TIDMTUN
RNS Number : 3828M
Tungsten West PLC
14 September 2023
14 September 2023
Tungsten West Plc
("Tungsten West", the "Company" or the "Group")
Final Results for the year ended 31 March 2023 and
Availability of Annual Report
Tungsten West (LON:TUN), the mining company focused on
restarting production at the Hemerdon tungsten and tin mine
("Hemerdon" or the "Project") in Devon, UK, is pleased to announce
its audited results for the year ended 31 March 2023.
Highlights for the Period
-- Updated JORC compliant Ore Reserve Estimate to 101.2 million
tonnes ("Mt"), making the Hemerdon deposit the second largest
reported Committee for Mineral Reserves International Reporting
Standards ("CRIRSCO") standard tungsten reserve globally
-- An updated Feasibility Study highlighted strong project economics, including:
o Average annual production of 2,900 tonnes of WO(3) in
concentrate and 310 tonnes of Tin ("Sn") in concentrate
o Life of Mine ("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
-- Key permits, including the Mining Waste Facility ("MWF") and
Open Pit Water Abstraction Licence, granted by the Environment
Agency
-- Following the draw down of the Tranche A and Tranche B
convertible loan notes, GBP6.95 million in total, there is not any
current commitment from existing or new noteholders to purchase any
Tranche C notes. If the Group fails to find purchasers for the
Tranche C notes, then, in the absence of other new sources of
finance, it would no longer be able to meet its liabilities as they
fall due in November 2023
o The Board continues to implement a cost reduction programme,
is proactively engaging with loan note holders and is reviewing
other sources of funding to address the short-term liquidity needs
of the business
Post Period Highlights
-- Production of legacy tungsten pre-concentrate and tin concentrate totalling 50 tonnes
-- The Company entered into a strategic collaboration with the
fusion energy company, Oxford Sigma
-- Following the completion of Low Frequency Noise ("LFN")
Trials, the Company made a formal submission to the Environment
Agency to secure the Mineral Processing Facility ("MPF") permit
-- The Company submitted a section 73 (variation of a condition
of existing permission) application to vary the tonnage cap on
truck movements from site
-- Strengthening of the Board with new Non-Executive Directors
Copies of the Company's full Annual Report and Financial
Statements for the financial year to 31 March 2023 will be made
available to download from the Company's website at
www.tungstenwest.com and will shortly be posted to
shareholders.
Ends
For further information, please contact:
Enquiries
Tungsten West Strand Hanson
Neil Gawthorpe (Nominated Adviser and Financial
Tel: +44 (0) 1752 278500 Adviser)
James Spinney / James Dance /
Abigail Wennington
Tel: +44 (0) 207 409 3494
BlytheRay VSA Capital Limited
(Financial PR) (Financial Adviser and Joint
Tim Blythe / Megan Ray Broker)
Tel: +44(0) 20 7138 3204 Andrew Raca / Andrew Monk
Email: tungstenwest@blytheray.com Tel: +44 (0)20 3005 5000
Hannam & Partners
(Joint Broker)
Andrew Chubb / Matt Hasson /
Jay Ashfield
Tel: +44 (0)20 7907 8500
Follow us on twitter @TungstenWest
Chairman's Statement
Overview of FY2023
I am pleased to report on the Group's audited results for the
year ended 31 March 2023. The financial year began with the Board
implementing a pause to the project so that the management team
could evaluate alternative approaches to restarting mining
operations, as the Group faced material inflationary pressures and
uncertainty over costs. Despite this being a difficult decision,
the Group prevented an unsustainable level of capital commitments
and exposure to potentially unviable high operating costs.
In July 2022, development was restarted with the Group
committing to detailed engineering design and re-commencing
construction based on a new development plan (the "Plan"). The
Group invited its preferred funding partner to independently
scrutinise and review the new plan which culminated in a
non-binding term sheet that would fully fund the restart.
Due to the changes required under the new Plan, the Group's
funding partner requested an update to the Feasibility Study of
March 2021. Within six months, the Group released the summary of
results from its updated Feasibility Study ("2022 FS update"). The
quality of work produced in the 2022 update is a reflection of the
dedication and efforts by all employees involved for what was
effectively a full re-run of the 2021 Feasibility Study, including
a review of the re-engineering process and upgrade of the flowsheet
which has significantly reduced the Capex and Opex of the project.
This was a significant task and has demonstrated a robust and
economically viable case for the mine.
Some of the key highlights from the 2022 FS update were:
-- A post-tax Net Present Value ("NPV")(5%) of GBP297 million
(base case) with an Internal Rate of Return ("IRR") of 25%
-- An Upside case post-tax NPV(5%) of GBP415 million with an IRR of 32%
-- Life of Mine ("LOM") of 27 years and an annual average
steady-state mining rate of 3.5 million tonnes ("Mt") per annum
As outlined in the Company's announcement of 19 December 2022,
we were also able to report an update to the 2021 Hemerdon deposit
Mineral Resource Estimate ("MRE") due to changes in costs and
processing assumptions, affecting the breakeven cut-off grade. The
Group reported a 60% increase in ore tonnage and 10% increase in
contained metal from previous 2021 Ore, taking the Hemerdon Ore
Reserve to 101.2Mt. As a result the Hemerdon deposit is estimated
to be the second largest reported CRIRSCO standard tungsten reserve
globally. The lift in both the Ore Reserve and Mineral Resource
could only be achieved from the work that has been undertaken this
year as part of our work on updating the Feasibility Study, cost
saving initiatives and operating efficiencies across the
business.
Throughout the year, the Group continued to engage with their
long-lead capital equipment suppliers, which included placing an
order for the new semi-mobile primary and secondary crushing
circuit which is being supplied by MO Group (Metso-Outotec of
Finland). The seven ore sorters required for the plant upgrade have
been delivered to the Hemerdon Mine. The construction of new
screens and vibrating feeders provided by Vibramech was completed
and these have been delivered to the Hemerdon Mine.
Inside our Mineral Processing Facility ("MPF"), a number of
enhancements and upgrades have been taking place, designed to
increase efficiency, reduce future downtime and reduce future
maintenance, all of which were key factors that caused the previous
operator to incur significant downtime. This enabled the refinery
and magnetic separation end of the plant to be commissioned in
April 2023 and produce approximately 50 tonnes of tin and tungsten
concentrate from materials left by the previous operator.
Sales of aggregates continued until October 2022 when the Group
ceased its production of aggregates from barren material left by
the previous operator. The primary goal was to always demonstrate
the ability to establish a market for the product, and aggregates
production will recommence as the mineral processing ramp up
completes.
Safety and health continued to be our number one priority on
site and to help champion our safety and ESG principles, SHEQ
(Safety, Health, Environmental and Quality) captains were appointed
internally. Team members across all departments were invited to
apply for these roles who felt that could utilise their intimate
knowledge of their job roles in their respective departments. This
was an important change for Tungsten West, as we moved towards
embedding a culture of best practice across all departments, rather
than having one central site 'S&H administration'.
Despite all the efforts during the year to ensure permitting and
construction could run in parallel, it has now become apparent
following investor and lender feedback that this is not the case
due to potential design changes required to achieve permitting. The
Group needs to secure the mineral processing facility permit in
order to obtain the finance required to complete the plant rebuild
and commence production. As a consequence, the Company undertook a
strategic review, and, with the continued risk surrounding volatile
energy prices and a more conservative lending approach, it
announced a number of cost saving initiatives to ensure the project
could continue.
To allow enough time to finalise the full project funding
process, all non-core project construction activities ceased, with
recommencement to begin when the exact design requirements
necessary for obtaining the Mineral Processing Facility were
clarified. A review of staffing requirements inevitably followed
which led to redundancies post year-end. It is never easy to go
through a redundancy process, especially given the high aspirations
and goals of this Company, so I would like to thank all Tungsten
West staff for their level of maturity and understanding during the
process.
In June 2023, the Group raised GBP7.2 million of new funds from
issuing convertible loan notes and open offer. An additional GBP2.0
million notes can be issued if required. These funds were drawn in
order to finance the group through the process of obtaining the
necessary permits. The cost reduction and cash conservation
measures implemented by management triggered a number of defaults
under the terms of the notes. A waiver is in place for these
defaults until 31 January 2024. By 31 January 2024 the board plans
to have obtained the necessary permits and as a result additional
finance.
At the end of the financial year, the Company appointed a new
CEO, Neil Gawthorpe, following the resignation of Max Denning in
July 2022, and acting CEO Mark Thomson in March 2023. Max and Mark
were co-founders of Tungsten West and the Board thanks them for
their significant contribution during the Company's formative
years. Nigel Widdowson, CFO, resigned from the Board in August
2023. Adrian Bougourd, Kevin Ross and Guy Edwards were appointed to
the Board as Non-Executive Directors in September 2023.
The appointment of Neil brings operational and industry
experience to the Senior Management and Director teams and will be
an invaluable asset to the Company during this pivotal time.
Against the backdrop of the challenges the Hemerdon Mine has
faced this year, a positive development has been the release of the
first ever UK Critical Minerals Strategy. There is a real risk of
the UK falling behind in the race to secure responsibly sourced
critical minerals. It is promising to see that the UK Government is
starting to recognise the risks of critical mineral supply chain
shocks.
As a Board and Group, we feel that Hemerdon Mine has never been
more important to the UK to secure and protect its critical mineral
supply, and I am confident that Hemerdon Mine will soon be
producing tungsten and tin, providing a world class supply of
critical minerals, essential in both traditional applications and
aiding the supply of future alternative clean energy sources.
David Cather
Chairman
CEO Report
I joined Tungsten West as CEO near the end of the financial
year, but I have been involved with the Group throughout the
reporting period as a consultant and advisor. I have enjoyed many
years in the mining industry, both in operations and consulting,
and I share the vision of our investors, employees and Government,
that Hemerdon Mine can be a strategic asset for the UK whilst
creating long-term value and delivering strong returns for
shareholders.
Our project is exceptional to the UK in that we have the benefit
of a pre-built world class processing plant, a pre-stripped mine
and fully permitted Mine Waste Facility ("MWF"). We are on the cusp
of bringing mining back to the South-West, however, there remain
some critical milestones to be met, which all bring their own
unique challenges.
Permitting
Permitting is always a significant risk for any mining project,
and alongside funding risk, these are the biggest hurdles the Group
must overcome.
