The companies said after market close that they have entered into a definitive agreement under which they “will be combined to create a larger, more diversified American energy minerals development and exploration business.” Their aim will be to provide specialized graphite for use in batteries worldwide.
Alabama Graphite’s key asset is the Coosa graphite project in Alabama. According to a 2015 preliminary economic assessment, the project has a post-tax NPV of $320 million at an 8-percent discount, a post-tax IRR of 45.7 percent and a post-tax payback period of two years.
“This combination is an excellent strategic fit,” said Chris Jones, Westwater’s president and CEO. Westwater was formerly focused on uranium, but has expanded its portfolio to include lithium. It changed its name from Uranium Resources this past August “to reflect its growing energy metals business.”
Alabama Graphite Chairman Jean Depatie commented, “[t]he timing of this transaction could not be better. [Coosa] is at the feasibility-study stage and Westwater, having excellent management and financial resourcefulness, has the experience and ability to advance our projects and enhance shareholder value at a pace, and in a manner, we would not have been able to achieve on our own.”
Graphite has not been mined in the US since 1990, when United Minerals suspended operations at its graphite mine in Montana. The country currently imports all of the graphite it requires.
Under the deal, Westwater will acquire all of the issued and outstanding common shares of Alabama Graphite in exchange for shares of common stock of Westwater at a ratio of 0.08 of a share of Westwater common stock for each Alabama Graphite share. Based on the closing prices of each company’s common shares on December 11, 2017, the exchange ratio represents a discount of approximately 2.3 percent to current Alabama Graphite shareholders.
The companies will be seeking shareholder approval for the deal on or before March 30, 2018.
At close of day Wednesday, Alabama Graphite’s share price was sitting at $0.12, down 22.58 percent year-to-date. Meanwhile, Westwater’s share price was at $1.11, down 18.98 percent year-to-date.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.