8-K: Westwater Resources Secures First Off-Take Agreement with SK On for Graphite Supply

Westwater Resources has entered into a significant off-take agreement with SK On to supply natural graphite anode material from its Kellyton plant, marking a key step in its graphite business development.

Summary

• Westwater Resources has signed a Products Procurement Agreement with SK On, a major EV battery manufacturer.
• Under the agreement, SK On will purchase CSPG-10 natural graphite anode products from Westwater's Kellyton plant.
• The agreement includes a minimum annual purchase amount based on a percentage of SK On's forecasted volume requirements.
• The forecasted volume for the final year of the agreement is 10,000 metric tons of product.
• The agreement is contingent on Westwater completing Phase 1 of the Kellyton plant before a specified date and SK On securing a supply agreement with a third-party purchaser.
• The agreement specifies delivery terms as DDP (Delivered Duty Paid) to SK On's plants in Georgia, Kentucky, or Tennessee.
• The price is set at a not-to-exceed (NTE) level per kilogram, with potential for renegotiation based on market conditions.
• Westwater is responsible for all transportation, insurance, taxes, and duties related to the delivery of the product.
• The agreement includes a force majeure clause that allows for renegotiation of volume and price in case of unforeseen events.
• The agreement is governed by the laws of Singapore and any disputes will be resolved through arbitration in Singapore.

Sentiment

Score: 8

Explanation: The document is very positive due to the significant off-take agreement with a major EV battery manufacturer, which is a key step for Westwater's growth and financing. The agreement is also the first of its kind between a South Korean EV battery manufacturer and a U.S. natural purified graphite producer.

Positives

• The off-take agreement with SK On validates Westwater's graphite business strategy.
• The agreement provides a stable revenue stream for Westwater.
• The agreement is a significant step towards securing financing for the Kellyton plant.
• The agreement positions Westwater as a key supplier of IRA-compliant graphite by 2025.
• The agreement is the first of its kind between a South Korean EV battery manufacturer and a U.S. natural purified graphite producer.

Negatives

• The agreement is contingent on Westwater completing Phase 1 of the Kellyton plant by a specific date.
• The agreement is contingent on SK On securing a supply agreement with a third-party purchaser.
• The price is subject to renegotiation based on market conditions, which could impact profitability.
• The agreement includes a force majeure clause that could disrupt supply.

Risks

• Failure to complete Phase 1 of the Kellyton plant by the Longstop Date would invalidate the agreement.
• SK On not securing a supply agreement with a third-party purchaser would invalidate the agreement.
• Market conditions could lead to price renegotiations that may negatively impact Westwater's revenue.
• Force majeure events could disrupt the supply chain and impact Westwater's ability to fulfill the agreement.
• Changes in raw material components require six months notice and written approval from the buyer.

Future Outlook

Westwater expects to supply CSPG products to SK On, with the amounts, timing, and types of products included within those sales, and Westwater expects to secure additional off-take agreements with other customers.

Management Comments

• Terence Cryan, Westwater's Executive Chairman, stated that the agreement is a critically important step to securing the additional financing needed to complete construction of Phase I of the Kellyton Graphite Plant.
• Frank Bakker, Westwater's President & CEO, mentioned that this is the first off-take agreement for Westwater and that the company is actively negotiating additional off-take agreements with other customers.
• Frank Bakker also stated that the company believes the contract with SK On is the first agreement for the supply of CSPG between a South Korean EV battery manufacturer and a U.S. natural purified graphite producer.

Industry Context

This agreement highlights the growing demand for battery-grade graphite and the increasing importance of establishing secure and localized supply chains for EV battery materials. It also demonstrates the strategic importance of U.S.-based graphite production to meet the requirements of the Inflation Reduction Act (IRA).

Comparison to Industry Standards

• The agreement positions Westwater as a potential competitor to established graphite suppliers, particularly those based outside of the U.S.
• The agreement is significant as it is the first of its kind between a South Korean EV battery manufacturer and a U.S. natural purified graphite producer, indicating a shift towards localized supply chains.
• The 10,000 metric ton forecast for the final year of the agreement is a substantial volume, suggesting a significant commitment from SK On and a potential benchmark for future off-take agreements in the industry.
• The agreement is a positive sign for the U.S. graphite industry, which is seeking to establish itself as a reliable source of battery materials.

Stakeholder Impact

• Shareholders will benefit from the increased revenue and potential for growth.
• Employees will have job security and opportunities for advancement.
• Customers will have a reliable source of high-quality graphite.
• Suppliers will have a stable customer for their products.
• Creditors will have increased confidence in Westwater's ability to repay its debts.

Next Steps

• Westwater needs to complete Phase 1 of the Kellyton plant by the Longstop Date.
• Westwater will continue to negotiate additional off-take agreements with other customers.
• SK On needs to execute and sign a certain nomination or supply agreement with a third party purchaser.

Key Dates

Keywords

graphite, off-take agreement, SK On, EV battery, Kellyton Plant, CSPG-10, natural graphite, anode material, battery materials, supply chain