During the year, the Company received its MWF permit, which
outlines the permitting requirements for the commencement and
ongoing monitoring of the waste activities at Hemerdon Mine.
At the time of writing, the Group is yet to obtain a draft MPF
permit. In the Company's efforts to receive this, it is currently
undertaking a series of research and development projects which
will be carried out around the historical issues of the processing
plant which caused low frequency noise. The Group is confident that
the revised Plan has eliminated the issues as well as significantly
mitigating the general noise impact of the project. The Group
continues to liaise with the Environment Agency ("EA") on
timescales required to complete this work.
Alongside the MWF permit, the Group also received its water
abstraction Licences for the open pit, Loughter Mill and Tory Pond,
meaning it now has four of the five EA permits required for
restart.
As a precedent, Wolf Minerals held all necessary permits and
licences to operate the site, therefore the Group are confident
that they will resolve the historical issues with the EA and obtain
the MPF permit.
Financing
Since we paused the project in July 2022, it was expected that
we could operate on the basis that funding and permitting could run
in parallel. However, lender feedback has proven this to not be the
case. Even though the work conducted under the 2022 FS Update led
to an overall improved project, the design changes required have
impacted our ability to achieve permitting in the timeframe
initially envisaged. As such, it is now necessary to prioritise the
process of obtaining all necessary permits required for funding.
The updated timeline is to obtain the necessary permits and close
additional funding by December 2023.
The Board acknowledges and appreciates the support received from
shareholders following the decision to prioritise permitting. The
Group will remain actively engaged with financial and strategic
partners to explore all available funding options. Once the
permitting process is complete, the Board is confident in their
ability to secure the optimal funding package for successfully
executing the project.
Operational Updates
Construction
It was pleasing to see the early stages of the bulk earthworks
and civil engineering that begun in January this year. Additional
to this enabling work, the Group has also received deliveries of
steel rebar and components for the conveyor systems.
Under the revised crushing strategy, the Group has ordered its
new semi-mobile crushing equipment and taken delivery of the
screens and ore sorters which are now secured and stored on
site.
Running in parallel to the front-end rebuild has been the
mineral processing facility enhancements and upgrades. A
considerable amount of work has gone into ensuring the plant is in
the best possible condition for when operations restart. A
dedicated team of fabricators, electricians and engineers have done
some exceptional work with key enhancements being the
following:
Area Enhancements
Chutes Replacement of wear plates in conveyor chutes and installation
of new rock box designs to cut down on wear.
---------------------------------------------------------------
Conveyors Replacement belts and renewal of drums, bearings, and
scrapers throughout the processing plant.
---------------------------------------------------------------
Pumps Removal of previously installed pumps, inspection and
test of the drive motors.
---------------------------------------------------------------
Area 130 - Tertiary Extensive repair and redesign of the surge bin to increase
Crushing Circuit longevity in high-wear areas and minimise future downtime.
---------------------------------------------------------------
Area 140 - Primary Inspection and re-refurbishment of the agitators.
DMS
---------------------------------------------------------------
Area 150 - Primary Refurbishment of the Primary Mill including electrical
Mill inspection and testing. Inspection of drive shaft alignment
and lubrication systems to ensure they are fit for
production.
---------------------------------------------------------------
Area 160 - Shaking Overhaul of all tables and redesign of the spray bar
Tables structures to eliminate points of failure due to excessive
vibration.
---------------------------------------------------------------
Area 180 - Feeders Redesign of both the 180 feeders to include side skirts
and return rollers, new guarding manufactured and installed.
---------------------------------------------------------------
Area 200 - Refinery Mechanical overhaul of both the pre dryer and tin dryer.
The refinery was also commissioned as part of the work
done to process the legacy tungsten pre-concentrate
and tin concentrate, as announced in June 2023.
---------------------------------------------------------------
Area 390 - Raw Design manufacture and installation of an access door
water tank on the tank to allow for removal of silt build up.
This will reduce future downtime for maintenance.
---------------------------------------------------------------
Area 390 - Process Sand blasting and application of a wear resistant paint
water tank will reduce future downtime and maintenance.
---------------------------------------------------------------
2022 Feasibility Update
In January 2023, the Group released a summary update on its 2021
Feasibility Study which strengthened Hemerdon's case as a robust
and economically viable mine. The Feasibility Study highlighted the
project's strong economics and positioned Tungsten West to become
the largest tungsten producer in the Western World.
Processing optimisation
The revised plant design introduces two stages of Ore Sorting.
This provides operational flexibility through significantly
lowering the mass pull which reduces the capital and operating
costs downstream. Furthermore, by lowering the mass pull it reduces
the ratio of iron to tungsten leading to the elimination of the
reduction kiln, significantly reducing diesel consumption and
associated Opex.
A further advantage of the re-engineered flowsheet is to
introduce a secondary crushed stockpile ahead of the ore sorters.
This effectively de-couples the higher wear rate (and resultant
maintenance) of the primary and secondary crushing circuits from
the downstream MPF. This reduces the risk of metal losses created
by circuit instability encountered during the Wolf operation.
Mining operations
The mine plan has been redesigned to reflect the reduced
throughput planned for the MPF in the first two years of
operations, and changes in primary crushing circuit. This means
less waste is mined in the ramp-up period, preserving working
capital.
Direct tipping at a newly sited ROM (Run of the mine) pad
incorporating the introduction of new semi-mobile primary jaw and
secondary cone crushers also reduces Capex and Opex.
Mineral Resources
Through the Company re-engineering the mining and processing
operations, there were improvements in costs and processing
assumptions which lead to a reduction to the breakeven cut-off
grade. This meant that Tungsten West was able to report an update
to the MRE. The new LOM production schedule has increased the LOM
to approximately 27 years.
Aggregates
Sales of aggregates continued throughout the year until October
2022, with GBP118,000 revenue being recognised, providing the Group
with an early and differing revenue stream. The Group ceased its
production of aggregates from barren material after selling 102,000
tonnes of material, demonstrating the ability to establish a market
for the product. Sale of aggregates reduces the amount of barren
rock left on-site and supports Tungsten West in reducing our
environmental footprint. Aggregates production will recommence as
the mineral processing ramp up completes.
ESG
ESG principles are at the core of our operations, and we take
pride in the creative and dedicated efforts of our project team and
partners to address and resolve issues faced by previous
operators.
In line with the Climate Change Act (2008) and the UK
government's target of achieving net-zero carbon emissions by 2050,
the Company recognises its moral obligation to align itself with
this goal, and we are committed to taking proactive measures to
reduce our carbon footprint. Additionally, as part of our
commitment to international best practices, we have aligned
ourselves with the UN Sustainable Development Goals ("SDGs"),
specifically UN SDG 13, which emphasises the urgent need to combat
climate change and its impacts. To address these goals, we have
identified several action points, including the exploration of
renewable energy sources. The Group has undertaken scoping studies
to assess the feasibility of implementing both solar farms and wind
turbines as potential sources of renewable energy. The
collaboration with the fusion energy company, Oxford Sigma,
announced post year-end emphasises tungsten's role as a critical
material for the development of fusion energy, a clean alternative
energy source that can help deliver global net-zero targets.
Throughout the financial year, our community engagement team
maintained active communication with our broader stakeholders and
the local community through regular face-to-face consultations at
County Council, Parish Council and community levels. We believe it
is crucial to provide avenues for the community to understand the
project and to reach out to us and voice their concerns. As part of
our community engagement plan, we have established a regular forum
to facilitate open and transparent communication with local
communities. We also maintain a presence in the Shaugh Prior,
Cornwood, and Sparkwell Parish Councils, ensuring that we remain
connected to the concerns and needs of the local area.
Our team
During the year and post year-end, the Group experienced
challenging periods marked by necessary redundancies, which has
undoubtedly impacted our employees. However, the Board acknowledges
the resilience and commitment demonstrated by our staff during
these tough times.
As we move forward, we encourage open communication,
collaboration, and the sharing of knowledge between all staff
members. Together we form a cohesive team that can achieve a fully
permitted MPF and close the required funding to execute the
project.
Diversity
At Tungsten West, we value diversity and inclusion as essential
elements of our culture and our performance. We are proud to have a
higher percentage of women in our workforce than the global mining
and metals industry average for 2022 of 12.1% (Source: Ernst &
Young ). Despite the employee turnover we experienced during the
year, women still represent 20% (2022: 22%) of our team.
We believe that having a diverse team enhances our productivity,
safety, and creativity. These are key qualities that will help us
overcome the challenges we face in the next 12 months and
beyond.
Market overview
Tungsten is a critical mineral and is essential for sectors such
as energy and defence, and strengthening other metals, including
steel, for components used in the construction, mining, and medical
industries. The global demand for tungsten is forecast to grow by
3%% p.a. over the next 10 years.
The tungsten market is a significant sector within the global
metals industry and supply-wise tungsten remains predominantly
sourced from a small number of countries, with China being the
largest producer and exporter. The concentration of global supply
of tungsten concentrate between China, Russia and Vietnam creates a
degree of supply risk and price volatility, as geopolitical factors
and mining regulations can impact the availability and pricing of
tungsten.
In recent years, there have been efforts to diversify tungsten
supply sources and reduce reliance on Chinese and Russian
production. Exploration and development of tungsten deposits in
countries like Canada, Australia, and the United States continue to
gain attention as countries look to find a western supply of
tungsten.
This makes the Group a strategic asset, with a project of
significant importance to the UK and the West, as outlined in the
UK's first ever Critical Minerals Strategy, which included tungsten
and tin as minerals with high criticality. The report went on to
recognise the South-West as an area of high importance in meeting
commodity security.
Outlook
The 2022 FS Update presented an invaluable opportunity for the
Group to re-evaluate the most effective approach to resuming
operations at Hemerdon. The result was an outstanding
accomplishment, made possible through seamless collaboration across
the entire Company.
In the upcoming 12 months, the Company will enter a pivotal
phase as we look to obtain the required permits and secure funding
to enable construction phase. Successfully achieving these
milestones will pave the way for recommencing construction,
ultimately leading to the revival of mining activities at the
project and in the South-West region.
Unless otherwise defined herein, all capitalised terms in this
announcement shall have the meanings ascribed to them in the
relevant regulatory announcements by the Company.
