REG - Tungsten West PLC - Half Year Results
12/12/2022 07:00
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RNS Number : 2921J Tungsten West PLC 12 December 2022
12 December 2022
Tungsten West Plc
("Tungsten West", the "Company" or the "Group")
Half Year Results for the six months ended 30 September 2022
Tungsten West, the owner and operator of the Hemerdon Mine (the "Project") in
South West England, is pleased to announce its half-yearly results for the six
months ended 30 September 2022 (the "Period").
First Half and Post Period Highlights:
· Board approval of the re-optimised Project, with plant
commissioning starting in H1 2023.
· Mining operations scheduled to recommence in H2 2023.
· Feasibility Study for the Project is nearing completion and summary
results are expected to be released before the end of the year.
· Loss for the period of £5.1 million.
· Capital expenditure for the period of £6.4 million.
· Existing plant re-build and enhancement works c.70% complete.
· The Company had cash reserves of £14.9 million at 30 September
2022.
· Non-binding term sheet agreed for US$30 million royalty sale.
· Capex estimates received.
· All orders for long lead items placed.
· Successful recruitment of senior management team with all key
positions onboard.
Overview
Against the backdrop of the global energy crisis, coupled with rising
inflation, the Group spent the first half of the financial year re-evaluating
the Project, to minimise project capex associated with the front-end re-build
and reduce opex, particularly energy consumption.
The financial year began with the Board taking the decision to pause the
Project, as it was clear to management that due to significant and rapid
inflationary pressures on capex, consumables and energy, the operational plan
under the March 2021 Bankable Feasibility Study (the "BFS"), was no longer
optimal and sustainable.
This led to extensive technical and commercial reviews of the assumptions that
underpinned the BFS and after a detailed optioneering process, the Board was
able to announce, in July, that a viable plan for the restart of the Project
had been determined and commissioned the updating of the Feasibility Study to
confirm this. July also brought a change in management, as Max Denning left
his role as CEO with Executive Vice-Chairman Mark Thompson taking on the
responsibilities for the office of CEO with immediate effect.
With the Project re-optimised, the management team was able to turn its focus
to financing the revised capital requirements and, in September 2022, the
Company agreed a non-binding term sheet for a US$30 million (approximately
£26 million) royalty sale. We anticipate closing the transaction in the first
quarter of 2023, subject to completion of satisfactory due diligence.
Following the decision to continue with the re-optimised Project, headcount
increased with project, maintenance, administration, and technical teams being
strengthened. Headcount was 61 at 30 September 2022, with another 15 scheduled
to join the business before 31 December 2022, further strengthening the
Company's position to deliver on the Project in H2 2023.
In November 2022, the Company received the capex budget and construction
schedule from the EPCM (Engineering, Procurement and Construction Management)
contractor, Fairport Engineering Limited. The budget was within the
contingency applied to the previous budget.
Review of activities
Following the announcement of the decision to pause the Project in April 2022,
the Group's immediate objective for the first half of the financial year was
on re-optimisation studies. In light of the increased cost inputs,
predominantly construction materials, electricity and diesel, a new plan was
presented to the Board and subsequently approved in July 2022, leading the way
for detailed engineering and construction to start with immediate effect.
The new approach focuses on:
Process Changes Key benefits
New crushing strategy. Direct tipping into modular crushing and screening plant, located outside the Reduced capex, faster route to production and lower opex.
mineral processing facility.
New operating parameters for ore sorting. Utilisation of four of the seven ore sorters, reducing volume accepted (lower Reduced capex, less maintenance, lower power draw, less waste processed.
mass pull) and therefore increasing the grade of ore to be processed.
Re-purposing of equipment within the processing plant. Lower throughput presents an opportunity to repurpose the Secondary DMS as the Initial lower capex, lower opex, scalable at a later date if required.
Primary DMS.
New mine plan. Delayed waste stripping, accelerating positive cashflow in year one. Lower opex, lower diesel consumption, reduced emissions.
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 the MO Group. The ore sorters have been delivered to the UK and are
currently being stored whilst, post-period end, all required Vibramech screens
have been delivered to site.
Running in parallel to the front-end rebuild are the mineral processing
facility enhancements and upgrades. The following key works have been
completed at the time of this report:
Area Enhancements Increase Efficiency Reduces Future Downtime Reduces Future Maintenance
Chutes Replacement of wear plates in conveyor chutes and installation of new rock box ü ü ü
designs to cut down on wear.
Conveyors Replacement belts and renewal of drums, bearings, and scrapers throughout the ü ü
processing plant.
Pumps Removal of previously installed pumps and inspection and test of the drive ü ü
motors.
