Westwater Resources, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; filed May 14, 2024. Amounts are in U.S. dollars. Westwater is developing battery-grade graphite operations and has not recorded operating revenue since 2009.
Business context and project developments
- The company is developing the Kellyton Graphite Plant and Coosa Graphite Deposit in Alabama. Phase I of Kellyton is now expected to produce 12,500 metric tons of coated spherical purified graphite (CSPG) annually, following a debottlenecking study that increased planned production by 67%. Estimated Phase I construction costs remain approximately $271 million.
- Westwater signed a products procurement agreement with SK On. SK On’s forecasted requirement in the agreement’s final year is 10,000 metric tons; the filing does not state a clear fixed annual minimum purchase quantity. The company is also negotiating a potential offtake agreement with a North American automaker.
- Construction continued, including equipment and structural-steel installation, but activity was reduced pending financing. The company reports approximately $120.6 million in project costs incurred, inclusive of liabilities at March 31, and estimates approximately $150 million of additional funding is needed to complete Phase I.
Financial results and position
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | None reported | None reported |
| Operating expenses | $2.993 million | $3.006 million |
| Other income, net | $0.095 million | $0.616 million |
| Net loss | $2.898 million; $0.05 per share | $2.390 million; $0.05 per share |
| Cash used in operating activities | $2.776 million | $2.956 million |
| Cash used in investing activities | $2.491 million | $33.960 million |
| Cash provided by financing activities | $0.544 million | $1.424 million |
- Cash and cash equivalents were $6.129 million at March 31, down from $10.852 million at December 31, 2023. Total assets were $147.179 million; stockholders’ equity was $138.301 million.
- Current assets of $6.977 million were below current liabilities of $7.299 million, a $0.322 million working-capital deficit. The balance sheet reports lease liabilities but no material conventional borrowings; total finance lease liabilities were approximately $19,000.
- Net property, plant and equipment was $134.040 million, including $119.265 million in construction in progress. Capital expenditures were $2.491 million in the quarter; accrued capital expenditures at quarter-end were $4.518 million.
Changes, outlook, and key risks
- Net loss increased by $0.508 million year over year, mainly from higher general and administrative expense and lower interest income, partly offset by lower product development expense. Interest income fell to $0.126 million from $0.633 million, reflecting a lower average cash balance.
- General and administrative expense rose to $2.605 million from $2.402 million. Product development expense declined to $0.315 million from $0.490 million, partly because the in-house R&D lab reduced sample-processing costs. Q1 2024 stock compensation expense was $0.211 million; Q1 2023 included a net stock compensation benefit of $0.144 million.
- Management states that substantial doubt exists about the company’s ability to continue as a going concern within one year after issuance of the financial statements. Planned non-discretionary expenditures exceed cash on hand when potential external financing and the equity facility are excluded. The company expects continuing cash losses until plant operations begin.
- Westwater is discussing project financing with several parties and is considering debt, convertible debt, partnerships, or joint ventures. Management says commercial agreements for some anticipated production may be a condition to obtaining plant financing; there is no assurance that sufficient financing will be available on acceptable terms. Without funding, the company may further delay, curtail, or pause construction and could need to assess asset recoverability.
- The ATM facility had approximately $6.5 million of remaining capacity at March 31; Q1 sales of 1.2 million shares generated $0.6 million net. The existing shelf registration statement expires in July 2024, and further ATM sales after expiration require a new effective registration statement. Additional equity issuance may dilute shareholders.
- Key risks include financing access and construction costs or delays; graphite prices, customer contracts and demand; supply-chain and geopolitical conditions; interest rates and inflation; permits and regulation; and EV adoption. No interim asset impairment was recorded. The filing reports no material change in previously disclosed legal proceedings or risk factors and no off-balance-sheet arrangements.
Investor facts to verify
- Whether Westwater secures the approximately $150 million needed to complete Phase I, and how financing affects the construction schedule and remaining capital needs.
- The procurement agreement’s minimum purchase terms, timing, pricing, and conditions, and progress toward additional binding customer offtake agreements.
- Cash burn, working-capital position, ATM capacity and registration status, and potential share dilution.
- Whether planned 12,500-metric-ton annual Phase I output and the $271 million construction estimate remain achievable as the project advances.