Neil Gawthorpe
CEO
Consolidated Statement of Comprehensive Income
Year ended 31 March 2023
Note 2023 2022
GBP GBP
--------------------------------- ---- ------------ ------------
Revenue 5 626,460 673,509
Cost of sales (1,984,983) (4,028,123)
--------------------------------- ---- ------------ ------------
Gross loss (1,358,523) (3,354,614)
Administrative expenses (10,160,088) (7,998,774)
Other operating income 6 18,947 4,237
Other gains/(losses) 7 710,710 (846,373)
--------------------------------- ---- ------------ ------------
Operating loss 8 (10,788,954) (12,195,524)
--------------------------------- ---- ------------ ------------
Finance income 454,196 120,002
Finance costs (495,279) (913,466)
--------------------------------- ---- ------------ ------------
Net finance cost 9 (41,083) (793,464)
--------------------------------- ---- ------------ ------------
Loss before tax (10,830,037) (12,988,988)
Income tax credit 13 544,602 -
--------------------------------- ---- ------------ ------------
Loss for the year (10,285,435) (12,988,988)
--------------------------------- ---- ------------ ------------
Total comprehensive loss (10,285,435) (12,988,988)
--------------------------------- ---- ------------ ------------
Profit/(loss) attributable to:
Owners of the Company (10,285,435) (12,988,988)
--------------------------------- ---- ------------ ------------
GBP GBP
--------------------------------- ---- ------------ ------------
Basic and diluted loss per share 14 (0.06) (0.11)
--------------------------------- ---- ------------ ------------
The above results were derived from continuing operations.
Consolidated Statement of Financial Position
Year ended 31 March 2023
31 March 31 March
2023 2022
Note GBP GBP
--------------------------------------------- ---- ------------ ------------
Assets
Non-current assets
Property, plant and equipment 15 19,054,864 8,469,610
Right-of-use assets 16 2,022,672 1,743,736
Intangible assets 17 5,090,016 4,993,254
Deferred tax assets 13 1,390,346 1,397,789
Escrow funds receivable 19 5,146,986 8,370,024
--------------------------------------------- ---- ------------ ------------
32,704,884 24,974,413
--------------------------------------------- ---- ------------ ------------
Current assets
Inventories 22 114,173 156,944
Trade and other receivables 20 6,163,593 3,827,509
Cash and cash equivalents 21 3,438,018 28,755,388
--------------------------------------------- ---- ------------ ------------
9,715,784 32,739,841
--------------------------------------------- ---- ------------ ------------
Total assets 42,420,668 57,714,254
--------------------------------------------- ---- ------------ ------------
Equity and liabilities
Equity
Share capital 27 1,805,516 1,793,682
Share premium 51,882,761 51,610,414
Share option reserve 357,366 241,861
Warrant reserve 740,867 1,408,730
Retained earnings (23,805,018) (14,187,446)
--------------------------------------------- ---- ------------ ------------
Equity attributable to owners of the Company 30,981,492 40,867,241
--------------------------------------------- ---- ------------ ------------
Non-current liabilities
Loans and borrowings 24 1,901,583 1,440,630
Provisions 25 5,701,771 9,526,485
Deferred tax liabilities 13 1,390,346 1,397,789
--------------------------------------------- ---- ------------ ------------
8,993,700 12,364,904
--------------------------------------------- ---- ------------ ------------
Current liabilities
Trade and other payables 23 2,330,603 4,289,623
Loans and borrowings 24 114,873 192,486
--------------------------------------------- ---- ------------ ------------
2,445,476 4,482,109
--------------------------------------------- ---- ------------ ------------
Total liabilities 11,439,176 16,847,013
--------------------------------------------- ---- ------------ ------------
Total equity and liabilities 42,420,668 57,714,254
--------------------------------------------- ---- ------------ ------------
The financial statements were approved by the Board on 13
September 2023 and signed on its behalf by:
Neil Gawthorpe
Director
Company Registration Number: 11310159
Consolidated Statement of Changes in Equity
Year ended 31 March 2023
Share option Retained
Share capital Share premium reserve Warrant reserve earnings Total
GBP GBP GBP GBP GBP GBP
----------------------------- ------------- ------------- ------------ --------------- ------------ ------------
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)
----------------------------- ------------- ------------- ------------ --------------- ------------ ------------
Total comprehensive income - - - - (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 share capital 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 -
Share options charge - - 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
Loss for the year - - - - (10,285,435) (10,285,435)
----------------------------- ------------- ------------- ------------ --------------- ------------ ------------
Total comprehensive income - - - - (10,285,435) (10,285,435)
New share capital subscribed 11,834 272,347 - - - 284,181
Exercise of warrants - - - (334,378) 334,378 -
Expired warrants - - - (333,485) 333,485 -
Share options charge - - 134,610 - - 134,610
Forfeiture of share options - - (19,105) - - (19,105)
At 31 March 2023 1,805,516 51,882,761 357,366 740,867 (23,805,018) 30,981,492
----------------------------- ------------- ------------- ------------ --------------- ------------ ------------
Consolidated Statement of Cash Flows
Year ended 31 March 2023
2023 2022
Note GBP GBP
------------------------------------------------------ -------------------- ------------ ------------
Cash flows from operating activities
Loss for the year (10,285,435) (12,988,988)
Adjustments to cash flows from non-cash items
Depreciation and amortisation 8 514,394 209,233
Loss on disposal of right to use asset 8 124,528 -
Loss on disposal of intangible asset 8 73,401 -
Impairment of asset under construction 8 108,947 -
Fair value losses on escrow account 7 3,495,064 1,783,221
Fair value gains on restoration provision 7 (4,205,774) (786,849)
Finance income 9 (454,196) (120,002)
Finance costs 9 495,279 913,466
Share-based payment transactions 115,505 174,021
Founder incentives - (149,999)
Impact of foreign exchange 74,724 -
Income tax credit 13 (544,602) -
(10,488,165) (10,965,897)
Working capital adjustments
Income tax received 544,602 -
(Increase) in trade and other receivables 20 (2,336,084) (3,283,213)
(Decrease)/increase in trade and other payables 23 (1,959,020) 2,952,165
Decrease/(increase) in inventories 42,771 (156,944)
------------------------------------------------------ -------------------- ------------ ------------
Net cash outflow from operating activities (14,195,896) (11,453,889)
------------------------------------------------------ -------------------- ------------ ------------
Cash flows from investing activities
Interest received 9 99,082 1,134
Acquisitions of property, plant and equipment 15 (10,892,254) (4,203,803)
Proceeds from sale of vehicle 4,167 -
Acquisitions of intangibles 1 7 (191,523) (80,000)
------------------------------------------------------ -------------------- ------------ ------------
Net cash outflows from investing activities (10,980,528) (4,282,669)
------------------------------------------------------ -------------------- ------------ ------------
Cash flows from financing activities
Interest paid 9 (4,084) (4,955)
Proceeds from issue of Ordinary Shares, net
of issue costs - 41,021,204
Proceeds from the exercise of warrants 284,181 126,577
Proceeds from the exercise of share options - 3,472
Payments to hire purchase (63,294) -
Payments to lease liabilities (357,749) (153,932)
------------------------------------------------------ -------------------- ------------ ------------
Net cash (outflows)/inflows from financing activities (140,946) 40,992,366
------------------------------------------------------ -------------------- ------------ ------------
Net (decrease)/ increase in cash and cash equivalents (25,317,370) 25,255,808
Cash and cash equivalents at 1 April 28,755,388 3,499,580
------------------------------------------------------ -------------------- ------------ ------------
Cash and cash equivalents at 31 March 3,438,018 28,755,388
------------------------------------------------------ -------------------- ------------ ------------
Notes to the Consolidated Financial Statements
Year ended 31 March 2023
1 General information
Tungsten West plc ('the Company') is a public limited company,
incorporated in England and Wales and domiciled in the United
Kingdom.
The address of its The principal place
registered of
office is: business is:
Shakespeare Martineau
LLP Hemerdon Mine
6th Floor Drakelands
60 Gracechurch Street Plympton
London Devon
EC3V 0HR PL7 5BS
United Kingdom 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.
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 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 GBP36.0 million net of fees by way of an initial
public offering and at the year-end, had GBP3.4 million in cash
reserves.
Further to ongoing discussions with investors and debt
providers, it is clear that access to the capital required to
complete the project will be significantly limited until the Group
has secured the final permit required to operate the MPF and a
Planning Permission relevant to truck movements.
These conditions indicate that a material uncertainty exists
that may cast significant doubt on the Group's ability to continue
as a going concern.
The Group has focussed its short term operating strategy simply
on activities required to secure these permits, maintain the
requirements for the existing permits and secure funding to
complete the project and recommence mining operations.
The Group completed the issue of a convertible loan note
facility and an open offer in June 2023. These collectively raised
GBP7.2 million gross of fees. There is an additional facility in
place to issue a further GBP2.0 million convertible loan note under
the same terms dependant on investor demand at the time. The Board
consider this to be sufficient liquidity to meet its liabilities as
they fall due and to complete the short term strategic objectives
before December 2023. Opex has been significantly reduced and all
material capital commitments deferred until these objectives have
been achieved. As at the end of August 2023 the Group had issued
Tranche A (GBP3.975million) and Tranche B (GBP2.975 million) of the
CLN and had GBP2.5 million in cash reserves. The Group anticipates
issuing GBP2.0 million Tranche C notes in November 2023. There is
not currently any commitment from existing or new noteholders to
purchase any Tranche C notes. If the Group fails to find purchasers
for the Tranche C notes, then, in the absence of other new sources
of finance, it would no longer be able to meet its liabilities as
they fall due in November 2023.
After the year end, the Group took measures to conserve cash by
stopping capex payments, restructuring the cost base and deferring
certain contracted payments to creditors. As a result of this, the
Group has notified the Note Purchasers of multiple defaults on the
terms of the Note Purchase Agreement which relate to payments to
creditors. There are detailed in note 35 this report. Under the
terms of the Note Purchase Agreement, the Noteholders can cancel
any outstanding Notes under the Note Purchase Agreement and demand
immediate redemption unless a waiver is in place. The redemption
sum is two times the loan note principal outstanding along with any
accrued PIK. A waiver for the breaches in place at the time of
signing these accounts has been issued by the noteholders. The
waiver will expire on 31 January 2024 and going concern is reliant
on the Group complying with the terms of the waiver. The waiver
gives the Board sufficient comfort that the group can both meet the
terms of the original loan without further breaches and the terms
of the waiver hence is a going concern. For the Group to remain a
going concern, the Group is reliant on continued support of the
Noteholders by not exercising their rights under the Defaults
should the defaults not be remedied, or the note converted or
redeemed, by 31 January 2024.