Area 130 - Tertiary Crushing Circuit Extensive repair and redesign of the surge bin to increase longevity in ü ü ü
high-wear areas and minimise future downtime.
Area 140 - Primary DMS Inspection and re refurbishment of the agitators. ü ü
Area 150 - Primary Mill Refurbishment of the Primary Mill including electrical inspection and testing. ü ü
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 ü ü
failure due to excessive vibration.
Area 180 - Feeders Redesign of both the 180 feeders to include side skirts and return rollers, ü ü ü
new guarding manufactured and installed.
Area 200 - Refinery Mechanical overhaul of both the pre dryer and tin dryer. ü ü
Area 390 - Raw water tank Design manufacture and installation of an access door on the tank to allow for ü ü ü
removal of silt build up.
Area 390 - Process water tank Sand blasting and application of a wear resistant paint. ü ü
Sales of aggregates continued throughout the reporting period, with £117,000
revenue being recognised. The Group ceased its production of aggregates from
waste material left by the previous operator after selling 102,000 tonnes of
material and demonstrating the ability to establish a market for the product.
Aggregates production will recommence as the mineral processing ramp up
completes. Product mix and volumes will be in line with mine waste facility
strategy and valid permits.
The Company has also sold 120 tonnes of low-grade tungsten concentrate for a
combined value of £90,000. The Company continues to work with potential
buyers to sell the remaining inventory of tungsten and tin concentrate stocks
and preconcentrate.
At 30 September 2022, the Group employed 61 staff (excluding directors) (47
staff members as at 30 September 2021). Since the July announcement to restart
the Project, the Company has been scaling up its workforce to enable it to
deliver the plant re-build project, and progress towards operational
readiness.
CORPORATE
Following the revised plans to reduce project capex and re-optimise the
mineral processing facility, certain conditions precedent to drawing the 2021
funding packages were not met, resulting in the Company entering into new
discussions with financing partners to provide the additional capital.
In September, subject to the proposed investor's Investment Committee
approval, the Company agreed a non-binding term sheet for a US$30 million
(approximately £26 million) royalty sale with a global mine royalty
investment fund. The Company is in ongoing discussions with other providers of
capital to secure the remaining capital required to complete the Project.
These monies are required for capex and opex purposes, for cost over-run
contingencies and working capital during commissioning and ramp-up. It is
anticipated that the funding required to complete the Project will be
available during the first quarter of 2023.
In April 2022, the Company received £284,351 through the exercise of
1,183,400 warrants.
In September 2022, the Company granted 2,799,982 share options to employees,
including the Chief Financial Officer, Managing Director, Executive
Vice-Chairman and employees pursuant to the Company Share Option Plan ("2022
CSOP") and Employee Share Option Plan ("2022 ESOP"). The options are
exercisable at a price of £0.275 per ordinary share of £0.01 each in the
capital of the Company ("Ordinary Share"), being mid-market closing price on
21 September 2022, in accordance with the conditions of the 2022 CSOP and 2022
ESOP. The options will vest three years from the date of grant. The Board
considered it important to have equity incentives being issued to staff at all
levels. The options granted represent 1.55% of the existing Ordinary Shares in
issue.
There was one Board change during the period with CEO Max Denning departing
and Executive Vice-Chairman Mark Thompson assuming his CEO responsibilities.
Results
The Group invested £6.4 million of capital expenditure during the Period.
This was committed to equipment purchase and down payments, mineral processing
facility upgrades and enhancements, as well as design and engineering costs
for the crushing and ore sorting circuits. In addition, the Group has made
£2.3 million stage payment deposits for plant and equipment, and £0.3
million deposit for contractor services. These are recognised as other
receivables until delivered to site or services performed. Operating cash
outflows were £7.7 million with significant prepayments for services made in
the first half.
The Group made a half-yearly loss after taxation of £5,126,282 (2021
half-year: £4,990,226). This was within expectations for the Project at its
current stage of development. Staff costs and other opex increased
significantly compared with the prior year's comparable period, reflecting the
scaling up of operations as the Project nears commercial production.
communiTy and Sustainability
As well as ensuring compliance with all environmental legal obligations
required at the Hemerdon Mine, Tungsten West has developed an ESG Strategy,
which aligns with UN Sustainable Development Goals, International Finance
Corporation Performance Standards, and the Sustainability Accounting Standards
Board.
The Company's mission is to become a world-leading producer of tungsten and
tin, committed to adhering to international standards in mining operations,
environmental conservation and safe working practices to enable the delivery
of excellence and growth for our partner communities, investors, employees
and other stakeholders.
