Half Year Results

RNS Number : 2921J

Tungsten West PLC

12 December 2022

 

12 December 2022

Tungsten West Plc

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

Half Year Results for the six months ended 30 September 2022

Tungsten West, the owner and operator of the Hemerdon Mine (the "Project") in South West England, is pleased to announce its half-yearly results for the six months ended 30 September 2022 (the "Period").

First Half and Post Period Highlights:

· Board approval of the re-optimised Project, with plant commissioning starting in H1 2023.

· Mining operations scheduled to recommence in H2 2023.

·     Feasibility Study for the Project is nearing completion and summary results are expected to be released before the end of the year.

· Loss for the period of £5.1 million.

· Capital expenditure for the period of £6.4 million.

· Existing plant re-build and enhancement works c.70% complete.

· The Company had cash reserves of £14.9 million at 30 September 2022.

· Non-binding term sheet agreed for US$30 million royalty sale.

· Capex estimates received.

· All orders for long lead items placed.

· Successful recruitment of senior management team with all key positions onboard.

Overview

Against the backdrop of the global energy crisis, coupled with rising inflation, the Group spent the first half of the financial year re-evaluating the Project, to minimise project capex associated with the front-end re-build and reduce opex, particularly energy consumption.

The financial year began with the Board taking the decision to pause the Project, as it was clear to management that due to significant and rapid inflationary pressures on capex, consumables and energy, the operational plan under the March 2021 Bankable Feasibility Study (the "BFS"), was no longer optimal and sustainable.

This led to extensive technical and commercial reviews of the assumptions that underpinned the BFS and after a detailed optioneering process, the Board was able to announce, in July, that a viable plan for the restart of the Project had been determined and commissioned the updating of the Feasibility Study to confirm this. July also brought a change in management, as Max Denning left his role as CEO with Executive Vice-Chairman Mark Thompson taking on the responsibilities for the office of CEO with immediate effect.

With the Project re-optimised, the management team was able to turn its focus to financing the revised capital requirements and, in September 2022, the Company agreed a non-binding term sheet for a US$30 million (approximately £26 million) royalty sale. We anticipate closing the transaction in the first quarter of 2023, subject to completion of satisfactory due diligence.

Following the decision to continue with the re-optimised Project, headcount increased with project, maintenance, administration, and technical teams being strengthened. Headcount was 61 at 30 September 2022, with another 15 scheduled to join the business before 31 December 2022, further strengthening the Company's position to deliver on the Project in H2 2023.

In November 2022, the Company received the capex budget and construction schedule from the EPCM (Engineering, Procurement and Construction Management) contractor, Fairport Engineering Limited. The budget was within the contingency applied to the previous budget.

Review of activities

Following the announcement of the decision to pause the Project in April 2022, the Group's immediate objective for the first half of the financial year was on re-optimisation studies. In light of the increased cost inputs, predominantly construction materials, electricity and diesel, a new plan was presented to the Board and subsequently approved in July 2022, leading the way for detailed engineering and construction to start with immediate effect.

The new approach focuses on:

Process	Changes	Key benefits
New crushing strategy.	Direct tipping into modular crushing and screening plant, located outside the mineral processing facility.	Reduced capex, faster route to production and lower opex.
New operating parameters for ore sorting.	Utilisation of four of the seven ore sorters, reducing volume accepted (lower mass pull) and therefore increasing the grade of ore to be processed.	Reduced capex, less maintenance, lower power draw, less waste processed.
Re-purposing of equipment within the processing plant.	Lower throughput presents an opportunity to repurpose the Secondary DMS as the Primary DMS.	Initial lower capex, lower opex, scalable at a later date if required.
New mine plan.	Delayed waste stripping, accelerating positive cashflow in year one.	Lower opex, lower diesel consumption, reduced emissions.

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 the MO Group. The ore sorters have been delivered to the UK and are currently being stored whilst, post-period end, all required Vibramech screens have been delivered to site.

Running in parallel to the front-end rebuild are the mineral processing facility enhancements and upgrades. The following key works have been completed at the time of this report:

Area	Enhancements	Increase Efficiency	Reduces Future Downtime	Reduces Future Maintenance
Chutes	Replacement of wear plates in conveyor chutes and installation of new rock box designs to cut down on wear.	ü	ü	ü
Conveyors	Replacement belts and renewal of drums, bearings, and scrapers throughout the processing plant.		ü	ü
Pumps	Removal of previously installed pumps and inspection and test of the drive motors.		ü	ü
Area 130 - Tertiary Crushing Circuit	Extensive repair and redesign of the surge bin to increase longevity in high-wear areas and minimise future downtime.	ü	ü	ü
Area 140 - Primary DMS	Inspection and re refurbishment of the agitators.		ü	ü
Area 150 - Primary Mill	Refurbishment of the Primary Mill including electrical inspection and testing. Inspection of drive shaft alignment and lubrication systems to ensure they are fit for production.		ü	ü
Area 160 - Shaking Tables	Overhaul of all tables and redesign of the spray bar structures to eliminate failure due to excessive vibration.		ü	ü
Area 180 - Feeders	Redesign of both the 180 feeders to include side skirts and return rollers, new guarding manufactured and installed.	ü	ü	ü
Area 200 - Refinery	Mechanical overhaul of both the pre dryer and tin dryer.		ü	ü
Area 390 - Raw water tank	Design manufacture and installation of an access door on the tank to allow for removal of silt build up.	ü	ü	ü
Area 390 - Process water tank	Sand blasting and application of a wear resistant paint.		ü	ü

