Westwater Resources reported a $20.5 million net loss in the quarter ending June 2018, including a one-time non-cash charge of $18.0 million for impairment of the Company’s uranium assets in Turkey. The accounting treatment was triggered by the revocation of licenses by the Turkish mining authority without any specified compensation figure. Concerns over the license discrepancy and asset write-down have been amplified by continued discussion of the souring of Turkey-U.S. relations that could potentially undermine negotiations for a fair resolution. The Company has made a response to the Turkey authority and awaits a reply.
Fortunately, management appears to have kept its eye on the prizes in the graphite and lithium materials markets. The quarter financial report was accompanied by an update on the Company business plan for developing the recently acquired natural flake graphite asset in Alabama. Management also confirmed that it has enough cash on hand and access to sufficient capital resources to support operations through September 2019.
WWR is now trading at just under half total asset value even after the full write-off of the uranium assets in Turkey. The valuation suggests a fire sale at Westwater, which may be premature given positive developments on the markets for all three energy materials represented on the Company’s balance sheet. The lithium and graphite markets in particular are heated up, driving valuation of any asset with strong geological data. A review of the economic analysis of the Company’s graphite resource in Alabama shows that it is in an area of proven and previously exploited natural flake graphite deposits. In our view, it is not logical that promising assets should be discounted to such degree.
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