REG - Tungsten West PLC - Updated Feasibility Study Delivers Further Value

Tungsten WestAnnouncement

16/01/2023 07:00

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RNS Number : 7508M  Tungsten West PLC  16 January 2023

16(th) January 2023

 

Tungsten West Plc

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

 

Updated Feasibility Study Delivers Further Value

 

Tungsten West plc (LON: TUN), the mining company focussed on restarting
production at the Hemerdon tungsten and tin mine ("Hemerdon" or the "Project")
in Devon, UK, is pleased to release the summary of results from its updated
and independently reviewed Feasibility Study ("FS") covering recommencement of
operations at Hemerdon, demonstrating a robust and economically viable case
for the mine.

 

 

Highlights:

 

·    Strong Project Economics

o  A post-tax Net Present Value ("NPV")(5%) of £297 million (base case) with
an Internal Rate of Return ("IRR") of 25%

o  Life of Mine ("LOM") post financing free cash-flow of £550 million (base
case)

o  An Upside case post-tax NPV((5%)) of £415 million  with an IRR of 32%

o Average annual production of 2,900 tonnes of WO(3) in concentrate and 310
tonnes of Tin ("Sn") in concentrate

o  LOM of 27 years and an annual average steady-state mining rate of 3.5 Mt
per annum

§ The LOM model assumes stockpiling lower grade killas ore for processing
from Year 17 onwards, significantly extending the mine life

o  LOM  C1 cash-cost of £135 per mtu of WO(3)

o  Remaining Project CAPEX, including EPCM fees, is £31.1m as of 1(st)
October 2022

§ £12 million of restart CAPEX already spent

Overall, this positions Tungsten West to become the largest tungsten producer
in the Western World.

 

·    Processing Re-optimisation

o  A complete redesign of the front-end crushing circuit considerably reduces
CAPEX

o  Optimisation of XRT ore-sorting operational parameters significantly
reduces OPEX

o Ore sorting optimisation allows the re-purposing of Dense Media Separation
("DMS") circuits and the removal of the refinery kiln from the circuit
reducing diesel consumption by 1.3 million litres per annum

o  Significant upsides have been identified to optimise recoveries post
operational restart

 

·    Recently Increased Reserves and Resources (see announcement of 19(th)
December 2022)

o  Ore Reserve Estimate ("ORE") of 101.2 Mt at 0.14% WO(3) and 0.03% Sn

o  Mineral Resource Estimate ("MRE") of 351.5 Mt at 0.12% WO(3) and 0.03% Sn

o  Exploration targets provide future growth of reserves and resources
potential

§ Adjacent to MRE

§ Drill ready

 

·    Sunk Capital

o  The Project benefits from over £200 million of investment to date,
including the development of significant infrastructure, pre-stripping of the
open pit, construction of the mineral processing facility ("MPF") and a fully
funded restoration bond

 

·    Upholding strong ESG credentials

o  The FS has been designed to optimise the Project and reduce environmental
risk

o  Tungsten West remains committed to restarting operations, delivering value
to the local area and ensuring open and positive dialogue with the local
communities

o  Received two of the four permits required to restart operations and
anticipate the approval of the remaining permits in Q1 2023 (see announcement
of 15(th) December 2022)

 

Mark Thompson, Executive Vice Chairman of Tungsten West, commented on the
Feasibility Study: "We are delighted to deliver this updated Feasibility Study
which showcases the attractive economics of our Project that will enable us to
sustainably deliver the critical metals, tungsten and tin, into World markets.

 

"The updated Feasibility Study was completed as part of the revised plan for
the Hemerdon mine, which was essential due to the unforeseen geopolitical
circumstances and energy price inflation shock of 2022. The Feasibility Study
provides solutions to the energy price challenges and will enable increased
operating efficiencies at the Project. Key highlights from this study include
a revised ore delivery and waste mining strategy, a split phase approach to
operational ramp-up to the full design specification, a new primary and
secondary crushing method and location, a re-optimisation of the operating
strategy for the XRT ore sorters, re-design and re-engineering of the feed
preparation, ore sorter buildings and structures, and a re-evaluation of the
operation of unit processes and expected recoveries.

