Updated Feasibility Study Delivers Further Value

RNS Number : 7508M

Tungsten West PLC

16 January 2023

 

16^th January 2023

Tungsten West Plc

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

Updated Feasibility Study Delivers Further Value

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, UK, is pleased to release the summary of results from its updated and independently reviewed Feasibility Study ("FS") covering recommencement of operations at Hemerdon, demonstrating a robust and economically viable case for the mine.

Highlights:

· Strong Project Economics

o  A post-tax Net Present Value ("NPV")_5% of £ 297 million (base case) with an Internal Rate of Return ("IRR") of 25%

o  Life of Mine ("LOM") post financing free cash-flow of £550 million (base case)

o  An Upside case post-tax NPV_(5%) of £415 million  with an IRR of 32%

o  Average annual production of 2,900 tonnes of WO₃ in concentrate and 310 tonnes of Tin ("Sn") in concentrate

o  LOM of 27 years and an annual average steady-state mining rate of 3.5 Mt per annum

§ The LOM model assumes stockpiling lower grade killas ore for processing from Year 17 onwards, significantly extending the mine life

o  LOM  C1 cash-cost of £135 per mtu of WO₃

o  Remaining Project CAPEX, including EPCM fees, is £31.1m as of 1^st October 2022

§ £12 million of restart CAPEX already spent

Overall, this positions Tungsten West to become the largest tungsten producer in the Western World.

· Processing Re-optimisation

o  A complete redesign of the front-end crushing circuit considerably reduces CAPEX

o  Optimisation of XRT ore-sorting operational parameters significantly reduces OPEX

o  Ore sorting optimisation allows the re-purposing of Dense Media Separation ("DMS") circuits and the removal of the refinery kiln from the circuit reducing diesel consumption by 1.3 million litres per annum

o  Significant upsides have been identified to optimise recoveries post operational restart

· Recently Increased Reserves and Resources (see announcement of 19^th December 2022)

o  Ore Reserve Estimate ("ORE") of 101.2 Mt at 0.14% WO₃ and 0.03% Sn

o  Mineral Resource Estimate ("MRE") of 351.5 Mt at 0.12% WO₃ and 0.03% Sn

o  Exploration targets provide future growth of reserves and resources potential

§ Adjacent to MRE

§ Drill ready

· Sunk Capital

o  The Project benefits from over £200 million of investment to date, including the development of significant infrastructure, pre-stripping of the open pit, construction of the mineral processing facility ("MPF") and a fully funded restoration bond

· Upholding strong ESG credentials

o  The FS has been designed to optimise the Project and reduce environmental risk

o  Tungsten West remains committed to restarting operations, delivering value to the local area and ensuring open and positive dialogue with the local communities

o  Received two of the four permits required to restart operations and anticipate the approval of the remaining permits in Q1 2023 (see announcement of 15^th December 2022)

Mark Thompson, Executive Vice Chairman of Tungsten West, commented on the Feasibility Study : "We are delighted to deliver this updated Feasibility Study which showcases the attractive economics of our Project that will enable us to sustainably deliver the critical metals, tungsten and tin, into World markets.

"The updated Feasibility Study was completed as part of the revised plan for the Hemerdon mine, which was essential due to the unforeseen geopolitical circumstances and energy price inflation shock of 2022. The Feasibility Study provides solutions to the energy price challenges and will enable increased operating efficiencies at the Project. K ey highlights from this study include a revised ore delivery and waste mining strategy, a split phase approach to operational ramp-up to the full design specification, a new primary and secondary crushing method and location, a re-optimisation of the operating strategy for the XRT ore sorters, re-design and re-engineering of the feed preparation, ore sorter buildings and structures, and a re-evaluation of the operation of unit processes and expected recoveries.

"Tungsten is on both the EU and US lists of critical metals and due to geopolitical tensions and security of supply issues the market remains strong. With Hemerdon in production, we will provide an alternative source of tungsten to Western consumers in markets which are otherwise dominated by China. China currently accounts for circa 90% of global tungsten reserves and 80% of mine production, and Chinese APT production share is between 85% and 90% of world supply.

"We are build-ready at Hemerdon and we look forward to continuing to work with our partners and stakeholders to bring Hemerdon back into production in the fourth quarter of 2023. "

Summary of Feasibility Study Results

Project Economics

The post-tax NPV_5% of the Project is £297 million with an associated IRR of 25%. Conservative assumptions have been made with regards to the ramp up schedule and WO₃ and Sn recovery levels used in the financial model leaving considerable upside to metallurgical recoveries and a faster than planned ramp up.

The cumulative free cash flows after expected financing of the Project through the LOM exceed £550 million.

