Financial Results for the Year Ended 31 March 2026

Notes to the Consolidated Financial Statements

Year ended 31 March 2026

1 General information

Tungsten West plc ('the Company') is a public limited company, incorporated in England and Wales and domiciled in the United Kingdom.

2 Accounting policies

Summary of significant accounting policies and key accounting estimates

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Application of new and revised UK adopted International Financial Reporting Standards (UK-adopted IFRS)

New and amended Standards and Interpretations applied

The following amendments are effective for the year beginning 1 January 2025:

·   Amendments to IAS 21 - Lack of Exchangeability

The adoption of these new standards and amendments did not have a material impact on the Group.

New and revised Standards and Interpretations in issue but not yet effective

At the date of approval of these financial statements, the Company has not early adopted the following amendments to Standards and Interpretations that have been issued but are not yet effective:

The Group is assessing the impact of IFRS 18. The Directors do not currently expect the adoption of these standards and amendments to have a material impact on the Group's recognised assets, liabilities or profit, although additional presentation and disclosure requirements may arise.

Basis of preparation

The Group financial statements have been prepared in accordance with International Accounting Standards as adopted in the United Kingdom ('UK adopted IAS') and those parts of the Companies Act 2006 that are applicable to companies which apply UK adopted IAS.

The financial statements are presented in Sterling, which is the functional currency of the Group and Company.

Going Concern

The Group and Company financial statements have been prepared on a going concern basis, which the Directors consider to be appropriate for the reasons set out below, having given careful consideration to the Group's and Company's financial position, funding arrangements and future cash flow forecasts, covering a period of at least twelve months from the date of approval of these financial statements.

The Group's principal asset is the Hemerdon Mine (also known as Drakelands Mine), operated by Drakelands Restoration Limited. During the year ended 31 March 2026 the Group was a developer with low levels of production. A phased restart of commissioning commenced from July 2026 and will ramp up through the remainder of the calendar year and into 2027.

During the year, the Group significantly strengthened its funding position. In February 2026, the Company completed an equity fundraise of approximately £43 million (gross). Separately, the Group's outstanding Convertible Loan Notes converted into equity during the year and were accordingly extinguished, removing the Group's prior reliance on convertible loan note financing and associated short-term bridging finance. Following the year end, the Group secured further funding from National Wealth Fund Limited ("NWF"), comprising an equity raise of approximately £36 million (before expenses) and a new 366-day £25 million loan facility, with a £10 million uncommitted accordion. Together, these transactions secured the funding required for the Group's remaining project capital expenditure at Hemerdon. As at the date of these accounts, the £25 million loan facility had been drawn down in full.

The Directors have prepared detailed cash flow forecasts covering the going concern assessment period, based on the production, cost and pricing assumptions underpinning the Group's Feasibility Study, updated to reflect the phased restart plan, and the funding secured as described above. These forecasts have been sensitised for a range of downside scenarios, consistent with the sensitivity analysis performed as part of the Feasibility Study and the value in use assessment described in note 2, including delays to the production ramp-up schedule, lower than forecast metal prices and recoveries, and unfavourable movements in foreign exchange rates.

The Directors have also modelled a downside scenario addressing the risk of delay to completion of the front-end crushing circuit. Under this scenario, the Group would fall back on its existing mobile front-end crushing and in-pit crushing arrangements with a contractor - the process route already in use earlier in the year - pushing back the ramp-up of the permanent front-end by three months. This fallback route carries a higher per-tonne processing cost than the planned front-end/ore sorter route, increasing operating costs over the delay period by approximately £3 million. The Group has also modelled a corresponding pause to waste mining over the same period, which reduces drill and blast costs but is offset by increased haulage costs to the more distant processing facility under the fallback route; these two effects have been assessed as broadly offsetting.

Under each of the scenarios modelled, the Group retains sufficient liquidity throughout the going concern period, taking into account the £25 million NWF loan facility (with its £10 million uncommitted accordion) and the Group's cash resources.

The Directors have also considered the maturity of the NWF loan facility, which is repayable 366 days from drawdown, and have concluded that the Group's forecast operating cash flows from production, together with the accordion facility and the Group's ongoing relationship with NWF, provide a reasonable basis to expect that the facility can be refinanced or repaid as it falls due.

Having considered the matters set out above, the Directors have a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the going concern assessment period. Accordingly, the Directors continue to adopt the going concern basis in preparing these financial statements. This represents a change from the prior year, in which a material uncertainty relating to going concern was disclosed pending completion of the Group's longer-term funding arrangements.

