REG - Tungsten West PLC - Finance and Trading Update

Tungsten WestAnnouncement

13/09/2022 07:00

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RNS Number : 2390Z  Tungsten West PLC  13 September 2022

Tungsten West Plc

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

 

Finance and Trading Update

 

 

Tungsten West plc (LON: TUN), the mining company focussed on restarting
production at the Hemerdon tungsten and tin mine ("Hemerdon" or the "Project")
in Devon in the UK provides this update on progress with financing and
construction.

 

 

Project Progress:

 

As announced on 19(th) July 2022 the Company committed to detailed engineering
design and to commencing construction based on a new development plan (the
"Plan") developed in response to global crises in power and diesel costs and
widely publicised inflationary pressures.

 

The Plan has been independently scrutinised and accepted by the Company's
preferred funding partners. The Company is happy to announce that it has
signed a non-binding term sheet for a USD $30m (approximately £26m) royalty
investment. (the "Term Sheet") (the "Royalty").

 

The Company has confidence that the conditions precedent for the drawdown of
the royalty investment as set out in the Term Sheet and as summarised below,
can be met and has committed to pushing ahead with the construction of the
Hemerdon Project and the enactment of the Plan utilising its existing
financial resources.

 

Further refinements to the Plan have been made over the summer months and a
construction schedule and final cap-ex budget is expected to be received from
Tungsten West's EPC contractor Fairport Engineering by the end of September
2022. The Company will update the market with this information once finalised.

 

In the meantime enabling works have commenced, equipment orders have been
placed, and a recruitment process enacted; all whilst the refurbishment of the
processing plant has been, and remains, ongoing.

 

Project milestones include:

 

·      Orders have been placed for a number of long-lead time items,
including the new semi-mobile primary and secondary crushing circuit which is
being supplied by MO Group (Metso-Outotec of Finland.)

 

·      As previously announced the seven ore sorters required for the
plant upgrade have already been delivered in warehouse in the UK. Expressions
of interest to purchase three of these units that are surplus to requirements
under the new Plan have been received from third parties.

 

·      Construction of new screens and vibrating feeders as provided by
Vibramech of South Africa is complete and they are in transit to the UK.

 

·      The Company has signed a letter of intent with EPC Groupe for the
provision of drill and blast services during the restart of mining operations.

 

·      The Company has identified a 50-acre site within 1.2km of
Hemerdon that is suitable for the installation of 9MW - 12MW of solar energy
production and has commissioned a scoping study to be followed by a separate
feasibility study into developing this project. The scoping study will be
completed within four weeks and the feasibility study is expected before the
end of December 2022. (Peak energy consumption for the processing plant is
calculated at circa 7MW.)

 

·      Three potential sites suitable for the installation of wind
turbines have been identified within the mine boundary, on land owned by the
Company. A scoping study has been commissioned into the feasibility of
building our own dedicated wind turbine with a private connection into the
processing plant, including planning and permitting requirements.

 

·      Progress continues in the plant refurbishment and upgrade, with
works within the tertiary crushing circuit now completed. 67% of the plant
refurbishment programme is now complete.

 

·      Refurbishment of the on-site lab has been completed and it is now
capable of providing internal assay and metallurgical analysis.

 

·      Earthworks for the installation of the new ore sorting building
have been completed.

 

 

Financing:

 

The Royalty:

 

Subject to the proposed investor's investment committee approval the Company
has agreed a non-binding term sheet for a US$30 million (approximately £26
million) royalty sale with a global mine royalty investment fund and is
working towards agreeing definitive documentation and meeting conditions
precedent ("the expected CPs") to the sale of the Royalty as set out in the
Term Sheet and which include:

 

•           The completion of customary legal, tax, commercial,
financial and technical due diligence

•           A site visit including necessary representatives or
agents of the proposed Royalty holder

•           The good standing of all applicable permits and
licences

•           The Company having entered into off-take agreements
which meet the Royalty holder's requirements

•           The finalisation of appropriate security over project
assets; and

•           Obtaining all required shareholder, director, or
regulatory approvals.

 

An update to the Feasibility Study of March 2021 commenced in July 2022 to
reflect the new Plan (the "Updated Feasibility Study"). The completion of the
Updated Feasibility Study is a CP for the completion of the Royalty sale and
is expected to be completed in November 2022. As with the original study it is
being independently verified by AMC Consultants. (Note: Completing the Updated
Feasibility Study will not delay commencement of construction activities.)

