08 August 2022

 

Tungsten West Plc

 

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

Final Results for the year ended 31 March 2022,

Availability of Annual Report and Notice of Annual General Meeting

 

Tungsten West, the owner and operator of the Hemerdon Mine in South West England, is pleased to announce its audited results for the year ended 31 March 2022.

 

Copies of the Company's full Annual Report and Financial Statements for the financial year to 31 March 2022 will be made available to download from the Company's website at www.tungstenwest.com and will shortly be posted to shareholders together with a Notice of Annual General Meeting, which will also be made available on the Company's website, to be held at Shakespeare Martineau 60 Gracechurch Street London EC3V 0HR on 14 September 2022 at 0900.

 

Financial Summary

 

·      Net loss for the year was £13.0 million against the prior year loss of £8.0 million.

·      Net cash position of £28.8 million (2021: £3.5 million) as at the year end.

 

Operational Summary

 

LTI (Lost Time Injury) and MTI (Medical Treatment Injury) free during reporting period.

Seven Ore Sorters delivered in the UK.

Offtake agreements entered into with Wolfram Bergbaau und Hutten AG and Global Tungsten and Powders Corp to purchase tungsten concentrate.

Offtake agreement entered into with AfriMet Resources to purchase tin concentrate.

Average number of employees at 31 March 2022 increased to 58 (2021: 34)

In July 2022, post-year end, the Board gave its approval to proceed with detailed engineering design and to commence construction of the Hemerdon Project following a three-month technical and commercial review of the assumptions that underlaid the BFS.

 

 

Corporate Summary

 

During April 2021, the Company undertook a £3.7 million financing through the issue of new shares to existing and new investors. The funding enabled the Company to progress planning and designs for the ore sorters and rebuild of the front end of the process plant, initiate the refurbishment and redesign of the existing plant and hire key management and financial and administrative personnel.

 

The Company completed a successful admission to the AIM market of the London Stock Exchange in October 2021, issuing 65,000,000 new ordinary shares of £0.01 each ("Ordinary Shares") at 60p per share, raising new funds of £39 million gross. Fees incurred on the AIM admission process were, in aggregate, £3.1 million, resulting in net proceeds of £35.9 million.

 

As part of the AIM admission process, the 8% Convertible Loan taken out to acquire the project, comprising £10.0 million of principle and £0.7 million accrued interest, was converted at 30p per share into 35,935,200 Ordinary Shares.

 

There were a number of board changes during the period as the Group strengthened its executive and non-executive management in advance of the Company's AIM admission.

 

In July 2021, Nigel Widdowson was appointed to the Board of Tungsten West (the "Board") as Chief Financial Officer.

 

Robert Ashley was appointed Chair of the Board in September 2021. At the same time, Grace Stevens was appointed to the Board and Chair of the Audit Committee. David Cather was appointed to the Board and Chair of the Technical Committee and Chair of the Remuneration Committee.

 

Stephen Fabian stepped down from the Board in September 2021.

 

Post year-end, Max Denning stepped down from the Board in July 2022 with Executive Vice-Chairman Mark Thompson assuming the responsibilities of the CEO.

 

The Board would like to thank both Stephen and Max for all their hard work in the foundation of the Company and its formative years.

 

Tungsten West's Executive Vice-Chairman, Mark Thompson, commented:

"Despite the financial loss during the year, the results were in line with the Boards expectations as the Group ramped up headcount and increased its corporate activities.

 

Throughout the reporting period and post year-end, everyone involved in the Hemerdon Project have shown immense commitment in ensuring the Group can overcome the inflationary pressures that have impacted our plans considerably.

 

Sometimes a pause in development is necessary, and whilst it was a challenging task for our Tungsten West team to re-design and re-evaluate the project, I am certain this was the right course of action to take back in April this year.

 

We firmly believe the Hemerdon deposit has a deep and strategic value for the local region and UK. Just last month the Government launched the UK's critical minerals strategy, stating 'The world in 2040 is expected to need 4 times as many critical minerals for clean energy technologies as it does today,' and we remain convinced Tungsten West can contribute hugely in achieving this goal".

