TIDMTUN
RNS Number : 6897X
Tungsten West PLC
22 December 2023
Tungsten West Plc
("Tungsten West", the "Company" or the "Group")
Half Year Results for the six months ended 30 September 2023
Tungsten West, the owner and operator of the Hemerdon Mine (the
"Project" or "Hemerdon") in Southwest England, is pleased to
announce its half-yearly results for the six months ended 30
September 2023 (the "Period").
First Half and Post Period Highlights:
-- Alistair Stobie was appointed as CFO on 13 November 2023;
-- 50 tonnes of tin and tungsten concentrate produced from legacy material;
-- GBP6.95 million convertible loan notes issued over two tranches;
-- Agreement to place an additional GBP1.8 million tranche of convertible loan notes;
-- Low frequency noise trials completed;
-- Mineral Processing Facility Permit application submitted;
-- Section 73 application was approved on 06 December 2023
-- Loss for the period of GBP9.1 million;
-- Capital expenditure for the period of GBP2.8 million
-- The Company had cash reserves of GBP1.4 million at 30 September 2023; and
-- Front end re-build and plant upgrade projects ceased pending
outcome of permit application and subsequent funding
activities.
Neil Gawthorpe, CEO of Tungsten West, commented:
"This period has seen some challenges for the Company as we
continue to navigate difficult market conditions. However, there
have been many positives to take from the last six months and
progress has been made at Hemerdon.
"The formal submission of the Mineral Processing Facility
permit, following the completion of the low frequency noise trials,
is a positive step forwards and, despite the delays and additional
questions from the Environment Agency, we continue to have a
positive relationship with the team and an open dialogue with them.
Additionally, the approval of the Section 73 application marks
further progress and will augment the Project.
"Furthermore, the production of tin and tungsten from legacy
material marked a significant milestone in the Company's progress
and is an indication of what can be achieved once the mine is
re-opened.
"Tungsten and tin remain critical minerals and are essential to
everyday living, as well as being crucial in future green and
emerging technologies. Tungsten West aims to help provide a secure
supply chain of these critical minerals."
Overview
Tungsten West started the Period with the recently appointed
CEO, Neil Gawthorpe, conducting a strategic review of operations
and funding requirements. At the same time, the Company was in
discussions with a number of institutions to complete a funding of
approximately GBP65 million, required to complete the Project.
The Company had been progressing the Project on the basis that
funding, permitting and construction could run in parallel.
However, the CEO concluded in his review that this was not the
case, as full permitting would be required to source the funds
required to complete the Project.
To allow the Company sufficient time to secure the remaining
permit required to operate the Mineral Processing Facility ("MPF"),
the Company launched an interim funding exercise in April 2023. The
objective of the interim funding was to raise approximately GBP7
million via placing a Convertible Loan Note ("CLN") and an Open
Offer. On 6 April 2023, the Company announced that it had secured
commitments from purchasers of GBP6.95 million CLN. Additionally,
the Open Offer raised GBP0.2 million of new capital.
Earth and civil engineering work has been completed to allow
capital intensive construction work to commence once permits are
granted and funding completed. The Company's focus is now on
permitting, funding and compliance activities. A cost reduction
programme was initiated in April 2023 with the objective of
reducing both capex and opex until permitting and funding
activities have been completed.
Unfortunately, this resulted in a number of redundancies. The
Board would like to express their thanks and appreciation to the
employees who departed: all had been incredibly dedicated to the
Project.
review of activities
interim tungsten and tin production
During the first quarter of the Period, the Company
recommissioned the refinery portion of the MPF and processed
approximately 50 tonnes of legacy tin and tungsten concentrate.
This was shipped to an off-taker in March 2023, generating
approximately GBP0.4 million in revenue. This was part of a series
of activities undertaken to generate cash from liquidating surplus
assets. A total of 1,200 tonnes of low grade concentrate left by
the previous operator was also sold between the final quarter of
the prior year and first quarter of the Period, generating an
additional GBP0.7 million revenue.
strategic focus and restructuring
By April 2023, it became apparent that funding was dependent
upon the final operating permit required to operate by the
Environment Agency ("EA"). The grant of a change to the existing
planning permission for truck movements was also required to enable
delivery of the aggregates business. Accordingly, management
initiated a programme to preserve cash, reduce costs and focus on
strategic priorities:
-- The business was re-focused on maintaining environmental
compliance, securing permits and raising capital;
-- Project capex for the front-end re-build was scaled back to
existing capital commitments only; and
-- All staff not engaged in these core activities were at risk
and headcount was reduced by 42% through a combination of
redundancies and resignations.
In August 2023, a further cost reduction programme was
implemented, resulting in further headcount reduction. At the same
time, the Company initiated a number of discussions with suppliers
to agree deferred payment plans and restructure supply
agreements.
In October 2023, as the EA process to approve the MPF permit
application, and specifically reviewing the results of the low
frequency noise ("LFN") trials, was taking longer than the EA had
indicated, it became necessary to reduce the cost base further. At
the time of this report, the ongoing headcount had been reduced to
15 full-time employees, focused only on environmental and corporate
compliance, permitting and funding activities.
Mineral Processing facility permit and Low frequency noise
trials
In July and August 2023, the Company undertook a series of
investigations into LFN levels at the Project.
