Cornish Metals secures £28.6 million government investment to restart historic South Crofty tin mine

The UK’s National Wealth Fund (NWF) has announced a £28.6 million direct equity investment into Cornish Metals (TSX-V: CUSN) to help finance and de-risk the re-opening of the South Crofty tin mine in Cornwall.

The fully-permitted underground development hosts one of the world’s highest-grade tin resources and racked up more than 400 years of recorded production prior to its closure in 1998 due to falling metal prices.

Since then, increasing demand from a range of technological and clean energy applications has lifted tin prices to a level that warrants the recommencement of production.

Major shareholder

The NWF investment will see the fund subscribe for 359.3 million new common Cornish shares to become a major shareholder in the junior miner.

The move is believed to demonstrate the government’s support for a production restart at the historic mine.

It also brings into focus the importance of tin and lithium, which have been classified by the UK government as critical minerals essential for the nation’s transition to net zero emissions.

The investment is subject to scaling conditions, with a minimum commitment of £25 million before expenses.

Capital injection

Cornish Metals’ chief executive officer Don Turvey said the company was pleased to have received the capital injection to bring tin mining back to Cornwall.

“We have achieved many important milestones over the last couple of years as we continue to advance South Crofty towards a restart and this financing will enable us to maintain this strong momentum and further unlock the project’s potential by completing key work programs,” he said.

Allocations will include £17.2 million for early site works and ordering long-lead items; £13.3 million for mine dewatering and shaft refurbishment; and £12.6 million for site costs and corporate expenses.

Additional funds will be directed towards project engineering studies and the repayment of a credit facility through existing shareholder Vision Blue Resources.

Second investment

The NWF is an expansion and rebranding of the UK Infrastructure Bank, which was created by the then-Conservative government in June 2021.

Chief executive John Flint said the Cornish investment follows a 2023 investment by the fund into Cornish Lithium in the same county.

“This is our second investment into critical minerals in Cornwall and is indicative of our ability to mobilise private investment into local economies, creating skilled and long-term employment,” he said.

“Critical minerals are an important driver in the UK’s transition to net zero and also in the nation’s growth mission, providing opportunities to anchor important supply chains in the UK.”

Capital raising

The NWF investment is part of a wider funding round by Cornish Metals to raise a minimum of £56 million for the South Crofty project’s development towards a final investment decision.

The initiative has attracted an £18.28 million commitment from Vision Blue to retain its 25.95% stake.

Cornish directors are expected to subscribe for 1.5 million new common Cornish shares at 8 pence each under a direct share subscription for a total investment of around £130,000.

A separate retail investor offer via the BookBuild platform could raise another £3 million.

Funds raised will be combined with Cornish Metals’ existing cash reserves of £5.3 million to advance several areas of the project.

Preliminary economic assessment

Cornish Metals has been working on bringing South Crofty back to life since 2016.

Last year, a preliminary economic assessment (PEA) of the project highlighted an after-tax net present value of £161 million and a 29.8% internal rate of return at a tin price of approximately £25,000 per tonne.

It was based on a mine throughput of 500,000 tonnes per annum at an average grade of 0.94% tin and a processed throughput of 250,000tpa at an average 87.8% tin recovery for a production total of 49,310 tonnes contained tin over a 14-year mine life.

The report included life of mine production totals of 3,844 tonnes contained copper and 3,225 tonnes of contained zinc.

South Crofty is expected to generate substantial cash flows, with a total after-tax cash flow of £502 million over the production period and an average annual earnings before interest, taxation, depreciation and amortisation (EBITDA) of £66 million during peak production years.