Updated Development Strategy for Hemerdon Projects

Tungsten West Plc

 ("Tungsten West", the "Company" or the "Group")

Updated Development Strategy for the Hemerdon Tungsten Projects

Tungsten West plc (LON: TUN), the mining Company focussed on recommencing production at the Hemerdon tungsten and tin mine ("Hemerdon" or the "Project") in Devon, England, announces that in light of current market conditions it is pausing the current Hemerdon development plan in order to evaluate alternative approaches to restarting mining operations.

Since the publication of the Project's Bankable Feasibility Study (BFS) in March 2021 and the subsequent admission to AIM in October 2021, there has been significant and rapid inflation across key consumables for the Hemerdon project. These input costs include steel, cement, ammonium nitrate (explosives), power and diesel.

These inflationary pressures have been widely documented in the financial press and originate from a variety of monetary and geopolitical factors in particular the war in Ukraine. The March 2021 Bankable Feasibility Study was optimised using assumptions that are now widely different from prevailing market conditions and therefore is unlikely to still be the optimal development strategy for the asset should current markets persist in the medium term and the tungsten price does not react to a level greater than it has. Given the scale of the inflationary pressures experienced in the last few weeks, the Board of Tungsten West has decided to pause development to re-optimise the Project based on new assumptions.

The Company expects to update the market with a new plan in the coming months. Any new plan will likely entail a lower capital cost for redevelopment and a reduced operating cost (from current expectations based on present input costs) at a reduced production rate whilst maintaining the optionality of expanding the production rate in the future.  The updated plan will focus on achieving maximum margin for its three revenue streams: tungsten, tin and aggregates.

The pause in project execution will allow the Company to accelerate feasibility studies for a number of Phase 2 upgrades to the Project that had previously been identified.

Tungsten West has recently completed a scoping study on the replacement of the current refinery (which produces an iron tungstate concentrate) with a sodium tungstate plant. This hydrometallurgical plant would be more energy efficient and environmentally friendly than the existing pyrometallurgical solution currently employed within the refinery  whilst also producing a superior product that trades at a premium to tungsten concentrate. Initial financial modelling suggests this upgrade could enhance  operating margins and therefore the Company is moving to a full feasibility study on this upgrade.

Power prices at Hemerdon have increased from 11p per kWh to 28p per kwh in the last twelve months. The Company is therefore accelerating its investigation of on-site renewable energy generation and storage solutions which were already under consideration as part of our ESG initiatives. The Company is working through its industry association, the Critical Minerals Association, to engage with Government on fast-tracking renewable energy projects that support domestic production of critical minerals.

The Company has a robust balance sheet position with cash in hand of £28 million as at 31 March 2022 and has not yet drawn down on the previously announced Orion Project Finance Facility. It will use this position to pursue the alternative production strategy that focuses on lower capital and operational costs to value-engineer and re-optimise the Project, while still bringing Hemerdon into operation.

Hemerdon is the third largest tungsten deposit in the world, which under the current global political and economic situation illustrates more than ever its importance in securing the supply of two key critical minerals in tungsten and tin to the Western World. The price outlook for both metals, also considered conflict minerals, remains very robust, and as such Tungsten West remains focussed on restarting this strategically important project.  The Project benefits from current planning permission, a pre-stripped open pit along with significant infrastructure and sunk costs from previous operators and combines this with a strong operational team and recently purchased equipment which includes seven Tomra ore sorters.

Tungsten West's CEO, Max Denning, commented:

"It's clear we are not alone in that many mining operations, whether in production or development, are feeling the impact of the current unprecedented global economic challenges. However, as Tungsten West had only recently commenced development it is still in a position to alter its development strategy to take account of these factors and can build on significant project infrastructure and IP within our team. We have access to a significant quantity of tungsten, tin, aggregates, processing equipment and knowledge on site. These provide all the key ingredients required to formulate a revised production strategy and successfully bring Hemerdon back into profitable production. I look forward to updating shareholders with progress in due course."

This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014 as amended by the Market Abuse (Amendment) (EU Exit) Regulations 2019.

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Overview of Tungsten West

Tungsten West is the 100 per cent owner and operator of the past producing Hemerdon tungsten and tin mine, located near Plymouth in southern Devon, England. The Hemerdon mine is currently the world's third largest tungsten resource, with a JORC (2012) compliant Mineral Resource Estimate of approximately 325Mt at 0.12 per cent. WO₃. The Company acquired the mine out of a receivership process in 2019 after its most recent operators, Wolf Minerals ("Wolf"), stopped production in 2018. While it was operator, Wolf invested over £170 million into the development of the site, the development of significant infrastructure and processing facilities. Hemerdon was producing tungsten and tin materials, under Wolf, between 2015 and 2018, before the company entered administration and placed the mine into receivership due to a number of issues that have since been identified and rectified by Tungsten West.

The Company is focussed on updating the existing infrastructure and, in the near-term, restarting the Hemerdon mine at a low cost. Following the restart, Hemerdon is expected to produce significant volumes of tungsten and tin, both of which are strategically important materials, particularly in the development of new technology.