Business context and reporting period
Westwater Resources, Inc. filed this Form 10-K for the fiscal year ended December 31, 2023. The company is developing a U.S. battery-grade natural graphite business, centered on the Kellyton, Alabama processing plant and the Coosa graphite deposit. It had no revenue from operations in 2023 and last recorded operating revenue in 2009.
Financial performance and position
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue from operations | None | None |
| Net loss | $7.8 million | $11.1 million |
| Loss per share | $0.15 | $0.25 |
| Operating expenses | $13.3 million | $12.1 million |
| Net cash used in operating activities | $11.4 million | $13.2 million |
| Capital expenditures | $58.3 million | $52.8 million |
| Net cash provided by financing activities | $5.4 million | $25.9 million |
| Cash and cash equivalents at year-end | $10.9 million | $75.2 million |
The 2023 net loss improved by $3.3 million, mainly reflecting a $3.1 million settlement gain from the Republic of Turkey, a $1.2 million write-off of accrued uranium royalties, and higher interest income. These benefits were partly offset by a $1.8 million increase in product-development expense. Product-development expenses were $2.9 million; general and administrative expenses were $9.8 million.
At year-end, total assets were $149.8 million, including $117.6 million of construction in progress. Total liabilities were $9.4 million, including $7.8 million of current liabilities. Net working capital was approximately $3.8 million. The balance sheet reports lease liabilities but no material conventional borrowing balance. The filing provides no meaningful operating margin because the company had no operating revenue.
Material changes and project developments
- Phase I construction continued, including completion of five of six main buildings and installation of some equipment. The company had incurred approximately $119.2 million in construction costs, inclusive of year-end liabilities; it separately estimated $157.1 million of remaining capital expenditures to complete Phase I.
- Construction activity was reduced pending additional financing, delaying the schedule. The company had not provided a revised completion date; it had previously anticipated operations in 2025, subject to financing and further delays.
- A debottlenecking study increased planned Phase I annual capacity to 12,500 metric tons of coated spherical purified graphite (CSPG) and 14,000 metric tons of spherical graphite fines. Estimated Phase I construction costs remained approximately $271 million.
- After year-end, on February 4, 2024, Westwater entered a procurement agreement with SK On. SK On’s forecasted requirement in the agreement’s final year is 10,000 metric tons of CSPG; actual minimum purchases are defined as a percentage of forecast volume. The company also reported negotiations with a North American automaker and other prospective customers.
- The Coosa deposit assessment reported 26 million short tons of indicated resources at 2.89% graphitic carbon and 97 million short tons of inferred resources at 3.08%. These are mineral resources, not reserves, and do not demonstrate economic viability. The preliminary economic analysis relies substantially on inferred resources.
Outlook, risks and unusual items
- Going concern: Management and the auditor cited substantial doubt about Westwater’s ability to continue as a going concern. Planned non-discretionary expenditures for the year following issuance exceeded available cash, excluding prospective financing and the equity facility. Completion of Phase I depends on securing additional funding; there is no assurance financing will be available on acceptable terms.
- Funding and dilution: Westwater raised $5.5 million net through share sales in 2023, versus $25.9 million in 2022. Approximately $16 million remained available under its ATM offering at year-end, subject to registration, market-capitalization, share-price and trading-volume limitations. The Lincoln Park purchase agreement expired in December 2023.
- Operating and execution risks: The plant is not yet producing commercially. Risks include construction delays and overruns, commissioning and product qualification, feedstock availability and cost, customer commitments, permits, graphite prices, competition, and access to capital. The company currently expects third-party graphite concentrate to supply the plant before any Coosa mine is developed.
- Accounting and audit: No impairment charge was recorded in 2023, although the auditor identified the recoverability test for the plant construction asset as a critical audit matter because its cash-flow forecasts depend on significant assumptions.
- Other items: The $3.1 million Turkey arbitration payment fully settled that proceeding. A separate Canadian lawsuit remains unresolved, with no trial schedule reported. The auditor issued an unmodified opinion on the financial statements; management reported effective disclosure controls and internal control over financial reporting.
Important facts for investors to verify
- Whether Westwater secures sufficient project financing, on what terms, and whether financing is conditional on additional customer agreements.
- Updated Phase I construction costs, completion and commissioning schedule, and cash runway before financing or operations.
- The binding purchase minimums, pricing, timing, and conditions in the SK On agreement, and progress toward other offtake agreements.
- Whether product qualification and commercial-scale production meet planned capacity, quality, cost, and customer requirements.
- The assumptions and limitations underlying the Coosa resource estimate and preliminary economics, including the absence of mineral reserves and the need for mine permits and surface access.
- Potential equity dilution, remaining ATM capacity, and any new debt, partnership, or joint-venture financing obligations.