Figure 1.1: Project Cashflow over LOM

As part of the FS sensitivity and upside scenarios have been examined which are summarised in Table 1.1 and Figure 1.2. The alternate scenarios illustrated in Table 1.1 show potential project upside in the region of a NPV5% of between £318 million and £416 million.

Table 1.1: Results of Scenario Analysis for key outputs

	Scenario 1	Scenario 2	Scenario 3	Scenario 4
Input Parameter	Base	Recovery Upside	Price Upside: 5% increase	Recovery and Price Upside
Starting APT Price	340	340	340	340
Price Growth (per annum)	3%	3%	5%	5%
Maximum APT Price ($)	450(1)	450(1)	450(2)	450(2)
WO₃ Granite Recovery	54.0%	62.6%	54.0%	62.6%
Sn Granite Recovery	31.0%	34.5%	31.0%	34.5%
NPV	297	391	318	416

(1)  Reached in Year 10

(2)  Reached in Year 7

Figure 1.2: 'Spidergram' illustrating sensitivity of various Project parameters

Capital and Operating Costs

As of 1^st October 2022, the remaining Project CAPEX, including EPCM fees, is estimated at £31.1 million  (excluding contingency.) Pre-operating costs (which include spares inventory, staff overheads, G&A and mining services to prepare the site) are estimated at £19.4 million.

Other corporate commitments, including environmental bond payments, and opportunistic land purchases are estimated at £4.4 million, with a further £6 million of deferred consideration for project acquisition included in the forecast cashflow. In total pre-production expenditure is estimated at £54.9 million.

The Company forecasts that the first two years of production will involve a ramp-up in throughput to allow for ongoing process improvements in the initial phase of production. This results in forecast throughput production of 2.0 Mtpa (Year 1), 2.7 Mtpa (Year 2) and 3.5 Mtpa (Year 3 onwards). As part of the revised operating strategy and staged ramp-up, the Company will benefit from a delayed waste stripping profile which will result in the Project generating positive operating cashflows in the first year of operation.

The base case has assumed a long-term cost of power supply of £0.247/kWh based on 100% grid supply. (This compares to £0.115/kWh in the 2021 FS). Scoping studies on renewable energy projects that have been undertaken demonstrate that power prices can be significantly reduced with initial guidance indicating a long-term power cost of £0.10 - £0.125 kWh for at least 30% of the Project's power needs. 

Mineral Resources

As outlined in the Company's announcement of 19th December 2022, Tungsten West has reported an update to the 2021 Hemerdon deposit MRE due to changes in costs and processing assumptions, affecting the breakeven ("BE") cut-off grade ("CoG"). Furthermore, the Company has reported updated changes to the Hemerdon stockpile inventory following depletion of various stockpiles since the 2021 reported MRE. The 2021 block model estimate has been used to report the updated resource confidence categories due to no material differences in geological interpretation or data used to support the estimation.

Table 1.2: Summary Updated October 2022 MRE for the Hemerdon Project

DOMAIN	Cut-Off WO3 Eq (%)	MEASURED				INDICATED				INFERRED
		Tonnes (Mt)	WO₃ (%)	Sn (%)	WO₃ Eq (%)	Tonnes (Mt)	WO₃ (%)	Sn (%)	WO₃ Eq (%)	Tonnes (Mt)	WO₃ (%)	Sn (%)	WO₃ Eq (%)
Granite	0.0640	33.6	0.18	0.03	0.19	84.0	0.15	0.02	0.16	36.5	0.11	0.02	0.12
Killas	0.0620	8.5	0.11	0.03	0.13	44.7	0.10	0.03	0.11	140.4	0.09	0.03	0.10
Stockpiles	N/A	0.6	0.20	0.06	0.23	-	-	-	-	-	-	-	-
MWF	N/A	-	-	-	-	-	-	-	-	3.2	0.18	0.02	0.18
Total	-	42.8	0.16	0.03	0.18	128.6	0.13	0.03	0.14	180.1	0.1	0.03	0.11

Notes to accompany Mineral Resource table

1. The Qualified Person for the estimate is Mr. James McFarlane, BSc (hons), MSc, MCSM, FGS, CEng FIMMM, RPGeo MAIG, FIQ, a Tungsten West employee. The estimate has an effective date of 11 October 2022.

2. Mineral Resources are reported using the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves" (The JORC Code) 2012 Edition.

3. Numbers may not add up due to rounding. Rounding as required by reporting guidelines may result in apparent differences between tonnes, grade and contained metal content.

4. All tonnages reported are dry metric tonnes.

5. WO₃ Eq calculated as [[Sn%*0.379]+WO₃%].

Mining and Ore Reserves

As outlined in the Company's announcement of 19^th December 2022, the Ore Reserves have been estimated using the Mineral Resource block model produced in January 2021. The Ore Reserves were subject to a pit optimisation study conducted by Tungsten West during October to November 2022. This was followed by detailed pit design, pushback design and LOM plan by the Company and Mining Plus UK Ltd ("MPUK") in addition to financial modelling. All of the studies illustrated that the Project is robust and also illustrated that there is significant potential upside present.