 

Enquiries

 

Tungsten West Mark Thompson Tel: +44 (0) 203 178 7385	Strand Hanson (Nominated Adviser and Financial Adviser) James Spinney / James Dance / Abigail Wennington Tel: +44 (0) 207 409 3494
Camarco (Financial PR) Gordon Poole / Emily Hall Tel: +44(0) 20 3757 4980 Email: tungstenwest@camarco.co.uk	Hannam & Partners (Joint Broker) Andrew Chubb / Nilesh Patel +44 (0)20 7907 8500   VSA Capital Group plc (Joint Broker) Andrew Raca / Andrew Monk +44 (0)20 3005 5000

Follow us on twitter @TungstenWest

 

CHAIRMAN'S STATEMENT

 

I am pleased to report on the Group's audited results for the year ended 31st March 2022.

 

The past financial year saw the Group make significant preparations for the recommencement of mining operations at Hemerdon, as well as completing a successful admission and capital raise on the London Stock Exchange's AIM Market. I am pleased to report that the Group met several key corporate and operational milestones during the year whilst most importantly doing so with all staff and contractors keeping safe and long-term injury free. The health and safety and well-being of our employees and contractors remains our number one priority and to be LTI/MTI free during the year is a testament to the professional standards of the team. As the Group moves into production this will become increasingly challenging, however, the Group will adapt and actively manage its risks to ensure we can promote and adhere to health and safety standards of the highest quality. 

 

It cannot go unsaid that the Group has been impacted by the inflationary environment which started in the final quarter of the financial year. The plant re-build project was due to start in a period of rapidly escalating materials and energy prices. The operation is particularly sensitive to energy costs for both the mining and processing operations. In April 2022 the Board concluded that the proposed project should be paused to evaluate alternative approaches to restarting mining operations. By making this decision early before the Group committed to unsustainable capital and operating expenditure it provided the Group with the opportunity to work up revised plans for a smarter and lower capital expenditure programme, focusing on minimising opex and energy consumption, whilst maximising profit contribution rather than volume. Following this short pause, which allowed all members of the team to assess alternative strategies for restarting Hemerdon, development was restarted in July 2022.

 

The Board is immensely proud of the dedication and commitment that has been applied by our project and support teams in the last few months. It has been a difficult period for everyone connected to the Hemerdon Mine, however the Board has full confidence in the revised project plans being the optimal and economical way forward to re-launch mining operations, focus on sustainability and margins, and deliver shareholder value.

 

CORPORATE MILESTONES

 

The Group's primary corporate objective for the year was to raise the necessary funding for the processing plant-rebuild and recommencement of mining operations at Hemerdon. In October 2021, the Group completed a successful admission to the AIM market of the London Stock Exchange, issuing equity to raise £39 million before expenses.

 

The Company also agreed a financing package with an aggregate value of approximately US$49m through a Royalty sale and a Senior Loan Facility with Orion Resource Partners ("Orion"). At the time of the Orion negotiations, the rebuild plans were to maximise volume and therefore required significant capital investment to which the Orion funds were primarily intended to support. This included capital equipment and resources needed for the project execution. Following the revised plans to reduce project capex and re-optimise the mineral processing facility, certain conditions precedent to drawing on the Orion funds were not met and therefore this financing package cannot currently be drawn down. 

 

The Group is now in discussions with financing partners to provide the additional capital required to execute the development of the project.

 

OPERATIONAL MILESTONES

 

Alongside our long-term financing the Group met major project milestones which are key to restarting mining operations. Offtake agreements were signed for our core tungsten product and offtake and distribution agreements for our tin and aggregates products are also in place. The first aggregates sales were made through a trial run by the Group which included processing material mined by the previous operator. This successfully established a presence in the local and regional aggregates market.

 

 

 

 

OUR TEAM

 

Critical to reaching commercial operations will be our workforce. Facing the dynamic challenges ahead, the Group has at its disposal a world class cohort of talent across project development and mining operations.

 

At the executive level, the Group strengthened the Board with the appointment of Nigel Widdowson as Chief Financial Officer. David Cather was appointed to the Board and acts as Chair of the Technical Committee and Chair of the Remuneration Committee whilst at the same time, Grace Stevens was appointed to the Board and acts as Chair of the Audit Committee.

 

In July 2022, the Group announced that Max Denning would leave his role as CEO and the Board with immediate effect. Executive Vice-Chairman Mark Thompson has assumed the responsibilities of the office of the CEO. 

 

As a co-founder and having held several senior roles within commodity trading and investment, as well as junior mining and exploration companies, Mark has valuable strategic experience. The Board look forward to having Mark lead this project through the construction phase of the Hemerdon Project.

 

Mark still retains his Vice-Chairmanship and whilst he has assumed the responsibilities of the CEO office, he will be supported by an executive committee which has assumed project and site-based responsibilities going forward.