Upon completion of the LFN Trials, the Company submitted the MPF
permit application to the EA which, once granted, will allow the
plant to operate, thus facilitating the production of tungsten and
tin at Hemerdon. The Company has worked closely with the EA and
Devon County Council (the "Council") throughout the entire
permitting and LFN trial process and anticipates the decision
regarding the permit approval to be forthcoming early in 2024.
The Company received a further series of questions in October
2023. These questions were fully addressed by the end of October
2023 and a formal response submitted to the EA. At the time of
writing this report the Company is still waiting for the EA's
decision and on whether to grant the MPF permit. Taking into
account the demonstrated reduction in LFN emitted from the test rig
following the implementation of the noise mitigation measures, the
Company is confident that the historical LFN issues have been
resolved and that the last required permit will be obtained early
in 2024.
Section 73 Application
To deliver the Project sustainably, the Company will produce
secondary aggregates, a by-product from mining which, once sold,
will provide an ongoing revenue stream and reduce the storage of
barren rock at site.
Post-period end on 6 December 2023 the Council approved the
Company's Section 73 application to vary the tonnage cap associated
with the existing permission for 50 truck movements per day from
the site, in order to facilitate the sales of secondary aggregates.
Traffic and market studies carried out in conjunction with the
application highlight that the Company can plug a gap in the market
for high-quality, secondary aggregates in Devon with a minimal
increase in overall heavy vehicle traffic.
Tungsten West has actively involved the local community, local
councils and regulatory bodies in the process, participating in
regular discussions and offering a direct line to the Company for
all stakeholders.
In addition, the Company received positive news relating to test
work carried out on its secondary aggregate products, showing them
to be superior, in several applications, to other materials
available locally.
management changes
On 28 April 2023 James McFarlane resigned and stepped down as
Managing Director of the Group. James had joined the Company soon
after the acquisition of the Project in 2019. During this period,
he played a key role in completing two feasibility studies and the
successful IPO process.
On 16 May 2023 Mark Thompson stepped down from the Board of
Directors. Mark was one of the founding Directors of Tungsten West
and was instrumental in the acquisition of the Project and
subsequent rounds of pre-IPO funding and the AIM admission.
Nigel Widdowson resigned as CFO on 16 August 2023, however he
has remained with the Group to oversee the restructuring and
funding processes and transition to a new CFO.
The Board was strengthened by the appointment of three
Non-Executive Directors on 4 September 2023:
-- Kevin Ross, a mining engineering specialist who has held
numerous COO roles in the mining sector for operating and
development companies;
-- Guy Edwards, who brings significant experience in the
aggregates industry having held CEO positions at Aggregates
Industries UK and Aggregates Industries USA; and
-- Adrian Bougourd, currently part of the Developed Markets team
at Lansdowne Partners, a financial analyst with experience in
capital markets and advising companies in the global industrial and
mining sector.
After the period ended, Alistair Stobie was appointed CFO on 13
November 2023 and will act in capacity as a PDMR. Alistair has over
20 years' experience as CFO at AIM listed companies in the natural
resources sector. In particular, he has significant experience of
raising capital for, and delivering, complex capital-intensive
projects in the natural resources sector.
funding
The Group completed the issue of a CLN facility and open offer
in June 2023. These collectively raised GBP7.2 million gross of
fees. The CLN facility provided the ability to issue a further
tranche up to GBP2.0 million ("Tranche C") under the same terms. On
18 December 2023 the Company announced that it had raised GBP1.8
million under Tranche C to existing CLN holders. The Tranche C
Notes, together with further funding (via and additional notes
under the existing CLN facility ("Tranche D") or other similar
instrument), the sale of certain assets and existing on site
aggregates are anticipated to provide sufficient funding to allow
the Company to meet its liabilities as they fall due and to
complete the short-term strategic objectives before June 2024. The
existing waivers on previous breaches of the CLN also expire in
June 2024. Notwithstanding, as set-out in Note 2 Going Concern,
there remains material uncertainty regarding further funding, the
sale of certain assets and the value of onsite aggregate sales
which would have an impact on the Group's ability to continue as a
going concern. Opex has been significantly reduced and all material
capital commitments deferred until these objectives have been
achieved. As at the end of November 2023 the Group had issued
Tranche A (GBP3.975 million) and Tranche B (GBP2.975 million) of
the CLN and had GBP0.5 million in cash reserves.
At the date of this report, there is not currently any
commitment from existing or new noteholders to purchase any Tranche
D notes, any agreed sale of any assets or sale of onsite
aggregates. If the Group fails to find purchasers for the Tranche D
notes, and / or assets or the sale of onsite aggregates, then, in
the absence of other new sources of finance, it is anticipated it
would no longer be able to meet its liabilities as they fall due in
March 2024.
outlook
Considered a critical mineral, the outlook for tungsten is
positive with the European Metal Bulletin Ammonium Para-Tungstate
price being reported at circa US$305 per Metric Tonne Unit (MTU) (1
MTU = 10 kilograms). Tungsten remains an essential component in
construction tools, electrical components, including lightbulbs,
MRI scanners, and for defense applications. Additionally, it is
also a mineral of the future, with applications in both emerging
and green technologies including electric vehicles, nuclear fusion,
renewable energy, and aerospace
Tin prices are currently at their 12-month average of US$24,500
per tonne at the date of this statement. Tin is a major component
in the global drive towards electrification and clean energy and,
whilst a by-product of the tungsten operations, Tungsten West is
poised to become a significant producer.
