Water Tower Research has initiated coverage of graphite company Westwater Resources Inc (NYSE-A:WWR), calling it a green energy materials company with a “laser focus” on becoming a US supplier of battery-grade graphite products.
NYSE American exchange-listed Westwater Resources is developing the Kellyton graphite processing facility that is under construction in east-central Alabama.
In addition, Westwater’s Coosa graphite deposit is the most advanced natural flake graphite deposit in the contiguous United States, located across 41,900 acres (around 17,000 hectares) in Coosa County, Alabama.
READ: Westwater Resources says Steven M. Cates has been elected as its new CFO and vice president – Finance following the retirement of Jeffrey L. Vigil
Analysts at Water Tower noted Westwater’s plan to develop its processing plant before exploring Coosa could lead to faster value creation.
“Unlike similar early-stage resource development companies, Westwater made the strategic decision to bring on initial processing capacity utilizing a non-Chinese third-party graphite flake supply and develop its own graphite mine later, which should allow the company to achieve commercial revenues and generate operating cash faster than would otherwise be the case,” analysts at Water Tower wrote. “This should provide Westwater the means to potentially self-fund, in part, Phase 2 expansion as well as the development of its mine.”
They also highlighted the firm’s proprietary, patent-pending purification process that is less environmentally impactful than current technologies used by Chinese producers. The process allows the company to process graphite flake from different sources to produce 99.95%-plus purity materials required by the battery industry.
Plant-first approach should pay off
Westwater is on track to complete the construction of production facilities and associated infrastructure of Phase 1, keeping the project on plan for completion by the end of the second quarter of 2023, Water Tower noted.
“By focusing on processing and production capacity for battery-grade graphite products before developing its own mine, Westwater should be able to develop a profitable business even while purchasing graphite flake from third parties,” analysts wrote.
Water Tower added that Westwater’s continued progress on the conversion plant construction should result in the company being first to market when it comes to the domestic supply of both coated and uncoated spherical purified graphite, which it called “an important driver of higher shareholder value creation and ultimately a higher stock price.”
“It is here that we believe management’s ‘plant-first’ strategy will ultimately pay off,” Water Tower concluded.
The full research report is available here.
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