REG - Zinnwald Lithium PLC - Final Results
22/02/2022 07:00
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RNS Number : 3399C Zinnwald Lithium PLC 22 February 2022
Zinnwald Lithium plc / EPIC: ZNWD.L / Market: AIM / Sector: Mining
22 February 2022
Zinnwald Lithium plc ("Zinnwald Lithium" or the "Company")
Final Results
Zinnwald Lithium plc, the German focused lithium development company, is
pleased to announce its final audited results for the year ended 31 December
2021.
The Company's Annual Report and Financial Statements for the year ended 31
December 2021 will be posted to shareholders today and will be available on
its website www.zinnwaldlithium.com.
OVERVIEW
Significant advances made towards becoming an important supplier to Europe's
fast-growing lithium sector
· Gained full control of flagship Zinnwald Lithium Project in
south-eastern Germany via a cash and shares transaction worth €8.8 million
· Extended resource position in the Saxony region, bringing total
resource inventory at the Zinnwald Project to over one million tonnes lithium
carbonate equivalent ('LCE').
· Raised approximately €7 million in additional equity to advance
the Project in 2022; €7.7 million cash position at today's date.
· Welcomed new shareholders to the register including several large
institutions.
Focusing on ways to improve the Project, including identifying options for
cost reduction, as well as enhancements that reduce the CO(2) footprint
· Completed a technical review of the Project during the second
half of 2021.
· Pivoted the Project to focus on battery-grade lithium hydroxide
as a primary product to better align with the market specifications of core
European off-takers.
· Exploring the possibility of expanding the production capacity of
the Project.
Potential to become an important strategic source of a vital commodity for
the transition to a greener economy for both Germany and Europe
· Strong market demand for lithium as the growth in EV demand
gathers pace.
· No current domestic European producers of battery-grade lithium
products; need for significant import volumesto meet demand in Europe.
Several workstreams planned for 2022
· Completing detailed test work and preliminary engineering studies
related to lithium hydroxide production.
· Undertaking an in-fill drilling campaign at the Zinnwald License
to assist in detailed mine planning, with the objective of evaluating the
ability to increase mining output.
· Exploring options to improve project logistics and sustainability
through utilising existing infrastructure assets.
· Commencing an exploration drilling campaign at nearby Falkenhain
exploration license targeting lithium, tin, and tungsten to enhance the
Project's scale and economics.
· Looking to assess the viability of economic recovery of tin as a
by-product and its possible impact on the Project's economics.
CHAIRMAN'S STATEMENT
The past year has seen a number of key milestones delivered by Zinnwald
Lithium. During the course of 2021, we gained full control of our flagship
Zinnwald Lithium Project (the "Project") in south-eastern Germany via a cash
and shares transaction worth €8.8 million. We also expanded our mineral
resource base in the Saxony region, following the granting of an additional
exploration license at Sadisdorf by the regional mining authority - bringing
our total resource inventory at the Zinnwald Project to over one million
tonnes lithium carbonate equivalent ('LCE'). These transactions, achieved in
2021, have served to firmly establish Zinnwald Lithium as major player in the
in the European lithium space. To round the year off, we took advantage of
the strong lithium market and raised approximately €7 million in equity -
securing funds to advance the Project.
Having gained 100% ownership of Deutsche Lithium in June 2021, management
completed a thorough technical review of the Project during the second half of
the year. We also analysed market trends in battery chemistry, through
meetings with off-takers and battery manufacturers, as to preferred lithium
product and anticipated demand. As part of this, we are undertaking
additional test work to determine our ability to produce lithium hydroxide
economically and the results are expected shortly. The conclusion of our
technical review, and the encouraging results from the initial test work, has
resulted in pivoting the Project to focus on battery-grade lithium hydroxide
as its primary end product.
In addition, as part of the ongoing value engineering work, trade-off studies
are underway to determine the optimum mining rate and process plant
capacity. By increasing the targeted annual production rate, there is the
potential to maximise the project economics and lower the cash cost, which is
a key driver for the Project to be in the lower range of the cost curve. The
work also focuses on other key ways to optimise the Project, including
identifying options for cost reduction, as well as enhancements that reduce
the CO2 footprint and our overall environmental impact.
In terms of the lithium market, 2021 was a year in which commodity markets
benefitted from the impact of the increasingly rapid shift to electric
vehicles ('EVs') and the implications for the critical raw materials required
to produce lithium-ion batteries. Since January 2021, the price for lithium
hydroxide has more than doubled and spot prices in China have recently hit
levels of ~$50,000/tonne. As the growth in EV demand gathers pace, we
believe supply deficits in the lithium market will become increasingly
apparent. On the back of this surge, many market commentators have raised
their long-term lithium price forecasts, which further supports the potential
value of the Project.
Europe, in particular, is forecast to emerge as a key market for lithium with
regional lithium battery production forecast to increase fifteen-fold by
2030. It is worth noting that, presently, there are no domestic European
producers of battery-grade lithium products. In addition, even if all the
currently contemplated lithium projects in Europe commence production, there
will still be a need for significant import volumes to meet anticipated
demand. Positioned in the heart of the German automotive sector, the
Zinnwald Lithium Project has the potential to become a highly important
strategic source of a vital commodity for the transition to a greener economy
for both Germany and Europe.
With regard to our non-core assets in Ireland, the Company has rationalised
its license holdings and retained just the core prospecting license related to
the brownfields Abbeytown Project. The zinc price rebounded strongly during
2021 and the Company's core objective for Abbeytown remains to find a partner
or purchaser for the asset. In Sweden, we relinquished our Brännberg
licences.
Looking ahead to 2022, the funds raised in December last year have set us up
well to advance the Project. Specific workstreams planned for 2022 include
completing detailed test work and preliminary engineering studies related to
lithium hydroxide production. We will also be undertaking an in-fill drilling
campaign at Zinnwald, as part of detailed mine planning, all part of the
ongoing value engineering.
It is important to highlight that the Saxony region of Germany, in which the
Project is located, has a long history of mining and contains legacy mining
infrastructure. Work is currently underway to determine if it is viable to
utilise parts of this existing infrastructure around the Project as part of
our planned mining operations. This, in turn, has the potential to improve the
logistics of the Project and lessen the impact on local communities and the
environment through less movement on local roads.
The Project already benefits from the fact that its anticipated by-products
are all benign in nature, almost all saleable, and the planned beneficiation
process is comparatively energy and water efficient. Access to existing mining
infrastructure, therefore, could further help improve the sustainability of
the Project - helping us to achieve one of our core objectives, which is to
bring to production a project that meets the highest standards of
environmental and social responsibility.
A further key priority in 2022 is the commencement of an exploration drilling
campaign at our nearby Falkenhain exploration license. A detailed review of
historic drill data completed on the license prior to German Reunification has
proved encouraging with respect to the potential prospectivity of the license
area. The planned exploration drill campaign - targeting lithium, tin, and
tungsten - will allow us to test the historic work, and assess the potential
of the Falkenhain deposit, ultimately, to determine if this has the potential
to feed the planned plant at the Zinnwald Project.
Corporate
The Companies shares have performed well over the last 12 months driven by the
increased demand in lithium as the EV and clean energy transition gains global
momentum. We have welcomed many new shareholders to our register including
several large institutions, through both our fundraising activities, the
acquisition of the remaining 50% of Deutsche Lithium, as well as from Bacanora
Lithium Plc, which spun out its holding in our Company to its own shareholders
shortly before the year end.
Financial Overview
The Company maintains a disciplined approach to expenditure and, as such, is
well funded for 2022 with a €7.7 million cash position at today's date.
Long-term Outlook
Zinnwald has the potential to become a key European lithium project. We look
forward to reporting further progress in the year ahead as we further develop
the Project towards a Bankable Feasibility Study for Lithium Hydroxide.
In closing, I would like to thank the team for the work they have put in
during the year and all our shareholders for their support. We look forward
to an active year on the Project in 2022.
Jeremy Martin
Non-Executive Chairman
21 February 2022
STRATEGIC REPORT
Extracts from the Company's Strategic Report are set out below.
Highlights - 12 Months to 31 December 2021
Zinnwald Lithium Project
· Acquired the remaining 50% of Deutsche Lithium GmbH from
SolarWorld AG to consolidate full ownership of the Zinnwald Lithium Project.
The acquisition cost comprised 50 million new shares issued at a price of
12.5p and €1.5m in cash.
· Raised circa £5.8m primarily from existing shareholders at a
price of 15.5p per share.
· Granted five-year Sadisdorf exploration licence within 12km of
primary Zinnwald mining license.
· Completed initial phase of Lithium Hydroxide testwork.
· Completed a phase of value engineering to optimise the plant
capacity and evaluate the production of a more conventional product, Lithium
Hydroxide.
Legacy Assets
· Ireland - the Company undertook sufficient drilling to renew its
core licence at the Abbeytown Project for a further two years to 2023, whilst
relinquishing all other licenses.
· Sweden - the Company relinquished all its licenses and closed its
operations.
Company Overview - Background and evolution
The Group was originally established in 2012 as a mineral exploration and
development company focused on Zinc licenses in Ireland and Gold licenses in
Sweden. The Company made its IPO on AIM in December 2017 with Osisko Gold
Royalties as its cornerstone investor and a project level partnership in
Sweden with Centerra Gold. The Company has dropped all licenses in Sweden
and closed its operations. In Ireland, the Company now retains a single
license in Ireland at the brownfield Abbeytown project, which is on care and
maintenance. The Company considers that the increase in the Zinc price in
2021 may assist in securing a partner to progress this asset.
In October 2020, the Company completed its transformation into a
lithium-focused development company with the acquisition (via a
reverse-takeover) of Bacanora Lithium Plc's 50% ownership and joint
operational control of, Deutsche Lithium GmbH, whose principal asset is the
Zinnwald Lithium Project.
