Industry Background
With the world’s population exceeding
seven and a half billion people and growing, the need for electricity is rising and is an important driver for the projected long
term increase in nuclear power generation and uranium demand. The world’s current operating fleet of nuclear power plants,
in addition to the global growth in new reactors under construction and those planned is testimony to the confidence in nuclear
power to provide safe, economical, reliable carbon free energy as part of an overall energy supply mix. As of August 2017, World
Nuclear Association (“WNA”) data showed 447 reactors operable worldwide with 58 new reactors under construction, 162
reactors planned or on order and another 349 proposed. Translated into global uranium demand, Ux Consulting Company (“UxC”),
a uranium market information source, projects their “URM Base Demand” to increase from about 188 million pounds in
2017 to 199 million pounds in 2024 and about 222 million pounds by 2030.
Over the past two years, global growth in
nuclear power has been impressive with 20 new reactors reaching commercial operation. The prospects for future growth also looks
strong in future years with new and robust programs underway in countries like China, India, United Arab Emirates, etc. China
and other countries with growing nuclear programs have embarked on sovereign-backed uranium acquisition programs, building inventory
stockpiles for their future requirements. This also includes substantial long-term contracting with western suppliers and taking
controlling interests in primary mine production capacity. In addition, Russia, China and South Korea are aggressively pursuing
programs to sell their reactors around the globe. In many cases the sales agreements will likely contain turnkey provisions, including
uranium supply as a component of the reactor package that will require far more uranium than they currently produce. As such,
they will need to be large importers of uranium in the coming years.
World base case demand was about 189 million pounds in 2016,
exceeding the 162 million pounds of total production by about 27 million pounds. The cumulative gap between existing production
and consumption is projected to be about 76 million pounds by 2020 and increases further to almost 230 million pounds in 2025
(UxC 2017 Q2 UMO). The difference between primary production and reactor demand is being filled with secondary market sources.
However, recent forecasts expect secondary sources to drop almost 30% from 44 million pounds in 2017 to about 32 million pounds
by 2024.
Nuclear generation in the United States
increased in 2016, from 797 to 805 billion kilowatt-hours, accounting for 19.7% of the country’s total electrical generation
and about 60% of the nation’s clean air energy (Nuclear Energy Institute). The operating U.S. reactor fleet stands at 99
reactors, with two new commercial reactors under construction (Vogtle 3 and 4 in Georgia). While Summer 2 & 3 in South Carolina
have recently been cancelled by their owners (SCANA and Santee Cooper), there are efforts to continue construction on these projects
via a new owner.
Preserving the existing U.S. nuclear fleet
has become a priority for the industry and increasingly, the federal government and the individual states. President Trump has
recently said his administration will attempt to expand the nuclear energy sector by launching a "complete review" of
current policy to identify ways to revive the industry. One of the most encouraging aspects is recognition by the Federal Energy
Regulatory Commission that nuclear needs to be valued properly for its grid stability attributes and base load generation. The
recently released U.S. Department of Energy “Grid Reliability Study” reinforced this point and identified dysfunctional
elements of de-regulated energy markets that need to be fixed to achieve that objective and preserve valuable nuclear energy capacity
on the U.S. electricity grid. Illinois and New York have both passed measures that will help level the playing field, enabling
nuclear energy to continue providing the clean air, highly reliable base load electricity in their energy supply. Ohio, Pennsylvania,
New Jersey and Connecticut are also evaluating similar measures.
The U.S. remains the world’s largest
consumer of uranium with annual requirements of about 50 million pounds of U
3
O
8
. The U.S. Energy Information
Administration (“EIA”) reported domestic production totaled 2.5 million pounds in 2016, down 31% from 3.3 million
pounds in 2015. This amounts to about 6% of U.S. reactor requirements in 2016 and highlights an extreme U.S. dependency on foreign
sources of uranium supply. This situation is expected to become more acute in 2017, with U.S. production forecast to drop below
2 million pounds.
Uranium production around the globe increased
about 2.5% in 2016 from 158 to 162 million pounds of U
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8
. Kazakhstan remained the world’s largest
producer; producing 64 million pounds - about 39% of the world’s total production. Many of the projects in various production
countries are subject to heightened geopolitical and other risks. In choosing a long-term supplier in this highly concentrated
industry, these are important considerations for a utility relying on a secure uranium supply source to fuel their reactor needs.
Japan’s
March 11, 2011 earthquake and subsequent tsunami causing the Fukushima Daiichi accident has had a substantial impact on the nuclear
fuel markets and resulted in an oversupply situation that has persisted for several years. As this oversupply has continued in
the nuclear fuel market during 2016, prices have remained under pressure. Uranium spot market prices have fallen as much as 75%
from a March 1, 2011 pre-Fukushima price of $70.00 per pound to a 12 year low at $17.75 per pound in early December of 2016. Since
that low, spot prices rallied up above the $26 per pound area in mid-February after the world’s largest producer (Kazatomprom)
announced a 10% cut in production. Prices have since pulled back into the low $20/lb area, but have held above the December 2016
lows. A spot price in the low $20/lb range is below the all-in production cost of virtually all global mining operations (UxC
Data). This is an unsustainable situation and will eventually result in a strengthening of the market as it transitions from being
inventory-driven to production-driven. While Japan’s return to nuclear power post Fukushima has been slower than expected,
it’s still progressing with an ultimate goal of producing 20 to 22% of their electrical generation requirements
Since Fukushima, there has been a trend
of significant production cuts and project deferrals that have continued for several years. Before the Fukushima event, the annual
production projection for 2016 in the 2011 Q1 Uranium Market Outlook (UMO) was about 231 million pounds. Actual production in 2016
was about 162 million pounds – a 69 million pound annual decrease over that previously anticipated level. Over this past
year, there have been announcements of additional supply cuts, amounting to another 15 million pounds of annual production that
is being cancelled or deferred. In addition, there are at least another near 17 million pounds of annual production that will be
removed from the current supply base by 2025 as resources are depleted. Beyond those factors, many longer-term high priced contracts
fall out of producer portfolios and will likely result in additional production cuts. Those contracts that have been supporting
higher cost production will not be replaced and will force higher cost production to be cancelled. We believe this trend is likely
to continue absent a substantial and sustained increase in market price. Production cuts, project deferrals and cancellations further
exacerbate the growing longer term gap between production and consumption and are likely to increase the prospects for an eventual
strong rebound in uranium prices.
Ultimately, the forces of supply and demand
will dictate the future uranium market’s direction. Production is likely to decline as higher price contracts supporting
elevated production costs expire and as existing resources are depleted. Lead times for new production typically range from 7-
10 years. Various supply-demand projections show annual supply deficits emerging in the early 2020’s. The market appears
to be approaching the time when new production should begin the investment required to bring new supply to meet those lead times.
As a matter of practice, utilities typically contract for their open needs two to four years in advance of the requirement. As
utilities return to the spot, mid and long term markets, the more recent inventory driven market is likely to wane and a production
driven market should emerge. All things considered, we believe supply and demand fundamentals have significant potential to force
uranium prices upward.
TiO2 (Titanium) Industry Background
TiO2 is used in many "quality of life"
products for which demand historically has been linked to global, regional and local GDP and discretionary spending. Historically,
the market for large volume TiO2 applications, including coatings, paper and plastics, has experienced alternating periods of tight
supply, causing prices and margins to increase, followed by periods of lower capacity utilization resulting in declining prices
and margins.
Demand for titanium minerals such as ilmenite
is closely tied to titanium dioxide pigment manufacture. The global TiO2 pigment industry continued to strengthen through the
June 2017 quarter. All of the major pigment producers continue to report strong demand and several announced a further round of
pigment price increases taking effect through June and July 2017. Positive ilmenite pricing trends seen in 2016 continue in 2017
due to increasing pressure on the availability of titanium dioxide feedstock and pigment, leading to strong ilmenite offtake for
many producers. The ongoing strong demand for TiO2 feedstock from pigment plants, now operating at high utilization rates, resulted
in further feedstock price increases through the quarter. While ilmenite prices have increased strongly in the past 18 months,
there has been a recent decline in Chinese ilmenite spot prices after spiking to very high levels in April 2017. Seasonally weaker
Chinese pigment demand and some declines to pigment plant operating rates associated with the enforcement of stricter environmental
regulations have resulted in weaker Chinese demand for ilmenite in the September 2017 quarter. In India, ongoing political disruptions
to ilmenite exports from Tamil Nadu are now being off-set to some extent by an increase in ilmenite supply from various sources
of low quality, high cost concentrates – bolstered by the high market prices. According to Bloomberg, ilmenite bulk concentrate
was priced at approximately $170 per ton in July 2017, compared to $60 per ton towards the end of 2015 to early 2016. The ongoing
strength in pigment demand and pricing is expected to help stabilize prices for ilmenite at the current healthy levels through
the coming quarters.
95% of all the mined titanium minerals are used to manufacture pure titanium dioxides – a pigment that
enhances brightness and opacity in paints, inks, paper, plastics, food products and cosmetics. The remaining 5% of supply is used
in the production of titanium metal. Titanium is also combined with iron, aluminum, vanadium and molybdenum to produce strong,
lightweight alloys for aerospace applications.
In-Situ Recovery (ISR) Mining
We utilize or plan on utilizing in-situ recovery
or ISR uranium mining for our South Texas projects including the Palangana Mine and will continue to utilize ISR mining whenever
such alternative is available to conventional mining. When compared to conventional mining, ISR mining requires lower capital
expenditures and has a reduced impact on the environment, as well as a shorter lead time to uranium recovery.
ISR mining involves circulating oxidized water
through an underground uranium deposit, dissolving the uranium and then pumping the uranium-rich solution to the surface for processing.
Oxidizing solution enters the formation through a series of injection wells and is drawn to a series of communicating extraction
wells. To create a localized hydrologic cone of depression in each wellfield, more groundwater will be produced than injected.
Under this gradient, the natural groundwater movement from the surrounding area is toward the wellfield, providing control of the
injection fluid. Over-extraction is adjusted as necessary to maintain a cone of depression which ensures that the injection fluid
does not move outside the permitted area.
The uranium-rich solution is pumped from the
ore zone to the surface and circulated through a series of ion exchange columns located at the mine site. The solution flows
through resin beds inside an ion exchange column where the uranium bonds to small resin beads. As the solution exits the
ion exchange column, it is mostly void of uranium and is re-circulated back to the wellfield and through the ore zone. Once
the resin beads are fully-loaded with uranium, they are transported by truck to the Hobson Processing Facility and transferred
to a tank for flushing with a brine solution, or elution, which strips the uranium from the resin beads. The stripped resin beads
are then transported back to the mine and reused in the ion exchange columns. The uranium solution, now free from the resin,
is precipitated out and concentrated into a slurry mixture and fed to a filter press to remove unwanted solids and contaminants.
The slurry is then dried in a zero-emissions rotary vacuum dryer, packed in metal drums and shipped out as uranium concentrates,
or yellowcake, to ConverDyn for storage and sales.
Each project is divided into a mining unit
known as a PAA which lies inside an approved Mine Permit Boundary. Each PAA will be developed, extracted and restored as one unit
and will have its own set of monitor wells. It is common to have multiple PAAs in extraction at any one time with additional units
in various states of exploration, pre-extraction and/or restoration.
After mining is complete in a PAA, aquifer
restoration will begin as soon as practicable and will continue until the groundwater is restored to pre-mining conditions. Once
restoration is complete, a stability period of no less than one year is scheduled with quarterly baseline and monitor well sampling.
Wellfield reclamation will follow after aquifer restoration is complete and the stability period has passed.
Hobson Processing Facility
The Hobson Processing Facility is located in
Karnes County, Texas, about 100 miles northwest of Corpus Christi. It was originally licensed and constructed in 1978, serving
as the hub for several satellite mining projects until 1996, and completely refurbished in 2008. On December 18, 2009, we acquired
the Hobson Processing Facility as part of the acquisition of South Texas Mining Venture, L.L.P.
With a physical capacity to process uranium-loaded
resins up to a total of two million pounds of U
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annually and licensed to process up to one million pounds
of U
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annually, our fully-licensed and 100%-owned Hobson Processing Facility forms the basis for our “hub-and-spoke”
strategy in the State of Texas, specifically the South Texas Uranium Belt where we utilize ISR mining.
Palangana Mine
We hold various mining lease and surface use agreements generally having an initial five-year term with
extension provisions, granting us the exclusive right to explore, develop and mine for uranium at the Palangana Mine, a 6,987-acre
property located in Duval County, Texas, approximately 100 miles south of the Hobson Processing Facility. These agreements are
subject to certain royalty and overriding royalty interests indexed to the sale price of uranium.
On December 18, 2009, we acquired the Palangana
Mine as part of the acquisition of South Texas Mining Venture, L.L.P. In November 2010, the Palangana Mine commenced uranium extraction
utilizing ISR mining and in January 2011, the Hobson Processing Facility began processing resins received from the Palangana Mine.
Material Relationships Including Long-Term
Delivery Contracts
At July 31, 2017, we had no uranium supply
or “off-take” agreements in place
Given that there are up to approximately 60
different companies as potential buyers in the uranium market, we are not substantially dependent upon any single customer to purchase
the uranium extracted by us.
Seasonality
The timing of our uranium concentrate sales
is dependent upon factors such as extraction results from our mining activities, cash requirements, contractual requirements and
perception of the uranium market. As a result, our sales are neither tied to nor dependent upon any particular season. In addition,
our ability to extract and process uranium does not change on a seasonal basis. Over the past ten years, uranium prices have tended
to decline during the calendar third quarter before rebounding during the fourth quarter, but there does not appear to be a strong
correlation.
Mineral Rights
In Texas, our mineral rights are held exclusively
through private leases from the owners of the land/mineral/surface rights with varying terms. In general, these leases provide
for uranium and certain other specified mineral rights only including surface access rights for an initial term of five years and
renewal for a second five-year term. Production royalties apply which are calculated on a sliding-scale basis tied to the gross
sales price of uranium. Remediation of the property is required in accordance with regulatory standards, which may include the
posting of reclamation bonds.
In Arizona, Colorado, New Mexico and Wyoming,
our mineral rights are held either exclusively or through a combination of federal mining claims and state and private mineral
leases. Remediation of the property is required in accordance with regulatory standards, which may include the posting of reclamation
bonds. Our federal mining claims consist of both unpatented lode and placer mining claims registered with the U.S. Bureau of Land
Management (“BLM”) and the appropriate counties. These claims provide for all mineral rights including surface access
rights for an indefinite period. Annual maintenance requirements include BLM claim fees of $155 per claim due yearly on September
1. Our state mineral leases are registered with their respective states. These leases provide for all mineral rights including
surface access rights, subject to a production royalty of 4% in Wyoming and 5% to 6% in Arizona, ranging from a five-year term
in Arizona to a ten-year term in Wyoming. Annual maintenance requirements include lease fees of $1 and $3 per acre and minimum
exploration expenditure requirements of $10 and $20 per acre in Arizona. Our private mineral leases are negotiated directly with
the owners of the land/mineral/surface rights with varying terms. These leases provide for uranium and certain other specified
mineral rights only, including surface access rights, subject to production royalties, for an initial term of five years and renewal
for a second five-year term.
Under the mining laws of the Republic of Paraguay,
title to mineral rights for the Yuty Project is held through a “Mineral Concession Contract” approved by the National
Congress and signed between the Government of the Republic of Paraguay and the Company, and title to mineral rights for the Oviedo
Project is held through a “Mining Permit” granted by the Ministry of Public Works and Communications. These mineral
rights provide for the exploration of metallic and non-metallic minerals and precious and semi-precious gems within the territory
of Paraguay for up to a 6-year period, and for the exploitation of minerals for a minimum period of 20 years from the beginning
of the production phase, extendable for an additional ten years.
Burke Hollow Project, Texas
We hold various mining lease and surface use
agreements having an initial five-year term with extension provisions, granting us the exclusive right to explore, develop and
mine for uranium at the Burke Hollow Project, a 19,335-acre property located in Bee County, Texas, subject to certain royalty interests
indexed to the sale price of uranium.
Goliad Project, Texas
We hold various mining lease and surface
use agreements having an initial five-year term with extension provisions, granting us the exclusive right to explore, develop
and mine for uranium at the Goliad Project, a 995-acre property located in Goliad County, Texas, subject to certain royalty interests
indexed to the sale price of uranium.
Longhorn Project, Texas
We hold various mining lease and surface use
agreements having an initial five-year term with extension provisions, granting us the exclusive right to explore, develop and
mine for uranium at the Longhorn Project, a 651-acre property located in Live Oak County, Texas, subject to certain royalty interests
indexed to the sale price of uranium.
Salvo Project, Texas
We hold various mining lease and surface
use agreements having an initial five-year term with extension provisions, granting us the exclusive right to explore, develop
and mine for uranium at the Salvo Project, a 1,514-acre property located in Bee County, Texas, subject to certain royalty interests
indexed to the sale price of uranium.
Anderson Project, Arizona
We hold an undivided 100% interest in contiguous
mineral lode claims and state leases in the Anderson Project, a 8,268-acre property located in Yavapai County, Arizona.
Workman Creek Project, Arizona
We hold an undivided 100% interest in contiguous
mineral lode claims in the Workman Creek Project, a 4,036-acre property located in Gila County, Arizona, subject to a 3.0% net
smelter royalty requiring an annual advance royalty payment of $50,000 for 2016 and 2017, and $100,000 thereafter.
Los Cuatros Project, Arizona
We hold an undivided 100% interest in a state
lease in the Los Cuatros Project, a 640-acre property located in Maricopa County, Arizona.
Slick Rock Project, Colorado
We hold an undivided 100% interest in contiguous
mineral lode claims in the Slick Rock Project, a 5,333-acre property located in San Miguel County, Colorado. Certain claims of
the Slick Rock Project are subject to a 1.0% or 3.0% net smelter royalty, the latter requiring an annual advance royalty payment
of $30,000 beginning in November 2017.
Yuty Project, Paraguay
We hold an undivided 100% interest in one exploitation
concession in the Yuty Project, a 289,680-acre property located in Paraguay, subject to an overriding royalty payable of $0.21
for each pound of uranium produced from the property.
Oviedo Project, Paraguay
We hold an undivided 100% interest in one exploration
permit in the Oviedo Project, a 464,548-acre property located in Paraguay, subject to a 1.5% gross overriding royalty over which
we have an exclusive right and option at any time to acquire 0.5% for $166,667 and a right of first refusal to acquire all or any
portion of the remaining 1.0%.
Alto Paraná Titanium Project,
Paraguay
We hold an undivided 100% interest in five concession blocks in the Alto Paran
á
Titanium Project, a 174,200-acre property located in Paraguay. The property is subject to 1.5% net smelter returns royalty. We
have the right, exercisable at any time for a period of six years following our acquisition, to acquire 0.5% of the royalty at
a purchase price of $500,000.
Environmental Regulation
Our activities will be subject to existing
federal, state and local laws and regulations governing environmental quality and pollution control. Our operations will be subject
to stringent environmental regulation by state and federal authorities including the Railroad Commission of Texas (the “RCT”),
the Texas Commission on Environmental Quality (“TCEQ”) and the United States Environmental Protection Agency (the “EPA”).
In Texas, surface extraction and exploration
for uranium is regulated by the RCT, while in-situ uranium extraction is regulated by the TCEQ. An exploration permit is the initial
permit granted by the RCT that authorizes exploration drilling activities inside an approved area. This permit authorizes specific
drilling and plugging activities requiring documentation for each borehole drilled. All documentation is submitted to the RCT on
a monthly basis and each borehole drilled under the exploration permit is inspected by an RCT inspector to ensure compliance. At
July 31, 2017, we held one exploration permit in each of Bee, Duval, and Goliad Counties.
Before in-situ uranium extraction can begin
in Texas, a number of permits must be granted by the TCEQ.
A Mine Area Permit application is required
for submission to the TCEQ to establish a specific permit area boundary, aquifer exemption boundary and the mineral zones of interests
or production zones. The application also includes a financial surety plan to ensure funding for all plugging and abandonment
requirements. Funding for surety is in the form of cash or bonds, including an excess of 15% for contingencies and 10% for overhead,
adjusted annually for inflation. At July 31, 2017, we held Mine Area Permits, for the Palangana Mine, the Goliad Project and the
Burke Hollow Project.
A Radioactive Material License (“RML”)
application is also required for submission to the TCEQ for authorization to operate a uranium recovery facility. The application
includes baseline environmental data for soil, vegetation, surface water and groundwater along with operational sampling frequencies
and locations. A Radiation Safety Manual is a key component of the application which defines the environmental health and safety
programs and procedures to protect employees and the environment. Another important component of the application is a financial
surety mechanism to ensure plant and wellfield decommissioning is properly funded and maintained. Surety funding is in the form
of cash or bonds and includes an excess of 15% for contingencies and 10% for overhead, adjusted annually for inflation. At July
31, 2017, we held RMLs for the Palangana Mine, Goliad Project and Hobson Processing Facility.
Production Area Authorization applications
are also required for submission to the TCEQ to establish specific extraction areas inside the Mine Area Permit boundary. These
are typically 30 to 100 acre units that have been delineated and contain producible quantities of uranium. The PAA application
includes baseline water quality data that is characteristic of that individual unit, proposes upper control limits for monitor
well analysis and establishes restoration values. The application will also include a financial security plan for wellfield restoration
and reclamation which must be funded and in place prior to commencing uranium extraction. At July 31, 2017, we held four PAA permits
for the Palangana Mine and one for the Goliad Project.
A Class I disposal well permit application
is also required for submission to the TCEQ for authorization for deep underground wastewater injection. It is the primary method
for disposing of excess fluid from the extraction areas and for reverse osmosis concentrate during the restoration phase. This
permit authorizes injection into a specific injection zone within a designated injection interval. The permit requires continuous
monitoring of numerous parameters including injection flow rate, injection pressure, annulus pressure and injection/annulus differential
pressure. Mechanical integrity testing is required initially and annually to ensure the well is mechanically sound. Surety funding
for plugging and abandonment of each well is in the form of cash or bonds, including 15% for contingencies and 10% for overhead,
adjusted annually for inflation. At July 31, 2017, we held two Class I disposal well permits for the Hobson Processing Facility,
Palangana Satellite Facility, Burke Hollow Project and the Goliad Project.
