REG - Tungsten West PLC - Half Year Results
22/12/2023 07:00
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RNS Number : 6897X Tungsten West PLC 22 December 2023
Tungsten West Plc
("Tungsten West", the "Company" or the "Group")
Half Year Results for the six months ended 30 September 2023
Tungsten West, the owner and operator of the Hemerdon Mine (the "Project" or
"Hemerdon") in Southwest England, is pleased to announce its half-yearly
results for the six months ended 30 September 2023 (the "Period").
First Half and Post Period Highlights:
· Alistair Stobie was appointed as CFO on 13 November 2023;
· 50 tonnes of tin and tungsten concentrate produced from legacy
material;
· £6.95 million convertible loan notes issued over two tranches;
· Agreement to place an additional £1.8 million tranche of
convertible loan notes;
· Low frequency noise trials completed;
· Mineral Processing Facility Permit application submitted;
· Section 73 application was approved on 06 December 2023
· Loss for the period of £9.1 million;
· Capital expenditure for the period of £2.8 million
· The Company had cash reserves of £1.4 million at 30 September
2023; and
· Front end re-build and plant upgrade projects ceased pending
outcome of permit application and subsequent funding activities.
Neil Gawthorpe, CEO of Tungsten West, commented:
"This period has seen some challenges for the Company as we continue to
navigate difficult market conditions. However, there have been many positives
to take from the last six months and progress has been made at Hemerdon.
"The formal submission of the Mineral Processing Facility permit, following
the completion of the low frequency noise trials, is a positive step forwards
and, despite the delays and additional questions from the Environment Agency,
we continue to have a positive relationship with the team and an open dialogue
with them. Additionally, the approval of the Section 73 application marks
further progress and will augment the Project.
"Furthermore, the production of tin and tungsten from legacy material marked a
significant milestone in the Company's progress and is an indication of what
can be achieved once the mine is re-opened.
"Tungsten and tin remain critical minerals and are essential to everyday
living, as well as being crucial in future green and emerging technologies.
Tungsten West aims to help provide a secure supply chain of these critical
minerals."
Overview
Tungsten West started the Period with the recently appointed CEO, Neil
Gawthorpe, conducting a strategic review of operations and funding
requirements. At the same time, the Company was in discussions with a number
of institutions to complete a funding of approximately £65 million, required
to complete the Project.
The Company had been progressing the Project on the basis that funding,
permitting and construction could run in parallel. However, the CEO concluded
in his review that this was not the case, as full permitting would be required
to source the funds required to complete the Project.
To allow the Company sufficient time to secure the remaining permit required
to operate the Mineral Processing Facility ("MPF"), the Company launched an
interim funding exercise in April 2023. The objective of the interim funding
was to raise approximately £7 million via placing a Convertible Loan Note
("CLN") and an Open Offer. On 6 April 2023, the Company announced that it had
secured commitments from purchasers of £6.95 million CLN. Additionally, the
Open Offer raised £0.2 million of new capital.
Earth and civil engineering work has been completed to allow capital intensive
construction work to commence once permits are granted and funding completed.
The Company's focus is now on permitting, funding and compliance activities. A
cost reduction programme was initiated in April 2023 with the objective of
reducing both capex and opex until permitting and funding activities have been
completed.
Unfortunately, this resulted in a number of redundancies. The Board would like
to express their thanks and appreciation to the employees who departed: all
had been incredibly dedicated to the Project.
review of activities
interim tungsten and tin production
During the first quarter of the Period, the Company recommissioned the
refinery portion of the MPF and processed approximately 50 tonnes of legacy
tin and tungsten concentrate. This was shipped to an off-taker in March 2023,
generating approximately £0.4 million in revenue. This was part of a series
of activities undertaken to generate cash from liquidating surplus assets. A
total of 1,200 tonnes of low grade concentrate left by the previous operator
was also sold between the final quarter of the prior year and first quarter of
the Period, generating an additional £0.7 million revenue.
strategic focus and restructuring
By April 2023, it became apparent that funding was dependent upon the final
operating permit required to operate by the Environment Agency ("EA"). The
grant of a change to the existing planning permission for truck movements was
also required to enable delivery of the aggregates business. Accordingly,
management initiated a programme to preserve cash, reduce costs and focus on
strategic priorities:
· The business was re-focused on maintaining environmental
compliance, securing permits and raising capital;
· Project capex for the front-end re-build was scaled back to
existing capital commitments only; and
· All staff not engaged in these core activities were at risk and
headcount was reduced by 42% through a combination of redundancies and
resignations.
In August 2023, a further cost reduction programme was implemented, resulting
in further headcount reduction. At the same time, the Company initiated a
number of discussions with suppliers to agree deferred payment plans and
restructure supply agreements.
In October 2023, as the EA process to approve the MPF permit application, and
specifically reviewing the results of the low frequency noise ("LFN") trials,
was taking longer than the EA had indicated, it became necessary to reduce the
cost base further. At the time of this report, the ongoing headcount had been
reduced to 15 full-time employees, focused only on environmental and corporate
compliance, permitting and funding activities.
Mineral Processing facility permit and Low frequency noise trials
In July and August 2023, the Company undertook a series of investigations into
LFN levels at the Project.
Upon completion of the LFN Trials, the Company submitted the MPF permit
application to the EA which, once granted, will allow the plant to operate,
thus facilitating the production of tungsten and tin at Hemerdon. The Company
has worked closely with the EA and Devon County Council (the "Council")
throughout the entire permitting and LFN trial process and anticipates the
decision regarding the permit approval to be forthcoming early in 2024.