 

The Board recognise the need for independence and good corporate governance and all agree that the current management structure does not compromise our ability to enforce effective corporate governance.

 

We recognise that women are underrepresented at all levels within mining companies and 23% of the Group's current employees are female as at 31 March 2022. Tungsten West are an employer who aspires to enjoy the full spectrum of diversity, in all respects, across our operations and administration and will continue to review and improve its employment terms and conditions to ensure that our policies and procedures are not a barrier to those keen to work for the organisation.

 

 

RESPECTING OUR COMMUNITY

 

As a Company we recognise our responsibility as a positive actor for change, particularly in the local communities within which we work. We maintain our commitment to leading global standards and have set up an ESG framework together with aligning our policies and procedures with UN Sustainable Goals.

 

Core to our business plan is our responsibilities to the environment and the relationships that we build with our wider stakeholders. I am pleased to report the Group has made important inroads in engaging with the local community to ensure it can operate not only effectively but also respectfully. I can also reaffirm the Group continues to work with the local authorities on our (2022: £13.2 million) site restoration plan and bond which is a critical assurance needed for us to restart mining operations.

 

An example of this includes our week-long public consultation carried out in March 2022 to understand the views of local people prior to submitting our planning permission on our HGV aggregates sales volumes.

 

The consultation attracted significant interest from surrounding communities - approximately 400 people attended the events, resulting in 396 completed on-line surveys.

 

In direct response to public views, the Company will no longer be applying for a maximum of 300 HGV exports per day to support its growing aggregates business but will reduce numbers to a maximum of 200 exports per day in its latest planning application to allay public concern.

 

It is the Company's mission to develop a significant and sustainable secondary aggregates business but we must listen to people living locally about how we can do that with the least amount of disruption. We believe our revised planning application addresses the main issues raised by the community through the reduction in traffic volumes.

 

Without the support of the communities in which we live and work, Tungsten West would not be able to succeed. The success of the Hemerdon project is largely dependent on maintaining the positive relationships we have built within our local communities and their continued support of our development strategy and operations. Part of our community engagement is providing opportunities to make contact with us and our senior team listening to concerns. Tungsten West has created a regular forum for open and transparent communications with local communities. We look forward to working alongside our local community as we progress towards recommencing commercial operations and beyond.

 

RESPONSIBILITY TO THE ENVIRONMENT

 

Our success is based on what the planet provides to us, so we must treat it well. Minimising our environmental footprint is at the core of our strategy - and where we do have an unavoidable impact, we aim to make a positive contribution elsewhere.

 

That's why our dedicated environmental team have built a comprehensive approach to environmental protection at Tungsten West. This consists of minimising waste, monitoring all emissions and developing plans to invest in biodiversity and restoration. Please see our ESG report for information on our monitoring activities during the year.

 

MARKET OVERVIEW

 

Tungsten supply remains of strategic importance as China continues to dominate, controlling 82% of global tungsten mine production, demonstrating why restarting the Hemerdon mine will provide a critical global supply. The Group will also look to leverage off the high value in tin as the global use of tin is expected to increase rapidly through use in electronics and solar panels.

 

Demand for aggregates continues to be strong, driven by infrastructure projects throughout the UK and I can report that the local construction industry is starting to benefit from our low cost, low carbon footprint product as approximately 90,000 tonnes of aggregates was delivered to projects in the Southwest in the year ended 31 March 2022.

 

In July 2022, it was pleasing to see the UK Government release the UK's first ever Critical Minerals Strategy which includes tungsten and tin as minerals with high criticality and recognises the South West as an area of high importance in meeting commodity security.

 

OUTLOOK

 

The inflationary pressures that began in 2021 show no signs of fading. Construction materials   have been subject to significant supply constraints and increased input costs in their manufacture. The Group is experiencing price inflation for materials required for the plant and as an energy intensive business, we are exposed to the recent inflation in power and diesel costs.

 

The decision to pause the original development plan, taken in light of current market conditions, has allowed the Group to re-evaluate the design of the mineral processing facility, to focus on margin over volume by minimising capex and power utilisation. The Board has been actively engaged with senior management in evaluating the options for redesigning the processing plant and selecting the most viable, sustainable option. The Board have reviewed the proposed plans and has given its approval to proceed with the detailed engineering design and to commence construction of the Hemerdon Project with immediate effect. As discussed earlier in Corporate Milestones, the Group is in discussions with financing partners to provide the additional capital required to fully execute the project.

