The last few years have been filled with challenge for Westwater Resources (WWR: NYSE-AMEX) as the Company navigated entrance into new energy metals markets for graphite and lithium and faced government confiscation of uranium mining licenses in Turkey. The second quarter 2021 report revealed the bad news may have come to an end as positive developments continue to unfold. First, favorable pilot test results of the Company’s proprietary graphite materials prove the products are marketable and ready for customer qualification screening. Second, the Company selected a site for its graphite processing facility and secured a generous package of tax credits and incentives valued at $36 million that will help reduce operating expenses over the next decade. With a location locked up, the Company’s newly hired operating officer can move forward with the construction phase. Third, robust equity market conditions have given the Company the cash resources to proceed with timely and opportunistic execution. The cash balance at the end of June 2021, was $119.1 million, enough to support operations through the end of 2022. Even Westwater’s claim against the Republic of Turkey for the Company’ lost uranium investments appears to be nearing a conclusion with a hearing in September 2021 before an international arbitration panel. Such proceedings are typically followed by a final, binding decision within months.
After the recent price weakness, in our view, Westwater’s common stock is even more undervalued than ever. The stock is currently trading at less than one times book value. While we have retained our Speculative Buy rating of WWR, we acknowledge recent progress has injected more certainty into Westwater’s circumstances, making a stake in the Company much less tentative.
The current price level represents an impressive return potential when compared to our price target of $20.00. It is noteworthy that our target price coincides with a line of volume-related price support/resistance that has developed in historic trading. We believe there are several key catalysts that could help push the stock through that line. Most notably, the Company has promised publication of a final feasibility study near the end of the third quarter 2021, that will provide details on a proprietary graphite processing plan and budget. We expect that study to be pivotal in raising capital and beginning construction of the planned processing facility in Alabama. The accomplishment should inject new confidence in management’s ability to execute on the Company’s strategy plan and deliver even more certainty to Westwater’s unique domestic U.S. graphite materials story.
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