Given the digitalization-of-everything trend, mining firm Westwater Resources (NASDAQ:WWR) has always been fundamentally significant. That’s because Westwater specializes in graphite, a commodity that’s crucial for the development of lithium-ion batteries. Thus, WWR stock, though technically tethered to one of the oldest industries, is also linked to one of the most relevant. And because of that, the underlying company also finds itself in a geopolitical hotspot.
As you know, U.S-China relations haven’t exactly been warm under the Trump administration. To be clear, I don’t believe that all of the president’s actions are unwarranted. Obviously, in order to have robust international commerce, participants must abide by certain accepted standards. The contention by the White House is that this has not occurred, catapulting the trade war.
The Coronavirus Erupts
Then, the novel coronavirus happened and that sent relations into a tailspin. With Donald Trump consistently calling the pandemic the China or Chinese virus, he has placed direct blame on China. And it’s not just hot air that Trump is spewing. Recently, the administration issued an executive order that has strong implications for WWR stock.
According to our own William White, Westwater shares soared earlier this month due to the order, which is designed “to beef up the U.S.’s own mining of critical minerals and to reduce reliance on foreign nations for these supplies.”
Based on information from Roskill.com, the U.S. “does not produce its own natural flake graphite and relies on imports for its consumption. It imported 3kt [metric kiloton] of natural flake graphite from China in 2018, accounting for 45% of all its flake graphite imports that year. Its other main sources are Mexico and Canada.”
By bolstering commodity independence in this arena, the U.S. stands a better chance of insulating itself from severe economic turbulence in the new normal. Of course, that bodes well for WWR stock, hence its sharp rise. However, this geopolitical narrative is complicated.
Murky Waters Make WWR Stock a Tricky Bet
One of the biggest counterarguments against WWR stock is our own political landscape. From the latest polls, it appears that former Vice President Joe Biden has a commanding lead. But we all know from 2016 that the polls are fake. And that makes the more recent collapse in WWR stock incredibly compelling.
I’m being facetious about the polls being fake. However, you should never underestimate Trump’s influence with the under and modestly educated. As The Economist pointed out in November of last year, “Poorly educated voters hold the keys to the White House.”
To that effect, a Business Insider report revealed that a survey indicated “23% of Americans think the coronavirus was created in a Chinese lab.” Unsurprisingly, the survey “found that people who are older, numerically savvy, and trust scientists are less likely to fall for coronavirus misinformation.”
Further, the study revealed that ignorant people from other countries, as well as a larger percentage of nations that have poor education infrastructures, believe in the unfounded conspiracy theory. I mention this because if you want to understand how people can gather at Trump rallies en masse during a pandemic, this is probably why.
So don’t be surprised if Trump wins the whole thing. At least you can comfort yourself with a potentially skyrocketing WWR stock price.
Outlook Could Change for Mineral
On the other hand, what if the polls weren’t fake? While polls are not 100% accurate, it’s also inaccurate to say that one missed call means that the entire polling industry has lost credibility. If that were the case, then neither side can reference opinion polls to bolster their argument because that would look hypocritical.
And right now, the situation doesn’t look good for the incumbent. Even the Senate races in red states like Alaska and South Carolina are surprisingly competitive. Moreover, it wouldn’t be out of the question that Democrat voters, who felt burnt in 2016, represent the majority of those voting early in full force.
To be fair, I’m not entirely sure what a Joe Biden administration will look like in terms of U.S.-China relations. But something tells me that we’ll take a less antagonistic approach, which might not favor WWR stock.
A True Political Gamble
However, an interesting wrinkle is that if Biden wins, it doesn’t necessarily spell doom and gloom for WWR stock fundamentally. According to the U.S. Geological Survey – which I’m trusting is not a fake federal agency – we import most of our graphite from other non-China nations.
Additionally, some of the countries from which we import graphite are our neighborings Canada and Mexico. Theoretically, relations with these two should improve under a Biden administration. Therefore, it’s possible we’ll still rely less on Chinese imports and make up for the loss through extended partnerships with our neighbors.
Then again, the market is always right. Should Biden win, that could freak out mining investors, causing a sharp decline in WWR stock.
Over the long term, I like the relevance of Westwater Resources. However, conservative investors should probably wait out until after the election results to determine how they want to approach this.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