Tungsten West is committed to a vision of a safe and sustainable service
delivered throughout the business with professionalism, attention to detail
and the empowerment of employees. Tungsten West prides itself on its respect
for the environment, community, health, safety, sustainable working practices,
and meeting the needs and expectations of its interested parties.
Providing significant economic benefits to the people and communities
surrounding the mine, as well as the UK as a whole, is an important
consideration for the Company.
· Tungsten West has invested over £2.9 million in goods and services
sourced from Devon and Cornwall in the six months to 30 September 2022.
· Just over 77% of Tungsten West's total spend in the six months to 30
September 2022 has been made in the UK.
· 26% of staff employed by Tungsten West live in the two postcode areas
closest to the mine, and a further 55% of the workforce live in PL postcodes
(Plymouth and the wider area).
· 96% of employees live in Devon and Cornwall at the date of this
report reflecting the Company's recruitment policy to hire from the local
population.
· The average Tungsten West salary is £53,000, significantly above
the average for the region.
· Tungsten West is pursuing a number of renewable energy projects to
reduce the Project's carbon footprint including solar PV and hydro-energy
schemes.
· RheEnergise, the company Tungsten West is working with, recently
announced Government grant funding of £8.25 million for a prototype hydro
energy scheme at the Hemerdon Mine.
· To date Tungsten West has supported five local community initiatives
with donations of just over £2,850, with more planned pre-production.
· Tungsten West launched its Company values - care, integrity,
teamwork and excellence.
outlook
The tungsten markets remain quiet with the European Metal Bulletin Ammonium
Para-Tungstate price being reported at circa US$335 per Metric Tonne Unit
(MTU) (1 MTU = 10 kilograms). The near-term outlook for prices will likely
be driven by the Chinese domestic market. Most recent official figures show
Chinese growth is slowing compared to the levels of growth seen for decades.
As China begins to find fewer customers for its products both on the domestic
and international stage, demand for raw materials such as tungsten will drag.
However, in the USA, we have seen continued growth and an increase in demand
for US domestic oil and gas, meaning the demand for tungsten outside of China
remains strong which might be augmented with an increase in global defence
spending fueled by the Ukraine and Russia conflict.
Tin prices have fallen since their spectacular performance in 2021 and now
hover around US$24,000 per tonne at the date of this statement. Despite the
fall in price, tin is a major component in the global drive towards clean
energy and whilst a by-product of the tungsten operations, on latest BGS
figures (2020), Tungsten West would be one of the top 20 global tin producers.
In the long term, the Company expects a floor price closer to US$25,000 -
US$30,000 per tonne.
The Company and the Board acknowledge that this is a challenging project and
there are risks that could impact the Company's ability to reach construction
through to commercial production. The principal risks and uncertainties are
outlined in the Company's most recent consolidated accounts on pages 40 - 44,
which can be found on www.tungstenwest.com.
General
The accompanying condensed consolidated interim financial statements were
approved for issue by the Board on 9 December 2022.
Cautionary statement
This document contains certain forward-looking statements in respect of the
financial condition, results, operations and business of the Group. Whilst
these statements are made in good faith based on information available at the
time of approval, these statements and forecasts inherently involve risk and
uncertainty because they relate to events and depend on circumstances that
will occur in the future. There are a number of factors that could cause the
actual results of developments to differ materially from those expressed or
implied by these forward-looking statements and forecasts. Nothing in this
document should be construed as a profit forecast.
Enquiries
Tungsten West Strand Hanson
Mark Thompson (Nominated Adviser and Financial Adviser)
Tel: +44 (0) 203 178 7385 James Spinney / James Dance
Tel: +44 (0) 207 409 3494
Blythe Ray Hannam & Partners
(Financial PR) (Joint Broker)
Tim Blythe / Megan Ray Andrew Chubb / Nilesh Patel
info@blytheray.com Tel: +44 (0)20 7907 8500
Tel: +44 (0) 20 7138 3204
VSA Capital
(Joint Broker)
Andrew Monk
Tel: +44 (0)20 3005 5000
Further information on Tungsten West Limited can be found at
www.tungstenwest.com
Overview of Tungsten West
Tungsten West is the 100 per cent owner and operator of the past producing
Hemerdon tungsten and tin mine, located near Plymouth in southern Devon,
England. The Hemerdon mine is currently the world's third largest tungsten
resource, with a JORC (2012) compliant Mineral Resource Estimate of
approximately 325Mt at 0.12 per cent. WO(3). The Company acquired the mine out
of a receivership process in 2019 after its most recent operators, Wolf
Minerals, stopped production in 2018. While it was operator, Wolf invested
over £170 million into the development of the site, the development of
significant infrastructure and processing facilities. Hemerdon was producing
tungsten and tin materials, under Wolf, between 2015 and 2018, before the
Company entered administration and placed the mine into receivership due to a
number of issues that have since been identified and rectified by Tungsten
West.