Basis of consolidation

The Group financial statements consolidate the financial statements of the Company and its subsidiary undertakings drawn up to 31 March 2026.

A subsidiary is an entity controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

The purchase method of accounting is used to account for business combinations that result in the acquisition of subsidiaries of the Group. The cost of a business combination is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed as at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, including deferred tax if required. Any excess of the cost of the business combination over the acquirer's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised as goodwill.

Business Combinations

Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value at the acquisition date and comprises the fair value of the assets transferred, liabilities incurred to former owners of the acquiree and equity interests issued by the Group.

Identifiable assets acquired and liabilities assumed are recognised at their acquisition-date fair values, except where IFRS requires a different measurement basis.

Goodwill is measured as the excess of the aggregate of the consideration transferred, the amount of any non-controlling interest and, in a business combination achieved in stages, the fair value of the Group's previously held interest in the acquiree, over the net fair value of the identifiable assets acquired and liabilities assumed. Where the net fair value of the identifiable assets acquired and liabilities assumed exceeds the aggregate consideration transferred, the excess is recognised immediately in profit or loss as a bargain purchase gain.

Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to the owners of Tungsten West PLC, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.

Diluted earnings per share adjust the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

Potential ordinary shares are anti-dilutive when the Group reports a loss and are therefore excluded from the calculation of diluted loss per share.

Revenue recognition

Revenue comprises proceeds from the sale of tungsten and tin concentrate produced by the Group. The sale of concentrate represents a single performance obligation, which is satisfied at the point in time when control of the product transfers to the customer, typically on collection from site or on delivery, in accordance with the agreed shipping terms. Revenue is recognised at the transaction price, net of any applicable discounts, price adjustments, provisional pricing adjustments or selling fees.

Cost of sales

Cost of sales comprises all costs incurred in bringing tungsten and tin concentrate to its present location and condition and is recognised in the period in which the related revenue is recognised.

Cost of sales includes:

·      Direct mining costs, including drilling, blasting, loading and hauling of ore;

·      Processing costs, including crushing, milling, gravity separation and other beneficiation costs incurred in converting ore to saleable concentrate;

·      Directly attributable labour costs, including on-site operational and supervisory salaries, wages and related on-costs;

·      Consumables, reagents and maintenance spares consumed in mining and processing;

·      Depreciation of mining and processing property, plant and equipment, on a units-of-production or straight-line basis as appropriate to the useful economic life of the asset;

·      Site utilities, including power and water directly consumed in production.

In the prior year, the Group had not yet commenced production and generated no revenue. The costs recognised within cost of sales in that period represented the direct costs of maintaining the mine and processing facility in a state of readiness for production - principally care and maintenance of the site - which are of a comparable nature to, and precursor to, the direct production costs incurred once mining operations commenced. These costs were therefore presented on a consistent basis with the current year's cost of sales, notwithstanding the absence of revenue in that period.

Taxation

Income tax expense consists of the sum of current tax and deferred tax.

Current tax is based on taxable profit for the year. Taxable profit differs from profit as reported for accounting purposes because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.

Current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. A provision is recognised for tax matters that are uncertain if it is considered probable that there will be a future outflow of funds to a tax authority. The provision is measured at the best estimate of the amount expected to become payable. The assessment is based on the judgement of management supported by the advice of tax professionals contracted by the company.

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the reporting date.

The Group recognises research and development tax credits when management considers that the claim is substantially agreed and there is no material uncertainty regarding its recovery. Generally this is considered to be upon receipt of cash.

Property, plant and equipment

Land and buildings are stated at cost less any depreciation or impairment losses subsequently accumulated (cost model). Land and buildings have been uplifted to fair value on consolidation.

Plant and equipment is stated in the statement of financial position at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

The asset under construction relates to costs incurred to upgrade the mineral processing facility and, in accordance with IAS 16, costs have been capitalised if it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.

Depreciation on the mineral processing facility will be calculated using the units of production ("UOP") method, reflecting the pattern in which the economic benefits of the asset are consumed. Under this method, the depreciable amount of the asset is allocated based on the actual production achieved in the period as a proportion of the total estimated recoverable production over the asset's useful life, capped by the estimated life of the mine. Deprecation will commence when we have successfully commissioned the mineral processing facility.