In June 2021, the Company completed the acquisition of the remaining 50% of
Deutsche Lithium from SolarWorld AG, a company which had been in
administration since 1 August 2017. This gave the Company full ownership and
full operational control of Deutsche Lithium. It also led to the
cancellation of the Joint Venture Agreement with SolarWorld AG and the removal
of certain obligations due to Bacanora in relation to this Agreement.
In December 2021, Bacanora distributed its entire holding of 30.9% of the
Company's shares to its own shareholders as part of the terms of its takeover
by Ganfeng Lithium Ltd. This expunged most of the agreements between the
Company and Bacanora that had been put in place at the time of the RTO,
including the Relationship Agreement that gave Bacanora the right to appoint a
Director to the Company. The sole remaining agreement is the Royalty Agreement
covering 50% of the Project, which remains in place.
Zinnwald Lithium Project
The Zinnwald Lithium project (the "Project") is located in southeast Germany,
some 35 km from Dresden and adjacent to the border of the Czech Republic.
The Project is in a granite hosted Sn/W/Li belt that has been mined
historically for tin, tungsten, and lithium at different times over the past
400 years. The Project benefits from a strategic location in close proximity
to the German automotive and downstream chemical industries. The Project
comprises four key areas, as follows:
The advanced Zinnwald core project area
The Zinnwald core project area covers 256.5 ha and already has a 30-year
mining licence to 31 December 2047. In May 2019, Deutsche Lithium first
announced the results of the NI 43-101 Feasibility Study for the Project,
which included an identified resource at this license area as follows:
· Measured plus Indicated Mineral Resource estimate containing
35.51 Mt at a grade of 3,519 ppm containing 124,974 t Li at cut-off grade of
2,500 ppm Li.
· Represents approximately 665,000 tonnes of lithium carbonate
equivalent ('LCE'), comprising approximately 357,500 tonnes of LCE in Measured
Resources and approximately 307,500 tonnes of LCE in Indicated Resources.
· Estimated Inferred Mineral Resources of 4.87 Mt at a grade of
3,549 ppm containing 17,266 t Li metal (approximately 92,000 tonnes LCE).
Falkenhain and Altenberg satellite areas
Prior to 2021, Deutsche Lithium held two other exploration licences; the
Falkenhain licence (covering 295.7 ha and with a five-year term to 31 December
2022); and the Altenberg licence (covering 4,225.3 ha and with an
approximately five-year term to 15 February 2024). The Falkenhain license
area had been extensively explored for tin and tungsten prior to German
reunification and historic data still exists for these drill campaigns. The
Company intends to perform an exploration drill campaign to test the
historical drilling and assess the potential of the Falkenhain target as a
potential satellite lithium resource to feed into the main Zinnwald Project.
Sadisdorf satellite area
In June 2021, Deutsche Lithium was granted the Sadisdorf Licence, which covers
circa 225 ha in the Erzgebirge or Ore Mountains region of Saxony, Germany and
is valid until 30 June 2026. The license area is located circa 12km NNE of
the Company's Zinnwald license area, and forms part of the same geological
unit that hosts the historic Li-Sn-W deposits at Zinnwald, Falkenhain and
Altenberg. The deposit at Sadisdorf has historically been mined for tin and
copper. Historical exploration work at the Sadisdorf Licence by previous
licence holders resulted in a December 2017 historic JORC compliant inferred
mineral resource of 25 million tons with an average grade of 0.45% Li2O
(average 2,053 ppm lithium head grade). Subject to follow up exploration work
and verification of the lithium grades, the Sadisdorf area has the potential
to provide additional plant feed in the future.
Historic Project Plans
Whilst Deutsche Lithium was under the operational direction of Bacanora, the
strategy for the Project was threefold - match the long mine life of
Bacanora's main Sonora Project; produce a niche complimentary product to
Sonora's mainstream lithium products (lithium carbonate); and most
importantly, be financeable from Bacanora's internal cash flows.
With an abundant supply of fluorspar/hydrofluoric acid available in the
immediate vicinity, Deutsche Lithium chose to focus on LiF (Lithium Fluoride)
which is a high value downstream lithium product and one of the two key
components in the manufacturing process of LiPF6, which is the most important
conducting salt in lithium electrolytes and serves as the "shuttle" in the
lithium battery electrolyte which "ships" the lithium ion between the cathode
and the anode. Approximately 95 per cent. of all lithium battery electrolytes
use LiPF6, and the percentage used in each cathode is increasing in some of
the newer battery types.
The resultant Deutsche Lithium 2019 Feasibility Study was predicated on a
30-year mine life production of 5,112 tpa (~7,285 tpa LCE) of battery grade
LiF. This study showed a pre-tax project NPV of €428 million and an IRR of
27.4%, based on a Capex of €160 million. The study also included the
potential to produce up to 32,000 tpa of potassium sulphate for sale to the
European fertiliser industry. Further, the majority of its mined tailings
would be inert Quartz Sands that may be sold for use as an aggregate filler to
local building companies.
The mining operation was planned as an underground mine development using a
single decline ramp for access to the mine and for ore transportation from the
mine to the surface. The mining method to be used was room and pillar with
subsequent backfill using self- hardening material. The processing operation
was to be based on a conventional processing flow sheet using established
sulphate route processing technology. The integrated plant was designed to
process approximately 570,000 tonnes of ore per year (assuming a 30-year mine
plan).
Evolution of the Project Plans
During 2021, as part of planning the next phase of development, the Company
completed a holistic technical review to identify ways to optimise all facets
of the project to maximise value and make it as attractive as possible to
potential Industry partners, off-takers and future finance providers. This
review indicated that the core project could potentially sustain both a higher
annual production level and a more conventional battery-grade lithium end
products (lithium hydroxide and lithium carbonate) that are better suited to
the current market demand.
In terms of the scale of the project, the Company has been reviewing the
potential to operate with a higher annual output, but with a shorter mine life
(still exceeding 20 years) from the Zinnwald license area. As noted above,
the addition of the new deposits covered by the three new nearby license areas
has the potential to increase Zinnwald's resource base and annual lithium
production.
In prior years, Deutsche Lithium had already established the possibility of
producing battery-grade lithium carbonate directly from the lithium mica
concentrate with only minimal modifications to the flowsheet. In 2021,
Deutsche Lithium undertook further testwork to determine if battery-grade
lithium hydroxide could be produced. This testwork remains ongoing, but the
preliminary indications appear to endorse that strategy.
The Company also continues to undertake detailed value engineering in order to
optimise the cost profile of the Project. This work includes a closer
examination of the potential for economic by-products including the tin and
high-quality potassium sulphate, and good quality aggregate products for the
construction industry. A potential to significantly decrease CO2 emission and
operating costs has been recognised if the old mining infrastructure was
utilised and plant locations optimised. This would also reduce the impact of
the project on surrounding communities.
Company Strategy
Prior to 2020, the Company's strategy was focused on shareholder value through
the process of discovering new mineral deposits and seeking attractive
acquisition opportunities. The Zinnwald Lithium Project was one such
acquisition opportunity and the Board believes that advancing the Project
represents an excellent opportunity to create value for Shareholders,
particularly as the Project is at an advanced stage when compared with the
Company's historic assets. The Company's strategy continues to be
underpinned by a technically led team with extensive experience in bringing
projects from the feasibility stage through to mine production, as well as the
capital markets experience to source the funding required for these types of
mining projects. The Project also fits into the Company's strategy of
focusing on low-risk jurisdictions (Germany) in areas with proven metallogenic
potential, an active mining industry, low political risk and transparent
permitting processes.
The Project is now the Company's core development asset and the team will
focus on further de-risking the project as it is advanced towards a
development decision. Key work areas include:
· Assess the commercial viability of producing a broader range of
lithium compounds, specifically lithium hydroxide and lithium carbonate;
· Expansion of the size of the Project by increasing annual
production potential through increasing the planned mining rate and
potentially bringing other satellite resources into the mining schedule;
· Identification of and negotiation with off-take partners
(potentially locally) that could include battery manufacturers, chemical
producers or commodity traders;
· Identification of and negotiation with potential financing
partners that could include banks and national and trans-national development
organisations;
· Exploration work to advance the satellite project areas to
increase the potential size of the overall project resource base;
· Advance the plant engineering towards AAC Class 3;
· Minimising the carbon footprint by optimising Lithium plant
location and transportation methods;
· Finalisation of the selection of the optimal chemical processing
site location;
· Negotiation with the holders (principally the German state) of
existing mining infrastructure in the vicinity of the Project that has the
potential to enhance the project economics;
· Advancing the permitting process for the construction and
operation of the mine; and•
· Ensuring the social license to operate by extensive public
participation.
The Company recognises the importance of the general public and the NGOs in
the permitting processes and has committed to proactively engage with all the
stakeholders in its projects.
Operational review & outlook
Germany
During 2021, the Group has continued to progress the Project on both a
corporate and operational level.
At a Corporate level, in line with our previously stated strategy, we
successfully completed the acquisition of the remaining 50% of Deutsche
Lithium giving us 100% ownership and full operational control of the
Project. The acquisition cost was €8.8 million, with most of the purchase
consideration structured as an issue of new ordinary shares in the Company
allowing us to conserve cash resources. New ordinary shares equivalent to
19.6% of our enlarged share capital were issued as part of the transaction and
were distributed to a number of parties being primarily the creditors of
SolarWorld AG.
At the Project level during the year, we have been busy advancing various
workstreams and have completed the initial phase of the lithium hydroxide
("LiOH") testwork. The initial results were highly encouraging and showed
the potential to produce a high purity, battery grade product that is low in
contaminants. We have also generated LiOH product samples, which we will be
sharing with potential off-takers to help them evaluate the product. The
ability to produce a high quality, battery-grade LiOH, alongside the Project's
already demonstrated ability to produce battery grade lithium fluoride and
lithium carbonate, further demonstrates the flexible nature of the Project and
its ability to produce high value products to meet demand from battery makers.