Sales of aggregates continued throughout the reporting period, with £117,000 revenue being recognised. The Group ceased its production of aggregates from waste material left by the previous operator after selling 102,000 tonnes of material and demonstrating the ability to establish a market for the product. Aggregates production will recommence as the mineral processing ramp up completes. Product mix and volumes will be in line with mine waste facility strategy and valid permits.

The Company has also sold 120 tonnes of low-grade tungsten concentrate for a combined value of £90,000. The Company continues to work with potential buyers to sell the remaining inventory of tungsten and tin concentrate stocks and preconcentrate.

At 30 September 2022, the Group employed 61 staff (excluding directors) (47 staff members as at 30 September 2021). Since the July announcement to restart the Project, the Company has been scaling up its workforce to enable it to deliver the plant re-build project, and progress towards operational readiness.

CORPORATE

Following the revised plans to reduce project capex and re-optimise the mineral processing facility, certain conditions precedent to drawing the 2021 funding packages were not met, resulting in  the Company entering into new discussions with financing partners to provide the additional capital.

In September, subject to the proposed investor's Investment Committee approval, the Company agreed a non-binding term sheet for a US$30 million (approximately £26 million) royalty sale with a global mine royalty investment fund. The Company is in ongoing discussions with other providers of capital to secure the remaining capital required to complete the Project. These monies are required for capex and opex purposes, for cost over-run contingencies and working capital during commissioning and ramp-up. It is anticipated that the funding required to complete the Project will be available during the first quarter of 2023.

In April 2022, the Company received £284,351 through the exercise of 1,183,400 warrants.

In September 2022, the Company granted 2,799,982 share options to employees, including the Chief Financial Officer, Managing Director, Executive Vice-Chairman and employees pursuant to the Company Share Option Plan ("2022 CSOP") and Employee Share Option Plan ("2022 ESOP"). The options are exercisable at a price of £0.275 per ordinary share of £0.01 each in the capital of the Company ("Ordinary Share"), being mid-market closing price on 21 September 2022, in accordance with the conditions of the 2022 CSOP and 2022 ESOP. The options will vest three years from the date of grant. The Board considered it important to have equity incentives being issued to staff at all levels. The options granted represent 1.55% of the existing Ordinary Shares in issue.

There was one Board change during the period with CEO Max Denning departing and Executive Vice-Chairman Mark Thompson assuming his CEO responsibilities.

Results

The Group invested £6.4 million of capital expenditure during the Period. This was committed to equipment purchase and down payments, mineral processing facility upgrades and enhancements, as well as design and engineering costs for the crushing and ore sorting circuits. In addition, the Group has made £2.3 million stage payment deposits for plant and equipment, and £0.3 million deposit for contractor services. These are recognised as other receivables until delivered to site or services performed. Operating cash outflows were £7.7 million with significant prepayments for services made in the first half.

The Group made a half-yearly loss after taxation of £5,126,282 (2021 half-year: £4,990,226). This was within expectations for the Project at its current stage of development. Staff costs and other opex increased significantly compared with the prior year's comparable period, reflecting the scaling up of operations as the Project nears commercial production.

communiTy and Sustainability

As well as ensuring compliance with all environmental legal  obligations required at the Hemerdon Mine, Tungsten West has developed an ESG Strategy, which aligns with UN Sustainable Development Goals, International Finance Corporation Performance Standards, and the Sustainability Accounting Standards Board.

The Company's mission is to become a world-leading producer of tungsten and tin, committed to adhering to international standards in mining operations, environmental conservation and safe working practices to enable the delivery of excellence and growth for our partner communities, investors, employees and other stakeholders.

Tungsten West is committed to a vision of a safe and sustainable service delivered throughout the business with professionalism, attention to detail and the empowerment of employees. Tungsten West prides itself on its respect for the environment, community, health, safety, sustainable working practices, and meeting the needs and expectations of its interested parties.

Providing significant economic benefits to the people and communities surrounding the mine, as well as the UK as a whole, is an important consideration for the Company.

·     Tungsten West has invested over £2.9 million in goods and services sourced from Devon and Cornwall in the six months to 30 September 2022.

·     Just over 77% of Tungsten West's total spend in the six months to 30 September 2022 has been made in the UK.

·     26% of staff employed by Tungsten West live in the two postcode areas closest to the mine, and a further 55% of the workforce live in PL postcodes (Plymouth and the wider area).