The Company received a further series of questions in October 2023. These
questions were fully addressed by the end of October 2023 and a formal
response submitted to the EA. At the time of writing this report the Company
is still waiting for the EA's decision and on whether to grant the MPF permit.
Taking into account the demonstrated reduction in LFN emitted from the test
rig following the implementation of the noise mitigation measures, the Company
is confident that the historical LFN issues have been resolved and that the
last required permit will be obtained early in 2024.
Section 73 Application
To deliver the Project sustainably, the Company will produce secondary
aggregates, a by-product from mining which, once sold, will provide an ongoing
revenue stream and reduce the storage of barren rock at site.
Post-period end on 6 December 2023 the Council approved the Company's Section
73 application to vary the tonnage cap associated with the existing permission
for 50 truck movements per day from the site, in order to facilitate the sales
of secondary aggregates. Traffic and market studies carried out in conjunction
with the application highlight that the Company can plug a gap in the market
for high-quality, secondary aggregates in Devon with a minimal increase in
overall heavy vehicle traffic.
Tungsten West has actively involved the local community, local councils and
regulatory bodies in the process, participating in regular discussions and
offering a direct line to the Company for all stakeholders.
In addition, the Company received positive news relating to test work carried
out on its secondary aggregate products, showing them to be superior, in
several applications, to other materials available locally.
management changes
On 28 April 2023 James McFarlane resigned and stepped down as Managing
Director of the Group. James had joined the Company soon after the acquisition
of the Project in 2019. During this period, he played a key role in completing
two feasibility studies and the successful IPO process.
On 16 May 2023 Mark Thompson stepped down from the Board of Directors. Mark
was one of the founding Directors of Tungsten West and was instrumental in the
acquisition of the Project and subsequent rounds of pre-IPO funding and the
AIM admission.
Nigel Widdowson resigned as CFO on 16 August 2023, however he has remained
with the Group to oversee the restructuring and funding processes and
transition to a new CFO.
The Board was strengthened by the appointment of three Non-Executive Directors
on 4 September 2023:
· Kevin Ross, a mining engineering specialist who has held numerous
COO roles in the mining sector for operating and development companies;
· Guy Edwards, who brings significant experience in the aggregates
industry having held CEO positions at Aggregates Industries UK and Aggregates
Industries USA; and
· Adrian Bougourd, currently part of the Developed Markets team at
Lansdowne Partners, a financial analyst with experience in capital markets and
advising companies in the global industrial and mining sector.
After the period ended, Alistair Stobie was appointed CFO on 13 November 2023
and will act in capacity as a PDMR. Alistair has over 20 years' experience as
CFO at AIM listed companies in the natural resources sector. In particular, he
has significant experience of raising capital for, and delivering, complex
capital-intensive projects in the natural resources sector.
funding
The Group completed the issue of a CLN facility and open offer in June 2023.
These collectively raised £7.2 million gross of fees. The CLN facility
provided the ability to issue a further tranche up to £2.0 million ("Tranche
C") under the same terms. On 18 December 2023 the Company announced that it
had raised £1.8 million under Tranche C to existing CLN holders. The Tranche
C Notes, together with further funding (via and additional notes under the
existing CLN facility ("Tranche D") or other similar instrument), the sale of
certain assets and existing on site aggregates are anticipated to provide
sufficient funding to allow the Company to meet its liabilities as they fall
due and to complete the short-term strategic objectives before June 2024. The
existing waivers on previous breaches of the CLN also expire in June 2024.
Notwithstanding, as set-out in Note 2 Going Concern, there remains material
uncertainty regarding further funding, the sale of certain assets and the
value of onsite aggregate sales which would have an impact on the Group's
ability to continue as a going concern. Opex has been significantly reduced
and all material capital commitments deferred until these objectives have been
achieved. As at the end of November 2023 the Group had issued Tranche A
(£3.975 million) and Tranche B (£2.975 million) of the CLN and had £0.5
million in cash reserves.
At the date of this report, there is not currently any commitment from
existing or new noteholders to purchase any Tranche D notes, any agreed sale
of any assets or sale of onsite aggregates. If the Group fails to find
purchasers for the Tranche D notes, and / or assets or the sale of onsite
aggregates, then, in the absence of other new sources of finance, it is
anticipated it would no longer be able to meet its liabilities as they fall
due in March 2024.
outlook
Considered a critical mineral, the outlook for tungsten is positive with the
European Metal Bulletin Ammonium Para-Tungstate price being reported at circa
US$305 per Metric Tonne Unit (MTU) (1 MTU = 10 kilograms). Tungsten remains an
essential component in construction tools, electrical components, including
lightbulbs, MRI scanners, and for defense applications. Additionally, it is
also a mineral of the future, with applications in both emerging and green
technologies including electric vehicles, nuclear fusion, renewable energy,
and aerospace
Tin prices are currently at their 12-month average of US$24,500 per tonne at
the date of this statement. Tin is a major component in the global drive
towards electrification and clean energy and, whilst a by-product of the
tungsten operations, Tungsten West is poised to become a significant producer.
Despite energy costs having stabilised and the most recent feasibility study
demonstrating a viable Project with a strong NPV, the Company and the Board
acknowledge that this is a challenging Project and there are many risks that
could impact the Company's ability to reach construction through to commercial
production. Permitting, funding and macro-economic risks (geopolicial,
domestic political, economic instability) remain the most significant risks.