Additionally, during the year, Deutsche Lithium was granted a five-year
exploration licence (the "Sadisdorf Licence") covering approximately 225
hectares ("ha") in the Erzgebirge or Ore Mountains region of Saxony,
Germany. This complements two other exploration licences already held by
Deutsche Lithium: the Falkenhain licence, covering 295.7 ha and with a term to
31 December 2022; and the Altenberg licence, covering 4,225.3 ha and with a
term to 15 February 2024. The Sadisdorf Licence is circa 12km NNE of
Zinnwald's key lithium deposit and forms part of the same geological unit that
hosts the historic Li-Sn-W deposits at Zinnwald, Falkenhain and Altenberg.
The grant of this licence coupled with the Falkenhain and Altenberg licences
represents exciting expansion potential for Zinnwald and, based on the
historical resource delineated by previous licence holders, effectively
increases our overall resource to greater than 1 million tons contained
lithium carbonate equivalent ("LCE"), an increase of over 50%. We will be
undertaking further work on all our exploration licence areas to further
evaluate their potential and how they can enhance the Project.
Looking forward into 2022 and beyond, as noted above, the Group's plans for
the Project are to seek ways to expand the size of the Project, increase
annual lithium production, explore the potential for additional and higher
value co-products, and to produce a more conventional lithium end-product for
future off-takers. Consequently, the Group raised circa £5.8m in December
2021 to finance the start of this work. Some of the key workstreams for 2022
include the following:
· 15,000m of planned exploration drilling across Falkenhain and
in-filling drilling at Zinnwald. At Falkenhain, a detailed review has been
performed on historic drill data. Initial tests have indicated similar
characteristics to the bulk samples from the Zinnwald licence. The planned
drilling work at Zinnwald will help to refine the early years mine plan for an
expanded mining operation on the Zinnwald license.
· The Group has started the process of updating the feasibility
study to be based on the production of Lithium Hydroxide. This will also
include value engineering work, finalisation of the plant locations, review of
the potential to produce a tin by-product, refinement of the plans for
co-product production, and the potential for sale of its quartz sand
by-products.
· The Group is working to advance the permitting status of the
Project. Deutsche Lithium obtained its mining licence for Zinnwald in 2017,
which is valid until 2047, but comes with the standard requirements to apply
for further permits for environmental and construction aspects of the Project.
Deutsche Lithium is undertaking environmental and community studies to
continue to develop the overall Zinnwald sustainability framework.
Environmental monitoring programmes are ongoing as well as the permitting
process for Zinnwald's mining and mineral processing plant.
· The Company has commenced data analytics and archive work with
regard to the Sadisdorf licence.
Lithium Market
2021 saw a transformation in general market sentiment towards Lithium, as
consumption grew strongly whilst pricing, especially in the spot market saw
spectacular growth. These were driven by a number of macro-economic factors,
some of which may be temporary, but several are likely to be longer term and
support the progress of the Lithium industry away from being a niche volatile
market.
In terms of consumption, estimates from the Australian Department of Industry
put global demand for lithium carbonate equivalent (LCE) at 486,000 tonnes in
2021, up almost 60% from 2020's 305,000 tonnes. They forecast this to increase
a further 50% to 724,000 tonnes by 2023. For the longer term, Canaccord, an
investment bank, forecast a longer-term demand of circa 1.2 million tonnes by
2025 and 2.5 million tonnes by 2030, a CAGR of 20%. This was in large part
due to increased demand for Electric Vehicles (EVs), that saw YOY growth in
2021 of 103% to 6.1m units, driven by China (+149% growth to 3.1m units) and
Europe (+57% to 2.1m units). Canaccord forecast global sales to increase to
16.8m units by 2025 and 46m units by 2030 (representing an estimated EV
penetration rate of 24% and 46%, respectively).
Lithium prices in the spot market in 2021 saw spodumene pricing up 532%,
lithium carbonate 431% and lithium hydroxide 340% higher. However, it should
be noted that the spot market is a smaller part of the industry, estimated to
represent less than 30% of the total lithium market. Some of this price
increase can be put down to a couple of inherently short-term factors, such
as:
· "Hangover" from the Lithium price crash of 2018-19. The period
2017 to 2019 saw a number of large-scale projects, especially spodumene,
coming online to flood a market, that at the time, enjoyed only modest EV
growth. This caused a collapse in the lithium price, which in turn caused
project deferrals or cancellations. This was further exacerbated by delays
and restrictions caused by COVID-19 and left a mining industry unable to
supply the post-lockdown surge in pent-up demand.
· Contract vs Spot market. The Global auto industry has
increasingly prioritised securing contract supply prices, for which details
are generally not reported to the market, which in turn reduced available
supply for the spot market.
· Trader speculation. There is an inherent incentive for miners
and traders to defer supply in the hope of even high prices, which in turn
exaggerates short term price movement.
In the short term there may well be a price correction as suppliers have
already started to take advantage of the incentive pricing, with new or
restarted production in 2022, such as Greenbushes and Pilbara in Western
Australia (spodumene) and the South American brine producers, Albemarle and
SQM. In terms of supply, the Australian Department of Industry estimates
global supply at 485,000 tonnes LCE in 2021 (up only 2%) and forecasts an
increase to 615,000 tonnes in 2022 and 821,000 tonnes in 2023. However, the
Australian Department of Industry also notes that currently supply from mine
and brine operations is falling short in terms of matching demand growth, so
whilst project development is underway, it will take time to fill the supply
gap.
Globally, the longer-term outlook for lithium does appear promising which will
hopefully see demand growth outpace production and a long term sustained
higher price for producers. As governments and organisations worldwide
drive the rapid deployment of new clean energy technologies, the role of
critical materials, including metals such as lithium, is becoming more
apparent. The European automotive industry also appears to be focusing its
battery chemistry technology towards nickel-based chemistries (which require
lithium hydroxide) as these typically offer better cold weather performance as
well as superior energy density.
In Europe, the European Commission released a proposal for stronger emissions
standards on vehicles which would require average emissions of new cars to
come down by 55% on 2021 levels by 2030 and 100% by 2035. These targets mean
security of supply for battery grade chemicals may become a big issue for
customers, with a shortfall in battery grade products projected towards the
end of the outlook period. The EU estimates 18 times more lithium is required
by 2030 to support its climate-neutrality scenarios, while at least 24 new
lithium battery Gigafactories are planned in Europe with four expected to come
online in 2021, bringing Europe's production capacity from its current 30 GWh
to 700 GWh by 2028. Volkswagen alone has committed to build six 40GWh battery
factories in Europe by 2030 (equates to ~350kt of LCE demand). To keep up
with this demand, the EU is focused on encouraging local supply.
In terms of the nature of the industry, the first half of 2021 saw the start
of sector consolidation between lithium companies (Galaxy & Orocobre, IGO
& Tianqi). The second half of the year saw more aggressive M&A,
especially by the Chinese companies Ganfeng and CATL, who spent more than $2bn
on five projects. Canaccord estimates that a total of US$7bn was spent on
M&A during 2021 up from US$400m in 2020.
The larger more diversified miners have also started to take an interest in
the industry as it matures. Rio Tinto's head of economics, Vivek Tulpule,
said that by 2030 EV manufacturers would need about three million tonnes of
lithium, compared with the roughly 350,000 tonnes they consume today. They
estimated that existing operations and projects combined, will contribute one
million tonnes of lithium and filling the supply gap would require over 60
Jadar projects (58kt per annum), even before the Jadar project was cancelled
by the Serbian government.
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
31-Dec 31-Dec
2021 2020
Continuing operations Notes € €
Cost of sales (46,096) (56,540)
Exploration projects impairment (1,583,566) (592,465)
Administrative expenses (1,076,438) (690,356)
Other operating income 779 -
RTO costs - (839,940)
Share based payments charge 25 (7,779) (3,725)
Operating loss 5 (2,713,100) (2,183,026)
Revaluation gain on joint venture 7 1,038,252 -
Share of loss of joint venture 10 (52,911) (32,579)
Finance income 9 455 367
Loss before taxation (1,727,304) (2,215,238)
Tax on loss 12 - -
Loss for the financial year 30 (1,727,304) (2,215,238)
Other comprehensive income 181 19
Total comprehensive loss for the year (1,727,123) (2,215,219)
Earnings per share from continuing operations attributable to the owners of 13
the parent company
Basic (cents per share) (1) (4)
Diluted (cents per share) (1) (4)
Total loss and comprehensive loss for the year is attributable to the owners
of the parent company.