Estimated recoverable units are based on proved and probable ore reserves, adjusted for expected process recovery rates, and are reviewed at

Property, plant and equipment (continued)

least annually or when there is an indication of significant change (e.g. reserve restatement, mine plan revision, or a change in processing recovery assumptions). Changes are accounted for prospectively as a change in accounting estimate under IAS 8. Depreciation commences when the asset is available for use in the manner intended by management. i.e. when commissioning is complete and the plant is capable of operating at a level consistent with commercial production.

Depreciation

Depreciation is charged so as to write off the cost of assets, other than land and assets under construction over their estimated useful lives, as follows:

Intangible assets

Software is recognised as an intangible asset when it is probable that the expected future economic benefits attributable to the asset will flow to the Group and the cost of the asset can be measured reliably. Software is initially measured at cost, including directly attributable costs incurred in acquiring and preparing the asset for its intended use.

Following initial recognition, software is carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is recognised on a straight-line basis over the asset's estimated useful economic life of three years, reflecting the pattern in which the asset's future economic benefits are expected to be consumed. Software is amortised on a straight-line basis using a rate of 33%.

Mining Rights

The mining rights are subject to amortisation over the useful life of the mine which is 27 years (2025: 27 years). Amortisation will be charged from the date the mine is brought into use. Following full commissioning of the Mineral Processing Facility, the mining rights will be reclassified to property, plant and equipment, on the basis that they then form part of the broader mine asset from which future production is derived, and depletion will thereafter be charged on a units-of-production basis, consistent with the basis applied to depreciation of the Mineral Processing Facility.

Research and development activities

All research costs are expensed.

Current and non-current classification  

Assets and liabilities are presented in the statement of financial position based on current and non-current classification.

An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.

A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no right at the end of the reporting period to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.

Deferred tax assets and liabilities are always classified as non-current.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Trade receivables

Trade and other receivables where payment is due within one year do not constitute a financing transaction and are recorded at the undiscounted amount expected to be received, less attributable transaction costs. Any subsequent impairment is recognised as an expense in profit or loss.

All trade and other receivables are subsequently measured at amortised cost, net of impairment.

Trade payables

Trade and other payables are initially recognised at fair value less attributable transaction costs. They are subsequently measured at amortised cost.

Convertible debt

Convertible loan notes issued by the Group are assessed at the date of issuance to determine whether they contain liability and/or equity components in accordance with IAS 32 Financial Instruments: Presentation.

Where the convertible loan notes' conversion feature does not meet the IAS 32 "fixed-for-fixed" test (variable conversion price, capped share allocation), the instrument is classified in full as a financial liability, with no separate equity component.

The convertible loan notes are designated at fair value through profit or loss (FVTPL) on initial recognition, avoiding separate bifurcation of the embedded conversion derivative. Fair value movements are recognised in profit or loss at each reporting date.

Fair value is estimated using a probability-weighted scenario model rather than an option-pricing model, as the conversion terms mean the payoff is not dependent on future share price movements. Two outcomes are modelled: conversion into equity, and cash redemption at maturity. Expected cash flows under each scenario are probability-weighted using Management's best estimate (based on financing and operational milestones) and discounted using a rate benchmarked to the internal rate of return implicit at issuance, itself derived using this same probability-weighted approach applied to the cash proceeds received.

At each reporting date the same approach is reapplied over the shorter remaining period to maturity. Immediately before conversion, the conversion probability is updated to 100% and the discount period is shortened to the actual date of conversion.

On conversion, the convertible loan note liability is derecognised. The consideration for derecognition is measured as the fair value of the ordinary shares issued, determined by reference to the quoted market price of the Group's shares at the conversion date. Any difference between the carrying value of the liability immediately before conversion and the fair value of shares issued is recognised as a gain or loss in profit or loss. This gain or loss principally reflects movement in the Group's quoted share price between the date the fair value model's conversion assumptions were set and the actual conversion date, rather than a change in the substantive terms of the instrument.

Provisions

A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that settlement will be required, and a reliable estimate can be made of the amount. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the reporting date, discounted to present value where the effect is material.

The Group recognises a provision for restoring and rehabilitating areas disturbed by its mining activities on a full life-of-mine basis, recognised when the disturbance giving rise to the obligation occurs. As the provision is measured on this basis at each reporting date, its balance moves principally through the unwinding of the discount and changes in the discount rate and inflation assumptions applied to an otherwise unchanged cost estimate; no corresponding restoration asset is recognised (see note 26 and note 37).