·   96% of employees live in Devon and Cornwall at the date of this report reflecting the Company's recruitment policy to hire from the local population.

· The average Tungsten West salary is £53,000, significantly above the average for the region.

·     Tungsten West is pursuing a number of renewable energy projects to reduce the Project's carbon footprint including solar PV and hydro-energy schemes.

· RheEnergise, the company Tungsten West is working with, recently announced Government grant funding of £8.25 million for a prototype hydro energy scheme at the Hemerdon Mine.

·     To date Tungsten West has supported five local community initiatives with donations of just over £2,850, with more planned pre-production.

· Tungsten West launched its Company values - care, integrity, teamwork and excellence.

outlook

The tungsten markets remain quiet with the European Metal Bulletin Ammonium Para-Tungstate price being reported at circa US$335 per Metric Tonne Unit (MTU) (1 MTU = 10 kilograms).  The near-term outlook for prices will likely be driven by the Chinese domestic market. Most recent official figures show Chinese growth is slowing compared to the levels of growth seen for decades. As China begins to find fewer customers for its products both on the domestic and international stage, demand for raw materials such as tungsten will drag. However, in the USA, we have seen continued growth and an increase in demand for US domestic oil and gas, meaning the demand for tungsten outside of China remains strong which might be augmented with an increase in global defence spending fueled by the Ukraine and Russia conflict.

Tin prices have fallen since their spectacular performance in 2021 and now hover around US$24,000 per tonne at the date of this statement. Despite the fall in price, tin is a major component in the global drive towards clean energy and whilst a by-product of the tungsten operations, on latest BGS figures (2020), Tungsten West would be one of the top 20 global tin producers. In the long term, the Company expects a floor price closer to US$25,000 - US$30,000 per tonne.

The Company and the Board acknowledge that this is a challenging project and there are risks that could impact the Company's ability to reach construction through to commercial production. The principal risks and uncertainties are outlined in the Company's most recent consolidated accounts on pages 40 - 44, which can be found on www.tungstenwest.com.

General

The accompanying condensed consolidated interim financial statements were approved for issue by the Board on 9 December 2022.

Cautionary statement

This document contains certain forward-looking statements in respect of the financial condition, results, operations and business of the Group. Whilst these statements are made in good faith based on information available at the time of approval, these statements and forecasts inherently involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause the actual results of developments to differ materially from those expressed or implied by these forward-looking statements and forecasts.  Nothing in this document should be construed as a profit forecast.

Enquiries

Tungsten West Mark Thompson Tel: [phone]	Strand Hanson (Nominated Adviser and Financial Adviser) James Spinney / James Dance Tel: [phone]
Blythe Ray (Financial PR) Tim Blythe / Megan Ray [e-mail] Tel: [phone]	Hannam & Partners (Joint Broker) Andrew Chubb / Nilesh Patel Tel: [phone]
	VSA Capital (Joint Broker) Andrew Monk Tel: [phone]

Further information on Tungsten West Limited can be found at www.tungstenwest.com

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, 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.

Independent Auditor's Review Report on Interim Financial Information

Conclusion

We have reviewed the accompanying Consolidated Statement of Financial Position of Tungsten West Plc as of 30 September 2022 and the related Consolidated Income Statement, Consolidated Statement of Change in Equity and Consolidated Statement of Cash-Flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes.

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information does not give a true and fair view of the financial position of the Group as at 30 September 2022, and of its financial performance and its cash flows for the six-month period then ended in accordance with UK-adopted International Accounting Standard 34.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed. This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410, however future events or conditions may cause the entity to cease to continue as a going concern.

Responsibilities of directors

Management is responsible for the preparation and fair presentation of this interim financial information in accordance with International Accounting Standard 34. In preparing the half-yearly financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion, including our Conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report.

Other matters

The Group did not opt to have a review for the period ended 30 September 2021 and consequently the comparative information, which is derived from that interim financial information, is unreviewed.

Use of our report

This report is made solely to the company in accordance with ISRE (UK) 2410. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

PKF Francis Clark

North Quay House

Sutton Harbour

Plymouth

Devon

PL4 0RA

Date: 9 December 2022

Consolidated Income Statement
		Unaudited		Unaudited		Audited
		Six months to		Six months to		Year ended
	Note	30-Sep-22		30-Sep-21		31-Mar-22
		£		£		£
Revenue	4	208,217		200,887		673,509
Cost of sales		(1,959,326)		(2,844,474)		(4,028,123)
Gross loss		(1,751,109)		(2,643,587)		(3,354,614)
Administrative expenses		(3,323,977)		(1,763,573)		(7,998,774)
Other operating income		-		-		4,237
Other gains/(losses)		107,292		198		(846,373)
Operating loss	5	(4,967,794)		(4,406,962)		(12,195,524)
Finance income		128,366		47,388		120,002
Finance costs		(286,854)		(630,652)		(913,466)
Net finance cost		(158,488)		(583,264)		(793,464)
Loss before tax		(5,126,282)		(4,990,226)		(12,988,988)
Income tax credit		-		-		-
Loss for the period		(5,126,282)		(4,990,226)		(12,988,988)
Profit/(loss) attributable to:
Owners of the Company		(5,126,282)		(4,990,226)		(12,988,988)
		Unaudited		Unaudited		Audited
		£		£		£
Basic and diluted loss per share	12	(0.028)		(0.066)		(0.110)

There were no items of other comprehensive income in either period presented.