The pit designs were used to generate a LOM production schedule (Figure 1.3). To maximise the Project NPV, the Company plans to stockpile the lower grade (but still economic) killas material until completion of the granite mining phase, at which time the killas stockpiles will be reclaimed and fed through the Mineral Processing Facility ("MPF"). The resulting schedule provides a mining life of approximately 27 years. Granite processing will last 17 years and there is a further period of killas processing which lasts just under 10 years after the last granite ore is processed.

Figure 1.3: LoM Schedule - Tonnages by Material Type.

The total updated Ore Reserve (Proved and Probable) for Hemerdon is 101 Mt at 0.14% WO ₃ and 0.03% Sn, reported above an Ore Reserve cut-off grade of 0.0742% WO ₃ Equivalent ("WO ₃ Eq") for the granite and 0.0689% WO ₃ Eq for the killas. This Ore Reserve includes 0.6 Mt of existing stockpiles remaining from the previous open pit mining of the Hemerdon granite between 2015 and 2018.

The Hemerdon Mineral Reserves tabulation is shown in Table 1.3 below

ORE TYPE	Cut-off WO3 Eq (%)	PROVED ORE RESERVES			PROBABLE ORE RESERVES			TOTAL ORE RESERVES
		Tonnes (Mt)	WO3 (%)	Sn (%)	Tonnes (Mt)	WO3 (%)	Sn (%)	Tonnes (Mt)	WO3 (%)	Sn (%)
Granite	0.0742	32.1	0.18	0.03	24.0	0.17	0.02	56.1	0.17	0.03
Killas	0.0689	8.3	0.11	0.03	36.3	0.10	0.03	44.5	0.10	0.03
Stockpiles	N/A	0.60	0.20	0.06	-	-	-	0.60	0.20	0.06
Total	-	41.00	0.17	0.03	60.20	0.13	0.03	101.20	0.14	0.03

Notes to accompany Ore Reserves table:

1. The Qualified Person for the estimate is Mr. Adriano Carneiro, fellow AusIMM, a MPUK employee. The estimate has an effective date of 15 November 2022.

2. Ore Reserves are reported using the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves" (The JORC Code) 2012 Edition.

3. Numbers may not add up due to rounding. Rounding as required by reporting guidelines may result in apparent differences between tonnes, grade and contained metal content.

4. All tonnages reported are dry metric tonnes.

5. WO₃Eq calculated as WO₃Eq = WO₃ + (0.4942*Sn) for granite and WO₃Eq = WO₃ + (0.3794*Sn) for killas.

Processing

Enhancing the role of ore sorting as a fundamental step change in the processing strategy has provided Tungsten West with significant operational flexibility due to the ability to reduce ore sorter weight yields to pre-concentrate ore. This method reduces the amount of material being processed in the next stages within the MPF and therefore resulting in reduced capital requirements and operating costs. The ore sorter technology has the added benefit of removing much of the iron-rich material from the Run of Mine ("ROM") feed to the MPF enabling the removal of the reduction kiln in the refinery from the flowsheet. This removes approximately 1.3 million litres of diesel consumption per annum. The upgraded feed grade from the ore sorters both the DMS and Spiral-Table Gravity circuits will enable the Company to achieve higher recoveries in these circuits.

Results from an optioneering study on the revised mine plan and processing strategy and mine plan have yielded an optimised solution reducing initial capital and operating costs:

The re-design is phased as follows:

· Years One and Two ("Phase1") - average of 2.4 Mtpa of granite ore

· Year Three onwards ("Phase 2") - 3.5 Mtpa of granite ore

The changes to the existing process flowsheet to be implemented at Hemerdon can be categorised into three areas, namely:

· Front End Upgrades - New Crushing, Screening and Ore Sorting Circuit required for Phase 1;

· Existing Minerals Processing Facility Modifications - Upgrades to existing plant to accommodate production requirements for Phase 1; and

· Phase 2 Crushing and Process Plant Expansion - Future upgrades to both Crushing and Processing plants required for increased production rates, envisaged from Year Three onwards.

The re-engineering has mainly reduced CAPEX and OPEX around reduced ore handling costs by the introduction of direct tipping at a newly sited ROM pad incorporating the introduction of new semi-mobile primary jaw and secondary cone crushers, new operating parameters for the ore sorting circuit, and to a lesser extent changes to the existing DMS and fine gravity dressing circuits.