As identified earlier in this report, permitting, funding and
macro-economic risks (Geopolitical, Economic instability) are the
most significant risks facing the Company. Lack of or delayed
permits, alongside volatile input costs, forex and commodity
prices, will significantly increase the risk of lack of access to
capital.
The Board is pursuing a strategy of completing the project on a
capital build and operate basis. In light of the noise mitigation
measures now anticipated to be required for securing the MPF
permit, the Board forecasts in excess of GBP60 million remaining
expenditure prior to recommencing operations. Various options for
progress post January 2024 will be considered as further
information becomes available through the intervening period and
are expected to result in the Group continuing as a going concern
once the various permissions are secured.
Going concern is reliant on further funding being secured by the
end of December 2023, without which the group would be unable to
pay its liabilities as they fall due beyond this point. Management
have prepared one forecast as follows:
Model 1 - Additional funding closed December 2023
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. As the terms of any finance
package have not yet been agreed the model does not include costs
of finance.
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 once the relevant permits are secured.
As a result, there is a material uncertainty over the granting
of the permits and permissions required, within the necessary
timeframes, to allow the group to obtain the finance it requires.
The Board's aim is that it will obtain the necessary permit and
permissions and required funding, allowing the group to operate as
a going concern for the foreseeable future. Consequently, they
continue to adopt the going concern basis in preparing these
financial statements despite the material uncertainty referred to
above.
Basis of consolidation
The Group financial statements consolidate the financial
statements of the Company and its subsidiary undertakings drawn up
to 31 March 2023.
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.
Changes in accounting policy
None of the standards, interpretations and amendments effective
for the first time from 1 April 2022 have had a material effect on
the financial statements.
Revenue recognition
In the year revenue has mainly related to the sale of low grade
concentrate which was left behind by the previous mining operator.
This is recognised upon pick up by customers at the fair value of
consideration receivable at that date. The Group has not yet
commenced commercial sales of tungsten and tin.
Tax
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 tax professionals within 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 has submitted research and development tax credit
claims. The Group accounts for a claim at the point it considers
the claim to be unchallenged by HMRC.
Property, plant and equipment
Land and buildings are stated at the 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, have capitalised costs 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
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:
Depreciation method
Asset class and rate
--------------------- ----------------------
Land None
Building 2% Straight Line
Furniture, fittings
and equipment 5% - 20% Straight Line
Other property, plant
and equipment 5%- 33% Straight Line
Motor vehicles 33% Straight Line
Computer equipment 33% Straight Line
--------------------- ----------------------
Goodwill
Goodwill is recognised at cost and reviewed for impairment
annually.
Intangible assets
Contractual mining rights as set out in the mining lease are
recognised as a separate intangible asset on consolidation under
IFRS 3.
The mining rights are subject to amortisation over the useful
life of the mine which is 27 years (2022: 23 years). Amortisation
will be charged from the date the mine is brought into use.
Software is amortised on a straight-line basis using a rate of
33%.
Right-of-use assets
Right-of-use assets consist of a lease for the Hemerdon Mine and
three property leases under IFRS 16. These assets are depreciated
over the shorter of the lease term and the useful life of the
underlying asset. Depreciation starts at the commencement date of
the lease.
Research and development activities
All research costs are expensed. Costs related to the
development of products are capitalised when they meet the
following conditions:
(i) It is technically feasible to complete the development so
that the product will be available for use or sale.
(ii) It is intended to use or sell the product being developed.
(iii) The Group is able to use or sell the product being developed.
(iv) It can be demonstrated that the product will generate
probable future economic benefits.
(v) Adequate technical, financial and other resources exist so
that product development can be completed and the product
subsequently used or sold.
(vi) Expenditure attributable to the development can be reliably measured.
All other development expenditure is recognised as an expense in
the period in which it is incurred.
Capitalised development costs are stated at cost less
accumulated amortisation and accumulated impairment losses (cost
model). Amortisation is recognised using the straight-line basis
and results in the carrying amount being expensed in profit or loss
over the estimated useful lives which range from 5 to 15 years.
Exploration for and evaluation of mineral resources
Costs relating to the exploration for and evaluation on mineral
resources are expensed.
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.
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 27 years' time which
assumes a 27-year useful life of mining operations.
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
The redemption of convertible debt does not give rise to a fixed
number of shares on conversion and so is recognised as a liability
with no equity element initially recorded at the amount of proceeds
received. Interest compounds annually but shall not be payable
until the maturity date.
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.
Leases
At inception of the contract, the Group assesses whether a
contract is, or contains, a lease. It recognises a right-of-use
asset and a corresponding lease liability with respect to all
material lease arrangements in which it is the lessee. The
right-of-use assets and the lease liabilities are presented as
separate line items in the statement of financial position.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the Group uses its incremental
borrowing rate. It is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount
to reflect the lease payments made.
Short-term or low-value leases, in accordance with the available
exemption in IFRS 16, are not capitalised on the statement of
financial position and instead recognised as an expense, on a
straight-line or other systematic basis.
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.
Financial liabilities are initially recognised at fair value,
representing the proceeds received net of premiums, discounts and
transaction costs that are directly attributable to the financial
liability.
All regular way purchases and sales of financial assets and
financial liabilities classified as fair value through profit or
loss ('FVTPL') are recognised on the trade date, i.e., the date on
which the Group commits to purchase or sell the financial assets or
financial liabilities. All regular way purchases and sales of other
financial assets and financial liabilities are recognised on the
settlement date, i.e., the date on which the asset or liability is
received from or delivered to the counterparty. Regular way
purchases or sales are purchases or sales of financial assets that
require delivery within the time frame generally established by
regulation or convention in the marketplace.
Subsequent to initial measurement, financial assets and
financial liabilities are measured at either amortised cost or fair
value.
In particular the Group has previously recognised a financial
liability arising from the founder share incentives at fair value.
Subsequent movements in fair value are recognised 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
To consider the impairment of the Group's non-current assets,
management has calculated a value in use of the Group's
cash-generating unit which comprises the Hemerdon Mine. This was
determined using a discounted cashflow approach, supported by
project cashflow forecasts prepared by management. The value of
assets impacted is GBP24.1 million.
The previous model under the Bankable Feasibility Study ('BFS')
has been adapted to reflect the changes in inputs and assumptions
as a result of the project re-evaluation. The inputs and key
assumptions that were used in the determination of value in use
were discount rate, metal prices, metal recoveries, probability of
financing, probability of permit award and foreign exchange.
Discounted cashflows are based on future forecasts which reflect
uncertainty. Therefore, management has prepared a sensitised
discounted cashflow calculation. The underlying assumptions that
were stress tested include the discount rate, FX and metal prices
and recoveries.
Management were satisfied in the recoverability of the Group's
assets and no impairment was required.
Capitalisation of research and development costs
The Directors have reviewed any costs relating to evaluating the
technical feasibility of processing the extracted tungsten ore and
have expensed these costs in line with the current policy. The
Directors have also reviewed research and development costs and
concluded that these costs fail to meet the criteria set out in IAS
38 for the capitalisation of development costs as the Directors
still consider that they are in the research phase. The Group will
commence capitalisation of development costs at the point when
available finance has been secured to complete the project in
accordance with IAS 38. Development costs that are capitalised in
accordance with the requirements of IFRS are not treated, for
dividend purposes, as a realised loss. The Group has currently
capitalised no research and development costs in accordance with
IAS 38. The Group has only capitalised costs associated with the
tangible improvement and installation of property, plant and
equipment under IAS 16.
Capitalisation of asset under construction costs
The Directors have reviewed any costs relating to the upgrade of
the mineral processing facility in accordance with IAS 16 and have
capitalised costs if it is probable that future economic benefits
associated with the item will flow to the entity and the cost can
be measured reliably. At the year end, GBP13.6 million (2022:
GBP3.9 million) of costs have been capitalised.
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 GBPNil. When exercised the shares are
recognised at option price.
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 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.
A 1% change in the discount rate on the Group's restoration
estimates would result in an impact of GBP1.2 million to 1.6
million (2022: GBP1.9 million) on the restoration provision. A 5%
change in cost on the Group's restoration estimates would result in
an impact of GBP0.3 million (2022: GBP0.5 million) on the provision
for restoration.
More information on the restoration provision is disclosed in
Note 25.
Escrow account
These are funds being held under escrow with a third party and
will be released back to the Company on the cessation of mining
once restoration works have been completed.
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.
A 1% change in the discount rate on the Group's escrow account
estimate would result in an impact of GBP1.1 million to GBP1.5
million (2022: GBP1.7 million) on the escrow account valuation. A
one-year change in useful mining life would result in an impact of
GBP0.2 million (2022: GBP0.1 million) on the escrow account
valuation.
More information on the escrow account is disclosed in Note
19.
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 right-of-use assets, escrow funds, the restoration
provision and share based payments. The discount rate on the
right-of-use asset is the rate for an equivalent debt instrument.
The escrow funds are discounted at the risk free rate which is the
yield on an equivalent long-term UK government bond. The
restoration provision is discounted at the risk-free rate plus a
premium based on the specific risk associated with this
liability.
The UK risk-free rate increased over the financial year to 3.7%
(2022: 2.0%).
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 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 as noted in the previous going concern
policy.
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 24 to the financial
statements. The Company's policy is to obtain the most favourable
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.
4 Operating segments
The Chief Economic Decision Maker of the Group is the Board of
Directors which considers that the Group is comprised of one
operating segment representing the Group's mining activities at the
Hemerdon Mine. All operations and assets are located in the United
Kingdom and all revenues are originated in the United Kingdom.
