Westwater Resources, Inc.
Q3 2020 Earnings Call Transcript

Published: 12 Nov 2020

[Operator:]

Thank you for standing by. This is the conference operator. Welcome to the Westwater Resources Inc. Third Quarter 2020 Results and Business Update Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Chris Jones, President and CEO. Please go ahead, sir.

[Chris Jones:]

Thanks, Anastasia, and good morning. Welcome to Westwater Resources Q3, 2020 Results Call. I'm Chris Jones, President and CEO. And with me here in Centennial at our Main Office is Jeff Vigil, Vice President of Finance and Chief Financial Officer; and with us by phone from Alabama, is Dain McCoig, our Vice President of Operations.

[Jeff Vigil:]

First, let's take a look at our capitalization on Slide 5. Our closing share price yesterday was $4.14 and was approximately 19 million shares outstanding, our market capitalization stands at approximately $79 million. During this past nine months, our stock performance was influenced largely by the ups and downs in the capital markets, due to the country's reaction to the COVID-19 pandemic. Certainly, enactment of the CARES Act at the end of March added some stability to the capital markets. Our share price began the third quarter at $2.35, and ended the quarter at $2.51. However, a series of events triggered exceptional upward stock price movement and trading volume in the first week of October. These events included Elon Musk's presentation at the Battery Day conference on September 22, where he projected a shortage of battery materials in the next five years, as demand for electric vehicles grows exponentially. That was followed by the announcement on October 28, by Piedmont Lithium of the supply contract with Tesla for its lithium project in North Carolina, and then on September 28, the President issued an executive order declaring a national emergency for U.S. production of critical minerals, and this included graphite and vanadium.

[Chris Jones:]

A quick reminder on Page 7, of our core values here at Westwater. Safety first, that means the safety of each other, the safety of our environment, our assets, the communities where we work, and our reputation. Cost management, that's effective and efficient use of our shareholders' assets, a focus on first quartile cost performance. And integrity, the highest level of performance every day, improving our processes and conservative promises well kept. On Page 8, we are the owner of the leading graphite development property in the United States. We've developed a new environmentally sustainable proprietary process for purifying graphite, and we've applied for U.S. patent. Our pilot plant scheduled for operations this quarter, expects to produce battery grade graphite for customer testing and validate the design of our commercial scale facilities.

[Operator:]

Thank you. We will now begin the question-and-answer session. First question comes from Debra Fiakas with Crystal Equity Research. Please go ahead.

[Debra Fiakas:]

Thank you. And thank you for taking my questions. First, just a couple of housekeeping questions, and one is in regard to the impairment charge that was taken on the uranium properties. Is this charge primarily triggered by the pending purchase agreements that you have the pending sale? And can we anticipate that this would be all the impairment charges that that sale might trigger? Or can we expect additional charges when the deal finally closes, so perhaps in the fourth quarter of 2020?

[Chris Jones:]

Thanks for your question, Debra. Two questions, really. Yes, the impairment charges triggered by the valuation as a result of the deal. And no, there will be no further impairment charges as we finish the deal during this quarter.

[Debra Fiakas:]

Okay, very good. Thank you. And also, I did want to ask a little bit more about the recent capital raise. And of course it's a very nice little kitty of cash that you have now, I wondered if you could perhaps just give us a little bit more color on what you think that amount of money will support in terms of the strategic plans that you have over the next year or two. Can we expect it to fully fund everything related to the pilot plant? Can we expect it to help fund? I noted that you had mentioned a feasibility study I guess, sometime in 2021. If maybe you could just provide us a little color on what you expect to use those funds for.

[Chris Jones:]

You bet. The pilot plant, the feasibility study, the exploration project, and all of our base business activities are fully funded for 2021, as a result of this particular raise, as well as well into 2022. The project itself had a $118 million of capital raise, is not yet funded, but could be partially funded through some of this cash. We await results from the feasibility study before we execute fully on project level financing.