Lack of or delayed permits, alongside volatile input costs, forex and
commodity prices, will significantly increase the risk of lack of access to
capital.
The principal risks and uncertainties are outlined in the Company's most
recent audited annual report and accounts which can be found on
www.tungstenwest.com (http://www.tungstenwest.com) .
The Board remains positive for the long-term prospects for the Hemerdon mine
and the commodities it will produce, and is committed to delivering the
Project and recommencing operations.
Neil Gawthorpe
Chief Executive Officer
Cautionary statement
This document contains certain forward-looking statements in respect of the
financial condition, results, operations, and business of the Group. Whilst
these statements are made in good faith based on information available at the
time of approval, these statements and forecasts inherently involve risk and
uncertainty because they relate to events and depend on circumstances that
will occur in the future. There are several factors that could cause the
actual results of developments to differ materially from those expressed or
implied by these forward-looking statements and forecasts. Nothing in this
document should be construed as a profit forecast.
Enquiries
Tungsten West Strand Hanson
Neil Gawthorpe (Nominated Adviser and Financial Adviser)
Tel: +44 (0) 1752 278500 James Spinney / James Dance / Abigail Wennington
Tel: +44 (0) 207 409 3494
Blythe Ray Hannam & Partners
(Financial PR) (Joint Broker)
Tim Blythe / Megan Ray Andrew Chubb / Nilesh Patel
tungstenwest@blytheray.com Tel: +44 (0)20 7907 8500
Tel: +44 (0) 20 7138 3204
VSA Capital
(Joint Broker)
Andrew Monk
Tel: +44 (0)20 3005 5000
Further information on Tungsten West Limited can be found at
www.tungstenwest.com
Overview of Tungsten West
Tungsten West is the 100 per cent owner and operator of the past producing
Hemerdon tungsten and tin mine, located near Plymouth in southern Devon,
England. The Hemerdon mine is currently the world's third largest tungsten
resource, with a JORC (2012) compliant Mineral Resource Estimate of
approximately 325Mt at 0.12 per cent. WO(3). The Company acquired the mine out
of a receivership process in 2019 after its most recent operators, Wolf
Minerals, stopped production in 2018. While it was operator, Wolf invested
over £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 2023 and the related Consolidated
Income Statement, Consolidated Statement of Change in Equity and Consolidated
Statement of Cash-Flows for the six-month period then ended, and a summary of
significant accounting policies and other explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the accompanying interim financial information does not give a
true and fair view of the financial position of the Group as at 30 September
2023, and of its financial performance and its cash flows for the six-month
period then ended in accordance with UK-adopted International Accounting
Standard 34.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity." A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing and consequently does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
Material uncertainty relating to going concern
We draw attention to Note 2 in the interim accounts, which indicates that the
group has yet to secure a key permit necessary to obtain the finance it needs
to complete the plant rebuild and continue in operational existence for the
foreseeable future. The group's ability to pay liabilities as they fall due
beyond early 2024 is dependent on uncertain events such as securing additional
finance, asset sales or inventory sales. As stated in Note 2, these events
or conditions, along with other matters as set forth in Note 2 indicate that a
material uncertainty exists that may cast significant doubt on the group's
ability to continue as a going concern. Our conclusion is not modified in
respect of this matter.
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410, however future events
or conditions may cause the entity to cease to continue as a going concern.
Responsibilities of directors
Management is responsible for the preparation and fair presentation of this
interim financial information in accordance with International Accounting
Standard 34. In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our conclusions
relating to going concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company, for our review work,
for this report, or for the conclusions we have formed.
PKF Francis Clark
Melville Building East
Unit 18,23 Royal William Yard
Plymouth
Devon
PL1 3GW
Date:…21/12/2023……………….
Consolidated Income Statement
Unaudited Unaudited Audited
Six months to Six months to Year ended
Note 30-Sep-23 30-Sep-22 31-Mar-23
£ £ £
Revenue 4 722,036 208,217 626,460
Cost of sales (780,649) (1,959,326) (1,984,983)
Gross loss (58,613) (1,751,109) (1,358,523)
Administrative expenses (8,037,199) (3,323,977) (10,160,088)
Other operating income 130 - 18,947
Other gains/(losses) (117,953) 107,292 710,710
Operating loss 5 (8,213,635) (4,967,794) (10,788,954)
Finance income 102,004 128,366 454,196
Finance costs (1,020,782) (286,854) (495,279)
Net finance cost (918,778) (158,488) (41,083)
Loss before tax (9,132,413) (5,126,282) (10,830,037)
Income tax credit - - 544,602
Loss for the period (9,132,413) (5,126,282) (10,285,435)
Loss attributable to:
Owners of the Company (9,132,413) (5,126,282) (10,285,435)
Unaudited Unaudited Audited
£ £ £
Basic and diluted loss per share 12 (0.050) (0.028) (0.057)
There were no items of other comprehensive income in any period presented.