Despite energy costs having stabilised and the most recent
feasibility study demonstrating a viable Project with a strong NPV,
the Company and the Board acknowledge that this is a challenging
Project and there are many risks that could impact the Company's
ability to reach construction through to commercial production.
Permitting, funding and macro-economic risks (geopolicial, domestic
political, economic instability) remain the most significant risks.
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 principal risks and uncertainties are outlined in the
Company's most recent audited annual report and accounts which can
be found on www.tungstenwest.com .
The Board remains positive for the long-term prospects for the
Hemerdon mine and the commodities it will produce, and is committed
to delivering the Project and recommencing operations.
Neil Gawthorpe
Chief Executive Officer
Cautionary statement
This document contains certain forward-looking statements in
respect of the financial condition, results, operations, and
business of the Group. Whilst these statements are made in good
faith based on information available at the time of approval, these
statements and forecasts inherently involve risk and uncertainty
because they relate to events and depend on circumstances that will
occur in the future. There are several factors that could cause the
actual results of developments to differ materially from those
expressed or implied by these forward-looking statements and
forecasts. Nothing in this document should be construed as a profit
forecast.
Enquiries
Tungsten West 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
Blythe Ray Hannam & Partners
(Financial PR) (Joint Broker)
Tim Blythe / Megan Ray Andrew Chubb / Nilesh Patel
tungstenwest@blytheray.com Tel: +44 (0)20 7907 8500
Tel: +44 (0) 20 7138 3204
VSA Capital
(Joint Broker)
Andrew Monk
Tel: +44 (0)20 3005 5000
Further information on Tungsten West Limited can be found at
www.tungstenwest.com
Overview of Tungsten West
Tungsten West is the 100 per cent owner and operator of the past
producing Hemerdon tungsten and tin mine, located near Plymouth in
southern Devon, England. The Hemerdon mine is currently the world's
third largest tungsten resource, with a JORC (2012) compliant
Mineral Resource Estimate of approximately 325Mt at 0.12 per cent.
WO(3) . The Company acquired the mine out of a receivership process
in 2019 after its most recent operators, Wolf Minerals, stopped
production in 2018. While it was operator, Wolf invested over
GBP170 million into the development of the site, the development of
significant infrastructure and processing facilities. Hemerdon was
producing tungsten and tin materials, under Wolf, between 2015 and
2018, before the Company entered administration and placed the mine
into receivership due to a number of issues that have since been
identified and rectified by Tungsten West.
Independent Auditor's Review Report on Interim Financial
Information
Conclusion
We have reviewed the accompanying Consolidated Statement of
Financial Position of Tungsten West Plc as of 30 September 2023 and
the related Consolidated Income Statement, Consolidated Statement
of Change in Equity and Consolidated Statement of Cash-Flows for
the six-month period then ended, and a summary of significant
accounting policies and other explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the accompanying interim financial
information does not give a true and fair view of the financial
position of the Group as at 30 September 2023, and of its financial
performance and its cash flows for the six-month period then ended
in accordance with UK-adopted International Accounting Standard
34.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity." A review of interim financial information consists of
making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Material uncertainty relating to going concern
We draw attention to Note 2 in the interim accounts, which
indicates that the group has yet to secure a key permit necessary
to obtain the finance it needs to complete the plant rebuild and
continue in operational existence for the foreseeable future. The
group's ability to pay liabilities as they fall due beyond early
2024 is dependent on uncertain events such as securing additional
finance, asset sales or inventory sales. As stated in Note 2, these
events or conditions, along with other matters as set forth in Note
2 indicate that a material uncertainty exists that may cast
significant doubt on the group's ability to continue as a going
concern. Our conclusion is not modified in respect of this
matter.
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that management have inappropriately adopted
the going concern basis of accounting or that management have
identified material uncertainties relating to going concern that
are not appropriately disclosed. This conclusion is based on the
review procedures performed in accordance with ISRE (UK) 2410,
however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of directors
Management is responsible for the preparation and fair
presentation of this interim financial information in accordance
with International Accounting Standard 34. In preparing the
half-yearly financial report, the directors are responsible for
assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the company or to cease operations, or
have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
ISRE (UK) 2410. Our work has been undertaken so that we might state
to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
PKF Francis Clark
Melville Building East
Unit 18,23 Royal William Yard
Plymouth
Devon
PL1 3GW
Date:...21/12/2023...................
