Westwater Announces an Anticipated 33%
Increase in Phase I Production to 10,000 MT Annually While
Maintaining the Existing Budget
Westwater Resources, Inc. (NYSE American: WWR), an energy
technology and battery-grade natural graphite development company
(“Westwater” or the “Company”), is pleased to announce its third
quarter results for the quarter ended September 30, 2023, and to
provide business and financial updates.
Anticipated 33% Increase in Phase I Planned
Production
During the third quarter of 2023, Westwater completed a
debottlenecking study with its third-party engineering firm
resulting in design changes that are expected to result in an
anticipated 33% increase in coated spherical purified graphite
(“CSPG”) production for Phase I of the Kellyton Graphite Processing
Plant (“Kellyton Plant”). As a result of the study, Westwater now
expects to produce 10,000 MT of CSPG annually in Phase I while
still remaining within its existing Phase I cost estimate of $271
million. “Increasing expected CSPG production by 33%, while
maintaining our estimated budget, is another significant step in
improving the economics of the Kellyton Plant,” said Frank Bakker,
Westwater’s President and CEO. “Customer engagement and market
demand for domestic CSPG remains strong, and we believe moving to
10,000 MT in response to this market demand enhances Westwater’s
position as a domestic source of CSPG.”
China to Curb Export of Graphite Products
In October, China announced a new set of export restrictions on
certain graphite products beginning December 1, 2023. Chinese
exporters will be required to apply for permits to ship two types
of graphite material, including “high-purity, high-hardness and
high-intensity synthetic graphite material and natural flake
graphite and its products.” Nearly 100% of the battery-grade
natural graphite materials produced today involve some amount of
processing in China. Westwater believes these new export
restrictions could increase prices of Chinese graphite materials
and could disrupt the global production of electric vehicle (“EV”)
batteries.
“This recent announcement by China further exposes the need for
the United States to establish a reliable battery-grade supply
chain,” said Terence J. Cryan, Westwater’s Executive Chairman.
“With the Kellyton Plant, Westwater is committed to leading the
domestic solution for a reliable supply of battery-grade graphite
materials for the EV market.”
Customer Engagement
As previously announced, Westwater has a Joint Development
Agreement (“JDA”) with SK On, a leading EV battery manufacturer. SK
On has provided testing feedback for samples produced by Westwater
under the JDA. If a supply agreement is executed between the
parties, the Company anticipates it would then supply a mass
production sample to SK On as part of its formal qualification
process.
Additionally, Westwater has signed general terms and conditions
for a supply agreement with a North American automobile
manufacturing company and is negotiating a possible offtake
agreement with this company for potentially all of Westwater’s
Phase I and Phase II production capacity.
Westwater continues to engage with other potential customers who
have tested samples of CSPG produced by the Company. Feedback from
certain potential customers indicates that Westwater’s material
meets their initial specifications. Westwater is continuing to
provide additional samples to these potential customers and current
counterparty interest indicates that Westwater's Phase I and Phase
II production capacity may be subject to commercial contracts in
2023 or 2024.
Jon Jacobs, Westwater’s Chief Commercial Officer added,
“Westwater expects to benefit from the combination of three trade
policies that all positively affect our U.S.-produced graphite
value proposition: the IRA, section 301 tariffs, and the
newly-announced China export restrictions on graphite. Together, we
believe these policies create financial motivation for U.S.-based
cell makers to source graphite domestically. Westwater is working
to fulfill that need.”
Construction Progress at the Kellyton Plant
During the third quarter of 2023, Westwater continued
construction activities at the Kellyton Plant, including the
receipt of additional long-lead equipment components, completing
the construction of five of six primary plant buildings, and
installation of overhead cranes ahead of equipment installation. As
of the date of this press release, Westwater has constructed and is
currently operating its research and development laboratory
(“R&D Lab”). The R&D Lab allows Westwater to continue
product development and optimization under the JDA with SK On and
other potential customers, and to perform additional quality
control tests. It also affords greater flexibility to optimize
future samples in accordance with customer specifications. Further,
in August, Westwater began installing micronizers, shaping mills
and steel in its shaping building.
