Tungsten West (LON: TUN) shares are down 24% Thursday. TUN shares are suffering from the long running - a century now and counting - basic problem with mining in Cornwall. It’s an expensive place to go mining. Therefore mines and deposits there are only economic at high metals prices. This is the reason all those mines closed down over the past century in the first place. Unless there’s some new method of mining (as with the idea from geothermal waters) there’s not really anything that can deal with this problem. Metal can be produced elsewhere cheaper - so the global price is likely to be below Cornish production costs.
This is leading to the following announcement: “Updated JORC compliant Ore Reserve Estimate to 101.2 million tonnes ("Mt"), making the Hemerdon deposit the second largest reported Committee for Mineral Reserves International Reporting Standards ("CRIRSCO") standard tungsten reserve globally An updated Feasibility Study highlighted strong project economics, including: Average annual production of 2,900 tonnes of WO3 in concentrate and 310 tonnes of Tin ("Sn") in concentrate” which is lovely, it’s just that the economics are not strong. Mining for tin alone isn;t profitable at current prices - hard rock mining for it isn’t at least. Yes, here there’s the WO3 revenue as well but at current prices that’s around 10% of total revenue - it’s tin prices that matter here.
This then leads to: “Following the draw down of the Tranche A and Tranche B convertible loan notes, £6.95 million 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 as they fall due in November 2023” Unless they can raise new cash they’re bust. And given the market capitalisation any rights issue would have to be horribly dilutive.
Tungsten West share price from Google Finance
As we’ve said before about Tungsten West: “Of course Tungsten West has a problem anyway. Their intended mine at Hemerdon undoubtedly contains both tin and tungsten. Cornwall never was mined out, it's just that alternative and cheaper deposits were opened up elsewhere in the world. Which is a distinct possibility here too. That current world prices - especially for tin - just aren't sufficient to justify re-opening a Cornish mine. Would be a pity if that were so but it's still entirely possible. We're seeing very weak stock prices in other London listed shares like First Tin as well - they're trying to open in Europe's other historic tin district, the Krusny Hory. “
And about TUN shares: “Just for the avoidance of doubt we're quite certain that there's tin and tungsten there at Hemerdon to mine. We're just not certain that what's there is worth mining. For the Cornish industry didn't close down because the ores were worked out. That industry closed because other deposits elsewhere were cheaper to exploit - therefore the global price for both metals came down so much that it wasn't worth bothering to mine in Cornwall. Sometimes, and for brief times, global prices have climbed to the point where reopening might make sense. But as happens they've not remained that high for that long.”
The basic problem Tungsten West has is the long running one that all Cornish mines have faced. They’re simply expensive to mine. Therefore, except at times of globally high metals prices, they’re not worth mining. And if that true then why would anyone want to refinance Tungsten West?
It wouldn’t surprise us if TUN shares went to zero and soon enough. We’re not predicting it but it wouldn’t surprise us.