Consolidated Income
Statement
Unaudited Unaudited Audited
Six months Six months Year ended
to to
Note 30-Sep-23 30-Sep-22 31-Mar-23
GBP GBP GBP
Revenue 4 722,036 208,217 626,460
Cost of sales (780,649) (1,959,326) (1,984,983)
Gross loss (58,613) (1,751,109) (1,358,523)
Administrative
expenses (8,037,199) (3,323,977) (10,160,088)
Other operating
income 130 - 18,947
Other gains/(losses) (117,953) 107,292 710,710
Operating loss 5 (8,213,635) (4,967,794) (10,788,954)
Finance income 102,004 128,366 454,196
Finance costs (1,020,782) (286,854) (495,279)
Net finance cost (918,778) (158,488) (41,083)
Loss before tax (9,132,413) (5,126,282) (10,830,037)
Income tax credit - - 544,602
Loss for the period (9,132,413) (5,126,282) (10,285,435)
============ ============ =============
Loss attributable
to:
Owners of the Company (9,132,413) (5,126,282) (10,285,435)
============ ============ =============
Unaudited Unaudited Audited
GBP GBP GBP
Basic and diluted
loss per share 12 (0.050) (0.028) (0.057)
============ ============ =============
There were no items of other comprehensive income in any period
presented.
Consolidated Statement
of Financial Position
Unaudited Unaudited Audited
Six months Six months Year ended
to to
30-Sep-23 30-Sep-22 31-Mar-23
Note GBP GBP GBP
Non-current assets
Property, plant and equipment 6 19,811,546 14,674,729 19,054,864
Right-of-use assets 7 1,955,412 1,702,233 2,022,672
Intangible assets 8 5,096,005 4,997,853 5,090,016
Deferred tax assets 1,390,346 1,397,789 1,390,346
Escrow funds receivable 9 4,107,892 5,564,319 5,146,986
32,361,201 28,336,923 32,704,884
------------- ------------- -------------
Current assets
Trade and other receivables 4,788,186 5,045,579 6,163,593
Inventories 29,850 69,901 114,173
Cash and cash equivalents 1,416,765 14,925,706 3,438,018
6,234,801 20,041,186 9,715,784
------------- ------------- -------------
Total assets 38,596,002 48,378,109 42,420,668
============= ============= =============
Equity and liabilities
Equity
Share capital 13 1,870,741 1,805,516 1,805,516
Share premium account 51,949,078 51,882,931 51,882,761
Share option reserve 412,831 292,579 357,366
Warrant reserve 740,867 1,408,730 740,867
Convertible loan note
reserve 165,408 - -
Retained earnings (32,937,431) (19,313,728) (23,805,018)
Equity attributable
to the owners of the
parent 22,201,494 36,076,028 30,981,492
============= ============= =============
Non-current liabilities
Loans and borrowings 11 1,927,165 1,522,723 1,901,583
Provisions 10 4,799,194 6,702,984 5,701,771
Deferred tax liabilities 1,390,346 1,397,789 1,390,346
8,116,705 9,623,496 8,993,700
------------- ------------- -------------
Current liabilities
Trade and other payables 1,519,343 2,502,202 2,330,603
Loans and borrowings 11 6,758,460 176,383 114,873
8,277,803 2,678,585 2,445,476
------------- ------------- -------------
Total liabilities 16,394,508 12,302,081 11,439,176
------------- ------------- -------------
Total equity and liabilities 38,596,002 48,378,109 42,420,668
============= ============= =============
Consolidated Statement of
Cash Flows
Unaudited Unaudited Audited
30-Sep 30-Sep 31-Mar
2023 2022 2023
Note GBP GBP GBP
Cash flows from operating
activities
Loss for the period (9,132,413) (5,126,282) (10,285,435)
Adjustments to cash flows
from non-cash items
Depreciation and amortisation 6,7 265,675 261,099 514,394
Loss on disposal of right-of-use
asset - - 124,528
Loss on disposal of intangible
asset - - 73,401
Impairment of asset under
construction 6 1,841,039 - 108,947
Fair value losses on escrow
account 1,133,447 2,904,871 3,495,064
Fair value gains on restoration
provision (1,015,494) (3,012,163) (4,205,774)
Finance income (102,004) (128,366) (454,196)
Finance costs 1,020,782 236,120 495,279
Share based payment transactions 55,465 50,718 115,505
Impact of foreign exchange (42,593) - 74,724
Income tax credit - - (544,602)
------------ ------------- -------------
(5,976,096) (4,814,003) (10,488,165)
Working capital adjustments
Income tax received - - 544,602
(Increase)/decrease in trade
and other receivables 1,375,407 (1,218,070) (2,336,084)
Increase/(decrease) in trade
and other payables (811,260) (1,787,421) (1,959,020)
(Increase)/decrease in inventories 84,323 87,043 42,771
Net cash outflow from operating
activitie s (5,327,626) (7,732,451) (14,195,896)
------------ ------------- -------------
Cash flows from investing
activities
Interest received 5,204 29,193 99,082
Acquisitions of property
plant and equipment (2,764,261) (6,407,451) (10,892,254)
Proceeds from disposals 2,088 - 4,167
Acquisitions of intangibles (39,952) (20,000) (191,523)
Net cash outflow from investing ( 6,398,258
activitie s (2,796,921) ) (10,980,528)
------------ ------------- -------------
Cash flows from financing
activities
( 4,084
Interest paid (2,971) - )
Proceeds from exercise of
warrants 131,542 284,351 284,181
Proceeds from exercise of - - -
share options
Proceeds from convertible 6,038,428 - -
debt
Payments to hire purchase (14,398) - (63,294)
New leases - 74,250 -
Payment of lease liabilities (49,307) (57,574) (357,749)
------------ ------------- -------------
Net cash inflow (outflows)
from financing activities 6,103,294 301,027 (140,946)
------------ ------------- -------------
Net (decrease) in cash and
cash equivalents (2,021,253) (13,829,682) (25,317,370)
Opening cash and cash equivalents 3,438,018 28,755,388 28,755,388
------------ ------------- -------------
Closing cash and cash equivalents
c/f 1,416,765 14,925,706 3,438,018
============ ============= =============
Consolidated Statement of Changes in Equity
Audited Share Share Share Warrant Convertible Retained Total
capital premium option reserve loan note earnings
account reserve reserve