The underlying cost estimate is only expected to change where there is a genuine change in the scope of restoration required - for example, disturbance beyond that currently approved and estimated, a regulatory change in restoration requirements, or a cost category not contemplated in the original estimate. Management does not expect such a change in the near term, but recognises this may arise if the Group expands operations or exercises options beyond the currently approved plan.

The current mine life is 11 years, based on the mining permits currently held. Should the scope of restoration change, the corresponding cost would be capitalised within mining assets from the point the change is approved and depreciated over the mine's useful life as assessed at that time; useful life is reviewed at each reporting date and revised prospectively where a change in the approved mining plan, resource base, or permitted life extends or shortens it beyond the current 11-year estimate.

The unwinding of the discount is recognised as a finance cost. Expenditure incurred is charged against the provision when it is incurred.

Leases

At the inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group assesses whether it has the right to obtain substantially all of the economic benefits from use of the identified asset and the right to direct its use throughout the period of use.

As a lessee, the Group recognises a lease liability and a corresponding right-of-use asset at the lease commencement date, except for short-term leases and leases of low-value assets, for which the recognition exemptions available under IFRS 16 are applied.

The lease liability is initially measured at the present value of lease payments to be made over the lease term that are not paid at the commencement date. Lease payments included in the measurement of the lease liability comprise:

·   fixed lease payments, less any lease incentives receivable;

·   variable lease payments that depend on an index or rate;

·   amounts expected to be payable under residual value guarantees;

·   the exercise price of purchase options where the Group is reasonably certain to exercise such options; and

·   payments of penalties for terminating the lease, where the lease term reflects the exercise of a termination option.

Lease payments are discounted using the interest rate implicit in the lease where that rate can be readily determined. Where this is not readily determinable, the Group applies its incremental borrowing rate, being the rate of interest that it would have to pay to borrow, over a similar term and with similar security, the funds necessary to obtain an asset of similar value in a similar economic environment.

Subsequently, the lease liability is measured at amortised cost using the effective interest method. The carrying amount is increased to reflect interest accrued on the lease liability and reduced for lease payments made. The lease liability is remeasured when there is a change in future lease payments, a reassessment of a lease term, or a lease modification.

Right-of-use assets primarily comprise the lease relating to the Hemerdon Mine together with other property leases. Right-of-use assets are initially measured at cost, comprising:

·   the amount of the initial lease liability;

·   lease payments made at or before the commencement date less any lease incentives received;

·   initial direct costs incurred in obtaining the lease; and

·   an estimate of costs to dismantle, remove or restore the underlying asset or site on which it is located, where applicable.

Subsequently, right-of-use assets are measured at cost less accumulated depreciation and impairment losses and adjusted for certain remeasurements of the associated lease liabilities.

Right-of-use assets are depreciated on a straight-line basis from the commencement date over the shorter of the lease term and the useful life of the underlying asset. Where ownership of the underlying asset transfers to the Group at the end of the lease term, or the cost of the right-of-use asset reflects that a purchase option will be exercised, depreciation is charged over the useful life of the underlying asset.

The Group reviews right-of-use assets for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

Payments associated with short-term leases and leases of low-value assets are recognised as an expense in profit or loss on a straight-line basis over the lease term.

Inventories

Inventories are stated at the lower of cost and net realisable value on a 'first in first out' basis. Cost comprises direct materials and delivery costs, direct labour, import duties and other taxes, an appropriate proportion of variable and fixed overhead expenditure based on normal operating capacity, and, where applicable, transfers from cash flow hedging reserves in equity. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable.

Cost is determined on the following basis: 

(a) Metal concentrate on hand is valued on an average total production cost method

(b) Ore stockpiles are valued at the average cost of mining and stockpiling the ore, including haulage 

(c) A proportion of related depreciation and amortisation charge is included in the cost of inventory

Stock in transit is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Impairment of non-current assets

Property, plant and equipment is assessed for impairment under IAS 36 at each reporting date, or when indicators of impairment exist. For this purpose, assets are grouped into cash-generating units (CGUs), being the smallest group of assets generating largely independent cash inflows. The Group has determined that the Hemerdon Mine, comprising the mining operations and mineral processing facility, is managed and generates cash flows as a single CGU, as mined ore has no realisable value independent of processing through the mineral processing facility. Where an indicator of impairment is identified, the recoverable amount of the CGU (the higher of fair value less costs of disposal and value in use) is compared to its carrying amount, with any shortfall recognised in profit or loss.