GROUP STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
31-Dec-21 31-Dec-20
Notes € €
Non-current assets
Intangible assets 14 16,165,085 1,546,111
Property, plant and equipment 15 48,621 3,662
Investments using equity method 16 - 3,852,083
16,213,706 5,401,856
Current assets
Trade and other receivables 21 121,845 170,926
Cash and cash equivalents 20 8,291,991 4,846,527
8,413,836 5,017,453
Total assets 24,627,542 10,419,309
Current liabilities
Current tax liabilities 23,802 -
Trade and other payables 22 614,858 58,833
638,660 58,833
Net current assets 7,775,176 4,958,620
Total liabilities 638,660 58,833
Total assets less current liabilities 23,988,882 10,360,476
Deferred tax liability 23 (1,382,868) -
Net assets 22,606,014 10,360,476
Equity
Share capital 27 3,316,249 2,278,155
Share premium 28 20,289,487 7,362,699
Other reserves 29 822,781 814,821
Retained earnings 31 (1,822,503) (95,199)
Total equity 22,606,014 10,360,476
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
Share capital Share premium account Other reserves Retained earnings Total
Notes € € € € €
Balance at 1 January 2020 351,133 4,151,045 811,077 (1,820,744) 3,492,511
Year ended 31 December 2020:
Loss for the year - - - (2,215,238) (2,215,238)
Other comprehensive income:
Currency translation difference - - 19 - 19
Total comprehensive income for the year - - 19 (2,215,238) (2,215,219)
Conversion of share premium to retained profits - (4,431,671) - 4,431,671 -
Issue of share capital 27 1,927,022 7,643,325 - - 9,570,347
Dividend in specie - - - (490,888) (490,888)
Credit to equity for equity settled share-based payments 26 - - 3,725 - 3,725
Total transactions with owners recognised directly in equity 1,927,022 3,211,654 3,725 3,940,783 9,083,184
Balance at 31 December 2020 and 1 January 2021 2,278,155 7,362,699 814,821 (95,199) 10,360,476
Year ended 31 December 2021:
Loss for the year - - - (1,727,304) (1,727,304)
Other comprehensive income:
Currency translation differences - - 181 - 181
Total comprehensive income for the year - - 181 (1,727,304) (1,727,123)
Issue of share capital 27 1,038,094 13,217,816 - - 14,255,910
Share issue costs - (291,028) - - (291,028)
Credit to equity for equity settled share-based payments 26 - - 7,779 - 7,779
Total transactions with owners recognised directly in equity 1,038,094 12,926,788 7,779 - 13,972,661
Balance at 31 December 2021 3,316,249 20,289,487 822,781 (1,822,503) 22,606,014
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
Year ended 31 December 2021 Year ended 31 December 2020
Notes € € € €
Cash flows from operating activities
Cash used in operations 34 (495,174) (1,711,087)
Net cash outflow from operating activities (495,174) (1,711,087)
Cash flows from investing activities
Investment in Deutsche Lithium as Joint Venture (735,800) (199,000)
Purchase of remaining 50% of Deutsche Lithium (1,500,000) -
Cash acquired on purchase of Deutsche Lithium 486,213 -
Exploration expenditure in Germany (948,157) -
Exploration expenditure in Ireland and Sweden (37,455) (227,130)
Purchase of property, plant and equipment (8,437) (3,885)
Proceeds on disposal of property, plant and equipment - 5,300
Interest received 455 367
Net cash used in investing activities (2,743,181) (424,348)
Cash flows from financing activities
Proceeds from issue of shares 6,927,255 5,884,685
Share issue costs (243,436) -
Equity subscription in Erris Gold Resources - (400,000)
Net cash generated from financing activities 6,683,819 5,484,685
Net increase in cash and cash equivalents 3,445,464 3,349,250
Cash and cash equivalents at beginning of year 4,846,527 1,497,277
Cash and cash equivalents at end of year 8,291,991 4,846,527
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
1 Accounting policies
Company information
Zinnwald Lithium Plc ("the Company") is a public limited company which is
listed on the AIM Market of the London Stock Exchange domiciled and
incorporated in England and Wales. The registered office address is 29-31
Castle Street, High Wycombe, Buckinghamshire, United Kingdom, HP13 6RU.
The Company name was changed from Erris Resources Plc to Zinnwald Lithium Plc
by a special resolution approved by shareholders at the General Meeting held
on 26 October 2020.
The group consists of Zinnwald Lithium Plc and its subsidiaries as detailed in
Note 17.
1.1 Basis of preparation
These financial statements have been prepared in accordance with UK-adopted
International Accounting Standards and IFRIC interpretations and with those
parts of the Companies Act 2006 applicable to companies reporting under IFRS
(except as otherwise stated).
The financial statements are prepared in euros, which is the functional
currency of the Company and the Group's presentation currency, since the
majority of its expenditure, including funding provided to Deutsche Lithium,
is denominated in this currency. Monetary amounts in these financial
statements are rounded to the nearest €.
The € to GBP exchange rate used for translation as at 31 December 2021 was
1.18981.
The consolidated financial statements have been prepared under the historical
cost convention, unless stated otherwise within the accounting policies. The
principal accounting policies adopted are set out below.
1.2 Basis of consolidation
The consolidated financial statements incorporate those of Zinnwald Lithium
Plc and all of its subsidiaries (i.e., entities that the group controls when
the group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity).
In regard to its shareholding in Deutsche Lithium, for the period from 1
January 2021 to 24 June 2021, the Board concluded that whilst it had
significant influence over Deutsche Lithium (50% shareholding, 1 of the 2
co-managing directors and a casting vote on operational matters), it did not
have control over that company and consequently the investment was accounted
for using equity accounting rather than consolidated. On conclusion of the
acquisition of the remaining 50% of Deutsche Lithium on 24 June 2021, the
Company now consolidates the full results of Deutsche Lithium. Business
combinations are accounted for using the acquisition method. Identifiable
assets acquired and liabilities assumed are measured at their fair values at
the acquisition date.
Zinnwald Lithium Plc was incorporated on 21 June 2017. On 1 December 2017,
Zinnwald Lithium Plc acquired the entire issued share capital of Erris
Resources (Exploration) Ltd by way of a share for share exchange. This
transaction was treated as a group reconstruction and accounted for using the
reverse merger accounting method.
All financial statements are made up to 31 December 2021. Where necessary,
adjustments are made to the financial statements of subsidiaries to bring the
accounting policies used into line with those used by other members of the
group.
All intra-group transactions, balances and unrealised gains on transactions
between group companies are eliminated on consolidation. Unrealised losses are
also eliminated unless the transaction provides evidence of an impairment of
the asset transferred.
Subsidiaries are fully consolidated from the date on which control is
transferred to the group. They are deconsolidated from the date on which
control ceases.
1.3 Going concern
At the time of approving the financial statements, the directors have a
reasonable expectation that the group and company have adequate resources to
continue in operational existence for the foreseeable future. The Company had
a cash balance of €8.3m at the year end and keeps a tight control over all
expenditure. Thus, the going concern basis of accounting in preparing the
Financial Statements continues to be adopted.
The Directors have reviewed the ongoing situation with COVID-19 and do not
consider its effects to have a material impact on the Group's and Company's
going concern.
1.4 Intangible assets
Capitalised Exploration and Evaluation costs
Capitalised Exploration and Evaluation Costs consist of direct costs, licence
payments and fixed salary/consultant costs, capitalised in accordance with
IFRS 6 "Exploration for and Evaluation of Mineral Resources". The Group and
Company recognises expenditure in Exploration and Evaluation assets when it
determines that those assets will be successful in finding specific mineral
assets. Exploration and Evaluation assets are initially measured at
cost. Exploration and Evaluation Costs are assessed for impairment when
facts and circumstances suggest that the carrying amount of an asset may
exceed its recoverable amount. Any impairment is recognised directly in
profit or loss.
1.5 Property, plant and equipment
Property, plant and equipment are initially measured at cost and subsequently
measured at cost, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets
less their residual values over their useful lives on the following
bases:
Leasehold land and
buildings
Plant and equipment 25% on
cost
Fixtures and fittings
25% on cost
Computers
25% on cost
Motor vehicles
The gain or loss arising on the disposal of an asset is determined as the
difference between the sale proceeds and the carrying value of the asset and
is recognised in the income statement.
1.6 Non-current investments
In the parent company financial statements, investments in subsidiaries and
joint ventures are initially measured at cost and subsequently measured at
cost less any accumulated impairment losses.
1.7 Impairment of non-current assets
At each reporting period end date, the group reviews the carrying amounts of
its tangible and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any). Where it is not
possible to estimate the recoverable amount of an individual asset, the group
estimates the recoverable amount of the cash-generating unit to which the
asset belongs.
Intangible assets not yet ready to use and not yet subject to amortisation are
reviewed for impairment whenever events or circumstances indicate that the
carrying value may not be recoverable.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised immediately in profit or loss, unless the relevant asset is
carried at a revalued amount, in which case the impairment loss is treated as
a revaluation decrease.
1.8 Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with
banks.
1.9 Financial assets
Financial assets are recognised in the group's and company's statement of
financial position when the group and company become party to the contractual
provisions of the instrument.
Financial assets are classified into specified categories at initial
recognition and subsequently measured at amortised cost, fair value through
other comprehensive income, or fair value through profit or loss. The
classification of financial assets at initial recognition that are debt
instruments depends on the financial assets cash flow characteristics and the
business model for managing them.
Financial assets are initially measured at fair value plus transaction
costs. In order for a financial asset to be classified and measured at
amortised cost, it needs to give rise to cash flows that are "solely payments
of principal and interest SPPI" on the principal amount outstanding.
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the
effective interest rate method and are subject to impairment. The group's
and company's financial assets at amortised cost comprise trade and other
receivables and cash and cash equivalents.
Interest is recognised by applying the effective interest rate, except for
short-term receivables when the recognition of interest would be immaterial.
The effective interest method is a method of calculating the amortised cost of
a debt instrument and of allocating the interest income over the relevant
period. The effective interest rate is the rate that exactly discounts
estimated future cash receipts through the expected life of the debt
instrument to the net carrying amount on initial recognition.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each reporting
end date.
Financial assets are impaired where there is objective evidence that, as a
result of one or more events that occurred after the initial recognition of
the financial asset, the estimated future cash flows of the investment have
been affected.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash
flows from the asset expire, or when it transfers the financial asset and
substantially all the risks and rewards of ownership to another entity.
Financial liabilities
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at
fair value, net of transaction costs. They are subsequently measured at
amortised cost using the effective interest method, with interest expense
recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of
a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts
estimated future cash payments through the expected life of the financial
liability to the net carrying amount on initial recognition.
Derecognition of financial liabilities
Financial liabilities are derecognised when the group's contractual
obligations expire or are discharged or cancelled.
1.10 Equity instruments
Equity instruments issued by the group are recorded at the proceeds received,
net of direct issue costs.