GBP GBP GBP GBP GBP GBP GBP
At 1 April
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)
New shares
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
========== =========== ========= ========== ============ ============= =============
Unaudited
At 1 April
2022 1,793,682 51,610,414 241,861 1,408,730 - (14,187,446) 40,867,241
Loss for the
period - - - - - (5,126,282) (5,126,282)
New shares
subscribed 11,834 272,517 - - - - 284,351
Share options
charge - - 50,718 - - - 50,718
---------- ----------- --------- ---------- ------------ ------------- -------------
At 30
September
2022 1,805,516 51,882,931 292,579 1,408,730 - (19,313,728) 36,076,028
========== =========== ========= ========== ============ ============= =============
Unaudited
At 1 April
2023 1,805,516 51,882,761 357,366 740,867 - (23,805,018) 30,981,492
Loss for the
period - - - - - (9,132,413) (9,132,413)
New shares
subscribed 65,225 66,317 - - - - 131,542
Issue of
convertible
loan 165,408 - 165,408
Share options
charge - - 55,465 - - - 55,465
At 30
September
2023 1,870,741 51,949,078 412,831 740,867 165,408 (32,937,431) 22,201,494
========== =========== ========= ========== ============ ============= =============
Notes to the interim accounts
1. Basis of Preparation
These unaudited condensed consolidated interim accounts have
been prepared in accordance with the recognition and measurement
principles of International Accounting Standards as adopted in the
United Kingdom ("UK-adopted IAS") using the accounting policies
that are expected to apply in the Company's next annual report.
The accounting policies applied are consistent with those
disclosed in the Company's last statutory financial statements.
The interim accounts are in compliance with IAS 34, Interim
Financial Reporting.
The interim accounts do not comprise the Company's statutory
accounts. The information for the year ended 31 March 2023 is not
the Company's statutory accounts. The Company's financial
statements for that year have been filed with the registrar of
companies. The independent auditor's report on those financial
statements was unqualified but drew attention to a material
uncertainty relating to going concern. The independent auditor's
report did not contain statements under s498(2) or s498(3) of the
Companies Act 2006.
2. 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 30 September 2023, had GBP1.4 million in
cash reserves.
Further to ongoing discussions with investors and debt
providers, it remains 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 the
recently issued Section 73 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 continues to focus its short-term operating strategy
simply on activities required to secure these permits, maintain
environmental compliance and secure funding to complete the project
and recommence mining operations, including an updated Feasibility
Study.
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. Tranche C Notes were issued on 18
December 2023, raising GBP1.8 million gross of fees. It is
envisaged that Tranche D Notes, or other similar instrument, will
be issued towards the end of 1Q 2024. In addition, management will
seek to sell certain assets and existing onsite aggregates. The sum
of the Tranche C & D Notes, asset sales and sale of onsite
aggregates is expected to be not less than GBP6.5 million. The
Board consider this to be sufficient liquidity to meet its
liabilities as they fall due and to complete the short-term
strategic objectives, including completing an updated Feasibility
Study, before December 2024. Opex has been significantly reduced
and all material capital commitments deferred until these
objectives have been achieved.
As at the end of November 2023 the Group had issued Tranche A
(GBP3.95 million) and Tranche B (GBP2.95 million) of the CLN and
had GBP0.5m in cash reserves. The Company issued Tranche C of the
notes on 18 December 2023. Tranche C raised GBP1.8 million gross of
fees.
There is not currently any commitment from existing or new
noteholders to purchase any Tranche D notes, nor have any
agreements to sell certain assets been agreed. If the Group fails
to find purchasers for the Tranche D notes or find buyers for
certain assets, 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 March 2024.
Since the 31 March 2023, the Group has taken 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 the
annual report and accounts to March 2023. 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 the
31 March annual report and accounts was issued by the noteholders
in June and again in December 2023, to clear further breaches
arising post September 2023. The waiver will expire in June 2024
and going concern is reliant on the Group complying with the terms
of the waiver. The Company has agreed terms of an amended waiver
for the breaches in place at the time of signing this report and
going concern is dependent on the Group complying with the terms of
the amended waiver until it expires on 30 June 2024. The waivers
give 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
June 2024.
As identified earlier in this report, permitting, funding and
macro-economic risks (Geopolitical, Economic instability) continue
to be the most significant risks facing the Group. 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 GBP80 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 March 2024, or the receipt of funds form the sale of certain
assets and/or ongoing aggregate sales, 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 in 2024
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 permit, 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 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.