Consolidated Statement of Financial Position
		Unaudited		Unaudited		Audited
		Six months to		Six months to		Year ended
		30-Sep-22		30-Sep-21		31-Mar-22
	Note	£		£		£
Non-current assets
Property, plant and equipment	6	14,674,729		4,682,080		8,469,610
Right of use assets	7	1,702,233		1,564,581		1,743,736
Intangible assets	8	4,997,853		4,919,853		4,993,254
Deferred tax assets		1,397,789		1,070,658		1,397,789
Escrow funds receivable	9	5,564,319		10,105,858		8,370,024
		28,336,923		22,343,030		24,974,413
Current assets
Trade and other receivables		5,045,579		1,315,178		3,827,509
Inventories		69,901		-		156,944
Cash and cash equivalents		14,925,706		2,863,684		28,755,388
		20,041,186		4,178,862		32,739,841
Total assets		48,378,109		26,521,892		57,714,254
Equity and liabilities
Equity
Share capital	13	1,805,516		760,113		1,793,682
Share premium account		51,882,931		5,519,169		51,610,414
Share option reserve		292,579		123,728		241,861
Warrant reserve		1,408,730		841,318		1,408,730
Retained earnings		(19,313,728)		(6,403,342)		(14,187,446)
Equity attributable to the owners of the parent		36,076,028		840,986		40,867,241
Non-current liabilities
Loans and borrowings	11	1,522,723		12,210,825		1,440,630
Provisions	10	6,702,984		10,139,081		9,526,485
Deferred tax liabilities		1,397,789		1,070,658		1,397,789
		9,623,496		23,420,564		12,364,904
Current liabilities
Trade and other payables		2,502,202		2,188,133		4,289,623
Loans and borrowings		176,383		72,209		192,486
		2,678,585		2,260,342		4,482,109
Total liabilities		12,302,081		25,680,906		16,847,013
Total equity and liabilities		48,378,109		26,521,892		57,714,254

Consolidated Statement of Cash Flows
		Unaudited		Unaudited		Audited
		30-Sep		30-Sep		31-Mar
		2022		2021		2022
	Note	£		£		£
Cash flows from operating activities
Loss for the period		(5,126,282)		(4,990,226)		(12,988,988)
Adjustments to cash flows from non-cash items
Depreciation and amortisation	6,7	261,099		92,352		209,233
Impairment of property plant and equipment	6	-		-		-
Fair value losses on escrow account		2,904,871		-		1,783,221
Fair value gains on restoration provision		(3,012,163)		-		(786,849)
Finance income		(128,366)		(47,388)		(120,002)
Finance costs		236,120		630,652		913,466
Share based payment transactions		50,718		55,888		174,021
Founder incentives		-		-		(149,999)
Income tax expense		-		-		-
		(4,814,003)		(4,258,722)		(10,965,897)
Working capital adjustments
(Increase) in trade and other receivables		(1,218,070)		(770,882)		(3,283,213)
Increase/(decrease) in trade and other payables		(1,787,421)		721,988		2,952,165
(increase)/decrease in inventories		87,043		-		(156,944)
Net cash flow from operating activitie s		(7,732,451)		(4,307,616)		(11,453,889)
Cash flows from investing activities
Interest received		29,193		-		1,134
Acquisitions of property plant and equipment		(6,407,451)		(359,954)		(4,203,803)
Acquisitions of intangibles		(20,000)		-		(80,000)
Net cash flow from investing activitie s		(6,398,258)		(359,954)		(4,282,669)
Cash flows from financing activities
Interest paid		-		-		(4,955)
Proceeds from issue of ordinary shares, net of issue costs		-		4,031,674		41,021,204
Proceeds from exercise of warrants		284,351		-		126,577
Proceeds from exercise of share options		-		-		3,472
New leases		74,250		-		-
Payment of lease liabilities		(57,574)		-		(153,932)
Net cash flows from financing activities		301,027		4,031,674		40,992,366
Net increase in cash and cash equivalents		(13,829,682)		(635,896)		25,255,808
Opening cash and cash equivalents		28,755,388		3,499,580		3,499,580
Closing cash and cash equivalents c/f		14,925,706		2,863,684		28,755,388