1.11 Employee benefits
The costs of short-term employee benefits are recognised as a liability and an
expense, unless those costs are required to be recognised as part of the cost
of non-current assets.
The cost of any unused holiday entitlement is recognised in the period in
which the employee's services are received.
Termination benefits are recognised immediately as an expense when the group
and company is demonstrably committed to terminate the employment of an
employee or to provide termination benefits.
1.12 Retirement benefits
Payments to defined contribution retirement
benefit schemes are charged as an expense as they fall due.
1.13 Equity
Share capital
Ordinary shares are classified as equity.
Share premium
Share premium represents the excess of the issue price over the par value on
shares issued. Incremental costs directly attributable to the issue of new
ordinary shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Merger reserve
A merger reserve was created on purchase of the entire share capital of Erris
Resources (Exploration) Ltd which was completed by way of a share for share
exchange and which has been treated as a group reconstruction and accounted
for using the reverse merger accounting method.
Share-based payment reserve
The share-based payment reserve is used to recognise the fair value of
equity-settled share-based payment transactions.
1.14 Share-based payments
Equity-settled share-based payments with employees and others providing
services are measured at the fair value of the equity instruments at the grant
date. Fair value is measured by use of an appropriate pricing model.
Equity-settled share-based payment transactions with other parties are
measured at the fair value of the goods and services, except where the fair
value cannot be estimated reliably, in which case they are valued at the fair
value of the equity instrument granted.
The fair value determined at the grant date is expensed on a straight-line
basis over the vesting period, based on the estimate of shares that will
eventually vest. A corresponding adjustment is made to equity.
When the terms and conditions of equity-settled share-based payments at the
time they were granted are subsequently modified, the fair value of the
share-based payment under the original terms and conditions and under the
modified terms and conditions are both determined at the date of the
modification. Any excess of the modified fair value over the original fair
value is recognised over the remaining vesting period in addition to the grant
date fair value of the original share-based payment. The share-based payment
expense is not adjusted if the modified fair value is less than the original
fair value.
Cancellations or settlements (including those resulting from employee
redundancies) are treated as an acceleration of vesting and the amount that
would have been recognised over the remaining vesting period is recognised
immediately.
1.15 Foreign exchange
Foreign currency transactions are translated into the functional currency
using the rates of exchange prevailing at the dates of the transactions. At
each reporting end date, monetary assets and liabilities that are denominated
in foreign currencies are retranslated at the rates prevailing on the
reporting end date. Gains and losses arising on translation are included in
administrative expenses in the income statement for the period.
The financial statements are presented in the functional currency of Euros,
since the majority of exploration expenditure is denominated in this currency.
1.16 Exceptional items
Items are disclosed separately in the financial statements where it is
necessary to do so to provide further understanding of the financial
performance of the group. They are items that are material, either because
of their size or nature, or that are non-recurring.
1.17 Joint Arrangements
Up to 24 June 2021, the Group's core activities in relation to the Zinnwald
Lithium project were conducted through joint arrangements in which two or more
parties have joint control. A joint arrangement is classified as either a
joint operation or a joint venture, depending on the rights and obligations of
the parties to the arrangement.
Joint operations arise when the Group has a direct ownership interest in
jointly controlled assets and obligations for liabilities. The Group does not
currently hold this type of arrangement.
Joint ventures arise when the Group has rights to the net assets of the
arrangement. For these arrangements, the Group uses equity accounting and
recognises initial and subsequent investments at cost, adjusting for the
Group's share of the joint venture's income or loss, dividends received and
other comprehensive income thereafter. When the Group's share of losses in a
joint venture equals or exceeds its interest in a joint venture it does not
recognise further losses. The transactions between the Group and the joint
venture are assessed for recognition in accordance with IFRS.
No gain on acquisition, comprising the excess of the Group's share of the net
fair value of the investee's identifiable assets and liabilities over the cost
of investment, has been recognised in profit or loss. The net fair value of
the identifiable assets and liabilities have been adjusted to equal cost.
Joint ventures are tested for impairment whenever objective evidence indicates
that the carrying amount of the investment may not be recoverable under the
equity method of accounting. The impairment amount is measured as the
difference between the carrying amount of the investment and the higher of its
fair value less costs of disposal and its value in use. Impairment losses are
reversed in subsequent periods if the amount of the loss decreases and the
decrease can be related objectively to an event occurring after the impairment
was recognised.
1.18 Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the Chief Executive Officer, who is considered to be the
group's chief operating decision-maker ('CODM').
1.19 New standards, amendments and interpretations not yet
adopted
There were no new standards or amendments to standards adopted by the group
and company during the year which had a material impact on the financial
statements.
At the date of approval of these financial statements, the following standards
and amendments were in issue but not yet effective, and have not been early
adopted:
· IFRS 3 amendments - Business Combinations (effective 1 January
2022)
· IAS 16 amendments - Property, Plant and Equipment* (effective 1
January 2022)
· IAS 37 amendments - Provisions, Contingent Liabilities and
Contingent Assets* (effective 1 January 2022),
· IAS 1 amendments - Presentation of Financial Statements:
Classification of Liabilities as Current or Non-Current*
· IAS 1 amendments - Presentation of Financial Statements:
Disclosure of Accounting Policies*, and
· IAS 8 amendments - Changes in Accounting Estimates and Errors:
Definition of Accounting Estimates*
· Annual Improvements to IFRS Standards 2018-2020 Cycle* (effective
1 January 2022).
*subject to UK endorsement
There are no other IFRSs or IFRIC interpretations that are not yet effective
that would be expected to have a material impact on the group or company.
2 Judgements and key sources of estimation
uncertainty
In the application of the accounting policies, the directors are required to
make judgements, estimates and assumptions about the carrying amount of assets
and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised where the revision affects only that period, or in the
period of the revision and future periods where the revision affects both
current and future periods.
Critical judgements
The following judgements and estimates have had the most significant effect on
amounts recognised in the financial statements.
Share-based payments
Estimating fair value for share based payment transactions requires
determination of the most appropriate valuation model, which depends on the
terms and conditions of the grant. This estimate also requires determination
of the most appropriate inputs to the valuation model including the expected
life of the share option or appreciation right, volatility and dividend yield
and making assumptions about them. For the measurement of the fair value of
equity settled transactions with employees at the grant date, the Group and
Company use the Black Scholes model.
Joint venture investment
The Group applies IFRS 11 to all joint arrangements and classifies them as
either joint operations or joint ventures, depending on the contractual rights
and obligations of each investor. The Group held 50% of the voting rights of
its joint arrangement with SolarWorld AG. The Group determined itself to have
joint control over this arrangement as under the contractual agreements,
unanimous consent is required from all parties to the agreements for certain
key strategic, operating, investing and financing policies. The Group's joint
arrangement was structured through a limited liability entity, Deutsche
Lithium GmbH, and provided the Group and SolarWorld AG (parties to the joint
venture agreement) with rights to the net assets of Deutsche Lithium under the
arrangements. Therefore, this arrangement was classified as a joint venture up
to 24 June 2021 when the Company acquired the remaining 50% of Deutsche
Lithium and thereafter consolidated its full results
The investment was assessed at each reporting period date for impairment. An
impairment is recognised if there is objective evidence that events after the
recognition of the investment have had an impact on the estimated future cash
flows which can be reliably estimated. In addition, the assessment as to
whether economically recoverable reserves exist is itself an estimation
process. Under IFRS 3, on acquisition of the additional stake in the joint
venture, the Company remeasured the fair value of its original investment in
the joint venture and recognised a gain.
Impairment of Capitalised Exploration Costs
Excluding the newly acquired exploration assets of Deutsche Lithium, other
Group capitalised exploration costs had a carrying value as at 31 December
2021 of €186,995 (2020: €1,546,111). Ordinarily, Management tests annually
whether capitalised exploration costs have a carrying value in accordance with
the accounting policy stated in note 1.6. Due to the acquisition of the
remaining shareholding in Deutsche Lithium and the Company's now sole focus on
the Zinnwald Lithium project, the Directors elected to undertake a full review
of non-core assets as part of the Interim accounts review. Each exploration
project is subject to a review either by a consultant or an appropriately
experienced Director to determine if the exploration results returned to date
warrant further exploration expenditure and have the potential to result in an
economic discovery. This review takes into consideration long-term metal
prices, anticipated resource volumes and grades, permitting and infrastructure
as well as the likelihood of on-going funding from joint venture partners. In
the event that a project does not represent an economic exploration target and
results indicate that there is no additional upside, or that future funding
from joint venture partners is unlikely, a decision will be made to
discontinue exploration.
In Ireland, five licences were originally granted for six years in 2013 and in
Q3 2019, the Group extended these licences for a further six years. The
exploration work identified excellent mineralisation in its drill holes and
the metallurgical review has shown a good quality concentrate can be
produced. However, in 2021, the Group elected to relinquish the four
non-core licences but undertook the required further exploration work to
maintain the core licence area (PL 3735) at Abbeytown and expects that this
spend meets the requirement to maintain this licence in good standing through
to Q3 2022. Whilst the current Zinc market is relatively subdued and
Zinnwald is no longer focussed on Ireland, the Company still intends to find a
JV Partner for PL 3735. Accordingly, the Board has concluded that an
impairment charge should be made in the 2021 interim accounts in regard to
capitalised costs from the Irish licences, which has resulted in an impairment
of €1,581,677 (2020: €477,595).
In 2021 in Sweden, the Company has been unable to find a joint venture partner
to further develop its licences and has elected to cease all operations, close
its Filial branch and relinquish all licences. In 2020, the Company fully
impaired its Swedish assets and the Board have recommended a further
impairment charge of €1,889 for expenditure made in 2021 (2020: €114,870).
3 Financial Risk and Capital Risk Management
The Group's and Company's activities expose it to a variety of financial
risks: market risk (primarily currency risks), credit risk and liquidity
risk. The overall risk management programme focusses on currency and working
capital management.