3. Asset and liabilities held at fair value
Escrow funds
These funds are held with a third party to be released to the
Group as it settles its obligation to restore the mining site once
operations cease. The debtor has been discounted to present value
assuming the funds will be receivable in 28 years' time which
assumes one year of set up and a 27-year useful life of mining
operations. The key assumptions that would lead to significant
changes in the escrow account fair value are the discount rate and
the useful life of the mine.
Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle that
obligation and a reliable estimate can be made of the amount of the
obligation.
Provisions are measured at the Directors' best estimate of the
expenditure required to settle the obligation at the reporting date
and are discounted to present value where the effect is material.
This includes a provision for the obligation to restore the mining
site once mining ceases.
The restoration provision is the contractual obligation to
restore the mining site back to its original state once mining
ceases. The provision is equal to the expected outflows that will
be incurred at the end of the mine's useful life discounted to
present value. As the restoration work will predominantly be
completed at the end of the mine's useful life, these calculations
are subject to a high degree of estimation uncertainty. The key
assumptions that would lead to significant changes in the provision
are the discount rate, useful life of the mine and the estimate of
the restoration costs.
Convertible loan notes
Convertible loan notes which entitle the holder to convert into
a fixed number of shares for a fixed amount of cash contain both
the features of a financial liability and an equity instrument. The
initial fair value amount of the liability is calculated as the
present value of all future payments and interest (at the rate
determined by the instrument) all being discounted at a market rate
of interest for a similar loan without a conversion option. The
amount of the equity component is residual balance after deducting
the initial fair value amount of the liability from the proceeds of
the convertible loan issue. Issue costs are assigned to the
liability component.
Subsequently, interest is calculated on the liability component
under the effective interest method.
The present value of the liability cash-flows has been estimated
with reference to management's judgement of the most likely
cash-flows, as permitted under IFRS9. Under the terms of the
convertible loan notes if the Group breaches the terms of the
agreement or an exit event occurs the initial capital can be called
in for repayment at a premium of 100%. As management judge this
unlikely it has not been accounted for in the fair value of the
liability at period end. Were this clause to be enacted the capital
repayment due, on loan notes drawn to period end, would be
increased from GBP6.95m to GBP13.90m.
4. Revenue
Revenue by product comprised the following:
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March
2023
GBP GBP GBP
Tungsten 286,964 89,509 508,184
Aggregates - 117,091 118,276
Tin 435,072 - -
Other - 1,617 -
----------------- ----------------- ----------
722,036 208,217 626,460
================= ================= ==========
5. Operating loss
Operating loss is stated after the following:
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March
2023
GBP GBP GBP
Depreciation of property, plant and equipment 164,452 202,332 276,995
Depreciation of right of use assets 67,260 43,366 216,039
Loss on disposal of ROU asset - - 124,528
Impairments of assets under construction 1,841,039 - 108,947
Amortisation of intangibles 33,963 15,401 21,360
Impairment to deposits 1,547,245 - -
Staff costs 1,950,849 2,107,029 4,593,833
================= ================= ==========
6. Property, plant and equipment
Land Furniture, Computer Motor Other Asset Total
and fittings equipment vehicles property, Under
buildings and plant Construction
equipment and
equipment
Unaudited GBP GBP GBP GBP GBP GBP GBP
Cost
At 1 April
2023 5,189,361 114,709 313,400 141,500 243,455 13,717,101 19,719,526
Additions - 61 2,101 - 6,053 2,756,046 2,764,261
Disposals - - (2,088) - - - (2,088)
At 30 September
2023 5,189,361 114,770 313,413 141,500 249,508 16,473,147 22,481,699
========== =========== ========== ========= ========== ============= ===========
Depreciation
At 1 April
2023 339,688 14,494 82,329 35,435 83,769 108,947 664,662
Impairment - - - - - 1,841,039 1,841,039
Charge for
the period 52,723 11,980 49,720 23,349 26,680 - 164,452
At 30 September
2023 392,411 26,474 132,049 58,784 110,449 1,949,986 2,670,153
========== =========== ========== ========= ========== ============= ===========
Unaudited
Cost
At 1 April
2022 4,446,750 27,327 171,420 8,740 196,755 3,904,548 8,755,540
Additions 33,865 22,234 27,361 112,500 16,800 6,194,691 6,407,451
Transfer 713,969 - - - - (713,969) -
At 30 September
2022 5,194,584 49,561 198,781 121,240 213,555 9,385,270 15,162,991
========== =========== ========== ========= ========== ============= ===========
Depreciation
At 1 April
2022 235,797 1,578 9,932 5,047 33,576 - 285,930
Charge for
the period 132,715 2,370 29,539 14,216 23,492 - 202,332
At 30 September
2022 368,512 3,948 39,471 19,263 57,068 - 488,262
========== =========== ========== ========= ========== ============= ===========
Audited
Cost
At 1 April
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 1 April
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
========== =========== ========== ========= ========== ============= ===========
At 30 September
2023 4,796,950 88,296 181,364 82,716 139,059 14,523,161 19,811,546
========== =========== ========== ========= ========== ============= ===========
At 30 September
2022 4,826,072 45,613 159,310 101,977 156,487 9,385,270 14,674,729