Consolidated Statement of Financial Position
Unaudited Unaudited Audited
Six months to Six months to Year ended
30-Sep-23 30-Sep-22 31-Mar-23
Note £ £ £
Non-current assets
Property, plant and equipment 6 19,811,546 14,674,729 19,054,864
Right-of-use assets 7 1,955,412 1,702,233 2,022,672
Intangible assets 8 5,096,005 4,997,853 5,090,016
Deferred tax assets 1,390,346 1,397,789 1,390,346
Escrow funds receivable 9 4,107,892 5,564,319 5,146,986
32,361,201 28,336,923 32,704,884
Current assets
Trade and other receivables 4,788,186 5,045,579 6,163,593
Inventories 29,850 69,901 114,173
Cash and cash equivalents 1,416,765 14,925,706 3,438,018
6,234,801 20,041,186 9,715,784
Total assets 38,596,002 48,378,109 42,420,668
Equity and liabilities
Equity
Share capital 13 1,870,741 1,805,516 1,805,516
Share premium account 51,949,078 51,882,931 51,882,761
Share option reserve 412,831 292,579 357,366
Warrant reserve 740,867 1,408,730 740,867
Convertible loan note reserve 165,408 - -
Retained earnings (32,937,431) (19,313,728) (23,805,018)
Equity attributable to the owners of the parent 22,201,494 36,076,028 30,981,492
Non-current liabilities
Loans and borrowings 11 1,927,165 1,522,723 1,901,583
Provisions 10 4,799,194 6,702,984 5,701,771
Deferred tax liabilities 1,390,346 1,397,789 1,390,346
8,116,705 9,623,496 8,993,700
Current liabilities
Trade and other payables 1,519,343 2,502,202 2,330,603
Loans and borrowings 11 6,758,460 176,383 114,873
8,277,803 2,678,585 2,445,476
Total liabilities 16,394,508 12,302,081 11,439,176
Total equity and liabilities 38,596,002 48,378,109 42,420,668
Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
30-Sep 30-Sep 31-Mar
2023 2022 2023
Note £ £ £
Cash flows from operating activities
Loss for the period (9,132,413) (5,126,282) (10,285,435)
Adjustments to cash flows from non-cash items
Depreciation and amortisation 6,7 265,675 261,099 514,394
Loss on disposal of right-of-use asset - - 124,528
Loss on disposal of intangible asset - - 73,401
Impairment of asset under construction 6 1,841,039 - 108,947
Fair value losses on escrow account 1,133,447 2,904,871 3,495,064
Fair value gains on restoration provision (1,015,494) (3,012,163) (4,205,774)
Finance income (102,004) (128,366) (454,196)
Finance costs 1,020,782 236,120 495,279
Share based payment transactions 55,465 50,718 115,505
Impact of foreign exchange (42,593) - 74,724
Income tax credit - - (544,602)
(5,976,096) (4,814,003) (10,488,165)
Working capital adjustments
Income tax received - - 544,602
(Increase)/decrease in trade and other receivables 1,375,407 (1,218,070) (2,336,084)
Increase/(decrease) in trade and other payables (811,260) (1,787,421) (1,959,020)
(Increase)/decrease in inventories 84,323 87,043 42,771
Net cash outflow from operating activities (5,327,626) (7,732,451) (14,195,896)
Cash flows from investing activities
Interest received 5,204 29,193 99,082
Acquisitions of property plant and equipment (2,764,261) (6,407,451) (10,892,254)
Proceeds from disposals 2,088 - 4,167
Acquisitions of intangibles (39,952) (20,000) (191,523)
Net cash outflow from investing activities (2,796,921) (6,398,258) (10,980,528)
Cash flows from financing activities
Interest paid (2,971) - (4,084)
Proceeds from exercise of warrants 131,542 284,351 284,181
Proceeds from exercise of share options - - -
Proceeds from convertible debt 6,038,428 - -
Payments to hire purchase (14,398) - (63,294)
New leases - 74,250 -
Payment of lease liabilities (49,307) (57,574) (357,749)
Net cash inflow (outflows) from financing activities 6,103,294 301,027 (140,946)
Net (decrease) in cash and cash equivalents (2,021,253) (13,829,682) (25,317,370)
Opening cash and cash equivalents 3,438,018 28,755,388 28,755,388
Closing cash and cash equivalents c/f 1,416,765 14,925,706 3,438,018
Consolidated Statement of Changes in Equity
Audited Share capital Share premium account Share option reserve Warrant reserve Convertible loan note reserve Retained earnings Total
£ £ £ £ £ £ £
At 1 April 2022 1,793,682 51,610,414 241,861 1,408,730 - (14,187,446) 40,867,241
Loss for the year - - - - - (10,285,435) (10,285,435)
New shares subscribed 11,834 272,347 - - - - 284,181
Exercise of warrants - - - (334,378) - 334,378 -
Expired warrants - - - (333,485) - 333,485 -
Share options charge - - 134,610 - - - 134,610
Forfeiture of share options - - (19,105) - - - (19,105)
At 31 March 2023 1,805,516 51,882,761 357,366 740,867 - (23,805,018) 30,981,492
Unaudited
At 1 April 2022 1,793,682 51,610,414 241,861 1,408,730 - (14,187,446) 40,867,241
Loss for the period - - - - - (5,126,282) (5,126,282)
New shares subscribed 11,834 272,517 - - - - 284,351
Share options charge - - 50,718 - - - 50,718
At 30 September 2022 1,805,516 51,882,931 292,579 1,408,730 - (19,313,728) 36,076,028
Unaudited
At 1 April 2023 1,805,516 51,882,761 357,366 740,867 - (23,805,018) 30,981,492
Loss for the period - - - - - (9,132,413) (9,132,413)
New shares subscribed 65,225 66,317 - - - - 131,542
Issue of convertible loan 165,408 - 165,408
Share options charge - - 55,465 - - - 55,465
At 30 September 2023 1,870,741 51,949,078 412,831 740,867 165,408 (32,937,431) 22,201,494
Notes to the interim accounts
1. Basis of Preparation
These unaudited condensed consolidated interim accounts have been prepared in
accordance with the recognition and measurement principles of International
Accounting Standards as adopted in the United Kingdom ("UK-adopted IAS") using
the accounting policies that are expected to apply in the Company's next
annual report.