The federal Safe Drinking Water Act (“SDWA”)
creates a regulatory program to protect groundwater and is administered by the EPA. The SDWA allows states to issue underground
injection control (“UIC”) permits under two conditions: the state’s program must have been granted primacy and
the EPA must have granted an aquifer exemption upon the state’s request. Texas, being a primacy state, is therefore
authorized to grant UIC permits and makes the official requests for an aquifer exemption to the EPA. The aquifer exemption
request is submitted by the Company to the TCEQ, and once approved, is then submitted by the TCEQ to the EPA for concurrence and
final issuance. At July 31, 2017, we held an aquifer exemption for the Palangana Mine, Goliad Project and Burke Hollow Project.
Waste Disposal
The Resource Conservation and Recovery Act
(“RCRA”) and comparable state statutes affect minerals exploration and production activities by imposing regulations
on the generation, transportation, treatment, storage, disposal and cleanup of “hazardous wastes” and on the disposal
of non-hazardous wastes. Under the auspices of the EPA, the individual states administer some or all of the provisions of RCRA,
sometimes in conjunction with their own, more stringent requirements.
Comprehensive Environmental Response,
Compensation and Liability Act
The federal Comprehensive Environmental Response,
Compensation and Liability Act (“CERCLA”) imposes joint and several liability for costs of investigation and remediation
and for natural resource damages, without regard to fault or the legality of the original conduct, on certain classes of persons
with respect to the release into the environment of substances designated under CERCLA as hazardous substances (collectively “Hazardous
Substances”). These classes of persons or potentially responsible parties include the current and certain past owners and
operators of a facility or property where there is or has been a release or threat of release of a Hazardous Substance and persons
who disposed of or arranged for the disposal of the Hazardous Substances found at such a facility. CERCLA also authorizes the EPA
and, in some cases, third parties, to take actions in response to threats to the public health or the environment and to seek to
recover the costs of such action. We may also in the future become an owner of facilities on which Hazardous Substances have been
released by previous owners or operators. We may in the future be responsible under CERCLA for all or part of the costs to clean
up facilities or property at which such substances have been released and for natural resource damages.
Air Emissions
Our operations are subject to local, state
and federal regulations for the control of emissions of air pollution. Major sources of air pollutants are subject to more stringent,
federally imposed permitting requirements. Administrative enforcement actions for failure to comply strictly with air pollution
regulations or permits are generally resolved by payment of monetary fines and correction of any identified deficiencies. Alternatively,
regulatory agencies could require us to forego construction, modification or operation of certain air emission sources. In Texas,
the TCEQ issues an exemption for those processes that meet the criteria for low to zero emission by issuing a Permit by Rule. Presently
the Palangana Mine, the Hobson Processing Facility and the Goliad Project all have Permits by Rule covering air emissions.
Clean Water Act
The Clean Water Act (“CWA”) imposes
restrictions and strict controls regarding the discharge of wastes, including mineral processing wastes, into waters of the United
States, a term broadly defined. Permits must be obtained to discharge pollutants into federal waters. The CWA provides for civil,
criminal and administrative penalties for unauthorized discharges of hazardous substances and other pollutants. It imposes substantial
potential liability for the costs of removal or remediation associated with discharges of oil or hazardous substances. State laws
governing discharges to water also provide varying civil, criminal and administrative penalties and impose liabilities in the case
of a discharge of petroleum or it derivatives, or other hazardous substances, into state waters. In addition, the EPA has promulgated
regulations that may require us to obtain permits to discharge storm water runoff. In the event of an unauthorized discharge of
wastes, we may be liable for penalties and costs. Management believes that we are in substantial compliance with current applicable
environmental laws and regulations.
Competition
The uranium industry is highly competitive,
and our competition includes larger, more established companies with longer operating histories that not only explore for and produce
uranium, but also market uranium and other products on a regional, national or worldwide basis. Due to their greater financial
and technical resources, we may not be able to acquire additional uranium projects in a competitive bidding process involving such
companies. Additionally, these larger companies have greater resources to continue with their operations during periods of depressed
market conditions.
The global TiO2 market is highly competitive,
with the top six producers accounting for approximately 60% of the world's production capacity according to TZMI. Competition is
based on a number of factors, such as price, product quality and service. Among our competitors are companies that are vertically-integrated
(those that have their own raw material resources).
Research and Development Activities
No research and development expenditures have
been incurred, either on our account or sponsored by customers, for the three most recently completed Fiscal years.
Employees
Amir Adnani is our President and Chief Executive
Officer, and effective October 29, 2015, Pat Obara was appointed our Chief Financial Officer. These individuals are primarily responsible
for all our day-to-day operations. Effective September 8, 2014, Scott Melbye was appointed our Executive Vice President. Other
services are provided by outsourcing and consulting and special purpose contracts. As of July 31, 2017, we had 45 persons employed
on a full-time basis and two individuals providing services on a contract basis.
Available Information
The Company’s website address is
www.uraniumenergy.com
and our annual reports on Form 10-K and quarterly reports on Form 10-Q, and amendments to such reports, are available free of charge
on our website as soon as reasonably practicable after such materials are filed or furnished electronically with the United States
Securities and Exchange Commission (the “SEC”). These same reports, as well as our current reports on Form 8-K, and
amendments to those reports, filed or furnished electronically with the SEC are available for review at the SEC’s website
at
www.sec.gov
. Printed copies of the foregoing materials are available free of charge upon written request by email at
info@uraniumenergy.com
. Additional information about the Company can be found on our website, however, such information
is neither incorporated by reference nor included as part of this or any other report or information filed with or furnished to
the SEC.
Item 1A.
Risk Factors
In addition
to the information contained in this Form 10-K Annual Report, we have identified the following material risks and uncertainties
which reflect our outlook and conditions known to us as of the date of this Annual Report. These material risks and uncertainties
should be carefully reviewed by our stockholders and any potential investors in evaluating the Company, our business and the market
value of our common stock. Furthermore, any one of these material risks and uncertainties has the potential to cause actual results,
performance, achievements or events to be materially different from any future results, performance, achievements or events implied,
suggested or expressed by any forward-looking statements made by us or by persons acting on our behalf. Refer to “Cautionary
Note Regarding Forward-Looking Statements”.
There is no
assurance that we will be successful in preventing the material adverse effects that any one or more of the following material
risks and uncertainties may cause on our business, prospects, financial condition and operating results, which may result in a
significant decrease in the market price of our common stock. Furthermore, there is no assurance that these material risks and
uncertainties represent a complete list of the material risks and uncertainties facing us. There may be additional risks and uncertainties
of a material nature that, as of the date of this Annual Report, we are unaware of or that we consider immaterial that may become
material in the future, any one or more of which may result in a material adverse effect on us. You could lose all or a significant
portion of your investment due to any one of these material risks and uncertainties.
Risks Related to Our Company and Business
Evaluating our future performance may
be difficult since we have a limited financial and operating history, with significant negative cash flow and accumulated deficit
to date. Furthermore, there is no assurance that we will be successful in securing any form of additional financing in the future;
therefore substantial doubt exists as to whether our cash resources and/or working capital will be sufficient to enable our Company
to continue its operations over the next twelve months. Our long-term success will depend ultimately on our ability to achieve
and maintain profitability and to develop positive cash flow from our mining activities.
As more fully described under Item 1. Business,
Uranium Energy Corp. was incorporated under the laws of the State of Nevada on May 16, 2003 and since 2004, we have been engaged
in uranium mining and related activities, including exploration, pre-extraction, extraction and processing, on projects located
in the United States and Paraguay. In November 2010, we commenced uranium extraction for the first time at the Palangana Mine utilizing
ISR methods and processed those materials at the Hobson Processing Facility into drums of U
3
O
8
, our only
sales product and source of revenue. We also hold uranium projects in various stages of exploration and pre-extraction in the States
of Arizona, Colorado, New Mexico, Texas and Wyoming and the Republic of Paraguay.
As more fully described under “Liquidity
and Capital Resources” of Item 7. Management’s Discussion and Analysis of Financial Condition and Result of Operations,
we have a history of significant negative cash flow and net losses, with an accumulated deficit balance of $227.3 million at July
31, 2017. Historically, we have been reliant primarily on equity financings from the sale of our common stock and, for Fiscal 2014
and Fiscal 2013, on debt financing in order to fund our operations. Although we generated revenues from sales of U
3
O
8
during Fiscal 2015, Fiscal 2013 and Fiscal 2012 of $3.1 million, $9.0 million and $13.8 million, respectively, with no revenues
from sales of U
3
O
8
generated during Fiscal 2017, Fiscal 2016, Fiscal 2014 or for any periods prior to Fiscal
2012, we have yet to achieve profitability or develop positive cash flow from our operations, and we do not expect to achieve profitability
or develop positive cash flow from operations in the near term. As a result of our limited financial and operating history, including
our significant negative cash flow and net losses to date, it may be difficult to evaluate our future performance.
At July 31, 2017, our Company had working capital
of $21.1 million including cash and cash equivalents of $12.6 million and short-term investments of $10.0 million. The existing
cash resources as at July 31, 2017 are expected to provide sufficient funds to carry out our planned operations for 12 months from
the date that the consolidated financial statements are issued. Our continuation as a going concern for a period beyond those 12
months will be dependent upon our ability to obtain adequate additional financing, as our operations are capital intensive and
future capital expenditures are expected to be substantial. Our continued operations, including the recoverability of the carrying
values of our assets, are dependent ultimately on our ability to achieve and maintain profitability and positive cash flow from
our operations.
Our reliance on equity and debt financings
is expected to continue for the foreseeable future, and their availability whenever such additional financing is required, will
be dependent on many factors beyond our control including, but not limited to, the market price of uranium, the continuing public
support of nuclear power as a viable source of electrical generation, the volatility in the global financial markets affecting
our stock price and the status of the worldwide economy, any one of which may cause significant challenges in our ability to access
additional financing, including access to the equity and credit markets. We may also be required to seek other forms of financing,
such as asset divestitures or joint venture arrangements to continue advancing our uranium projects which would depend entirely
on finding a suitable third party willing to enter into such an arrangement, typically involving an assignment of a percentage
interest in the mineral project.
Our long-term success, including the recoverability
of the carrying values of our assets and our ability to acquire additional uranium projects and continue with exploration and pre-extraction
activities and mining activities on our existing uranium projects, will depend ultimately on our ability to achieve and maintain
profitability and positive cash flow from our operations by establishing ore bodies that contain commercially recoverable uranium
and to develop these into profitable mining activities. The economic viability of our mining activities, including the expected
duration and profitability of the Palangana Mine and of any future satellite ISR mines, such as the Burke Hollow and Goliad Projects,
located within the South Texas Uranium Belt, has many risks and uncertainties. These include, but are not limited to: (i) a significant,
prolonged decrease in the market price of uranium; (ii) difficulty in marketing and/or selling uranium concentrates; (iii) significantly
higher than expected capital costs to construct the mine and/or processing plant; (iv) significantly higher than expected extraction
costs; (v) significantly lower than expected uranium extraction; (vi) significant delays, reductions or stoppages of uranium extraction
activities; and (vi) the introduction of significantly more stringent regulatory laws and regulations. Our mining activities may
change as a result of any one or more of these risks and uncertainties and there is no assurance that any ore body that we extract
mineralized materials from will result in achieving and maintaining profitability and developing positive cash flow.
Our operations are capital intensive,
and we will require significant additional financing to acquire additional uranium projects and continue with our exploration and
pre-extraction activities on our existing uranium projects.
Our operations are capital intensive and future
capital expenditures are expected to be substantial. We will require significant additional financing to fund our operations, including
acquiring additional uranium projects and continuing with our exploration and pre-extraction activities which include assaying,
drilling, geological and geochemical analysis and mine construction costs. In the absence of such additional financing we would
not be able to fund our operations or continue with our exploration and pre-extraction activities, which may result in delays,
curtailment or abandonment of any one or all of our uranium projects.
If we are unable to service our indebtedness,
we may be faced with accelerated repayments or lose the assets securing our indebtedness. Furthermore, restrictive covenants governing
our indebtedness may restrict our ability to pursue our business strategies.
On February 9, 2016, we entered into a Second
Amended and Restated Credit Agreement with our lenders (the “Lenders”) under which we had previously drawn down the
maximum $20 million in principal (the “Credit Facility”). The Credit Facility requires monthly interest payments calculated
at 8% per annum and other periodic fees, and principal repayments of $1.67 million per month over a twelve-month period commencing
on February 1, 2019. Our ability to continue making these scheduled payments will be dependent on and may change as a result of
our financial condition and operating results. Failure to make any one of these scheduled payments will put us in default with
the Credit Facility which, if not addressed or waived, could require accelerated repayment of our indebtedness and/or enforcement
by the Lenders against the Company’s assets. Enforcement against our assets would have a material adverse effect on our financial
condition and operating results.
Furthermore, the Credit Facility includes restrictive
covenants that, among other things, limit our ability to sell our assets or to incur additional indebtedness other than permitted
indebtedness, which may restrict our ability to pursue certain business strategies from time to time. If we do not comply with
these restrictive covenants, we could be in default which, if not addressed or waived, could require accelerated repayment of our
indebtedness and/or enforcement by the Lenders against our assets.
Our uranium extraction and sales history
is limited, with our uranium extraction to date originating from a single uranium mine. Our ability to continue generating revenue
is subject to a number of factors, any one or more of which may adversely affect our financial condition and operating results
.
We have a limited history of uranium extraction
and generating revenue. In November 2010, we commenced uranium extraction at the Palangana Mine, which has been our sole source
of U
3
O
8
sold to generate our revenues during Fiscal 2015, Fiscal 2013 and Fiscal 2012 of $3.1 million, $9.0
million and $13.8 million, respectively, with no revenues from sales of U
3
O
8
generated during Fiscal 2017,
Fiscal 2016, Fiscal 2014 or for any periods prior to Fiscal 2012.
During Fiscal 2017, uranium extraction at PAA-1,
2 and 3 continued to operate at a reduced pace since implementing our strategic plan in September 2013 to align our operations
to a weak uranium commodity market in a challenging post-Fukushima environment. This strategy has included the deferral of major
pre-extraction expenditures and remaining in a state of operational readiness in anticipation of a recovery in uranium prices.
Our ability to continue generating revenue from the Palangana Mine is subject to a number of factors which include, but are
not limited to: (i) a significant, prolonged decrease in the market price of uranium; (ii) difficulty in marketing and/or selling
uranium concentrates; (iii) significantly higher than expected capital costs to construct the mine and/or processing plant; (iv)
significantly higher than expected extraction costs; (v) significantly lower than expected uranium extraction; (vi) significant
delays, reductions or stoppages of uranium extraction activities; and (vii) the introduction of significantly more stringent regulatory
laws and regulations. Furthermore, continued mining activities at the Palangana Mine will eventually deplete the Palangana Mine
or cause such activities to become uneconomical, and if we are unable to directly acquire or develop existing uranium projects,
such as the Burke Hollow and Goliad Projects, into additional uranium mines from which we can commence uranium extraction, it will
negatively impact our ability to generate revenues. Any one or more of these occurrences may adversely affect our financial condition
and operating results.
Exploration and pre-extraction programs
and mining activities are inherently subject to numerous significant risks and uncertainties, and actual results may differ significantly
from expectations or anticipated amounts. Furthermore, exploration programs conducted on our Projects may not result in the establishment
of ore bodies that contain commercially recoverable uranium.
Exploration and pre-extraction programs and
mining activities are inherently subject to numerous significant risks and uncertainties, with many beyond our control and including,
but not limited to: (i) unanticipated ground and water conditions and adverse claims to water rights; (ii) unusual or unexpected
geological formations; (iii) metallurgical and other processing problems; (iv) the occurrence of unusual weather or operating conditions
and other force majeure events; (v) lower than expected ore grades; (vi) industrial accidents; (vii) delays in the receipt of or
failure to receive necessary government permits; (viii) delays in transportation; (ix) availability of contractors and labor; (x)
government permit restrictions and regulation restrictions; (xi) unavailability of materials and equipment; and (xii) the failure
of equipment or processes to operate in accordance with specifications or expectations. These risks and uncertainties could result
in: (i) delays, reductions or stoppages in our mining activities; (ii) increased capital and/or extraction costs; (iii) damage
to, or destruction of, our mineral projects, extraction facilities or other properties; (iv) personal injuries; (v) environmental
damage; (vi) monetary losses; and (vii) legal claims.
Success in exploration is dependent on many
factors, including, without limitation, the experience and capabilities of a company’s management, the availability of geological
expertise and the availability of sufficient funds to conduct the exploration program. Even if an exploration program is successful
and commercially recoverable material is established, it may take a number of years from the initial phases of drilling and identification
of the mineralization until extraction is possible, during which time the economic feasibility of extraction may change such that
the material ceases to be economically recoverable. Exploration is frequently non-productive due, for example, to poor exploration
results or the inability to establish ore bodies that contain commercially recoverable material, in which case the Project may
be abandoned and written-off. Furthermore, we will not be able to benefit from our exploration efforts and recover the expenditures
that we incur on our exploration programs if we do not establish ore bodies that contain commercially recoverable material and
develop these Projects into profitable mining activities, and there is no assurance that we will be successful in doing so for
any of our Projects.
Whether an ore body contains commercially recoverable
material depends on many factors including, without limitation: (i) the particular attributes, including material changes to those
attributes, of the ore body such as size, grade, recovery rates and proximity to infrastructure; (ii) the market price of the material,
which may be volatile; and (iii) government regulations and regulatory requirements including, without limitation, those relating
to environmental protection, permitting and land use, taxes, land tenure and transportation.
We have not established proven or probable
reserves through the completion of a “final” or “bankable” feasibility study for any of our Projects, including
the Palangana Mine. Furthermore, we have no plans to establish proven or probable reserves for any of our Projects for which we
plan on utilizing ISR mining, such as the Palangana Mine. Since we commenced extraction of mineralized materials from the Palangana
Mine without having established proven or probable reserves, it may result in our mining activities at the Palangana Mine, and
at any future Projects for which proven or probable reserves are not established, being inherently riskier than other mining activities
for which proven or probable reserves have been established.
We have established the existence of mineralized
materials for certain Projects, including the Palangana Mine. We have not established proven or probable reserves, as defined by
the SEC under Industry Guide 7, through the completion of a “final” or “bankable” feasibility study for
any of our Projects, including the Palangana Mine. Furthermore, we have no plans to establish proven or probable reserves for any
of our Projects for which we plan on utilizing ISR mining, such as the Palangana Mine. Since we commenced uranium extraction at
the Palangana Mine without having established proven or probable reserves, there may be greater inherent uncertainty as to whether
or not any mineralized material can be economically extracted as originally planned and anticipated. Any mineralized materials
established or extracted from the Palangana Mine should not in any way be associated with having established or produced from proven
or probable reserves.
Since we are in the Exploration Stage,
pre-production expenditures including those related to pre-extraction activities are expensed as incurred, the effects of which
may result in our consolidated financial statements not being directly comparable to the financial statements of companies in the
Production Stage.
Despite the fact that we commenced uranium
extraction at the Palangana Mine in November 2010, we remain in the Exploration Stage as defined under Industry Guide 7, and will
continue to remain in the Exploration Stage until such time proven or probable reserves have been established, which may never
occur. We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles
(“U.S. GAAP”) under which acquisition costs of mineral rights are initially capitalized as incurred while pre-production
expenditures are expensed as incurred until such time we exit the Exploration Stage. Expenditures relating to exploration
activities are expensed as incurred and expenditures relating to pre-extraction activities are expensed as incurred until such
time proven or probable reserves are established for that uranium project, after which subsequent expenditures relating to mine
development activities for that particular project are capitalized as incurred.
We have neither established nor have any plans
to establish proven or probable reserves for our uranium projects for which we plan on utilizing ISR mining, such as the Palangana
Mine. Companies in the Production Stage as defined by the SEC under Industry Guide 7, having established proven and probable reserves
and exited the Exploration Stage, typically capitalize expenditures relating to ongoing development activities, with corresponding
depletion calculated over proven and probable reserves using the units-of-production method and allocated to future reporting periods
to inventory and, as that inventory is sold, to cost of goods sold. As we are in the Exploration Stage, it has resulted in us reporting
larger losses than if we had been in the Production Stage due to the expensing, instead of capitalization, of expenditures relating
to ongoing mill and mine pre-extraction activities. Additionally, there would be no corresponding amortization allocated to our
future reporting periods since those costs would have been expensed previously, resulting in both lower inventory costs and cost
of goods sold and results of operations with higher gross profits and lower losses than if we had been in the Production Stage.
Any capitalized costs, such as acquisition costs of mineral rights, are depleted over the estimated extraction life using the straight-line
method. As a result, our consolidated financial statements may not be directly comparable to the financial statements of companies
in the Production Stage.
Estimated costs of future reclamation
obligations may be significantly exceeded by actual costs incurred in the future. Furthermore, only a portion of the financial
assurance required for the future reclamation obligations has been funded.
We are responsible for certain remediation
and decommissioning activities in the future primarily for the Hobson Processing Facility and the Palangana Mine, and have recorded
a liability of $3.7 million on our balance sheet at July 31, 2017, to recognize the present value of the estimated costs of such
reclamation obligations. Should the actual costs to fulfill these future reclamation obligations materially exceed these
estimated costs, it may have an adverse effect on our financial condition and operating results, including not having the financial
resources required to fulfill such obligations when required to do so.
During Fiscal 2015, we secured $5.6 million
of surety bonds as an alternate source of financial assurance for the estimated costs of the reclamation obligations of the Hobson
Processing Facility and the Palangana Mine, of which we have $1.7 million funded and held as restricted cash for collateral purposes
as required by the surety. We may be required at any time to fund the remaining $3.9 million or any portion thereof for a number
of reasons including, but not limited to, the following: (i) the terms of the surety bonds are amended, such as an increase in
collateral requirements; (ii) we are in default with the terms of the surety bonds; (iii) the surety bonds are no longer acceptable
as an alternate source of financial assurance by the regulatory authorities; or (iv) the surety encounters financial difficulties.
Should any one or more of these events occur in the future, we may not have the financial resources to fund the remaining amount
or any portion thereof when required to do so.
We do not insure against all of the risks
we face in our operations.
In general, where coverage is available and
not prohibitively expensive relative to the perceived risk, we will maintain insurance against such risk, subject to exclusions
and limitations. We currently maintain insurance against certain risks including securities and general commercial liability claims
and certain physical assets used in our operations, subject to exclusions and limitations, however, we do not maintain insurance
to cover all of the potential risks and hazards associated with our operations. We may be subject to liability for environmental,
pollution or other hazards associated with our exploration, pre-extraction and extraction activities, which we may not be insured
against, which may exceed the limits of our insurance coverage or which we may elect not to insure against because of high premiums
or other reasons. Furthermore, we cannot provide assurance that any insurance coverage we currently have will continue to be available
at reasonable premiums or that such insurance will adequately cover any resulting liability.
