Westwater Resources, Inc. (Nasdaq:WWR) (“WWR” or
“Westwater”), is pleased to announce that it has entered into a
definitive agreement to acquire Alabama Graphite Corp. (“AGC” or
“Alabama Graphite”) (TSX-V:CSPG) (OTCQB:CSPGF) pursuant to a plan
of arrangement under the Business Corporations Act (British
Columbia) (the “Acquisition”). Upon completion of the Acquisition,
the two companies will be combined to create a larger, more
diversified American energy minerals development and exploration
business, with the aim of becoming a low-cost producer in the
United States of specialized graphite for use in batteries
worldwide. The Acquisition is expected to provide significant
benefits for both of AGC’s and WWR’s shareholders, including
operational efficiencies and improved access to capital.
As a result of this combination, Westwater increases its ability
to participate in the value chain of critical materials for the
high growth battery market with:
- The Coosa Graphite Project (“Coosa Project”) – a near term,
high value planned producer of battery materials in Alabama that
can serve fast growing markets for electrical power storage.
- Westwater’s existing lithium exploration projects in Nevada and
Utah.
Westwater retains its leverage to the anticipated increase in
pricing and demand for uranium with its diversified portfolio of
conventional and in-situ recovery uranium projects in the United
States and the Republic of Turkey. Following recently
announced production cuts by two major producers, the uranium price
has risen significantly since the first week of November due to the
perceived improvement in supply/demand fundamentals within the
sector.
Based on the financial analysis outlined in the Coosa Project’s
NI 43-101 compliant Preliminary Economic Assessment (summarized
below) which includes an after-tax NPV for the project of $320
million, Westwater believes the Acquisition represents compelling
value and is accretive to Westwater shareholders. For further
information about the Coosa Project and about Alabama Graphite see
AGC website at: www.alabamagraphite.com.
Transaction Details
On December 13, 2017, Westwater and a wholly owned subsidiary of
Westwater entered into an Arrangement Agreement (the “Arrangement
Agreement”) with Alabama Graphite, a corporation existing under the
laws of British Columbia, pursuant to which Westwater will
indirectly acquire all of the issued and outstanding common shares
of AGC (the “Arrangement”). The Arrangement will be implemented by
way of a plan of arrangement (the “Plan of Arrangement”) and is
subject to approval by the Supreme Court of British Columbia and
AGC’s shareholders. The effect of the Arrangement will result in
AGC becoming a wholly-owned subsidiary of Westwater.
Pursuant to the Arrangement, Westwater will acquire all of the
issued and outstanding common shares of AGC (the “AGC Shares”) in
exchange for shares of common stock of Westwater at a ratio of 0.08
of a share of Westwater common stock for each AGC Share (“Exchange
Ratio”). 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% to current AGC
shareholders. Following completion of the Acquisition,
Westwater shareholders are expected to retain ownership of
approximately 70% of Westwater’s common stock outstanding. In
addition, certain issued and outstanding options and warrants to
acquire AGC Shares will be converted into rights to purchase shares
of common stock of Westwater based on the Exchange Ratio.
The Boards of Directors of Westwater and AGC each unanimously
approved the Arrangement Agreement. Both Boards of Directors
received opinions that the proposed transaction is fair from a
financial point of view to the respective shareholders of Westwater
and AGC. Roth Capital Partners, LLC provided the fairness opinion
to the Westwater’s Board of Directors and Echelon Wealth Partners,
Inc. provided the fairness opinion to the AGC Special Committee of
its Board of Directors.
Consummation of the Arrangement is subject to customary closing
conditions, including, among others the approval of WWR’s and AGC’s
respective shareholders and approval of the court. The Arrangement
Agreement includes customary representations, warranties, and
covenants by the parties, including, customary deal protection and
exclusivity agreements, no-shop and no-talk provisions, matching
and notification rights in the event of a competing proposal and
expense reimbursement fees payable by Alabama Graphite to Westwater
in specified circumstances.
Concurrent with the execution of the Arrangement Agreement,
Alabama Graphite and Westwater also agreed to the terms of a
secured convertible loan from WWR to AGC for up to US$2.0 million
(the “Secured Loan”). The Secured Loan will provide AGC with
working capital to return to a positive working capital position
and ensure it can continue to progress the Coosa Project towards
development, and to cover costs associated with the
Acquisition.
The Secured Loan will carry a 3% interest rate, and is
convertible into AGC shares at WWR's election. The Secured Loan
will become repayable on June 30, 2018 unless the Arrangement
closes. However, it would become repayable immediately if the
transaction is terminated as a result of AGC breaching certain
Terms and Conditions of the Arrangement Agreement, including AGC
recommending a competing, alternate transaction. Should the Secured
Loan be converted into AGC shares, WWR would hold approximately a
7.5% interest in Alabama Graphite, assuming the full $2.0 million
is outstanding at the time of conversion.