Revenue from customers accounting for 10% or more of Group
revenue was as follows:
2023 2022
GBP GBP
----------- ------- -------
Customer A 118,276 384,000
Customer B - 83,000
Customer C - 144,000
Customer D 508,184 -
----------- ------- -------
5 Revenue from contracts with customers
The analysis of the Group's revenue for the year from continuing
operations is as follows:
2023 2022
GBP GBP
-------------- ------- -------
Tungsten 508,184 232,940
Aggregates 118,276 440,569
-------------- ------- -------
Sale of goods 626,460 673,509
-------------- ------- -------
6 Other income
The analysis of the Group's other operating income for the year
is as follows:
2023 2022
GBP GBP
----------------------- ------ -----
Sale of scrap metal 13,962 4,237
Sublease rental income 4,985 -
----------------------- ------ -----
18,947 4,237
----------------------- ------ -----
7 Other gains and losses
The analysis of the Group's other gains and losses for the year
is as follows:
2023 2022
GBP GBP
------------------------------------------- ----------- -----------
Gain on restoration provision due to
change in discount rate 4,205,774 786,849
Loss on escrow account due to change
in discount rate (3,495,064) (1,783,221)
Gains/(losses) on founder share incentives - 149,999
------------------------------------------- ----------- -----------
Other gains and losses 710,710 (846,373)
------------------------------------------- ----------- -----------
See note 19 and note 25 for further details on other gains and
losses on the restoration provision and the escrow account.
8 Operating loss
Arrived at after charging/(crediting):
2023 2022
GBP GBP
--------------------------------------- --------- ---------
Depreciation of property, plant and
equipment 276,995 101,464
Depreciation of right-of-use assets 216,039 101,169
Loss on disposal of right to use asset 124,528 -
Impairment of asset under construction 108,947 -
Amortisation of intangibles 21,360 6,599
Staff costs 4,593,833 2,465,924
--------------------------------------- --------- ---------
9 Finance income and costs
2023 2022
GBP GBP
------------------------------------------- ---------- ---------
Finance income
Notional interest income on the escrow
funds receivable 272,026 94,775
Other interest income 99,082 1,134
Foreign exchange gains 83,088 24,093
------------------------------------------- ---------- ---------
454,196 120,002
Finance costs
Interest expense on other financing
liabilities (101,772) (556,558)
Notional cost on the restoration provision (381,060) (348,507)
Other interest - (1,133)
Bank charges (4,083) (3,823)
Foreign exchange losses (8,364) (3,445)
------------------------------------------- ---------- ---------
Total finance costs (495,279) (913,466)
------------------------------------------- ---------- ---------
Net finance costs (41,083) (793,464)
------------------------------------------- ---------- ---------
10 Staff costs
The aggregate payroll costs (including Directors' remuneration)
were as follows:
2023 2022
GBP GBP
------------------------------------------------ --------- ---------
Wages and salaries 3,888,672 2,114,626
Social security costs 427,748 234,915
Pension costs, defined contribution
scheme 161,908 116,383
Share based payment 115,505 298,878
Amounts capitalised to asset under construction 968,262 988,917
------------------------------------------------ --------- ---------
5,562,095 3,753,719
------------------------------------------------ --------- ---------
The average number of persons employed by the Group (including
Directors) during the year, analysed by category, was as
follows:
2023 2022
No. No.
------------------------------------- ---- ----
Project, maintenance, administration
and support 74 52
Directors 7 6
------------------------------------- ---- ----
81 58
------------------------------------- ---- ----
11 Directors' remuneration
The Directors' remuneration for the year was as follows:
2023 2022
GBP GBP
------------------------ -------- -------
Remuneration 873,029 524,125
Pension contribution 21,019 13,974
Benefits in kind 2,340 7,483
------------------------ -------- -------
Total cash remuneration 896,388 545,582
Share-based payment 66,993 182,997
------------------------ -------- -------
Total remuneration 963,381 728,579
------------------------ -------- -------
Included in the remuneration above was GBPNil (2022: GBPNil)
paid in shares rather than cash.
Remuneration by each Director is as follows:
2023 2023
2023 2023 2023
2023 Total
Loss of Share-based GBP
Salary Pension office Benefits payment
GBP GBP GBP GBP GBP
-------------------------- --------- --------- --------- --------- ------------ ---------
Francis Johnstone 20,000 - - - - 20,000
------------------ ----------------- --------- --------- --------- ------------ ---------
Stephen Fabian - - - - - -
------------------ ----------------- --------- --------- --------- ------------ ---------
Richard M Maxey 20,000 - - - - 20,000
-------------------------- --------- --------- --------- --------- ------------ ---------
Max Denning** 124,246 9,613 158,411 - 38,781 331,051
-------------------------- --------- --------- --------- --------- ------------ ---------
Mark Thompson 200,000 - 100,000 - 3,134 303,134
-------------------------- --------- --------- --------- --------- ------------ ---------
Nigel Widdowson 156,275 10,754 - 2,340 25,078 194,447
-------------------------- --------- --------- --------- --------- ------------ ---------
Robert Ashley 26,667 - - - - 26,667
-------------------------- --------- --------- --------- --------- ------------ ---------
David Cather 33,462 - - - - 33,462
-------------------------- --------- --------- --------- --------- ------------ ---------
Martin Wood 4,833 - - - - 4,833
-------------------------- --------- --------- --------- --------- ------------ ---------
Neil Gawthorpe 4,968 - - - - 4,968
-------------------------- --------- --------- --------- --------- ------------ ---------
Grace Stevens 24,167 652 - - - 24,819
-------------------------- --------- --------- --------- --------- ------------ ---------
614,618 21,019 258,411 2,340 66,993 963,381
-------------------------- --------- --------- --------- --------- ------------ ---------
** Denotes the highest paid Director.
Directors' interests in share options and warrants are disclosed
in the Directors' Report.
The share-based payment is an IFRS 2 cost charged for options
issued. No cash benefit is received by the Directors. No Director
exercised any options during the year. Please see Note 28 for more
information.
2022 2022 2022 2022 2022
2022
Share-based Total
Salary Pension Loss of office Benefits payment GBP
GBP GBP GBP GBP GBP
------------------ -------- -------- ---------------- --------- ------------ -------
Francis Johnstone 24,000 - - - - 24,000
Stephen Fabian 18,000 - - - - 18,000
Richard M Maxey 24,000 - - - - 24,000
Max Denning** 170,000 8,500 - 6,256 163,046 347,802
Mark Thompson 132,500 - - - - 132,500
Nigel Widdowson 97,115 4,856 - 1,227 19,951 123,149
Robert Ashley 23,333 - - - - 23,333
David Cather 17,013 73 - - - 17,086
Grace Stevens 18,164 545 - - - 18,709
------------------ -------- -------- ---------------- --------- ------------ -------
524,125 13,974 - 7,483 182,997 728,579
------------------ -------- -------- ---------------- --------- ------------ -------
** Denotes the highest paid Director.
Directors' interests in share options and warrants are disclosed
in the Directors' Report.
12 Auditors' remuneration
2023 2022
GBP GBP
---------------------------------------------- ------- -------
Audit of these financial statements 50,000 54,000
---------------------------------------------- ------- -------
Other fees to auditors
---------------------------------------------- ------- -------
Audit-related assurance services 89,000 85,000
Auditors' remuneration - accounts preparation - 10,500
---------------------------------------------- ------- -------
139,000 149,500
---------------------------------------------- ------- -------
All accounts preparation services were provided prior to the
Group listing on AIM in October 2021.
13 Income tax
Tax charged/(credited) in the income statement:
2023 2022
GBP GBP
---------------------------------------- --------- ----
Current taxation
Adjustments in respect of prior periods (544,602) -
---------------------------------------- --------- ----
The tax on profit for the year is higher (2022: higher) than the
standard rate of corporation tax in the UK of 19% (2022: 19%). The
differences are reconciled below:
2023 2022
GBP GBP
------------------------------------------ ------------ ------------
Loss before tax (10,830,037) (12,988,988)
------------------------------------------ ------------ ------------
Corporation tax at standard rate (2,057,707) (2,467,908)
Fixed asset differences 12,498 _
Increase from effect of expenses not
deductible in determining taxable profit
(tax loss) 300,510 90,608
Other differences 512 -
Surrender of tax losses for R&D tax
credit refund (544,602) -
Remeasurement of deferred tax for changes
in tax rates (550,799) -
Income not taxable - (24,709)
Decrease/(increase) from tax losses
for which no deferred tax asset was
recognised 2,294,986 2,402,009
------------------------------------------ ------------ ------------
Total tax credit (544,602) -
------------------------------------------ ------------ ------------
Deferred tax
Group
2023 2023 2023 2023 2023
Intangibles Tangibles Losses Other Total
GBP GBP GBP GBP GBP
------------ ------------ ---------- ----------- ------ ------
At 1 April
2022 961,083 436,706 (1,397,789) - -
Charged to
profit and
loss 1 (7,444) 7,443 - -
------------ ------------ ---------- ----------- ------ ------
At 31 March
2023 961,084 429,262 (1,390,346) - -
------------ ------------ ---------- ----------- ------ ------
The net deferred tax of GBPNil is made up of a liability of
GBP1,390,346 and asset of GBP1,390,346. The unrecognised deferred
tax asset for carried forward losses at 31 March 2023 was
GBP7,730,527.
The rate used for the deferred tax is 25% (2021: 19%) as the
rate was substantively enacted in May 2021.
2022 2022 2022 2022 2022
Intangibles Tangibles Losses Other Total
GBP GBP GBP GBP GBP
------------ ------------ ---------- ----------- -------- ------
At 1 April
2021 730,423 337,554 (1,020,857) (47,120) -
Charged to
profit and
loss 230,660 99,152 (376,932) 47,120 -
------------ ------------ ---------- ----------- -------- ------
At 31 March
2022 961,083 436,706 (1,397,789) - -
------------ ------------ ---------- ----------- -------- ------
The net deferred tax of GBPNil is made up of a liability of
GBP1,397,789 and asset of GBP1,397,789. The unrecognised deferred
tax asset for carried forward losses at 31 March 2022 was
GBP3,653,030.
14 Basic and diluted loss per share
Basic and diluted loss per share is calculated as follows:
2023 2022
GBP GBP
------------------------------------- ------------- ------------
Loss for the year (10,285,435) (12,988,988)
Weighted average number of shares in
issue 180,511,110 119,017,666
Basic and diluted loss per share (0.06) (0.11)
------------------------------------- ------------- ------------
The calculation of the loss per share has been retrospectively
restated for each period presented to reflect the bonus issue of
shares and share consolidation which took place on 22 July 2021
(see Note 27).