The accounting policies applied are consistent with those disclosed in the
Company's last statutory financial statements.
The interim accounts are in compliance with IAS 34, Interim Financial
Reporting.
The interim accounts do not comprise the Company's statutory accounts. The
information for the year ended 31 March 2023 is not the Company's statutory
accounts. The Company's financial statements for that year have been filed
with the registrar of companies. The independent auditor's report on those
financial statements was unqualified but drew attention to a material
uncertainty relating to going concern. The independent auditor's report did
not contain statements under s498(2) or s498(3) of the Companies Act 2006.
2. Going concern
The Group is still in the pre-production phase of operations and meets its day
to day working capital requirements by utilising cash reserves from investment
made in the Group. In October 2021, the Group raised £36.0 million net of
fees by way of an initial public offering and at 30 September 2023, had £1.4
million in cash reserves.
Further to ongoing discussions with investors and debt providers, it remains
clear that access to the capital required to complete the project will be
significantly limited until the Group has secured the final permit required to
operate the MPF and the recently issued Section 73 permission relevant to
truck movements.
These conditions indicate that a material uncertainty exists that may cast
significant doubt on the Group's ability to continue as a going concern.
The Group continues to focus its short-term operating strategy simply on
activities required to secure these permits, maintain environmental compliance
and secure funding to complete the project and recommence mining operations,
including an updated Feasibility Study.
The Group completed the issue of a convertible loan note facility and an open
offer in June 2023. These collectively raised £7.2 million gross of fees.
Tranche C Notes were issued on 18 December 2023, raising £1.8 million gross
of fees. It is envisaged that Tranche D Notes, or other similar instrument,
will be issued towards the end of 1Q 2024. In addition, management will seek
to sell certain assets and existing onsite aggregates. The sum of the Tranche
C & D Notes, asset sales and sale of onsite aggregates is expected to be
not less than £6.5 million. The Board consider this to be sufficient
liquidity to meet its liabilities as they fall due and to complete the
short-term strategic objectives, including completing an updated Feasibility
Study, before December 2024. Opex has been significantly reduced and all
material capital commitments deferred until these objectives have been
achieved.
As at the end of November 2023 the Group had issued Tranche A (£3.95 million)
and Tranche B (£2.95 million) of the CLN and had £0.5m in cash reserves. The
Company issued Tranche C of the notes on 18 December 2023. Tranche C raised
£1.8 million gross of fees.
There is not currently any commitment from existing or new noteholders to
purchase any Tranche D notes, nor have any agreements to sell certain assets
been agreed. If the Group fails to find purchasers for the Tranche D notes or
find buyers for certain assets, then, in the absence of other new sources of
finance, it would no longer be able to meet its liabilities as they fall due
in March 2024.
Since the 31 March 2023, the Group has taken measures to conserve cash by
stopping capex payments, restructuring the cost base and deferring certain
contracted payments to creditors. As a result of this, the Group has notified
the Note Purchasers of multiple defaults on the terms of the Note Purchase
Agreement which relate to payments to creditors. There are detailed in Note 35
the annual report and accounts to March 2023. Under the terms of the Note
Purchase Agreement, the Noteholders can cancel any outstanding Notes under the
Note Purchase Agreement and demand immediate redemption unless a waiver is in
place. The redemption sum is two times the loan note principal outstanding
along with any accrued PIK. A waiver for the breaches in place at the time of
signing the 31 March annual report and accounts was issued by the noteholders
in June and again in December 2023, to clear further breaches arising post
September 2023. The waiver will expire in June 2024 and going concern is
reliant on the Group complying with the terms of the waiver. The Company has
agreed terms of an amended waiver for the breaches in place at the time of
signing this report and going concern is dependent on the Group complying with
the terms of the amended waiver until it expires on 30 June 2024. The waivers
give the Board sufficient comfort that the Group can both meet the terms of
the original loan without further breaches and the terms of the waiver hence
is a going concern. For the Group to remain a going concern, the Group is
reliant on continued support of the Noteholders by not exercising their rights
under the defaults should the defaults not be remedied, or the note converted
or redeemed, by June 2024.
As identified earlier in this report, permitting, funding and macro-economic
risks (Geopolitical, Economic instability) continue to be the most significant
risks facing the Group. Lack of or delayed permits, alongside volatile input
costs, forex and commodity prices, will significantly increase the risk of
lack of access to capital.
The Board is pursuing a strategy of completing the project on a capital build
and operate basis. In light of the noise mitigation measures now anticipated
to be required for securing the MPF permit, the Board forecasts in excess of
£80 million remaining expenditure prior to recommencing operations. Various
options for progress post January 2024 will be considered as further
information becomes available through the intervening period and are expected
to result in the Group continuing as a going concern once the various
permissions are secured.
