Westwater Resources ‘buried the headline’ deep in the announcement of financial results for the second quarter ending June 2022. Nonetheless, shareholders have plenty to celebrate as the Company announced a letter of intent with a manufacturer of consumer batteries to supply Westwater’s Purified Micronized Graphite (PMG) beginning in 2023, following the construction and commissioning of the Kellyton Graphite Processing Plant. The unnamed battery producer has committed to additional testing and qualification of PMG samples produced using the Westwater’s pilot plant capacity.
The announcement brings to three the number of customer prospects that have advanced to final steps in Westwater’s business pipeline, including final qualification testing, indications of interest in specified volumes and commitments to mutual development activities. In our view, despite the lack of details regarding the potential customer, the announcement provides strong evidence of the commercial potential in Westwater’s graphite materials. We believe the Company continues as a leader in the graphite sector in terms of its business development efforts.
We continue to view WWR as undervalued relative to its peers in the graphite materials. A group of sixteen graphite exploration and development companies are trading at an average of 5.69 times book value. This compares to a price to book value multiple of 0.49 for WWR. Impeccable execution on its graphite materials processing plant near Kellyton, Alabama that puts the Company in a good position to begin commercial scale production of its proprietary graphite materials products in late 2023. Nonetheless, traders have kept WWR trimmed back over concerns about the ability of the Company to raise all the capital needed to pay for the construction and commissioning of the plant. We believe the fretting over capital resources could be overplayed given the addition of yet a third prospective customer with a clear interest in Westwater products. The potential for orders beginning as early as 2023, clearly improves the chances of gaining new capital.
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