A stock name that frequently gets mentioned in the debate about how to best trade clean energy is Westwater Resources (WWR). Uranium miners and copper stocks are immediately associated with a move to non-carbon power and battery-based energy. Westwater offers another angle into the same seismic shift being undertaken by the global economy. The graphite that Westwater mines and sells is a key component of the renewable energy sector, but it’s an exceptionally volatile market with high levels of risk-return.
This Westwater Resources stock prediction will use technical and fundamental analysis to consider the company’s prospects in the short, medium and long term. It can be something of a rollercoaster ride with the stock having a track record of almost doubling in price in the space of one trading session. It has also plummeted in value over a similar timeframe, and the long-term price action can only be described as bearish.
The question, “Westwater Resources buy or sell?” is a hard one to answer, and there is substantial market risk, the chance of price going against you, whether you are going long or short-selling the stock. One risk that can be managed is operational risk, which relates to carrying out the act of trading as safely as possible and avoiding scammers. This step-by-step Westwater Resources stock forecast will consider the prospects of WWR and share inside tips on how to trade the stock in ways that optimise returns.
Alabama-based Westwater Resources was founded in 1977 and is listed on the New York Stock Exchange under ticker WWR, and it has a market cap in the region of $107m. The firm is an explorer and developer of US-based mineral resources essential to clean energy production.
Restructuring projects have seen the company recently offload fringe business divisions such as those relating to uranium. Westwater now has a strong focus on exploring and extracting lithium and graphite. The firm aims to exploit a rise in demand of battery-related materials due to accelerating electric vehicle production, and with a lot of its assets based in North America, it offers a secure supply-line for US and Canada manufacturers.
Another competitive advantage the firm claims to have is its management team. The company website states that “our experienced staff and extensive technical expertise set us apart from our peers and provide a strong platform for energy minerals exploration and development”.
Westwater Resources' management team includes the following people:
The role of Christopher Murrel Jones is key to the firm’s prospects, and he has been building a personal position in the firm. Company filings as of January 2021 stated he owned over 10,455 units of WWR stock. He has not sold any of his position over the previous four years. In the last six months, there have been a total of three insider transactions, and all of them were ‘buys’.
Highlights from the nine-month financial results up to 30th April 2021 include:
Westwater Resources investors who have held their position for years rather than months have had to endure a long-term decline in value. On a short-term basis, there are peaks and troughs that are large enough to encourage those with more speculative strategies to buy and sell WWR stock.
The October 2020 price spike saw WWR stock rise in value by an eye-watering 719% in the space of just 12 days. The February 2021 price spike was not as dramatic in nature but still demonstrates how the market can generate extreme returns for those asking if Westwater Resources is a good stock to buy. Both of these price points related to White House political initiatives to ring-fence the domestic supply of materials needed for battery production. Trying to predict what soundbites out of Washington might be in the pipeline is a high-risk strategy, but there is certainly potential for high price volatility to return to WWR at any time.
Over the last six months, the 100 SMA on daily price charts has become a key indicator. It’s on several occasions acted as resistance to share price strength, and in the absence of an upwards breakthrough of the line, the path of least resistance for price appears to be downwards.
The range-bound price pattern does still allow traders with short-term strategies to take positions. Those using CFDs to sell the peaks as well as buy the dips could have had significant success. For example, between 24th June and 27th July, the price of WWR fell in value by more than 28%.
The RSI has also been a relatively reliable signal for those looking to short WWR through the second half of 2021. The peaks in the indicator have been followed by sell offs in the stock. The only point to note is that using the standard measure of 70 hasn’t been triggered since February. Bringing that metric down to 60 would have been more beneficial for traders because the poor market sentiment surrounding WWR means it’s just not being overbought to any great extent.
The potential to profit from downward price moves in WWR means that institutional investors and hedge funds are actively short-selling in the market. The list of firms that have currently bet against the WWR share price details names of prestigious hedge funds including Marshall Wace LLP, Jane Street Group LLC, UBS Group AG, Citadel Advisors LLC and Wolverine Trading LLC.
To establish the short-term prospects for WWR, it is important to look at what fundamental factors could trigger a price move. As with other commodity markets, short-term price moves in the graphite market are driven largely by changes in demand and political statements such as those from the White House that can cause a dramatic change in price. The supply side of the market takes months and years to adapt to any changes in demand because finding and developing mines is a multi-year project.
Global economic growth and the pace and extent of the electric vehicle EV roll out also come into play. The COP26 global summit on the subject of carbon emissions confirmed the direction of travel is away from carbon-based energy, but the timeline for the move is constantly being adjusted. Until EV infrastructure is developed to an extent that there is a ‘tipping point’ moment in terms of adoption, then the graphite mined by Westwater Resources will be associated with potential rather than actual returns.
US President Joe Biden’s $1rn infrastructure package, which was signed off on 15th November, is a multi-year project that could help kickstart the move towards EVs. However, it has done little for the WWR stock price, which actually suffered another price fall after the announcement was made.
Westwater Resources stock predictions for the next 12 months involve incorporating more factors relating directly to the firm’s own actions and the steps it takes to tap into global demand for battery power.