Independent Auditor's Review Report on Interim Financial Information
Conclusion
We have reviewed the accompanying Consolidated Statement of Financial Position
of Tungsten West Plc as of 30 September 2022 and the related Consolidated
Income Statement, Consolidated Statement of Change in Equity and Consolidated
Statement of Cash-Flows for the six-month period then ended, and a summary of
significant accounting policies and other explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the accompanying interim financial information does not give a
true and fair view of the financial position of the Group as at 30 September
2022, and of its financial performance and its cash flows for the six-month
period then ended in accordance with UK-adopted International Accounting
Standard 34.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity." A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing and consequently does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410, however future events
or conditions may cause the entity to cease to continue as a going concern.
Responsibilities of directors
Management is responsible for the preparation and fair presentation of this
interim financial information in accordance with International Accounting
Standard 34. In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
relating to going concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for conclusion paragraph of
this report.
Other matters
The Group did not opt to have a review for the period ended 30 September 2021
and consequently the comparative information, which is derived from that
interim financial information, is unreviewed.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company, for our review work,
for this report, or for the conclusions we have formed.
PKF Francis Clark
North Quay House
Sutton Harbour
Plymouth
Devon
PL4 0RA
Date: 9 December 2022
Consolidated Income Statement
Unaudited Unaudited Audited
Six months to Six months to Year ended
Note 30-Sep-22 30-Sep-21 31-Mar-22
£ £ £
Revenue 4 208,217 200,887 673,509
Cost of sales (1,959,326) (2,844,474) (4,028,123)
Gross loss (1,751,109) (2,643,587) (3,354,614)
Administrative expenses (3,323,977) (1,763,573) (7,998,774)
Other operating income - - 4,237
Other gains/(losses) 107,292 198 (846,373)
Operating loss 5 (4,967,794) (4,406,962) (12,195,524)
Finance income 128,366 47,388 120,002
Finance costs (286,854) (630,652) (913,466)
Net finance cost (158,488) (583,264) (793,464)
Loss before tax (5,126,282) (4,990,226) (12,988,988)
Income tax credit - - -
Loss for the period (5,126,282) (4,990,226) (12,988,988)
Profit/(loss) attributable to:
Owners of the Company (5,126,282) (4,990,226) (12,988,988)
Unaudited Unaudited Audited
£ £ £
Basic and diluted loss per share 12 (0.028) (0.066) (0.110)
There were no items of other comprehensive income in either period presented.
Consolidated Statement of Financial Position
Unaudited Unaudited Audited
Six months to Six months to Year ended
30-Sep-22 30-Sep-21 31-Mar-22
Note £ £ £
Non-current assets
Property, plant and equipment 6 14,674,729 4,682,080 8,469,610
Right of use assets 7 1,702,233 1,564,581 1,743,736
Intangible assets 8 4,997,853 4,919,853 4,993,254
Deferred tax assets 1,397,789 1,070,658 1,397,789
Escrow funds receivable 9 5,564,319 10,105,858 8,370,024
28,336,923 22,343,030 24,974,413
Current assets
Trade and other receivables 5,045,579 1,315,178 3,827,509
Inventories 69,901 - 156,944
Cash and cash equivalents 14,925,706 2,863,684 28,755,388
20,041,186 4,178,862 32,739,841
Total assets 48,378,109 26,521,892 57,714,254
Equity and liabilities
Equity
Share capital 13 1,805,516 760,113 1,793,682
Share premium account 51,882,931 5,519,169 51,610,414
Share option reserve 292,579 123,728 241,861
Warrant reserve 1,408,730 841,318 1,408,730
Retained earnings (19,313,728) (6,403,342) (14,187,446)
Equity attributable to the owners of the parent 36,076,028 840,986 40,867,241
Non-current liabilities
Loans and borrowings 11 1,522,723 12,210,825 1,440,630
Provisions 10 6,702,984 10,139,081 9,526,485
Deferred tax liabilities 1,397,789 1,070,658 1,397,789
9,623,496 23,420,564 12,364,904
Current liabilities
Trade and other payables 2,502,202 2,188,133 4,289,623
Loans and borrowings 176,383 72,209 192,486
2,678,585 2,260,342 4,482,109
Total liabilities 12,302,081 25,680,906 16,847,013
Total equity and liabilities 48,378,109 26,521,892 57,714,254
Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
30-Sep 30-Sep 31-Mar
2022 2021 2022
Note £ £ £
Cash flows from operating activities
Loss for the period (5,126,282) (4,990,226) (12,988,988)
Adjustments to cash flows from non-cash items
Depreciation and amortisation 6,7 261,099 92,352 209,233