 

The outlook for tin as the primary beneficiary of the global move to electrification is compelling and the demand for tungsten concentrate is strong, driven from the increase in its application in progressive technologies and use in defence. On the back of the recent UK Government release of their Critical Minerals Strategy, I feel the Group is strategically well positioned to deliver on its advances on the mine and plant upgrades through the remainder of 2022 and we look forward to successfully starting production in 2023.

 

 

 

Robert Ashley

Chairman

 

YEAR IN REVIEW

 

OUR FOCUS

 

The financial year ending 31 March 2022 has been transformational for Tungsten West; it began with the publication of our Bankable Feasibility Study for the Hemerdon Mine, the document that enabled us to sign key offtake agreements on all three key revenue streams associated with Hemerdon - tungsten, tin and aggregates.

 

Tungsten West went onto successfully raise £35.9 million net of expenses through its listing on AIM, having originally gone out to market to raise £25 million.

 

Towards the end of the financial year, construction projects globally started to feel the pressure of the rising cost of raw materials, and Tungsten West was no exception. The outbreak of COVID-19 and supply chain issues ultimately increased prices in materials and energy across the board. To complicate matters further, the Russia and Ukraine conflict has amplified global concerns over supply chains. Lastly, sustained inflation in energy costs has compounded this situation, meaning our initial project economics were no longer a viable option and in April 2022, the Board decided to pause the development plans and re-optimise the processing plant and mining operations.

 

After a three-month technical and commercial review of the assumptions that underlaid the BFS, the Board gave its approval to proceed with the revised project plans with immediate effect.

 

Changes include a new ramp-up schedule, new crushing strategy, new operating parameters for ore sorting, a re-purposing of equipment within the processing plant, and the production of a different specification of final tungsten concentrate product.

 

The result of the plan is a lower cap-ex requirement and a much lower diesel and power consumption whilst still delivering profitable operating margins.

 

Tungsten West is in a unique situation where we have a strong balance sheet at the year end and no debt to service. With the previous operators having spent more than £170 million on the mine site, the path to production  requires minimal capital expenditure compared to a typical mining project, and the pause on the feasibility plan provided an opportunity to formulate a revised re-build and production strategy that will ensure Hemerdon can reach its full potential as a profitable mine.

 

I want to thank all our past and current employees who have worked tirelessly to ensure this project can be a success and whilst 2022 is not going to be without its challenges, the Group has some of the best individuals in the business ready to develop this project in unison in the run-up to commissioning in 2023.

 

THE MINING OPERATIONS

 

The mine plan has been re-designed to reflect the reduced throughput planned for the Mineral Processing Facility in the first two years of operations, and changes in primary crushing circuit. This will have the following advantages:

 

·      Less waste mined in ramp up period, preserving cash flow

·      Higher proportion of material processed and sold as aggregates, hence reducing cost per tonne

·      Lower power requirement for plant

·      ROM pad rehandling costs to be reduced through direct tipping into the primary crushing circuit

 

THE MINERAL PROCESSING FACILITY

 

The Tungsten West maintenance team undertook a comprehensive review to understand and address the issues experienced by the former operator of the Hemerdon Mine. The areas where issues were identified have been redesigned and will be enhanced during the re-build programme, not only to rectify the issues faced by the previous operators, but to improve significantly the overall operations and reduce downtime.

 

The recent inflationary environment has presented the opportunity to re-design significant elements of the processing flow and re-optimise the plant to maximise margins in a higher energy cost environment. Whilst throughput will be reduced in the first two years, feasibility study volumes are targeted from year three onwards. Operating efficiencies are forecast to increase from the changes set out below.

 

Process	Changes	Key benefits
Primary crushing and screening	Direct tipping into modular crushing and screening plant, located outside the mineral processing facility	Reduced capex, faster route to production, lower opex
Ore sorters	Utilise minimum number of ore sorters, by optimising mass pull	Reduce capex, less maintenance, lower power draw, less waste processed in the plant
Dense Media Separation	Streamline to run a smaller DMS circuit - bypass primary DMS and upgrade secondary DMS and scavenger DMS	Scalable at a later date if required, tried and tested equipment, lower capex
Refinery	Deploy wet magnetic separation technology (WHIMS) instead of the roasting kiln	Lower opex, lower diesel consumption, reduced emissions, higher overall recovery.

 

 

AGGREGATES

 

In December 2021, the Aggregates Division commissioned a Terex® Agg Wash 60 plant to conduct trial production on a temporary basis whilst the main plant installation is undertaken. The Group has been shipping aggregates since early 2021, utilising existing stockpiles that the previous operator had deemed as waste.

