Westwater Resources, Inc. — 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019; filed February 14, 2020. This is an annual report, not a standalone fourth-quarter report. Westwater is a pre-revenue energy-materials developer focused on graphite, lithium exploration and uranium assets, with vanadium exploration at its Coosa, Alabama project.
Financial performance and position
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | $0 | $0 |
| Net loss | $10.6 million | $35.7 million |
| Net loss per share | $5.39 | $38.47 |
| Net cash used in operating activities | $10.0 million | $11.6 million |
| Net cash provided by investing activities | $3.8 million | $0.5 million |
| Net cash provided by financing activities | $6.7 million | $8.7 million |
- At December 31, 2019, cash and cash equivalents were $1.9 million; working capital was negative $1.3 million. Restricted cash of $3.8 million was pledged for performance bonds and is not available for general corporate use.
- Total assets were $27.0 million and total liabilities were $9.9 million. Liabilities included $6.3 million of asset-retirement obligations and $0.5 million of other long-term liabilities; the filing does not report conventional borrowings as a material balance-sheet item. Operating lease liabilities were $0.5 million.
- Gross margin is not applicable because the company had no revenue. The filing reports no mineral production since 2009.
- Operating cash burn averaged approximately $0.9 million per month in 2019. Cash was reported at $1.6 million on February 12, 2020; the filing also says the company raised approximately $9.2 million through February 14, 2020 from equity sales and asset-sale proceeds.
Changes and notable items
- Net loss narrowed substantially from 2018, primarily because 2018 included $23.7 million of uranium-property impairments, including an $18.0 million impairment of Turkish assets. 2019 impairment expense was $0.1 million.
- 2019 operating cash use declined by $1.6 million year over year, while equity financing and asset sales continued to fund operations. Westwater sold uranium royalties and the Laramide promissory note to Uranium Royalty Corp. for $2.75 million gross consideration, recognizing a $0.7 million gain.
- Arbitration costs rose to $1.4 million in 2019. General and administrative expense fell to $6.1 million, compared with $7.0 million in the audited statement of operations for 2018.
- The company completed a one-for-fifty reverse stock split in April 2019 to regain compliance with Nasdaq’s minimum bid-price requirement. Shares outstanding increased from 1.44 million at year-end 2018 to 3.34 million at year-end 2019, reflecting equity issuance after the split.
Outlook, risks and contingencies
- Going concern: Management and the auditor state that substantial doubt exists about Westwater’s ability to continue as a going concern. The company expects continued losses and depends on equity or debt financing, asset sales, or partners; unavailable or insufficient funding could require substantial curtailment of operations.
- Graphite plans: Subject to financing, management planned pilot-scale processing and customer qualification work in 2020, with a commercial-scale processing facility targeted for 2022. Coosa mine development was described as an 8–10-year prospect. These are plans, not assured outcomes; the Coosa project had no active permits at year-end.
- Other projects: Lithium properties in Nevada and Utah remain exploratory, with no known lithium reserves. Vanadium potential at Coosa requires further evaluation, and the company reports no known vanadium reserves. Texas uranium facilities remain idle; restart depends on market conditions, permits, financing and additional resources.
- Turkey arbitration: Turkey revoked licenses for the Temrezli and Sefaatli projects. Westwater’s claim seeks $36.5 million plus costs and interest; recovery, amount and timing are uncertain, and no receivable is recognized until compensation is fixed, determinable and probable of collection.
- Reclamation and permitting: Estimated South Texas restoration and reclamation liability was approximately $7.9 million, with $6.3 million recorded. Surety bonds totaled $9.2 million, supported by $3.8 million restricted cash. Remaining Texas reclamation was expected to continue in 2020.
- Key risks include commodity-price volatility, project financing and dilution, technical and customer qualification risks in graphite processing, exploration uncertainty, environmental and permitting obligations, title risks, and Nasdaq listing compliance. Management does not anticipate dividends in the foreseeable future.
Important facts for investors to verify
- Confirm near-term liquidity, cash burn, and actual proceeds available from Lincoln Park and Cantor equity facilities; stated capacity is conditional and additional share issuance may dilute holders.
- Track whether pilot-plant funding, permitting, testing, customer qualification and commercial-facility milestones are achieved on the stated schedule and within budget.
- Assess the status and likely outcome of the ICSID arbitration independently; the $36.5 million is a claim, not an established recovery.
- Review the difference between the $5.31 loss per share cited in one MD&A passage and $5.39 in the audited financial statements. The filing text also gives differing 2018 G&A figures; the audited statement reports $7.009 million.
- Monitor reclamation costs, restricted-cash requirements, uranium-market conditions, and continued Nasdaq listing compliance.