REG - Tungsten West PLC - Final Results for the year ended 31 March 2023
14/09/2023 07:15
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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, £6.95 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 Adviser)
Tel: +44 (0) 1752 278500 James Spinney / James Dance / Abigail Wennington
Tel: +44 (0) 207 409 3494
BlytheRay VSA Capital Limited
(Financial PR) (Financial Adviser and Joint Broker)
Tim Blythe / Megan Ray Andrew Raca / Andrew Monk
Tel: +44(0) 20 7138 3204 Tel: +44 (0)20 3005 5000
Email: tungstenwest@blytheray.com
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 £297 million (base case)
with an Internal Rate of Return ("IRR") of 25%
· An Upside case post-tax NPV((5%)) of £415 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 £7.2 million of new funds from issuing
convertible loan notes and open offer. An additional £2.0 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 Crushing Circuit Extensive repair and redesign of the surge bin to increase longevity in
high-wear areas and minimise future downtime.
Area 140 - Primary DMS Inspection and re-refurbishment of the agitators.
Area 150 - Primary Mill Refurbishment of the Primary Mill including electrical inspection and testing.
Inspection of drive shaft alignment and lubrication systems to ensure they are
fit for production.
Area 160 - Shaking Tables Overhaul of all tables and redesign of the spray bar 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 water tank Design manufacture and installation of an access door on the tank to allow for
removal of silt build up. This will reduce future downtime for maintenance.
Area 390 - Process water tank Sand blasting and application of a wear resistant paint 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
£118,000 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
(https://assets.ey.com/content/dam/ey-sites/ey-com/en_au/topics/corporate-social-responsibility/ey-you-cant-be-what-you-cant-see-20220923.pdf)
). 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
£
£
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)
£ £
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
Note 31 March 31 March
2023
2022
£
£
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 capital Share premium Share option reserve Warrant reserve Retained earnings Total
£
£
£
£
£
£
At 1 April 2021 6,856 12,327,484 67,840 754,586 (11,413,116) 1,743,650
Loss for the year - - - - (12,988,988) (12,988,988)
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
Note 2023 2022
£
£
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 17 (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 registered The principal place 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 £36.0 million net of
fees by way of an initial public offering and at the year-end, had £3.4
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 £7.2 million gross of fees.
There is an additional facility in place to issue a further £2.0 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
(£3.975million) and Tranche B (£2.975 million) of the CLN and had £2.5
million in cash reserves. The Group anticipates issuing £2.0 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
£60 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:
Asset class Depreciation method 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 £24.1 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, £13.6
million (2022: £3.9 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 £Nil. 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 £1.2 million to 1.6 million (2022: £1.9 million) on
the restoration provision. A 5% change in cost on the Group's restoration
estimates would result in an impact of £0.3 million (2022: £0.5 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 £1.1 million to £1.5 million (2022: £1.7 million) on
the escrow account valuation. A one-year change in useful mining life would
result in an impact of £0.2 million (2022: £0.1 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
£
£
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
£
£
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
£
£
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
£
£
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
£
£
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
£
£
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
£
£
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
£
£
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 £Nil (2022: £Nil) paid in shares
rather than cash.
Remuneration by each Director is as follows:
2023 2023 2023 2023 2023 2023
Share-based payment
Salary Pension Loss of office Benefits
£
£
£
£
£
Total
£
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
Share-based payment
2022 Pension 2022 Benefits
£ 2022
£
£
Salary Loss of office
£
£
Total
£
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
£
£
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
£
£
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
£
£
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 300,510 90,608
(tax loss)
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 2,294,986 2,402,009
recognised
Total tax credit (544,602) -
Deferred tax
Group
2023 2023 2023 2023 2023
Intangibles
Tangibles
Losses
Other
Total
£
£
£
£
£
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 £Nil is made up of a liability of £1,390,346 and
asset of £1,390,346. The unrecognised deferred tax asset for carried forward
losses at 31 March 2023 was £7,730,527.
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
£
£
£
£
£
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 £Nil is made up of a liability of £1,397,789 and
asset of £1,397,789. The unrecognised deferred tax asset for carried forward
losses at 31 March 2022 was £3,653,030.
14 Basic and diluted loss per share
Basic and diluted loss per share is calculated as follows:
2023 2022
£
£
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
Group Land and Furniture, fittings and equipment Computer equipment Motor Other property, plant and equipment Asset under construction Total
buildings
£
£
vehicles
£
£
£
£
£
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 £4,142,662
(2022: £4,210,953) in respect of freehold land and buildings.
Impairment - Asset under construction
The amount of impairment loss included in profit and loss is £108,947 (2022:
£nil). 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
£
£
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
£216,039 (2022: £101,169). Interest expense on lease liabilities charged
through the profit and loss totals £101,772 (2022: £87,838).
Lease liabilities
2023 2023 2023
Future lease payments
Discount
Lease liability
£
£
£
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 2022 2022
Future lease payments
Discount
Lease liability
£
£
£
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
£
£
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
£
£
£
£
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 £1,075,520. The whole balance is attributable to
goodwill.
The carrying amount of the mining rights is £3.844 million (2022: £3.844
million). The mining rights will begin to be amortised when mining operations
restart.