Going concern is reliant on further funding being secured by the end of March
2024, or the receipt of funds form the sale of certain assets and/or ongoing
aggregate sales, without which the group would be unable to pay its
liabilities as they fall due beyond this point. Management have prepared one
forecast as follows:
Model 1 - Additional funding closed in 2024
This scenario models management's intended plan of the expected future
outflows required to complete the capital build once finance is secured.
Sensitivity analysis has been applied in terms of when the project would
restart, availability of additional capital and the cashflow demands for each
scenario. As the terms of any finance package have not yet been agreed the
model does not include costs of finance.
Management are satisfied there is sufficient headroom to service the projected
cost of debt when this is agreed. As negotiations with finance providers
proceed the model will be updated with the anticipated finance costs to ensure
that a sufficient level of liquidity is maintained. Management is confident
that the project finance can be secured to complete the capital build under
the updated business plan once the relevant permits are secured.
As a result, there is a material uncertainty over the granting of the permit,
within the necessary timeframes, to allow the group to obtain the finance it
requires. The Board's aim is that it will obtain the necessary permit and
required funding, allowing the group to operate as a going concern for the
foreseeable future. Consequently, they continue to adopt the going concern
basis in preparing these financial statements despite the material uncertainty
referred to above.
3. Asset and liabilities held at fair value
Escrow funds
These funds are held with a third party to be released to the Group as it
settles its obligation to restore the mining site once operations cease. The
debtor has been discounted to present value assuming the funds will be
receivable in 28 years' time which assumes one year of set up and a 27-year
useful life of mining operations. The key assumptions that would lead to
significant changes in the escrow account fair value are the discount rate and
the useful life of the mine.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that the Group will
be required to settle that obligation and a reliable estimate can be made of
the amount of the obligation.
Provisions are measured at the Directors' best estimate of the expenditure
required to settle the obligation at the reporting date and are discounted to
present value where the effect is material. This includes a provision for the
obligation to restore the mining site once mining ceases.
The restoration provision is the contractual obligation to restore the mining
site back to its original state once mining ceases. The provision is equal to
the expected outflows that will be incurred at the end of the mine's useful
life discounted to present value. As the restoration work will predominantly
be completed at the end of the mine's useful life, these calculations are
subject to a high degree of estimation uncertainty. The key assumptions that
would lead to significant changes in the provision are the discount rate,
useful life of the mine and the estimate of the restoration costs.
Convertible loan notes
Convertible loan notes which entitle the holder to convert into a fixed number
of shares for a fixed amount of cash contain both the features of a financial
liability and an equity instrument. The initial fair value amount of the
liability is calculated as the present value of all future payments and
interest (at the rate determined by the instrument) all being discounted at a
market rate of interest for a similar loan without a conversion option. The
amount of the equity component is residual balance after deducting the initial
fair value amount of the liability from the proceeds of the convertible loan
issue. Issue costs are assigned to the liability component.
Subsequently, interest is calculated on the liability component under the
effective interest method.
The present value of the liability cash-flows has been estimated with
reference to management's judgement of the most likely cash-flows, as
permitted under IFRS9. Under the terms of the convertible loan notes if the
Group breaches the terms of the agreement or an exit event occurs the initial
capital can be called in for repayment at a premium of 100%. As management
judge this unlikely it has not been accounted for in the fair value of the
liability at period end. Were this clause to be enacted the capital repayment
due, on loan notes drawn to period end, would be increased from £6.95m to
£13.90m.
4. Revenue
Revenue by product comprised the following:
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March
2023
£ £ £
Tungsten 286,964 89,509 508,184
Aggregates - 117,091 118,276
Tin 435,072 - -
Other - 1,617 -
722,036 208,217 626,460
5. Operating loss
Operating loss is stated after the following:
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March
2023
£ £ £
Depreciation of property, plant and equipment 164,452 202,332 276,995
Depreciation of right of use assets 67,260 43,366 216,039
Loss on disposal of ROU asset - - 124,528
Impairments of assets under construction 1,841,039 - 108,947
Amortisation of intangibles 33,963 15,401 21,360
Impairment to deposits 1,547,245 - -
Staff costs 1,950,849 2,107,029 4,593,833
6. Property, plant and equipment
Land and buildings Furniture, fittings and equipment Computer equipment Motor vehicles Other property, plant and equipment Asset Under Construction Total
Unaudited £ £ £ £ £ £ £
Cost
At 1 April 2023 5,189,361 114,709 313,400 141,500 243,455 13,717,101 19,719,526
Additions - 61 2,101 - 6,053 2,756,046 2,764,261
Disposals - - (2,088) - - - (2,088)
At 30 September 2023 5,189,361 114,770 313,413 141,500 249,508 16,473,147 22,481,699
Depreciation
At 1 April 2023 339,688 14,494 82,329 35,435 83,769 108,947 664,662