The revised front end design also includes a significant tactical advantage through the introduction of a secondary crushed ore stockpile ahead of the ore sorters. This provides up to circa 40 hours of redundancy capacity to the crushing circuit thereby de-coupling the front end crushing circuit from the MPF - minimising downtime and maximising availability of the concentrator circuit.  

Tungsten West has maintained the ethos of the original FS in continuing to engineer out as many operational, mechanical, electrical or ESG issues associated with the previous operation as possible and to ensure MPF availability and operability remains a priority.

ESG

As part of the Company's ongoing commitment to complying with the highest environmental and social standards, the Company has maintained an integrated environmental management system consisting of ISO 14001 (Environment), 9001 (Quality), 45001 (Health & Safety) and 50001 (Energy Efficiency). Tungsten West has also been working and consulting with the local community and as a result has developed an ESG strategy, which aligns with UN Sustainable Development Goals, International Finance Corporation Performance Standards, and the Sustainability Accounting Standards Board.

Tungsten West is committed to a vision of a safe and sustainable operation 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 all stakeholders.

The Company is focussed on providing significant economic benefits to the people and communities surrounding the mine, as well as the UK as a whole. 

Qualified Person Statements

Information in this announcement   has been reviewed and approved by Mr James McFarlane, BSc (Hons), MSc, MCSM, FGS, CEng FIMMM, RPGeo MAIG, FIQ . Mr McFarlane holds a BSc with Honours from The University of Wales, Aberystwyth in Environmental Earth Science and an MSc in Mining Geology from Camborne School of Mines, University of Exeter, he is also a Master of the Camborne School of Mines (MCSM). Mr McFarlane is a Fellow of the Geological Society of London (FGS), a Chartered Engineer (CEng) and Fellow of the Institute of Materials, Minerals and Mining (FIMMM) through which he is also a Registered Mineral Resources and Reserves Reporting Practitioner. Mr McFarlane is a Member of the Australian Institute of Geoscientists (MAIG) and through which is Registered Professional Geoscientist in the joint fields of Mining and Mineral Exploration (RPGeo). Mr McFarlane is also a Fellow of the Institute of Quarrying (FIQ). Mr McFarlane is an employee of the Company. Mr McFarlane has sufficient experience relevant to the style of mineralisation and type of deposit under consideration, and to the activity which he is undertaking to qualify as a Competent Person  as defined by   the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code) and under the AIM Rules.

Mr. McFarlane relied on a number of supporting qualified persons (other experts) in relevant areas including environmental, metallurgy & recovery methods, ore reserves, tailing facility design, economic and market analysis, aggregates & planning matters, of which Mr James McFarlane had oversight.

- Note for Mining and Oil & Gas Companies , which outline standards of disclosure for mineral projects. Mr McFarlane consents to the inclusion in this announcement of the matters based on this information in the form and context in which it appears. Mr McFarlane confirms that the Company is not aware of any new information or data that materially affects the information included in the relevant market announcements, and that the form and context in which the information has been presented has not been materially modified.

The information in this release that relates to the Estimation and Reporting of Ore Reserves has been compiled by Mr Adriano Carneiro BEng (Mining) FAusIMM. Mr Carneiro is a full-time employee of Mining Plus UK Limited Ltd and has acted as the Competent Person on the Hemerdon deposit Ore Reserve Estimation. Mr Carneiro is a Fellow Professional of the Australasian Institute of Mining and Metallurgy and has sufficient experience with the commodity, style of mineralisation and deposit type under consideration and to the activities undertaken to qualify as a Competent Person as defined in the 2012 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves" (The JORC Code).

- Note for Mining and Oil & Gas Companies , which outline standards of disclosure for mineral projects.  Mr. Carneiro consents to the inclusion in this report of the contained technical information relating the Ore Reserve Estimation in the form and context in which it appears. Mr Carneiro confirms that the Company is not aware of any new information or data that materially affects the information included in the relevant market announcements, and that the form and context in which the information has been presented has not been materially modified.

The Feasibility Study was also independently reviewed by AMC Consultants (UK) Limited ("AMC"). AMC was engaged by Tungsten West Limited (TWL) to undertake a review (the Review) of Sections 1-4, 6, 18, 19, 20, 21, 22, 24 (ii), 25 and 26. 

Enquiries

Tungsten West Mark Thompson Tel: [phone]	Strand Hanson (Nominated Adviser and Financial Adviser) James Spinney / James Dance / Abigail Wennington Tel: [phone]
BlytheRay (Financial PR) Tim Blythe / Megan Ray Tel: [phone] Email:  [e-mail]	Hannam & Partners (Joint Broker) Andrew Chubb / Matt Hasson / Jay Ashfield [phone] VSA Capital Group plc (Joint Broker) Andrew Raca / Andrew Monk [phone]

Follow us on twitter @TungstenWest

 

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