Finance and Trading Update

RNS Number : 2390Z

Tungsten West PLC

13 September 2022

 

Tungsten West Plc

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

Finance and Trading Update

Tungsten West plc (LON: TUN), the mining company focussed on restarting production at the Hemerdon tungsten and tin mine ("Hemerdon" or the "Project") in Devon in the UK provides this update on progress with financing and construction.

Project Progress:

As announced on 19^th July 2022 the Company committed to detailed engineering design and to commencing construction based on a new development plan (the "Plan") developed in response to global crises in power and diesel costs and widely publicised inflationary pressures.

The Plan has been independently scrutinised and accepted by the Company's preferred funding partners. The Company is happy to announce that it has signed a non-binding term sheet for a USD $30m (approximately £26m) royalty investment. (the "Term Sheet") (the "Royalty").

The Company has confidence that the conditions precedent for the drawdown of the royalty investment as set out in the Term Sheet and as summarised below, can be met and has committed to pushing ahead with the construction of the Hemerdon Project and the enactment of the Plan utilising its existing financial resources.

Further refinements to the Plan have been made over the summer months and a construction schedule and final cap-ex budget is expected to be received from Tungsten West's EPC contractor Fairport Engineering by the end of September 2022. The Company will update the market with this information once finalised.

In the meantime enabling works have commenced, equipment orders have been placed, and a recruitment process enacted; all whilst the refurbishment of the processing plant has been, and remains, ongoing.

Project milestones include:

· Orders have been placed for a number of long-lead time items, including the new semi-mobile primary and secondary crushing circuit which is being supplied by MO Group (Metso-Outotec of Finland.)  

· As previously announced the seven ore sorters required for the plant upgrade have already been delivered in warehouse in the UK. Expressions of interest to purchase three of these units that are surplus to requirements under the new Plan have been received from third parties.

· Construction of new screens and vibrating feeders as provided by Vibramech of South Africa is complete and they are in transit to the UK.

· The Company has signed a letter of intent with EPC Groupe for the provision of drill and blast services during the restart of mining operations.

· The Company has identified a 50-acre site within 1.2km of Hemerdon that is suitable for the installation of 9MW - 12MW of solar energy production and has commissioned a scoping study to be followed by a separate feasibility study into developing this project. The scoping study will be completed within four weeks and the feasibility study is expected before the end of December 2022. (Peak energy consumption for the processing plant is calculated at circa 7MW.)

· Three potential sites suitable for the installation of wind turbines have been identified within the mine boundary, on land owned by the Company. A scoping study has been commissioned into the feasibility of building our own dedicated wind turbine with a private connection into the processing plant, including planning and permitting requirements.

· Progress continues in the plant refurbishment and upgrade, with works within the tertiary crushing circuit now completed. 67% of the plant refurbishment programme is now complete.

· Refurbishment of the on-site lab has been completed and it is now capable of providing internal assay and metallurgical analysis.

· Earthworks for the installation of the new ore sorting building have been completed.

Financing:

The Royalty:

Subject to the proposed investor's investment committee approval the Company has agreed a non-binding term sheet for a US$30 million (approximately £26 million) royalty sale with a global mine royalty investment fund and is working towards agreeing definitive documentation and meeting conditions precedent ("the expected CPs") to the sale of the Royalty as set out in the Term Sheet and which include:

• The completion of customary legal, tax, commercial, financial and technical due diligence

• A site visit including necessary representatives or agents of the proposed Royalty holder

• The good standing of all applicable permits and licences

• The Company having entered into off-take agreements which meet the Royalty holder's requirements

• The finalisation of appropriate security over project assets; and

• Obtaining all required shareholder, director, or regulatory approvals.

An update to the Feasibility Study of March 2021 commenced in July 2022 to reflect the new Plan (the "Updated Feasibility Study"). The completion of the Updated Feasibility Study is a CP for the completion of the Royalty sale and is expected to be completed in November 2022. As with the original study it is being independently verified by AMC Consultants. (Note: Completing the Updated Feasibility Study will not delay commencement of construction activities.)