Highlights of the Transaction
The Board of Directors of both Westwater Resources and Alabama
Graphite consider the Acquisition to be an advantageous
transaction, and is expected to provide significant strategic and
financial benefits to the shareholders of both companies.
Key highlights of the Acquisition include:
- Combining Westwater’s in-house technical abilities and
operational experience over a wide range of commodities with the
mineral resources controlled by AGC near Sylacauga, Alabama
provides strategic corporate experience and an improved route to
low cost specialized graphite to supply existing and growing
battery markets;
- Creating a larger, international energy minerals company, with
a larger market capitalization and a critical mass that is expected
to be more favorably positioned with potential offtake
customers;
- Provides the shareholders of both companies with exposure to an
extensive project portfolio of resources to support the
fast-growing transportation battery market through the nearer term
AGC Coosa Project and the WWR lithium exploration properties in
Nevada and Utah, as well as long term exposure to the potential
rise in the uranium price with Westwater’s extensive uranium
property portfolio;
- Greatly improved access to and greater appeal for global equity
capital markets through Westwater’s listing on the NASDAQ; and
- Establishes a strong platform to continue developing a leading
energy minerals, exploration and development company through both
organic growth and/or further corporate
transactions.
The Coosa Project
The Coosa project is located near Sylacauga, Alabama,
approximately 50 miles southeast of Birmingham. The
area has been a past producer of graphite, utilizing a geology
trend spanning tens of thousands of acres, known as the “Alabama
Graphite Belt.” Alabama remains a friendly business
jurisdiction, exemplified by successfully securing a $1 billion
commitment from Daimler Benz to build a lithium-ion battery factory
near their automobile assembly plant in that state.
The Coosa Project deposit covers more than 41,900 acres of
cultivated, commercial forest, and the NI 43-101 compliant
Preliminary Economic Assessment already completed by AGC shows the
following financial metrics, based on an initial capital
expenditure of $43.2 million, of:
- A pretax payback of 1.9 years, post-tax 2.0 years.
- An NPV-8% discount rate of $444 million pretax and $320 million
post tax.
- An internal rate of return of 53.2% pretax and 45.7% post
tax.
Further details regarding the Coosa Project can
be found at Alabama Graphite’s website and on SEDAR.
The Westwater and AGC management teams are working to further
optimize the project, working in conjunction with product
development labs in the US and Canada.
Westwater’s Chief Executive Officer, Chris Jones
said:
"This will be a transformational acquisition for our
shareholders that we believe positions our combined company as a
leading battery materials developer in the US with potential for
near term production from the Coosa Project. We will be meeting
with all stakeholders and state regulatory entities shortly and
plan to be full speed ahead with development of the project in
Alabama following closing.”
Benefits to Alabama Graphite Shareholders
AGC shareholders will derive many benefits from the Acquisition,
including:
- Very significant increase in average daily share trading
liquidity;
- Leveraging the skills and know-how of Westwater’s experienced
mining and operations teams;
- Benefits of a NASDAQ listing;
- Retaining material exposure to the upside from development of
the combined companies’ graphite, lithium and uranium project
portfolios;
- Improved funding position; and
- Alleviation of the substantial financial duress and going
concern risk that AGC is currently experiencing.
Benefits to Westwater Shareholders
Westwater’s shareholders will also realize many benefits from
the Acquisition, including:
- A pathway to potential production and strong cash flows through
sharing in the development of the Coosa Project;
- Exposure to a new commodity, which is in high demand as
transportation batteries increase production; and
- Potential for WWR to be re-rated as a graphite producer sooner
than relying upon uranium and lithium alone.
Benefits for both Alabama Graphite and Westwater
Shareholders
In addition to the strong benefits expected for each group of
shareholders, there are a number of benefits that both companies'
shareholders may enjoy, including deeper portfolio of projects
ranging from a potential near-term production asset (Coosa
Project), down to grassroots exploration opportunities which better
equip the combined company to respond to changing commodity market
conditions;
- Expected increase in attractiveness to retail and institutional
investors;
- Expected increase in trading liquidity and coverage by green
energy sector analysts; and
- Establishing a stronger platform from which the combined
business may pursue future growth opportunities.
Acquisition Process and Indicative
Timetable
The Acquisition will be subject to various approvals, including
the TSX Venture Exchange, NASDAQ, shareholder, other regulatory
agencies as well as Court approval. The parties are progressing to
obtain these approvals.
A proxy statement for WWR stockholders and a circular for AGC
stockholders will set out additional information relevant to the
Acquisition, including two fairness opinions that conclude the
Acquisition is in the best interests of both companies.
Submittals to the stockholders of both companies are expected to be
made in January 2018 with meetings anticipated to occur prior to
the end of March 2018.
Advisers
Roth Capital Partners, LLC has provided an opinion to
Westwater’s' Board of Directors that the Exchange Ratio is fair,
from a financial point of view, to Westwater’s shareholders.