Foreign Exchange Risk
The Company operates internationally and is exposed to foreign exchange risk
arising from one main currency exposure, namely GBP for its Head Office costs
and the value of its shares for fund-raising and Euros for a material part of
its operating expenditure. The Group's Treasury risk management policy is
currently to hold most of its cash reserves in GBPs and to match as promptly
as possible its Euro expenditures on its commitments in Germany.
Credit and Interest Rate Risk
The Group and Company have no borrowings and a low level of trade creditors
and have minimal credit or interest rate risk exposure.
Working Capital and Liquidity Risk
Cashflow and working capital forecasting is performed in the operating
entities of the Group and consolidated at a Group level basis for monthly
reporting to the Board. The Directors monitor these reports and rolling
forecasts to ensure the Group has sufficient cash to meet its operational
needs. The Board has a policy of maintaining at least a GBP 0.5m cash reserve
headroom. Aside from its commitments under the Deutsche Lithium Joint Venture,
the Group has no other material fixed cost overheads other than Director costs
4 Segmental reporting
The Group operates principally in the UK and Germany with a largely dormant
subsidiary in Ireland. Activities in the UK include the Head Office
corporate and administrative costs whilst the activities in Germany relate to
the work done by Deutsche Lithium on the Group's primary asset of the Zinnwald
Lithium Project. The reports used by the Board and Management are based on
these geographical segments. As noted earlier, the results of Germany were
reported as an Investment in Joint Venture for the period to 24 June 2021, and
from thereon are reported on a fully consolidated basis.
Non-Core Assets Germany UK Total
2021 2021 2021 2021
€ € € €
Cost of sales and administrative expenses (6,270) (151,979) (1,206,383) (1,364,632)
Share based payments charge - - (7,779) (7,779)
Project Impairment (1,583,566) - (1,583,566)
Gain/loss on foreign exchange (1) 242,099 242,098
Other operating income - 779 1,038,707 1,039,486
Share of loss from joint venture - (52,911) - (52,911)
Profit/(loss) from operations per reportable segment (1,589,837) (204,111) 66,644 (1,727,304)
Reportable segment assets 15,144 16,242,874 8,369,525 24,627,543
Reportable segment liabilities - 1,664,143 357,386 2,021,529
Non-Core Assets Germany UK Total
2020 2020 2020 2020
€ € € €
Cost of sales and administrative expenses (64,358) - (1,451,017) (1,515,375)
Share based payments charge - - (3,725) (3,725)
Project Impairment (592,465) - - (592,465)
Gain/loss on foreign exchange (3,503) - (67,958) (71,461)
Other operating income - - 367 367
Share of loss from joint venture - (32,579) - (32,579)
Profit/(loss) from operations per reportable segment (660,326) (32,579) (1,522,333) (2,215,238)
Reportable segment assets 1,565,029 - 8,854,280 10,419,309
Reportable segment liabilities - - 58,833 58,833
Non-Core Assets includes Ireland, Scandinavia, Finland and Scotland. Ireland
is the only one with material balances within this category and makes up a
majority of the balances.
5 Operating loss
Group
2021 2020
€ €
Operating loss for the year is stated after charging/(crediting):
Exchange (gains)/losses (242,098) 71,461
Depreciation of owned property, plant and equipment 7,077 244
Profit on disposal of property, plant and equipment - (5,300)
Amortisation of intangible assets 829 -
Ireland and Sweden exploration projects impairment 1,583,566 592,465
RTO costs - 839,940
Share-based payments 7,779 3,725
Operating lease charges 39,098 40,942
Exploration costs expensed 143,735 64,358
6 Auditor's remuneration
2021 2020
Fees payable to the company's auditor and associates: € €
For audit services
Audit of group, parent company and subsidiary undertakings 41,952 31,164
For other services
Taxation compliance services 3,500 3,799
Reporting accountant work for the Admission Document - 61,205
3,500 65,004
7 Other gains and losses
2021 2020
€ €
Gain on re-measurement of initial 50% interest in Deutsche Lithium 1,038,252 -
8 Employees
The average monthly number of persons (including directors) employed by the
group and company during the year was:
Group
2021 2020
Number Number
Directors 5 5
Employees 6 3
11 8
Their aggregate remuneration comprised:
Group
2021 2020
€ €
Wages and salaries 870,447 416,827
Social security costs 111,925 40,941
Pension costs 38,005 12,399
1,114,135 470,167
Aggregate remuneration expenses of the group include €225,499 (2020:
€150,583) of costs capitalised and included within non-current assets of the
group.
Aggregate remuneration expenses of the company include €nil (2020: €3,397)
of costs capitalised and included within non-current assets of the group.
Directors' remuneration is disclosed in note 33.
9 Finance income
Group
2021 2020
€ €
Interest income
Interest on bank deposits 455 367
10 Share of results in Joint Venture
Group
2021 2020
€ €
Share of Loss in Joint Venture (52,911) (32,579)
(52,911) (32,579)
11 Impairments
Impairment tests have been carried out where appropriate and the following
impairment losses have been recognised in profit or loss:
2021 2020
Notes € €
In respect of:
Intangible assets 14 1,583,566 592,465
Recognised in:
Administrative expenses 1,583,566 592,465
The impairment losses in respect of financial assets are recognised in other
gains and losses in the income statement.
12 Taxation
The actual charge for the year can be reconciled to the expected credit for
the year based on the profit or loss and the standard rate of tax as follows:
Group
2021 2020
€ €
Loss before taxation (1,727,304) (2,215,238)
Expected tax credit based on the standard rate of corporation tax in the UK of (328,188) (420,895)
19.00% (2020: 19.00%)
Disallowable expenses 11,531 166,486
Non-taxable gains (197,268)
Unutilised tax losses carried forward 513,925 254,409
Taxation charge for the year - -
Losses available to carry forward amount to €3,730,000 (2020:
€2,316,000). No deferred tax asset has been recognised on these losses, as
the probability of available future taxable profits is not currently
quantifiable.
13 Earnings per share 2021 2020
Number Number
Weighted average number of ordinary shares for basic earnings per share 232,669,857 63,203,583
Effect of dilutive potential ordinary shares:
Weighted average number of outstanding share options 2,265,890 3,183,333
Weighted average number of ordinary shares for diluted earnings per share 234,935,747 66,386,916
Earnings € €
Continuing operations
Loss for the period from continuing operations (1,727,304) (2,215,238)
Earnings for basic and diluted earnings per share attributable to equity (1,727,304) (2,215,238)
shareholders of the company
Earnings per share for continuing operations
Basic and diluted earnings per share - -
Basic earnings per share (1) (4)
Diluted earnings per share (1) (4)
There is no difference between the basic and diluted earnings per share for
the period ended 31 December 2021 or 2020 as the effect of the exercise of
options would be anti-dilutive.
14 Intangible fixed assets
Goodwill Germany Exploration and Evaluation costs Ireland Exploration and Evaluation costs Sweden Exploration and Evaluation costs Total
€ € € € €
Cost
At 1 January 2020 1,895,332 107,002 2,002,334
Additions - group funded 128,374 7,868 136,242
At 31 December 2020 - - 2,023,706 114,870 2,138,576
Revaluation - on acquisition of subsidiary 1,038,252 - - - 1,038,252
Additions - on acquisition of subsidiary 4,493,222 8,303,416 - - 12,796,638
Reallocated to Germany E&E (5,531,474) 5,531,474 - - -
Deferred tax provision on fair value - 1,382,868 - - 1,382,868
Additions - group funded - 948,156 35,566 1,889 985,611
At 31 December 2021 - 16,165,914 2,059,272 116,759 18,341,945
Amortisation and impairment
At 1 January 2021 - - 477,595 114,870 592,465
Amortisation charged for the year - 829 - - 829
Project impairment - - 1,581,677 1,889 1,583,566
At 31 December 2021 - 829 2,059,272 116,759 2,176,860
Carrying amount
At 31 December 2021 - 16,165,085 - - 16,165,085
At 31 December 2020 - - 1,546,111 - 1,546,111
Intangible assets comprise capitalised exploration and evaluation costs
(direct costs, licence fees and fixed salary / consultant costs) of the
Zinnwald Lithium project in Germany, as well as the now fully impaired Ireland
Zinc and Sweden Gold Projects.
15 Property, plant and equipment
Leasehold land and buildings Fixtures, fittings and equipment Motor vehicles Total
€ € € €
Cost
At 1 January 2021 - 14,769 - 14,769
Additions - on acquisition of subsidiary 9,817 1,175 32,427 43,419
Additions - group - 8,437 - 8,437
Exchange adjustments - 261 - 261
At 31 December 2021 9,817 24,381 32,427 66,886
Depreciation and impairment
At 1 January 2021 - 11,107 - 11,107
Depreciation - 1,956 5,122 7,078
Exchange adjustments - 80 - 80
At 31 December 2021 - 13,063 5,122 18,265
Carrying amount
At 31 December 2021 9,817 11,499 27,305 48,621
At 31 December 2020 - 3,662 - 3,662
16 Fixed asset investments
Group
Notes 2021 2020
€ €
Investments in subsidiaries 17 - -
Investments in joint ventures - 3,852,083
- 3,852,083
Investments in subsidiaries are recorded at cost, which is the fair value of
the consideration paid.
Movements in non-current investments
Shares in group undertakings and participating interests
€
Cost
At 1 January 2021 3,852,083
Additions 735,800
Share of loss (52,911)
Reclassified on consolidation of Deutsche Lithium (4,534,972)
At 31 December 2021 -
Carrying amount
At 31 December 2021 -
At 31 December 2020 3,852,083
Movements in non-current investments
16.1 Initial Investment in Deutsche
Lithium
On 29 October 2020, the Company completed the acquisition of a 50%
shareholding in Deutsche Lithium Gmbh ("Deutsche Lithium") from Bacanora
Lithium Plc ("Bacanora") via a reverse takeover. Bacanora contributed its
share in Deutsche Lithium and €1.35m in cash in exchange for 90,619,170 new
shares in the Company at a price of 5p per share and a 2% Net Profits
Royalty. The Company thereafter took over the obligations due under the
Deutsche Lithium Joint Venture Agreement and made all payments due monthly
from October 2020 to June
2021.
