Westwater Resources Inc. (NYSE American: NYSE:) has announced a significant milestone in its latest earnings call, securing a second multi-year offtake agreement with Fiat Chrysler Automobiles (FCA), part of Stellantis (NYSE:) Group, for the sale of Coated Spherical Purified Graphite (CSPG) from its Kellyton Graphite Plant.
This agreement ensures that 100% of the plant’s phase one production is contracted through 2031, with some phase two volumes also under contract. The company is now focused on securing debt financing to complete phase one construction, with discussions with multiple lenders already underway.
Key Takeaways
- Westwater Resources Inc. has signed a second multi-year offtake agreement with FCA, ensuring full phase one production is contracted through 2031.
- The company has begun contracting for phase two volumes, with the Stellantis contract already accounting for some.
- The agreement includes price indexation for graphite flake and CSPG, providing downside protection and commodity price risk reduction.
- Westwater is in discussions with lenders for debt financing to complete phase one construction at the Kellyton Graphite Plant.
- The company anticipates being in production with phase one volumes by the end of 2026.
Company Outlook
- Westwater is planning to select a lender and sign a binding term sheet to move forward with debt financing.
- The company aims to provide an economic update on phase two during the August call.
Bearish Highlights
- No specific bearish highlights were discussed during the call.
Bullish Highlights
- Westwater has secured 100% of phase one production capacity through long-term contracts, enhancing their financial stability.
- The company has started the process of contracting phase two production volumes.
Misses
- There were no specific misses mentioned in the earnings call.
Q&A Highlights
- Phase one design capacity is 12,500 metric tons per annum, and all volumes are fully contracted.
- Westwater is in regular dialogue with the Department of Energy and other U.S. government entities regarding funding opportunities.
- The company has no plans for a reverse stock split and is in full compliance with NYSE American listing requirements.
In the Q&A session, Westwater confirmed that it is fully compliant with NYSE American listing requirements and has not received any notices of non-compliance. The company also clarified that they are listed on the NYSE American exchange and have no plans to move to the OTC markets.
With the new offtake agreements in place, Westwater expressed confidence in its profitability and ability to service debt financing once the Kellyton plant is operational. The next update on the company’s progress, including the feasibility study for phase two, is expected in the August earnings call.
InvestingPro Insights
As Westwater Resources Inc. (NYSE American: WWR) forges ahead with its Kellyton Graphite Plant and secures its financial future through offtake agreements, the company’s financial metrics and market performance provide a deeper understanding of its current position. With a market capitalization of $29.5 million, Westwater Resources presents itself as a smaller player in the market, which may appeal to investors looking for growth opportunities in the specialty minerals sector.
An InvestingPro Tip worth noting is that the company is trading at a low Price / Book multiple of 0.22 as of the last twelve months ending Q1 2024. This could suggest that the stock is undervalued relative to its book value, potentially offering an attractive entry point for value investors. Additionally, Westwater Resources holds more cash than debt on its balance sheet, which is a positive sign for investors concerned about the company’s financial resilience.
Despite the optimism surrounding the new offtake agreements, it’s important to consider that Westwater Resources is not profitable over the last twelve months and has a negative EBITDA of -$13.02 million for the same period. This underlines the importance of the company’s strategic moves, such as the recent agreements, to pave the way towards future profitability.
Investors interested in further analysis and additional InvestingPro Tips for Westwater Resources can explore the full suite of insights available on InvestingPro. There are 10 more tips to discover, which could provide valuable context for investment decisions. Remember to use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and enrich your investment strategy with expert analysis.
Full transcript – Westwater Resources Inc (WWR) Q1 2023:
Operator: Thank you for standing by. This is the conference operator. Welcome to the Westwater Resources Inc., Business Update and Investor Call. As a reminder, all participants are in listen-only mode. The conference is being recorded. (Operator Instructions). I would now like to turn the conference over to Frank Bakker, President and CEO. Please go ahead, sir.