The diluted loss per share calculations exclude the effects of
share options, warrants and convertible debt on the basis that such
future potential share transactions are anti-dilutive. Information
on share options and warrants is disclosed in Note 28.
Shares issued subsequent to the end of the year are disclosed in
Note 35.
15 Property, plant and equipment
Furniture, Other property,
Land and fittings Computer Motor plant and Asset under
buildings and equipment equipment vehicles equipment construction Total
Group GBP GBP GBP GBP GBP GBP GBP
------------------ ---------- -------------- ---------- --------- --------------- ------------- -----------
Cost or valuation
At 31 March
2021 4,416,300 34,289 - 8,740 92,408 - 4,551,737
Additions 30,450 25,279 171,420 - 72,106 3,904,548 4,203,803
Reclassifications - (32,241) - - 32,241 - -
------------------ ---------- -------------- ---------- --------- --------------- ------------- -----------
At 31 March
2022 4,446,750 27,327 171,420 8,740 196,755 3,904,548 8,755,540
Additions 228,570 87,382 141,980 141,500 46,700 10,326,594 10,972,726
Reclassifications 514,041 - - - - (514,041) -
Disposals - - - (8,740) - - (8,740)
------------------ ---------- -------------- ---------- --------- --------------- ------------- -----------
At 31 March
2023 5,189,361 114,709 313,400 141,500 243,455 13,717,101 19,719,526
------------------ ---------- -------------- ---------- --------- --------------- ------------- -----------
Depreciation
At 31 March
2021 168,513 1,516 - 2,163 12,274 - 184,466
Charge for the
year 67,284 1,271 9,932 2,884 20,093 - 101,464
Reclassifications - (1,209) - - 1,209 - -
------------------ ---------- -------------- ---------- --------- --------------- ------------- -----------
At 31 March
2022 235,797 1,578 9,932 5,047 33,576 - 285,930
Charge for the
year 103,891 12,916 72,397 37,598 50,193 - 276,995
Disposals - - - (7,210) - - (7,210)
Impairment - - - - - 108,947 108,947
------------------ ---------- -------------- ---------- --------- --------------- ------------- -----------
At 31 March
2023 339,688 14,494 82,329 35,435 83,769 108,947 664,662
------------------ ---------- -------------- ---------- --------- --------------- ------------- -----------
Carrying amount
At 31 March
2023 4,849,673 100,215 231,071 106,065 159,686 13,608,154 19,054,864
------------------ ---------- -------------- ---------- --------- --------------- ------------- -----------
At 31 March
2022 4,210,953 25,749 161,488 3,693 163,179 3,904,548 8,469,610
------------------ ---------- -------------- ---------- --------- --------------- ------------- -----------
At 31 March
2021 4,247,787 32,773 - 6,577 80,134 - 4,367,271
------------------ ---------- -------------- ---------- --------- --------------- ------------- -----------
Included within the net book value of land and buildings above
is GBP4,142,662 (2022: GBP4,210,953) in respect of freehold land
and buildings.
Impairment - Asset under construction
The amount of impairment loss included in profit and loss is
GBP108,947 (2022: GBPnil). The impairment relates to labour
capitalised to an area of the MPF which has since been eliminated
from the process, following the updated feasibility study released
during the year.
16 Leases
Property Total
GBP GBP
-------------------- ---------- ----------
Cost or valuation
At 1 April 2021 1,722,067 1,722,067
Additions 233,117 233,117
-------------------- ---------- ----------
At 31 March 2022 1,955,184 1,955,184
Additions 619,503 619,503
Disposals (233,117) (233,117)
-------------------- ---------- ----------
At 31 March 2023 2,341,570 2,341,570
-------------------- ---------- ----------
Depreciation
At 1 April 2021 110,279 110,279
Charge for the year 101,169 101,169
-------------------- ---------- ----------
At 31 March 2022 211,448 211,448
Charge for the year 216,039 216,039
Disposals (108,589) (108,589)
-------------------- ---------- ----------
At 31 March 2023 318,898 318,898
-------------------- ---------- ----------
Carrying amount
At 31 March 2023 2,022,672 2,022,672
At 31 March 2022 1,743,736 1,743,736
-------------------- ---------- ----------
Depreciation on right-of-use assets charged through the profit
and loss totals GBP216,039 (2022: GBP101,169). Interest expense on
lease liabilities charged through the profit and loss totals
GBP101,772 (2022: GBP87,838).
Lease liabilities
2023
Future lease 2023 2023
payments Discount Lease liability
GBP GBP GBP
--------------------- ------------- ----------- ----------------
Within one year 227,332 (112,459) 114,873
In two to five years 760,712 (417,285) 343,427
In over five years 3,091,696 (1,533,540) 1,558,156
--------------------- ------------- ----------- ----------------
4,079,740 (2,063,284) 2,016,456
--------------------- ------------- ----------- ----------------
2022
Future lease 2022 2022
payments Discount Lease liability
GBP GBP GBP
--------------------- ------------- ----------- ----------------
Within one year 282,507 (90,021) 192,486
In two to five years 457,214 (313,511) 143,703
In over five years 2,568,335 (1,271,408) 1,296,927
--------------------- ------------- ----------- ----------------
3,308,056 (1,674,940) 1,633,116
--------------------- ------------- ----------- ----------------
The lease liabilities are presented as follows:
31 March 31 March
2023 2022
GBP GBP
------------------------ ---------- ----------
Current liabilities 114,873 192,486
Non-current liabilities 1,901,583 1,440,630
------------------------ ---------- ----------
2,016,456 1,633,116
------------------------ ---------- ----------
17 Intangible assets
Group
Goodwill Mining rights Software Total
GBP GBP GBP GBP
--------------------- ---------- ------------- --------- ----------
Cost
At 1 April 2021 1,075,520 3,844,333 - 4,919,853
Additions - - 80,000 80,000
--------------------- ---------- ------------- --------- ----------
At 31 March 2022 1,075,520 3,844,333 80,000 4,999,853
Additions - - 191,523 191,523
Disposals - - (80,000) (80,000)
--------------------- ---------- ------------- --------- ----------
At 31 March 2023 1,075,520 3,844,333 191,523 5,111,376
--------------------- ---------- ------------- --------- ----------
Amortisation
At 1 April 2021 - - - -
Amortisation charged
to the profit and
loss - - 6,599 6,599
--------------------- ---------- ------------- --------- ----------
At 31 March 2022 - - 6,599 6,599
Amortisation charged
to the profit and
loss - - 21,360 21,360
Disposals - - (6,599) (6,599)
--------------------- ---------- ------------- --------- ----------
At 31 March 2023 - - 21,360 21,360
Carrying amount
At 31 March 2023 1,075,520 3,844,333 170,163 5,090,016
--------------------- ---------- ------------- --------- ----------
At 31 March 2022 1,075,520 3,844,333 73,401 4,993,254
--------------------- ---------- ------------- --------- ----------
At 31 March 2021 1,075,520 3,844,333 - 4,919,853
--------------------- ---------- ------------- --------- ----------
The carrying amount of intangible assets which is considered as
having an indefinite useful life is GBP1,075,520. The whole balance
is attributable to goodwill.
The carrying amount of the mining rights is GBP3.844 million
(2022: GBP3.844 million). The mining rights will begin to be
amortised when mining operations restart.
Software amortisation of GBP21,360 (2022: GBP6,599) has been
charged to the profit and loss presented in administrative
expenses.
Impairment
The value in use of the Group's cash-generating unit which
comprises the Hemerdon Mine was determined using a discounted cash
flow approach, supported by project cashflow forecasts prepared by
management. The previous model under the Bankable Feasibility Study
has been adapted to reflect the changes in inputs and assumptions
as a result of the project re-evaluation. The following inputs and
key assumptions were used in the determination of value in use:
2023 2022
--------------------------------------- ----------- -----------
Discount rate 5% 5%
Expected duration of mining activities 27 years 23 years
Tungsten grade 0.19 - 0.20 0.19 - 0.20
Tungsten metal price $340 $340
Foreign exchange rate 1.20 1.22
--------------------------------------- ----------- -----------
Management has prepared a sensitised NPV calculation which under
the updated project plans, calculated a value in excess of the
carrying amount of the Group's assets. The underlying assumptions
that were stress tested include the discount rate, FX and metal
price. Management were satisfied in the recoverability of the
Group's assets and no impairment was required.
18 Investments
Group subsidiaries
Details of the Group subsidiaries as at 31 March 2023 are as
follows:
Proportion of ownership
interest and voting rights
held
------------------------------------------------------------------- -----------------------------
Name of subsidiary Principal activity Registered office 2023 2022
------------------- -------------------- ------------------------ -------------- -------------
Shakespeare Martineau
LLP,
6th Floor,
60 Gracechurch Street,
London,
Drakelands United Kingdom
Restoration Mining of tungsten EC3V 0HR
Limited* and tin England and Wales 100% 100%
------------------- -------------------- ------------------------ -------------- -------------
Shakespeare Martineau
LLP,
6th Floor,
60 Gracechurch Street,
London,
Provision United Kingdom
Tungsten West of services EC3V 0HR
Services Limited* to the Group England and Wales 100% 100%
------------------- -------------------- ------------------------ -------------- -------------
Shakespeare Martineau
LLP,
6th Floor,
60 Gracechurch Street,
London,
United Kingdom
Aggregates EC3V 0HR
West Limited* Sales of aggregates England and Wales 100% 100%
------------------- -------------------- ------------------------ -------------- -------------
* Indicates direct investment of Tungsten West plc in the subsidiary.
19 Escrow funds
31 March 31 March
2023 2022
GBP GBP
----------------------------- --------- ---------
Non-current financial assets
Escrow funds 5,146,986 8,370,024
----------------------------- --------- ---------
These are funds being held under escrow with a third party which
will be released back to the Group on the cessation of mining once
restoration works have been completed. The funds have been
discounted to present value over the expected useful life of the
mine. During the year, the discount rate was revised to 3.7% (2022:
2.0%) resulting in a loss of GBP3,495,064 (2022: GBP1,783,221). The
actual funds held in the escrow account at year end were
GBP13,230,653 (2022: GBP13,203,139).