The Company held one of the two managing director positions and a 50%
shareholding in Deutsche Lithium, but only had a casting vote on purely
operational development matters. Therefore, the Directors concluded that the
Company only had significant influence over Deutsche Lithium and not
control.
The Company followed the requirements of IAS 28 in applying the equity method
and increased or decreased the investment by recognising its share of the
profit or loss and other comprehensive income from Deutsche
Lithium.
The table below shows the movements in the equity accounted
investment:
€
Value of 50% share in Deutsche Lithium acquired from Bacanora on 29 October 3,685,662
2020
Funds provided under the terms of the Joint Venture Agreement 165,000
Additional committed funds for further testwork 34,000
Share of Deutsche Lithium Loss for the period November to December 2020 (32,579)
Carrying Value as at 31 December 2020 3,852,083
Funds provided under the terms of the Joint Venture Agreement 330,000
Additional committed funds for further testwork 389,800
Additional review work 16,000
Share of Deutsche Lithium Loss for the period January to June 2021 (52,911)
Carrying Value as at 24 June 2021 4,534,972
16.2 Remeasurement of fair value of initial holding in Deutsche Lithium
Under IFRS 3, on acquisition of the controlling stake, the Company remeasured
the fair value of its original investment in Deutsche Lithium. In terms of
calculating that revaluation and any resulting gain or loss, the Directors
noted that both transactions were conducted on an arms-length basis with
unconnected third-parties. The Directors considered that there was a
significant control premium in acquiring the second 50% of Deutsche Lithium
and used an estimate of 30% in its calculations of the revaluation of the fair
value of the initial shareholding.
Value of second acquisition € 8,781,062 Control premium (30%) of Net Value € 2,388,525
Less: Cash in company (486,213) Fair Value of original investment € 5,573,224
Less: Free Carry eliminated (333,100) Cash € 486,213
Net Value of second acquisition € 7,961,749 Release of obligation € 333,100
Value of second Acquisition € 8,781,062
Carrying Value at 24 June 2021 € 4,534,972
Gain recognised on revaluation € 1,038,252
16.3 Accounting for acquisition of remaining 50% of Deutsche Lithium
On 24 June 2021, the Company completed the acquisition of SolarWorld AG's 50%
shareholding in Deutsche Lithium by the payment of €1.5m in cash and the
issuance of 49,999,996 new shares in the Company. These new shares were
valued at the closing price on 21 June 2021 of 12.5p, as all legal agreements
became legally binding on completion on the morning of 22 June 2021,
conditional solely on admission of the new shares on 24 June 2021. These
49,999,996 new shares were valued at 12.5p per share and an exchange rate of
€1.16497, equating to a total value of €8,781,062 including the cash
element.
On 24 June 2021, by virtue of acquiring the remaining 50% of Deutsche Lithium
it did not own, the Company became the owner of 100% of Deutsche Lithium and
the Joint Venture Agreement that covered its management was automatically
terminated. This transaction is categorised as a 'step acquisition' under
IFRS 3 whereby the Company now has a 100% owned subsidiary. Management has
concluded that the acquisition is one of a business rather than an asset and
accordingly, Deutsche Lithium moves from being equity accounted as a Joint
Venture to being fully consolidated as a subsidiary
undertaking.
16.4 Commitments under the Deutsche Lithium JV
Agreement
The Company signed a Deed of Adherence to abide by the terms of the Joint
Venture Agreement. The only outstanding financial commitment was the 2nd
Amendment entered into by Bacanora in February 2020 by which it committed to
fund Deutsche Lithium with €1.35m in monthly instalments over two years.
At the date of completion of the initial acquisition of 50% of Deutsche
Lithium by the Company, the amount outstanding was €0.935m, as at 31
December 2020 it was €0.770m and as at 24 June 2021 it was €440,000. On
completion of the acquisition of the remaining 50% of Deutsche Lithium, the
Joint Venture Agreement was formally terminated and the Company shall
henceforth fund the operations at Deutsche Lithium as a normal subsidiary
undertaking.
On consolidation as at 24 June 2021, a calculation was required under normal
acquisition rules to calculate the goodwill arising at the date of
acquisition, but taking into consideration the 50% already owned at that
date. The previously held 50% investment in Deutsche Lithium at Fair Value
is derecognised and replaced with the assets and liabilities of Deutsche
Lithium, so that going forward it is consolidated in full as normal as a
subsidiary undertaking. The Directors have concluded that there should be
no adjustment to the carrying value of Deutsche Lithium's Net Assets. The
Directors undertook a detailed review of Deutsche Lithium's balance sheet at
the time of the Company's acquisition of the remaining 50% of Deutsche Lithium
it did not own and concluded that no adjustments were required. Since that
date, Deutsche Lithium has continued with the same accounting policies, which
are in accordance with those of the Company.
Fair Value of consideration given to acquire the controlling interest €
Cash of €1.5m 1,500,000
49,999,996 new shares 7,281,062
Total 8,781,062
Fair value of 50% investment in Deutsche Lithium as at 24 June 2021 5,573,224
14,354,286
Fair value of net assets acquired in Deutsche Lithium as at 24 June 2021 (8,822,812)
Goodwill - allocated to Deutsche Lithium intangible exploration assets 5,531,474
17 Subsidiaries
Details of the company's subsidiaries as at 31 December 2021 are as follows:
% Held
Name of undertaking Registered office Nature of business Class of shares held Direct Indirect
Deutsche Lithium Holdings Ltd United Kingdom Exploration Ordinary 100 -
Erris Zinc Limited Ireland Exploration Ordinary 100 -
Deutsche Lithium GmbH Germany Exploration Ordinary - 100
On 1 December 2017, Zinnwald Lithium Plc acquired the entire issued share
capital of Deutsche Lithium Holdings Ltd (formerly Erris Resources
(Exploration) Ltd) by way of a share for share exchange. This transaction
has been treated as a group reconstruction and accounted for using the reverse
merger accounting method. Its registered office address is 29-31 Castle
Street, High Wycombe, Bucks, HP13 6RU.
On 26 February 2018, Zinnwald Lithium Plc acquired the entire issued share
capital of Erris Zinc Limited on incorporation. Erris Zinc Limited is a
company registered in Ireland. Its registered office address is The
Bungalow, Newport Road, Castlebar, Co. Mayo. F23YF24.
On 29 October 2020, Zinnwald Lithium Plc acquired 50% of the issued share
capital of Deutsche Lithium GmbH ("Deutsche Lithium"). On 24 June 2021, the
Company acquired the remaining 50% of the issued share capital of Deutsche
Lithium. Deutsche Lithium is a company registered in Germany. Its
registered office is at Am St Niclas Schacht 13, 09599, Freiberg, Germany.
18 Trade and other receivables - credit risk
Fair value of trade and other receivables
The directors consider that the carrying amount of trade and other receivables
is equal to their fair value.
No significant balances are impaired at the reporting end date.
19 Financial Instruments
Group
2021 2020
€ €
Financial assets at amortised cost
Trade and other receivables 121,845 170,926
Cash and bank balances 8,291,991 4,846,527
8,413,836 5,017,453
Financial liabilities at amortised cost
Trade and other payables 614,859 58,833
614,859 58,833
20 Security held over cash
Under the terms of the Deed of Adherence with Bacanora Lithium Plc, entered
into on 29 October 2020, Bacanora held a secured charge over a cash amount
equal to the amount outstanding under the Deutsche Lithium JV Agreement. On
completion of the acquisition of the remaining 50% of Deutsche Lithium in June
2021, the JV Agreement was cancelled and the charge over the company's bank
account removed. There are no other securities remaining over any Group
assets.
21 Trade and other receivables
Group
2021 2020
Amounts falling due within one year: € €
Amounts owed by group undertakings - -
Other receivables 83,982 133,459
Prepayments and accrued income 37,863 37,467
121,845 170,926
Other receivables primarily comprise VAT recoverable, which were received
following the year end.
The carrying amounts of the Group and Company's trade and other receivables
are denominated in the following currencies:
Group
2021 2020
Euros 63,591 19,672
British Pounds 58,254 151,254
121,845 170,926
22 Trade and other payables
Group
2021 2020
€ €
Trade payables 313,391 14,108
Other taxation and social security 23,802 -
Other payables 13,509 -
Accruals and deferred income 287,958 44,725
638,660 58,833
All Trade payables have been settled since the year end.
The carrying amounts of the Group and Company's current liabilities are
denominated in the following currencies:
Group
2021 2020
Euros 330,443 914
British Pounds 308,217 57,919
638,660 58,833
23 Deferred taxation
The following are the major deferred tax liabilities and assets recognised by
the group and company, and movements thereon:
Liabilities Liabilities
2021 2020
Group € €
Deutsche Lithium intangible assets - fair value adjustment 1,382,868 -
The deferred tax liability set out above relates to a 25% provision made on
the fair value uplift of the company's acquisition of control of Deutsche
Lithium GmbH.
24 Retirement benefit schemes
2021 2020
Defined contribution schemes € €
Charge to profit or loss in respect of defined contribution schemes 38,005 12,099
A defined contribution pension scheme is operated for all qualifying
employees. The assets of the scheme are held separately from those of the
group in an independently administered fund.
25 Share based Incentives
The Directors believe that the success of the Group will depend to a
significant degree on the performance of the Group's senior management team.