Frank Bakker: Thank you, moderator, and thanks to those attending this business update call. With me today is Terence Cryan, our Executive Chairman of the Board and Steve Cates, our Chief Financial Officer. During this presentation, the forward-looking statements we make are based on management judgments, including, but not limited to, our planned sales of graphite anode materials from our Kellyton Graphite Plant, future demand and price forecasts for graphite flake and CSPG, projections and economic expectations related to the Kellyton Graphite Plant and the Coosa Graphite Deposit, and capital-raising activities, including the estimated timing of those activities. These and other similar statements are subject to certain risks and uncertainties, of which a description can be found on Slide 2 within this presentation, and in our 10-K for 2023 and our other SEC filings. Please read our cautionary statement and realize that actual results may differ materially from what is discussed today. Turning to Slide 3, today we are excited to announce the signing of our second multi-year offtake agreement with Fiat Chrysler Automobiles, or FCA, which is part of the Stellantis Group of Companies. As required by SEC rules, we have filed a Form S-8-K disclosing this agreement. Stellantis is a multinational automotive manufacturing corporation that owns multiple brands, such as Dodge, Chrysler, Fiat Jeep, Maserati, Opel, Peugeot (OTC:) and others. Under the terms of the agreement, Westwater will sell CSPG that will be produced at our Kellyton plant to FCA. With this agreement in place, along with our agreement with SK ON announced in February, our production volume of phase one is completely sold out during the term of the agreements. This agreement is significant for Westwater, as we have now contracted to complete planned phase one production in 2026, and we contracted 100% of our planned phase one volumes from 2027 until 2031, and we have begun contracting phase two volumes as well. We are excited to partner with one of the world’s leading manufacturers of electrical vehicles, and to assist Stellantis in securing a U.S.-based supply of anode material. And now I would like to turn the call over to our Chief Financial Officer, Steve Cates to provide an update on finance.
Steve Cates: Thank you, Frank. Moving to Slide 4, this agreement with Stellantis is not only a significant achievement for Westwater from a contracted volume standpoint, but it is also a critical step in securing debt financing to complete phase one construction at Kellyton. It’s important to emphasize that the FCA agreement is a multi-year contract and includes indexation for flake and CSPG pricing that should provide downside protection related to the changing graphite prices. We believe this indexation will limit exposure to commodity prices, which is attractive to lenders as well. Since both graphite flake and CSPG products do not have established markets to hedge price fluctuations, securing indexation in the FCA agreement provides a hedging element within the contract. While we are still planning to be vertically integrated through the development of our Coosa graphite deposit, this indexation also reduces commodity price risk for Westwater until the Coosa graphite deposit is developed. In addition, we believe the long-term nature of this contract is beneficial and attractive to lenders. The multi-year agreements with Stellantis and SK ON mean that 100% of the planned phase one volume is under contract through 2031. Regarding debt financing to complete construction of phase one, as previously stated, we have been in discussions with multiple lenders over the past six to nine months, and securing offtake agreements for plant capacity is critical in moving those discussions forward. As we move forward, we will be looking to select a lender, sign a binding term sheet, and thus go exclusive with a preferred lender. From there, we will enter the formal diligence and loan documentation processes. We plan to keep the market updated as we move through and complete those processes. With that, I will turn the call back to you, Frank.
Frank Bakker: Thank you, Steve. Signing this second multi-year offtake agreement with phase one volumes contracted through 2031 is a significant accomplishment for the Westwater team. I want to acknowledge our sales and technical teams for the hard work in achieving this significant milestone. To our knowledge, this is the first offtake agreement for natural graphite anode material executed by a 100% U.S.-based company with a tier 1 automotive manufacturer. Before turning the call over for questions, I want to thank the entire Westwater team for their continued dedication and excellent work. With that, I will turn the call back to you, operator, for questions. Thank you.
Operator: (Operator Instructions) First question comes from Michael Pierce with Gene Lockworm (ph). Please go ahead.
Unidentified Analyst: Hey, guys. How are you doing?
Frank Bakker: Doing well, Michael. How are you?
Unidentified Analyst: Good. First thing I want to do is clarify, Frank said something about contracting phase two volumes as well. Was he saying that part of that has been contracted or that you’re anticipating that?
Steve Cates: Michael, this is Steve. With the two contracts, the SK ON contract and the now Stellantis contract, when we look at those volumes put together, and we get into the out years, some of phase two volumes are already under contract with those two contracts combined.
Unidentified Analyst: Okay. I understand that. So phase one, I know you guys have done a number of updates on the amount that can be produced in phase one. What is the amount now that can be produced in phase one based on your technical working?
