Struggling Devon mine facing uncertain future as it struggles to raise funding
A struggling Devon tungsten mine is facing an uncertain future if it fails to raise more funds.
Tungsten West, the company behind Hemerdon mine, has published its full results for the year.
Following the publication of the results the value of shares in the company plummeted by more than 50 per cent.
Shares in Tungsten West dropped by as much as 53 per cent after the company said it might not be able to meet liabilities and raise the necessary funds to restart operations.
The tungsten mining company has said it has limited options to raise the capital needed to restart production at the Hemerdon mine – the company’s sole project – until it secures a final operating permit and planning permission.
The mining company said it is focused on restarting production at the Hemerdon tungsten and tin mine following a difficult year.
A cost cutting programme saw a round of redundancies and both the co-founders have now left the business.
An updated feasibility study highlighted strong project economics, including average annual production of 2,900 tonnes of tungsten,
Key permits, including the Mining Waste Facility and Open Pit Water Abstraction Licence have been granted by the Environment Agency.
However following the draw down of the Tranche A and Tranche B convertible loan notes, worth £6.95, in total, there is not any current commitment from existing or new noteholders to purchase any Tranche C notes.
If the group fails to find purchasers for the Tranche C notes, then, in the absence of other new sources of finance, it would no longer be able to meet its liabilities which are due in November.
The board says it continuing to implement a cost reduction programme, is proactively engaging with loan note holders and is reviewing other sources of funding to address the short-term liquidity needs of the business.
Chairman David Cather said: “Despite all the efforts during the year to ensure permitting and construction could run in parallel, it has now become apparent following investor and lender feedback that this is not the case due to potential design changes required to achieve permitting.
“The group needs to secure the mineral processing facility permit in order to obtain the finance required to complete the plant rebuild and commence production. As a consequence, the company undertook a strategic review, and, with the continued risk surrounding volatile energy prices and a more conservative lending approach, it announced a number of cost saving initiatives to ensure the project could continue.
“To allow enough time to finalise the full project funding process, all non-core project construction activities ceased, with recommencement to begin when the exact design requirements necessary for obtaining the Mineral Processing Facility were clarified. A review of staffing requirements inevitably followed which led to redundancies post year-end. It is never easy to go through a redundancy process, especially given the high aspirations and goals of this Company, so I would like to thank all Tungsten West staff for their level of maturity and understanding during the process.
“In June 2023, the Group raised £7.2m of new funds from issuing convertible loan notes and open offer. An additional £2m notes can be issued if required. These funds were drawn in order to finance the group through the process of obtaining the necessary permits. The cost reduction and cash conservation measures implemented by management triggered a number of defaults under the terms of the notes. A waiver is in place for these defaults until 31 January 2024. By 31 January 2024 the board plans to have obtained the necessary permits and as a result additional finance.”