Acquisitions that we may make from time
to time could have an adverse impact on us.
From time to time, we examine opportunities
to acquire additional mining assets and businesses. Any acquisition that we may choose to complete may be of a significant size,
may change the scale of our business and operations, and may expose us to new geographic, political, operating, financial and geological
risks. Our success in our acquisition activities depends on our ability to identify suitable acquisition candidates, negotiate
acceptable terms for any such acquisition, and integrate the acquired operations successfully with those of our Company. Any acquisitions
would be accompanied by risks which could have a material adverse effect on our business. For example: (i) there may be a significant
change in commodity prices after we have committed to complete the transaction and established the purchase price or exchange ratio;
(ii) a material ore body may prove to be below expectations; (iii) we may have difficulty integrating and assimilating the operations
and personnel of any acquired companies, realizing anticipated synergies and maximizing the financial and strategic position of
the combined enterprise, and maintaining uniform standards, policies and controls across the organization; (iv) the integration
of the acquired business or assets may disrupt our ongoing business and our relationships with employees, customers, suppliers
and contractors; and (v) the acquired business or assets may have unknown liabilities which may be significant. In the event that
we choose to raise debt capital to finance any such acquisition, our leverage will be increased. If we choose to use equity as
consideration for such acquisition, existing shareholders may suffer dilution. Alternatively, we may choose to finance any such
acquisition with our existing resources. There can be no assurance that we would be successful in overcoming these risks or any
other problems encountered in connection with such acquisitions.
The uranium and TiO2 industries
are subject to numerous stringent laws, regulations and standards, including environmental protection laws and regulations. If
any changes occur that would make these laws, regulations and standards more stringent, it may require capital outlays in excess
of those anticipated or cause substantial delays, which would have a material adverse effect on our operations.
Uranium and TiO2 exploration and pre-extraction
programs and mining activities are subject to numerous stringent laws, regulations and standards at the federal, state, and local
levels governing permitting, pre-extraction, extraction, exports, taxes, labor standards, occupational health, waste disposal,
protection and reclamation of the environment, protection of endangered and protected species, mine safety, hazardous substances
and other matters. Our compliance with these requirements requires significant financial and personnel resources.
The laws, regulations, policies or current
administrative practices of any government body, organization or regulatory agency in the United States or any other applicable
jurisdiction, may change or be applied or interpreted in a manner which may also have a material adverse effect on our operations.
The actions, policies or regulations, or changes thereto, of any government body or regulatory agency or special interest group,
may also have a material adverse effect on our operations.
Uranium and TiO2 exploration and pre-extraction
programs and mining activities are subject to stringent environmental protection laws and regulations at the federal, state, and
local levels. These laws and regulations include permitting and reclamation requirements, regulate emissions, water storage and
discharges and disposal of hazardous wastes. Uranium and TiO2 mining activities are also subject to laws and regulations which
seek to maintain health and safety standards by regulating the design and use of mining methods. Various permits from governmental
and regulatory bodies are required for mining to commence or continue, and no assurance can be provided that required permits will
be received in a timely manner.
Our compliance costs including the posting
of surety bonds associated with environmental protection laws and regulations and health and safety standards have been significant
to date, and are expected to increase in scale and scope as we expand our operations in the future. Furthermore, environmental
protection laws and regulations may become more stringent in the future, and compliance with such changes may require capital outlays
in excess of those anticipated or cause substantial delays, which would have a material adverse effect on our operations.
To the best of our knowledge, our operations
are in compliance, in all material respects, with all applicable laws, regulations and standards. If we become subject to liability
for any violations, we may not be able or may elect not to insure against such risk due to high insurance premiums or other reasons.
Where coverage is available and not prohibitively expensive relative to the perceived risk, we will maintain insurance against
such risk, subject to exclusions and limitations. However, we cannot provide any assurance that such insurance will continue to
be available at reasonable premiums or that such insurance will be adequate to cover any resulting liability.
We may not be able to obtain, maintain
or amend rights, authorizations, licenses, permits or consents required for our operations.
Our exploration and mining activities are dependent
upon the grant of appropriate rights, authorizations, licences, permits and consents, as well as continuation and amendment of
these rights, authorizations, licences, permits and consents already granted, which may be granted for a defined period of time,
or may not be granted or may be withdrawn or made subject to limitations. There can be no assurance that all necessary rights,
authorizations, licences, permits and consents will be granted to us, or that authorizations, licences, permits and consents already
granted will not be withdrawn or made subject to limitations.
Major nuclear
incidents may have adverse effects on the nuclear and uranium industries.
The nuclear incident
that occurred in Japan in March 2011 had
significant and
adverse
effects on both the nuclear and uranium industries. If another nuclear incident were to occur, it may have further adverse effects
for both industries. Public opinion of nuclear power as a source of electrical generation may be adversely affected, which may
cause governments of certain countries to further i
ncrease regulation
for the nuclear industry, reduce or abandon current reliance on nuclear power or reduce or abandon existing plans for nuclear power
expansion. Any one of these occurrences has the potential to reduce current and/or future demand for nuclear power, resulting in
lower demand for uranium and lower market prices for uranium, adversely affecting the Company’s operations and prospects.
Furthermore, the
growth of the nuclear and uranium industries is dependent on continuing and growing public support of nuclear
power as a viable source of electrical generation.
The marketability of uranium concentrates
will be affected by numerous factors beyond our control which may result in our inability to receive an adequate return on our
invested capital.
The marketability of uranium concentrates extracted
by us will be affected by numerous factors beyond our control. These factors include macroeconomic factors, fluctuations in the
market price of uranium, governmental regulations, land tenure and use, regulations concerning the importing and exporting of uranium
and environmental protection regulations. The future effects of these factors cannot be accurately predicted, but any one or a
combination of these factors may result in our inability to receive an adequate return on our invested capital.
The TiO2 industry is affected by global
economic factors, including risks associated with volatile economic conditions, and the market for many TiO2 products is cyclical
and volatile, and we may experience depressed market conditions for such products.
TiO2 is used in many "quality of life"
products for which demand historically has been linked to global, regional and local GDP and discretionary spending, which can
be negatively impacted by regional and world events or economic conditions. Such events are likely to cause a decrease in demand
for products and, as a result, may have an adverse effect on our results of operations and financial condition. The timing and
extent of any changes to currently prevailing market conditions is uncertain, and supply and demand may be unbalanced at any time.
Uncertain economic conditions and market instability make it particularly difficult for us to forecast demand trends. As a consequence,
we may not be able to accurately predict future economic conditions or the effect of such conditions on our financial condition
or results of operations. We can give no assurances as to the timing, extent or duration of the current or future economic cycles
impacting the industries in which we operate.
Historically, the market for large volume TiO2
applications, including coatings, paper and plastics, has experienced alternating periods of tight supply, causing prices and margins
to increase, followed by periods of lower capacity utilization resulting in declining prices and margins. The volatility this market
experiences occurs as a result of significant changes in the demand for products as a consequence of global economic activity and
changes in customers' requirements. The supply-demand balance is also impacted by capacity additions or reductions that result
in changes of utilization rates. In addition, TiO2 margins are impacted by significant changes in major input costs such as energy
and feedstock. Demand for TiO2 depends in part on the housing and construction industries. These industries are cyclical in nature
and have historically been impacted by downturns in the economy. In addition, pricing may affect customer inventory levels as customers
may from time to time accelerate purchases of TiO2 in advance of anticipated price increases or defer purchases of TiO2 in advance
of anticipated price decreases. The cyclicality and volatility of the TiO2 industry results in significant fluctuations in profits
and cash flow from period to period and over the business cycle. Primarily as a result of oversupply in the market, global prices
for TiO2 declined throughout 2015 before reaching a trough in the first quarter of 2016.
The uranium industry is highly competitive
and we may not be successful in acquiring additional projects.
The uranium industry is highly competitive,
and our competition includes larger, more established companies with longer operating histories that not only explore for and produce
uranium, but also market uranium and other products on a regional, national or worldwide basis. Due to their greater financial
and technical resources, we may not be able to acquire additional uranium projects in a competitive bidding process involving such
companies. Additionally, these larger companies have greater resources to continue with their operations during periods of depressed
market conditions.
The TiO2 industry is concentrated and
highly competitive, and we may not be able to compete effectively with our competitors that have greater financial resources or
those that are vertically integrated, which could have a material adverse effect on our business, results of operations and financial
condition.
The global TiO2 market is highly competitive,
with the top six producers accounting for approximately 60% of the world's production capacity. Competition is based on a number
of factors, such as price, product quality and service. Competition is based on a number of factors, such as price, product quality
and service. Among our competitors are companies that are vertically-integrated (those that have their own raw material resources).
Changes in the competitive landscape could make it difficult for us to retain our competitive position in various products and
markets throughout the world. Our competitors with their own raw material resources may have a competitive advantage during periods
of higher raw material prices. In addition, some of the companies with whom we compete may be able to produce products more economically
than we can. Furthermore, some of our competitors have greater financial resources, which may enable them to invest significant
capital into their businesses, including expenditures for research and development.
We hold mineral
rights in foreign jurisdictions which could be subject to additional risks due to political, taxation, economic and cultural factors.
We hold certain mineral rights located in Paraguay
through the acquisition of Piedra Rica Mining S.A., Transandes Paraguay S.A., Trier S.A., and Metalicos Y No Metalicos S.R.L, which
are incorporated in Paraguay. Operations in foreign jurisdictions outside of the United States and Canada, especially in developing
countries, may be subject to additional risks as they may have different political, regulatory, taxation, economic and cultural
environments that may adversely affect the value or continued viability of our rights. These additional risks include, but are
not limited to: (i) changes in governments or senior government officials; (ii) changes to existing laws or policies on foreign
investments, environmental protection, mining and ownership of mineral interests; (iii) renegotiation, cancellation, expropriation
and nationalization of existing permits or contracts; (iv) foreign currency controls and fluctuations; and (v) civil disturbances,
terrorism and war.
In the event of a dispute arising at our foreign
operations in Paraguay, we may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting
foreign persons to the jurisdiction of the courts in the United States or Canada. We may also be hindered or prevented from enforcing
our rights with respect to a government entity or instrumentality because of the doctrine of sovereign immunity. Any adverse or
arbitrary decision of a foreign court may have a material and adverse impact on our business, prospects, financial condition and
results of operations.
The title to our mineral property interests
may be challenged.
Although we have taken reasonable measures
to ensure proper title to our interests in mineral properties and other assets, there is no guarantee that the title to any of
such interests will not be challenged. No assurance can be given that we will be able to secure the grant or the renewal of existing
mineral rights and tenures on terms satisfactory to us, or that governments in the jurisdictions in which we operate will not revoke
or significantly alter such rights or tenures or that such rights or tenures will not be challenged or impugned by third parties,
including local governments, aboriginal peoples or other claimants. Our mineral properties may be subject to prior unregistered
agreements, transfers or claims, and title may be affected by, among other things, undetected defects. A successful challenge to
the precise area and location of our claims could result in us being unable to operate on our properties as permitted or being
unable to enforce our rights with respect to our properties.
Due to the nature of our business, we
may be subject to legal proceedings which may divert management’s time and attention from our business and result in substantial
damage awards.
Due to the nature of our business, we may be
subject to numerous regulatory investigations, securities claims, civil claims, lawsuits and other proceedings in the ordinary
course of our business including those described under Item 3. Legal Proceedings. The outcome of these lawsuits is uncertain
and subject to inherent uncertainties, and the actual costs to be incurred will depend upon many unknown factors. We may be forced
to expend significant resources in the defense of these suits, and we may not prevail. Defending against these and other lawsuits
in the future may not only require us to incur significant legal fees and expenses, but may become time-consuming for us and detract
from our ability to fully focus our internal resources on our business activities. The results of any legal proceeding cannot be
predicted with certainty due to the uncertainty inherent in litigation, the difficulty of predicting decisions of regulators, judges
and juries and the possibility that decisions may be reversed on appeal. There can be no assurances that these matters will not
have a material adverse effect on our business, financial position or operating results.
We depend on certain key personnel, and
our success will depend on our continued ability to retain and attract such qualified personnel.
Our success is dependent on the efforts, abilities
and continued service of certain senior officers and key employees and consultants. A number of our key employees and consultants
have significant experience in the uranium industry. A loss of service from any one of these individuals may adversely affect our
operations, and we may have difficulty or may not be able to locate and hire a suitable replacement.
Certain directors and officers may be
subject to conflicts of interest.
The majority of our directors and officers
are involved in other business ventures including similar capacities with other private or publicly-traded companies. Such individuals
may have significant responsibilities to these other business ventures, including consulting relationships, which may require significant
amounts of their available time. Conflicts of interest may include decisions on how much time to devote to our business affairs
and what business opportunities should be presented to us. Our Code of Business Conduct for Directors, Officers and Employees provides
for guidance on conflicts of interest.
The laws of the State of Nevada and our
Articles of Incorporation may protect our directors and officers from certain types of lawsuits.
The laws of the State of Nevada provide that
our directors and officers will not be liable to the Company or its stockholders for monetary damages for all but certain types
of conduct as directors and officers of the Company. Our Bylaws provide for broad indemnification powers to all persons against
all damages incurred in connection with our business to the fullest extent provided or allowed by law. These indemnification provisions
may require us to use our limited assets to defend our directors and officers against claims, and may have the effect of preventing
stockholders from recovering damages against our directors and officers caused by their negligence, poor judgment or other circumstances.
Several of our directors and officers
are residents outside of the United States, and it may be difficult for stockholders to enforce within the United States any judgments
obtained against such directors or officers.
Several of our directors and officers are nationals
and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are
located outside of the United States. As a result, it may be difficult for investors to effect service of process on such directors
and officers, or enforce within the United States any judgments obtained against such directors and officers, including judgments
predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently,
stockholders may be effectively prevented from pursuing remedies against such directors and officers under United States federal
securities laws. In addition, stockholders may not be able to commence an action in a Canadian court predicated upon the civil
liability provisions under United States federal securities laws. The foregoing risks also apply to those experts identified in
this document that are not residents of the United States.
Disclosure controls and procedures and
internal control over financial reporting, no matter how well designed and operated, are designed to obtain reasonable, and not
absolute, assurance as to its reliability and effectiveness.
Management’s evaluation on the effectiveness
of disclosure controls and procedures is designed to ensure that information required for disclosure in our public filings is recorded,
processed, summarized and reported on a timely basis to our senior management, as appropriate, to allow timely decisions regarding
required disclosure. Management’s report on internal control over financial reporting is designed to provide reasonable assurance
that transactions are properly authorized, assets are safeguarded against unauthorized or improper use and transactions are properly
recorded and reported. However, any system of controls, no matter how well designed and operated, is based in part upon certain
assumptions designed to obtain reasonable, and not absolute, assurance as to its reliability and effectiveness. Any failure to
maintain effective disclosure controls and procedures in the future may result in our inability to continue meeting our reporting
obligations in a timely manner, qualified audit opinions or restatements of our financial reports, any one of which may affect
the market price for our common stock and our ability to access the capital markets.
Risks Related to Our Common Stock
Historically, the market price of our
common stock has been and may continue to fluctuate significantly.
On September 28, 2007, our common stock commenced
trading on the NYSE American (formerly known as the American Stock Exchange, the NYSE Amex Equities Exchange and the NYSE MKT)
and prior to that, traded on the OTC Bulletin Board.
The global markets have experienced significant
and increased volatility in the past, and have been impacted by the effects of mass sub-prime mortgage defaults and liquidity problems
of the asset-backed commercial paper market, resulting in a number of large financial institutions requiring government bailouts
or filing for bankruptcy. The effects of these past events and any similar events in the future may continue to or further affect
the global markets, which may directly affect the market price of our common stock and our accessibility for additional financing.
Although this volatility may be unrelated to specific company performance, it can have an adverse effect on the market price of
our shares which, historically, has fluctuated significantly and may continue to do so in the future.
In addition to the volatility associated with
general economic trends and market conditions, the market price of our common stock could decline significantly due to the impact
of any one or more events, including, but not limited to, the following: (i) volatility in the uranium market; (ii) occurrence
of a major nuclear incident such as the events in Fukushima in March 2011; (iii) changes in the outlook for the nuclear power and
uranium industries; (iv) failure to meet market expectations on our exploration, pre-extraction or extraction activities, including
abandonment of key uranium projects; (v) sales of a large number of our shares held by certain stockholders including institutions
and insiders; (vi) downward revisions to previous estimates on us by analysts; (vii) removal from market indices; (viii) legal
claims brought forth against us; and (ix) introduction of technological innovations by competitors or in competing technologies.
A prolonged decline in the market price
of our common stock could affect our ability to obtain additional financing which would adversely affect our operations.
Historically, we have relied on equity financing
and more recently, on debt financing, as primary sources of financing. A prolonged decline in the market price of our common stock
or a reduction in our accessibility to the global markets may result in our inability to secure additional financing which would
have an adverse effect on our operations.
Additional issuances of our common stock
may result in significant dilution to our existing shareholders and reduce the market value of their investment.
We are authorized to issue 750,000,000 shares
of common stock of which 139,815,124 shares were issued and outstanding as of July 31, 2017. Future issuances for financings, mergers
and acquisitions, exercise of stock options and share purchase warrants and for other reasons may result in significant dilution
to and be issued at prices substantially below the price paid for our shares held by our existing stockholders. Significant dilution
would reduce the proportionate ownership and voting power held by our existing stockholders, and may result in a decrease in the
market price of our shares.
We filed a Form S-3 shelf registration statement,
which was declared effective on January 10, 2014 (the “2014 Shelf”), providing for the public offer and sale of certain
securities of the Company from time to time, at our discretion, up to an aggregate offering amount of $100 million.
We filed a Form S-3 shelf registration statement,
which was declared effective on March 10, 2017 (the “2017 Shelf”), and, as a result, it replaced the 2014 Shelf which
was then deemed terminated. The 2017 Shelf provides for the public offer and sale of certain securities of our Company from time
to time, at our discretion, of up to an aggregate offering amount of $100 million, of which a total of $33.7 million has been utilized
through public offerings as of July 31, 2017.
We are subject to the Continued Listing
Criteria of the NYSE American and our failure to satisfy these criteria may result in delisting of our common stock
.
Our common stock is currently listed on the
NYSE American. In order to maintain this listing, we must maintain certain share prices, financial and share distribution
targets, including maintaining a minimum amount of shareholders’ equity and a minimum number of public shareholders.
In addition to these objective standards, the NYSE American may delist the securities of any issuer (i) if, in its opinion, the
issuer’s financial condition and/or operating results appear unsatisfactory; (ii) if it appears that the extent of public
distribution or the aggregate market value of the security has become so reduced as to make continued listing on the NYSE American
inadvisable; (iii) if the issuer sells or disposes of principal operating assets or ceases to be an operating company; (iv) if
an issuer fails to comply with the NYSE American’s listing requirements; (v) if an issuer’s common stock sells at what
the NYSE American considers a “low selling price” and the issuer fails to correct this via a reverse split of shares
after notification by the NYSE American; or (vi) if any other event occurs or any condition exists which makes continued listing
on the NYSE America, in its opinion, inadvisable.
If the NYSE American delists our common stock,
investors may face material adverse consequences, including, but not limited to, a lack of trading market for our securities, reduced
liquidity, decreased analyst coverage of our securities, and an inability for us to obtain additional financing to fund our operations.
Item 2. Properties
General
At July 31, 2017, we held mineral rights in
uranium projects located in the U.S. States of Arizona, Colorado, New Mexico, Texas and Wyoming and in the Republic of Paraguay
by way of federal mining claims, state and private mineral leases and mineral concessions. We also held a wholly-owned uranium
processing facility located in the State of Texas, the Hobson Processing Facility, which processes material extracted from the
Palangana Mine.
We have not established proven or probable
reserves, as defined by the SEC under Industry Guide 7, through the completion of a “final” or “bankable”
feasibility study for any of our uranium projects, including the Palangana Mine. Furthermore, we have no plans to establish proven
or probable reserves for any of our uranium projects for which we plan on utilizing ISR mining, such as the Palangana Mine.
Texas Processing Facility and Projects
The following map shows the location of our
Hobson Processing Facility and main projects in Texas:
Hobson Processing Facility
Property Description and Location
The Hobson Processing Facility is a fully-licensed
and permitted in-situ recovery or ISR uranium processing plant designed to process uranium-loaded resins from satellite ISR mining
facilities to the final product, U
3
O
8
or yellowcake. The Hobson Processing Facility was originally constructed
in 1978 and served as a central processing site for several satellite ISR mining projects until 1996. It was completely refurbished
in 2008 and on December 18, 2009, we acquired the Hobson Processing Facility through the acquisition of South Texas Mining Venture,
L.L.P.
The Hobson Processing Facility is located in
Karnes County, Texas on a 7.286-acre leased tract of land, approximately one mile south of the community of Hobson and about 100
miles northwest of Corpus Christi, Texas. The surface lease of the Hobson Processing Facility is for an initial term of five years
commencing May 30, 2007, and thereafter so long as uranium, thorium and other fissionable or spatially associated substances are
being processed or refined without cessation of more than five consecutive years.
The Hobson Processing Facility has a physical
capacity to process two million pounds of U
3
O
8
annually and is licensed to process up to one million pounds
of U
3
O
8
annually, which provides for the capacity to process uranium-loaded resins from a number of satellite
ISR mining facilities in South Texas. We utilize a “hub-and-spoke” strategy whereby the Hobson Processing Facility
acts as our central uranium processing site (the “hub”) for the Palangana Mine and for future satellite ISR mines,
including our Burke Hollow and Goliad Projects, (the “spokes”) located within the South Texas Uranium Belt.
In January 2011, the Hobson Processing Facility
began processing uranium-loaded resins received from the Palangana Mine upon commencement of uranium extraction in November 2010.
Since then, the Hobson Processing Facility has processed 578,000 pounds of uranium concentrates. During Fiscal 2016, the Hobson
Processing facility was in a state of operational readiness.
Uranium Processing System
Once the uranium-loaded resin from the satellite
ISR mining facility is delivered to the Hobson Processing Facility by semi-trailer, the material is transferred and placed in a
pressure vessel for elution which involves flushing with a brine solution. The uranium is stripped from the resin in a three-stage
elution process and concentrated into a rich eluate tank, at which point the solution is analyzed for total uranium concentration.
After the uranium is eluted from the resin, the resin is washed to remove excess brine solution, transferred back to the trailer
and returned to the satellite ISR mining facility to again begin the cycle of capturing uranium from the wellfield, transport to
the Hobson Processing Facility and subsequent elution.