========== =========== ========== ========= ========== ============= ===========
At 31 March
2023 4,849,673 100,215 231,071 106,065 159,686 13,608,154 19,054,864
========== =========== ========== ========= ========== ============= ===========
7. Right-of-use asset
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March
2023
GBP GBP GBP
Opening net book value 2,022,672 1,743,736 1,743,736
Additions - 1,863 619,503
Depreciation (67,260) (43,366) (216,039)
Net disposals - - (124,528)
----------------- ----------------- ----------
Closing net book value 1,955,412 1,702,233 2,022,672
================= ================= ==========
8. Intangible assets (net book value)
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March
2023
GBP GBP GBP
Goodwill 1,075,520 1,075,520 1,075,520
Mining rights 3,844,333 3,844,333 3,844,333
Software 176,152 78,000 170,163
Closing net book value 5,096,005 4,997,853 5,090,016
================= ================= ==========
9. Escrow Funds
Unaudited Unaudited Audited
Six months to Six months to Year ended
Escrow Funds 30 September 2023 30 September 2022 31 March
2023
GBP GBP GBP
Carrying amount 4,107,892 5,564,319 5,146,986
================= ================= ==========
The funds held in escrow with a third party will be released
back to the Company on the cessation of mining once restoration
works have been completed. The amounts have been discounted to
present value over the expected useful life of the mine. During the
period, the discount rate was revised to 4.7% (30 September 2022:
4.1%) (31 March 2023: 3.7%) resulting in a loss of GBP1.0 million
in the six months to September 2023 (loss in period to 30 September
2022: GBP2.9 million) (loss in year to 31 March 2023: GBP3.5
million). The actual funds held in escrow at the period end were
GBP13,468,004 (30 September 2022: GBP13,228,692) (31 March 2023:
GBP13,230,653).
10. Provisions
Unaudited Unaudited Audited
Six months to Six months to Year ended
Restoration provision 30 September 2023 30 September 2022 31 March
2023
GBP GBP GBP
Carrying amount brought forward 5,701,771 9,526,485 9,526,485
Change in inflation and discount rate (1,015,494) (3,012,163) (4,205,774)
Unwinding of discount 112,917 188,662 381,060
Closing net book value 4,799,194 6,702,984 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 GBP13.2 million (30 September 2022: GBP13.2 million) (31
March 2023: GBP13.2 million).
The provision has been discounted using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset. The ultimate costs to restore
the mine are uncertain, and cost estimates can vary in response to
many factors, including estimates of the extent and costs of
rehabilitation activities, technological changes, regulatory
changes, cost increases as compared to the inflation rates and
changes in discount rates.
Management has considered these risks and used a discount rate
of 6.7% (30 September 2022: 6.1%) (31 March 2023: 5.7%), an
inflation rate of 2.5% to 7% over the life of the project (30
September 2022: 2.5% to 7%) (31 March 2023: 2.5% to 9%) and an
estimated mining period of 27 years (30 September 2022: 24 years)
(31 March 2023: 27 years).
11. Borrowings
Borrowings comprised:
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March
2023
GBP GBP GBP
Current
Lease liabilities 82,665 176,383 114,873
Convertible debt 6,675,795 - -
----------------- ----------------- ----------
6,758,460 176,383 114,873
Non-current
Lease liabilities 1,927,165 1,522,723 1,901,583
Convertible debt - - -
8,685,625 1,699,106 2,016,456
================= ================= ==========
The Group issued convertible loan notes in two tranches as
follows:
-- On 15 June 2023 - GBP3.975 million of Tranche A notes
-- On 15 August 2023 - GBP2.975 million of Tranche B notes
Interest on the convertible loan notes in the form of payment in
kind notes (PIK notes) is 20%. The final termination date of the
convertible loan notes is 14 June 2023. The normal conversion price
of the loan notes is GBP0.03 per share however under an equity
raise (excluding equity raised to certain qualifying shareholders,
on a normal conversion of the loan notes or on an issue of shares
in relation to warrants and share options) the conversion price is
equal to the issue price on the equity raise less a discount of
50%.
Under the terms of the convertible loan notes if the Company
breaches the terms of the agreement or an exit event occurs the
initial capital can be called in for repayment at a premium of
100%.
The Company was in breach of the terms of the CLN Agreement in
June 2023 and post period end prior to the issuance of the Tranche
C Notes. In each case the Note Holders waived the breaches such
that the Company was not in breach of the Agreement.
Further issues of Tranche C loan notes are disclosed in note
16.
12. Basic and diluted loss per share
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March
2023
GBP GBP GBP
Loss for the year ( 9,132,413) (5,126,282) (10,285,435)
------------------ ----------------- --------------
Number Number Number
Weighted average number of ordinary shares in issue 184,472,241 180,470,827 180,511,110
------------------ ----------------- --------------
Basic and diluted loss per share (0.050) (0.028) (0.057)
================== ================= ==============
The diluted loss per share calculations excludes the effects of
share options, warrants and convertible debt on the basis that such
future potential share transactions are anti-dilutive.
Were the Company's options and warrants to be converted, a
potential further 23,956,451 ordinary shares of between GBP0.01 to
GBP0.60 would be issued Information on share options and warrants
is disclosed in note 14. This figure excludes the conversion of any
CLN's in Note 11.
There were no shares issued subsequent to the end of the interim
period.
