Westwater Resources Inc (NYSE-A:WWR) recently announced that it has signed its first graphite off-take agreement with South Korean electric vehicle (EV) battery developer SK On.
The announcement is significant for the Alabama-based company which is positioning itself to be a key domestic supplier of graphite for American EV-makers.
The company will supply natural graphite anode products from its Kellyton graphite plant to SK On’s battery plants located in the United States. SK On supplies EV batteries to major automakers including Ford, Hyundai and Volkswagen.
In conversation with Proactive, Westwater’s chief commercial officer Jon Jacobs discusses the achievement and provides an update on construction activities at the Kellyton plant.
Proactive: The company announced that it has signed its first off-take agreement. Can you talk about this key milestone?
JJ: This is Westwater’s first production off-take agreement so it’s a big deal. It’s a big win for the company. We worked hard to achieve that.
We had a joint development agreement with SK On and were working to optimize a graphite material. This formal off-take agreement, which is a rare announcement in the battery world, is evidence that their technical teams like the material and they’re ready to use it in production.
Much of the agreement is confidential but what I can mention is that it will grow to 10,000 tons per year. To put that into perspective, the average EV contains about 175 pounds of graphite. If you assume about half of that is natural graphite, 10,000 tons per year is equivalent to about 250,000 EVs, so it’s a significant agreement.
Westwater is one of only two US companies to have signed this type of agreement for the type of graphite you’re producing. What does this mean for the company moving forward and what opportunities do you see?
There’s three things working to our advantage right now. The Inflation Reduction Act (IRA) is a big one. And in December of last year, the Department of Energy offered some clarity on foreign entities of concern meaning that any EV that uses graphite extracted or processed in China is ineligible for the entire US$7,000 EV tax credit. More than 98% of EVs use graphite from China so starting next year that’s got to change and that’s driving interest to Westwater because we’re one of the few companies that is going to be ready.
The second thing is Chinese export restrictions. The country put restrictions on graphite exports last year which shows that this supply chain that was once considered pretty stable can change. The Chinese government can pick winners and losers. That again drives interest to Westwater.
The third is, of course, the SK On deal. This is a show of credibility. Other battery makers and car companies pay attention to these types of agreements and they know the due diligence that would have been required by SK On to take such a step. This cements Westwater on a short list of companies that are able to supply graphite.
Tell me about where you are at with construction at your graphite plant.
We’re shifting from sales mode to execution. To get ready to supply these materials, we have to produce increasingly larger sample sizes in the neighborhood of 10 to 15 tons. We are now installing our own qualification line right at the facility alongside our mass production plant. This will give us the ability to produce a ton every two to three days. By the latter half of this year, we will start to send these important big samples to the companies for them to do their final qualification runs.
In parallel, at the plant itself, we are still seeking the final portion of financing necessary to finish the plant. The SK On off-take agreement definitely helps with those discussions. We will continue to work on the plant with the goal of bringing it online in time to support customers, which is off-take dependent as to when they are going to start to take material, but will most likely be next year.
Quotes have been edited for clarity and style