The uranium-rich solution remaining at the
Hobson Processing Facility after elution is agitated and chemicals are added to precipitate the uranium. In this precipitation
process, sulfuric acid is added to reduce the pH to between 2 and 3. Hydrogen peroxide (“H
2
O
2
”)
is then added at the rate of 0.2 to 0.5 pounds of H
2
O
2
per pound of uranium while maintaining the pH of the
solution between two and three using sodium hydroxide. Once the precipitation reaction is complete, the solution is allowed to
set in order for the uranium to precipitate and settle to the bottom of the tank. The excess overflow is decanted to a storage
tank or to the waste disposal system. All waste process solutions from the plant area report to a chemical waste storage tank and
waste solutions are pumped to a Class I, non-hazardous, waste disposal well system.
The remaining material, at approximately 3
to 5% solids, is pumped to a filter press where the uranium is separated from the liquid. After the uranium, or yellowcake, has
been filtered, fresh water is pumped through to remove the entrained salts, with the resulting liquids pumped to the fresh eluate
makeup system or the waste disposal system. From the filter press, the thickened yellowcake, at 50 to 60 percent solids, is transferred
to the drying package for drying and drumming. A zero-emissions vacuum dryer removes moisture from the yellowcake and a scrubber
system removes these vapors from the dryer and discharges the gases to an exhaust stack. The dried yellowcake is packaged in 55
gallon drums. Each drum is weighed, cleaned, surveyed and analyzed, after which it is transferred to a temporary yellowcake storage
area at the Hobson Processing Facility. Once approximately one truckload is accumulated, the drums are then shipped to a third-party
storage and sales facility.
Palangana Mine, Duval County, Texas
Property Description and Location
The Palangana Mine is located in Texas near
the center of the extensive South Texas Uranium Trend. The Palangana Mine consists of multiple leases that would allow the mining
of uranium by ISR methods while utilizing the land surface (with variable conditions) as needed, for mining wells and aboveground
facilities for fluid processing and ore capture during the mining and groundwater restoration phases of the project. The Palangana
Mine is situated in Duval County, Texas and is located approximately 25 miles west of the town of Alice, 6 miles north of the town
of Benavides, 15 miles southeast of the town of Freer and 12 miles southwest of the town of San Diego, as shown in the map below:
Mineral Titles
At July 31, 2017, there were nine leases covering
6,987 acres at the Palangana Mine. PAA-1 is on the de Hoyos leases while PAA-2, PAA-3 and the Dome trend are on the Palangana Ranch
Management, LLC lease. Bordering the east side of the Palangana Ranch Management, LLC lease is the White Bell Ranch lease, comprised
of 1,006 acres, which contains the Jemison Fence and Jemison East trends. The fourth major lease is the Garcia/Booth property comprised
of 1,278 acres which borders the east side of the De Hoyos property. It contains the NE Garcia and SW Garcia trends.
Lease ownership is held by South Texas Mining
Venture, L.L.P. (“STMV”), which is wholly-owned by the Company.
Accessibility, Climate, Local Resources,
Infrastructure and Physiography
Topography, Elevation and Vegetation
Surface elevations at the Palangana Mine range
from about 410 feet to 500 feet above sea level.
Climate and Length of Operating Season
The region’s subtropical climate allows
uninterrupted, year-round mining activities. Temperatures during the summer range from 75°F to 95°F, although highs above
100°F are common while winter temperatures range from 45°F to 65°F. Humidity is generally over 85% year-round and commonly
exceeds 90% during the summer months. Average annual rainfall is 30 inches.
Physiography
The dome area to the west of the PAA-1 and
PAA-2 deposits is a concentric collapsed area with the surrounding landscape being hilly and elevated. Surface water generally
drains away from the dome area although no prominent creeks or rivers are evident.
Access to Property
The Palangana Mine occurs in the South Texas
Uranium Belt between San Antonio and Corpus Christi in Duval County. Corpus Christi, the largest nearby metropolitan district,
is about 65 miles to the east of the Palangana Mine. Approximately halfway between San Diego and Freer on Texas Highway 44 is a
turn-off to the south referred to as Ranch Road 3196 that runs directly through the property about eight miles from the turn-off.
The road continues southward about six miles to the town of Benavides. Access is excellent, with major two lane roads connecting
the three surrounding towns and unpaved secondary roads connecting to Palangana.
Surface Rights
The uranium leaseholders under most of the
current leases have conveyed the surface rights under certain conditions of remuneration. These conditions essentially require
payments for surface area taken out of usage.
Local Resources and Infrastructure
An entire infrastructure is in place including
office buildings, access roads, electrical power and maintenance faculties. Each property has sources of water for drilling operations
for both exploration and extraction drilling.
Manpower
A nearby workforce of field technicians, welders,
electricians, drillers and pipefitters exists in the local communities. The technical workforce for facility operations from the
area is sparse although ample qualified resources can be found in the South Texas area from the petrochemical industry.
History Prior to Acquisition by Our Company
Uranium mineralization was discovered during
potash exploration drilling of the Palangana Dome’s gypsum-anhydrite cap rock in 1952 by Columbia Southern Inc. (“CSI”),
a subsidiary of Pittsburgh Plate Glass Corp. CSI conducted active uranium exploration drilling on the property starting in March
1956. Records of CSI’s exploration work are unavailable, however, both CSI and the U.S. Atomic Energy Commission estimated
underground mineable uranium mineralization. The only known details of the estimation method include a 0.15% eU
3
O
8
cut-off grade, a minimum mining thickness of three feet, and widely spaced drilling on a nominal 200 foot exploration grid. Union
Carbide acquired the Palangana property in 1958 and initiated underground mine development. Development work was quickly abandoned
due to heavy concentrations of H
2
S gas and Union Carbide dropped the property. Union Carbide reacquired Palangana in
1967 after recognizing that it would be amenable to exploitation by the emerging ISR mining technologies. During the 1960s and
1970s, Union Carbide drilled over 1,000 exploration and development holes and installed over 3,000 injection-extraction holes in
a 31-acre lease block.
Union Carbide attempted an ISR operation from
1977 through 1979 using a push/pull injection/recovery system. Ammonia was used as the lixiviate that later caused some environmental
issues with groundwater. About 340,000 pounds of U
3
O
8
were produced from portions of a 31 acre wellfield
area. The extraction pounds indicate a 32% to 34% recovery rate. The push/pull injection/recovery system was later proven to be
less productive than well configurations or patterns of injection wells around a recovery well. Further, the wellfield was developed
without any apparent regard to the geology of the deposit including disequilibrium. The Union Carbide ISR work was basically conducted
at a research level in contrast to the current level of knowledge. The historic extraction area lies on the western side of the
dome.
In 1981, Chevron Corporation acquired the Union
Carbide leases and conducted their own resource evaluation. After the price of uranium dropped to under $10 per pound, General
Atomics acquired the property and dismantled the processing plant in a property-wide restoration effort. Upon formal approval of
the clean up by the Texas Natural Resources Conservation Commission and the United States Nuclear Regulatory Commission, the property
was returned to the landowners in the late 1990’s. In 2005, Everest Exploration Inc. acquired the Palangana property and
later joint ventured with Energy Metals Corp. (“Energy Metals”) through the formation of STMV. An independent consultant,
Blackstone (2005), estimated inferred resources in an area now referred to as the Dome trend proximal to the dome on the west side
north of the prior Union Carbide leach field. In 2006 and 2007, Energy Metals drilled approximately 200 additional confirmation
and delineation holes. The PAA-1 and PAA-2 areas were found during this drilling program. In 2008 Energy Metals was acquired by
Uranium One. During 2008 and 2009, the remaining holes on this project were drilled by Uranium One. During this time the five exploration
trends to the east of the dome were identified and partially delineated. In December 2009, we acquired 100% ownership of STMV.
Geological Setting
South Texas geology is characterized by an
arcuate belt of Tertiary fluvial clastic units deposited along the passive North American plate. These units strike parallel to
the Gulf Coast between the Mexican border and Louisiana within an area known as the Mississippi Embayment. The uranium-bearing
sedimentary units are primarily of fluvial origin and were deposited by southeasterly flowing streams and rivers. Uranium deposits
are contained within fault-controlled roll-fronts in the Pliocene-age Goliad Formation on the flank of the Palangana salt dome.
The uranium mineralization in the Goliad Formation at Palangana occurs at a depth of approximately 220 to 600 feet below the surface.
Geological Model
Uranium mineralization in the South Texas Uranium
Belt occurs as sandstone-hosted roll-front deposits. The deposits are strata-bound, elongate, and often, but not necessarily, occur
in the classic “C” or truncated “C” roll configuration. They can be associated with an oxidation front
or can be found in a re-reduced condition where an overprint of later reduction from hydrogen sulfide or other hydrocarbon reductant
has seeped along faults and fractures. The uranium bearing sandstone units can themselves be separated into several horizons by
discontinuous mudstone units, and separate roll-fronts and sub-rolls can occur in the stacked sandstone sequences.
The generally accepted origin of uranium mineralization
in the Goliad Formation is from leaching of intraformational tuffaceous material or erosion of older uranium-bearing strata. The
leached uranium was carried by oxygenated groundwater in a hexavalent state and deposited where a suitable reductant was encountered.
The oxidation/reduction (redox) fronts are often continuous for miles, although minable grade uranium mineralization is not nearly
as continuous. The discontinuous nature of uranium mineralization is often characterized as “beads on a string” and
is due to sinuous vertical and lateral fluvial facies changes in the permeable sandstone host horizons, coupled with ground water
movements and the presence or absence of reducing material.
Figure 2: Schematic view of a typical uranium
roll-front configuration
The red area is the uranium mineralization
deposited at the interface between the oxidized (up gradient) sand shown in yellow and the reduced (down gradient) sand shown in
gray. The up gradient sand has been altered by oxidizing groundwater that carried the uranium that was deposited in the roll-front
at the oxidation/reduction (redox) interface. The uranium mineralization is hydrologically confined by an upper and lower confining
layer of shale or mudstone. At wellfields, extraction (pumping) wells have been completed near the center of the roll-front and
are fed lixiviate (leach solutions) by injection wells on each side of the front.
Mineralized Zones and Historical Drilling
Results
As stated previously, mineralization does not
occur in all of the Goliad sands nor does it persist in the same sand intervals across the dome area. On the west half of the dome
near what is referred to as the Dome trend, Union Carbide developed the “C” sand zone. The NW Garcia and SE Garcia
trends to the east of the dome also reside in the “C” sand zone. Also to the east of the dome, the PAA-2 deposit, as
well as the PAA-3 deposit, Jemison Fence and Jemison East trends all occur in the “E” sand, while the PAA-1 deposit
occurs in the “G” sand. Within these mineralized horizons, smaller roll fronts are evident that can be mapped as discrete
bodies. Some of these bodies contain economic mineralization while others do not. The mineralized horizons occur as stacked intervals
often separated by claystones. Generally, they overlap one another but there are differences making a concurrent, multiple-horizon
recovery scenario not uniformly effective.
The table below summarizes the historical drilling
results at the Palangana Mine prior to its acquisition by our Company on December 18, 2009:
Trend
|
|
Total
# DHs
|
|
Max.
Depth
(feet)
|
|
Avg.
Depth
(feet)
|
|
#of
Mineralized
Intervals
|
|
Interval
Thickness
Range (feet)
|
|
Interval
Thickness
Avg. (feet)
|
PAA-1
|
|
518
|
|
660
|
|
565
|
|
389
|
|
0.5
– 13.5
|
|
5.24
|
PAA-2
|
|
239
|
|
600
|
|
337.5
|
|
186
|
|
0.5
– 13.5
|
|
5.79
|
PAA-3
|
|
69
|
|
520
|
|
417
|
|
49
|
|
2.0
– 18.5
|
|
5.9
|
Jemison
East
|
|
53
|
|
560
|
|
434
|
|
17
|
|
1.0
– 11.0
|
|
4.4
|
NE
Garcia
|
|
186
|
|
600
|
|
344
|
|
158
|
|
0.5
– 20.0
|
|
4.6
|
SW
Garcia
|
|
84
|
|
600
|
|
367
|
|
45
|
|
0.5
– 11.0
|
|
4.6
|
Dome
|
|
231
|
|
600
|
|
346
|
|
239
|
|
0.5
– 12.5
|
|
4.1
|
Update to July 31, 2017
Since commencing uranium extraction at the
Palangana Mine in November 2010 to July 31, 2017, the Hobson Processing Facility has processed 578,000 pounds of uranium concentrates
extracted directly from the Palangana Mine utilizing ISR methods. A summary by PAA is provided below:
|
1)
|
PAA-1 commenced uranium extraction in November 2010 and remains fully-permitted. With 69 monitor
wells already in place prior to our acquisition of the Palangana Mine, we drilled a total of 201 holes for well control facilities
and wellfields including injection and extraction wells and infield drilling efforts. During Fiscal 2015, Fiscal 2016 and Fiscal
2017, no additional infield drilling took place;
|
|
2)
|
PAA-2 commenced uranium extraction in March 2012 and remains fully-permitted. With 43 monitor wells
already in place prior to our acquisition of the Palangana Mine, we drilled a total of 63 holes for well control facilities and
wellfields including injection and extraction wells and infield drilling efforts. During Fiscal 2015, Fiscal 2016 and Fiscal 2017,
no additional infield drilling took place;
|
|
3)
|
PAA-3 commenced uranium extraction in December 2012 and remains fully-permitted. We drilled a total
of 345 holes for mineral trend exploration and delineation, monitor wells, well control facilities and wellfields including injection
and extraction wells and infield drilling efforts. During Fiscal 2015, Fiscal 2016 and Fiscal 2017, no additional infield drilling
took place;
|
|
4)
|
PAA-4 permitting was completed and approved in November 2014, including the approval of the aquifer
exemption in March 2015. The Mine Area Permit boundary was expanded to 8,722 acres from 6,200 acres to include PAA-4. Wellfield
design is being finalized in preparation for installment of the first module inside PAA-4. During Fiscal 2015, we drilled five
holes for a total of 214 holes for mineral trend exploration, delineation and monitor wells. All monitor wells were sampled for
baseline parameters and a pumping test has been completed; and
|
|
5)
|
PAA-5 and PAA-6 mine area expansion application was approved in November 2014. We drilled a total
of 46 holes at PAA-5 and PAA-6 for mineral trend exploration and delineation and a monitor well. During Fiscal 2015, Fiscal 2016
and Fiscal 2017, no additional drilling took place.
|
During Fiscal 2017 and Fiscal 2016, we reduced
operations at the Palangana Mine to capture residual uranium only. As a result, no material amount of U
3
O
8
was processed at the Hobson Processing Facility.
During Fiscal 2015, uranium extraction at PAA-1,
2 and 3 operated at a reduced pace since implementing our strategic plan in September 2013 to align our operations to a weak uranium
market in a challenging post-Fukushima environment. This strategy has included the deferral of major pre-extraction expenditures
and remaining in a state of operational readiness in anticipation of a recovery in uranium prices. As a consequence, U
3
O
8
pounds extracted from the Palangana Mine and processed at the Hobson Processing Facility decreased significantly during Fiscal
2015. The Hobson Processing Facility processed finished goods representing 18,000 pounds of U
3
O
8
during
Fiscal 2015 (Fiscal 2014: 43,000 pounds; Fiscal 2013: 194,000 pounds; and Fiscal 2012: 198,000 pounds) extracted solely from the
Palangana Mine. Based on the Company’s estimate of mineralized materials in PAA 1, 2 and 3 over which an average mining
grade of 0.135% has been established, cumulative recovery since the commencement of uranium extraction in November 2010 to July
31, 2016 was 44% (July 31, 2015: 44%; July 31, 2014: 43%; July 31, 2013: 40%; July 31, 2012: 31%).
The following table summarizes the drill holes
completed by our Company from December 18, 2009, the date of the Company’s acquisition of STMV, to July 31, 2017:
Trend
|
|
Total
# DHs
|
|
Max.
Depth
(feet)
|
|
Avg.
Depth
(feet)
|
PAA-1
|
|
201
|
|
610
|
|
541
|
PAA-2
|
|
63
|
|
370
|
|
305
|
PAA-3
|
|
345
|
|
620
|
|
396
|
PAA-4
|
|
214
|
|
640
|
|
436
|
PAA-5
|
|
40
|
|
520
|
|
370
|
SW Garcia
|
|
6
|
|
620
|
|
568
|
Dome
|
|
56
|
|
500
|
|
355
|
We have not established proven or probable
reserves, as defined by the SEC under Industry Guide 7, through the completion of a “final” or “bankable”
feasibility study for the Palangana Mine. Furthermore, we have no plans to establish proven or probable reserves for any of our
uranium projects for which we plan on utilizing ISR mining, such as the Palangana Mine. Since we commenced extracting mineralized
materials at the Palangana Mine without having established proven and probable reserves, any mineralized materials established
or extracted from the Palangana Mine should not in any way be associated with having established or produced from proven or probable
reserves.
Burke Hollow Project, Bee County, Texas
Property Description and Location
The Burke Hollow Project is comprised of two
leases covering 19,335 acres located in Texas near the northeast end of the extensive South Texas Uranium trend. These leases allow
for the mining of uranium by ISR methods while utilizing the land surface (with variable conditions) as needed, for mining wells
and aboveground facilities for fluid processing and uranium extraction during the mining and groundwater restoration phases of
the project. The Burke Hollow Project area is about 18 miles southeast of the town of Beeville, is located on the western side
of US 77, and is located northeast of US 181 which links with US 59 in Beeville. The nominal center of the Burke Hollow Project
lease is located at latitude 28.2638 and longitude -97.5176. Site drilling roads are entirely composed of caliche and gravel, allowing
for access for trucks and cars in most weather conditions. Four-wheel drive vehicles may be needed during high rainfall periods.
Virtually all mining in Texas is on private
lands with leases negotiated between mining companies and each individual land/mineral owner. The Burke Hollow Project consists
of two leases, one lease dated February 21, 2012, comprised of 17,510 acres with Thomson-Barrow Corporation as mineral owner and
Burke Hollow Corporation as surface owner, and the other dated December 15, 2012, comprised of 1,825 acres with a separate owner.
The leases are paid-up leases for a primary term of five years and allow for an extension term of an additional five years and
so long thereafter as uranium or other leased substances are being produced. The leases have various stipulated fees for land surface
alterations, such as per well or exploration hole fees (damages). The primary lease stipulation is the royalty payments as a percentage
of production. Because the leases are negotiated with a private land and mineral owners and none of the property is located on
government land, some of the details of the lease information and terms are considered confidential.
There are no known environmental liabilities
associated with the Burke Hollow property. The Company currently has an exploration permit for their work in Bee County from the
Texas Railroad Commission (the “TRC”).
Prior to any mining activity at the Burke Hollow
Project, we would be required to obtain a Radioactive Materials License, a large area Underground Injection Control (“UIC”)
Mine permit, and a PAA permit for each wellfield developed for mining within the Mine Permit area. In addition, a waste disposal
well would, if needed, require a separate UIC Permit. These permits would be issued by Texas regulatory agencies.
The TRC requires exploration companies to obtain
exploration permits before conducting drilling in any area. The permits include standards for the abandonment and remediation of
test bore holes. The standards include that ASTM type 1 neat-cement be used in the plugging of test bore holes, the filling and
abandonment of mud pits, and the marking of bore holes at the surface. Remediation requirements are sometimes specific to the area
of exploration and may include segregation, storage, and re-covering with topsoil, re-grading, and re-vegetation. Potential future
environmental liability as a result of the mining must be addressed by the permit holder jointly with the permit granting agency.
Most permits now have bonding requirements for ensuring that the restoration of groundwater, the land surface, and any ancillary
facility structures or equipment is properly completed. If the Burke Hollow Project reaches economic viability in the future, we
would need to complete a number of required environmental baseline studies such as cultural resources (including archaeology),
socioeconomic impact, and soils mapping. Flora and fauna studies will need to be conducted as will background radiation surveys.
Accessibility, Climate, Local Resources,
Infrastructure and Physiography
The Burke Hollow Project is situated in the
interior portion of the Gulf Coastal Plain physiographic province. The area is characterized by rolling topography with parallel
to sub-parallel ridges and valleys. There is about 47 feet of relief at the site with ground surface elevations ranging from a
low of 92 feet to a high of 139 feet above mean sea level. The leased property for the Burke Hollow Project is used mostly for
petroleum production, ranching, and game management. Access by vehicular traffic is provided from Hwy. 77 to the property.
The property is in a rural setting in southeastern
Bee County. The nearest population centers are Skidmore, approximately 11 miles west, Refugio about 15 miles east, and Beeville
approximately 18 miles northwest. While Skidmore and Refugio are relatively small towns, they provide basic needs for food and
lodging and some supplies. Beeville is a much larger city and provides a well-developed infrastructure that has resulted from being
a regional center to support oil and gas exploration and production. The Burke Hollow Project site area has good accessibility
for light to heavy equipment. There is an excellent network of county, state and federal highways that serve the region and the
moderate topography with dominantly sandy, well-drained soils provide good construction conditions for building gravel site roads
necessary for site access. Water supply in the project area is from private water wells, mostly tapping sands of the upper Goliad
Formation. Water needs for potential future pre-extraction activities would be from the same sources.
Bee County has a climate characterized by long,
hot summers and cool to warm winters. The moderate temperatures and precipitation result in excellent conditions for developing
an ISR mine. The average annual precipitation is about 32 inches with the months from November to March normally the driest and
May through October typically having more precipitation due partly to more intense tropical storms. From June through September
the normal high temperatures are routinely above 90 degrees Fahrenheit, while the months from December through February are the
coolest with average low temperatures below 50 degrees Fahrenheit. Periods of freezing temperatures are generally quite brief and
infrequent. Tropical weather from the Gulf of Mexico can occur during the hurricane season and may affect the site area with large
rain storms. The infrequent freezing weather and abnormally large rainfalls are the primary conditions that could cause temporary
shutdowns at an operating ISR mine. Otherwise there is not a regular non-operating season.
The necessary rights for constructing the needed
surface processing facilities are in-place on selected lease agreements. Sufficient electric power is believed to be available
in the area, however new lines may be needed to bring additional service to a plant site and well fields. Within a 20 mile radius
of the planned Burke Hollow facility there is sufficient population to supply the necessary number of suitable mining personnel.