Impairment of property plant and equipment 6 - - -
Fair value losses on escrow account 2,904,871 - 1,783,221
Fair value gains on restoration provision (3,012,163) - (786,849)
Finance income (128,366) (47,388) (120,002)
Finance costs 236,120 630,652 913,466
Share based payment transactions 50,718 55,888 174,021
Founder incentives - - (149,999)
Income tax expense - - -
(4,814,003) (4,258,722) (10,965,897)
Working capital adjustments
(Increase) in trade and other receivables (1,218,070) (770,882) (3,283,213)
Increase/(decrease) in trade and other payables (1,787,421) 721,988 2,952,165
(increase)/decrease in inventories 87,043 - (156,944)
Net cash flow from operating activities (7,732,451) (4,307,616) (11,453,889)
Cash flows from investing activities
Interest received 29,193 - 1,134
Acquisitions of property plant and equipment (6,407,451) (359,954) (4,203,803)
Acquisitions of intangibles (20,000) - (80,000)
Net cash flow from investing activities (6,398,258) (359,954) (4,282,669)
Cash flows from financing activities
Interest paid - - (4,955)
Proceeds from issue of ordinary shares, net of issue costs - 4,031,674 41,021,204
Proceeds from exercise of warrants 284,351 - 126,577
Proceeds from exercise of share options - - 3,472
New leases 74,250 - -
Payment of lease liabilities (57,574) - (153,932)
Net cash flows from financing activities 301,027 4,031,674 40,992,366
Net increase in cash and cash equivalents (13,829,682) (635,896) 25,255,808
Opening cash and cash equivalents 28,755,388 3,499,580 3,499,580
Closing cash and cash equivalents c/f 14,925,706 2,863,684 28,755,388
Consolidated Statement of Changes in Equity
Audited Share capital Share premium account 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)
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 shares 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 -
Issue of share options - - 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
Unaudited
At 1 April 2021 6,856 12,327,484 67,840 754,586 (11,413,116) 1,743,650
Loss for the period - - - - (4,990,226) (4,990,226)
New shares subscribed 744 3,944,198 - - - 3,944,942
Issue of bonus shares 752,513 (752,513) - - - -
Capital reduction of share premium account - (10,000,000) - - 10,000,000 -
Issue of share options - - 55,888 - - 55,888
Warrant charge - - - 86,732 - 86,732
At 30 September 2021 760,113 5,519,169 123,728 841,318 (6,403,342) 840,986
Unaudited
At 1 April 2022 1,793,682 51,610,414 241,861 1,408,730 (14,187,446) 40,867,241
Loss for the period - - - - (5,126,282) (5,126,282)
New shares subscribed 11,834 272,517 - - - 284,351
Issue of share options - - 50,718 - - 50,718
At 30 September 2022 1,805,516 51,882,931 292,579 1,408,730 (19,313,728) 36,076,028
Notes to the interim accounts
1. Basis of Preparation
These unaudited condensed consolidated interim accounts have been prepared in
accordance with the recognition and measurement principles of International
Accounting Standards as adopted in the United Kingdom ("UK-adopted IAS") using
the accounting policies that are expected to apply in the Company's next
annual report.
The accounting policies applied are consistent with those disclosed in the
Company's last statutory financial statements and the AIM admission document.
The interim accounts are in compliance with IAS 34, Interim Financial
Reporting.
The interim accounts do not comprise the Company's statutory accounts. The
information for the year ended 31 March 2022 is not the Company's statutory
accounts. The Company's financial statements for that year have been filed
with the registrar of companies and the auditor's report on those financial
statements was unqualified and did not contain statements under s498(2) or
s498(3) of the Companies Act 2006.
2. Going concern
The interim accounts are prepared on a going concern basis which contemplates
the continuity of normal business activities and the realisation of assets and
settlement of liabilities in the normal course of business.
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 million by way of an
initial public offering and at 30 September 2022, had £14.9m million in cash
reserves and £12.5 million at 30 November 2022. For the Group to be able to
execute its estimated capex spend, it still requires additional funding and is
in discussions with financing partners to provide the additional capital.
Until the additional capital is secured, the Group will proceed with detailed
engineering design and will commence construction by utilising cash reserves.
The board will not commit to significant further capital expenditure until the
full finance package is in place to complete the rebuild. Management has
prepared a number of different forecasts to model all anticipated potential
outcomes as follows.
