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:

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:

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

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. WO₃. 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.