Full Steam Ahead for Graphite Processor

Westwater Resources (WWR:  Nasdaq-Amex) has broken ground on a a processing plant in Alabama to produce battery-grade graphite.  Even a change in leadership does not appear to have slowed down the pace of work on a plant that is to process natural flake graphite concentrate.  A patent application is pending on a proprietary process that will produce the Company’s unique battery materials for lithium ion and other batteries.   

Source:  Alexander City Outlook

The change-over of senior officers for Westwater appears to have been handled with some ease, as the Company elevated its chief operating officer to replace the retiring chief executive officer.  To make certain the new CEO Chad Potter can remain focused on the construction of the graphite materials processing facility in Kellyton, Alabama, some of the usual executive responsibilities will be carried out by the Company’s chairman, Terence Cryan, who was named Executive Chairman. 

The right talent is still represented on Westwater’s executive team, even if its ranks appear to be a bit thin following the retirement of Christopher Jones.  The path forward for the next two years is already well mapped out and appears now to be a matter of strong and timely execution.  In this regard, Potter is well suited to the new assignment with an extensive operational background.

A review of recent corporate announcements from the graphite sector suggests that Westwater is well to the leading edge.  The Company has begun construction of a processing facility with the capacity to process 8,050 metric tons of graphite concentrate and produce 7,500 metric tons of battery-grade graphite materials per year.  The Westwater sales team has also built up a business pipeline populated by as many as forty parties interested enough to sign non-disclosure agreements and take up testing of Waterwater’s proprietary battery materials.  At least two of these prospects have moved forward with volume testing and preliminary order discussion.

Yet compared to other public companies in the graphite sector, Westwater’s stock appears undervalued.  Indeed, the intrinsic value of WWR could be as much as $21.29 per share based on the application of a price-to-book value multiple derived from a group of sixteen public graphite companies. 

Achievement of several milestones in the next few months that could trigger a change in sentiment toward WWR.  It is more likely than not that will make encouraging announcements related to its graphite processing facility construction project.  The plant itself will become physically visible. 

Wild cards in valuing Westwater's stock could be announcements related to potential customers.  In late 2021, management had suggested that as many as forty non-disclosure agreements had been executed, implying a robust business pipeline.  Unfortunately, the pipe flows slowly.  The review, testing and design-in process for battery manufacturers can be expected to be lengthy, even extending into years.  

In August 2019, Westwater announced that a major battery manufacturer had moved forward far enough to request a bulk sample of one metric ton of Purified Micronized Graphite (PMG) for volume testing, ostensibly in an alkaline battery.  In November 2021, the Company announced a letter of intent with another undisclosed prospect with interests in lithium-ion batteries.  The letter calls for the sale of 125 to 250 metric tons of Coated Spherical Purified Graphite (CSPG) beginning in 2023.

The Westwater graphite train appears to be leaving the station with a full head of steam.  Tickets for that train appear to be well discounted given the Company’s accomplishments.

 

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 WWR under the CER Reports series for micro-cap issuers.