 

"Tungsten is on both the EU and US lists of critical metals and due to
geopolitical tensions and security of supply issues the market remains strong.
With Hemerdon in production, we will provide an alternative source of tungsten
to Western consumers in markets which are otherwise dominated by China. China
currently accounts for circa 90% of global tungsten reserves and 80% of mine
production, and Chinese APT production share is between 85% and 90% of world
supply.

 

"We are build-ready at Hemerdon and we look forward to continuing to work with
our partners and stakeholders to bring Hemerdon back into production in the
fourth quarter of 2023."

 

 

Summary of Feasibility Study Results

 

Project Economics

The post-tax NPV(5%) of the Project is £297 million with an associated IRR of
25%. Conservative assumptions have been made with regards to the ramp up
schedule and WO(3) and Sn recovery levels used in the financial model leaving
considerable upside to metallurgical recoveries and a faster than planned ramp
up.

The cumulative free cash flows after expected financing of the Project through
the LOM exceed £550 million.

 

 

 

 

Figure 1.1: Project Cashflow over LOM

 

As part of the FS sensitivity and upside scenarios have been examined which
are summarised in Table 1.1 and Figure 1.2. The alternate scenarios
illustrated in Table 1.1 show potential project upside in the region of a
NPV5% of between £318 million and £416 million.

 

Table 1.1: Results of Scenario Analysis for key outputs

 

                           Scenario 1  Scenario 2       Scenario 3                 Scenario 4
 Input Parameter           Base        Recovery Upside  Price Upside: 5% increase  Recovery and Price Upside
 Starting APT Price        340         340              340                        340
 Price Growth (per annum)  3%          3%               5%                         5%
 Maximum APT Price ($)     450((1))    450((1))         450((2))                   450((2))
 WO₃ Granite Recovery      54.0%       62.6%            54.0%                      62.6%
 Sn Granite Recovery       31.0%       34.5%            31.0%                      34.5%
 NPV                       297         391              318                        416

(1)        Reached in Year 10

(2)        Reached in Year 7

 

 

Figure 1.2: 'Spidergram' illustrating sensitivity of various Project
parameters

 

Capital and Operating Costs

 

As of 1(st) October 2022, the remaining Project CAPEX, including EPCM fees, is
estimated at £31.1 million  (excluding contingency.) Pre-operating costs
(which include spares inventory, staff overheads, G&A and mining services
to prepare the site) are estimated at £19.4 million.

 

Other corporate commitments, including environmental bond payments, and
opportunistic land purchases are estimated at £4.4 million, with a further
£6 million of deferred consideration for project acquisition included in the
forecast cashflow. In total pre-production expenditure is estimated at £54.9
million.

 

The Company forecasts that the first two years of production will involve a
ramp-up in throughput to allow for ongoing process improvements in the initial
phase of production. This results in forecast throughput production of 2.0
Mtpa (Year 1), 2.7 Mtpa (Year 2) and 3.5 Mtpa (Year 3 onwards). As part of the
revised operating strategy and staged ramp-up, the Company will benefit from a
delayed waste stripping profile which will result in the Project generating
positive operating cashflows in the first year of operation.

The base case has assumed a long-term cost of power supply of £0.247/kWh
based on 100% grid supply. (This compares to £0.115/kWh in the 2021 FS).
Scoping studies on renewable energy projects that have been undertaken
demonstrate that power prices can be significantly reduced with initial
guidance indicating a long-term power cost of £0.10 - £0.125 kWh for at
least 30% of the Project's power needs.

Mineral Resources

 

As outlined in the Company's announcement of 19th December 2022, Tungsten West
has reported an update to the 2021 Hemerdon deposit MRE due to changes in
costs and processing assumptions, affecting the breakeven ("BE") cut-off grade
("CoG"). Furthermore, the Company has reported updated changes to the Hemerdon
stockpile inventory following depletion of various stockpiles since the 2021
reported MRE. The 2021 block model estimate has been used to report the
updated resource confidence categories due to no material differences in
geological interpretation or data used to support the estimation.