History
The earliest historic uranium exploration at
the Burke Hollow Project was the drilling of five exploration holes completed on the Welder lease by Nufuels (Mobil) in 1982. Oxidation/reduction
interfaces were intercepted in two of the holes and oxidized tails were logged in three of the holes. In 1993, Total Minerals conducted
a short reconnaissance exploration drilling program and completed a total of 12 exploration holes of which 11 intersected anomalous
gamma ray log signatures indicative of uranium mineralization. The resulting 12 log files include good quality electric logs, with
each log file containing a detailed lithological report based on drill hole cuttings prepared by Total Mineral’s field geologists
who were supervising and monitoring the drilling activity contemporaneously.
All of the boreholes were drilled using contracted
truck-mounted drilling rigs. The holes were drilled by conventional rotary drilling methods using drilling mud fluids. All known
uranium exploration at the Burke Hollow Project has been conducted with vertical drill holes. Drill cuttings were typically collected
from the drilling fluid returns circulating up the annulus of the borehole. These samples were generally taken at five foot intervals
and laid out on the ground in consecutive rows of twenty by the drill crew for review and description by a geologist. Upon completion,
the holes were logged for gamma ray, self-potential, and resistance by contract logging companies. Century Geophysical was the
logging company utilized by both Nufuels and Total Minerals, and Century Geophysical provided primarily digital data. A tool recording
down-hole deviation was also utilized for each of the holes drilled.
This description of previous exploration work
undertaken at the Burke Hollow Project is based primarily on gamma ray and electric logs, several small maps and cross-sections
constructed by Total Minerals.
The historic data package obtained by us for
a portion of the current Burke Hollow Project area provided the above described information. Based on the very limited number of
drill holes, no meaningful resource or reserve determination was made by either Nufuels or Total Minerals. The actual drilling
and geophysical logging results however, have been determined to be properly conducted to current industry standards and usable
by our exploration staff in their geologic investigation.
The only historic work relating to uranium
exploration or mining is the early exploration work done by Nufuels in 1982, and by Total Minerals in 1993 as described above.
There has been no known ownership of the Burke Hollow property by a mining company and prior ownership or changes in ownership
for the property are not known by the Company or relevant to the project.
Geological Setting
Regional Geology
The Burke Hollow Project area is situated within
the Texas Gulf Coastal Plain physiographic province that is geologically characterized by sedimentary deposits that typically dip
and thicken toward the Gulf of Mexico from the northwest source areas. Additionally, the regional dip generally increases with
distance in the down dip direction as the overall thickness of sediments increase. The sedimentary units are dominantly continental
clastic deposits with some underlying near shore and shallow marine facies. The uranium-bearing units of South Texas are virtually
all sands and sandstones in Tertiary formations ranging in age from Eocene (oldest) to Pliocene (youngest). At Burke Hollow, deposits
are hosted by the Goliad Formation of Lower Pliocene to Miocene age.
The Project area, located about 18 miles southeast
of Beeville, which is the county seat of Bee County, is situated in the major northeast-southwest trending Goliad Formation of
fluvial origin. The Geologic Atlas of Texas, Beeville-Bay City Sheet (Texas Bureau of Economic Geology, Revised 1987) indicates
that a thin layer of Pleistocene-aged Lissie Formation overlies the Miocene Goliad Formation. The Lissie Formation unconformably
overlies the Goliad Formation, and consists of unconsolidated deposits of sand, silt, and clay, with minor amounts of gravel. The
thickness of the Lissie Formation in the Project area ranges from approximately 35 feet on the western edge to a maximum of 70
feet in thickness on the down-dip eastern edge of the Project area. The map below shows the surface geology at the Burke Hollow
Project.
The Goliad Formation was originally classified
as Pliocene in age, but the formation has been reclassified as early Pliocene to middle Miocene after research revealed the presence
of indigenous Miocene-aged mega-fossils occurring in upper Goliad sands. The lower Goliad fluvial sands are correlative with down-dip
strata containing benthic foraminifera, indicative of a Miocene age (Baskin and Hulbert, 2008, GCAGS Transactions, v. 58, p. 93-101).
The Geology of Texas map published by The Bureau of Economic Geology in 1992 classifies the Goliad as Miocene.
Relevant earlier literature described the Goliad
Formation as Pliocene-aged, including the Geologic Atlas of Texas, Beeville-Bay City Sheet (Bureau of Econ. Geol, revised 1987),
and The Geology of Texas, Volume I (No. 3232, 1932, Texas Bureau of Econ. Geology).
Local and Property Geology
The uranium-bearing sands of the Goliad Formation
at the Project site occur beneath a thin layer of Lissie Formation sand, silt, clay, and gravel, which covers most of the Project
area with a total thickness of approximately 35 feet on the western side to approximately 70 feet thickness on the downdip eastern
side of the Project. The Goliad Formation underlies the Lissie, and is present at depths ranging from 35 feet to approximately
1,050 feet in depth on the eastern side of the property. The Company has determined that uranium mineralization discovered to date
occurs within at least four individual sand units in the Upper Goliad at depths generally ranging from 160 feet to 500 feet, and
within two deeper sand units in the Lower Goliad located between 900 feet to 950 feet in depth.
The Goliad sand is one of the principal water-bearing
formations in Bee County capable of yielding moderate to large quantities of fresh to slightly saline water in the south half of
Bee County, which includes the Project area.
The hydrogeological characteristics of the
water-bearing Goliad sands at the Burke Hollow Project have not yet been determined, but required hydrogeological tests will determine
the hydraulic character of the sands and the confining beds separating the individual sand zones. Information regarding the water-bearing
characteristics of the Goliad sands from aquifer tests of a city of Beeville and a City of Refugio supply well (O.C. Dale, et al.,
1957) reported an average coefficient of permeability of about 100 gallons per day per square foot. This would be the equivalent
coefficient of transmissivity of approximately 2,500 gallons per day per foot for a 25-foot thick sand. It is likely that the uranium
bearing mineralized sand zones at the Burke Hollow Project will have similar hydraulic characteristics.
There are at least two northeast-southwest
trending faults at the Burke Hollow property that are likely related to the formation of the uranium mineralization. These faults
are shown at a depth of approximately 3,500 feet below ground surface based on petroleum industry maps and extend upward into the
Goliad Formation. The northwesterly fault is a typical Gulf Coast normal fault, downthrown toward the coast, while the southeastern
fault is an antithetic fault downthrown to the northwest, forming a graben structure. The presence of these faults is likely related
to the increased mineralization at the site. The faulting has probably served as a conduit for reducing waters/gases migrating
from deeper horizons as well as altering the groundwater flow system in the uranium-bearing sands.
Mineralization
The Burke Hollow Project uranium-bearing units
occur as multiple roll-front type deposits in vertically stacked sands and sandstones. Groundwater flowing from northwest to southeast
in the Goliad sands likely contained low concentrations of dissolved uranium resulting from oxidizing conditions and the relatively
short distance from the recharge area. The geochemical conditions in the sands near the Project changed from oxidizing to reducing
due to an influx of reductants. Hydrogen sulfide and/or methane dissolved in groundwater are likely sources for creating a reduction-oxidation
boundary in the area with consequent precipitation and concentration of uranium mineralization.
Specific identification of the uranium minerals
has not yet been determined at the Burke Hollow Project. The very fine uranium minerals found coating quartz grains and within
the interstices in most south Texas sand and sandstone roll-front deposits has generally been found to be dominantly uraninite
and, to a lesser extent, coffinite. No uraninite has been identified on the Burke Hollow Project and the presence of uraninite
on other properties does not mean that such mineralization will be found at the Burke Hollow Project. Detailed petrographic examination
of disseminated uranium mineralization within sands/sandstones is generally not suitable for identification of the specific uranium
minerals. Laboratory equipment such as x-ray diffraction units may be used to identify the minerals, however the specific mineral
species typically found in reduced sands are generally similar in south Texas ISR projects and leaching characteristics are also
similar. Based on the experience of the ISR mines throughout south Texas, the use of gamma-ray logging with a calibrated logging
probe has become the standard method to determine the thickness and estimated grade of uranium bearing minerals.
At the Project site the Goliad Formation is
located near the surface underlying the Lissie Formation, and extends to depths exceeding 1,050 feet on the eastern side of the
property. Uranium mineralization discovered to date occurs in multiple sand/sandstone units that are all below the saturated zone.
These are the Goliad Lower A sand, the Goliad Upper B sand, the Goliad Lower B sand and the Goliad D sand. The sands are fluvial-deltaic
in origin, and thicken and thin across the project site. Each zone is hydrologically separated by clay or silty clay beds. The
uranium deposits discovered to date range from several feet to over 30 feet in thickness. The C-shaped configuration is typically
convex in a downdip direction with tails trailing on the updip side.
Update to July 31, 2017
During Fiscal 2017
During Fiscal 2017, 103 exploration holes totaling
44,480 feet were drilled at the Burke Hollow Project to depths ranging from a minimum of 420 feet to a maximum 480 feet, with an
average depth of 432 feet. As of July 31, 2017, a total of 678 exploration holes totaling 316,000 feet have been drilled to depths
ranging from a minimum of 160 feet to a maximum of 1,100 feet, with an average depth of 466 feet.
As at July 31, 2017, a total of 30 regional
baseline monitor wells have been installed in order to establish baseline water quality in both the Goliad Lower A and Goliad Lower
B sands. With respect to permitting, a preoperational groundwater characterization sampling program from the drilling of the regional
baseline monitor wells was completed in February 2014. A drainage study of the proposed license boundary was completed in
January 2013 and encompasses the first three production areas. Archeology, socioeconomic and ecology studies for the Project
were all completed by December 2013. Two Class I disposal well applications were submitted and final permits were issued by the
TCEQ in July 2015. The final Mine Area Permit was issued by the TCEQ in December 2016 and an Aquifer Exemption was approved by
the EPA in March 2017. A Radioactive Material License application remains under technical review by the TCEQ.
An earlier Technical Report dated February
27, 2013 for Burke Hollow was prepared in accordance with the provisions of National Instrument 43-101, Standards of Disclosure
for Mineral Projects of the Canadian Securities Administrators (“NI 43-101”) by Thomas A. Carothers, P.G., a consulting
geologist, and filed by our Company on the public disclosure website of the Canadian Securities Administrators (the “CSA”)
at
www.sedar.com
. An Updated Technical Report dated October 6, 2014 was prepared in accordance with the provisions of NI
43-101 by Andrew W. Kurrus III, P. G., with Clyde L. Yancey, P.G. serving as the Qualified Person. As required by NI 43-101, the
Technical Report contains certain disclosure relating to inferred mineral resource estimates and an exploration target for the
Company’s Burke Hollow Project. Such mineral resources have been estimated in accordance with the definition standards on
mineral resources of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in NI 43-101. Inferred mineral resources
and exploration targets, while recognized and required by Canadian regulations, are not defined terms under the SEC’s Industry
Guide 7, and are normally not permitted to be used in reports and registration statements filed with the SEC. Accordingly, we
have not reported them in this Annual Report or otherwise in the United States. Investors are cautioned not to assume that any
part or all of the mineral resources in these categories will ever be converted into mineral reserves. These terms have a great
amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. In particular,
it should be noted that mineral resources, which are not mineral reserves, do not have demonstrated economic viability. It cannot
be assumed that all or any part of measured mineral resources, indicated mineral resources or inferred mineral resources discussed
in the Technical Report will ever be upgraded to a higher category. In accordance with Canadian rules, estimates of inferred mineral
resources cannot form the basis of feasibility or other economic studies. Investors are cautioned not to assume that any part
of the reported inferred mineral resources referred to in the Technical Report are economically or legally mineable. Exploration
targets have a greater amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility.
In particular, it should be noted that exploration targets do not have demonstrated economic viability. It cannot be assumed that
all or any part of the exploration target discussed in the Technical Report will ever be upgraded to a higher category, or if
additional exploration will result in discovery of an economic mineral resource on the property.
We have not established proven or probable
reserves, as defined by the SEC under Industry Guide 7, through the completion of a “final” or “bankable”
feasibility study for the Burke Hollow Project. Furthermore, we have no plans to establish proven or probable reserves for any
of our uranium projects for which we plan on utilizing ISR mining.
Goliad Project, Goliad County, Texas
Property Description and Location
The Goliad Project is comprised of 9 leases
covering 995 acres located in Texas near the northeast end of the extensive South Texas Uranium Trend. The Goliad Project consists
of multiple leases that would allow the mining of uranium by ISR methods while utilizing the land surface (with variable conditions)
as needed, for mining wells and aboveground facilities for fluid processing and ore capture during the mining and groundwater restoration
phases of the Project. The Goliad Project area is about 14 miles north of the town of Goliad and is located on the east side of
US route 77A/183, a primary highway that intersects with US 59 in Goliad and IH-10 to the north. The approximate center of the
Project area is 28° 52’ 7” N latitude, 97° 20’ 36” W longitude. Site drilling roads are mostly
gravel based and allow reasonable weather access for trucks and cars. Four-wheel drive vehicles may be needed during high rainfall
periods. A location map for the Goliad Project is shown below:
Virtually all mining in Texas is on private
lands with leases negotiated with each individual landowner/mineral owner. Moore Energy Corporation (“Moore Energy”)
obtained leases for exploration work in the Project area in the early 1980s and completed an extensive drilling program resulting
in a historic uranium mineral estimate in 1985. We obtained mining leases from individuals and by assignment from a private entity
in 2006.
At July 31, 2017, we held 9 leases ranging
in size from 42 acres to 253 acres, for a total of 995 acres. The majority of the leases have starting dates in 2005 or 2006 with
an initial term of five years and a five-year renewal option. The various lease fees and royalty conditions are negotiated with
individual lessors and terms may vary from lease to lease. We have amended the majority of the leases to extend the time period
for an additional five years past the five-year renewal option period.
No historic uranium mining is known to have
occurred on any of the Goliad Project lease properties and only state permitted uranium exploration drilling has taken place. There
are believed to be no existing environmental liabilities at the property leases. Prior to any mining activity at the Goliad Project,
we are required to obtain a Radioactive Materials License, a large area Underground Injection Control Mine Permit and a PAA Permit
for each wellfield developed for mining within the Mine Permit area. In addition, a waste disposal well will, if needed, require
a separate UIC Permit. These permits will be issued by Texas regulatory agencies. The current drilling and abandonment of uranium
exploration holes on any of the leases is permitted by the Texas Railroad Commission. Potential future environmental liability
as a result of the mining must be addressed by the permit holder jointly with the permit granting agency. Most permits now have
bonding requirements for ensuring that the restoration of groundwater, the land surface and any ancillary facility structures or
equipment is properly completed.
Accessibility, Climate, Local Resources,
Infrastructure and Physiography
The Goliad Project area is situated in the
interior portion of the Gulf Coastal Plain physiographic province. The area is characterized by rolling topography with parallel
to sub-parallel ridges and valleys. There is about 130 feet of relief at the site with ground surface elevations ranging from a
low of 150 feet to a high of 280 feet above mean sea level. The leased property for the Goliad Project is used mostly for livestock
grazing pasture and woodland. The overall property area is shown as having a Post Oak Woods, Forest, and Grassland Mosaic vegetation/cover
type.
The site property is accessed from combined
route US 77A/183 that trends north-south to the west of the property. Highway FM 1961 intersects with 77A-183 at the crossroad
town of Weser. Highway FM 1961 to the east of the intersection trends along the south side of the property. Access from either
of these roads into the property is via vehicular traffic on private gravel roads.
The property is in a rural setting at the north
end of Goliad County. The nearest population centers are Goliad (14 miles south), Cuero (18 miles north) and Victoria (about 30
miles east). While Goliad and Cuero are relatively small towns, they provide basic needs for food and lodging and some supplies.
Victoria is a much larger city and provides a well-developed infrastructure that has resulted from being a regional center to support
oil and gas exploration and production. The Goliad Project site area generally has very good accessibility for light to heavy equipment.
There is an excellent network of county, state and federal highways that serve the region and the moderate topography, with dominantly
sandy, well-drained soils, provides good construction conditions for building gravel site roads necessary for site access.
The climate in Goliad County is mild with hot
summers and cool to warm winters. The moderate temperatures and precipitation result in excellent conditions for developing an
ISR mine. Periods of freezing temperatures are generally very brief and infrequent. Tropical weather from the Gulf of Mexico can
occur during the hurricane season and may affect the site area with large rain storms. The periodic freezing weather and abnormally
large rainfalls are the primary conditions that can cause temporary shutdowns. Otherwise there is not a regular non-operating season.
The necessary rights for constructing needed
surface processing facilities are in-place on selected lease agreements. Sufficient electric power is believed to be available
in the area; however, new lines may be needed to bring additional service to the plant site and wellfields. We believe that within
a 30 mile radius of the planned Goliad Project facility there is located sufficient population to supply the necessary number of
suitable mining personnel.
History
Ownership History of the Property
The Goliad Project site is located in the north-central
portion of Goliad County to the east and north of the intersection of U.S. Routes 77A/183 and Farm to Market Route 1961. There
has been a long history of oil and gas exploration and production in the area and oil and gas is still a primary part of the economy
for the relatively lightly populated county. In the period from October 1979 to June 1980, as a part of a large oil, gas and other
minerals lease holding (approximately 55,000 acres), Coastal Uranium utilized the opportunity to drill several widely spaced exploration
holes in the region. There were reported to be eight holes drilled at or near the Goliad Project area.
In the early 1980s Moore Energy obtained access
to review some of the Coastal States wide-spaced drilling exploration data. The review resulted in Moore Energy obtaining several
leases from Coastal Uranium, including several of the current Goliad Project leases. During the period from March 1983 through
August 1984, Moore Energy conducted an exploration program in the Goliad Project area. No further drilling was done at the Goliad
Project area until we obtained the leases through assignment from a private entity and from individual mineral owners.
Exploration and Pre-Extraction Work Undertaken
This description of previous exploration and
pre-extraction work undertaken at the Goliad Project is based primarily on electric logs and maps produced by Moore Energy during
the period 1983 to 1984. Moore Energy completed 479 borings on various leases. Eight widespread exploration borings were completed
by Coastal Uranium in 1980. We obtained leases through an assignment from a private entity in 2006 and from individual mineral
owners thereafter, and began confirmation drilling in May 2006.
In December 2010, the TCEQ approved the mine
permit and the production area authorization for PAA-1 and granted the request for the designation of an Exempt Aquifer for the
Company. In December 2011, a Radioactive Material License was issued by the TCEQ. All other state-level permits and authorizations
have been received including a Class III Injection Well Permit (Mine Permit), two Class I Injection Well Permits (disposal well
permits), a PAA for its first production area, a Permit by Rule (air permit exemption) and an Aquifer Exemption for which our Company
received concurrence from the regional EPA.
A Technical Report dated March 7, 2008 for
Goliad, prepared in accordance with the provisions of NI 43-101, was completed by Thomas A. Carothers, P.G., a consulting geologist,
and filed by the Company on the public disclosure website of the Canadian Securities Administrators at
www.sedar.com
. As
required by NI 43-101, the Technical Report contains certain disclosure relating to measured, indicated and inferred mineral resource
estimates for our Company’s Goliad Project. Such mineral resources have been estimated in accordance with the definition
standards on mineral resources of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in NI 43-101. Measured
mineral resources, indicated mineral resources and inferred mineral resources, while recognized and required by Canadian regulations,
are not defined terms under the SEC’s Industry Guide 7, and are normally not permitted to be used in reports and registration
statements filed with the SEC. Accordingly, we have not reported them in this Annual Report or otherwise in the United States.
Investors are cautioned not to assume that any part or all of the mineral resources in these categories will ever be converted
into mineral reserves. These terms have a great amount of uncertainty as to their existence, and great uncertainty as to their
economic and legal feasibility. In particular, it should be noted that mineral resources, which are not mineral reserves, do not
have demonstrated economic viability. It cannot be assumed that all or any part of measured mineral resources, indicated mineral
resources or inferred mineral resources discussed in the Technical Report will ever be upgraded to a higher category. In accordance
with Canadian rules, estimates of inferred mineral resources cannot form the basis of feasibility or other economic studies. Investors
are cautioned not to assume that any part of the reported measured mineral resources, indicated mineral resources or inferred
mineral resources referred to in the Technical Report are economically or legally mineable.
Geological Setting
Regional Geology
The Goliad Project area is situated in the
Texas Gulf Coastal Plain physiographic province that is geologically characterized by sedimentary deposits that typically dip and
thicken toward the Gulf of Mexico from the northwest source areas. Additionally, the regional dip generally increases with distance
in the down dip direction as the overall thickness of sediments increase. The sedimentary units are dominantly continental clastic
deposits with some near shore and shallow marine facies. The uranium-bearing units are virtually all sands and sandstones in Tertiary
formations ranging in age from Eocene (oldest) to Upper Miocene (youngest).
Local and Property Geology
The surface of the property is all within the
outcrop area of the Goliad Formation (Figure 4-3). The mineralized units are sands and sandstone within the Goliad Formation and
are designated by us as the A through D sands from younger (upper) to older (lower), respectively. The sand units are generally
fine to medium grained sands with silt and varying amounts of secondary calcite. The sand units vary in color depending upon the
degree of oxidation-reduction and could be from light brown-tan to grays. The sands units are generally separated from each other
by silty clay or clayey silts that serve as confining units between the sand units.
The Goliad Formation at the Project site occurs
from the surface to a depth of about 500 feet. Depending upon the land surface elevation, groundwater occurs in the sands of the
formation below depths of about 30 to 60 feet. The four sand/sandstone zones (A-D) designated as containing uranium mineralization
at the site are all considered to be a part of the Gulf Coast Aquifer on a regional basis. At the project area, however, each zone
is a hydrogeologic unit with similar but variable characteristics. The A Zone is the uppermost unit and based on resistance logs,
groundwater in this unit may be unconfined over portions of the site. The three deeper zones are confined units with confining
clays and silts above and below the water-bearing unit.
Groundwater from sands of the Goliad Formation
is used for water supplies over much of the northern portion of Goliad County. Water quality in the Goliad Formation is variable
and wells typically can yield small to moderate amounts of water. Data indicates an approximate average hydraulic conductivity
of the water-bearing zones of the Goliad Formation in Goliad County is 100 gallons per day per square foot. Based on this value,
a 20 foot sand unit would have an approximate transmissivity of 2,000 gallons per day. With sufficient available drawdown properly
completed ISR wells could have average yields in the range of 25 to 50 gallons per minute.
The site area structures include two faults
that intersect and offset the mineralized units. These faults are normal, with one downthrown toward the coast and one downthrown
toward the northwest. The fault throws range from about 40 to 80 feet.
Project Type
The Goliad uranium project is characteristic
of other known Goliad sand/sandstone deposits in south Texas. The mineralization occurs within fluvial sands and silts as roll
front deposits that are typically a “C” or cutoff “C” shape. The roll fronts are generally associated with
an extended oxidation-reduction boundary or front.
