The broad U.S. market has been fretting over the pace of economic activity as China and other countries attempt to contain spread of the virus. However, energy materials developer Westwater Resources (WWR: Nasdaq) has been unfazed by the prospect of quarantines or work stoppages. They are not in production yet anyway.
Westwater is in a race to bring
battery-grade graphite to market. The
company’s first three proprietary graphite products include Purified Micronized
Graphite (PMG), Delaminated Expanded Purified Graphite (DEXPG) and Coated Spheronized Purified Graphite (CSPG).
PMG has taken on
greater priority for Westwater in the last couple of years as battery
manufacturers have turned to specialized graphite materials for performance
enhancement of conventional batteries.
The company apparently remains on schedule to deliver one ton of its PMG product to an unnamed battery
manufacturer with a product line that includes lead acid and alkaline
batteries. The large volume of PMG will be used in a follow-on round of
qualification testing. During an
earnings conference call in mid-February 2020, management expressed confidence in the ability to
produce the one ton of PMG at its
planned graphite materials pilot plant.
To produce its
battery materials in the near-term the company is sourcing graphite raw
materials from the open market, but in the long-term will mine graphite
concentrate from its own mine in Coosa Country, Alabama. Graphite has not been mined in Alabama for
decades and Westwater’s return to the state will represent a seminal event for
the U.S. commodity market.
Westwater
recently engaged a German engineering firm, Dorfner Anzaplan, to take
what has been a laboratory exercise to commercial scale production of the three
graphite products. The Dorfner engineers
are expected to perfect the methods and operating requirements for purifying
natural flake graphite and then design a pilot plant.
The pilot plant
is scheduled for completion yet in 2020, contingent upon the availability of
project financing. The plan so far is to
use standard equipment and proven processes in the pilot plant, which should foster
some confidence with lenders and investors considering financing the
plant. Dorfner is expected to complete
its current engineering and design work sometime near the end of the quarter
ending June 2020.
China figures
prominently in the battery-grade graphite supply chain. Operations at China processors of flake and
spherical graphite had resumed by the third week in February 2020, but with
partial workforce. Producers near port
cities are more likely to begin making export shipments as they have access to
seaborne delivery options. Market prices
have remained steady on reportedly limited trading. There had been suggestions that prices of
higher mesh graphite could increase.
However, even by the end of February 2020, price quotations had yet to
reflect this development.
Graphite price
fluctuation may occur in the near-term, but that is not likely to have any
impact on Westwater’s long-term plans for its graphite market entrance. The adoption of electric vehicles, most of
which are powered by lithium ion batteries, is driving demand for
graphite. Despite the name, conventional
designs of lithium ion batteries use more graphite than any other
material. Demand for natural flake
graphite from lithium ion battery manufacturers is expected to increase at
about 20% annually through 2028.
Consequently,
Westwater management is keeping their collective eye on the prize of a large
and growing market for battery grade graphite.
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.
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