The court approval

Tungsten West (LSE:TUN) announced on 5 November 2026 that the High Court had, on 3 November, sanctioned the cancellation of the balance standing to the Credit of its share premium account. Shareholders had approved the step at the Annual General Meeting on 29 September. The company said the reduction takes effect once registered at Companies House, which it expected within days, and that it will not alter the number of shares in issue or admitted to trading.

The stated purpose is to give the company the ability to pay dividends and make other distributions in future. LSE:TUN gave no assurance about whether, when or how much it might distribute, and investors should read the move as housekeeping rather than a signal of imminent payouts.

About the company

Tungsten West owns the Hemerdon tungsten and tin mine near Plymouth in Devon. The mine closed under a previous owner in 2018 and is being restarted. Tungsten is used in hard metals, cutting tools and defence applications, and Supply outside China is limited, which is why the project has strategic interest.

Why the Balance Sheet needed it

LSE:TUN owns the Hemerdon tungsten and tin mine near Plymouth, one of the largest tungsten deposits in the Western world, which closed under a previous owner in 2018. Restarting it has required repeated share issues, and those funds were booked largely as share premium rather than as distributable profit.

According to the company's results for the year to 31 March 2026, the share premium account stood at about £277.0m while accumulated losses reached roughly £234.0m. Under UK company law a Business cannot pay dividends while it has a Deficit on distributable reserves, however healthy its trading becomes. Cancelling share premium is the standard route to clear that deficit, and on these figures the premium balance exceeded the accumulated losses at March 2026. The amount actually cancelled was not stated.

How the losses arose

Much of the deficit is non-cash. The 2025-26 loss of about £175.4m was driven by a £167.3m finance charge reflecting Fair Value movements on convertible Loan notes before they converted into shares in December 2025 and February 2026. The operating loss was about £7.9m. Cash at the year end was roughly £25.5m and net Assets attributable to owners were about £58.3m, compared with a restated deficit a year earlier. That distinction matters because the accounting deficit overstates the cash the company has consumed.

Funding and operations

Since March the company has added further backing. In August 2026 the National Wealth Fund committed up to £71m, made up of a £36m share subscription before costs, a fully drawn 366-day £25m loan Facility and an uncommitted £10m accordion, according to the results statement. That followed a £43m gross share issue in February.

Processing began in mid-September, when the company announced operations had started during a visit by the fund. On 23 September it signed a strategic supply and offtake agreement with Elmet Technologies, a US tungsten products manufacturer, which industry press described as an eight-year arrangement. Management has said commissioning should run to the end of the first quarter of 2027 on time and within budget.

Risks and limits

A cleaner balance sheet does not create cash. Any distribution would depend on Hemerdon reaching steady production, generating profits and servicing its debt, including the short-dated £25m facility. The results statement modelled a downside in which a three-month delay to the permanent front-end plant added about £3m of operating costs. Recoveries, tungsten and tin prices, and currency remain key sensitivities, and in 2025-26 a single customer accounted for all of the group's £0.6m of revenue.

What a share premium cancellation does

Share premium is the amount paid for shares above their nominal value, and in UK company law it is a restricted reserve that cannot be paid out as dividends. Cancelling it, with court approval, converts it into a distributable reserve, which can absorb accumulated losses and create room for future dividends. Because the number of shares does not change, shareholders' holdings are unaffected.

The numbers

Share premium of about £277.0m against accumulated losses of about £234.0m gives a difference of about £43.0m, which is the maximum that would remain after covering the deficit if the whole premium were cancelled, though the amount actually cancelled was not stated. Net assets of about £58.3m, with cash of about £25.5m, show the scale of the balance sheet.

The nature of the loss

The loss of about £175.4m includes a £167.3m finance charge from fair value movements on the convertible notes. That leaves about £8.1m for other items, with an operating loss of about £7.9m. The convertible notes converted into shares in December 2025 and February 2026, so the charge will not recur in the same form. The result is that the accounting deficit is far larger than the cash used by operations.

Commissioning

The company is in the process of commissioning the mine. Revenue and profit from sales would be needed before any distribution could be made, since dividends are paid from distributable profits as well as from reserves. The company has said it gives no assurance of any distribution, so the cancellation is a preparatory step.

Operational context

The company is working to bring Hemerdon back into production, which involves commissioning processing equipment, ramping up output and selling concentrate. Each of those steps affects when revenue and Cash Flow can begin. A reserve restructuring of this kind is a preparation for the time when the company has profits that can be distributed.

Tungsten and tin are used in products ranging from tools to electronics, and prices for tungsten have attracted attention because supply outside China is limited. Hemerdon is one of the largest deposits in the Western world, which is why it has been the subject of several attempts to restart it.

For shareholders, the number of shares remains unchanged, so the cancellation does not affect their holdings, and the company's statement that it gave no assurance of distributions shows the cautious wording attached to the step.

What to watch next

The immediate step is registration of the reduction, which the company expected shortly after 5 November. Beyond that, investors will look for commissioning progress towards the first-quarter 2027 target, early delivery data under the Elmet agreement and plans to refinance or extend the National Wealth Fund loan. Only after sustained profitable output, and a Capital allocation policy, would the reserves question become practical.