There has been a mix of current events for energy materials developer Westwater Resources. The Company released a business plan for its recently acquired natural flake graphite asset in Alabama. The plan brings into a single focus a series of tactical decisions Westwater management has made since the deal closed to bring battery grade graphite to market. In mid-June 2018, a private placement of common stock and prepaid warrants was completed, bringing $2.9 million in new capital to the Company. Proceeds are to be used for working capital purposes and, in particular, near-term expenditures for the graphite project.
Shareholders barely had time to digest the lubricating impact of a capital raise when news was received that mining licenses were being revoked for its Temrezli uranium project. Turkey government agency in charge of mining indicated compensation would be offered, but no amount was stipulated. The Company has sixty days to respond. We believe there is a wide range of possible outcomes from a reinstatement of the licenses by the government to Westwater’s exit from the Turkey region with some level of compensation for the foregone licenses.
We continue to rate WWR at Speculative Buy with a $1.50 price target. In our view, the Company is deeply undervalued based on the mineral assets in the portfolio and the market opportunity for those assets. Conditions in all end-markets are favorable. Neither high purity graphite nor lithium supplies are keeping pace with ramping demand for battery materials. The nuclear power industry appears to be working through an excess in uranium inventory and the prognosis is good for high enough uranium selling prices to coax minders like Westwater back into production. These positive conditions notwithstanding, a bull-case position in WWR requires patience to look beyond the next few months to evaluate the merits of the Company’s long-term business prospects.
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