Share capital

Ordinary Shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on a present value basis.

Share options

Share options granted to shareholders classified as equity instruments are accounted for at the fair value of cash received or receivable. Share options granted to shareholders which represent a future obligation for the Company outside of its control are recognised as a financial liability at fair value through profit and loss.

Share options granted to employees are fair valued at the date of grant with the cost recognised over the vesting period. If the employee is employed in a subsidiary company, the cost is added to the investment value, in the financial statements of the parent, and the expense recognised in staff costs in the statements of the subsidiary.

Warrants issued in return for a service are classified as equity instruments and measured at the fair value of the service received. Where the service received relates to the issue of shares the cost is debited against the proceeds received in share premium.

Defined contribution pension obligation

A defined contribution plan is a pension plan under which pension contributions are paid into a separate entity and the group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

For defined contribution plans contributions are paid into publicly or privately administered pension insurance plans on a mandatory or contractual basis. The contributions are recognised as employee benefit expense when they are due. If contribution payments exceed the contribution due for service, the excess is recognised as an asset.

Financial instruments

Initial recognition

Financial assets and financial liabilities comprise all assets and liabilities reflected in the statement of financial position, although excluding property, plant and equipment, intangible assets, right of use assets, inventories, deferred tax assets, prepayments, deferred tax liabilities and the mining restoration provision. The Group recognises financial assets and financial liabilities in the statement of financial position when, and only when, the Group becomes party to the contractual provisions of the financial instrument.

Financial assets are initially recognised at fair value. For financial assets not measured at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset are added to the fair value on initial recognition.

Financial liabilities are initially recognised at fair value. For financial liabilities not measured at fair value through profit or loss, directly attributable transaction costs are deducted from the fair value of the liability on initial recognition.

Subsequent to initial measurement, financial assets and financial liabilities are measured at either amortised cost or fair value (either through other comprehensive income or through profit or loss).

Derecognition

Financial assets

The Group derecognises a financial asset when:

•    the contractual rights to the cash flows from the financial asset expire;

•    it transfers the right to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred; or

•    the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

On derecognition of a financial asset, the difference between the carrying amount of the asset and the sum of the consideration received is recognised as a gain or loss in the profit or loss.

Financial liabilities

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled, or expire.

Significant accounting estimates and judgements

The preparation of the financial statements requires management to make estimates and judgements that affect the reported amounts of certain financial assets, liabilities, income and expenses.

The use of estimates and judgements is principally limited to the determination of provisions for impairment and the valuation of financial instruments as explained in more detail below:

Significant accounting judgements

Impairment of non-current assets

Cash-generating units ("CGUs") are defined in the accounting policies note, with the Hemerdon Mine, comprising the mining operations and mineral processing facility, determined to be a single CGU (see note 2).

Management makes regular checks on internal and external impairment indicators in respect of the Company's investment in subsidiary undertakings, mining rights and properties. During the year ended 31 March 2026 and as of the date of this report, management did not identify any internal or external indicators triggering a detailed impairment review. The group commenced phased commissioning at the Hemerdon Mine in August 2026, in line with management's phased restart plan, and the Group secured the funding required to complete its remaining project capital expenditure through the National Wealth Fund agreement entered into following the year end. Management is confident that the carrying amount of the Company's investment in subsidiaries continues to be fully recoverable, with no impairment of any assets being deemed necessary.

Founder options

The Directors consider the non-EMI portion of the founder options meet the definition of equity in the financial statements of the Group on the basis that the 'fixed for fixed' condition is met and that they were awarded to shareholders relating to investing in the share capital of the Group. The accounting treatment has been applied in accordance with IAS 32, which requires initial recognition at fair value of consideration paid less costs. As there was no consideration received at inception, the value of the options is £nil. When exercised the shares are recognised at option price. Please see note 30.

Key sources of estimation uncertainty

Restoration provision

The restoration provision is the contractual obligation to restore the mining site back to its original state once mining ceases. The provision represents the expected outflows required to settle that obligation, discounted to present value. As restoration work will predominantly be completed towards the end of the mine's useful life, the calculation is subject to a high degree of estimation uncertainty. The key assumptions that would lead to significant changes in the provision are the discount rate, the timing of restoration relative to the term of the Mineral Lease, and the estimated restoration cost (see note 26).

