With the fourth quarter 2019 financial report, Westwater Resources disclosed several recent advancements that we believe favorably impact Westwater’s competitive position, market opportunity and equity value:
- In late 2019, German engineering firm Dorfner Anzaplan was engaged to take what has been a laboratory exercise to pilot scale production of Westwater’s three battery-grade graphite materials. The pilot plant is scheduled for completion yet in 2020, contingent upon the availability of project financing.
- A research and development project has been undertaken related to its Coated Spherical Purified Graphite or CSPG While it is apparently not a battery application and the project involves no revenue, the project may confirm market visibility for the Company’s products.
- In early February 2020, Westwater Resources filed a required claimant’s memo against the Republic of Turkey with the International Center for Settlement of Investment Disputes (ICSID). The claim is for $36.5 million as compensation for what Westwater argues was Turkey’s unlawful retraction in June 2018, of Westwater’s license to mine uranium at the Temrezli and Sefaatli projects in Turkey. A ruling by the arbitration panel could be delivered as early as mid-2021.
In our view, Westwater Resources shares continue to be undervalued. In the Valuation and Outlook section of our most recent report dated February 25, 2020, we describe a valuation exercise based on a selected group of comparable companies in the energy materials sectors where the Company operates. WWR is currently valued at just under half its net asset value. Based on the multiple of the comparable group WWR shares should be priced today nearer $13.20 per share. We believe this is a base case valuation and does not fully encompass the potential in Westwater’s graphite and vanadium assets in Alabama. Westwater is among several graphite developers planning new pilot plant capacity. However, it is among few with a pilot plant design in the final stages and a significant potential customer in the final stage qualifying battery-grade graphite materials. Westwater is currently on schedule to be the first domestic U.S. producer of graphite materials in decades and the first to produce battery-grade graphite for a commercial battery product.
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