Westwater Resources, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Westwater is developing battery-grade graphite processing and mineral assets; it reported no operating revenue and last recorded operating revenue in 2009.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / prior date |
|---|---|---|
| Revenue | None reported | None reported |
| Net loss | $2.8 million; $0.08 per share | $5.4 million; $0.19 per share |
| Operating expenses | $2.8 million | $5.6 million |
| Operating cash used | $2.7 million | $4.9 million |
| Investing cash used | $12.1 million | Investing cash provided: $0.3 million |
| Financing cash provided | $15.5 million | $72.1 million |
| Cash and cash equivalents | $116.0 million at March 31 | $115.3 million at December 31, 2021 |
| Total assets | $148.6 million | $133.0 million at December 31, 2021 |
| Total liabilities | $9.6 million | $6.8 million at December 31, 2021 |
Margins are not meaningful because the company had no revenue. The balance sheet presents no separate borrowings line; liabilities include $0.2 million of operating lease liabilities and $1.4 million of other long-term liabilities. The filing does not characterize the latter as debt.
Changes versus the prior-year quarter
- Net loss narrowed by $2.6 million, mainly because product development expenses fell $1.6 million and arbitration costs fell $1.4 million. General and administrative and exploration expenses increased modestly.
- Operating cash use declined by $2.1 million. Investing cash outflow rose as the company funded Kellyton plant equipment and construction.
- Financing proceeds were $56.6 million lower, reflecting less stock issuance activity than in Q1 2021.
- The company issued 7.4 million shares through its ATM program for net proceeds of $15.6 million, versus 9.3 million shares and $47.3 million in Q1 2021. Shares outstanding were 42.8 million at March 31, compared with 35.3 million at December 31, 2021.
- Property, plant and equipment increased to $31.7 million from $14.5 million, including $18.1 million of construction in progress. Cash capital expenditures were $12.1 million; accrued capital expenditures were $3.2 million.
Outlook, projects, risks and contingencies
- Kellyton Graphite Plant Phase I construction continued, with civil and earthwork beginning in March. The company estimates Phase I construction and commissioning at approximately $202 million, with about $17.8 million incurred to date. Target completion is Q2 2023.
- Management said cash on hand was sufficient for planned nondiscretionary expenditures through 2022. Funding Phase I in 2023 remains dependent on additional financing; the company is considering equity, project or convertible debt, government funding, and partnerships or joint ventures. Financing may not be available on acceptable terms.
- After quarter-end and through the report date, Westwater sold another 4.4 million shares through the ATM for $9.0 million net proceeds. It reported $31.6 million of ATM capacity and 9.7 million shares available under its Lincoln Park facility at March 31.
- Coosa exploration drilling was completed in April 2022; a technical study is expected by year-end. Potential mine start-up by the end of 2028 is conditional on feasibility, financing and regulatory approvals. Economic potential of the graphite and vanadium resources is not established in this filing.
- The company noted risks from inflation, labor and supply-chain constraints, construction cost or schedule overruns, financing availability, permitting, exploration results, commodity markets, and COVID-19-related uncertainty. It is evaluating a DOE funding opportunity but gave no assurance it would qualify or receive funds.
- Arbitration-related trailing costs were $0.1 million in Q1. The filing reports no material change in previously disclosed legal proceedings and says it does not expect potential settlements to materially affect results or cash flows. Management reported disclosure controls were effective at March 31.
Important facts for investors to verify
- Whether the company secures sufficient committed financing for the estimated $202 million Phase I project and how dilution or financing costs may affect shareholders.
- Whether construction remains on schedule for Q2 2023 and within budget amid inflation, labor and supply-chain pressures.
- Actual cash burn, upcoming capital commitments, and the remaining availability and terms of the ATM and Lincoln Park facilities.
- Results of the Coosa technical study, including resource quality, recoverability and potential economics; the filing does not establish a commercially viable mine.
- Progress on permits, including the wastewater disposal permit application, and any DOE funding eligibility or award developments.