Model 1 - Capital build basis
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. 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. Management acknowledge that the Group
could fall-back to a more modest business plan in the short term to maintain
cash reserves if the economic environment were to deteriorate.
Model 2 - Operational readiness basis
This forecast models the scenario where part of the finance is drawn but not
all the required finance is agreed in sufficient time, as full funding is
dependant on certain conditions being met. If these conditions are delayed,
and the Board decides there is insufficient visibility that they will be met,
then the Board will instruct the company to pause the project and return to
operational readiness.
The Group would continue in operation and will be able to realise its assets
and discharge its liabilities as they fall due in the normal course of
operations, including any committed expenditure that is required to meet its
contractual capital and financial commitments.
No further capital expenditure would be committed but activity and staffing
levels would be maintained so that project restart could be recommenced as
soon as finance is secured. The group retains sufficient cash at the current
time to operate under Model 2 for at least eighteen months.
Model 3 - Care and maintenance basis
Whilst management consider this to be the least likely and desired option for
all stakeholder groups, it has prepared a forecast on a care and maintenance
basis to cover this unlikely scenario.
This forecast models the scenario where project finance is not agreed. The
Group would reduce its operations but continue to discharge its liabilities as
they fall due in the normal course of operations, including any committed
expenditure that is required to meet its contractual capital and financial
commitments. No further capital expenditure would be committed but operational
expenditure would be reduced to essential care and maintenance activities
only. Management would continue to develop a plan to recommence development of
the site when finance could be secured. The Group retains sufficient cash at
the current time to operate under Model 3 for at least 15 months
The directors have reviewed the three models detailed above and have
considered the positive progress in the update to the Feasibility Study of
March 2021 and feedback received during the technical and financial due
diligence. As a result, they consider that the group will be able to operate
as a going concern for the foreseeable future. Consequently, they continue to
adopt the going concern basis in preparing the consolidated financial
information.
3. Asset and liabilities held at fair value
Escrow funds
These funds are held with a third party to be released to the Group as it
settles its obligation to restore the mining site once operations cease. The
debtor has been discounted to present value assuming the funds will be
receivable in 24 years' time which assumes one year of set up and a 23-year
useful life of mining operations. The key assumptions that would lead to
significant changes in the escrow account fair value are the discount rate and
the useful life of the mine.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that the Group will
be required to settle that obligation and a reliable estimate can be made of
the amount of the obligation.
Provisions are measured at the Directors' best estimate of the expenditure
required to settle the obligation at the reporting date and are discounted to
present value where the effect is material. This includes a provision for the
obligation to restore the mining site once mining ceases.
The restoration provision is the contractual obligation to restore the mining
site back to its original state once mining ceases. The provision is equal to
the expected outflows that will be incurred at the end of the mine's useful
life discounted to present value. As the restoration work will predominantly
be completed at the end of the mine's useful life, these calculations are
subject to a high degree of estimation uncertainty. The key assumptions that
would lead to significant changes in the provision are the discount rate,
useful life of the mine and the estimate of the restoration costs.
4. Revenue
Revenue by product comprised the following:
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2022 30 September 2021 31 March
2022
£ £ £
Tungsten 89,509 67,870 232,940
Aggregates 117,091 133,017 440,569
Other 1,617 - -
208,217 200,887 673,509
5. Operating loss
Operating loss is stated after the following:
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2022 30 September 2021 31 March
2022
£ £ £
Depreciation of property, plant and equipment 202,332 45,145 101,464
Depreciation of right of use assets 43,366 47,207 101,169