Consolidated Statement of Changes in Equity

Audited		Share capital		Share premium account		Share option reserve		Warrant reserve		Retained earnings		Total
		£		£		£		£		£		£
At 1 April 2021		6,856		12,327,484		67,840		754,586		(11,413,116)		1,743,650
Loss for the year		-		-		-		-		(12,988,988)		(12,988,988)
Capital reduction of share premium account		-		(10,000,000)		-		-		10,000,000		-
Issue of bonus shares		752,513		(752,513)		-		-		-		-
Conversion of convertible  debt		359,352		10,421,208		-		-		-		10,780,560
New shares subscribed		674,961		40,310,822		-		-		-		40,985,783
Issue of warrants		-		(696,587)		-		785,144		-		88,557
Exercise of warrants		-		-		-		(131,000)		131,000		-
Issue of share options		-		-		298,878		-		-		298,878
Forfeiture of share options		-		-		(41,199)		-		-		(41,199)
Exercise of share options		-		-		(83,658)		-		83,658		-
At 31 March 2022		1,793,682		51,610,414		241,861		1,408,730		(14,187,446)		40,867,241
Unaudited
At 1 April 2021		6,856		12,327,484		67,840		754,586		(11,413,116)		1,743,650
Loss for the period		-		-		-		-		(4,990,226)		(4,990,226)
New shares subscribed		744		3,944,198		-		-		-		3,944,942
Issue of bonus shares		752,513		(752,513)		-		-		-		-
Capital reduction of share premium account		-		(10,000,000)		-		-		10,000,000		-
Issue of share options		-		-		55,888		-		-		55,888
Warrant charge		-		-		-		86,732		-		86,732
At 30 September 2021		760,113		5,519,169		123,728		841,318		(6,403,342)		840,986
Unaudited
At 1 April 2022		1,793,682		51,610,414		241,861		1,408,730		(14,187,446)		40,867,241
Loss for the period		-		-		-		-		(5,126,282)		(5,126,282)
New shares subscribed		11,834		272,517		-		-		-		284,351
Issue of share options		-		-		50,718		-		-		50,718
At 30 September 2022		1,805,516		51,882,931		292,579		1,408,730		(19,313,728)		36,076,028

Notes to the interim accounts

1.  Basis of Preparation

These unaudited condensed consolidated interim accounts have been prepared in accordance with the recognition and measurement principles of International Accounting Standards as adopted in the United Kingdom ("UK-adopted IAS") using the accounting policies that are expected to apply in the Company's next annual report.

The accounting policies applied are consistent with those disclosed in the Company's last statutory financial statements and the AIM admission document.

The interim accounts are in compliance with IAS 34, Interim Financial Reporting.

The interim accounts do not comprise the Company's statutory accounts. The information for the year ended 31 March 2022 is not the Company's statutory accounts. The Company's financial statements for that year have been filed with the registrar of companies and the auditor's report on those financial statements was unqualified and did not contain statements under s498(2) or s498(3) of the Companies Act 2006.

2.  Going concern

The interim accounts are prepared on a going concern basis which contemplates the continuity of normal business activities and the realisation of assets and settlement of liabilities in the normal course of business.

The Group is still in the pre-production phase of operations and meets its day to day working capital requirements by utilising cash reserves from investment made in the Group. In October 2021, the Group raised £36 million by way of an initial public offering and at 30 September 2022, had £14.9m million in cash reserves and £12.5 million at 30 November 2022. For the Group to be able to execute its estimated capex spend, it still requires additional funding and is in discussions with financing partners to provide the additional capital.

Until the additional capital is secured, the Group will proceed with detailed engineering design and will commence construction by utilising cash reserves. The board will not commit to significant further capital expenditure until the full finance package is in place to complete the rebuild. Management has prepared a number of different forecasts to model all anticipated potential outcomes as follows.

Model 1 - Capital build basis

This scenario models management's intended plan of the expected future outflows required to complete the capital build once finance is secured. Sensitivity analysis has been applied in terms of when the project would restart, availability of additional capital and the cashflow demands for each scenario. Management are satisfied there is sufficient headroom to service the projected cost of debt when this is agreed. As negotiations with finance providers proceed the model will be updated with the anticipated finance costs to ensure that a sufficient level of liquidity is maintained. Management is confident that the project finance can be secured to complete the capital build under the updated business plan. Management acknowledge that the Group could fall-back to a more modest business plan in the short term to maintain cash reserves if the economic environment were to deteriorate.

Model 2 - Operational readiness basis

This forecast models the scenario where part of the finance is drawn but not all the required finance is agreed in sufficient time, as full funding is dependant on certain conditions being met. If these conditions are delayed, and the Board decides there is insufficient visibility that they will be met, then the Board will instruct the company to pause the project and return to operational readiness.

The Group would continue in operation and will be able to realise its assets and discharge its liabilities as they fall due in the normal course of operations, including any committed expenditure that is required to meet its contractual capital and financial commitments.

No further capital expenditure would be committed but activity and staffing levels would be maintained so that project restart could be recommenced as soon as finance is secured. The group retains sufficient cash at the current time to operate under Model 2 for at least eighteen months.

Model 3 - Care and maintenance basis

Whilst management consider this to be the least likely and desired option for all stakeholder groups, it has prepared a forecast on a care and maintenance basis to cover this unlikely scenario.