Impairment - - - - - 1,841,039 1,841,039
Charge for the period 52,723 11,980 49,720 23,349 26,680 - 164,452
At 30 September 2023 392,411 26,474 132,049 58,784 110,449 1,949,986 2,670,153
Unaudited
Cost
At 1 April 2022 4,446,750 27,327 171,420 8,740 196,755 3,904,548 8,755,540
Additions 33,865 22,234 27,361 112,500 16,800 6,194,691 6,407,451
Transfer 713,969 - - - - (713,969) -
At 30 September 2022 5,194,584 49,561 198,781 121,240 213,555 9,385,270 15,162,991
Depreciation
At 1 April 2022 235,797 1,578 9,932 5,047 33,576 - 285,930
Charge for the period 132,715 2,370 29,539 14,216 23,492 - 202,332
At 30 September 2022 368,512 3,948 39,471 19,263 57,068 - 488,262
Audited
Cost
At 1 April 2022 4,446,750 27,327 171,420 8,740 196,755 3,904,548 8,755,540
Additions 228,570 87,382 141,980 141,500 46,700 10,326,594 10,972,726
Reclassifications 514,041 - - - - (514,041) -
Disposals - - - (8,740) - - (8,740)
At 31 March 2023 5,189,361 114,709 313,400 141,500 243,455 13,717,101 19,719,526
Depreciation
At 1 April 2022 235,797 1,578 9,932 5,047 33,576 - 285,930
Charge for the year 103,891 12,916 72,397 37,598 50,193 - 276,995
Disposals - - - (7,210) - - (7,210)
Impairment - - - - - 108,947 108,947
At 31 March 2023 339,688 14,494 82,329 35,435 83,769 108,947 664,662
At 30 September 2023 4,796,950 88,296 181,364 82,716 139,059 14,523,161 19,811,546
At 30 September 2022 4,826,072 45,613 159,310 101,977 156,487 9,385,270 14,674,729
At 31 March 2023 4,849,673 100,215 231,071 106,065 159,686 13,608,154 19,054,864
7. Right-of-use asset
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March
2023
£ £ £
Opening net book value 2,022,672 1,743,736 1,743,736
Additions - 1,863 619,503
Depreciation (67,260) (43,366) (216,039)
Net disposals - - (124,528)
Closing net book value 1,955,412 1,702,233 2,022,672
8. Intangible assets (net book value)
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March
2023
£ £ £
Goodwill 1,075,520 1,075,520 1,075,520
Mining rights 3,844,333 3,844,333 3,844,333
Software 176,152 78,000 170,163
Closing net book value 5,096,005 4,997,853 5,090,016
9. Escrow Funds
Unaudited Unaudited Audited
Six months to Six months to Year ended
Escrow Funds 30 September 2023 30 September 2022 31 March
2023
£ £ £
Carrying amount 4,107,892 5,564,319 5,146,986
The funds held in escrow with a third party will be released back to the
Company on the cessation of mining once restoration works have been completed.
The amounts have been discounted to present value over the expected useful
life of the mine. During the period, the discount rate was revised to 4.7% (30
September 2022: 4.1%) (31 March 2023: 3.7%) resulting in a loss of £1.0
million in the six months to September 2023 (loss in period to 30 September
2022: £2.9 million) (loss in year to 31 March 2023: £3.5 million). The
actual funds held in escrow at the period end were £13,468,004 (30 September
2022: £13,228,692) (31 March 2023: £13,230,653).
10. Provisions
Unaudited Unaudited Audited
Six months to Six months to Year ended
Restoration provision 30 September 2023 30 September 2022 31 March
2023
£ £ £
Carrying amount brought forward 5,701,771 9,526,485 9,526,485
Change in inflation and discount rate (1,015,494) (3,012,163) (4,205,774)
Unwinding of discount 112,917 188,662 381,060
Closing net book value 4,799,194 6,702,984 5,701,771
This provision is for the obligation to restore the mine to its original state
once mining operations cease, discounted back to present value based on the
estimated life of the mine. Prior to discounting the Directors estimate the
provision at current costs to be £13.2 million (30 September 2022: £13.2
million) (31 March 2023: £13.2 million).
The provision has been discounted using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific
to the asset. The ultimate costs to restore the mine are uncertain, and cost
estimates can vary in response to many factors, including estimates of the
extent and costs of rehabilitation activities, technological changes,
regulatory changes, cost increases as compared to the inflation rates and
changes in discount rates.
Management has considered these risks and used a discount rate of 6.7% (30
September 2022: 6.1%) (31 March 2023: 5.7%), an inflation rate of 2.5% to 7%
over the life of the project (30 September 2022: 2.5% to 7%) (31 March 2023:
2.5% to 9%) and an estimated mining period of 27 years (30 September 2022:
24 years) (31 March 2023: 27 years).
11. Borrowings
Borrowings comprised:
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March
2023
£ £ £
Current
Lease liabilities 82,665 176,383 114,873
Convertible debt 6,675,795 - -
6,758,460 176,383 114,873
Non-current
Lease liabilities 1,927,165 1,522,723 1,901,583
Convertible debt - - -
8,685,625 1,699,106 2,016,456
The Group issued convertible loan notes in two tranches as follows:
· On 15 June 2023 - £3.975 million of Tranche A notes
· On 15 August 2023 - £2.975 million of Tranche B notes
Interest on the convertible loan notes in the form of payment in kind notes
(PIK notes) is 20%. The final termination date of the convertible loan notes
is 14 June 2023. The normal conversion price of the loan notes is £0.03 per
share however under an equity raise (excluding equity raised to certain
qualifying shareholders, on a normal conversion of the loan notes or on an
issue of shares in relation to warrants and share options) the conversion
price is equal to the issue price on the equity raise less a discount of 50%.
Under the terms of the convertible loan notes if the Company breaches the
terms of the agreement or an exit event occurs the initial capital can be
called in for repayment at a premium of 100%.
The Company was in breach of the terms of the CLN Agreement in June 2023 and
post period end prior to the issuance of the Tranche C Notes. In each case the
Note Holders waived the breaches such that the Company was not in breach of
the Agreement.
Further issues of Tranche C loan notes are disclosed in note 16.