[Debra Fiakas:]

Okay, very good. And then maybe if I could just ask a couple of more questions about that pilot plant. You mentioned commissioning in your presentation, and I just wondered what there was left to build, what's left to connect in the various locations. There's multiple locations and maybe you can talk a little bit more about why you chose to approach it that way. And then maybe just give us a little bit of color on what that commissioning involves.

[Chris Jones:]

You bet. So, commissioning means it's built. We're just running it to make sure it works. It's simply put. And that is taking place at several different locations. The lab in Hamburg, Germany, where Dorfner is doing most of our primary work, the furnace in New York, the work in Illinois to make our DEXDG, and our shaping and sizing efforts in Frankfurt. So the reason we chose to execute our pilot plant in this particular way is because it utilizes on the ground expertise, important to our graphite processing at each of these locations, without importing those people all over the world. I want to say that our staff was present in defining our pilot plant this way, because with travel restrictions being what they are between, even here in the United States, but certainly between here in Europe. We don't have to move their experts to us, we can utilize their expertise in their locations where it's best utilized, and we can supervise from afar as we need to.

[Debra Fiakas:]

Okay, very good. And then, you mentioned that project financing and that you've begun to work with an advisory group on how to approach the various options that you have. And is that project financing that you're looking for at this point, the $118 million approximately, that's needed for the initial capital expenditure that's involved in constructing and starting operations in Alabama?

[Chris Jones:]

Yes. The $118 million includes the project itself, all the hardware that we need to buy the pots and pans and the land acquisition, et cetera. But it also includes working capital estimates and other things folded up inside there, as well as remember this is a PEA level estimate, so we seek further refinement through our feasibility study that happens during the first part of 2021.

[Debra Fiakas:]

Okay. And when would you expect to -- do you have a date in mind as to when you want to see the feasibility study done? And when you want to have this project financing in place?

[Chris Jones:]

June 30, on the feasibility study, and the project financing thereafter.

[Debra Fiakas:]

All right. Thank you very much. I'll get back into the queue.

[Chris Jones:]

Thanks, Debra.

[Operator:]

The next question comes from Russell Lacra , an Investor. Please go ahead.

[Unidentified Analyst:]

Good afternoon, and thank you for taking my call. Very quick question. As far as the project financing goes, as an individual investor, I'm very concerned about whether or not there's a possibility of making a partnership, say with automobile dealership. Is that something that you guys are looking at as possible project financing? Or are you just looking to raise that in other ways?

[Chris Jones:]

Thanks, Russell, for your question. I'm sure that you actually mean automobile manufacturer. And while we're not in direct talks right now with the automobile manufacturers in terms of a partnership, we are certainly in preliminary talks with some automobile manufacturers in terms of product sales. As we elucidated a little bit on the slide, we are interested in considering joint venture partnerships on our project as we go forward, as one of our three basic methods of finance, debt, equity, and a JV. So I hope that answers your question.

[Unidentified Analyst:]

It does. And one last question, if that is a possibility, is that possibility anytime in the next quarter?

[Chris Jones:]

Typically, project financing takes place after the feasibility study is finished, which is at midyear of 2021.

[Unidentified Analyst:]

Got you. Thank you. I'll return to the queue.

[Chris Jones:]

Thanks, Russell.

[Operator:]

The next question comes from Alicia Lavy an Investor. Please go ahead.

[Unidentified Analyst:]

Hello. Hi, thank you so much for taking the question. I'd like to know like, how is your mining more sustainable than your competitors?

[Chris Jones:]

Great question, Alicia. And thanks for that. The mining of our project will be done under U.S. law, as it's currently applied, which is the most legally robust and environmentally sensitive legislation in the world. Let's remind all of our listeners, that mining doesn't take place until 2028. And the larger footprint for our work for our processing is really in the post processing of graphite concentrate from 95% into our three product streams. So that's really where the footprint and the environmental sustainability meets the road, if you will.

[Unidentified Analyst:]

Okay, thank you very much.