This forecast models the scenario where project finance is not agreed. The Group would reduce its operations but continue to discharge its liabilities as they fall due in the normal course of operations, including any committed expenditure that is required to meet its contractual capital and financial commitments. No further capital expenditure would be committed but operational expenditure would be reduced to essential care and maintenance activities only. Management would continue to develop a plan to recommence development of the site when finance could be secured. The Group retains sufficient cash at the current time to operate under Model 3 for at least 15 months

The directors have reviewed the three models detailed above and have considered the positive progress in the update to the Feasibility Study of March 2021 and feedback received during the technical and financial due diligence. As a result, they consider that the group will be able to operate as a going concern for the foreseeable future. Consequently, they continue to adopt the going concern basis in preparing the consolidated financial information.

3.  Asset and liabilities held at fair value

Escrow funds

These funds are held with a third party to be released to the Group as it settles its obligation to restore the mining site once operations cease. The debtor has been discounted to present value assuming the funds will be receivable in 24 years' time which assumes one year of set up and a 23-year useful life of mining operations.  The key assumptions that would lead to significant changes in the escrow account fair value are the discount rate and the useful life of the mine.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the reporting date and are discounted to present value where the effect is material. This includes a provision for the obligation to restore the mining site once mining ceases.

The restoration provision is the contractual obligation to restore the mining site back to its original state once mining ceases. The provision is equal to the expected outflows that will be incurred at the end of the mine's useful life discounted to present value. As the restoration work will predominantly be completed at the end of the mine's useful life, these calculations are subject to a high degree of estimation uncertainty. The key assumptions that would lead to significant changes in the provision are the discount rate, useful life of the mine and the estimate of the restoration costs.

4.  Revenue

Revenue by product comprised the following:

	Unaudited	Unaudited	Audited
	Six months to	Six months to	Year ended
	30 September 2022	30 September 2021	31 March 2022
	£	£	£
Tungsten	89,509	67,870	232,940
Aggregates	117,091	133,017	440,569
Other	1,617	-	-
	208,217	200,887	673,509

5.  Operating loss

Operating loss is stated after the following:

	Unaudited	Unaudited	Audited
	Six months to	Six months to	Year ended
	30 September 2022	30 September 2021	31 March 2022
	£	£	£
Depreciation of property, plant and equipment	202,332	45,145	101,464
Depreciation of right of use assets	43,366	47,207	101,169
Amortisation of intangibles	15,401	-	6,599
Staff costs	2,107,029	1,297,387	2,465,924

6.  Property, plant and equipment

	Land and buildings		Furniture, fittings and equipment		Computer equipment		Motor vehicles		Other property, plant and equipment		Asset Under Construction		Total
Unaudited	£		£		£		£		£		£		£
Cost
At 1 April 2022	4,446,750		27,327		171,420		8,740		196,755		3,904,548		8,755,540
Additions	33,865		22,234		27,361		112,500		16,800		6,194,691		6,407,451
Transfer	713,969		-		-		-		-		(713,969)		-
At 30 September 2022	5,194,584		49,561		198,781		121,240		213,555		9,385,270		15,162,991
Depreciation
At 1 April 2022	235,797		1,578		9,932		5,047		33,576		-		285,930
Charge for the period	132,715		2,370		29,539		14,216		23,492		-		202,332
At 30 September 2022	368,512		3,948		39,471		19,263		57,068		-		488,262
Unaudited
Cost
At 1 April 2021	4,416,300		34,289		-		8,740		92,408		-		4,551,737
Additions	-		1,149		-		-		-		358,805		359,954
At 30 September 2021	4,416,300		35,438		-		8,740		92,408		358,805		4,911,691
Depreciation
At 1 April 2021	168,513		1,516		-		2,163		12,274		-		184,466
Charge for the period	33,387		272		-		1,441		10,045		-		45,145
At 30 September 2021	201,900		1,788		-		3,604		22,319		-		229,611
Audited
Cost
At 1 April 2021	4,416,300		34,289		-		8,740		92,408		-		4,551,737
Reclassification	-		(32,241)		-		-		32,241		-		-
Additions	30,450		25,279		171,420		-		72,106		3,904,548		4,203,803
At 31 March 2022	4,446,750		27,327		171,420		8,740		196,755		3,904,548		8,755,540
Depreciation
At 1 April 2021	168,513		1,516		-		2,163		12,274		-		184,466
Reclassification	-		(1,209)		-		-		1,209		-		-
Charge for the year	67,284		1,271		9,932		2,884		20,093		-		101,464
At 31 March 2022	235,797		1,578		9,932		5,047		33,576		-		285,930
At 30 September 2022	4,826,072		45,613		159,310		101,977		156,487		9,385,270		14,674,729
At 30 September 2021	4,214,400		33,650		-		5,136		70,089		358,805		4,682,080
At 31 March 2022	4,210,953		25,749		161,488		3,693		163,179		3,904,548		8,469,610

