Westwater Resources management is moving rapidly forward on its plans to build a natural flake graphite processing plant near Kellyton, Alabama. The Company’s footprint is now a 100-acre site at an existing industrial site composed of clear land and two adjacent commercial buildings that can be used for administrative and warehouse functions. The Company expects to begin construction of the processing facility on the cleared land before the end of December 2021. Completion and commissioning of the plant is expected in the first three months of 2023. The timetable makes it possible for Westwater to produce and sell its proprietary battery grade graphite materials beginning in 2023, the first domestically produced battery-grade graphite in decades.
Subsequent to the quarter earnings release, the Company announced a letter of intent to deliver in 2023, between 125 metric tons and 250 metric tons of the Company’s proprietary Coated Spherical Purified Graphite (CSPG) to an unnamed customer. The agreement includes an option for an additional 16,000 metric tons of CSPG for delivery in 2025. The announcement validated marketability for the Company’s products and provides some assurance the Company can begin realizing revenue as soon as its graphite processing facility is completed in early 2023.
The Company reported holding $119 million in cash on its balance sheet at the end of September 2021. Additionally, Westwater has $120 million in available capacity to raise capital through the sale of common stock pursuant to existing equity sales agreements. While these resources may not be sufficient to cover both the capital costs of the graphite project as well as regular operating activities, the Company appears to be well fortified to remain on the construction timetable. We expect Westwater management to explore additional capital raising alternatives, including equipment financing, strategic relationships, debt, and the sale of additional common stock.
We continue to view WWR as undervalued based on a review of valuation metrics for peers in the metals and mining industry. There are several potential catalysts that could bring the shares closer to a comparably implied $15.52 intrinsic value and ultimately to our target price of $20.00. 1) While not a central issue for Westwater, we believe the settlement of the Company’s dispute with the Republic of Turkey over confiscated uranium mining licenses is more likely than not to be decided in Westwater’s favor. 2) Favorable trends in graphite demand as electric vehicle adoption continues to grow around the world as well as additional sales contracts confirming the expansion of the Company’s business pipeline. 3) Visible progress on the graphite processing plant should materialize in the coming months, affirming the reality that Westwater could become the first domestic processing of commercial graphite materials in the U.S. in decades. 4) Additional customer orders and letters of intent to sell graphite could be the strongest drivers of higher stock prices.
Click on the image below to read more details in a 6-page report dated November 18, 2021.
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