Amortisation of intangibles 15,401 - 6,599
Staff costs 2,107,029 1,297,387 2,465,924
6. Property, plant and equipment
Land and buildings Furniture, fittings and equipment Computer equipment Motor vehicles Other property, plant and equipment Asset Under Construction Total
Unaudited £ £ £ £ £ £ £
Cost
At 1 April 2022 4,446,750 27,327 171,420 8,740 196,755 3,904,548 8,755,540
Additions 33,865 22,234 27,361 112,500 16,800 6,194,691 6,407,451
Transfer 713,969 - - - - (713,969) -
At 30 September 2022 5,194,584 49,561 198,781 121,240 213,555 9,385,270 15,162,991
Depreciation
At 1 April 2022 235,797 1,578 9,932 5,047 33,576 - 285,930
Charge for the period 132,715 2,370 29,539 14,216 23,492 - 202,332
At 30 September 2022 368,512 3,948 39,471 19,263 57,068 - 488,262
Unaudited
Cost
At 1 April 2021 4,416,300 34,289 - 8,740 92,408 - 4,551,737
Additions - 1,149 - - - 358,805 359,954
At 30 September 2021 4,416,300 35,438 - 8,740 92,408 358,805 4,911,691
Depreciation
At 1 April 2021 168,513 1,516 - 2,163 12,274 - 184,466
Charge for the period 33,387 272 - 1,441 10,045 - 45,145
At 30 September 2021 201,900 1,788 - 3,604 22,319 - 229,611
Audited
Cost
At 1 April 2021 4,416,300 34,289 - 8,740 92,408 - 4,551,737
Reclassification - (32,241) - - 32,241 - -
Additions 30,450 25,279 171,420 - 72,106 3,904,548 4,203,803
At 31 March 2022 4,446,750 27,327 171,420 8,740 196,755 3,904,548 8,755,540
Depreciation
At 1 April 2021 168,513 1,516 - 2,163 12,274 - 184,466
Reclassification - (1,209) - - 1,209 - -
Charge for the year 67,284 1,271 9,932 2,884 20,093 - 101,464
At 31 March 2022 235,797 1,578 9,932 5,047 33,576 - 285,930
At 30 September 2022 4,826,072 45,613 159,310 101,977 156,487 9,385,270 14,674,729
At 30 September 2021 4,214,400 33,650 - 5,136 70,089 358,805 4,682,080
At 31 March 2022 4,210,953 25,749 161,488 3,693 163,179 3,904,548 8,469,610
7. Right of use asset
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2022 30 September 2021 31 March
2022
£ £ £
Opening net book value 1,743,736 1,611,788 1,611,788
Additions 1,863 - 233,117
Depreciation (43,366) (47,207) (101,169)
Closing net book value 1,702,233 1,564,581 1,743,736
8. Intangible assets
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2022 30 September 2021 31 March
2022
£ £ £
Goodwill 1,075,520 1,075,520 1,075,520
Mining rights 3,844,333 3,844,333 3,844,333
Software 78,000 - 73,401
Closing net book value 4,997,853 4,919,853 4,993,254
9. Escrow Funds
Unaudited Unaudited Audited
Six months to Six months to Year ended
Escrow Funds 30 September 2022 30 September 2021 31 March
2022
£ £ £
Carrying amount brought forward 8,370,024 10,058,470 10,058,470
Change in inflation and discount rate (2,904,871) - (1,783,221)
Unwinding of discount 99,166 47,388 94,775
Closing net book value 5,564,319 10,105,858 8,370,024
The funds held in escrow with a third party will be released back to the
Company on the cessation of mining once restoration works have been completed.
The amounts have been discounted to present value over the expected useful
life of the mine plus one year start up. During the period, the discount rate
was revised to 4.1% (30 September 2021: 1.1%) (31 March 2022: 2.0%) resulting
in a loss of £2,904,871 (30 September 2021: £Nil) (31 March 2022:
£1,783,221). The actual funds held in escrow at the period end were
£13,228,692 (30 September 2021: £ 13,201,921) (31 March 2022: £13,203,139).
The Escrow Funds balance is the only financial instrument of the Group held at
fair value. The valuation is based on the eventual cash flow discounted at the
risk-free rate, being the yield on a UK Government bond for an equivalent
term. This is considered level 2 within the fair value hierarchy. There have
been no transfers between levels of the fair value hierarchy during the
period.
Notes to the interim accounts
10. Provisions
Unaudited Unaudited Audited
Six months to Six months to Year ended
Restoration provision 30 September 2022 30 September 2021 31 March
2022
£ £ £
Carrying amount brought forward 9,526,485 9,964,824 9,964,824
Change in inflation and discount rate (3,012,163) - (786,849)
Unwinding of discount 188,662 174,257 348,510
Closing net book value 6,702,984 10,139,081 9,526,485
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 (30 September 2021:
£13,201,256) (31 March 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 6.1% (30
September 2021: 3.5%) (31 March 2022: 4%) an inflation rate of 2.5-7% over the
life of the project (30 September 2021: 2%) (31 March 2022 2.5-7%) and an
estimated mining period of one year set up and 23 years mining. The fall in
the present value of the provision is a direct result of the rise in long-term
inflation and interest rate expectations.
At the reporting date these assumptions represent management's best estimate
of the present value of the future restoration costs.