7.  Right of use asset

	Unaudited	Unaudited	Audited
	Six months to	Six months to	Year ended
	30 September 2022	30 September 2021	31 March  2022
	£	£	£
Opening net book value	1,743,736	1,611,788	1,611,788
Additions	1,863	-	233,117
Depreciation	(43,366)	(47,207)	(101,169)
Closing net book value	1,702,233	1,564,581	1,743,736

8.  Intangible assets

	Unaudited	Unaudited	Audited
	Six months to	Six months to	Year ended
	30 September 2022	30 September 2021	31 March  2022
	£	£	£
Goodwill	1,075,520	1,075,520	1,075,520
Mining rights	3,844,333	3,844,333	3,844,333
Software	78,000	-	73,401
Closing net book value	4,997,853	4,919,853	4,993,254

9.  Escrow Funds

	Unaudited	Unaudited	Audited
	Six months to	Six months to	Year ended
Escrow Funds	30 September 2022	30 September 2021	31 March  2022
	£	£	£
Carrying amount brought forward	8,370,024	10,058,470	10,058,470
Change in inflation and discount rate	(2,904,871)	-	(1,783,221)
Unwinding of discount	99,166	47,388	94,775
Closing net book value	5,564,319	10,105,858	8,370,024

The funds held in escrow with a third party will be released back to the Company on the cessation of mining once restoration works have been completed. The amounts have been discounted to present value over the expected useful life of the mine plus one year start up. During the period, the discount rate was revised to 4.1% (30 September 2021: 1.1%) (31 March 2022: 2.0%) resulting in a loss of £2,904,871 (30 September 2021: £Nil) (31 March 2022: £1,783,221). The actual funds held in escrow at the period end were £13,228,692 (30 September 2021: £ 13,201,921) (31 March 2022: £13,203,139). The Escrow Funds balance is the only financial instrument of the Group held at fair value. The valuation is based on the eventual cash flow discounted at the risk-free rate, being the yield on a UK Government bond for an equivalent term. This is considered level 2 within the fair value hierarchy. There have been no transfers between levels of the fair value hierarchy during the period.

Notes to the interim accounts

10.  Provisions

	Unaudited	Unaudited	Audited
	Six months to	Six months to	Year ended
Restoration provision	30 September 2022	30 September 2021	31 March  2022
	£	£	£
Carrying amount brought forward	9,526,485	9,964,824	9,964,824
Change in inflation and discount rate	(3,012,163)	-	(786,849)
Unwinding of discount	188,662	174,257	348,510
Closing net book value	6,702,984	10,139,081	9,526,485

This provision is for the obligation to restore the mine to its original state once mining operations cease, discounted back to present value based on the estimated life of the mine. Prior to discounting the Directors estimate the provision at current costs to be £13,201,256 (30 September 2021: £13,201,256) (31 March 2022: £13,201,256).

The provision has been discounted using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. The ultimate costs to restore the mine are uncertain, and cost estimates can vary in response to many factors, including estimates of the extent and costs of rehabilitation activities, technological changes, regulatory changes, cost increases as compared to the inflation rates and changes in discount rates.

Management has considered these risks and used a discount rate of 6.1% (30 September 2021: 3.5%) (31 March 2022: 4%) an inflation rate of 2.5-7% over the life of the project (30 September 2021: 2%) (31 March 2022 2.5-7%) and an estimated mining period of one year set up and 23 years mining. The fall in the present value of the provision is a direct result of the rise in long-term inflation and interest rate expectations.

At the reporting date these assumptions represent management's best estimate of the present value of the future restoration costs.

11.  Long term borrowings

Long term borrowings comprised:

	Unaudited	Unaudited	Audited
	Six months to	Six months to	Year ended
	30 September 2022	30 September 2021	31 March 2022
	£	£	£
Lease liabilities	1,552,723	1,430,265	1,440,630
Convertible debt	-	10,780,560	-
	1,552,723	12,210,825	1,440,630

12.  Basic and diluted loss per share

	Unaudited	Unaudited	Audited
	Six months to	Six months to	Year ended
	30 September 2022	30 September 2021	31 March  2022
	£	£	£
Loss for the year	(5,126,282)	(4,990,226)	(12,988,988)
	Number	Number	Number
Weighted average number of ordinary shares in issue	180,470,827	75,974,318	119,017,666
Basic and diluted loss per share	(0.028)	(0.066)	(0.11)

The diluted loss per share calculations excludes the effects of share options, warrants and convertible debt on the basis that such future potential share transactions are anti-dilutive. Were the Company's options and warrants to be converted, a potential further 25,624,284 ordinary shares of between £0.01 to £0.60 would be issued. Information on share options and warrants is disclosed in note 14.

There were no shares issued subsequent to the end of the interim period.

