Tungsten West will Have Hemerdon Project Running Next Year

Tungsten West PLC has been forced to halt operations at its Hemerdon project after experiencing significant cost increases this year. Inflation has pushed up the projected cost of electricity at the famed Devon tungsten development by a factor of 2.5, while diesel and ammonium nitrate prices are also rising. The price of ammonium nitrate has quadrupled in the last four months.

Hemerdon project of Tungsten West image

Tungsten West has done the feasibility study for Hemerdon and constructed the economic model for Hemerdon, but realistic construction has not yet begun. Thus, unlike one or two other companies that have recently come into production in the economic environment prior to Ukraine, there is room for maneuvering, and Tungsten West has acted quickly on the difficulties encountered.

While tin has recently risen 240%, the price of tungsten has only risen about 6% in the same period, and although tin is a large part of the Hemerdon project, it is tungsten that will make or break the project.

Under the previous plan, Hemerdon could still make a profit at the operating level, even after taking into account all the price increases. The problem is that it would then not be able to pay its debts. The new plan being developed by Tungsten West will not have any debt component given its existing cash reserves of £28 million.

CEO Max Denning has made it clear that he wants to get Helmerton up and running by next year and may provide a detailed plan on how to do so within a few months. Max Denning has made it clear that he wants to have Helmerton up and running by next year, and is likely to provide a plan detailing how that will be achieved within a few months.

Denning said the company will focus on three areas: it will focus on cutting capital costs, operating costs and tonnage; providing a higher margin; and reducing ore processing by bypassing the front end of the plant.

Tungsten West breaks ground at Hemerdon image

What is clear, however, is that for the time being at least, Helmerton will be significantly smaller. Early estimates suggest that output rates under the revised plan will be half or two-thirds of what was originally planned. Denning said, "Our focus is on getting Hemerdon back into production without borrowing any money."

"We are planning a high-margin, small-scale operation that optimizes our three key revenue streams in tungsten, tin, and aggregates. Downsizing the operation will allow Tungsten West to sell more scrap from the tungsten plant as aggregate."

"If market conditions change, we can scale up again," Denning said. "If, on an optimistic note, economic conditions do return to pre-Ukraine invasion levels, Hemerdon Project 's scale can be funded by cash flow from existing operations."