Westwater Resources is a name that many penny stock investors are talking about after its 49% jump in one day. There are two reasons for this jump – Tesla and Trump. Tesla needs graphite for its batteries, and Trump wants to end U.S. reliance on China for rare earth metals. These two catalysts have created the perfect storm to drive shares of low-float Westwater Resources higher. In this article, we will take a look at the stock and why we believe there’s still further upside ahead for Westwater Resources.
The excitement surrounding Westwater Resources is because this junior miner has the ONLY battery-grade graphite mining project in the continental United States. The U.S. has NO current production of natural graphite. The Company’s battery-materials projects include the Coosa Graphite Project — the most advanced natural flake graphite project in the contiguous United States — and the associated Coosa Graphite Mine located across 41,900 acres (~17,000 hectares) in east-central Alabama. Processing pilot plant operations are scheduled in the fourth quarter of 2020, producing ULTRA-PMGTM, ULTRA-DEXDGTM, and ULTRA-CSPGTM in quantities that facilitate qualification testing at potential customers.
Prior to his hospitalization for COVID-19 and in a bid to reduce dependence on China, President Donald Trump signed an executive order on October 1st aimed at expanding domestic production of rare-earth minerals that are vital to many critical manufacturing sectors.
The order, which declares a national emergency in the mining industry, directs the Interior Department to explore using the Defense Production Act to hasten the development of mines.
The order also states the Interior and Energy Departments should encourage the development and reuse of old coal waste areas, the material on old mining sites, as well as abandoned mining sites for recovery of the critical minerals.
Graphite is a critical component of all batteries – lead-acid, alkaline, and lithium-ion. Coated Purified Spherical Graphite (CPSG) is a critical component of lithium-ion batteries. Furthermore, the U.S. government has declared “graphite to be critical to the nation’s security and prosperity.”
Westwater Resources Coosa Graphite Project
In November 2019, Westwater announced it had engaged Dorfner Anzaplan of Hirschau, Germany to advance the development of processes needed to purify graphite concentrates and to produce Westwater’s battery-grade products: ULTRA-PMGTM, ULTRA-SPGTM, and ULTRA-DEXDGTM.
Dorfner Anzaplan is an internationally recognized and highly regarded organization that specializes in high-purity industrial and strategic metals businesses. Dorfner Anzaplan employs state-of-the-art analytical methods and facilities and uses innovative processing technologies to provide effective solutions tailored to their clients’ requirements. All testing has been completed and, going forward, all required manufacturing equipment has been or is being ordered; construction to build an operational pilot plant will begin shortly.
Westwater is developing proprietary processes for the production of battery-grade graphite from non-Chinese sources that are designed to manufacture high performing products while ensuring a sustainable environmental footprint and low production costs. Test work on the products from these processes has been performed already in laboratories in Germany and the United States, and those results show that the performance of the Coosa Project’s graphite is on par with or exceeds that of currently available battery products.
The next step in Westwater’s development process is the operation of a pilot plant that is designed to process approximately 30-tonnes of graphite concentrate and to produce more than ten metric tons of ULTRA-PMGTM, ULTRA-SPGTM, and ULTRA-DEXDGTM products, now scheduled for later this year and the first part of 2021.
Commitments have been received from the various vendors involved in the project and long lead time items are in the process of being ordered. The 30-tonnes of graphite concentrate has been purchased and will be transported to Dorfner Anzaplan’s facility for September delivery. The Company will provide updates on this exciting project over the coming weeks and months. Funding for this effort is expected to come from existing financing instruments presently in place with Westwater. Christopher M. Jones, President, and Chief Executive Officer said:
“We have made graphite samples available to a number of potential customers for testing, and these tests have been successful. We believe our graphite materials can garner a significant global market share as we move forward.”
Tesla is on the hunt to meet its battery needs. Tesla has secured its own lithium mining rights in Nevada. During the Battery Day event last week, Elon Musk mused quite a bit about how easy it might be to extract lithium from clay deposits in southwest Nevada and the abundant supply in the state.
Westwater Resources is exploring for lithium in Nevada on two highly prospective properties.
Tesla is prepping to start selling some Model 3 vehicles made out of Shanghai in China equipped with cobalt-free lithium iron phosphate batteries, sources tip Reuters. The switch to LFP batteries for the Chinese-made Model 3s from using nickel-manganese-cobalt batteries is expected to save costs.
Demand for batteries is only going to keep increasing as more EVs hit the road.
In addition to the catalysts outlined above, the Coosa Graphite project has shown deposits on vanadium. This development will enhance the economics of the project, which calls for funding of $54.5 million.
Westwater Resources has prevailed in a court case against Turkey. ICSID tribunal turned down Turkey’s request for bifurcation of the case. Westwater Resources is seeking $36.5 million-plus fees.
Westwater Resources Bottom Line
With a float of just 7.56 million, Westwater Resources has all the catalysts to run. While there might be some short-term profit-taking after last week’s move, dips are a discount entry opportunity. Westwater Resources has all the makings of a short squeeze as the shorts increased their position on Friday. Last report was 3.86% of the float had been borrowed. This figure is more likely 10% now. Look for the shorts to scramble as more news hits the tape.
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in NASDAQ:WWR, or any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article. Insider Financial is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This article is not a solicitation or recommendation to buy, sell, or hold securities. This article is meant for informational and educational purposes only and does not provide investment advice.