12. Basic and diluted loss per share
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March
2023
£ £ £
Loss for the year (9,132,413) (5,126,282) (10,285,435)
Number Number Number
Weighted average number of ordinary shares in issue 184,472,241 180,470,827 180,511,110
Basic and diluted loss per share (0.050) (0.028) (0.057)
The diluted loss per share calculations excludes the effects of share options,
warrants and convertible debt on the basis that such future potential share
transactions are anti-dilutive.
Were the Company's options and warrants to be converted, a potential further
23,956,451 ordinary shares of between £0.01 to £0.60 would be issued
Information on share options and warrants is disclosed in note 14. This figure
excludes the conversion of any CLN's in Note 11.
There were no shares issued subsequent to the end of the interim period.
13. Share capital
Unaudited Unaudited Audited
Six months Six months Year ended
30 September 30 September 31
March
2023 2022 2023
Number of shares allotted Number Number Number
Ordinary Shares of £0.01 each 187,074,111 180,551,615 180,551,615
Nominal value £ £ £
Ordinary Shares of £0.01 each 1,870,741 1,805,516 1,805,516
Share issues during the period
During the period ended 30 September 2023 the following share transactions
took place:
· The Company issued 6,522,496 ordinary shares of £0.01 each
for consideration of £0.03 per share.
14. Share options and warrants
Founder share incentives
The founder shareholders have a right to receive shares at a nominal value
once certain milestones are met.
The movements in the number of incentives during the year were as follows:
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March 2023
Number Number Number
Outstanding at beginning of period 18,229,148 18,229,148 18,229,148
Granted during the period - - -
Terminated on admission to AIM - - -
Replacement share awards following admission to AIM - - -
Exercised during the year - - -
Outstanding at end of period 18,229,148 18,229,148 18,229,148
The founder options meet the definition of equity in the financial statements
of the Company on the basis that the 'fixed for fixed' condition is met. No
consideration was received for the founder options at grant date, therefore no
accounting for the issue of the equity instruments is required under IFRS. On
exercise, the shares are recognised at the fair value of consideration
received, being the option price of £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
EMI and ESOP
Share options have been issued to key employees as an incentive to stay with
the Company. These options can be exercised within one and ten years following
the grant date once the option has vested.
The movement on the number of share options issued by the Company during each
period presented was as follows.
Unaudited Unaudited Audited
Six months to Six months to Year ended
30-Sep-23 30-Sep-22 31-Mar-23
Number Number Number
Outstanding at beginning of period 1,533,333 1,683,333 1,683,333
Granted during the period 40,910 - -
Lapsed during the period - (100,000) (150,000)
Outstanding at end of period 1,574,243 1,583,333 1,533,333
The exercise price of share options issued to key employees ranges between
£0.30 and £0.45 (30 September 2022: £0.01 and £0.45) (31 March 2023:
£0.30 and £0.45) and their remaining contractual life was 9 years (30
September 2022: 10 years) (31 March 2023: 9.5 years.).
CSOP share options
Share options have been issued to key employees as an incentive to stay with
the Company. These options can be exercised within three and ten years
following the grant date once the option has vested.
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March 2023
Number Number Number
Outstanding at beginning of period 2,583,316 - -
Granted during the period - 2,799,982 2,799,982
Exercised/lapsed during the period (474,236) - (216,666)
Outstanding at end of period 2,109,080 2,799,982 2,583,316
The exercise price of share options outstanding at 30 September 2023 was
£0.275 and their remaining contractual life was 9 years.
The exercise price of share options outstanding at 31 March 2023 was £0.275
(2022: £nil) and their remaining contractual life was 9 years and 6 months.
Warrants
Warrants have been issued to certain shareholders and intermediaries as
commission for introducing capital to the Company. Warrants can be exercised
at any point before the expiry date for a fixed number of shares.
The movement on the number of warrants issued by the Company during each
period presented was as follows.
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 September 2023 30 September 2022 31 March 2023
Number Number Number
Outstanding at beginning of period 2,170,740 4,095,219 4,095,219
Granted during the period - - -
Exercised during the period - (1,183,400) (1,183,400)
Expired during the period (126,760) - (741,079)
Outstanding at end of period 2,043,980 2,911,819 2,170,740
At 30 September 2023 the exercise price of warrants outstanding ranged between
£0.01and £0.60 and their remaining contractual life was 1 month to 3 months.
At 31 March 2023 the exercise price of warrants outstanding ranged between
£0.01 and £0.60 and their remaining contractual life was 3 months to 9
months.
15. Commitments
Capital commitments
As at 30 September 2023 the Group had contracted to purchase property, plant
and machinery amounting to £2,329,060. (30 September 2022: £4,173,277). (31
March 2023: £3,754,738). An amount of £123,320 (31 March 2023: £123,320)
(30 September 2022: £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 £9,329,000 (30 September 2022: £10,329,000) (31 March 2023:
£10,329,000) 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 £3,000,000 (30 September 2022:
£5,000,000) (31 March 2023: £4,000,000) which is considered to be payable
annually.
16. Events after the end of the interim reporting period
On 18 December 2023 the Group issued £1.8 million of Tranche C convertible
loan notes which carry the same terms and conditions as the other convertible
loan notes as disclosed in note 11.
As disclosed above, the Group was in breach of the terms of the agreement post
period end. These breaches were waived by all Note holders whether they
subscribed to Tranche C or not in December 2023.
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