Westwater Resources, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Westwater is developing battery-grade natural graphite products and the Coosa Plant in Alabama; it had no operating revenue in 2021 and has not recorded operating revenue since 2009.
Financial results and position
| Metric | FY2021 / year-end | FY2020 / comparison |
|---|---|---|
| Revenue | No operating revenue | No operating revenue |
| Net loss from continuing operations | $16.1 million; $0.49 per share | $13.9 million; $1.58 per share |
| Total net loss | $16.1 million | $23.6 million, including $9.7 million loss from discontinued operations |
| Cash used in operating activities | $16.9 million | $15.2 million |
| Cash used in investing activities | $2.1 million | $4.1 million |
| Cash provided by financing activities | $84.0 million | $63.9 million |
| Cash and cash equivalents | $115.3 million | $50.3 million |
| Total assets / total liabilities | $133.0 million / $6.8 million | $61.9 million / $4.5 million |
Margins are not meaningful because the company reported no revenue. The filing reports no material conventional debt; year-end liabilities primarily included accounts payable, accruals, operating lease liabilities and a $1.4 million land-grant obligation. The $84.1 million of net common-stock issuance proceeds in 2021 funded operations and development, increasing outstanding shares from 19.2 million to 35.3 million during the year.
Material changes and project status
- Continuing-operations net loss increased $2.2 million year over year, mainly from higher product-development, exploration, general and administrative, and arbitration costs. A $2.1 million gain on sale of enCore shares partly offset the increase.
- Product-development expense was $6.0 million; general and administrative expense was $8.9 million; arbitration expense was $2.2 million; exploration expense was $1.1 million.
- The company completed its graphite pilot program, producing approximately 13 metric tonnes of products and samples for testing. Phase I construction at the Coosa Plant began in December 2021.
- Phase I has estimated capital costs of $202 million and projected annual output of 3,700 metric tonnes of ULTRA-CSPG and 3,800 metric tonnes of SPG fines. The company estimated approximately $198 million of remaining Phase I capital expenditures at year-end.
- Management expects Phase I completion and initial production in the first half of 2023, subject to financing, construction and permits. The plant is expected to use purchased feedstock until at least 2028; a Coosa Deposit mine is only planned for later development.
Outlook, risks and unusual items
- Management said year-end cash should cover planned non-discretionary expenditures through 2022, but the company has no committed financing for the remaining Phase I cost. It may seek further equity, project financing, convertible debt, or a partnership or joint venture; availability and terms are uncertain.
- The Phase I DFS estimated pre-tax NPV at $119 million and IRR at 15%. Phase II figures are preliminary feasibility estimates, not an approved construction commitment: $464 million additional capital, projected annual output of 32,400 metric tonnes, pre-tax NPV of $767 million and IRR of 20.5%.
- Alabama and local incentives were estimated at approximately $36 million, conditional on investment, job creation and future taxable income. The company recognized land valued at $1.4 million as a government grant; the accounting policy involved significant judgment and was identified as a critical audit matter.
- Key risks include completing an unproven commercial-scale process, construction cost and schedule overruns, raising the required capital, obtaining permits, securing customers and feedstock, graphite price and supply volatility, and competition. The air-emissions and wastewater permits remained pending at filing; a construction stormwater permit had been received.
- A November 2021 customer letter of intent contemplated ULTRA-CSPG sales for 2023, with potential additional sales in 2025, but depended on conditions including customer plant commissioning and product specifications. The filing gives inconsistent initial quantities: 125–250 metric tonnes in the business section versus 125–150 metric tonnes in MD&A.
- The Turkey investment arbitration hearing took place in September 2021; Westwater expected a ruling in the second half of 2022. Any recovery and timing were uncertain. A separate Canadian lawsuit remained inactive, with no trial schedule reported.
- After year-end, CEO Christopher Jones announced his retirement; Chad Potter was elected CEO effective February 26, 2022, and Terence Cryan was to become Executive Chairman.
Most important facts for investors to verify
- Whether Westwater can finance the approximately $198 million remaining Phase I construction cost without substantial dilution or unfavorable financing.
- Actual construction progress, final cost and schedule, and status of required operating permits and conditional Alabama incentives.
- Whether pilot results translate to commercial-scale product quality, customer qualification, and binding multi-year sales agreements; clarify the LOI quantity discrepancy and conditions.
- Whether the 2023 production target and projected DFS economics remain achievable amid inflation, supply-chain constraints and execution risks.
- Any ruling, timing or recoverable amount in the Turkey arbitration, and any material development in the inactive Taylor litigation.