Westwater Resources announces 2023 business, financial updates
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More than $119 million invested in Kellyton Graphite Plant construction
Special to the News
Westwater Resources Inc., an energy technology and battery-grade natural graphite development company, is pleased to announce its results for the year ended December 31, 2023, and to provide business and financial updates.
2023 a Year of Progress:
During 2023, Westwater achieved critical milestones and achievements related to its planned natural graphite business, notably:
- In May 2023, Westwater announced the execution of a joint development agreement (JDA) with SK On Co, Ltd. (SK On).
- On February 5, 2024, Westwater announced the execution of its first off-take agreement with SK On for Coated Spherical Purified Graphite (CSPG).
- As a result of the completion of a debottlenecking study, Westwater has increased its anticipated Phase I production of CSPG to 12,500 mt per year while maintaining the Phase I construction budget of the Kellyton Graphite Plant at $271 million.
- Continued Phase I construction at the Kellyton Graphite Plant deploying approximately $119.2 million since inception of the project.
- In December 2023, Westwater announced the completion of its Initial Assessment with an economic analysis related to its Coosa Graphite Deposit and publication of the S-K 1300 Technical Report Summary (TRS) disclosing mineral resources, which indicates an estimated pre-tax NPV of $229 million, estimated pre-tax internal rate of return of 26.7%, and estimated free cash flow of $714 million over the 20-plus year mine life.
“We believe 2023 was a year of significant progress across our graphite business, which was the result of tremendous hard work by the Westwater team,” said Terence J. Cryan, Westwater’s executive chairman. “We are especially excited about our first off-take agreement with a major Tier 1 battery manufacturer, the increase in anticipated Phase I production while staying on budget and the positive anticipated economic results from our initial assessment of the Coosa Graphite Deposit.”
“Westwater is the only U.S.-based natural graphite company under construction on a processing facility that has a multi-year off-take agreement for CSPG, and that has a graphite deposit in the same state as its future processing plant,” said Frank Bakker, Westwater’s president, and CEO. “The accomplishments of the Westwater team were not only significant for 2023, but I believe positions Westwater well for 2024.”
Recent Government Regulation of Graphite Products
China and the United States have imposed tariffs and export controls on critical minerals, including graphite, indicating the potential for further trade barriers between China and the U.S. Effective December 1, 2023, China began requiring government approval for exports of two types of graphite products, including high-purity, high-hardness and high-intensity synthetic graphite material and natural flake graphite and its products.
Westwater believes these export restrictions continue to highlight the supply-chain risk for the U.S. and other countries related to natural graphite products.
The U.S. Department of the Treasury has published guidance on key requirements for federal clean vehicle tax credits established by the Inflation Reduction Act (IRA); most significantly, the Treasury Department proposed new regulations to clarify the application of Foreign Entity of Concern (FEOC) credit eligibility exclusions. The U.S. Department of Energy simultaneously released companion interpretive regulations regarding the scope and application of FEOC-related restrictions.
Most importantly, both sets of guidance identified the People’s Republic of China as an FEOC. These regulations are important because, starting in 2025, any vehicle whose batteries contain critical minerals – including graphite – that were extracted or processed in any way, and to any degree, by an FEOC – including China – will be ruled ineligible for the Clean Vehicle Tax credit of $7,500 under section 30D of the Internal Revenue Code.
As a result, an FEOC must be excluded from a vehicle battery’s supply chain in order for the vehicle to be eligible for the tax credit. Because Westwater is not an FEOC and intends to produce battery-grade graphite for lithium-ion batteries to be used in electric vehicles in the United States, management believes its future production of battery-graphite products will meet the domestic content requirements of the IRA, which we anticipate will provide indirect future benefit to the company.
Continuing Customer Engagement
As previously announced, Westwater executed its first off-take agreement for the supply of CSPG from its Kellyton Graphite Plant to SK On battery plants located within the U.S., with forecasted volumes ramping to 10,000 mt in the final year of the agreement.
Additionally, Westwater continues to engage with other potential customers by providing samples of CSPG produced by the company for testing and evaluation, hosting site visits at its Kellyton Graphite Plant and having technical product development and commercial discussions.
“Customer interest and market demand for domestic CSPG remains strong, and customer interest in Westwater is due to the combination of our SK On off-take agreement, FEOC-related guidance requiring EV tax credit eligible vehicles to use IRA-compliant graphite by 2025, and new Chinese export restrictions on graphite that have reduced stability of supply,” said Jon Jacobs, Westwater’s chief commercial officer. “We believe customer interest is accelerating in Westwater as a stable, U.S.-based supplier of natural graphite.”
Construction Financing Update
Westwater continues its efforts to secure debt financing to fund the balance of the estimated capital requirements for completion of construction of Phase I of the Kellyton Graphite Plant.
“We are continuing to engage with third parties interested in funding our project, and those parties have indicated they are pleased to see we have our first off-take agreement in place,” said Steve Cates, Westwater’s chief financial officer and SVP – finance. “With positive interest from additional customers and lenders, Westwater remains focused on executing additional off-take sales agreements and completing the project debt financing necessary to complete Phase I at the Kellyton Graphite Plant.”
As of December 31, 2023, Westwater had a cash balance of $10.9 million and has incurred approximately $119.2 million, inclusive of liabilities, since beginning construction of Phase I of the Kellyton Graphite Plant.
Westwater Resources is focused on developing battery-grade natural graphite. The company’s primary project is the Kellyton Graphite Plant that is under construction in Coosa County 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 (approximately 17,000 hectares) in Coosa County. For more information, visit www.westwaterresources.net.
