We have updated coverage of energy materials developer Westwater Resources (WWR) following report of financial resulting in the quarter ending March 2018, and other developments in the Company’s asset portfolio.
In April 2018, Westwater completed the previously announced acquisition of Alabama Graphite. Management confirmed plans to develop what could be the first domestic source of natural graphite in decades in Coosa County, Alabama. Potential customers in the commercial battery industry and from the U.S. military have lined up to sample refined graphite materials produced from the Coosa County project. Until mining operations are commenced Westwater plans to fulfill requests for sampling materials and initial commercial deliveries with natural graphite outsourced from third-parties. Plans are also underway to construct and commission a pilot plant that will prove out a production process adjusted from plans originally set up by Alabama Graphite. Management hopes these changes will help accelerate first commercial deliveries by 2019.
We recommend WWR shares as a Speculative Buy with a $1.50 price target. The shares have traded off in recent weeks and, in our view, providing an even more compelling bull case. Notably, trading volumes have slumped in the last three months compared to the previous three months, suggesting the pessimism that is undercutting the share price is not widespread. News on new customer interest or movement forward with the battery manufacturer that recently signed a letter of interest in the Company’s PMG graphite material could be strong catalysts for the stock. Quarter reports during the 2018 could also provide valuable updates on pilot plant construction progress and implementation plans for the graphite purification facility. Such news could serve to reduce uncertainty and flip the supply/demand balance in favor of demand.
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