All eyes will be on the company’s progress regarding projects like the Coosa Graphite Project, the most advanced natural flake graphite project in the contiguous United States, and the associated Coosa Graphite Deposit located across 41,900 acres in east-central Alabama.
These graphite resources have an estimated lifespan of 27 years but aren’t due to come online until 2028. Instead, the firm will buy graphite from other miners, process it and sell it on to EV and other battery manufacturers. The proposed approach does allow Westwater to get its production processes up and running, but the firm will be operating on thinner margins than if it was processing its own supply.
Then there is the question of whether the first stage of the project will come in on time and within budget, which is not certain. Initial plans for the new business line announced in a letter to shareholders in 2020 stated,
“We plan to follow this effort with a feasibility study – then construction of the commercial sized plant. We plan to have this plant commissioned before the end of 2022”.
The most recent update from the firm in November 2022 added that,
“Our team is fully engaged in the work of planning the construction of our production facility in Kellyton, Alabama. With the acquisition of existing buildings and land previously announced, we are targeting plant operations in the first half of 2023”.
Westwater Resource’s balance sheet highlights how the venture is in the short term likely to continue to be loss-making. It sold its North American uranium operations to enCore Energy Corp of Vancouver earlier in 2021. The sale helps but doesn’t solve Westwater’s balance sheet situation.
Other income streams could come into play. For example, it will continue to maintain an interest in the New Mexico and Texas uranium fields as it holds 2.5% of enCore and further royalty rights.
The one big hope for the company share price in the next 12 months is that the global geo-political situation deteriorates, particularly the state of US-China relations. That would put a premium on the Alabama-based graphite resources of WWR. In an effort to keep this message in investors' minds, the firm states that when buying graphite to process, it will only use ‘non-Chinese feedstock’. Graphite has been declared a critical strategic mineral by the Department of Defense, and whenever possible, the US military is legally required to use US-sourced materials
Any Westwater Resources stock forecast for 2025 will be largely based on the effectiveness of the EV revolution and prospects for the firm tapping into its Alabama mining reserves.
EV expansion rates are tough to make a call on as politicians need to tread a balancing act between implementing new policies while not financially overburdening their citizens. Replacing the world’s fleet of vehicles is a costly business and even more so if it is rushed.
There is some good news for investors. In the earnings report of 17th November, the company announced it had signed a letter of intent for the sale of 125-250 metric tons of coated spherical purified graphite (CSPG) for lithium-ion batteries, intended for 2023. The deal also has an option on an additional 16,000 metric tons, scheduled for 2025. The deliveries are anticipated to come from Westwater’s planned Coosa Graphite Project – and are subject to the agreements that are expected to be negotiated in the coming months.
The mining reserves question is also difficult to get a clear view of. Expect quarterly earnings updates to be times of higher price volatility because they’ll include assessments of when the firm’s Alabama graphite will come online. The technical elements of the mining industry mean analysing the situation may be beyond many non-specialist investors.
Investors need to make another tough call on the firm’s legal case against the state of Turkey. The firm referred its case to the International Centre for Settlement of Investment Disputes (ICSID), which in turn issued a procedural order that denies a request made by the Republic of Turkey to bifurcate the arbitration proceeding. There is a good degree of legal terminology that has to be navigated in order to form an opinion on the case. This case can only be considered a wildcard, and while it could provide a windfall for the firm, it has already included an overspend on legal costs.
Westwater Resources stock is owned by a number of high-profile institutional investors. The list of significant shareholders includes Vanguard Group Inc (4.094%), BlackRock Inc (1.492%), Renaissance Technologies LLC (0.67%), Geode Capital Management LLC (0.66%), UBS Group AG (0.15%), Jane Street Group LLC (0.00%), Morgan Stanley (0.706%) and Barclays PLC (0.047%). Company insiders that own Westwater Resources stock include Deborah A Peacock and Jeffrey L Vigil.
These firms carry out extensive due diligence before investing in companies, so their willingness to invest in the firm offers some comfort to retail investors. They do also have long-term investment horizons, and the presence of high-profile investment banks and BlackRock, the world’s largest investment company, doesn’t guarantee immediate returns. It could be that they are in positions for the long haul, so individual investors may also need a buy-and-hold approach if they are to optimise their returns. There are hedge funds going short as well as long in Westwater Resources, and retail investors should be careful to not get caught in any crossfire.
Westwater Resources offers a way for investors to gain exposure to very popular trends. The graphite the firm mines is an integral part of the electric vehicle revolution, and thanks to US government guidelines, it is classified as a strategic natural resource.
From an investor standpoint, there are reasons to not buy WRR stock. The technical indicators offer few reasons for the current downward price patterns to not continue, and the fundamentals are challenged by the extended period of time until the firm’s major mining reserves come online.
Buying into WWR is a risky proposition. The firm has a market cap of only $107m. It’s not a firm with much weight to throw around in its dispute with the government of Turkey. The loss-making earnings per share number and negative cash flow reports are also a red flag. The bad news for Westwater is that although it’s possible to argue a business case for investing in the firm, particularly in the long term, there are more attractive candidates on any shortlist of the best renewable energy stocks.
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