Echelon Capital has provided a fairness opinion to the AGC Board
indicating that the consideration to be received by AGC’s
shareholders is fair, from a financial point of view, to Alabama
Graphite shareholders. Westwater is represented by Hogan
Lovells US LLP in Denver, Stikeman Elliott LLP in Toronto and Balch
& Bingham LLP in Alabama. AGC is represented by Miller
Thomson LLP in Toronto, Dorsey & Whitney LLP in Minneapolis and
Toronto, and Dominick Feld Hyde, P. C in Alabama.
About Westwater
WWR, or the “Company” (formerly Uranium Resources, Inc.) is
focused on developing energy-related metals. The Company has
developed a dominant land position in three prospective lithium
brine basins in Nevada and Utah in preparation for exploration and
potential development of any lithium resources that may be
discovered there. In addition, WWR remains focused on
advancing the Temrezli in-situ recovery (ISR) uranium project in
Central Turkey when uranium prices permit economic development of
this project. WWR controls extensive exploration properties in
Turkey under eight exploration and operating licenses covering
approximately 39,000 acres (over 16,000 ha) with numerous
exploration targets, including the potential satellite Sefaatli
Project, which is 30 miles (48 km) southwest of the Temrezli
Project. In Texas, the Company has two licensed and currently idled
uranium processing facilities and approximately 11,000 acres (4,400
ha) of prospective ISR uranium projects. In New Mexico, the Company
controls mineral rights encompassing approximately 186,000 acres
(75,300 ha) in the prolific Grants Mineral Belt, which is one of
the largest concentrations of sandstone-hosted uranium deposits in
the world. Incorporated in 1977, WWR also owns an extensive
information database of historic drillhole logs, assay
certificates, maps and technical reports for uranium properties
located in the Western United States.
Cautionary Statement
This news release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are subject to risks, uncertainties and
assumptions and are identified by words such as “expects,”
“estimates,” “projects,” “anticipates,” “believes,” “could,” and
other similar words. All statements addressing events or
developments that WWR expects or anticipates will occur in the
future, including but not limited to statements relating to
consummating the transaction with AGC, and the Company’s future
prospects, including benefits of the transaction to AGC and the
success of AGC’s business plan, expected operational efficiencies,
costs (including capex) at AGC’s Coosa Project, payback periods for
AGC’s projects, expected growth in battery markets, net present
value and expected rates of return at the Coosa Project are
forward-looking statements. Because they are forward-looking,
they should be evaluated in light of important risk factors and
uncertainties. These risk factors and uncertainties include,
but are not limited to, (a) the Company’s ability to close its
transaction with AGC and successfully integrate AGC’s business into
its own; (b) the Company’s ability to raise additional capital in
the future; (c) spot price and long-term contract price of
graphite, uranium and lithium; (d) risks associated with our
foreign and domestic operations; (e) operating conditions at the
Company’s projects; (f) government and tribal regulation of the
graphite industry, uranium industry, the lithium industry, and the
power industry; (g) world-wide graphite, uranium and lithium supply
and demand, including the supply and demand for lithium-based
batteries; (h) maintaining sufficient financial assurance in the
form of sufficiently collateralized surety instruments; (i)
unanticipated geological, processing, regulatory and legal or other
problems the Company may encounter in the jurisdictions where the
Company operates or intends to operate, including in Alabama,
Texas, New Mexico, Utah, Nevada and Republic of Turkey; (j) the
ability of the Company to enter into and successfully close
acquisitions or other material transactions, (k) the accuracy of
the Preliminary Economic Analysis of the Coosa Project and the
assumptions contained therein and Westwater’s ability to develop
the project in conformity to the assumptions therein, and (l) other
factors which are more fully described in the Company’s Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, and other
filings with the Securities and Exchange Commission. Should one or
more of these risks or uncertainties materialize, or should any of
the Company’s underlying assumptions prove incorrect, actual
results may vary materially from those currently anticipated. In
addition, undue reliance should not be placed on the Company’s
forward-looking statements. Except as required by law, the Company
disclaims any obligation to update or publicly announce any
revisions to any of the forward-looking statements contained in
this news release.
Competent Person’s Statement
Technical information in this news release is based on data
reviewed by Matthew Hartmann, who is Director – Technical Services
of Westwater Resources, Inc. Mr. Hartmann is a “Qualified
Person” as defined by Canadian National Instrument 43-101, and a
“Competent Person” as defined in the 2012 Edition of the
“Australasian Code for Reporting Exploration Results, Mineral
Resources and Ore Reserves” (JORC Code). He is a Licensed
Professional Geologist, and a Registered Member of the Society of
Mining, Metallurgy & Exploration (No. 4170350RM). Mr.
Hartmann has appropriate experience that is relevant to the
evaluation of the style and nature of mineral deposits relating to
this document. Mr. Hartmann consents to the inclusion in this
release of the matters based on their information in the form and
context in which they appear.
Westwater Resources Contact: Christopher M.
Jones, President and CEO 303.531.0480
Jeffrey L. Vigil, VP Finance and CFO303.531.0481
Email: Info@WestwaterResources.netWebsite:
www.WestwaterResources.net
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