 

During the year to March 2022, the Group sold approximately 90,000 tonnes of aggregate product at an average of 15 exports per day. The trial project was loss making, largely as a result of the low quality feed stock producing low yields and high silt content waste.

 

The temporary operation has allowed Tungsten West to build market share using available mined waste on site. Once in full scale operation (up to 200 exports per day), the feed will be fresh granite and we will be one of the first mining companies in the world to implement dual production to sell tungsten and tin, together with aggregate products, which would usually be classified as waste during base metal mining. 

 

The reduced throughput envisaged for the amended mine plan will generate sufficient feed stock from ore sorter rejects and spiral tails rejects.  The new plans for the processing facility will not significantly affect the forecasted volumes of aggregate sales when production recommences.

 

FUND RAISING

 

The successful admission to the AIM market in October 2021 raised £35.9 million net of fees. The oversubscribed fund raise signalled exciting momentum for the UK mining sector to have a project that is in the advanced stages of development and a UK mine that will be producing strategically important materials which are critical for the technology, decarbonisation and construction sectors, locally and globally.

 

Further to the decision shortly after the year end to re-optimise plant and reduce the capital expenditure, the conditions precedent for drawdown of the Orion facilities were not met. The Company is in active discussion with debt or other non-equity capital financing partners to secure the funding required for the planned processing plant upgrades.

 

 

ESG

 

The Group continues to undergo environmentally driven modifications and engage in regular and constructive dialogue with both the local community and authorities to ensure all previous concerns have been addressed. All necessary permits required for restart of operations have been reapplied for with the determination of such permits expected by the end of 2022.

 

We are proud of the creativity and dedication from our project team and partners to be able to deliver an upgrade plan that addresses and solves issues suffered by the previous operators.

 

We believe in promoting the availability of highly skilled graduate jobs within the mining sector, in particularly in Devon and to achieve this, we have begun attending career fairs in schools and universities whilst actively working with local tertiary education establishments for research projects. We were pleased to welcome our first graduate placement student from Plymouth University in April 2022 with further students expected throughout the summer.

 

Most importantly, we are a mining Group that listens to our neighbours. During the financial year, the community engagement team remained engaged with our wider stakeholders and local community hosting regular face-to-face local consultations.

 

Part of our community engagement plan is to ensure there are opportunities to get in touch with us and listen to concerns. Tungsten West has created a regular forum for open and transparent communications with local communities and maintains a community presence at Shaugh Prior, Cornwood and Sparkwell Parish Councils.

 

 

OUR TEAM

 

The next 12 months will be a critical period for the Group as we move towards transitioning from a mining development business to a fully operational production business. In preparation for this, the corporate team has expanded to provide additional support in the areas of finance, communications and investor and stakeholder relations.

 

LOOKING FORWARD

 

In the face of an inflationary environment where costs have materially increased, I am glad that we were able to pause development of the Hemerdon Project when we did.

 

The Tungsten West team have demonstrated immense professionalism and capability in re-optimising the development plan within just three months. I remain convinced of the deep and strategic value of the Hemerdon deposit in light of current geopolitical events where security of supply of critical minerals becomes ever more relevant.

 

Our new plan reduces capital expenditure, lowers the ongoing operating costs by streamlining processes for greater energy efficiency, and maximises the operating margins. We can do all of this whilst maintaining the optionality to revert to the original plan should conditions allow in the future.

 

Mark E Thompson

Executive Vice Chairman

Tungsten West plc

Consolidated Statement of Comprehensive Income

Year Ended 31 March 2022

	Note	2022 £	Restated 2021 £
Revenue	5	673,509	40,170
Cost of sales		(4,028,123)	(3,202,134)
Gross loss		(3,354,614)	(3,161,964)
Administrative expenses		(7,998,774)	(3,736,495)
Other operating income	6	4,237	3,612
Other gains/(losses)	7	(846,373)	(24,301)
Operating loss	8	(12,195,524)	(6,919,148)
Finance income		120,002	112,005
Finance costs		(913,466)	(1,174,640)
Net finance cost	9	(793,464)	(1,062,635)
Loss before tax		(12,988,988)	(7,981,783)
Income tax credit	13	-	-
Loss for the year		(12,988,988)	(7,981,783)
Total comprehensive loss		(12,988,988)	(7,981,783)
Profit/(loss) attributable to:
Owners of the Company		(12,988,988)	(7,981,783)
		Pence	Pence
Basic and diluted loss per share	14	(0.11)	(0.14)

The above results were derived from continuing operations.