20 Trade and other receivables
31 March 31 March
2023 2022
GBP GBP
------------------ ---------- ---------
Trade receivables 297,800 153,390
Deposits 4,458,031 2,340,738
Prepayments 816,723 1,018,274
Other receivables 591,039 315,107
------------------ ---------- ---------
6,163,593 3,827,509
------------------ ---------- ---------
The average credit period on sales of goods is 30 days. No
interest is charged on outstanding trade receivables. The carrying
amount of trade and other receivables approximates the fair
value.
As the Group is in the early phases of operations and making a
few minor sales, expected credit losses are being considered on a
customer-by-customer basis. At the year-end, trade receivables
include a provision of GBP69,873 (2022: GBP46,936).
21 Cash and cash equivalents
31 March 31 March
2023 2022
GBP GBP
------------- --------- ----------
Cash at bank 3,438,018 28,755,388
------------- --------- ----------
22 Inventories
31 March 31 March
2023 2022
GBP GBP
------------ -------- --------
Inventories 114,173 156,944
------------ -------- --------
23 Trade and other payables
31 March 31 March
2023 2022
GBP GBP
----------------------------------------- --------- ---------
Trade payables 544,064 694,320
Accrued expenses 1,578,986 3,383,300
Social security and other taxes 156,978 147,927
Outstanding defined contribution pension
costs 33,233 30,960
Other payables 17,342 33,116
----------------------------------------- --------- ---------
2,330,603 4,289,623
----------------------------------------- --------- ---------
Trade payables and accruals comprise amounts outstanding for
trade purchases and ongoing costs. The average credit period for
trade purchases is 45 days (2022: 45 days). No interest is charged
on overdue amounts.
The carrying amount of trade and other payables approximates the
fair value.
24 Loans and borrowings
31 March 31 March
2023 2022
GBP GBP
--------------------------------- ---------- ---------
Non-current loans and borrowings
Lease liabilities 1,901,583 1,440,630
1,901,583 1,440,630
--------------------------------- ---------- ---------
31 March 31 March
2023 2022
GBP GBP
----------------------------- -------- --------
Current loans and borrowings
Lease liabilities 114,873 192,486
----------------------------- -------- --------
Convertible bonds
In the prior year, the convertible loan notes were converted in
full, at the Company's election, on admission to AIM. The
convertible loan notes were converted into Ordinary Shares as
determined by dividing the prevailing principal amount of the
convertible loan notes, which was GBP10,044,000, together with any
accrued (but unpaid) interest thereon, which at the date of
conversion was GBP736,560, by the effective conversion price, which
is 30p.
Movement in liability
31 March 31 March
2023 2022
GBP GBP
--------------------------- --------- ------------
Brought forward - 10,311,840
Interest expense - 468,720
Converted to equity shares - (10,780,560)
--------------------------- --------- ------------
Carried forward - -
--------------------------- --------- ------------
25 Provisions
Group
Restoration provision Total
GBP GBP
-------------------------------------- --------------------- ------------
At 1 April 2022 9,526,485 9,526,485
Change in inflation and discount rate (4,205,774) (4,205,774)
Increase due to passage of time or
unwinding of discount 381,060 381,060
-------------------------------------- --------------------- ------------
At 31 March 2023 5,701,771 5,701,771
-------------------------------------- --------------------- ------------
Non-current liabilities 5,701,771 5,701,771
-------------------------------------- --------------------- ------------
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 GBP13,201,256 (2022: GBP13,201,256).
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 5.7% (2022: 4%), an inflation rate of 2.5-9% (2022: 2.5% - 7%)
and an estimated mining period of 27 years (2022: 23 years). At the
reporting date these assumptions represent management's best
estimate of the present value of the future restoration costs.
26 Pension and other schemes
Defined contribution pension scheme
The Group operates a defined contribution pension scheme. The
pension cost charge for the year represents contributions payable
by the Group to the scheme and amounted to GBP161,908 (2022:
GBP116,383).
Contributions totalling GBP33,233 (2022: GBP30,960) were payable
to the scheme at the end of the year and are included in
creditors.
27 Share capital
Allotted, called up and fully paid shares
31 March 2023 31 March 2022
-----------------
No. GBP No. GBP
----------------- ----------- --------- ----------- ---------
Ordinary Shares
of GBP0.01 each 180,551,615 1,805,516 179,368,215 1,793,682
----------------- ----------- --------- ----------- ---------
The holders of Ordinary Shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company. All Ordinary Shares rank equally
with regard to the Company's residual assets.
A reconciliation of the number of shares outstanding at the end
of each year is presented as follows:
31 March 31 March
2023 2022
GBP GBP
----------------------------------- ----------- ---------------
Number of shares brought forward 179,368,215 68,560,000
Issue of shares to 22 July 2021 - 7,349,832
Capitalisation of share premium
account (bonus issue) - 7,525,125,729
Effect of share consolidation (see
above) - (7,525,024,190)
----------------------------------- ----------- ---------------
179,368,215 76,011,371
----------------------------------- ----------- ---------------
Issue of shares on admission to
AIM - 65,125,000
Conversion of convertible debt - 35,935,200
Options exercised - 197,200
Warrants exercised 1,183,400 442,244
Founder options exercised - 1,657,200
----------------------------------- ----------- ---------------
180,551,615 179,368,215
----------------------------------- ----------- ---------------
During the year ended 31 March 2022, the share capital of the
Company was restructured. The following share transactions took
place:
-- The Company issued 7,349,832 Ordinary Shares of GBP0.0001
each for considerations ranging from GBP0.45 to GBP0.60 per
share.
-- On 22 July 2021 a bonus issue of shares from the share
premium account created 7,525,125,729 Ordinary Shares of GBP0.0001
each.
-- On 22 July 2021 a share capital consolidation took place
whereby each one hundred Ordinary Shares of GBP0.0001 each were
consolidated into one Ordinary Share of GBP0.01 each.
28 Share-based payments
Warrants
Details and movements
Warrants have been issued to certain shareholders and
intermediaries as commission for introducing capital to the
Company.
Warrants can be exercised at any point before the expiry date
for a fixed number of shares.
The movements in the number of warrants during the year were as
follows:
31 March 31 March
2023 2022
No. No.
--------------------------- ------------ ---------
Outstanding, start of year 4,095,219 2,310,681
Granted during the year - 2,226,760
Exercised during the year (1,183,400) (442,222)
Expired during the year (741,079) -
--------------------------- ------------ ---------
Outstanding, end of year 2,170,740 4,095,219
--------------------------- ------------ ---------
The warrants have been valued using the Black Scholes model as
management have judged it not possible to reliably estimate the
fair value of service received. Inputs to the pricing model were as
follows:
Date of grant 2022
Share price at date of grant GBP0.45 - GBP0.60
Exercise price GBP0.01 - GBP0.60
Risk-free interest rate 1.5%
Expected life of warrants 2 years
----------------------------- -----------------
Volatility 33%
----------------------------- -----------------
The exercise price of warrants outstanding at 31 March 2023
ranged between GBP0.01 and GBP0.60 and their remaining contractual
life was 3 months to 9 months.
The exercise price of warrants outstanding at 31 March 2022
ranged between GBP0.01 and GBP0.60 and their remaining contractual
life was 1 month to 21 months.
Founder share incentives
Details and movements
The founder shareholders have a right to receive shares at a
nominal value once certain milestones are hit.
The movements in the number of share options during the year
were as follows:
31 March 31 March
2023 2022
No. No.
----------------------------------- ---------- -----------
Outstanding, start of year 18,229,148 6,963,000
Granted during the year - 671,137
Terminated on admission to AIM - (7,634,137)
Replacement share awards following
admission to AIM - 19,886,344
Exercised during the year - (1,657,196)
----------------------------------- ---------- -----------
Outstanding, end of year 18,229,148 18,229,148
----------------------------------- ---------- -----------
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 GBP0.01.
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 GBPnil (2022: GBP143,603) and these options were fully
vested in the prior year.
EMI share options
Details and movements
Share options have been issued to key employees as an incentive
to stay with the Company. These options can be exercised within
four years following the grant date once the option has vested.
The movements in the number of share options during the year
were as follows:
31 March 31 March
2023 2022
No. No.
----------------------------------- ---------- ---------
Outstanding, start of year 1,683,335 1,233,333
Granted during the year - 1,097,228
Exercised/(lapsed) during the year (150,000) (647,226)
----------------------------------- ---------- ---------
Outstanding, end of year 1,533,335 1,683,335
----------------------------------- ---------- ---------
Share options have been valued using the Black Scholes model.
Inputs to the pricing model were as follows:
Date of grant 2022
Share price at date of grant GBP0.45 - GBP0.60
Exercise price GBP0.01 - GBP0.45
Risk-free interest rate 1.5%
Expected life of options 4 years
----------------------------- -----------------
Volatility 33%
----------------------------- -----------------
Volatility has been estimated based upon observable market
volatilities of similar entities.
The exercise price of share options outstanding at 31 March 2023
ranged between GBP0.30 and GBP0.45 (2022: GBP0.01 and GBP0.45) and
their remaining contractual life was 10 months to 30 months (2022:
22 months to 39 months).
31 March 2023 31 March 2022
--------------------------
Average Exercise Average Exercise
Price GBP Options Price GBP Options
-------------------------- ---------------- ---------- ---------------- ---------
Outstanding, start of
year 0.36 1,683,335 0.23 1,233,333
Granted during the year - - 0.43 1,097,228
Exercised/(lapsed) during
the year (0.35) (150,000) (0.21) (647,226)
-------------------------- ---------------- ---------- ---------------- ---------
Outstanding, end of
year 0.37 1,533,335 0.36 1,683,335
-------------------------- ---------------- ---------- ---------------- ---------
CSOP share options
Details and movements
Share options have been issued to key employees as an incentive
to stay with the Company. These options can be exercised within
three years following the grant date once the option has
vested.
31 March 31 March
2023 2022
No. No.
---------------------------------- ---------- --------
Outstanding, start of year - -
Granted during the year 2,799,982 -
Exercised/(lapsed) during the year (216,666) -
---------------------------------- ---------- --------
Outstanding, end of year 2,583,316 -
---------------------------------- ---------- --------
Share options have been valued using the Black Scholes model.
