Energy materials developer Westwater Resources (WWR: Nasdaq) is now found in the enviable position of capital sufficiency - at least for the next two years. With common stock placement agreements already in place, the company was able to move swiftly to take advantage of favorable price movements beginning in October 2020 and through February 2021. After the stock price languished near under $2.00 per share for months in early 2020, the stock was boosted favorable trends in the U.S. equity market that propelled valuation metrics and increased trading volumes. Over the four months ending January 2021, the Company was successful in raising $104.2 million at prices well over $5.00 per share.
As of early February 2021 Westwater had over $100 million in its cash kitty. During the conference call to discuss year-end 2020 financial results in February 2021, management suggested the current cash resources are sufficient for working capital through the end of the year 2022 with the potential for some allocation to the budget for Westwater’s graphite materials processing plant planned for construction in Coosa County, Alabama.
Some
shareholders may have been troubled by the increase in Westwater’s total shares
outstanding to 29.4 million compared to 3.3 million shares outstanding at the
end of 2019. While no astute investor likes
dilution, capital resources are required for successful execution on Westwater’s
plan to become the first domestic source of graphite in eighty years. If accomplished, we believe Westwater could be
placed in a highly visible position in the energy materials market as the sole
domestic source of a mineral recognized as critical by the U.S.
government. We expect this first-to-market
accomplishment to be pivotal in future market penetration and a strong driver
of long-term value.
The third week
in February 2021, Westwater Resources reported financial results for the fourth
quarter and year ending December 2020. Still
in non-commercial stage with its graphite asset development, the Company reported
total operating expenses for the year $11.2 million and an operating loss of
the same amount. This compared to $6.3
million in operating spending and loss in the previous year. Expenses in the year 2020 included an
incremental $4.0 million in product development expenses related to the ongoing
test of the Company’s proprietary graphite materials process technology and plant
design.
The report
summed up a year of dramatic change for the Company, including the divestiture
of uranium assets and the reversion of lithium exploration licenses that have
left the Company exclusively focused on graphite asset development. Arguably, the most important disclosures in the
reports related to changes in the Company’s balance sheet and cash flows rather
than in the operating loss for the year 2020.
In our view, in
the near-term it will not be quarter reports that fire up investors for WWR
shares. Instead, we expect attention-getting
announcements from Westwater as the pace of activity in Westwater’s graphite
development projects accelerate. The Company is on schedule to reach key
milestones in 2021. We expect
announcements related to the completion of the Company’s graphite materials
pilot process sometime in early 2021 and the publication by June 2021 of a
final feasibility study for the Alabama graphite mine and minerals processing
plant.
Neither the author of the Small Cap Strategist web
log, Crystal Equity Research nor its affiliates have a beneficial interest in
the companies mentioned herein. Crystal
Equity Research has a Speculative Buy rating on Westwater Resources, which is included
in the CER Reports series for issuers sponsored research coverage.
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