REG - Tungsten West PLC - Updated Development Strategy for Hemerdon Projects

Tungsten WestAnnouncement

21/04/2022 08:15

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RNS Number : 8792I  Tungsten West PLC  21 April 2022

Tungsten West Plc

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

Updated Development Strategy for the Hemerdon Tungsten Projects

 

Tungsten West plc (LON: TUN), the mining Company focussed on recommencing
production at the Hemerdon tungsten and tin mine ("Hemerdon" or the "Project")
in Devon, England, announces that in light of current market conditions it is
pausing the current Hemerdon development plan in order to evaluate alternative
approaches to restarting mining operations.

 

Since the publication of the Project's Bankable Feasibility Study (BFS) in
March 2021 and the subsequent admission to AIM in October 2021, there has been
significant and rapid inflation across key consumables for the Hemerdon
project. These input costs include steel, cement, ammonium nitrate
(explosives), power and diesel.

 

These inflationary pressures have been widely documented in the financial
press and originate from a variety of monetary and geopolitical factors in
particular the war in Ukraine. The March 2021 Bankable Feasibility Study was
optimised using assumptions that are now widely different from prevailing
market conditions and therefore is unlikely to still be the optimal
development strategy for the asset should current markets persist in the
medium term and the tungsten price does not react to a level greater than it
has. Given the scale of the inflationary pressures experienced in the last few
weeks, the Board of Tungsten West has decided to pause development to
re-optimise the Project based on new assumptions.

 

The Company expects to update the market with a new plan in the coming months.
Any new plan will likely entail a lower capital cost for redevelopment and a
reduced operating cost (from current expectations based on present input
costs) at a reduced production rate whilst maintaining the optionality of
expanding the production rate in the future.  The updated plan will focus on
achieving maximum margin for its three revenue streams: tungsten, tin and
aggregates.

 

The pause in project execution will allow the Company to accelerate
feasibility studies for a number of Phase 2 upgrades to the Project that had
previously been identified.

 

Tungsten West has recently completed a scoping study on the replacement of the
current refinery (which produces an iron tungstate concentrate) with a sodium
tungstate plant. This hydrometallurgical plant would be more energy efficient
and environmentally friendly than the existing pyrometallurgical solution
currently employed within the refinery  whilst also producing a superior
product that trades at a premium to tungsten concentrate. Initial financial
modelling suggests this upgrade could enhance  operating margins and
therefore the Company is moving to a full feasibility study on this upgrade.

 

Power prices at Hemerdon have increased from 11p per kWh to 28p per kwh in the
last twelve months. The Company is therefore accelerating its investigation of
on-site renewable energy generation and storage solutions which were already
under consideration as part of our ESG initiatives. The Company is working
through its industry association, the Critical Minerals Association, to engage
with Government on fast-tracking renewable energy projects that support
domestic production of critical minerals.

 

The Company has a robust balance sheet position with cash in hand of £28
million as at 31 March 2022 and has not yet drawn down on the previously
announced Orion Project Finance Facility. It will use this position to pursue
the alternative production strategy that focuses on lower capital and
operational costs to value-engineer and re-optimise the Project, while still
bringing Hemerdon into operation.

 

Hemerdon is the third largest tungsten deposit in the world, which under the
current global political and economic situation illustrates more than ever its
importance in securing the supply of two key critical minerals in tungsten and
tin to the Western World. The price outlook for both metals, also considered
conflict minerals, remains very robust, and as such Tungsten West remains
focussed on restarting this strategically important project.  The Project
benefits from current planning permission, a pre-stripped open pit along with
significant infrastructure and sunk costs from previous operators and combines
this with a strong operational team and recently purchased equipment which
includes seven Tomra ore sorters.

 

Tungsten West's CEO, Max Denning, commented:

"It's clear we are not alone in that many mining operations, whether in
production or development, are feeling the impact of the current unprecedented
global economic challenges. However, as Tungsten West had only recently
commenced development it is still in a position to alter its development
strategy to take account of these factors and can build on significant project
infrastructure and IP within our team. We have access to a significant
quantity of tungsten, tin, aggregates, processing equipment and knowledge on
site. These provide all the key ingredients required to formulate a revised
production strategy and successfully bring Hemerdon back into profitable
production. I look forward to updating shareholders with progress in due
course."

 

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

 

 Enquiries

 

 Tungsten West                                                           Strand Hanson

 Max Denning / Mark Thomspon                                             (Nominated Adviser and Financial Adviser)

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

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

 (Financial PR)                                                          (Joint Broker)

 Gordon Poole / Emily Hall                                               Andrew Chubb / Nilesh Patel

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

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

                                                                         VSA Capital Group plc

                                                                         (Joint Broker)

                                                                         Andrew Raca / Andrew Monk

                                                                         +44 (0)20 3005 5000

Follow us on twitter @TungstenWest

 

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 ("Wolf"), 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.

 

The Company is focussed on updating the existing infrastructure and, in the
near-term, restarting the Hemerdon mine at a low cost. Following the restart,
Hemerdon is expected to produce significant volumes of tungsten and tin, both
of which are strategically important materials, particularly in the
development of new technology.

 

 

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