Recently we discussed with Westwater management the status of current operations. Despite widespread stay-at-home and shelter-in-place directives, Westwater personnel and contractors have apparently continued with projects by working from home. Progress is continuing on the design and engineering work necessary for the planned graphite processing pilot plant and it appears that the Company is still in a position to put the new plant into operation before the end of 2020. This will allow Westwater to fill a request for one ton of the Company’s proprietary Purified Micronized Graphite (PMG) to be used in qualification tests by an unnamed battery manufacturer. We believe production orders are more likely than not to follow when the customer’s tests are completed.
While the impact of COVID-19 is still playing out and economic conditions remains uncertain, investors can be assured that company value is determined as usual by future earnings that can accrue from assets and knowhow. Westwater Resources’ assets include a mix of licenses that allow the Company to extract minerals from large tracts of land. The uranium, lithium, graphite and vanadium deposits remain unperturbed by the health disaster playing out across the world. True enough future earnings are the key to asset value and such projections involve judgment. After a review of current pricing and demand conditions, particularly in the graphite sector that is the Company’s priority market, we have maintained our estimates of future earnings from Westwater’s mineral assets. (See pages 5 and 6 of the report)
What is still in flux for investors is how and when the government and society will stage a recovery. Various letters of the alphabet have been used as predictive illustrations. A V-shaped future suggests recovery as rapid as the collapse we observed in March 2020. Most investors would prefer this outcome, but acknowledge it is just as likely that recovery will be U-shaped with the world economy tracking a period of weakness and consolidation before gradual revival.
Regardless of which letter is used to illustrate economic revival, Westwater is moving forward as planned with its graphite materials project. At this point, it appears the Company can sidestep the worst effects of the coronavirus outbreak. We view the much of the recent sell-off in WWR as an overreaction. (See page 8 of the report) Accordingly, we reiterate our Buy recommendation on the shares. Additionally, we have recommended approval of certain proposals before shareholders at the annual meeting scheduled in late April 2020. (See pages 3 and 4 of the report)
Click on the image below to access the full 10-page report dated April 14, 2020.
Please note the important disclosures and disclaimers at the end of every Crystal Equity Research report.