Key Terms of the Royalty

The Term Sheet includes the following key terms:

Royalty rate	4.75% until the successful production, processing, and sale of seven million metric tonne units (70,000 t) of WO3, following which it will reduce to 2.375%
Term	Life of the mine
Payment Schedule	Quarterly in arrears
Covenants	The Royalty will be subject to certain monthly reporting covenants and customary representations, undertakings and events of default
Buy-Back Option	The Company has the right to buy back 50% of the royalty within the first four years for a single payment of $30m
Security	The Royalty will be secured on a subordinated basis to other potential asset backed or other financing

In addition to the above Royalty sale, the Company is in advanced discussions with asset backed finance providers in order to secure additional finance of between £5m and £10m secured against fixed and mobile equipment, and spare parts. These monies are required for general corporate purposes, for cost over-run contingencies and to maintain a cash buffer during commissioning.

The Company is not seeking a project finance facility in the expectation that the Royalty and asset backed finance monies, plus cash on hand, are sufficient to finance the Company through to positive cash flow.

Cash on hand as of 31^st August 2022 is: £17.0m

Energy Prices:

Further extreme volatility has been witnessed in UK diesel and power prices over the summer months and the Company continues to monitor forward curves closely. The Company recognises the importance of delivering the project before Q3 2023 in order to benefit from the lower summer power prices.

The below chart shows how forward curves have evolved since June 2022 with the green line being the current curve.

UK Power curves on 22^nd April, 22^nd June and 5^th September 2022

Site Visit by Liz Truss MP:

The then Foreign Secretary (now Prime Minister) Liz Truss MP visited the Hemerdon site on Monday 1^st August and discussed UK Critical Minerals Policy, the permitting of renewable energy sources and the tax regime for the UK Mining Industry with Executive Vice-Chairman Mark Thompson and leading Tungsten West shareholders. 

Staffing - options scheme and recruitment drive:

Tungsten West recognises the importance of recruiting and retaining high quality staff in delivering the Hemerdon project. In addition to paying competitive salaries the Company is instituting an employee share option scheme. All existing members of staff will participate in the options scheme.

The Company is actively recruiting key personnel required to progress and manage the construction and recommissioning of the mine. Headcount is expected to increase in the coming months from 64 to 84. Additional operating staff will be recruited in 2023 as part of preparation for operational readiness.  

Further Updates

The Company will update the market with final capex estimates, project schedule and life of mine financial metrics as soon as it is able to do so. Further additional updates will be provided on a regular basis detailing construction progress.

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

"The agreement of a non-binding term sheet for a royalty sale is an important step forward in securing the finance required to enact the Plan. We have taken a conscious decision to seek a larger royalty sale, and no project finance debt in the belief that this will better protect shareholders' long-term interests in these extremely volatile and unpredictable times.

It was a great pleasure and honour to host the Prime Minister on site and to have the opportunity to explain and discuss the crucial role of Tungsten for key UK industries including defence, oil and gas production, and the automotive and aerospace manufacturing sectors. Discussions with the Government on the points raised are ongoing, both directly and through the Critical Minerals Association, with the hope that the requested policy assistance will be forthcoming.  

The next few months are key for Tungsten West as we work through completing the CP's for drawing down on our finance package whilst pushing ahead with construction from existing cash reserves. We are mindful that macro events can change quickly and are running as fast as we can whilst being careful not to overextend commitments until the CPs for the royalty drawdown have been met."

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.

Tungsten West Mark Thompson Tel: [phone]	Strand Hanson (Nominated Adviser and Financial Adviser) James Spinney / James Dance / Abigail Wennington Tel: [phone]
Camarco (Financial PR) Gordon Poole / Emily Hall Tel: [phone] Email:  [e-mail]	Hannam & Partners (Joint Broker) Andrew Chubb / Nilesh Patel [phone] VSA Capital Group plc (Joint Broker) Andrew Raca / Andrew Monk [phone]

Follow us on twitter @TungstenWest

 

END

 

 

UPDFIFEEALIVLIF