Westwater Resources, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing; it does not provide a clear standalone fourth-quarter results summary. Westwater is transitioning from uranium and other mineral activities to battery-graphite development. It had no revenue from operations in 2020 or since 2009.
Financial performance and position
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue from operations | None | None |
| Net loss | $23.6 million | $10.6 million |
| Loss per share | $2.68 | $5.39 |
| Cash used in operating activities | $15.2 million | $10.0 million |
| Cash from financing activities | $63.9 million | $6.7 million |
| Cash and cash equivalents at year-end | $50.3 million | $1.9 million |
| Total assets | $61.9 million | $27.0 million |
| Total liabilities | $4.5 million | $9.9 million |
There are no operating revenue or margins to assess. The net loss widened mainly as product-development spending rose to $4.0 million from $0.1 million, the company recorded a $5.2 million uranium-property impairment and a $2.7 million loss on the uranium-business sale, and continuing-operation general and administrative expenses increased. The 2019 comparison included a $0.7 million gain on a uranium-asset sale.
At December 31, 2020, Westwater reported $50.3 million of cash and $1.5 million of available-for-sale enCore shares. The balance sheet included $4.5 million of total liabilities, including $0.4 million of operating-lease liabilities. The filing reports a $0.3 million PPP loan, with repayment exposure dependent on forgiveness; it does not present significant conventional debt outstanding at year-end. Operating cash outflow was funded principally by equity issuance. After year-end financings, cash was approximately $101 million as of February 11, 2021.
Business developments and changes
- Westwater sold its U.S. uranium subsidiaries to enCore on December 31, 2020, receiving $0.7 million cash, enCore shares valued at $1.8 million, and royalty interests. It transferred $3.8 million of restricted cash collateral and eliminated uranium-related reclamation obligations, including $5.2 million of asset-retirement obligations and a $9.3 million bonding liability. Management cited expected annual cost savings of more than $4 million.
- The company discontinued its lithium business and allowed Nevada and Utah leases to lapse, concentrating resources on battery graphite. It retained Turkish uranium interests and related arbitration claims.
- Equity issuance was substantial: 11.0 million shares were sold through the Cantor at-the-market facility during 2020 for $49.9 million net proceeds. Total shares outstanding increased to 19.2 million at year-end from 3.3 million a year earlier. Additional sales after year-end generated $53.9 million net proceeds through February 11, 2021.
- The Coosa project pilot-processing program began operating in 2020. Westwater is developing purified micronized, delaminated expanded and coated spherical purified graphite products and is supplying samples to prospective customers for testing and qualification.
Outlook, risks and contingencies
- Management expected the definitive feasibility study to be completed by the end of the second quarter of 2021. The company planned commercial-plant construction to begin in the second half of 2021, completion in 2022 and initial product revenue in 2023, all subject to study results, permitting and financing.
- Estimated commercial-plant capital expenditure is approximately $120 million. Management said year-end cash and subsequent equity proceeds would fund planned non-discretionary spending through 2022, but additional project financing is required for construction. There is no assurance that financing will be available on acceptable terms.
- The company is pre-commercial, loss-making and dependent on external capital. Key risks include pilot results not supporting commercial-scale production, feasibility or construction delays and cost overruns, customer qualification and feedstock supply, permitting and environmental requirements, graphite-price and market changes, and further shareholder dilution.
- Westwater seeks at least $36.5 million, plus costs and post-award interest, in ICSID arbitration against Turkey over revoked uranium-project licenses. A hearing was scheduled for September 2021. The outcome and timing of any recovery are uncertain; no assurance of compensation is given.
- The $0.3 million PPP-loan escrow is subject to loan forgiveness; the filing gives no assurance that forgiveness will be granted. A separate Ontario defamation lawsuit seeks CAD $3.0 million plus other relief; the plaintiff had not prosecuted it and no trial schedule was set.
- COVID-19 could disrupt operations, suppliers, project schedules and access to capital. The filing describes no material interruption to corporate activities at the time, but future effects were uncertain.
Important facts for investors to verify
- Whether the feasibility study supports the project’s economics, capital estimate and planned 2021–2023 development schedule.
- Whether pilot products meet customer specifications and progress from testing to qualification and binding supply agreements.
- Actual cash burn and remaining liquidity relative to the approximately $120 million plant-cost estimate, including the terms and availability of project financing.
- Further share issuance, dilution and remaining capacity under equity financing arrangements.
- Final disposition of the PPP-loan forgiveness application, the enCore transaction’s royalty interests and any realization of expected cost savings.
- Progress and outcome of the Turkey arbitration and any developments in the Taylor lawsuit.
The independent auditor issued an unqualified opinion on the financial statements. Management reported effective disclosure controls and internal control over financial reporting as of December 31, 2020; the auditor did not attest to internal-control effectiveness.