While construction has continued during the quarter, Westwater
has reduced the level of construction activities from anticipated
levels, including adjusting the timing of future work, until
off-take and financing agreements are secured. Reducing the level
of construction activity until financing is secured is expected to
impact the overall construction schedule of Phase I of the Kellyton
Plant. Westwater expects to provide an update to investors
regarding the construction timeline of the Kellyton Plant when, and
if, the requisite financing is secured.
Coosa Graphite Deposit Update
During the third quarter, Westwater continued its third-party
consultant’s work on the preliminary economic assessment (“PEA”)
for the Coosa Graphite Deposit. The PEA will expand on the
Technical Report Summary (“TRS”) that was prepared as an initial
assessment in accordance with S-K 1300 and filed with the SEC on
Form 8-K on December 6, 2022. The PEA will include an economic
assessment based on the TRS and an initial mine plan. Westwater
still expects to complete and disclose the results of the PEA in
the fourth quarter of 2023.
Upon completion of the PEA, Westwater anticipates commencing a
strategic financing review process for the Coosa Graphite Deposit.
This strategic financing review process will seek to identify
financial investment sources and partners for the Coosa Graphite
Deposit and may include review of strategic investment partners or
other strategic transactions.
Construction Financing Update
Westwater continues its efforts to secure financing to fund the
balance of the estimated capital requirements for Phase I of the
Kellyton Plant. “We are still engaged with third parties interested
in funding our project, and we believe that finalizing an offtake
agreement for the sale of CSPG from the Kellyton Plant is critical
to securing and closing a financing transaction,” said Steve Cates,
Westwater’s Chief Financial Officer and SVP – Finance.
As of September 30, 2023, Westwater had a cash balance of $11.7
million and has incurred approximately $116.7 million since
beginning construction of the Kellyton Plant.
Financial Summary
($ in thousands, Except Share and Per
Share Amounts)
Q3
2023
Q3
2022
Variance
Net Cash Used in Operations*
$(12,187)
$(8,589)
42%
Net Cash Used in Investing Activities*
$(55,292)
$(31,968)
73%
Net Cash Provided by Financing
Activities*
$4,019
$25,572
(84%)
Product Development Expenses
$(979)
$(257)
281%
General and Administrative Expenses
$(2,499)
$(2,611)
(4%)
Net Loss
$(3,522)
$(3,453)
2%
Net Loss Per Share
$(0.07)
$(0.07)
–%
Avg. Weighted Shares Outstanding
52,989,857
47,462,656
12%
* Presented on a year-to-date basis.
- Net cash used in operations increased $3.6 million
during the nine months ended September 30, 2023, compared to the
same period in 2022 due to an increase in other long-term assets of
$2.9 million primarily related to purchases of raw material
inventory, and higher product development expenses of $1.8 million.
These increases were partially offset by other income (expense) of
$1.3 million resulting from higher interest income earned on the
Company’s cash balance and less foreign exchange loss during the
period.
- Net cash used in investing activities increased $23.3
million during the nine months ended September 30, 2023, compared
to the same period in 2022. The increase in investing cash outflows
is due to continued construction of the initial phase of the
Kellyton Plant. The capital expenditures in the first nine months
of 2023 included equipment and component purchases, engineering
costs, erection of five processing buildings and installation of
overhead cranes within certain buildings ahead of equipment
installation. The Company also continued engineering related to the
Phase I optimization and construction of the R&D Lab, which is
currently in operation. During the same period in 2022, activity
included earthwork and site grading, which was completed in July
2022, progress payments related to long-lead equipment items, work
on underground utilities and foundations, and detailed design
engineering and project management activities.
- Net cash provided by financing activities decreased
$21.6 million during the nine months ended September 30, 2023,
compared to the same period in 2022, due to lower sales of shares
under our equity financing facilities.
- Product development expenses for the third quarter of
2023 increased by $0.7 million compared to the same period in 2022.
The increase in Product development expenses primarily relates to
additional sample production for potential customers and work being
performed under the JDA with SK On. We expect to continue to incur
product development expenses as customers request additional
samples, and in some cases larger samples, as we work to contract
our planned CSPG production from Phase I of the Kellyton
Plant.
- General and administrative expenses decreased $0.1
million during the third quarter of 2023, compared to the same
period in 2022, due a reduction in personnel and overhead
costs.