 

Table 1.2: Summary Updated October 2022 MRE for the Hemerdon Project

 

 DOMAIN      Cut-Off WO(3) Eq (%)  MEASURED                                 INDICATED                                     INFERRED
             Tonnes (Mt)                 WO₃ (%)    Sn (%)  WO₃  Eq (%)     Tonnes (Mt)  WO₃ (%)    Sn (%)  WO₃ Eq (%)    Tonnes (Mt)  WO₃ (%)    Sn (%)  WO₃  Eq (%)
 Granite     0.0640                33.6  0.18       0.03    0.19            84.0         0.15       0.02    0.16          36.5         0.11       0.02    0.12
 Killas      0.0620                8.5   0.11       0.03    0.13            44.7         0.10       0.03    0.11          140.4        0.09       0.03    0.10
 Stockpiles  N/A                   0.6   0.20       0.06    0.23            -            -          -       -             -            -          -       -
 MWF         N/A                   -     -          -       -               -            -          -       -             3.2          0.18       0.02    0.18
 Total       -                     42.8  0.16       0.03    0.18            128.6        0.13       0.03    0.14          180.1        0.1        0.03    0.11

 

 

Notes to accompany Mineral Resource table

1. The Qualified Person for the estimate is Mr. James McFarlane, BSc (hons),
MSc, MCSM, FGS, CEng FIMMM, RPGeo MAIG, FIQ, a Tungsten West employee. The
estimate has an effective date of 11 October 2022.

2. Mineral Resources are reported using the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves" (The JORC Code) 2012
Edition.

3. Numbers may not add up due to rounding. Rounding as required by reporting
guidelines may result in apparent differences between tonnes, grade and
contained metal content.

4. All tonnages reported are dry metric tonnes.

5. WO(3) Eq calculated as [ Sn%*0.379 +WO₃%].

 

Mining and Ore Reserves

 

As outlined in the Company's announcement of 19(th) December 2022, the Ore
Reserves have been estimated using the Mineral Resource block model produced
in January 2021. The Ore Reserves were subject to a pit optimisation study
conducted by Tungsten West during October to November 2022. This was followed
by detailed pit design, pushback design and LOM plan by the Company and Mining
Plus UK Ltd ("MPUK") in addition to financial modelling. All of the studies
illustrated that the Project is robust and also illustrated that there is
significant potential upside present.

 

The pit designs were used to generate a LOM production schedule (Figure 1.3).
To maximise the Project NPV, the Company plans to stockpile the lower grade
(but still economic) killas material until completion of the granite mining
phase, at which time the killas stockpiles will be reclaimed and fed through
the Mineral Processing Facility ("MPF"). The resulting schedule provides a
mining life of approximately 27 years. Granite processing will last 17 years
and there is a further period of killas processing which lasts just under 10
years after the last granite ore is processed.

 

 

Figure 1.3: LoM Schedule - Tonnages by Material Type.

 

The total updated Ore Reserve (Proved and Probable) for Hemerdon is 101 Mt at
0.14% WO(3) and 0.03% Sn, reported above an Ore Reserve cut-off grade of
0.0742% WO(3) Equivalent ("WO(3) Eq") for the granite and 0.0689% WO(3) Eq for
the killas. This Ore Reserve includes 0.6 Mt of existing stockpiles remaining
from the previous open pit mining of the Hemerdon granite between 2015 and
2018.

 

The Hemerdon Mineral Reserves tabulation is shown in Table 1.3 below

 ORE TYPE    Cut-off WO(3) Eq  PROVED ORE RESERVES          PROBABLE ORE RESERVES             TOTAL ORE RESERVES

             (%)
             Tonnes (Mt)                WO(3) (%)  Sn (%)   Tonnes (Mt)  WO(3) (%)  Sn (%)    Tonnes (Mt)  WO(3) (%)  Sn (%)
 Granite     0.0742            32.1     0.18       0.03     24.0         0.17       0.02      56.1         0.17       0.03
 Killas      0.0689            8.3      0.11       0.03     36.3         0.10       0.03      44.5         0.10       0.03
 Stockpiles  N/A               0.60     0.20       0.06     -            -          -         0.60         0.20       0.06
 Total       -                 41.00    0.17       0.03     60.20        0.13       0.03      101.20       0.14       0.03

 

 

Notes to accompany Ore Reserves table:

1. The Qualified Person for the estimate is Mr. Adriano Carneiro, fellow
AusIMM, a MPUK employee. The estimate has an effective date of 15 November
2022.