13. Share capital
Unaudited Unaudited Audited
Six months Six months Year ended
30 September 30 September 31
March
2023 2022 2023
Number of shares allotted Number Number Number
Ordinary Shares of GBP0.01 each 187,074,111 180,551,615 180,551,615
===================== =================== ==================
Nominal value GBP GBP GBP
Ordinary Shares of GBP0.01 each 1,870,741 1,805,516 1,805,516
===================== =================== ==================
Share issues during the period
During the period ended 30 September 2023 the following share
transactions took place:
-- The Company issued 6,522,496 ordinary shares of GBP0.01 each
for consideration of GBP0.03 per share.
14. Share options and warrants
Founder share incentives
The founder shareholders have a right to receive shares at a
nominal value once certain milestones are met.
The movements in the number of incentives during the year were
as follows:
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March 2023
Number Number Number
Outstanding at beginning
of period 18,229,148 18,229,148 18,229,148
Granted during the period - - -
Terminated on admission to - - -
AIM
Replacement share awards - - -
following admission to AIM
Exercised during the year - - -
Outstanding at end of
period 18,229,148 18,229,148 18,229,148
=========================== ========================== ======================
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 GBP143,603 and these options were fully vested in the
year ended 31 March 2022.
Share Options - Employees
EMI and ESOP
Share options have been issued to key employees as an incentive
to stay with the Company. These options can be exercised within one
and ten years following the grant date once the option has
vested.
The movement on the number of share options issued by the
Company during each period presented was as follows.
Unaudited Unaudited Audited
Six months Six months Year ended
to to
30-Sep-23 30-Sep-22 31-Mar-23
Number Number Number
Outstanding
at beginning
of period 1,533,333 1,683,333 1,683,333
Granted during 40,910 - -
the period
Lapsed during
the period - (100,000) (150,000)
----------- ----------- -----------
Outstanding
at end of period 1,574,243 1,583,333 1,533,333
=========== =========== ===========
The exercise price of share options issued to key employees
ranges between GBP0.30 and GBP0.45 (30 September 2022: GBP0.01 and
GBP0.45) (31 March 2023: GBP0.30 and GBP0.45) and their remaining
contractual life was 9 years (30 September 2022: 10 years) (31
March 2023: 9.5 years.).
CSOP share options
Share options have been issued to key employees as an incentive
to stay with the Company. These options can be exercised within
three and ten years following the grant date once the option has
vested.
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March 2023
Number Number Number
Outstanding at beginning of 2,583,316 - -
period
Granted during the period - 2,799,982 2,799,982
Exercised/lapsed during the
period (474,236) - (216,666)
Outstanding at end of period 2,109,080 2,799,982 2,583,316
========================== ========================== ======================
The exercise price of share options outstanding at 30 September
2023 was GBP0.275 and their remaining contractual life was 9
years.
The exercise price of share options outstanding at 31 March 2023
was GBP0.275 (2022: GBPnil) and their remaining contractual life
was 9 years and 6 months.
Warrants
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 movement on the number of warrants issued by the Company
during each period presented was as follows.
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March 2023
Number Number Number
Outstanding at beginning of
period 2,170,740 4,095,219 4,095,219
Granted during the period - - -
Exercised during the period - (1,183,400) (1,183,400)
Expired during the period (126,760) - (741,079)
Outstanding at end of period 2,043,980 2,911,819 2,170,740
========================== ========================== ======================
At 30 September 2023 the exercise price of warrants outstanding
ranged between GBP0.01and GBP0.60 and their remaining contractual
life was 1 month to 3 months.
At 31 March 2023 the exercise price of warrants outstanding
ranged between GBP0.01 and GBP0.60 and their remaining contractual
life was 3 months to 9 months.
15. Commitments
Capital commitments
As at 30 September 2023 the Group had contracted to purchase
property, plant and machinery amounting to GBP2,329,060. (30
September 2022: GBP4,173,277). (31 March 2023: GBP3,754,738). An
amount of GBP123,320 (31 March 2023: GBP123,320) (30 September
2022: GBP123,320) is contingent on the commencement of mining
operations.
Other financial commitments
The total amount of other financial commitments not provided in
the financial statements was GBP9,329,000 (30 September 2022:
GBP10,329,000) (31 March 2023: GBP10,329,000) payable on the
commencement of mining operations and represented contractual
amounts due to the mining contractor and further committed payments
to the funds held in the escrow account under the escrow
agreement.
Included within other financial commitments is GBP3,000,000 (30
September 2022: GBP5,000,000) (31 March 2023: GBP4,000,000) which
is considered to be payable annually.
16. Events after the end of the interim reporting period
On 18 December 2023 the Group issued GBP1.8 million of Tranche C
convertible loan notes which carry the same terms and conditions as
the other convertible loan notes as disclosed in note 11.
As disclosed above, the Group was in breach of the terms of the
agreement post period end. These breaches were waived by all Note
holders whether they subscribed to Tranche C or not in December
2023.
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END
IR DFLFLXLLEFBZ
(END) Dow Jones Newswires
December 22, 2023 02:00 ET (07:00 GMT)
Tungsten West (LSE:TUN)
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De Mar 2024 a Abr 2024
Tungsten West (LSE:TUN)
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