 

Key Terms of the Royalty

 

The Term Sheet includes the following key terms:

 

 Royalty rate      4.75% until the successful production, processing, and sale of seven million
                   metric tonne units (70,000 t) of WO(3), following which it will reduce to
                   2.375%

 Term              Life of the mine

 Payment Schedule  Quarterly in arrears

 Covenants         The Royalty will be subject to certain monthly reporting covenants and
                   customary representations, undertakings and events of default

 Buy-Back Option   The Company has the right to buy back 50% of the royalty within the first four
                   years for a single payment of $30m
 Security          The Royalty will be secured on a subordinated basis to other potential asset
                   backed or other financing

 

 

 

In addition to the above Royalty sale, the Company is in advanced discussions
with asset backed finance providers in order to secure additional finance of
between £5m and £10m secured against fixed and mobile equipment, and spare
parts. These monies are required for general corporate purposes, for cost
over-run contingencies and to maintain a cash buffer during commissioning.

 

The Company is not seeking a project finance facility in the expectation that
the Royalty and asset backed finance monies, plus cash on hand, are sufficient
to finance the Company through to positive cash flow.

 

Cash on hand as of 31(st) August 2022 is: £17.0m

 

 

Energy Prices:

 

Further extreme volatility has been witnessed in UK diesel and power prices
over the summer months and the Company continues to monitor forward curves
closely. The Company recognises the importance of delivering the project
before Q3 2023 in order to benefit from the lower summer power prices.

 

The below chart shows how forward curves have evolved since June 2022 with the
green line being the current curve.

 

UK Power curves on 22(nd) April, 22(nd) June and 5(th) September 2022

 

 

 

Site Visit by Liz Truss MP:

 

The then Foreign Secretary (now Prime Minister) Liz Truss MP visited the
Hemerdon site on Monday 1(st) August and discussed UK Critical Minerals
Policy, the permitting of renewable energy sources and the tax regime for the
UK Mining Industry with Executive Vice-Chairman Mark Thompson and leading
Tungsten West shareholders.

 

 

 

Staffing - options scheme and recruitment drive:

 

Tungsten West recognises the importance of recruiting and retaining high
quality staff in delivering the Hemerdon project. In addition to paying
competitive salaries the Company is instituting an employee share option
scheme. All existing members of staff will participate in the options scheme.

 

The Company is actively recruiting key personnel required to progress and
manage the construction and recommissioning of the mine. Headcount is expected
to increase in the coming months from 64 to 84. Additional operating staff
will be recruited in 2023 as part of preparation for operational readiness.

 

 

Further Updates

 

The Company will update the market with final capex estimates, project
schedule and life of mine financial metrics as soon as it is able to do so.
Further additional updates will be provided on a regular basis detailing
construction progress.

 

 

 

Tungsten West's Executive Vice-Chairman, Mark Thompson, commented:

 

"The agreement of a non-binding term sheet for a royalty sale is an important
step forward in securing the finance required to enact the Plan. We have taken
a conscious decision to seek a larger royalty sale, and no project finance
debt in the belief that this will better protect shareholders' long-term
interests in these extremely volatile and unpredictable times.

 

It was a great pleasure and honour to host the Prime Minister on site and to
have the opportunity to explain and discuss the crucial role of Tungsten for
key UK industries including defence, oil and gas production, and the
automotive and aerospace manufacturing sectors. Discussions with the
Government on the points raised are ongoing, both directly and through the
Critical Minerals Association, with the hope that the requested policy
assistance will be forthcoming.

 

The next few months are key for Tungsten West as we work through completing
the CP's for drawing down on our finance package whilst pushing ahead with
construction from existing cash reserves. We are mindful that macro events can
change quickly and are running as fast as we can whilst being careful not to
overextend commitments until the CPs for the royalty drawdown have been met."

 

 

This announcement contains inside information for the purposes of Article 7 of
Regulation 596/2014 as amended by the Market Abuse (Amendment) (EU Exit)
Regulations 2019.

 

 

 Tungsten West                                                            Strand Hanson

 Mark Thompson                                                            (Nominated Adviser and Financial Adviser)

 Tel: +44 (0) 203 178 7385                                                James Spinney / James Dance / Abigail Wennington

                                                                          Tel: +44 (0) 207 409 3494
 Camarco                                                                  Hannam & Partners

 (Financial PR)                                                           (Joint Broker)

 Gordon Poole / Emily Hall                                                Andrew Chubb / Nilesh Patel

 Tel: +44(0) 20 3757 4980                                                 +44 (0)20 7907 8500

 Email: tungstenwest@camarco.co.uk (mailto:tungstenwest@camarco.co.uk)

                                                                          VSA Capital Group plc

                                                                          (Joint Broker)

                                                                          Andrew Raca / Andrew Monk

                                                                          +44 (0)20 3005 5000

Follow us on twitter @TungstenWest

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