Steve Cates: Yeah, Michael, as you recall, I believe it was probably our yearend update, I believe, if I remember correctly, we had increased our planned volumes to 12,500 metric tons per annum in phase one. And that’s still the design capacity right now.
Unidentified Analyst: Okay. So, and those volumes at this point are all locked up. You don’t have to worry about contracting for those anymore.
Frank Bakker: Yes, that’s correct. Everything is locked up with those two agreements that we have.
Unidentified Analyst: Do you guys have a construction timeline or anything that you can share with the market?
Frank Bakker: Yeah, we’ve been updating our schedule. And the way the schedule looks is that we are able to supply volume according to the offtake agreements we signed in 2026.
Unidentified Analyst: So, you anticipate being in production with phase one volumes by the end of next year?
Frank Bakker: Yes, correct. That’s what the schedule looks like.
Unidentified Analyst: Okay. Do you guys have any sort of an economic update on where that would put you guys, being able to sell that kind of volume on this new plant you’re building?
Frank Bakker: Economic update, you mean economic update on phase two or phase one?
Unidentified Analyst: Well, either. I know it was being discussed that you all were working on your feasibility study for phase two.
Frank Bakker: Correct, yeah. So we put a lot of effort in our feasibility study for phase two. And we’ll provide an update with the outcome of the feasibility study during our August call.
Unidentified Analyst: During your August call. Okay.
Frank Bakker: Yes.
Unidentified Analyst: With these contracts in place, do you anticipate being a profitable company once this plant is up and running?
Steve Cates: Hi, Michael. This is Steve. Yeah, we’ve spent a lot of work in negotiating and really holding firm to align to make sure we have profitability with these contracts in place. And not only profitability, but that we have the ability to service a debt financing.
Unidentified Analyst: Okay. Well, I look forward to hearing more from you guys. I appreciate it.
Steve Cates: All right. Thank you, Michael.
Unidentified Analyst: Thank you.
Operator: The next question comes from Nigel Smith (ph), private investor. Please go ahead.
Unidentified Analyst: Yes. Good morning to you all. I have a couple of questions. One being that the — in this critical mineral space, many junior miners have applied for and received not only federal funding, so throughout the U.S. and Canada, state funding as well. Could you detail which of these grants you have applied for and what the status of those grants are? And if not, why not? Thank you.
Terence Cryan: Good morning. And thanks for your question. This is Terence Cryan. We have maintained a very regular dialogue with a number of different government entities here in the U.S., including the Department of Energy for the last number of years. It’s not our policy that we would comment on any applications we may have made, or negotiations we may be having with those entities in advance of any awards that might be made. But as fiduciaries, I think you can be very confident that we are exploring all options. And if there’s an opportunity for us to access a lower cost of capital, we will do so.
Unidentified Analyst: Okay. Thank you. That’s very helpful. The other thing I’m wondering is minimum bid price. You’ve been at $0.50 for the last six months. Many of these junior mining companies are all on the OTC. Many of them are Canadian. Some are American. They’re on the OTC. You envisage going to the OTC since your share price isn’t going to affect your ability to receive any loans. That’s going to be fiduciary. So if you were to go to the OTC, we wouldn’t have a diminishment of shares. But if you do a reverse split, it’s really going to tank our portfolio values. Could you give some comment on what you plan to do when you run out of time with your minimum share price? Thank you.
Terence Cryan: So Westwater is listed on and trades on the New York Stock Exchange, American exchange, not the over-the-counter market. We think being on the New York Stock Exchange American provides significant benefits to investors, being arguably the preeminent trading platform in the world. Westwater has no plans at this time to consider a reverse split. We’re fully in compliance with all of the listing regulations of the New York Stock Exchange American. And so we look forward as shareholders ourselves to an appreciation in the stock price and a revaluation of our company as people begin to realize the value that we’re creating at Westwater.
Unidentified Analyst: Okay. Just with your share price being so low, have you received any notices of compliance or non-compliance from the NYSE? Thank you.
Terence Cryan: We have not. And as I previously mentioned, we’re fully in compliance with all of the listing requirements for the New York Stock Exchange American.
Unidentified Analyst: Okay. All right. I appreciate it. Thank you, gentlemen. Good day.
Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Frank Bakker for any closing remarks. Please go ahead.
Frank Bakker: Thank you, operator. I want to thank you for the interest in our company, and I look forward to our next call. Thank you.
Operator: This concludes today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
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