The other Goliad projects in the region include
the Palangana Mine, the Kingsville Dome mine southeast of Kingsville, the Rosita mine west of Alice, the Mestena mine in Brooks
County and the former Mt. Lucas mine at Lake Corpus Christi. These mines are all located south of the Goliad Project from about
60 to 160 miles. The average tons and uranium grade information for these mines is not known, but all these ISR projects mining
Goliad Formation sand units have been very successful with the following characteristics in common: excellent leaching characteristics
rate and favorable hydraulic conductivity of host sands.
At the Goliad Project there are four stacked
mineralized sand horizons (A-D) that are separated vertically by zones of finer sand, silt and clay. Deposition and concentration
of uranium in the Goliad Formation likely resulted due to a combination of leaching of uranium from volcanic tuff or ash deposits
within the Goliad Formation or erosion of uranium-bearing materials from older Oakville deposits. The leaching process occurred
near the outcrop area where recharge of oxidizing groundwater increased the solubility of uranium minerals in the interstices and
coating sand grains in the sediments. Subsequent downgradient migration of the soluble uranium within the oxygenated groundwater
continued until the geochemical conditions became reducing and uranium minerals were deposited in roll front or tabular bodies
due to varying stratigraphic or structural conditions.
There are at least two northeast-southwest
trending faults at the Goliad property that are likely related to the formation of the Goliad Project mineralization. The northwesterly
fault is a typical Gulf Coast normal fault, downthrown toward the coast, while the southeastern fault is downthrown to the northwest,
forming a graben structure. Both faults are normal faults. Throw on the northwest fault is about 75 feet and the southeast fault
has about 50 feet of throw. The presence of these faults is likely related to the increased mineralization at the site. The faulting
has probably served as a conduit for reducing waters/gases to migrate from deeper horizons as well as altering the groundwater
flow system in the uranium-bearing sands.
Mineralization
The Goliad Project uranium-bearing units occur
as multiple roll front type structures in vertically stacked sands and sandstones. Groundwater flowing from northwest to southeast
in the Goliad sands likely contained low concentrations of dissolved uranium resulting from oxidizing conditions and the relatively
short distance from the recharge area. The geochemical conditions in the sands near our property changed from oxidizing to reducing
due to an influx of reductants. Hydrogen sulfide and/or methane dissolved in groundwater are likely sources of creating a reduction-oxidation
boundary in the area with consequent precipitation and concentration of uranium mineralization.
Specific identification of the uranium minerals
has not been done at the Goliad Project. The very fine uranium minerals found coating quartz grains and within the interstices
in most south Texas sand and sandstone roll-front deposits has generally been found to be dominantly uraninite. No uraninite has
been identified on the Goliad Project and the presence of uraninite on other properties does not mean that such mineralization
will be found on the Goliad Project. Detailed petrographic examination of disseminated uranium mineralization within sands/sandstones
is generally not suitable for identification of the specific uranium minerals. Laboratory equipment such as x-ray diffraction units
may be used to identify the minerals, however the specific mineral species typically found in reduced sands are generally similar
in south Texas ISR projects and leaching characteristics are also similar. Based on the experience of the ISR mines throughout
south Texas, the use of gamma-ray logging with a calibrated logging probe has become the standard method to determine the thickness
and estimated grade of uranium bearing minerals.
At the project site, the Goliad Formation is
exposed at the surface and extends to depths exceeding 500 feet. Uranium mineralization occurs in four sand/sandstone units that
are all below the saturated zone. The zones are designated A to D from the top to the bottom of the sequence. The sands are fluvial-deltaic
in origin, and thicken and thin across the Project site. Each zone is hydrologically separated by 10 to 50 feet or more of clay
or silty clay. The uranium deposits are tabular in nature and can range from about one foot to over 45 feet in thickness. The “C”
shaped configuration is typically convex in a downdip direction with leading edge tails on the upper end. Most of the exploration
and delineation holes with elevated gamma ray log anomalies are situated within a southwest-northeast trending graben and most
of the gamma ray anomaly holes are situated along the northernmost of the two faults comprising the graben. This northernmost fault
is downthrown to the southeast, which is typical for the majority of faults along the Texas coastal area.
Leach Amenability
Mineral processing or metallurgical testing
was not reported as being conducted on any of the samples drilled or recovered during the Moore Energy exploration in the mid-1980s.
We submitted selected core samples from our core hole # 30892-111C to Energy Laboratories, Inc. in Casper, Wyoming, in January
2007. These samples from the Goliad Project were sent to the laboratory for leach amenability studies intended to demonstrate that
uranium mineralization at the property was capable of being leached using conventional in situ leach chemistry. The tests do not
approximate other in-situ variables (permeability, porosity, and pressure) but provide an indication of a sample’s reaction
rate and the potential chemical recovery.
Split sections of core were placed in laboratory
containers and a lixiviate solution with 2.0 grams per liter HCO
3
(NaHCO
3
) and either 0.50 or 0.25 g/L of
H
2
O
2
(hydrogen peroxide) was added to each test container. The containers were then rotated at 30 rpm for
16 hours. The lixiviate was then extracted from each test container and analyzed for uranium, molybdenum, sodium, sulfate, alkalinity
(bicarbonate, carbonate), pH and conductance. A clean charge of lixiviate was added and the container rotated another 16 hours.
Each sample rotation and lixiviate charge cycle was representative of five pore volumes with chemical analyses after each cycle.
The cycle was repeated for a total of six cycles or the equivalent of 30 pore volumes.
The four core samples subjected to the leach
amenability tests were determined to contain from 0.04% to 0.08% cU
3
O
8
before testing
.
Leach tests
conducted on the core samples from the A Zone indicate leach efficiencies of 60% to 80% U
3
O
8
extraction while
the tails analyses indicate efficiencies of 87 to 89%. The differences between the two calculations involve the loss of solid clay
based materials during multiple filtrations. Based on post leach solids analysis, the core intervals were leachable to a very favorable
86 to 89%. After tests the tails were reanalyzed for uranium concentration to determine the recovery, which ranged on the four
samples using two methods from 60% to 89%.
Laboratory amenability testing of the cores
samples indicated the uranium (dissolved elemental U) recoveries ranged from 86.4% to 88.9% in the four tests. These results show
that the mineralized intervals at the Goliad Project are very amenable to ISR mining even when exposed to only one-half of the
oxidant concentration normally used in the Leach Amenability test. Based on the Company’s experience with ISR mining of Catahoula
and Oakville uranium deposits, as well as discussions with other Goliad deposit mining personnel, the geologically younger deposits
in Texas (Goliad formation) have been the most amenable to in situ leaching. The uranium recovery is generally more complete (%
recovery) and occurs in a shorter time period. Both of these factors are important for ISR pre-extraction economics.
Based on the amenability test results, the
size of the mineralization at the Goliad Project, the geologic setting and the current and projected future demand and price of
uranium, the most feasible and cost effective mining method for the Goliad property uranium is by ISR. This method is most suitable
for the size and grade of the deposits in sands that are below the water table and situated at depths that would be prohibitive
for open pit or underground mining.
The amenability testing described above was
conducted on core recovered from four depth intervals from one boring. While this was a limited sampling for this property, the
samples are believed to be generally representative of the characteristics of the mineralized intervals and the determined recovery
ranges for these intervals is considered to be reliable. Two of the four samples tested contained approximately 0.08% cU
3
O
8
and two contained lower grades of uranium (~0.04% cU
3
O
8
). Energy Laboratories, Inc. in Casper, Wyoming, conducted
the laboratory testing for this project. The laboratory has been in business since 1952, is fully certified, but not ISO certified.
Certifications include the EPA, NRC and the following U.S. states: Arizona, California, Colorado, Florida, Indiana, Nevada, Oregon,
South Dakota, Texas, Utah and Washington.
Update to July 31, 2017
|
·
|
In May 2010, the Waste Disposal Well Permit was issued by the TCEQ;
|
|
·
|
In April 2011, the Mine Area Permit was issued by the TCEQ;
|
|
·
|
In April 2011, the PAA-1 Permit was issued by the TCEQ;
|
|
·
|
In December 2011, the Radioactive Materials License was issued by the TCEQ;
|
|
·
|
In December 2012, EPA concurrence was received for an Aquifer Exemption permit (“AE”)
which was the last and final permit needed to begin uranium extraction;
|
|
·
|
In June 2014, the EPA reaffirmed its earlier decision to uphold the granting of our Company’s
existing AE, with the exception of a northwestern portion containing less than 10% of the uranium resource which was withdrawn,
but not denied, from the AE area until additional information is provided in the normal course of mine development;
|
|
·
|
During Fiscal 2014, 34 delineation holes totaling 9,819 feet were drilled at the Goliad Project
to depths ranging from a minimum of 160 feet to a maximum of 480 feet, with an average depth of 289 feet. During Fiscal 2015, no
further drilling activities were conducted. At July 31, 2015, approximately 992 confirmation-delineation holes totaling 348,434
feet have been drilled by our Company to confirm and expand the mineralization base at the Goliad Project;
|
|
·
|
Construction of a three-phase electrical power system for the entire project and a large caliche
site pad for the main plant complex and disposal well have been completed; and
|
|
·
|
Processing equipment for the construction of the satellite facility and wellfield including long-lead
items such as ion exchange vessels have been received.
|
On or about March 9, 2011, the TCEQ granted
our Company’s applications for a Class III Injection Well Permit, Production Area Authorization and Aquifer Exemption for
our Goliad Project. On or about December 4, 2012, the U.S. Environmental Protection Agency concurred with the TCEQ issuance
of the Aquifer Exemption permit. With the receipt of this concurrence, the final authorization required for uranium extraction,
the Goliad Project achieved fully-permitted status. On or about May 24, 2011, a group of petitioners, inclusive of Goliad
County, appealed the TCEQ action to the 250
th
District Court in Travis County, Texas. A motion filed by our
Company to intervene in this matter was granted. The petitioners’ appeal lay dormant until on or about June 14, 2013, when
the petitioners filed their initial brief in support of their position. On or about January 18, 2013, a different group
of petitioners, exclusive of Goliad County, filed a petition for review with the Court of Appeals for the Fifth Circuit
in the United States (the “Fifth Circuit”) to appeal the EPA’s decision. On or about March 5, 2013, a motion
filed by our Company to intervene in this matter was granted. The parties attempted to resolve both appeals and, to
facilitate discussions and to avoid further legal costs, the parties jointly agreed, through mediation which was initially conducted
through the Fifth Circuit on or about August 8, 2013, to abate the proceedings in the State District Court. On or about August
21, 2013, the State District Court agreed to abate the proceedings. The EPA subsequently filed a motion to remand without
vacatur with the Fifth Circuit wherein the EPA’s stated purpose was to elicit additional public input and further explain
its rationale for the approval. In requesting the remand without vacatur, which would allow the AE to remain in place during
the review period, the EPA denied the existence of legal error and stated that it was unaware of any additional information that
would merit reversal of the AE. Our Company and the TCEQ filed a request to the Fifth Circuit for the motion to remand without
vacatur, if granted, to be limited to a 60-day review period. On December 9, 2013, by way of a procedural order from a three-judge
panel of the Fifth Circuit, the Court granted the remand without vacatur and initially limited the review period to 60 days. In
March of 2014, at the EPA’s request, the Fifth Circuit extended the EPA’s time period for review and additionally,
during that same period, our Company conducted a joint groundwater survey of the site, the result of which reaffirmed our Company’s
previously filed groundwater direction studies. On or about June 17, 2014, the EPA reaffirmed its earlier decision to uphold the
granting of our Company’s existing AE, with the exception of a northwestern portion containing less than 10% of the uranium
resource which was withdrawn, but not denied, from the AE area until additional information is provided in the normal course of
mine development. On or about September 9, 2014, the petitioners filed a status report with the State District Court which included
a request to remove the stay agreed to in August 2013 and to set a briefing schedule (the “Status Report”). In that
Status Report, the petitioners also stated that they had decided not to pursue their appeal at the Fifth Circuit. Our Company continues
to believe that the pending appeal is without merit and is continuing forward as planned towards uranium extraction at its fully-permitted
Goliad Project.
We have not established proven or probable
reserves, as defined by the SEC under Industry Guide 7, through the completion of a “final” or “bankable”
feasibility study for the Goliad Project. Furthermore, we have no plans to establish proven or probable reserves for any of our
uranium projects for which we plan on utilizing ISR mining, such as the Goliad Project.
Mineral Exploration Projects
We hold mineral rights in the U.S. States of
Arizona, Colorado, New Mexico, Texas and Wyoming and in the Republic of Paraguay by way of federal mining claims, state and private
mineral leases and mineral concessions.
We plan to conduct exploration programs on
these mineral exploration properties with the objective of determining the existence of economic concentrations of uranium. We
have not established proven or probable reserves, as defined by the SEC under Industry Guide 7, through the completion of a “final”
or “bankable” feasibility study for any of the uranium projects discussed below. Furthermore, we have no plans to establish
proven or probable reserves for any of our uranium projects for which we plan on utilizing ISR mining.
Arizona
All of our Arizona claims and state leases
were previously the subject of exploration drilling for the search of uranium by companies such as Union 76 Oil, Urangesellschaft,
Wyoming Minerals, Noranda, Inc., Uranerz Energy Corp., Homestake Mining Co., Occidental Minerals and Oklahoma Public Services.
Claims staked directly by us have been in areas known for uranium occurrences as shown in the Arizona State publication, “Occurrences
of Uranium in Miscellaneous Sedimentary Formations, Diatremes and Pipes and Veins”.
Arizona: Anderson Project
Property Location and Description
The Anderson Project is a 8,268-acre property
located in Yavapai County, west-central Arizona, approximately 75 miles northwest of Phoenix and 43 miles northwest of Wickenburg
(latitude 34°18’29” N and longitude 113°16’32” W, datum WGS84). The general area is situated along
the northeast margin of the Date Creek Basin. The Anderson Project is located on the south side of the Santa Maria River approximately
13 miles west of State Highway 93. The Anderson Project occupies part or all of Sections 1 and 3, 9 through 16, 21 through 27,
and 34 through 36 of Township 11 North, Range 10 West and portions of Sections 18, 19, and 30 of Township 11 North Range 9 West
of the Gila and Salt River Base Meridian.
Accessibility, Climate, Local Resources,
Infrastructure and Physiography
The Anderson Project is accessed by paved,
all-weather gravel and dirt roads. The property is reached by taking the Alamo Lake turnoff, located approximately 21 miles northwest
of Wickenburg on Arizona State Highway 93 (Joshua Tree Parkway), then driving 0.25 miles north of mile marker 179, and then following
the Alamo Road for 5.8 miles to the Pipeline Ranch Road turnoff. The road passes through the Pipeline Ranch, located in the bottom
of Date Creek Wash and continues for approximately 6.3 miles to FR 7581. The property boundary is located 1.4 miles north on FR
7581. There are alternate dirt roads, including a 15 mile primitive road from Highway 93 over Aso Pass (2,900 foot elevation).
The Anderson Project is located in the northeast
portion of the Date Creek Basin. The basin consists of low undulating terrain, centrally dissected by Date Creek Wash. The site
lies along the south bank of the Santa Maria River which runs along the northern edge of the basin. Elevations above sea level
are between 1,700 feet and 2,400 feet. Maximum local topographic relief at the site is approximately 700 feet.
Vegetation on the property is typical of the
Sonoran Desert of central Arizona and consists predominately of Joshua trees, palo verde bushes, saguaro, cholla, ocotillo, creosote
bushes and desert grasses. Fauna includes: jackrabbits, rattlesnakes, roadrunners, desert tortoise, various lizards, and less common
mule deer, wild burros and mules.
The alluvial valley of the Santa Maria River
varies substantially in width and depth to bedrock. The volume of alluvium, and particularly the depth of the material, influences
the proportion of surface flow to underflow in the river valley. The groundwater in the alluvium consists of underflow that is
forced toward the surface as the depth of the alluvium decreases.
The climate is arid, with hot summers and mild
winters. Annual rainfall averages 10 to 12 inches with rain showers from January through March and during summer thunderstorms.
Snowfall is rare. On average, temperatures range between a low of 31°F during winter months and a high of 104°F during
summer months. Temperature extremes of 10°F in winter and 120°F in summer have been recorded. The climate is favorable
for year-round mining operations and requires no special operational or infrastructure provisions that relate to weather.
Various water wells exist on and near the Anderson
Project that can support large-scale mining operations. There is plenty of usable land space to locate processing plants, heap
leach pads, tailings storage areas, waste disposal areas and other infrastructure development associated with large-scale mining.
The Anderson Project includes most of a 195 acre area designated by the BLM as “disturbed” resulting from surface mining
in the 1950s. It may be possible to expedite the permitting process for future metallurgical exploration and mining activities,
including waste disposal within the disturbed area.
The Anderson Project area is undeveloped with
the exception of various access and drill roads and various water wells previously constructed. No utilities exist on or adjacent
to the area. A transmission power line runs northwest-southeast along Highway 93, approximately 8 miles to the east; however, direct
access to the power line may be obstructed by the Arrastra Mountain Wilderness and Tres Alamos Wilderness located between the power
line and the Anderson Project. The construction of a power line would require routing along one of the existing road corridors,
a distance of 16.2 miles to the Project boundary.
The nearest town is Congress (population 1,700)
located 32 road miles to the east. The nearest major housing, supply center and rail terminal is in Wickenburg (population 6,363)
located approximately 43 miles from the Anderson Project by road. Phoenix (population 1.45 million), approximately 100 miles to
the southeast by road, is the nearest major industrial and commercial airline terminal. Kingman (population 24,000) is located
approximately 110 miles to the northwest by road. The Company’s surface rights encompass 15.4 square miles which is sufficient
for the surface structures associated with any proposed mining operation.
History
In January 1955, T.R. Anderson of Sacramento,
California, detected anomalous radioactivity in the vicinity of the Anderson Project using an airborne scintillometer. After a
ground check revealed uranium oxide in outcrop, numerous claims were staked. The “Anderson Mine,” as the operation
was known at the time, was drilled and mined by Mr. Anderson. Work between 1955 and 1959 resulted in 10,758 tons that averaged
0.15% U
3
O
8
and 33,230 pounds U
3
O
8
were shipped to Tuba City, Arizona, for custom milling.
In 1959, production stopped when the Atomic Energy Commission (“AEC”) ended the purchasing program.
During 1967 and 1968, Getty Oil Company (“Getty”)
secured an option on claims in the northern portion of the Anderson Project. Some drilling and downhole gamma logging was conducted
during the option period, but this failed to locate a sizeable uranium deposit. In 1968, Getty dropped their option.
In 1974 the increasing price of uranium created
a renewed interest in the vicinity of the Anderson Project. Following a field check and an evaluation of the 1968 Getty drill data,
MinEx optioned the northern portion of the current Anderson Project.
In 1975 MinEx purchased the northern portion
of the current Anderson Project after a 53-hole, 5,800 m (19,000 feet) drilling program on 250 m centers confirmed a much greater
uranium resource potential than had been interpreted from the 1968 Getty gamma log data. Further exploration work, consisting of
a 180-hole, 22,555 m (74,000 feett) drill and core program on 120 m centers was conducted from November 1975 through February 1976
to further delineate the uranium resources. By 1980, MinEx had completed a total of 1,054 holes by rotary and core drilling.
In 1977 the Palmerita Ranch, located 11 km
west of the deposit along the Santa Maria River, was acquired by MinEx to provide a water source for the operations in the event
that closer sources proved inadequate. Based on favorable economics, indicated in a Preliminary Feasibility Study completed by
Morrison-Knudsen Company, Inc. in December 1977, a detailed Final Feasibility Study was undertaken early in 1978 to evaluate the
MinEx holdings on the northern portion of the current Anderson Project.
In 1973 Urangesellschaft expressed an interest
in the former Anderson Property. Urangesellschaft located a claim block, the “Date Creek Project,” on the down-dip
extension of the mineralization immediately to the south of MinEx’s claims. In 1973 to 1982, subsequent drilling programs
delineated mineralization from a total of 352 drill holes with 122,744 m (402,773 feet) of rotary and core drilling. The following
table summarizes the phases of the historical exploration.
Exploration
History at the Anderson Property (Arseneau, 2011)
Company
|
|
Period
|
|
Exploration Activities
|
Mining Group Led by Mr. T. R. Anderson
|
|
1955−1959
|
|
Aerial scintillometer surveying, ground prospecting, and outcrop mining
|
Getty Oil Company
|
|
1967−1968
|
|
Limited exploration drilling
|
Urangesellschaft USA, Inc.
|
|
1973−1982
|
|
Exploration drilling: 352 total holes with 319 rotary holes and 33 core holes over a 610 ha area
|
MinEx
|
|
1974−1980
|
|
Exploration drilling: 970 rotary holes and 84 core holes over a 425 ha area
|
Concentric Energy Corp.
|
|
2006
|
|
Confirmation drilling: 24 RC holes and one RC core hole
|
Geologic Setting
Regional Geology
The Anderson Project is located along the northeast
margin of the Date Creek Basin of the Basin and Range Province of the western United States. The Date Creek Basin is one of hundreds
of Paleogene basins throughout western Arizona, southeastern California, Nevada and western Utah. Paleogene lacustrine and fluvial
sediments, and Quaternary gravels have filled these basins to depths of several thousand meters. The approximate location of the
Basin boundaries is shown in the figure below.
The Basin is surrounded by dissected mountain
ranges containing Precambrian metamorphic rocks and granites. Surrounding mountain ranges include the Black Mountains to the north
and northeast, and the Rawhide, Buckskin and McCracken Mountains to the west. To the south and southeast, the Basin is bordered
by a low drainage divide imposed by the Harcuvar and the Black Mountains. Margins of the basin are filled with early Paleogene
volcanic flows and volcaniclastic sediments. The Basin itself is filled with Oligocene to Miocene lacustrine and deltaic sediments
covered by a thick mantle of Quaternary valley fill.
Local and Property Geology
Three major faults cross the Anderson Project:
the East Boundary Fault System; Fault 1878; and the West Boundary Fault System. Faults trend predominantly N30ºW to N55ºW
and dip steeply (approximately 80º) to the southwest. Another set of faults trending more westerly (N65ºW) are present
in the south-central portion of the Anderson Project. A fault set trending northeast-southwest has been speculated by Urangesellschaft
and others, but has not been observed in the field. Many of the northwesterly surface water drainage tributaries are developed
partially along fault traces.
Minor faults and shear zones occur throughout
the Anderson Project. These probably represent fractures with slight offset of strata during differential compaction of the underlying
sediments or local adjustment to major faulting.