2. Ore Reserves are reported using the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves" (The JORC Code) 2012
Edition.

3. Numbers may not add up due to rounding. Rounding as required by reporting
guidelines may result in apparent differences between tonnes, grade and
contained metal content.

4. All tonnages reported are dry metric tonnes.

5. WO(3)Eq calculated as WO(3)Eq = WO(3) + (0.4942*Sn) for granite and WO(3)Eq
= WO(3) + (0.3794*Sn) for killas.

 

Processing

 

Enhancing the role of ore sorting as a fundamental step change in the
processing strategy has provided Tungsten West with significant operational
flexibility due to the ability to reduce ore sorter weight yields to
pre-concentrate ore. This method reduces the amount of material being
processed in the next stages within the MPF and therefore resulting in reduced
capital requirements and operating costs. The ore sorter technology has the
added benefit of removing much of the iron-rich material from the Run of Mine
("ROM") feed to the MPF enabling the removal of the reduction kiln in the
refinery from the flowsheet. This removes approximately 1.3 million litres of
diesel consumption per annum. The upgraded feed grade from the ore sorters
both the DMS and Spiral-Table Gravity circuits will enable the Company to
achieve higher recoveries in these circuits.

Results from an optioneering study on the revised mine plan and processing
strategy and mine plan have yielded an optimised solution reducing initial
capital and operating costs:

The re-design is phased as follows:

·    Years One and Two ("Phase1") - average of 2.4 Mtpa of granite ore

·    Year Three onwards ("Phase 2") - 3.5 Mtpa of granite ore

 

The changes to the existing process flowsheet to be implemented at Hemerdon
can be categorised into three areas, namely:

·    Front End Upgrades - New Crushing, Screening and Ore Sorting Circuit
required for Phase 1;

·  Existing Minerals Processing Facility Modifications - Upgrades to
existing plant to accommodate production requirements for Phase 1; and

·    Phase 2 Crushing and Process Plant Expansion - Future upgrades to
both Crushing and Processing plants required for increased production rates,
envisaged from Year Three onwards.

 

The re-engineering has mainly reduced CAPEX and OPEX around reduced ore
handling costs by the introduction of direct tipping at a newly sited ROM pad
incorporating the introduction of new semi-mobile primary jaw and secondary
cone crushers, new operating parameters for the ore sorting circuit, and to a
lesser extent changes to the existing DMS and fine gravity dressing circuits.

The revised front end design also includes a significant tactical advantage
through the introduction of a secondary crushed ore stockpile ahead of the ore
sorters. This provides up to circa 40 hours of redundancy capacity to the
crushing circuit thereby de-coupling the front end crushing circuit from the
MPF - minimising downtime and maximising availability of the concentrator
circuit.

Tungsten West has maintained the ethos of the original FS in continuing to
engineer out as many operational, mechanical, electrical or ESG issues
associated with the previous operation as possible and to ensure MPF
availability and operability remains a priority.

 

ESG

 

As part of the Company's ongoing commitment to complying with the highest
environmental and social standards, the Company has maintained an integrated
environmental management system consisting of ISO 14001 (Environment), 9001
(Quality), 45001 (Health & Safety) and 50001 (Energy
Efficiency). Tungsten West has also been working and consulting with the
local community and as a result has developed an ESG strategy, which aligns
with UN Sustainable Development Goals, International Finance Corporation
Performance Standards, and the Sustainability Accounting Standards Board.

 

Tungsten West is committed to a vision of a safe and sustainable operation
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 all stakeholders.

