Westwater Resources Announces 2023 Business and Financial Updates - Seite 2

Recent Government Regulation of Graphite Products

China and the United States have imposed tariffs and export controls on critical minerals, including graphite, indicating the potential for further trade barriers between China and the U.S. Effective December 1, 2023, China began requiring government approval for exports of two types of graphite products, including high-purity, high-hardness and high-intensity synthetic graphite material and natural flake graphite and its products. Westwater believes these export restrictions continue to highlight the supply-chain risk for the U.S. and other countries related to natural graphite products.

The U.S. Department of the Treasury (the “Treasury Department”) has published guidance on key requirements for federal clean vehicle tax credits established by the Inflation Reduction Act (“IRA”); most significantly, the Treasury Department proposed new regulations to clarify the application of Foreign Entity of Concern (“FEOC”) credit eligibility exclusions. The U.S. Department of Energy simultaneously released companion interpretive regulations regarding the scope and application of FEOC-related restrictions. Most importantly, both sets of guidance identified the People’s Republic of China as an FEOC. These regulations are important because, starting in 2025, any vehicle whose batteries contain critical minerals – including graphite – that were extracted or processed in any way, and to any degree, by an FEOC – including China – will be ruled ineligible for the Clean Vehicle Tax credit of $7,500 under section 30D of the Internal Revenue Code. As a result, an FEOC must be excluded from a vehicle battery’s supply chain in order for the vehicle to be eligible for the tax credit. Because Westwater is not an FEOC and intends to produce battery-grade graphite for lithium-ion batteries to be used in electric vehicles in the United States, management believes its future production of battery-graphite products will meet the domestic content requirements of the IRA, which we anticipate will provide indirect future benefit to the Company.

Continuing Customer Engagement

As previously announced, Westwater executed its first off-take agreement for the supply of CSPG from its Kellyton Graphite Plant to SK On battery plants located within the U.S., with forecasted volumes ramping to 10,000 mt in the final year of the agreement.

Additionally, Westwater continues to engage with other potential customers by providing samples of CSPG produced by the Company for testing and evaluation, hosting site visits at its Kellyton Graphite Plant, and having technical product development and commercial discussions.