The largest fold in the area is a broad, gentle,
northwest-trending syncline in the southeastern quarter of Section 9, T11N, R10W. Dips reach a maximum of 13º except where
modified by shearing. Many smaller folds with amplitudes of several feet are present in the lacustrine strata.
Fault displacements range from a few centimetres
to more than 100 m. Fault movement is generally of normal displacement resulting in stair-stepped fault blocks. Local faults also
have a tendency to hinge. Minor faulting across the mineralized area is often difficult to discern from variations in sedimentary
dips. The lacustrine sediments dip south to southwesterly from 2º to 5º, to a maximum of 15º. Much of this dip is
attributed to recurrent faulting during deposition.
Nine stratigraphic units were identified on
the Anderson Project, listed from oldest to youngest as follows:
|
·
|
Crystalline Intrusive Rocks: coarse-grained to pegmatitic Precambrian granite;
|
|
·
|
Felsic to Intermediate Volcanic: flows, breccias, tuffs and minor intrusive;
|
|
·
|
Felsic to Intermediate Volcaniclastic: ash flows, tuffaceous beds and arkosic sandstone;
|
|
·
|
Andesitic Volcanic: porphyritic andesitic flows with a paleosurface and locally reddish-brown paleosols;
|
|
·
|
Lacustrine Sedimentary rocks: micaceous siltstones and mudstone, calcareous siltstones and silty
limestone, thin beds of carbonaceous siltstone and lignitic material and host of uranium mineralization, averaging about 60 to
100 m thick;
|
|
·
|
Lower Sandstone Conglomerate: arkosic sandstones and conglomerate, averaging about 60 to 100 m
thick
|
|
·
|
Basaltic Flows and Dikes: amygdular basalt, averaging about 20 m thick;
|
|
·
|
Upper Conglomerate: cobble and boulder conglomerate, partly indurate and locally calcite cemented,
averaging about zero to 60 m thick; and
|
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·
|
Quaternary Alluvium: unconsolidated sand and gravel, caliche formed where calcite-cemented.
|
Uranium mineralization at the Anderson Project
occurs exclusively in the sequence of Miocene-age lacustrine lakebed sediments. The lacustrine sediments unconformably overlie
the andesitic volcanic unit over most of the Anderson Project. However, to the east of the Anderson Project, they overlie the felsic
to intermediate volcanic unit.
Evidence suggests that deposition of the lacustrine
sediments occurred in a restricted basin less than 5 km wide by 10 to 12 km long on the northern edge of an old Paleogene lake.
Moving southward, these sediments inter-tongue with siltstones and sandstones. The lakebed sediments represent time-transgressive
facies deposited within a narrow, probably shallow, basinal feature. This type of depositional environment exhibits complex relationships
between individual facies, lensing out, vertical and horizontal gradation, and interfingering.
The lake sediments include green siltstones
and mudstones, white calcareous siltstones, and silty limestone or calcareous tuffaceous material. Much of this material is silicified
to varying extents and was derived in part from volcanic ashes and tuffs common throughout the lakebeds. Also present in the lacustrine
sequence are zones of carbonaceous siltstone and lignitic material. Along the boundary between the former MinEx and Urangesellschaft
properties, drill holes encounter the basal arkosic sandstone. To the south and southwest, lakebeds interfinger with and eventually
are replaced by a thick, medium to coarse-grained, arkosic sandstone unit.
Mineralization
Uranium mineralization in outcrops and the
pit floor at the old Anderson mine was reported by the US Bureau of Mines in Salt Lake City as tyuyamunite (Ca(UO
2
)
2
(VO
4
)
2
·5-8H
2
O).
Carnotite (K(UO
2
)
2
(VO
4
)
2
·3H
2
O) and a rarer silicate mineral, weeksite
(K
2
(UO
2
)
2
(Si
2
O
5
)
3
·4H
2
O), were also reported
in outcrop samples. Carnotite mineralization occurs as fine coatings and coarse fibrous fillings along fractures and bedding planes
and has been noted in shallow drill holes and surface exposures.
The uranium mineralization found at depth on
the former Urangesellschaft property was reported by Hazen Research, Inc. (“Hazen Research”) to be poorly crystallized,
very fine-grained, amorphous uranium with silica. This could be in the form of either coffinite (U(SiO
4
)
1-x
(OH)
4x
)
or uraninite (UO
2
) in a primary or unoxidized state (Hertzke, 1997). Mineralogical studies performed by Hazen Research
(1978a, 1978b, 1978c and 1979) on Urangesellschaft core found that mineralization was associated, for the most part, with organic-rich
fractions of the samples. Specifically, the uraniferous material occurs as stringers, irregular masses and disseminations in carbonaceous
veinlets with uranium up to 54% as measured by microprobe analysis. X-ray diffraction identified the mineral as coffinite. It is
possible that an amorphous, ill-defined uranium silicate with a variable U:Si ratio is precipitated and, under favorable conditions,
develops into an identifiable crystalline form (coffinite).
Of special note is the detection of high-grade,
low-reflecting uraniferous material occurring with carbonaceous material in the siltstone. Similar assemblages in unoxidized mineralization
have also been reported for the former MinEx property.
Urangesellschaft distinguished seven mineralized
zones, identified as Horizons A, B, C, D, E, F and G, with the youngest (uppermost) being Horizon A and the oldest (deepest) being
Horizon G. The majority of uranium occurs in Horizons A, B and C within the property. A conglomeratic sandstone unit interbeds
with these units, but does not contain uranium mineralization; it is referred to as the Barren Sandstone Unit and it lies between
Horizon C and Horizon D. Consequently, Horizons A through C have been called the Upper Lakebed Sequence and Horizons D through
G have been called the Lower Lakebed Sequence.
Grades of mineralization range from 0.025%
U
3
O
8
to normal highs of 0.3 to 0.5% U
3
O
8
with intercepts on occasion of 1.0% to 2.0%
U
3
O
8
. Secondary enrichment of the syngenetic mineralization is observed along faults and at outcrops.
Exploration
A Light Detection and Ranging (“LiDAR”)
survey was performed over the entire project area by Cooper Aerial Surveys Co. (“Cooper Aerial”) on 9 July 2011, between
13:07 UTC and 15:14 UTC (6:07
A.M.
and 8:14 A.M., MST). Aerial imagery was collected
at the same time. Data was processed using one of two base stations to obtain positional accuracies of between 3 and 10 cm. 24
ground control points showed a root mean square error of 6.7 cm between predicted and measured elevations. Cooper Aerial provided
our Company with a one meter pixel digital elevation model (DEM) and a 0.61 m contour shape-file derived from the LiDAR data. Cooper
Aerial also corrected the ortho imagery with a 0.15 m pixel size. Coordinates were converted from WGS84 to NAD 1983 UTM Zone 12N
in meters, and elevation was reported in NAVD 1988 international feet. The conversion caused no distortion in elevations used in
the resource model.
The Company has not performed any drilling
to date on the Anderson Project.
Update to July 31, 2017
A Technical Report dated June 19, 2012, for
the Anderson Project, prepared in accordance with NI 43-101, was completed by Bruce Davis and Rober
t
Simm, consulting geologists, and filed by our Company on the public disclosure website of the Canadian Securities Administrators
at
www.sedar.com
. The Technical Report contains certain disclosure relating to inferred and indicated mineral resource
estimates for the
Anderson Project. Such mineral resources have been estimated in accordance with the definition standards
on mineral resources of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in NI 43-101. Inferred and indicated
mineral resources, while recognized and required by Canadian regulations, are not defined terms under the SEC’s Industry
Guide 7, and are normally not permitted to be used in reports and registration statements filed with the SEC. Accordingly, we
have not reported them in this Annual Report or otherwise in the United States. Investors are cautioned not to assume that any
part or all of the mineral resources in this category will ever be converted into mineral reserves. Inferred and indicated resources
have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. In
particular, it should be noted that mineral resources which are not mineral reserves do not have demonstrated economic viability.
It cannot be assumed that all or any part of inferred mineral resources discussed in the Technical Report will ever be upgraded
to a higher category. In accordance with Canadian rules, estimates of inferred mineral resources cannot form the basis of feasibility
or other economic studies. Investors are cautioned not to assume that any part of the reported inferred mineral resources referred
to in the Technical Report are economically or legally mineable.
A Preliminary Economic A
ssessment
(“PEA”) dated July 6, 2014 for the Anderson Project, prepared in accordance with NI 43-101, was completed by Douglas
Beahm, PE, PG and Terence McNulty, PE and filed by our Company on the public disclosure website of the Canadian Securities Administrators
at
www.sedar.com
. The PEA contains certain disclosure relating to indicated and inferred mineral resource estimates for
the Anderson Project. Su
ch mineral resources have been estimated in accordance with the definition standards on mineral
resources of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in NI 43-101. Indicated and inferred mineral
resources, while recognized and required by Canadian regulations, are not defined terms under the SEC’s Industry Guide 7,
and are normally not permitted to be used in reports and registration statements filed with the SEC. Accordingly, we have not
reported them in this annual report or otherwise in the United States. Investors are cautioned not to assume that any part or
all of the mineral resources in this category will ever be converted into mineral reserves. Indicated and inferred resources have
a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. In particular,
it should be noted that mineral resources which are not mineral reserves do not have demonstrated economic viability. It cannot
be assumed that all or any part of the indicated or inferred mineral resources discussed in the PEA will ever be upgraded to a
higher category. In accordance with Canadian rules, estimates of indicated and inferred mineral resources cannot form the basis
of feasibility or other economic studies. Investors are cautioned not to assume that any part of the reported indicated and inferred
mineral resources referred to in the PEA are economically or legally mineable. We have not established proven or probable reserves,
as defined by the SEC under Industry Guide 7, through the completion of a “final” or “bankable” feasibility
study for the Anderson Project.
Arizona: Workman Creek Project
The Workman Creek Project is a 4,036-acre property
located in Gila County, Arizona.
A Technical Report dated July 7, 2012 for
the Workman Creek Project, prepared in accordance with NI 43-101, was completed by Neil G. McCallum, P.G. and Gary H. Giroux,
P.E., a consulting geologist and engineer, respectively, and filed by our Company on the public disclosure website of the Canadian
Securities Administrators at
www.sedar.com
. The Technical Report contains certain disclosure relating to inferred mineral
resource estimates for the Workman Creek Project. Such mineral resources have been estimated in accordance with the definition
standards on mineral resources of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in NI 43-101. Inferred
mineral resources, while recognized and required by Canadian regulations, is not a defined term under the SEC’s Industry
Guide 7, and are normally not permitted to be used in reports and registration statements filed with the SEC. Accordingly, we
have not reported them in this Annual Report or otherwise in the United States. Investors are cautioned not to assume that any
part or all of the mineral resources in this category will ever be converted into mineral reserves. Inferred resources have a
great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. In particular,
it should be noted that mineral resources which are not mineral reserves do not have demonstrated economic viability. It cannot
be assumed that all or any part of inferred mineral resources discussed in the Technical Report will ever be upgraded to a higher
category. In accordance with Canadian rules, estimates of inferred mineral resources cannot form the basis of feasibility or other
economic studies. Investors are cautioned not to assume that any part of the reported inferred mineral resources referred to in
the Technical Report are economically or legally mineable.
The following table provides information relating
to our mineral rights located in Arizona:
Property
|
|
Number of Claims
or Leases Held
|
|
Gross Acres
|
|
Los Cuatros
|
|
1 lease
|
|
|
640
|
|
Anderson
|
|
386 claims & 1 lease
|
|
|
8,268
|
|
Workman Creek
|
|
198 claims
|
|
|
4,036
|
|
Colorado
Claims and leases acquired by us in Colorado
have historical production tonnages and grades published in the Colorado Geological Survey, Bulletin 40 “Radioactive Mineral
Occurrences of Colorado”. Also, our geological staff has evaluated a portion of the claims currently owned by us.
Colorado: Slick Rock Project
Pursuant to a Uranium Mining Lease dated May
23, 2012, our Company acquired from URenergy LLC a mining lease for uranium on the Slick Rock Project located in San Miguel and
Montrose Counties, Colorado.
Since January 2011, we staked a total of 129
claims in the Slick Rock district of the Uravan Mineral Belt. In June 2011, we acquired 103 claims from Spider Rock Mining also
in the Slick Rock District for a one-time payment of $500,000. As a result, our Company now holds a total of 315 contiguous claims
in the Slick Rock District. Certain claims of the Slick Rock Project are subject to a 1.0% or 3.0% net smelter royalty, the latter
requiring an annual advance royalty payment of $30,000 beginning in November 2017.
A Technical Report dated February 21, 2013
for the Slick Rock Project, prepared in accordance with NI 43-101, was completed by Bruce Davis and Robert Simm, consulting geologists,
and filed by our Company on the public disclosure website of the Canadian Securities Administrators at
www.sedar.com
. The
Technical Report contains certain disclosure relating to inferred mineral resource estimates for the Slick Rock Project. Such
mineral resources have been estimated in accordance with the definition standards on mineral resources of the Canadian Institute
of Mining, Metallurgy and Petroleum referred to in NI 43-101. Inferred mineral resources, while recognized and required by Canadian
regulations, is not a defined term under the SEC's Industry Guide 7, and are normally not permitted to be used in reports and
registration statements filed with the SEC. Accordingly, we have not reported them in this annual report or otherwise in the United
States. Investors are cautioned not to assume that any part or all of the mineral resources in this category will ever be converted
into mineral reserves. Inferred resources have a great amount of uncertainty as to their existence, and great uncertainty as to
their economic and legal feasibility. In particular, it should be noted that mineral resources which are not mineral reserves
do not have demonstrated economic viability. It cannot be assumed that all or any part of inferred mineral resources discussed
in the Technical Report will ever be upgraded to a higher category. In accordance with Canadian rules, estimates of inferred mineral
resources cannot form the basis of feasibility or other economic studies. Investors are cautioned not to assume that any part
of the reported inferred mineral resources referred to in the Technical Report are economically or legally mineable.
A PEA dated April 8, 2014 for the Slick Rock
Project, prepared in accordance with NI 43-101, was completed by Douglas Beahm, PE, PG and filed by the Company on the public
disclosure website of the Canadian Securities Administrators at
www.sedar.com
. The PEA contains certain disclosure relating
to inferred mineral resource estimates for the Slick Rock Project. Such mineral resources have been estimated in accordance with
the definition standards on mineral resources of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in NI
43-101. Inferred mineral resources, while recognized and required by Canadian regulations, is not a defined term under the SEC’s
Industry Guide 7, and are normally not permitted to be used in reports and registration statements filed with the SEC. Accordingly,
we have not reported them in this Annual Report or otherwise in the United States. Investors are cautioned not to assume that
any part or all of the mineral resources in this category will ever be converted into mineral reserves. Inferred resources have
a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. In particular,
it should be noted that mineral resources which are not mineral reserves do not have demonstrated economic viability. It cannot
be assumed that all or any part of inferred mineral resources discussed in the PEA will ever be upgraded to a higher category.
In accordance with Canadian rules, estimates of inferred mineral resources cannot form the basis of feasibility or other economic
studies. Investors are cautioned not to assume that any part of the reported inferred mineral resources referred to in the PEA
are economically or legally mineable.
The following table provides information relating
to our mineral rights located in Colorado:
Property
|
|
Number of Claims
or Leases Held
|
|
Gross Acres
|
|
Slick Rock
|
|
315 claims
|
|
|
5,333
|
|
Long Park
|
|
20 claims
|
|
|
400
|
|
New Mexico
In December 2014, the Company staked 51 claims
over the historic Dalton Pass project in the Crownpoint uranium district. Historic drilling at Dalton Pass by Pathfinder Mines
indicates that the uranium mineralization occurs as both primary tabular and roll front deposits. Mineralization is hosted by the
upper Westwater Canyon Member of the Morrison Formation, a sequence of stacked sands separated by discontinuous shale breaks, at
depths ranging from 1,900 to 2,100 feet.
The following table provides information relating
to our mineral rights located in New Mexico:
Property
|
|
Number of Claims
or Leases Held
|
|
Gross Acres
|
|
Todilto
|
|
1 lease
|
|
|
320
|
|
West Ranch
|
|
4 leases
|
|
|
1,916
|
|
West Ambrosia Lake
|
|
6 mineral deeds
|
|
|
3,844
|
|
C de Baca
|
|
30 claims
|
|
|
600
|
|
Dalton Pass
|
|
51 claims
|
|
|
1,020
|
|
Texas
At July, 31, 2016, we currently own various
exploration projects located in the South Texas Uranium Trend. The location and acquisition of these leases are based on historical
information contained within our extensive database, as well as current, ongoing geologic analyses by our exploration staff.
Texas: Salvo Project
The Salvo Project is a 1,514-acre property
located in Bee County, Texas.
A Phase I exploration drill program was completed
in April 2011 with a total of 105 holes drilled. Phase II drilling began at the Salvo Project in October 2011, with two drilling
rigs targeting Lower Goliad P and Q sand objectives. A total of 122 exploration and delineation holes for a total of 70,760 feet
were drilled during Phase II which was concluded in May 2012. Twenty-nine holes (23%) met or exceeded a grade-thickness (“GT”)
cutoff of 0.3 GT.
Interpretation of the Company’s exploration
and delineation drilling along with historic data from 1982 to 84 exploration drilling by Mobil and URI, revealed the existence
of two ore-bearing redox boundaries within the area, which has the potential to become PAA-1. A significant under-explored extension
to this area which exhibits strong mineralization remains open-ended. Future plans would include further exploration/delineation
drilling in this area in order to fully identify the extent of the mineralized zones in proposed PAA-1. Historic and recent Company
drilling results are being reviewed for future exploration/delineation activities in the Salvo Project in order to fully identify
the extent of the mineralized zones.
A Technical Report dated July 16, 2010 for
the Salvo Project, prepared in accordance with NI 43-101, was completed by Thomas A. Carothers, P.G., a consulting geologist,
and filed by our Company on the Canadian Securities Administrators (“CSA”) public disclosure website at
www.sedar.com
.
A further Technical Report dated March 31, 2011 for the Salvo Project, prepared in accordance with NI 43-101, was completed by
Thomas A. Carothers, P.G., a consulting geologist, and filed by our Company on the CSA’s public disclosure website at
www.sedar.com
.
The March 31, 2011 Technical Report contains certain disclosure relating to inferred mineral resource estimates for the Salvo
Project. Such mineral resources have been estimated in accordance with the definition standards on mineral resources of the Canadian
Institute of Mining, Metallurgy and Petroleum referred to in NI 43-101. Inferred mineral resources, while recognized and required
by Canadian regulations, is not a defined term under the SEC’s Industry Guide 7, and are normally not permitted to be used
in reports and registration statements filed with the SEC. Accordingly, we have not reported them in this Annual Report or otherwise
in the United States. Investors are cautioned not to assume that any part or all of the mineral resources in this category will
ever be converted into mineral reserves. Inferred resources have a great amount of uncertainty as to their existence, and great
uncertainty as to their economic and legal feasibility. In particular, it should be noted that mineral resources which are not
mineral reserves do not have demonstrated economic viability. It cannot be assumed that all or any part of inferred mineral resources
discussed in the Technical Report will ever be upgraded to a higher category. In accordance with Canadian rules, estimates of
inferred mineral resources cannot form the basis of feasibility or other economic studies. Investors are cautioned not to assume
that any part of the reported inferred mineral resources referred to in the Technical Report are economically or legally mineable.
Texas: Longhorn Project
The Longhorn Project is located in Live Oak
County, Texas, which historically has produced uranium by both open pit and ISR methods. The property lies within the historic
US Steel Clay West production area where uranium was previously mined utilizing ISR methods along the historic George West district
trend. Our Company has an extensive database of information regarding the area including drill maps and over 500 gamma logs. The
Project lies on trend between two former US Steel production areas, the Boots/Brown and the Pawlik. At least five separate roll-fronts
are believed to exist across the project area. Uranium grades within these Oakville deposits ranged from 0.10% to in excess
of 0.20% U
3
O
8
according to US Steel reports and historic well logs obtained by our Company. Well-developed
Oakville sands in this area exhibit higher than average uranium grades for South Texas, as shown on many historic gamma ray logs,
of which our Company has at least 500+ pertaining to the Project from various databases. These higher than average reported uranium
grades were later proven by excellent recoveries in the US Steel ISR production areas
The property is located approximately 65
miles northwest of Corpus Christi and 55 miles southwest of Hobson. It is comprised of 39 lease agreements covering 651 acres,
granting us the exclusive right to explore, develop and mine for uranium. We anticipate that any uranium identified at the Longhorn
Project will be extracted using ISR mining and processed at Hobson.
The following table provides information relating
to our main mineral rights located in the South Texas Uranium Trend, excluding the Palangana Mine and the Goliad and Burke Hollow
Projects:
Property
|
|
Number of Claims
or Leases Held
|
|
Gross Acres
|
|
Salvo
|
|
9 leases
|
|
|
1,514
|
|
Longhorn
|
|
39 leases
|
|
|
651
|
|
Paraguay
We hold interests in two projects within the
South American country of Paraguay. The following map shows the location of both projects, Coronel Oviedo and Yuty.
Oviedo Project
Property Description and Location
The Oviedo Project is located in southeastern
Paraguay, approximately 95 miles east of Asuncion, the capital of Paraguay. The Oviedo Project consists of a large exploration
mining permit covering a total area of 464,548 acres. The property can be classified as an early to intermediate stage exploration
project. Several areas have undergone drilling in the past by The Anschutz Company (“Anschutz”) of Denver, Colorado
(early 1980s), and recently by Crescent Resources (“Crescent”) in 2007. Access to the project is by paved roads from
Asuncion to the City of Coronel Oviedo and other populated areas. There is good access into the interior of the concession mainly
by unpaved secondary roads. The terrain is rolling hills with areas of forest, small farms, and some large cattle ranches.
Prior Exploration
The Oviedo Project located in central Paraguay
was subject to reconnaissance uranium exploration between 1976 and 1983 by Anschutz Corporation of Denver, Colorado, and by Crescent
Resources of Vancouver, Canada between 2006 and 2008. Most of the uranium occurrences in this environment are “roll front”
type deposits similar to those currently being produced by low-cost ISR methods in Texas, the western United States, Central Asia
and Australia. The work by Anschutz and Crescent was centered on a large belt of Permo-Carboniferous age continental sandstones
that represent the western flank of the Paraná Basin. According to the Geological Survey of Brazil or CPRM, these same sandstones
within the Brazilian section of the Paraná Basin contain numerous uranium occurrences including the Figueira Mine.