Software amortisation of £21,360 (2022: £6,599) 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
Drakelands Restoration Limited* Mining of tungsten and tin Shakespeare Martineau LLP, 100% 100%
6th Floor,
60 Gracechurch Street, London,
United Kingdom
EC3V 0HR
England and Wales
Tungsten West Services Limited* Provision Shakespeare Martineau LLP, 100% 100%
of services to the Group
6th Floor,
60 Gracechurch Street, London,
United Kingdom
EC3V 0HR
England and Wales
Aggregates West Limited* Sales of aggregates Shakespeare Martineau LLP, 100% 100%
6th Floor,
60 Gracechurch Street, London,
United Kingdom
EC3V 0HR
England and Wales
* Indicates direct investment of Tungsten West plc in
the subsidiary.
19 Escrow funds
31 March 31 March
2023
2022
£
£
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 £3,495,064 (2022:
£1,783,221). The actual funds held in the escrow account at year end were
£13,230,653 (2022: £13,203,139).
20 Trade and other receivables
31 March 31 March
2023
2022
£
£
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 £69,873
(2022: £46,936).
21 Cash and cash equivalents
31 March 31 March
2023
2022
£
£
Cash at bank 3,438,018 28,755,388
22 Inventories
31 March 31 March
2023
2022
£
£
Inventories 114,173 156,944
23 Trade and other payables
31 March 31 March
2023
2022
£
£
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
£
£
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
£
£
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 £10,044,000,
together with any accrued (but unpaid) interest thereon, which at the date of
conversion was £736,560, by the effective conversion price, which is 30p.
Movement in liability
31 March 31 March
2023
2022
£
£
Brought forward - 10,311,840
Interest expense - 468,720
Converted to equity shares - (10,780,560)
Carried forward - -
25 Provisions
Group
Restoration provision Total
£
£
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 £13,201,256 (2022: £13,201,256).
The provision has been discounted using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific
to the asset. The ultimate costs to restore the mine are uncertain, and cost
estimates can vary in response to many factors, including estimates of the
extent and costs of rehabilitation activities, technological changes,
regulatory changes, cost increases as compared to the inflation rates and
changes in discount rates.
Management has considered these risks and used a discount rate of 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 £161,908 (2022: £116,383).
Contributions totalling £33,233 (2022: £30,960) 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. £ No. £
Ordinary Shares of £0.01 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
£
£
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
£0.0001 each for considerations ranging from £0.45 to £0.60 per share.
• On 22 July 2021 a bonus issue of shares from the
share premium account created 7,525,125,729 Ordinary Shares of £0.0001 each.
• On 22 July 2021 a share capital consolidation took
place whereby each one hundred Ordinary Shares of £0.0001 each were
consolidated into one Ordinary Share of £0.01 each.
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 £0.45 - £0.60
Exercise price £0.01 - £0.60
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
£0.01 and £0.60 and their remaining contractual life was 3 months to 9
months.
The exercise price of warrants outstanding at 31 March 2022 ranged between
£0.01 and £0.60 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 £0.01.
Part of one of the founders' option agreement were share options issued in
their capacity as a Director and were dependent on their continuing
employment, and therefore 243,333 options have been accounted for under IFRS
2. This resulted in a charge to the income statement of £nil (2022:
£143,603) 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 £0.45 - £0.60
Exercise price £0.01 - £0.45
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 £0.30 and £0.45 (2022: £0.01 and £0.45) 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 Price £ Options Average Exercise Price £ 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 £0.275
Exercise price £0.275
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 £0.275
(2022: £nil) and their remaining contractual life was 2 years and 6 months.
31 March 2023 31 March 2022
Average Exercise Price £ Options Average Exercise Price £ 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 £3,754,738 (2022: £7,208,997). An amount of £123,320 (2022:
£123,320) 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 £10,329,000 (2022: £11,329,000) 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 £4,000,000 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 leases Other Converted At 31 March
2022
cash flows
£
changes
to equity
2023
£
£
£
£
£
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 leases Other Converted At 31 March
2021
cash flows
£
changes
to equity
2022
£
£
£
£
£
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 2023 2022
Financial assets
Financial assets
Financial assets
Financial assets
at amortised cost
at amortised cost
at FVTPL
at FVTPL
£
£
£
£
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 2023 2022
Financial liabilities at amortised cost
Financial liabilities at amortised cost
Financial liabilities at FVTPL
Financial liabilities
£
£
£
at FVTPL
£
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 -
£52,500) 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. £166,320 of interest accrued on these bonds
during the year and interest due on these bonds at the prior year end was
£Nil.
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:
Standard or Interpretation Effective for annual periods
commencing on or after
Definition of Accounting Estimates - Amendments to IAS 8 1 January 2023
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice 1 January 2023
Statement 2
Deferred Tax related to Assets and Liabilities arising from a Single 1 January 2023
Transaction - Amendments to IAS 12
Amendments to Insurance contracts in IFRS17 1 January 2023
Lease Liability in a Sale and Leaseback - Amendments to IFRS 16 1 January 2024
Classification of Liabilities as Current or Non-current - Amendments to IAS 1 1 January 2024
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 £6.95 million by way of
convertible loan notes (CLN) and £2.0 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 £6.95 million by way of convertible loan
notes and £195,675 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 £3.975 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
£250,000 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 £6.95 million principal plus £0.27m 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 £2.975 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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