[Operator:]

The next question comes from Sal Khan , an Investor. Please go ahead.

[Unidentified Analyst:]

Hello. I was just wondering, how come insiders do not own any of the shares.

[Chris Jones:]

The question basis may be a little bit distorted. We do own shares. And insiders have been investors along the last seven to eight years. What we have done in order to refinance and re-task this business is to reshape the share structure, which has resulted in significant dilution of insider ownership. I hope that answers your question.

[Unidentified Analyst:]

Thanks.

[Operator:]

This -- Oh, pardon me. The next question comes from Robert Duarte , a Private Investor. Please go ahead.

[Unidentified Analyst:]

Hi, Chris.

[Chris Jones:]

Hi. Good afternoon, and thank you.

[Unidentified Analyst:]

I know we've talked previously, my question is specifically on the executive ordering, obviously, the political platform is changing as we see it, and we still have to wait on results for that. But considering that the U.S. government has signaled pacific minerals as strategic to the well-being of our country. My question is, as we seek financing for additional projects and the building of the plant, are we seeking some government support as well as a business, maybe some grants, considering that this is now flagged as strategic to the success and security of our country?

[Chris Jones:]

Thanks for that. And thanks for that lead actually. With regard to the Presidential executive order, we believe that the executive order is true, no matter which kind of a President we have going forward, to be quite frank and blunt. These materials are indeed strategic and important to the United States and the safety and security of this country. On your second question, and whether or not we are seeking grants or other types of financing from the United States government, I will allow that there is flaws in place. Previous to the Trump administration in 2005 and 2007, that allowed for development funds through Department of Energy to be made available to companies that develop for instance, electric vehicles. Tesla was a major beneficiary of those loan programs to the tune of several billion dollars with a B. We are in conversations with all comers including the DOE for financing for this project as we go along. As you might expect, these conversations with the various entities take months, not weeks. And we have already begun some conversations with some players for resolution come June, when we present our feasibility study. I hope that answers your question.

[Unidentified Analyst:]

Thank you. I appreciate that. And then in regards to -- you mentioned earlier, having conversations with electric vehicle manufacturers, and of course other battery manufacturers in reference to sales. So, early in the call, you mentioned some probably additional catalysts going into the end of 2020, and possibly into 2021. Is the business expecting a success in those conversations in the near-term? Obviously, the projections for mining, they're not near-term. I think we understand that, considering some of the deals that have gone out there. Is that something that the business is actively pursuing and perceive a successful rate on?

[Chris Jones:]

Let me answer your question by saying that we did discuss during our presentation as much forward-looking information as we can. And I would refer you also to our slide around integrity. We make conservative promises, and we keep them. And with that as a backdrop, I would say that when we achieve results, and we can publish them, we will do so with alacrity as we have been for these last almost eight years. We adopt a very conservative ethic with regard to publishing our news, but we do so on time and in full as soon as it's real. So I hope that answers your question, perhaps a little differently than you intended.

[Unidentified Analyst:]

Yeah. Thanks, Chris. And last, and I might have missed it. But you mentioned that you're actively pursuing Department of Defense support in hopefully financing. When and if, that comes to fruition will that be something that will be announced?

[Chris Jones:]

One small correction, what we said is that we see Department of Defense markets as one of the places we can place materials. We didn't speak directly to any conversations directly with the DoD right now. And it'll be really up to the DoD if we get a contract, approximately how much of that we will be able to disclose at that time.

[Unidentified Analyst:]

Okay, thank you. I'll go back into the queue.

[Chris Jones:]

Thank you. Anastasia, back to you.

[Operator:]

This concludes the question-and-answer session. I would like to turn the conference back over to Chris Jones for any closing remark.

[Chris Jones:]

Thanks, Anastasia. And I want to thank you all for spending a little bit of your morning today with us to hear our story and to allow us a chance to talk about our success. We invite you to take a look at our website and our disclosures for any further information you desire. And with that, I'd like to wish you all a great day. Thank you.

[Operator:]

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.