 

The Company is focussed on providing significant economic benefits to the
people and communities surrounding the mine, as well as the UK as a whole.

 

 

Qualified Person Statements

Information in this announcement has been reviewed and approved by Mr James
McFarlane, BSc (Hons), MSc, MCSM, FGS, CEng FIMMM, RPGeo MAIG, FIQ . Mr
McFarlane holds a BSc with Honours from The University of Wales, Aberystwyth
in Environmental Earth Science and an MSc in Mining Geology from Camborne
School of Mines, University of Exeter, he is also a Master of the Camborne
School of Mines (MCSM). Mr McFarlane is a Fellow of the Geological Society of
London (FGS), a Chartered Engineer (CEng) and Fellow of the Institute of
Materials, Minerals and Mining (FIMMM) through which he is also a Registered
Mineral Resources and Reserves Reporting Practitioner. Mr McFarlane is a
Member of the Australian Institute of Geoscientists (MAIG) and through which
is Registered Professional Geoscientist in the joint fields of Mining and
Mineral Exploration (RPGeo). Mr McFarlane is also a Fellow of the Institute of
Quarrying (FIQ). Mr McFarlane is an employee of the Company. Mr McFarlane
has sufficient experience relevant to the style of mineralisation and type of
deposit under consideration, and to the activity which he is undertaking to
qualify as a Competent Person as defined by the 2012 Edition of the
Australasian Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves (the JORC Code) and under the AIM Rules.

Mr. McFarlane relied on a number of supporting qualified persons (other
experts) in relevant areas including environmental, metallurgy & recovery
methods, ore reserves, tailing facility design, economic and market analysis,
aggregates & planning matters, of which Mr James McFarlane had oversight.

- Note for Mining and Oil & Gas Companies, which outline standards of
disclosure for mineral projects. Mr McFarlane consents to the inclusion in
this announcement of the matters based on this information in the form and
context in which it appears. Mr McFarlane confirms that the Company is not
aware of any new information or data that materially affects the information
included in the relevant market announcements, and that the form and context
in which the information has been presented has not been materially modified.

The information in this release that relates to the Estimation and Reporting
of Ore Reserves has been compiled by Mr Adriano Carneiro BEng (Mining)
FAusIMM. Mr Carneiro is a full-time employee of Mining Plus UK Limited Ltd and
has acted as the Competent Person on the Hemerdon deposit Ore Reserve
Estimation. Mr Carneiro is a Fellow Professional of the Australasian Institute
of Mining and Metallurgy and has sufficient experience with the commodity,
style of mineralisation and deposit type under consideration and to the
activities undertaken to qualify as a Competent Person as defined in the 2012
Edition of the "Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves" (The JORC Code).

- Note for Mining and Oil & Gas Companies, which outline standards of
disclosure for mineral projects. Mr. Carneiro consents to the inclusion in
this report of the contained technical information relating the Ore Reserve
Estimation in the form and context in which it appears. Mr Carneiro confirms
that the Company is not aware of any new information or data that materially
affects the information included in the relevant market announcements, and
that the form and context in which the information has been presented has not
been materially modified.

The Feasibility Study was also independently reviewed by AMC Consultants (UK)
Limited ("AMC"). AMC was engaged by Tungsten West Limited (TWL) to undertake a
review (the Review) of Sections 1-4, 6, 18, 19, 20, 21, 22, 24 (ii), 25 and
26.

 

 

Enquiries

 

 Tungsten West                                                            Strand Hanson

 Mark Thompson                                                            (Nominated Adviser and Financial Adviser)

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

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

 (Financial PR)                                                           (Joint Broker)

 Tim Blythe / Megan Ray                                                   Andrew Chubb / Matt Hasson / Jay Ashfield

 Tel: +44 (0) 207 138 3204                                                +44 (0)20 7907 8500

 Email: TungstenWest@blytheray.com (mailto:TungstenWest@blytheray.com)

                                                                          VSA Capital Group plc

                                                                          (Joint Broker)

                                                                          Andrew Raca / Andrew Monk

                                                                          +44 (0)20 3005 5000

Follow us on twitter @TungstenWest

 

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