A recent site visit to Westwater Resources’ graphite project in Alabama confirmed of progress in construction of a facility to produce battery-grade graphite materials. Our day-long visit verified management’s claims of progress in its efforts in Alabama and more importantly confirmed the project is on-schedule for completion in early 2023. Additionally, we came away from the meeting with the Alabama team having gained new confidence in their capabilities to deal with the challenges of establishing Westwater as a fully integrated miner of graphite resource and supplier of battery-grade graphite materials. We gained insight into the next few months for the team, which must assemble and train staff for operating a processing plan as well as establish processes and procedures for shipping finished products and billing customers.
We continue to rate WWR at Speculative Buy with a $20.00 price target. The recent downward pressure on the stock renders our price target more aspirational than realistic in the near-term. However, there is no fundamental rational for changing our valuation. Indeed, the site visit reinforced our long-standing view of WWR as undervalued against its market opportunity and capacities to derive earnings from its assets.
With the upcoming first quarter 2022 financial report we expect to gain insight into capital requirements for completing the graphite processing plant. The Company had previously provided $202 million as a project cost. Experience in the first five months of the construction project should have given management a more informed view on its initial budget, which can be disclosed with the first quarter report. The first quarter update could be an important inflection point for WWR.
Click on the image below to access the full 17-page report, including seven pages of images from the April 21, 2022 site visit.
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