Inputs to the pricing model were as follows:
Date of grant 2023
Share price at date of grant GBP0.275
Exercise price GBP0.275
Risk-free interest rate 3.5%
Expected life of options 3 years
----------------------------- --------
Volatility 62%
----------------------------- --------
Volatility has been estimated based upon observable market
volatility of Tungsten West PLC.
The exercise price of share options outstanding at 31 March 2023
was GBP0.275 (2022: GBPnil) and their remaining contractual life
was 2 years and 6 months.
31 March 2023 31 March 2022
--------------------------
Average Exercise Average Exercise
Price GBP Options Price GBP Options
-------------------------- ---------------- ---------- ---------------- -------
Outstanding, start of - - - -
year
Granted during the year 0.275 2,799,982 - -
Exercised/(lapsed) during
the year 0.275 (216,666) - -
-------------------------- ---------------- ---------- ---------------- -------
Outstanding, end of
year 0.275 2,583,316 - -
-------------------------- ---------------- ---------- ---------------- -------
29 Commitments
Capital commitments
As at 31 March 2023 the Group had contracted to purchase plant
and machinery amounting to GBP3,754,738 (2022: GBP7,208,997). An
amount of GBP123,320 (2022: GBP123,320) is dependent on the
commencement of mining operations.
Other financial commitments
The total amount of other financial commitments not provided in
the financial statements was GBP10,329,000 (2022: GBP11,329,000)
committed at present or 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 GBP4,000,000 which is considered to be payable
between one to five years after mining operations commence.
30 Reconciliation of liabilities arising from financing
activities
Non-cash changes
At 1 April Financing New finance Other Converted At 31 March
2022 cash flows leases changes to equity 2023
GBP GBP GBP GBP GBP GBP
------------------ ---------- ----------- ----------- --------- ---------- -----------
Lease liabilities 1,633,116 (266,094) 719,846 (70,412) - 2,016,456
------------------ ---------- ----------- ----------- --------- ---------- -----------
1,633,116 (266,094) 719,846 (70,412) - 2,016,456
------------------ ---------- ----------- ----------- --------- ---------- -----------
Non-cash changes
At 1 April Financing New finance Other Converted At 31 March
2021 cash flows leases changes to equity 2022
GBP GBP GBP GBP GBP GBP
--------------------- ---------- ----------- ----------- -------- ------------ -----------
Long-term borrowings 10,311,840 - - 468,720 (10,780,560) -
Lease liabilities 1,493,224 (153,932) 205,987 87,837 - 1,633,116
--------------------- ---------- ----------- ----------- -------- ------------ -----------
11,805,064 (153,932) 205,987 556,557 (10,780,560) 1,633,116
--------------------- ---------- ----------- ----------- -------- ------------ -----------
31 Classification of financial and non-financial assets and
liabilities
The classification of financial assets and liabilities by
accounting categorisation for the year ending 31 March 2023 was as
follows:
2023 2022
Financial assets Financial assets 2023 2022
at amortised at amortised Financial assets Financial assets
cost cost at FVTPL at FVTPL
GBP GBP GBP GBP
------------------------ ----------------- ----------------- ----------------- -----------------
Assets
Non-current assets
Escrow funds receivable - - 5,146,986 8,370,024
Current assets
Trade and other
receivables 5,346,870 2,809,335 -
Cash and cash
equivalents 3,438,018 28,755,388 -
------------------------ ----------------- ----------------- ----------------- -----------------
8,784,888 31,564,723 5,146,986 8,370,024
------------------------ ----------------- ----------------- ----------------- -----------------
2023 2022
Financial liabilities Financial liabilities 2023 2022
at amortised at amortised Financial liabilities Financial liabilities
cost cost at FVTPL at FVTPL
GBP GBP GBP GBP
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Liabilities
Non-current
liabilities
Loans and borrowings (1,901,583) (1,440,630) - -
Current liabilities
Trade and other
payables (2,330,603) (4,289,573) - -
Loans and borrowings (114,873) (192,486) - -
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
(4,347,059) (5,922,689) - -
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
32 Financial risk review
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 match the maturity profiles of financial assets and liabilities
to ensure proper liquidity risk management and to maintain adequate
reserves, and borrowing facilities. In the view of the Directors,
the key risk to liquidity is in meeting short-term cash flow needs.
All amounts repayable on demand or within three months are covered
by the Company's cash and accounts receivable balances, which gives
the Directors confidence that funds will be available to settle
liabilities as they fall due. See further discussion of short term
liquidity risk in the going concern section of Note 2.
Market risk
The Group has no significant interest-bearing assets and
liabilities. The Group in the future will also be exposed to
exchange rate risk on the basis that tungsten prices are
principally denominated in USD. The Company 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.
The Group may require future borrowings to support its mineral
processing facility upgrades and therefore has an exposure to
future interest rate rises.
33 Related party transactions
During the year no Director received a commission payment (2022:
1 Director - GBP52,500) from a third party in connection with
raising additional share capital for Tungsten West plc. In
addition, no Director received a beneficial interest in warrants
(2022: 1 Director - 58,333 warrants at 60p) granted during the year
to a third party in relation to raising additional share capital
for Tungsten West plc.
Convertible bonds
During the prior year, the convertible bonds and accrued
interest that were issued to family members of two of the Directors
were converted into 12,751,200 Ordinary Shares. GBP166,320 of
interest accrued on these bonds during the year and interest due on
these bonds at the prior year end was GBPNil.
Key management personnel
Key management personnel are deemed to be the Directors. Their
remuneration can be seen in note 11.
34 Application of new and revised UK adopted International
Financial Reporting Standards (UK-adopted IFRS)
New and amended Standards and Interpretations applied
None of the new or amended IFRS Standards had an effect on the
financial statements.
New and revised Standards and Interpretations in issue but not
yet effective
At the date of authorisation 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:
Effective for annual
periods
Standard or Interpretation commencing on or after
----------------------------------------------- -----------------------
Definition of Accounting Estimates - Amendments 1 January 2023
to IAS 8
Disclosure of Accounting Policies - Amendments 1 January 2023
to IAS 1 and IFRS Practice Statement 2
Deferred Tax related to Assets and Liabilities 1 January 2023
arising from a Single Transaction - Amendments
to IAS 12
Amendments to Insurance contracts in IFRS17 1 January 2023
Lease Liability in a Sale and Leaseback - 1 January 2024
Amendments to IFRS 16
Classification of Liabilities as Current 1 January 2024
or Non-current - Amendments to IAS 1
----------------------------------------------- -----------------------
None of the above amendments are anticipated to have a material
impact on future financial statements.
35 Post balance sheet events
On 3 April 2023, the Group and Company announced that it was
undertaking a restructuring exercise and interim fundraising to
enable it to focus on satisfying the conditions for completing the
remaining funding required to complete the Project and take
Hemerdon into production.
On 19 May 2023, the Group announced it was raising GBP6.95
million by way of convertible loan notes (CLN) and GBP2.0 million
via an open offer. The funds raised are expected to fund working
capital for at least six months at the date of signing the Note
Purchase Agreement.
On 9th June 2023, the Group announced the completion of the
interim fund raise with the Group raising a total of GBP6.95
million by way of convertible loan notes and GBP195,675 via an open
offer, representing 9.8% available under the open offer.
Following satisfaction of the conditions precedent of the
Tranche A Notes, the Company served notice on the Note Purchasers
for the sum of GBP3.975 million, with the Tranche A Notes issued on
13 June 2023.
During July 2023 company notified Lansdowne Partners, the
majority holder of the 2023 Convertible Loan Note, of multiple
breaches of the terms of the loan. These breaches have resulted
from management implementing measures to conserve the cash flow of
the company to match the sources of finance available from the
Convertible Loan Note facility.
The specific terms of the note purchase agreement which have
been violated are:
(a) Clause 20.7 (Cross default): Certain liabilities under deferred payment arrangements in excess of GBP250,000 have not been paid when due.
(b) Clauses 20.8 (Insolvency) and 20.9 (Insolvency Proceedings): The company is unable to pay liabilities when they have fallen due: by reason of actual and anticipated financial difficulties the Group has suspended payments to certain creditors and has entered into negotiations with more than one creditor with a view to rescheduling its indebtedness. The Group has made formal arrangements with some creditors to defer or suspend payments.
(c) Clause 20.15 (Expropriation). The ability of the Group to conduct its business is wholly curtailed by the regulatory bodies who have yet to issue the Permit required for operations to recommence.
The Group has limited ability to cure these defaults as they are
ongoing and the liabilities cannot be settled until full project
finance has been secured.
The amount currently in default is GBP6.95 million principal
plus GBP0.27m PIK accrued.
Under the terms of the Note Purchase Agreement dated 19 May
2023, the Note Purchasers, if directed by the holders of at least
75% of the Notes outstanding, may by notice to the Group:
-- Terminate the agreement and cancel the Notes, and any
unutilised notes will not be available for purchase;
-- Demand the Notes can be redeemed / repurchased immediately at
the Redemption Price, plus any PIK is repaid. The redemption price
is a sum equal to two times the principal amount of the Notes.
-- Exercise its rights to enforce security under the terms of
the note purchase agreement and security deed.
At the date of this report the Group does not have the funds
available to redeem the notes.
On 16 August 2023 the Note Holders agreed a waiver of the
breaches which will expire on 31 January 2024. The Waiver gives the
Board sufficient comfort that the Group can both meet the terms of
the original loan without further breaches and the terms of the
waiver hence is a going concern. For the Group to remain a Going
Concern, the Group is reliant on continued support of the
Noteholders by not exercising their rights under the Defaults
should the defaults not be remedied, or the note converted or
redeemed, by 31 January 2024.
Following satisfaction of the conditions precedent of the
Tranche B notes, the Company served notice on the Note Purchasers
for the sum of GBP2.975 million, with the Tranche B Notes issued on
22 August 2023.
On the 18 May 2023, The Group and Company announced that Mark
Thompson has stepped down from the board of directors.
On 16 August 2023 the Group and Company announced that Nigel
Widdowson has stepped down from the board of directors.
On 4 September 2023 the Group announced that Adrian Bougourd,
Kevin Ross and Guy Edwards have been appointed to the Board as
Non-Executive Directors.
For information on updated project plans, please see the CEO
Review on page 5.
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END
FR LXLLFXKLFBBE
(END) Dow Jones Newswires
September 14, 2023 02:00 ET (06:00 GMT)
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