From 2006 to 2008, the Oviedo Project was optioned
to Crescent Resources. During this period, a total of 24 holes were drilled and logged in the southern portion, offsetting mineralized
holes drilled by Anschutz. A NI 43-101 Technical Report reported that 14 of the 24 holes had a grade-thickness (“GT”)
product (in feet) equal to or greater than 0.30 GT. GT values equal to and above 0.30 are typically considered producible under
ISR production methodology. The known uranium mineralization on the Oviedo Project intersected by the past drilling is at depths
between 450 and 750 feet. Crescent Resources dropped the option on the Oviedo Project in 2008.
Aquifer Test
During 2010, and prior to the acquisition of
the Oviedo Project, the Company conducted a 24-hour aquifer test in the area of the resource trend identified by the combined Anschutz-Crescent
drilling programs. The test was designed to assess aquifer properties of the lower massive sand, a uranium-bearing sandstone within
the San Miguel Formation. The focus of the test was to determine if the aquifer could sustain extraction rates typical of ISR mining
of uranium.
Results of the test indicate that the uranium-bearing
unit has aquifer characteristics that would support operational rates for ISR mining. The aquifer properties determined from the
hydrologic test fall within the range of values determined at other uranium ISR projects located in Wyoming, Texas and Nebraska.
During Fiscal 2012, the Company completed a
10,000-meter drilling program. A total of 35 holes were drilled, averaging 950 feet in depth. The holes were drilled on east to
west lines across known geologic structures believed to be integral in controlling uranium occurrence. The holes were drilled on
wide spacings, approximately one to 1.5 miles apart (see map above). Historic and recent drilling results are being reviewed for
future exploration/delineation drilling at the Oviedo Project. A radon extraction survey is being completed along the western basin
margins, following up on historic airborne radiometric anomalies and outcrop sampling results that indicate a potential for shallow
uranium mineralization.
A Technical Report dated October 15, 2012
for the Oviedo Project, prepared in accordance with NI 43-101, was completed by Douglas L. Beahm, P.E., P.G, a consulting geologist/engineer,
and filed by our Company on the public disclosure website of the Canadian Securities Administrators at
www.sedar.com
. The
Technical Report contains certain disclosure relating to an Exploration Target for the Oviedo Project. An Exploration Target has
been calculated in accordance with the definition standards on mineral resources of the Canadian Institute of Mining, Metallurgy
and Petroleum referred to in NI 43-101. Exploration Targets, while recognized and required by Canadian regulations, is not a defined
term under the SEC’s Industry Guide 7, and are normally not permitted to be used in reports and registration statements
filed with the SEC. Accordingly, we have not reported them in this Annual Report or otherwise in the United States. Investors
are cautioned not to assume that any part or all of the Exploration Target will ever be converted into mineral resources or reserves.
Exploration Targets have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal
feasibility. In particular, it should be noted that Exploration Targets do not have demonstrated economic viability. It cannot
be assumed that all or any part of the Exploration Target discussed in the Technical Report will ever be upgraded to a higher
category, or if additional exploration will result in discovery of an economic mineral resource on the property.
Yuty Project, Paraguay
Property Description and Location
The Yuty Project covers 289,680 acres and is
located approximately 125 miles east and southeast of Asunción, the capital of Paraguay. It is located within the Paraná
Basin, which is host to a number of known uranium deposits, including Figueira and Amorinópolis in Brazil. Preliminary studies
indicate amenability to extraction by in-situ recovery methods, which is the same process currently used by our Company at its
Texas operations. Cue Resources Ltd. spent over CAD$16 million developing Yuty since 2006.
History
Exploration for uranium in Southeastern Paraguay
was started in 1976 by Anschutz, after a Concession Agreement between the Government of Paraguay and Anschutz in December 1975.
This agreement allowed Anschutz to explore for “all minerals, excluding oil, gas, and construction materials.” The
initial uranium exploration by Anschutz in 1976 covered an exclusive exploration concession of some 162,700 square kilometers,
virtually the whole eastern half of Paraguay. This was followed by a program of diamond drilling and rotary drilling over selected
target areas. In total, some 75,000 meters of drilling were completed from 1976 to1983. Data is available for a total of 257 drill
holes in the San Antonio area. Anschutz carried out exploration on behalf of a joint venture with Korea Electric Power Corporation
and Taiwan Power Company. Anschutz intersected uranium mineralization in drill holes ranging from 0.115% U
3
O
8
over 10.2 meters to 0.351% U
3
O
8
over 0.3 meters in sandstones and siltstones. Work was suspended in 1983
due to the slump of the price of uranium, and no further work was done at that time.
During the exploration programs by Anschutz,
airborne radiometric surveys, regional geological mapping and geochemical sampling were the main exploration tools for uranium
exploration in the southeastern part of Paraguay. This was followed-up by core and rotary drilling, in two phases. The initial
phase was to drill wide-spaced reconnaissance diamond drill holes along fences spaced approximately ten miles apart. The objective
of this initial phase was to obtain stratigraphic information across an inferred host trend. The second phase was to drill rotary
holes, spaced approximately 1,000 feet apart, within and between the fences of reconnaissance holes, to establish and outline target
areas. All drill holes were logged and probed by gamma, neutron and resistivity surveys.
Exploration work by Anschutz outlined several
large target areas including what is now the Yuty Project. These include the San Antonio, San Miguel, Typychaty and Yarati-í
targets near and around the village of Yuty, approximately 125 miles southeast of Asunción.
Geologic Setting and Mineralization
The Yuty Project area is situated within the
western part of the Paraná Basin in Southeastern Paraguay, which also hosts the Figueira uranium deposit in Brazil. The
area is underlain by upper Permian-Carboniferous (“UPC”) continental sedimentary rocks. The exploration methodology
applied during past programs has been to determine the favorable host rocks of the UPC sequence and to explore favorable areas
of the host sandstone.
Continental sedimentary units of the Independencia
Formation (of the UPC) are known to have high potential for uranium exploration in eastern Paraguay. The source of the uranium
is thought to be the Lower Permian-Carboniferous Coronel Oviedo Formation, which is correlated with the Itataré Formation
underlying the Rio Benito Formation in Brazil. Occasional diabase sills and dikes intrude the sedimentary rocks, such as at the
San Antonio area near the village of Yuty. Outcrops are rare, mostly along road cuts, and mapping is done by drilling.
The rocks of the Yuty area are very gently
east dipping and undeformed. Occasional northwest and northeast trending normal faults cut the sedimentary units. Exploration work
to date suggests that the uranium mineralization within the San Miguel Formation is stratabound and possibly syngenetic or diagenetic
in origin. Recent interpretation of exploration data suggests that areas of limonite and hematite alteration within the grey-green,
fine-grained sandstones in the San Antonio area have characteristics similar to the alteration assemblages present at roll front-type
uranium deposits of the Powder River basin in the United States.
Geologic Setting of the Yuty Project, Paraguay
Recent Exploration
In late July 2006, Cue Resources Ltd. signed
an agreement with the shareholders of Transandes Paraguay S.A. to option the Yuty Property, followed by a formal earn-in agreement
signed on November 6, 2007, and started a systematic uranium exploration program. This included a compilation of all previous exploration
data, including lithologic and radiometric logs, stored at Ministry of Public Works (the “MOPC”) in Asunción.
The most recent drilling completed in the San Antonio area was in November and December 2010, at which time 33 holes were completed
for a total of 11,500 feet. Of these holes, five were not successfully completed. Of the 28 holes that reached the target, ten
had intersections greater than a GT (grade x thickness) of 0.10m% eU
3
O
8
, and an additional 13 had intersections
exceeding a GT of 0.03m% eU
3
O
8
.
Drilling and Sampling
Approximately 240,000 feet of drilling (core
as well as rotary) were completed by Anschutz in previous campaigns.
The procedures used during the diamond and
rotary drilling programs were drafted by Anschutz technical personnel. Healex reviewed all of the drill logs at the MOPC in Asunción
and is of the opinion that the lithologic logging procedures are comparable to industry standards. Detailed information on sampling
methods and approach during the Anschutz drilling campaigns is not available. Nevertheless, previous Technical Reports (Scott Wilson
(2008) and Healex (2009)) have concluded that sampling procedures were comparable to industry standards of that time. Mr. Beahm
(2011 Technical Report) concurs with this determination. From 2007 to 2010, Cue Resources Ltd. completed over 100,000 feet of drilling
at the San Antonio target area in 256 drill holes. Most of the holes were collared with a rotary drilling rig, surface casing was
then installed, and the holes were drilled to completion depth with a diamond rig.
To date, diamond drilling totals approximately
52,800 feet, and rotary drilling approximately 50,000 feet. For diamond drill holes, HQ-size core was retrieved and the drilling
contractor was Empire Drilling S.A. of Quito, Ecuador. For rotary drilling, the contractor was 9 de Junio S.A. (Primo) of Asunción,
Paraguay.
Exploration Potential
Except for the San Antonio area, the Yuty Uranium
Project is at an early-to intermediate stage of exploration. A number of areas of anomalous concentrations of uranium occur in
UPC sedimentary rocks within the property area. Past work was focused on developing roll front-type targets. Preliminary interpretation
of the drill results in the San Antonio area suggests that the basal sandstone unit (San Miguel Formation) is a favorable host
for uranium mineralization. These results also suggest that the diabase sill overlying the San Miguel Formation may have acted
as a trap for diagenetic fluids and provided a horizontal conduit for the circulation of the diagenetic fluids and emplacement
of uranium mineralization near the margin of a topographic high (gentle hill) below the diabase sill.
Historic and recent drilling results are being
reviewed for future exploration/delineation drilling at the Yuty Project.
A Technical Report dated August 24, 2011 for
the Yuty Project, prepared in accordance with NI 43-101, was completed by Douglas Beahm, P.G., P.E., Bill Northrup and Andre Deiss
consulting geologists, and filed by the Company on the CSA’s public disclosure website at
www.sedar.com
. The Technical
Report contains certain disclosure relating to measured, indicated and inferred mineral resource estimates for the Yuty Project.
Such mineral resources have been estimated in accordance with the definition standards on mineral resources of the Canadian Institute
of Mining, Metallurgy and Petroleum referred to in NI 43-101. Measured, indicated and inferred mineral resources, while recognized
and required by Canadian regulations, are not defined terms under the SEC's Industry Guide 7, and are normally not permitted to
be used in reports and registration statements filed with the SEC. Accordingly, we have not reported them in this Annual Report
or otherwise in the United States. Investors are cautioned not to assume that any part or all of the mineral resources in this
category will ever be converted into mineral reserves. Measured, indicated and inferred resources have a great amount of uncertainty
as to their existence, and great uncertainty as to their economic and legal feasibility. In particular, it should be noted that
mineral resources which are not mineral reserves do not have demonstrated economic viability. It cannot be assumed that all or
any part of measured, indicated or inferred mineral resources discussed in the Technical Report will ever be upgraded to a higher
category. In accordance with Canadian rules, estimates of inferred mineral resources cannot form the basis of feasibility or other
economic studies. Investors are cautioned not to assume that any part of the reported mineral resources referred to in the Technical
Report are economically or legally mineable.
In April 2015, the Yuty Project received a
signed resolution from the Ministry of Public Works and Communication (the “MOPC”), the national agency that regulates
mining in Paraguay, advancing the Project from the Exploration Phase into the Exploitation Phase. The Yuty Project is only the
third mining project to achieve the Exploitation Phase since the current Paraguayan mining law was promulgated in 2007.
When the MOPC grants a mineral concession to
an operator, the project initially enters the Exploration Phase for a maximum of six years, during which period a company must
advance and demonstrate a viable project. The Exploration Phase is followed by the Exploitation Phase for a maximum of 20
years renewable every 5 years indefinitely, during which period the environmental licensing process may begin, a key milestone
required before starting production, as well as allowing for reductions in land and various investment costs. The Exploitation
Phase is followed by the Production Phase which lasts for an indefinite period.
Alto Paraná Titanium Project,
Paraguay
The Alto Paraná Project was acquired
by our Company from CIC Resources Inc. (“CIC”) on July 7, 2017
.
Property Description and Location
The Alto Paraná Titanium Project is
a titanium project located in Eastern Paraguay in the Alto Paraná province approximately 100 km north of Ciudad del Este
and consists of 174,200 acres. The Alto Paraná Project resource is atypically high in titanium values when compared to
most beach sand deposits. High iron laterite hosts heavy minerals containing high iron and titanium values as ilmenite, titanomagnetite
and magnetite.
History
Exploration work on the property was initiated
by CIC in 2009 with a program of widespread hand-dug pits consisting of channel samples at approximately one meter verticals intervals
within the laterite. The initial phase of pitting and sampling was followed up by more closely spaced deep pitting and shallow
(1 m) auger drilling in 2010 and 2011. In total, 4,432 samples from deep pits and 2,992 one meter auger samples have been collected
and analyzed. The purpose of the exploration work was to evaluate the original CIC hectares to determine the area of best grade
and thickness. Based on these extensive sampling efforts, our Company now controls this generally higher-grade/thickness area as
previously noted.
CIC also conducted extensive process development
work with the objective of a viable process flow sheet for beneficiation of the heavy minerals from the laterite. This work carried
out by Mineral Advisory Group (“MAG”), and included design, construction and operation of a 1.5 tonne per hour pilot
plant in Paraguay. During operations, the plant underwent continual process improvements and eventually produced 108 tonnes of
concentrate over a three-month period. In January 2012, the concentrate was shipped to MINTEK in South Africa for smelting in a
MINTEK pilot plant.
Geologic Setting and Mineralization
Mineralization on the property consists of
laterite containing ilmenite, titanomagnetite and magnetite derived from Early Cretaceous tholeitic basalts of the Paraná
Basin and associated gabbro intrusions. The basalts and gabbros have been weathered to laterite to an average depth of approximately
7 m over a very extensive area. Kaolinite is the dominant mineral, representing 60% - 75% of the mineral assemblage. Ilmenite,
magnetite and titanomagnetite are present in the laterite as discrete minerals ranging in particle size from <40 to 350 µm
with an average particle sizes in the 135 μm to 165 μm range. The grade of TiO
2
in the laterite ranges up to approximately
11% but is typically in the 5% to 9% TiO
2
.
Summary
The Alto Paraná Titanium Project appears
to be homogeneous and much higher grade than existing mineral sands deposits. Further work on particle size distribution of the
ilmenite/titanomagnetite fractions and variable laterite bulk density as a function of depth will help better define the Alto
Paraná Titanium Project.
On September 12, 2017, we filed a NI 43-101
Technical Report and Resource Estimate for the Alto Paraná Project, titled “Technical Report and Resource Estimate
for the Alto Paraná Project” on the CSA’s public disclosure website at
www.sedar.com
. The Technical
Report contains certain disclosure relating to measured, indicated and inferred mineral resource estimates for the Alto Paraná
Project. Such mineral resources have been estimated in accordance with the definition standards on mineral resources of the Canadian
Institute of Mining, Metallurgy and Petroleum referred to in NI 43-101. Measured, indicated and inferred mineral resources, while
recognized and required by Canadian regulations, are not defined terms under the SEC's Industry Guide 7, and are normally not
permitted to be used in reports and registration statements filed with the SEC. Accordingly, we have not reported them in this
Annual Report or otherwise in the United States. Investors are cautioned not to assume that any part or all of the mineral resources
in this category will ever be converted into mineral reserves. Measured, indicated and inferred resources have a great amount
of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. In particular, it should
be noted that mineral resources which are not mineral reserves do not have demonstrated economic viability. It cannot be assumed
that all or any part of measured, indicated or inferred mineral resources discussed in the Technical Report will ever be upgraded
to a higher category. In accordance with Canadian rules, estimates of inferred mineral resources cannot form the basis of feasibility
or other economic studies. Investors are cautioned not to assume that any part of the reported mineral resources referred to in
the Technical Report are economically or legally mineable.
Other Properties
As of July 31, 2017, we owned 32 acres of real
estate located in Goliad County, Texas, and 76.6 acres of real estate located in the Republic of Paraguay. As of July 31, 2017,
we have entered into office rental and service agreements as follows:
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an office lease at $9,308 per month for the Corpus Christi administration office located at 500
N. Shoreline Blvd., Suite 800N, Corpus Christi, Texas 78471. The lease expires on July 31, 2018; and
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an office lease at $7,324 per month for the Vancouver administration office at 1030 West Georgia
Street, Suite 1830, Vancouver, B.C., Canada V6E 2Y3. The lease expires on March 31, 2021.
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Our Databases
We have acquired historical exploration data
that will assist in the direction of proposed exploration program on lands held in our current property portfolio. This prior exploration
data consists of management information and work product derived from various reports, drill hole assay results, drill hole logs,
studies, maps, radioactive rock samples, exploratory drill logs, state organization reports, consultants, geological study and
other exploratory information.
The following provides information relating
to our database:
Tronox Worldwide
Effective February 20, 2008, we acquired from
Tronox Worldwide LLC certain assets, consisting of certain maps, data, exploration results and other information pertaining to
lands within the United States (excluding New Mexico and Wyoming), Canada and Australia, and specifically including the former
uranium exploration projects by Kerr McGee Corporation. The Tronox database contains records on some of our properties located
in Arizona, the Colorado Plateau and Texas. We have exclusive ownership of this database.
Jebsen
The Jebsen database covers territory in Wyoming
and New Mexico, including some of our existing properties. The database belonged to a pioneering uranium developer and represents
work conducted from the 1950s through to the present.
This database adds over 500 drill holes and
over 500,000 feet of drilling data results to our Company’s existing library of data. Other than logs, the data set consists
of volumes of maps, lithographic logs, geologic reports, and feasibility studies, and many other essential tools for uranium exploration
and pre-extraction.
Our geologists have linked contents of the
database to some of our existing properties, specifically pertaining to our projects in the Shirley Basin and Powder River Basin
of Wyoming, and in the Grants Uranium District of New Mexico. We have exclusive ownership of this database.
Halterman
The Halterman database consists of exploratory
and pre-extraction work compiled during the 1970s and 80s, including extensive data on significant prospects and projects in the
following known uranium districts in the States of Colorado, New Mexico and Utah, including Grants, San Juan Basin, Chama Basin,
Moab, Lisbon Valley, Dove Creek, Slick Rock and Uravan districts.
This database includes drilling and logging
data from over 200,000 feet of uranium exploration and pre-extraction drilling, resource evaluations and calculations, drill-hole
locations and grade thickness maps, competitor activity maps as well as several dozen geological and project evaluation reports
covering uranium projects in New Mexico, Colorado, Utah, Texas and California. We have exclusive ownership of this database.
Brenniman
The Brenniman database includes drilling and
logging data from over two million feet of uranium exploration and pre-extraction drilling, resource calculation reports and various
other geological reports, drill hole location maps and other mapping. This database includes approximately 142 drill hole gamma
and E-logs. The data was originally compiled from 1972 to 1981 by various exploration companies, and covers over 100 uranium prospects
in 15 southern U.S. states. This library will be used by our technical personnel to determine locations of where drill-indicated
uranium may exist. We have exclusive ownership of this database.
Kirkwood
We acquired a database of uranium exploration
results covering an area of approximately 13,000 acres within the uranium zone known as the Poison Spider area, in central Wyoming.
The area covered includes property already held by us, as well as by other publicly-traded uranium exploration companies. The database
was compiled by William Kirkwood of North American Mining and Minerals Company, a significant participant in the uranium, coal,
gold and oil and gas industries in the western United States since the 1960s. The data acquired was generated from exploration
originally conducted by companies such as Homestake Mining, Kennecott Corp, Rampart Exploration and Kirkwood Oil and Gas, largely
between 1969 and 1982. The database consists of drill hole assay logs for 470 holes, including 75,200 feet of drilling, 22,000
feet of gamma logs, drill hole location maps, cross sections, geological maps, geological reports, and other assay data and will
be used to locate possible mineralized zones in the Poison Spider area in central Wyoming. We have exclusive ownership of this
database.
Odell
We acquired the rights to a database
containing over 50 years of uranium exploration data for the State of Wyoming. This database consists of 315,000 feet of
drill logs, over 400 maps, copies of all US geological survey uranium publications dating back to 1954, and geological
reports on uranium ore bodies throughout Wyoming. The database will be used to locate possible mineralized zones. The
database is made available to the Company by Robert Odell, the compiler and publisher of the Rocky Mountain Uranium Minerals
Scout since 1974. We do not own or have exclusive rights to this database.
Moore
We acquired a database of U.S. uranium exploration
results from Moore Energy, a private Oklahoma-based uranium exploration company.
The Moore Energy U.S. uranium database consists
of over 30 years of uranium exploration information in the States of Texas, New Mexico and Wyoming, originally conducted during
the 1970s, 80s and 90s. It includes results of over 10,000 drill holes, plus primary maps, and geological reports. It covers approximately
one million acres of prospective uranium claims, in the South Texas uranium trend, New Mexico, and Powder River Basin, Wyoming,
as well as zones in Texas, and will be used to locate possible mineralized zones.
The database also provides the Company with
exploration data about its Goliad Project in south Texas, including 250,000 feet of drill logs and further delineates zones of
potential uranium mineralization. It also contains drilling results from properties that are being developed by other uranium exploration
companies, and also widespread regional data from throughout the South Texas uranium trend. We have exclusive ownership of this
database.
Uranium Resources Inc.
We acquired the full database of historic drill
results for the Company’s Salvo ISR uranium project located in Bee County, Texas. The database consists of 425 gamma ray/resistivity
and lithology logs, PGT logs and drill plan maps. We have exclusive ownership of this database.
Uranium One – South Texas Goliad
Project
The South Texas Goliad database includes raw
and interpreted data compiled by Total Minerals (“TOMIN”) and others from the mid1980s to 1993. The database is an
evaluation of the uranium potential within the Goliad Formation from south of Houston to the Mexican border.
Through TOMIN’s purchase of the Holiday
- El Mesquite project, located in Duval County, Texas, in 1990, TOMIN acquired the Mobil uranium exploration database. Starting
with this data, and earlier data purchased from Tenneco Uranium, TOMIN also acquired regional oil and gas logs (included in the
database), water well driller logs and other regional information to begin their study of the Goliad Formation along the South
TX Uranium Trend.
As a result of the study, TOMIN identified
62 targets and drilled 22 by project end in 1993. Of the 22 drilled, 19 were disproved and the remaining three await further drilling
to assess trends. Another 40 targets remain to be drill-evaluated.
In summary, the database contains:
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4,894 South Texas uranium logs - 2.8 million feet of drilling;
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13,882 South Texas oil and gas logs - 41.6 million feet;
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752 maps/sections across South Texas; and
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103 documents, reports and analyses documenting the study.
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