WESTWATER RESOURCES, INC.

Graphite is the name given to a common form of the element carbon. Occurring naturally as a mineral in deposits around the world, graphite is used in many industrial applications. These end uses take advantage of graphite’s natural characteristics, which include high lubricity, high resistance to corrosion, the ability to withstand high temperatures while remaining highly stable, and excellent conductivity of heat and electricity.

In recent years, graphite has become an essential component in the production of all types of electrical storage batteries. Graphite’s role will continue to be important as demand for these batteries increases due to the world’s growing electric vehicle and energy-storage needs. Natural battery-grade graphite products are derived from flake graphite that has been transformed through a series of specialty downstream processes into various battery graphite products. These processes include, but are not limited to:

Natural flake graphite is an alternative to synthetic graphite, but most batteries contain a blend of natural and synthetic graphite in battery applications for cost and performance reasons. Through a series of sophisticated and precise processing steps, flake-graphite concentrates are transformed into high-value end products for the battery industry. Coated spherical purified graphite is used as a graphite anode or anode active material in lithium-ion batteries.

The global battery market demand for natural flake graphite in 2024 was approximately 1.9 million tons. Flake graphite demand is anticipated to reach approximately 4.7 million tons by the year 2034, roughly a 240% increase, largely fueled by the battery sector. Batteries are estimated to comprise approximately 86% of flake graphite demand by the year 2034, and electric vehicles are anticipated to comprise 88% of that demand for batteries. (Benchmark, September 2024).

Graphite is a critical, currently non-substitutable constituent in the lithium-ion and alkaline battery segments. These segments make up the greatest share of the global battery market and both segments require advanced battery-grade graphite products. According to Benchmark Intelligence, anode active material (or CSPG) demand is anticipated to reach approximately 5.4 million tons by the year 2034, with electric vehicles driving the demand. Of the total demand for anode active material, the electric vehicle sector is expected to be approximately 88% by the year 2034.

Although it may seem that synthetic and natural anode active materials are competing products, synthetic and natural graphite blends are becoming popular choices for electric vehicle applications to optimize performance and cost by taking advantage of each graphite attribute, such as cycle life, energy density, and cost. While synthetic graphite consumption by anode manufacturers is expected to grow because of the concentration of the graphite industry in China, natural graphite demand is forecasted to grow at an even higher rate because of natural graphite’s higher reversible capacity, lower CO2 footprint and cost efficiencies when compared to synthetic graphite.

Approximately 77% of the global natural flake graphite and approximately 97% of global anode active material is supplied by China (Mining Technology, 2024), which causes China to pose a geopolitical risk, particularly to the EU and U.S. regions. 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 United States. Effective March 4, 2025, imported Chinese natural graphite tariffs now total 45%. This is the result of the U.S. imposed 25% import tariff on Chinese natural and synthetic graphite materials and graphite anodes during 2024, additional 10% tariff on all goods originating from China in February 2025, and the most recent increase of an additional 10% tariff on all goods originating from China during March 2025. Potential further increase of graphite tariffs may increase up to a level of 920% pending the trade case currently under review by the International Trade Commission, with updates expected in May 2025. In addition, 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 tariffs and export restrictions continue to highlight the supply-chain risk for the U.S. and other countries related to natural graphite products and could provide an opportunity for Westwater.

Overall battery consumption has risen at an accelerated growth rate due to developments in electric-automobile markets, personal electronic devices, electrical grid storage, and technology for wind and solar power installation. The long-term shift towards low- and zero-emissions vehicles and power sources is expected to drive increasing demand for graphite-battery materials for the foreseeable future. Recent developments in this sector include:

to be approximately 68% by the year 2030. In addition, 17 states have adopted all or part of California’s low-emission and zero-emission vehicle regulations. These additional states include Colorado, Connecticut, Delaware, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington and the District of Columbia.

China, as the primary source of battery-grade graphite, presents the global battery industry with significant supply chain management risks, economic risks, geopolitical risks, and environmental sustainability concerns. Also, critical domestic production is lacking in the United States. A Presidential Executive Order signed on September 30, 2020 includes graphite on a list of minerals critical to the safety and security of the United States. With limited current domestic natural graphite production of any kind, the United States is presently required to source most of its battery graphite from China.

On August 16, 2022, then President Biden signed into law the Inflation Reduction Act (“IRA”). This legislation includes an investment of approximately $370 billion in climate programs. The IRA provides a 10% tax credit for the costs of producing certain critical minerals, including graphite and vanadium. This credit is eligible for direct pay and is also transferable to unrelated taxpayers. In addition, a key provision of the IRA that could indirectly benefit the Company is the Clean Vehicle credit. The IRA eliminates the previous limitation on the number of electric vehicles a manufacturer can sell before the Clean Vehicle credit is phased out or eliminated. Further, the IRA sets a minimum domestic content threshold for the percentage of the value of applicable critical minerals contained in the battery of the electric vehicles.

On May 3, 2024, the U.S. Department of the Treasury (the “Treasury Department”) adopted final regulations related to the Clean Vehicle Tax credit of $7,500 under section 30D of the Internal Revenue Code (the “federal electric vehicle tax credit”). The final rules effectuate the guidance previously provided in December 2023 by the Treasury Department related to the key requirements for the federal electric vehicle tax credit. The final rules include a process – called the traced qualifying value test – for automakers to trace the battery supply chain to qualify for the federal electric vehicle tax credit’s domestic content requirements, which takes effect in 2025. The final rules also prohibit battery parts and critical minerals from “excluded entities” – defined as foreign entities of concern, or FEOCs – from qualifying for the federal electric vehicle tax credit. Under relevant Treasury Department and U.S. Department of Energy interpretive regulations regarding the scope and application of FEOC-related restrictions, the People’s Republic of China is identified as an FEOC. The final FEOC battery component rules are important to Westwater because, beginning in 2027, any electric vehicle whose batteries contain graphite that was extracted or processed in any way, and to any degree, by an FEOC – including China – will be ruled ineligible for the federal electric vehicle tax credit. As a result, an FEOC must be excluded from an electric vehicle battery’s supply chain in order for the electric vehicle to be eligible for the federal electric vehicle 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. In November 2024, President Trump was re-elected as President; it is not yet known how a change in Presidential administration may affect the domestic production of critical materials, and related tariff and tax incentive policies.

See further discussion of risks factors of potential impacts for changes to tariffs or changes to existing regulations withinItem 1A. Risk Factors below in this Annual Report on From 10-K.

The State of Alabama and local municipalities have entered into incentive agreements with the Company for the siting of the Company’s proposed graphite processing plant in Coosa County, Alabama. The incentive agreements provide certain tax credits and incentives under the Alabama Jobs Act in connection with the construction of the Kellyton Graphite Plant.

Westwater has developed graphite-purification technology and advanced product-development processes designed to meet the demands of potential customers for battery-grade graphite materials. Westwater is developing methodologies and constructing facilities intended to produce high-purity, battery-grade graphite products at its Kellyton Graphite Plant. These products are designed to serve all major battery sectors with an initial focus on supporting the electric vehicle and energy storage markets. In addition, we believe the processes we intend to use are environmentally sustainable and permittable in the United States, where a robust regulatory environment complements our core values to reliably deliver safe, well-made products to our customers.

Westwater has and will continue to support the efforts by the relevant United States governmental agencies, the State of Alabama and local municipalities to ensure that they remain aware of the importance of natural battery-grade graphite, its importance to the nation’s security, and how the Kellyton Graphite Plant and the Coosa Graphite Deposit fit into the critical minerals-equation.