Westwater Resources Announces FY 2022 Results and Significant Strategic

Source: www.gulfoilandgas.com 3/7/2023, Location: North America

Agreement with Global Electric Vehicle Battery Manufacturer
Announces Increased Throughput and Significantly Enhanced Project Economics for Kellyton Graphite Processing Plant
$150 Million Non-Binding Term Sheet for Private Debt that Would Fund the Balance of Phase I Capital Requirements

Westwater Resources, Inc. an energy technology and battery-grade natural graphite development company, is pleased to announce its year-end 2022 results and provide various strategic, operational and financial updates.

Agreement with EV Battery Manufacturer
Westwater Resources has entered into an agreement with a Tier 1 battery manufacturer for electric vehicles. Under the agreement, the parties will work together to ensure that the Coated Spherical Purified Graphite (“CSPG”) that is expected to be produced at the Kellyton Graphite Processing Plant can be used as a high-performance anode material for the customer’s batteries. Subject to those efforts, the parties expect to negotiate another agreement that will allow for the sale of potentially all graphite anode material from the Kellyton Graphite Processing Plant for those batteries.

“Following the passage of the Inflation Reduction Act, many battery manufacturers have sought to secure North American anode material. We are pleased to be part of that solution and believe this agreement is a significant step in the process,” said Terence Cryan, Westwater’s Executive Chairman. “We are excited by the continued progress being made in our engagement with potential customers, and this agreement, and are anticipating making a joint announcement with our partner later this month. At that time, we expect to be in position to provide further details.”

Optimized DFS to Increase Throughput and Significantly Enhance Project Economics for Kellyton Graphite Processing Plant
In response to increasing customer demand and strong market conditions for CSPG, the Company is also announcing that it has optimized the original Definitive Feasibility Study (“DFS”) to increase the expected throughput for Phase I of the Kellyton Graphite Plant which also results in associated capital and operating efficiencies. As a result of this work with our third-party engineering firm, the Company is more than doubling its expected CSPG production in Phase I resulting in a significant enhancement to the estimated economics of Phase I of the Kellyton Graphite Plant compared to the original DFS.

The Company now expects the total Phase I capital requirements for the Kellyton Graphite Plant to be approximately $271 million, resulting in:
• More than doubling the expected annual production of CSPG to 7,500 metric tons and total annual production across all products to 16,000 metric tons.
• More than tripling the expected pre-tax net present value (“NPV”) to approximately $417 million (at an 8% discount rate).
• Nearly tripling the total estimated cumulative pre-tax cash flows to $1.9 billion over a project life of 35-years.
• Increasing the Phase I estimated internal rate of return (“IRR”), on a pre-tax basis, from 15.0% to 24.7%, a 65% increase.

The Company also is increasing the planned production capacity for its Phase II expansion of the Kellyton Graphite Plant. Prepared at a pre-feasibility level, the Phase II expansion is subject to its own DFS and securing the necessary funding.

• Estimated capital costs for both Phase I and Phase II are estimated to be $736 million.
• More than doubling the expected annual production of CSPG to 40,500 metric tons and total annual production across all products to 86,500 metric tons.
• Nearly tripling the expected pre-tax NPV to approximately $2.2 billion (at an 8% discount rate).
• Total estimated cumulative pre-tax cash flows to increase by a factor of nearly three to $10.3 billion over a project life of 35-years.
• Increasing the estimated IRR, on a pre-tax basis, from 20.5% to approximately 36.3%, a 77% increase.

“Great work by the Westwater team has resulted in significant improvements to the project economics for the Kellyton Graphite Plant,” said Frank Bakker, President and CEO. “We expect to begin testing and commissioning at the Plant in late 2023, and first production from Phase I is expected in the first half of 2024, subject to closing on the additional funding needed to complete construction. Additionally, we expect to complete the Phase I optimization in the second half of 2024. We believe that increasing our production capacity will allow us to position Westwater to play a more significant role in the domestic battery-grade graphite market.”

Construction Financing Update
Westwater is also announcing today that it has signed a non-binding, non-exclusive indicative term sheet for $150 million of private debt, which would cover the balance of the Phase I capital requirements and is targeting to close in the second quarter.

“We finished the year with a cash balance of $75.2 million and a working capital balance of $51.0 million,” said Steve Cates, CFO and SVP-Finance. “Since beginning construction of Phase I of the Kellyton graphite plant in the fourth quarter of 2021, we have incurred approximately $76.4 million of costs, which is comprised of $55.3 million in cash outflows and the remainder included in the Company’s working capital liabilities as of December 31, 2022.”

• Net cash used in operations decreased $3.7 million during the year ended December 31, 2022, compared to the prior year, due primarily to lower product development expenses, arbitration costs, and exploration expenses. These decreases were offset partially by the gain recognized on the sale of equity securities in 2021, and the purchase of feedstock inventory in the fourth quarter. The feedstock inventory is expected to be utilized for testing and commissioning later this year and to produce additional product samples for our customers.

• Net cash used in investing activities of $52.8 million for the year ended December 31, 2022, relates to construction spend for Phase I of the Kellyton graphite plant.

• Net cash provided by financing activities decreased $58.1 million during the year ended December 31, 2022, compared to the prior year due to lower sales of shares under our equity financing facilities.

• Product development expenses for the year ended December 31, 2022, were $1.1 million, a decrease of $4.8 million compared to the prior year. Product development costs for fiscal year 2022 primarily relate to continued product development, product optimization costs, and continued sample production of battery-grade anode material for evaluation by potential customers. Product development costs for the year ended December 31, 2021, were primarily comprised of expenses for our definitive feasibility study related to Phase I of the Kellyton Graphite Plant and our graphite processing pilot program that were both completed in 2021.

• General and administrative expenses increased by approximately $1.0 million for the year ended December 31, 2022, compared to the prior year. The increase is due primarily to increased personnel costs of approximately $0.8 million, as the Company continues to build its team, and higher costs related to the Company’s sales and marketing efforts of $0.2 million in the current year.

• Consolidated net loss for the year ended December 31, 2022, was $11.1 million, or $0.25 per share, compared to a net loss of $16.1 million, or $0.49 per share, for 2021. The $5.0 million decrease in net loss was due primarily to lower product development, arbitration, and exploration expenses, and higher interest income of $1.1 million; offset partially by an increase in general and administrative expenses, and a realized gain of $2.1 million related to equity securities sold in the fourth quarter of 2021.

• Cash and working capital as of December 31, 2022, were $75.2 million and $51.0 million, respectively, which represent respective decreases of $40.1 million and $59.3 million, compared to December 31, 2021. The decreases in cash and working capital were due primarily to capital expenditures of $52.8 million and cash used in operations of $13.2 million, as well as an increase in working capital liabilities due primarily to Phase I construction of $20.3 million. These decreases were partially offset by cash provided from financing activities.


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