A 1% change in the discount rate applied to the Group's restoration estimate would result in an impact of £1.5 million to £2.0 million (2025: £1.5 million to £2.0 million) on the restoration provision. A 5% change in the estimated restoration cost would result in an impact of £0.4 million (2025: £0.3 million) on the provision for restoration. More information on the restoration provision is disclosed in note 26.

Convertible loan notes

During the year, the convertible loan notes converted into equity shares. Immediately prior to conversion, the instrument was remeasured to fair value, with the conversion scenario weighted at 100% probability and the discount period shortened to the actual conversion date. The resulting shares were recognised in equity at fair value, determined by reference to the Company's quoted share price at the conversion date. As the notes have now converted, no liability remains at the balance sheet date and there is no ongoing estimation uncertainty associated with future settlement.

Prior to conversion, the notes were measured at fair value at each reporting date, with fair value calculated using a scenario pricing model. Management commissioned an external expert to calculate the fair value at the prior year end, with key assumptions being the probabilities assessed for each underlying scenario, the discount rate selected, and the expected dates of conversion or redemption.

Discount rates

The Group has had to assess reasonable discount rates based on market factors to use under IFRS. These discount rates have been used on the value in use model, right-of-use assets and the restoration provision.

The discount rate on the right-of-use asset is the rate for an equivalent debt instrument.

The restoration provision is discounted at the risk-free rate, being the yield on an equivalent maturity UK government bond matched to the expected date of restoration expenditure. Inflation on the underlying cost estimate is derived independently, using the difference between nominal and index-linked government bond yields at the same date, rather than being included as a separate risk premium. No further risk premium has been added to the discount rate, on the basis the original contingency allowance included within the cost estimate is considered to address the specific risks associated with this liability.

The discount rate applied to the value in use model reflects current market assessments of the time value of money and the risks specific to the Hemerdon Mine CGU that are not already reflected in the cash flow forecasts, being a post-tax discount rate derived by reference to a market participant's weighted average cost of capital.

3 Financial risk management

Group

This note presents information about the Group's exposure to financial risks and the Group's management of capital.

Credit risk

In order to minimise credit risk, the Group has adopted a policy of only dealing with creditworthy counterparties (banks and debtors) and it obtains sufficient collateral, where appropriate, to mitigate the risk of financial loss from defaults. The most significant credit risk relates to customers that may default in making payments for goods they have purchased.

To date the Group has only made a small number of sales and therefore the credit risk exposure has been low.

Liquidity risk

The Directors regularly monitor forecast and actual cash flows and to match the maturity profiles of financial assets and liabilities to ensure proper liquidity risk management for the day-to-day working capital requirements.

In the view of the Directors, the key risk to liquidity, in the medium term, is raising the additional capital required to meet its estimated Capex spend. The Group's continued future operations depend on the ability to raise sufficient capital through the issue of debt. At present the Group does not have sufficient capital to fund its estimated Capex spend therefore there is a liquidity risk which would result in the Group having to pause its future operations were it to not raise the necessary capital. At present, the Group is in discussions with financing partners to provide this additional capital.

In the short term the key risk is raising sufficient finance to fund the operational costs of the business.

Market risk

Interest rate risk

The Group is exposed to interest rate risk through the impact of rate changes on interest-bearing borrowings. The interest rates and terms of repayment are disclosed in note 23 to the financial statements. The Company's policy is to obtain the most favorable interest rates available for all liabilities. Except as outlined above, the Group has no significant interest-bearing assets and liabilities.

Foreign exchange risk

The Group in the future will also be exposed to exchange rate risk on the basis that tungsten prices are principally denominated in US Dollar. The Group will seek to manage this risk through the supply contracts it agrees with future customers.

The Group does not use any derivative instruments to reduce its economic exposure to changes in interest rates or foreign currency exchange rates at the current time.

Price risk

The Group is exposed to the price fluctuation of its primary products being tungsten and tin. Given the Group is currently in the development phase and is not yet producing any revenue, the costs of managing exposure to commodity price risk exceed any potential benefits. The Directors monitor this risk on an ongoing basis and will review this as the Group moves towards production.

Inflation risk

The Group is exposed to inflationary pressures that impact the core materials required for the operations, mainly being reagents, power and diesel costs. The Directors monitor this risk on an ongoing basis and will review this as the group moves towards production.