Through two strategic moves Westwater Resources is now able to direct all human and capital resources to the development of battery-grade graphite and the extraction of natural flake graphite from its Coosa County, Alabama graphite asset. Mid-September 2020, the Company announced the planned sale of its North American uranium assets to a U.S. uranium exploration and development company in exchange for an equity stake in the public stock of the acquirer. Additionally, the Company announced the intention to relinquish its lithium claims and licenses in the states of Nevada and Utah. The Company estimates that the strategic moves could free up as much as $4.2 million in operating cash flow over the next year, an outcome that could be pivotal in getting the Company’s battery-grade graphite materials to customers. A low-volume pilot process is currently being assemble in Germany. Before the end of 2020, the pilot plant is expected to produce at least one ton of the Company’s Purified Micronized Graphite (PMG) for a use by a prospective customer in final testing and verification tests.
We continue to rate Westwater Resources shares at Speculative Buy and reiterate our bullish view at the current stock price. In our view, the decisions to exit the uranium and lithium sectors are astute and timely given the real progress the Company has made with its graphite materials development. There appear to be near-term commercial opportunities for the graphite materials that could lead the Company to breakeven or profit in the next couple of years. We agree with management’s argument that it is wise cash management to exit the uranium and lithium initiatives and redirect cash resources to graphite. Both the uranium and lithium initiatives were facing long trajectories to reach an economic stage while the graphite picture appears more promising than ever.
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