- Consolidated net loss was $3.5 million, or $0.07 per
share, as compared with a net loss of $3.5 million, or $0.07 per
share for the same period in 2022. The Company’s net loss position
remained flat despite higher costs related to product development;
offset by less foreign exchange loss during the period.
- Cash and working capital as of September 30, 2023, were
$11.7 million and $3.2 million, respectively, compared to $75.2
million and $51.0 million as of December 31, 2022. The decrease in
cash was primarily due to capital expenditures of $55.3 million and
cash used in operations of $12.2 million; partially offset by cash
provided from financing activities. The decrease in working capital
was due primarily to cash spend during the first nine months of
2023; partially offset by lower current liabilities as of September
30, 2023, compared to December 31, 2022.
Live Conference Call
Management will host a conference call to provide a business
update to investors on December 14, 2023. Conference call
information related to this business update will be announced ahead
of the call.
About Westwater Resources, Inc.
Westwater Resources, Inc. (NYSE American: WWR), an energy
technology company, is focused on developing battery-grade natural
graphite. The Company’s primary project is the Kellyton Plant that
is under construction in east-central Alabama. In addition, the
Company’s Coosa Graphite Deposit is the most advanced natural flake
graphite deposit in the contiguous United States and located across
41,965 acres (~17,000 hectares) in Coosa County, Alabama. For more
information, visit www.westwaterresources.net.
Cautionary Statement Regarding Forward-Looking
Statements
This news release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are subject to risks, uncertainties and
assumptions and are identified by words such as "expects,"
"estimates," “planned,” "projects," "anticipates," "believes,"
"could,", “scheduled,” “targets” and other similar words. Forward
looking statements include, among other things, statements
concerning the JDA and future agreements with SK On, possible
offtake agreements, as well as the potential debt financing, the
construction and operation of the Company’s Kellyton Plant, the
Company’s Coosa Graphite Deposit and its PEA, and the costs,
schedules, production and economic projections associated with
them. The Company cautions that there are factors that could cause
actual results to differ materially from the forward-looking
information that has been provided. The reader is cautioned not to
put undue reliance on this forward-looking information, which is
not a guarantee of future performance and is subject to
uncertainties and other factors, many of which are outside the
control of the Company; accordingly, there can be no assurance that
such suggested results will be realized. The following factors, in
addition to those discussed in Westwater’s Annual Report on Form
10-K for the year ended December 31, 2022, and subsequent
securities filings, could cause actual results to differ materially
from management expectations as suggested by such forward-looking
information: (a) our ability to finance growth plans and raise debt
or equity capital; (b) the spot price and long‑term contract price
of graphite (both flake graphite feedstock and purified graphite
products) and vanadium, and the world-wide supply and demand of
graphite and vanadium; (c) the effects, extent and timing of
additional competition in the markets in which we operate; (d) the
ability to obtain contracts with customers; (e) available sources
and transportation of graphite feedstock; (f) the ability to
control costs and avoid cost and schedule overruns during the
development, construction and operation of the Kellyton graphite
processing plant; (g) the ability to construct and operate the
Kellyton graphite processing plant in accordance with the
requirements of permits and licenses and the requirements of tax
credits and other incentives; (h) effects of inflation and rising
interest rates; (i) the availability and supply of equipment and
materials needed to construct the Kellyton graphite processing
plant; (j) stock price volatility; (k) government regulation of the
mining and manufacturing industries in the United States; (l)
unanticipated geological, processing, regulatory and legal or other
problems we may encounter; (m) the results of our exploration
activities at the Coosa Graphite Deposit, and the possibility that
future exploration results may be materially less promising than
initial exploration results; (n) any graphite or vanadium
discoveries at the Coosa Graphite Deposit not being in high enough
concentration to make it economic to extract the metals; (o)
currently pending or new litigation or arbitration; (p) our ability
to maintain and timely receive mining, manufacturing, and other
permits from regulatory agencies; and (q) other factors which are
more fully described in our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, and other filings with the SEC.
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Westwater Resources, Inc. Email:
Info@WestwaterResources.net
Investor Relations Email:
Investorrelations@westwaterresources.net
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