11. Long term borrowings
Long term borrowings comprised:
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2022 30 September 2021 31 March
2022
£ £ £
Lease liabilities 1,552,723 1,430,265 1,440,630
Convertible debt - 10,780,560 -
1,552,723 12,210,825 1,440,630
12. Basic and diluted loss per share
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2022 30 September 2021 31 March
2022
£ £ £
Loss for the year (5,126,282) (4,990,226) (12,988,988)
Number Number Number
Weighted average number of ordinary shares in issue 180,470,827 75,974,318 119,017,666
Basic and diluted loss per share (0.028) (0.066) (0.11)
The diluted loss per share calculations excludes the effects of share options,
warrants and convertible debt on the basis that such future potential share
transactions are anti-dilutive. Were the Company's options and warrants to be
converted, a potential further 25,624,284 ordinary shares of between £0.01 to
£0.60 would be issued. Information on share options and warrants is disclosed
in note 14.
There were no shares issued subsequent to the end of the interim period.
13. Share capital
Unaudited Unaudited Audited
Six months Six months Year ended
30 September 30 September 31
March
2022 2021 2022
Number of shares allotted Number Number Number
Ordinary Shares of £0.01 each 180,551,615 76,011,371 179,368,215
Nominal value £ £ £
Ordinary Shares of £0.01 each 1,805,516 760,113 1,793,682
Share issues during the period
During the period ended 30 September 2021 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 per share to £0.60.
· 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.
.
14. Share options and warrants
Founder share incentives
The founder shareholders have a right to receive shares at a nominal value
once certain milestones are met.
The movements in the number of incentives during the year were as follows:
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2022 30 September 2021 31 March 2022
Number Number Number
Outstanding at beginning of period 18,229,148 6,930,000 6,963,000
Granted during the period - 671,137 671,137
Terminated on admission to AIM - - (7,634,137)
Replacement share awards following admission to AIM - - 19,866,344
Exercised during the year - - (1,657,196)
Outstanding at end of period 18,229,148 7,601,137 18,229,148
In the prior year, 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 £143,603 and these
options were fully vested in the year ended 31 March 2022.
Share Options - Employees
The movement on the number of share options issued by the Company during each
period presented was as follows.
Unaudited Unaudited Audited
Six months to Six months to Year ended
30-Sep-22 30-Sep-21 31-Mar-22
Number Number Number
Outstanding at beginning of period 1,683,335 1,233,333 1,233,333
Granted during the period 2,799,982 1,097,226 1,097,228
Exercised during the year - - (647,226)
Outstanding at end of period 4,483,317 2,330,559 1,683,335
At 30 September 2022 the exercise price of share options issued to key
employees ranges between £0.01 and £0.45 and their remaining contractual
life was three years.
At 30 September 2021 the exercise price of share options issued to key
employees ranges between £0.01 and £0.45 and their remaining contractual
life was three years.
At 31 March 2022 the exercise price of share options outstanding ranged
between £0.01 and £0.45 and their remaining contractual life was 22 months
to 39 months.
Warrants
The movement on the number of warrants issued by the Company during each
period presented was as follows.
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2022 30 September 2021 31 March 2022
Number Number Number
Outstanding at beginning of period 4,095,219 2,310,681 2,310,681
Granted during the period - 126,760 2,226,760
Exercised during the year (1,183,400) - (442,222)
Outstanding at end of period 2,911,819 2,437,441 4,095,219
At 30 September 2022 the exercise price of warrants outstanding ranged between
£0.45 and £0.60 and their remaining contractual life was 3 month to 13
months.
At 30 September 2021 the exercise price of warrants ranges between £0.25 and
£0.60 and their remaining contractual life was two years.
At 31 March 2022 the exercise price of warrants outstanding ranged between
£0.01 and £0.60 and their remaining contractual life was 1 month to 21
months.
15. Commitments
Capital commitments
As at 30 September 2022 the Group had contracted to purchase property, plant
and machinery amounting to £4,173,277 (31 March 2022: 7,208,997) (30
September 2021: 4,476,559). An amount of £123,320 (31 March 2022: £123,320)
(30 September 2021: £123,320) is contingent on the commencement of mining
operations.
Other financial commitments
The total amount of other financial commitments not provided in the financial
statements was £10,329,000 (31 March 2022: £11,329,000) (30 September 2021:
£12,329,000) payable on the commencement of mining operations and represented
contractual amounts due to the mining contractor and further committed
payments to the funds held in the escrow account under the escrow agreement.
Included within other financial commitments is £5,000,000 which is considered
to be payable between one to five years after mining operations commence.
16. Events after the end of the interim reporting period
On 28th November 2022, the Company announced that the Company's Chairman,
Robert Ashley, stepped down from his position on the Board with immediate
effect and David Cather, Senior Independent Non-Executive Director, became
Chairman of the Board.
Additionally, Martin Wood has been appointed to the Board and will assume the
role of Senior Non-Executive Director.
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