13.  Share capital

	Unaudited		Unaudited		Audited
	Six months		Six months		Year ended
	30 September		30 September		31 March
	2022		2021		2022
Number of shares allotted	Number		Number		Number
Ordinary Shares of £0.01 each	180,551,615		76,011,371		179,368,215
Nominal value	£		£		£
Ordinary Shares of £0.01 each	1,805,516		760,113		1,793,682

Share issues during the period

During the period ended 30 September 2021 the share capital of the company was restructured. The following share transactions took place:

· The Company issued 7,349,832 ordinary shares of £0.0001 each for considerations ranging from £0.45 per share to £0.60.

· On 22 July 2021 a bonus issue of shares from the share premium account created 7,525,125,729 ordinary shares of £0.0001 each.

· On 22 July 2021 a share capital consolidation took place whereby each one hundred ordinary shares of £0.0001 each were consolidated into one ordinary share of £0.01 each.

.

14.  Share options and warrants

Founder share incentives

The founder shareholders have a right to receive shares at a nominal value once certain milestones are met.

The movements in the number of incentives during the year were as follows:

		Unaudited	Unaudited	Audited
		Six months to	Six months to	Year ended
		30 September 2022	30 September 2021	31 March 2022
		Number	Number	Number
Outstanding at beginning of period	18,229,148		6,930,000	6,963,000
Granted during the period	-		671,137	671,137
Terminated on admission to AIM	-		-	(7,634,137)
Replacement share awards following admission to AIM	-		-	19,866,344
Exercised during the year	-		-	(1,657,196)
Outstanding at end of period	18,229,148		7,601,137	18,229,148

In the prior year, upon admission to AIM, the original founder agreement was terminated and the Company granted replacement founder options to the founder shareholders with effect from admission.

The founder options meet the definition of equity in the financial statements of the Company on the basis that the 'fixed for fixed' condition is met. No consideration was received for the founder options at grant date, therefore no accounting for the issue of the equity instruments is required under IFRS. On exercise, the shares are recognised at the fair value of consideration received, being the option price of £0.01.

Part of one of the founders' option agreement were share options issued in their capacity as a Director and were dependent on their continuing employment, and therefore 243,333 options have been accounted for under IFRS 2. This resulted in a charge to the income statement of £143,603 and these options were fully vested in the year ended 31 March 2022.

Share Options - Employees

The movement on the number of share options issued by the Company during each period presented was as follows.

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Year ended
	30-Sep-22		30-Sep-21		31-Mar-22
	Number		Number		Number
Outstanding at beginning of period	1,683,335		1,233,333		1,233,333
Granted during the period	2,799,982		1,097,226		1,097,228
Exercised during the year	-		-		(647,226)
Outstanding at end of period	4,483,317		2,330,559		1,683,335

At 30 September 2022 the exercise price of share options issued to key employees ranges between £0.01 and £0.45 and their remaining contractual life was three years.

At 30 September 2021 the exercise price of share options issued to key employees ranges between £0.01 and £0.45 and their remaining contractual life was three years.

At 31 March 2022 the exercise price of share options outstanding ranged between £0.01 and £0.45 and their remaining contractual life was 22 months to 39 months.

Warrants

The movement on the number of warrants issued by the Company during each period presented was as follows.

	Unaudited	Unaudited	Audited
	Six months to	Six months to	Year ended
	30 September 2022	30 September 2021	31 March 2022
	Number	Number	Number
Outstanding at beginning of period	4,095,219	2,310,681	2,310,681
Granted during the period	-	126,760	2,226,760
Exercised during the year	(1,183,400)	-	(442,222)
Outstanding at end of period	2,911,819	2,437,441	4,095,219

At 30 September 2022 the exercise price of warrants outstanding ranged between £0.45 and £0.60 and their remaining contractual life was 3 month to 13 months.

At 30 September 2021 the exercise price of warrants ranges between £0.25 and £0.60 and their remaining contractual life was two years.

At 31 March 2022 the exercise price of warrants outstanding ranged between £0.01 and £0.60 and their remaining contractual life was 1 month to 21 months.

15.  Commitments

Capital commitments

As at 30 September 2022 the Group had contracted to purchase property, plant and machinery amounting to £4,173,277 (31 March 2022: 7,208,997) (30 September 2021: 4,476,559). An amount of £123,320 (31 March 2022: £123,320) (30 September 2021: £123,320) is contingent on the commencement of mining operations.

Other financial commitments

The total amount of other financial commitments not provided in the financial statements was £10,329,000 (31 March 2022: £11,329,000) (30 September 2021: £12,329,000) payable on the commencement of mining operations and represented contractual amounts due to the mining contractor and further committed payments to the funds held in the escrow account under the escrow agreement. Included within other financial commitments is £5,000,000 which is considered to be payable between one to five years after mining operations commence.

16.  Events after the end of the interim reporting period

On 28th November 2022, the Company announced that the Company's Chairman, Robert Ashley, stepped down from his position on the Board with immediate effect and David Cather, Senior Independent Non-Executive Director, became Chairman of the Board.

Additionally, Martin Wood has been appointed to the Board and will assume the role of Senior Non-Executive Director.

 

END

 

 

IR EFLFFLLLBFBQ