The Directors also recognise the importance of ensuring that the management
team are well motivated and identify closely with the success of the
Group. The Company adopted an initial Share Option Plan in December 2017
and will continue to issue options to key employees, consultants and
Non-Executive Directors. In October 2020, the Company's shareholders
approved two additional new short-term and long-term incentive schemes for
Executive Management, the key terms of which are detailed in the Remuneration
Committee report.
25.1 Share Option Plan (2017)
Movements in the number of share options, under the Share Option Plan (2017),
outstanding and their related weighted average exercise prices are as follows:
Year ended 31 December 2021 Year ended 31 December 2020
Average Exercise Price in £ per Share Options Number Average Exercise Price in £ per Share Options Number
At beginning of the period £0.091 3,350,000 0.094 3,550,000
Granted - - - -
Lapsed £0.100 (300,000) 0.085 (400,000)
Exercised £0.088 (1,150,000)
At end of period £0.092 1,900,000 0.094 3,150,000
Exercisable at the period end 1,900,000 3,150,000
Weighted average remaining exercise period, years 1.27 2.96
Option Classification Issue Date No of Options Exercise Price Expiry Date
01-Mar-14 300,000 £0.080 20/12/2022
01-Feb-17 300,000 £0.100 20/12/2022
21-Dec-17 1,100,000 £0.100 20/12/2022
29-Oct-20 200,000 £0.050 28/10/2025
1,900,000 £0.092
25.2 RSU Scheme (2020)
The first awards of RSUs under the new scheme were made on 15 January 2022
relating to the initial performance period from 1 October 2020 to 31 December
2021. A total of 1,909,531 RSUs were issued, which will be included on the
register for next year's disclosure.
The next awards of RSUs will be made in January 2023 relating to the second
performance period from 1 January 2022 to 31 December 2022.
25.3 - PSU Scheme (2020)
The first awards of PSUs under the new scheme are expected to be issued in
January 2024, based on the initial performance period from 1 October 2020 to
31 December 2023. The maximum potential issuance under the first performance
period is 6.000,000 PSUs, if all performance metrics are achieved.
The second awards of PSUs will be made in January 2025 relating to the second
performance period from 1 January 2022 to 31 December 2024.
26 Share-based payment transactions
Group Company
2021 2020 2021 2020
€ € € €
Expenses recognised in the year
Options issued under the Share Option Plan (2017) 7,779 3,725 7,779 3,725
Awards made under the new RSU and PSU scheme will be expensed over the
relevant vesting periods for each scheme. The first RSU awards were made in
January 2022 and will expensed over 2022 and 2023. The first PSU awards will
be made in January 2024 and will expensed over 2024 and 2025.
27 Share capital
Group and company
2021 2020
Ordinary share capital € €
Issued and fully paid
293,395,464 ordinary shares of 1p each 3,316,249 2,278,155
3,316,249 2,278,155
The Group's share capital is issued in GBP £ but is converted into the
functional currency of the Group (Euros) at the date of issue of the shares.
Reconciliation of movements during the year:
Ordinary Ordinary
Number €
Ordinary shares of 1p each
At 1 January 2021 204,455,957 2,278,155
Issue of fully paid shares (cash subscription) 38,939,511 455,609
Issue of fully paid shares (consideration for shares in DL) 49,999,996 582,485
At 31 December 2021 293,395,464 3,316,249
28 Share premium account
Group
2021 2020
€ €
At beginning of year 7,362,699 4,151,045
Issue of new shares 13,114,010 7,643,325
Exercise of share options 103,806
Share issue expenses (291,028) -
Cancellation of share premium - (4,431,671)
At end of period 20,289,487 7,362,699
In 2020, the Company's share premium account was cancelled by Special
Resolution and by Court Order on 15 September 2020 and the funds were
converted to retained earnings.
29 Other reserves
Merger reserve Share based payment reserve Translation reserve Total
Group € € € €
At 1 January 2020 688,732 122,345 - 811,077
Additions - 3,725 19 3,744
At 31 December 2020 688,732 126,070 19 814,821
Additions - 7,779 181 7,960
At 31 December 2021 688,732 133,849 200 822,781
A merger reserve was created in 2017 on the purchase of the entire share
capital of Erris Resources (Exploration) Ltd (now renamed Deutsche Lithium
Holdings Ltd) which was completed by way of a share for share exchange and
which has been treated as a group reconstruction and accounted for using the
reverse merger accounting method.
30 Financial commitments, guarantees and contingent
liabilities
Bacanora Royalty Agreement
The Company and Bacanora entered into on completion of the Acquisition a
royalty agreement which provides, that the Company agrees to pay Bacanora a
royalty of 2 per cent. of the net profit received by the Company pursuant to
its 50 per cent. shareholding in Deutsche Lithium and earned in relation to
the sale of lithium products or minerals by Deutsche Lithium's projects on the
Zinnwald and Falkenhain licence areas. The royalty fee shall be paid in Euros
and paid by Deutsche Lithium half yearly. The agreement is for an initial term
of 40 years and shall automatically extend for additional 20-year terms until
mining and processing operations cease at Deutsche Lithium's projects at the
Zinnwald and Falkenhain licence areas. The Company has undertaken to Bacanora
to abide by certain obligations in relation to Deutsche Lithium's projects at
the Zinnwald and Falkenhain licence areas such as complying with applicable
laws and ensure that these projects are operated in accordance with the
underlying licences and concessions granted to Deutsche Lithium. The Company
shall have the right, but not the obligation, to extinguish at any time its
right to pay a royalty fee to Bacanora prior to the expiry of the term by
paying a one-off payment of €2,000,000. Whilst the Directors acknowledge
this contingent liability, at this stage, it is not considered that the
outcome can be considered probable or reasonably estimable and hence no
provision has been made in the financial statements.
Whilst the Directors acknowledge this contingent liability, at this stage, it
is not considered that the outcome can be considered probable or reasonably
estimable and hence no provision has been made in the financial statements.
The Directors note that the Royalty is only applicable to 50% of Deutsche
Lithium's production and does not apply to the additional 50% of Deutsche
Lithium acquired by the Company in June 2021. The Directors also note that
the Royalty obligation will remain due to Bacanora after the completion of the
acquisition of Bacanora by Ganfeng Lithium Limited.
Osisko Royalty Agreements
Deutsche Lithium Holdings Ltd ("DLH", formerly Erris Resources (Exploration)
Ltd ("ERL") entered into Osisko Royalty Agreement 1 with Osisko on 16
September 2016 pursuant to which it granted a royalty to Osisko for a 1 per
cent. net smelter return on the sale or disposition of all minerals provided
from the Abbeytown Project. The royalty is based on published spot prices in
relation to minerals delivered for processing and actual amounts received
where raw ore or concentrates are sold. Osisko shall be entitled to elect to
receive the royalty on precious metals in kind rather than cash. This royalty
was granted to Osisko in consideration of Osisko's payment of C$500,000 to
DLH. The royalty is perpetual and as such the agreement (and obligation on DLH
to pay the royalty) shall continue indefinitely. Whilst the Directors
acknowledge this contingent liability, at this stage, it is not considered
that the outcome can be considered probable or reasonably estimable and hence
no provision has been made in the financial statements.
ERL entered into Osisko Royalty Agreement 2 with Osisko on 16 September 2016
pursuant to which it granted a royalty to Osisko for a 1 per cent. net smelter
return on the sale or disposition of all minerals provided from the Swedish
properties (originally including Käringberget, Klippen, Nottjärn and
Vaikijaur but, as at the date of this document, only Brännberg) licensed by
ERL. The royalty also extends to any other mining rights ERL acquires or holds
(or from time to time comes to acquire or hold) in Sweden and so applies to
all exploration permits currently held in Sweden by ERL. The royalty is based
on published spot prices in relation to minerals delivered for processing and
actual amounts received where raw ore or concentrates are sold. Osisko shall
be entitled to elect to receive the royalty on precious metals in kind rather
than cash. This royalty was granted to Osisko in consideration of Osisko's
payment of C$250,000 to Erris Resources UK. The royalty is perpetual and as
such the agreement (and obligation on ERL to pay the royalty) shall continue
indefinitely. Whilst the Directors acknowledge this contingent liability, at
this stage, it is not considered that the outcome can be considered probable
or reasonably estimable and hence no provision has been made in the financial
statements. The Directors also note that the Company surrendered all
licenses in Sweden in 2021 and have no plans to acquire any further licenses
in Sweden.
Neither of the Osisko royalties apply to the Zinnwald Lithium project.
Grundtrask Acquisition Agreement
On 13 October 2016, the Company entered into an asset purchase agreement with
Beowulf Mining Sweden AB ("Beowulf") pursuant to which the Company purchased
exploration rights for the areas known as Grundsträsk nr 6 and Grundträsk nr
7 (together with all information relating thereto) from Beowulf. The
consideration of US$200,000 will become payable subject to the Company
announcing JORC indicated resource of 100,000 troy ounces of gold, together
with a further amount of $2 per troy ounce on the announcement of indicated
resource subject to a JORC indicated resource of at least 1 million troy
ounces. Pursuant to this agreement, the Company is obliged to grant to
Beowulf a royalty under which it is paid 1 per cent. of the net smelting
revenue generated by the Company on any gold produced from the property.
This royalty shall continue indefinitely unless the Company "buys out" the
royalty by payment of US$2,000,000 to Beowulf. Whilst the Directors
acknowledge this contingent liability, at this stage, it is not considered
that the outcome can be considered probable or reasonably estimable and hence
no provision has been made in the financial statements. The Company
surrendered all license areas in Sweden during 2021, including Grundsträsk
nr 6 and Grundträsk nr 7, and accordingly the Company considers its
obligations under this Royalty to have expired.
31 Retained earnings
Group
2021 2020
€ €
At the beginning of the year (95,199) (1,820,744)
Conversion of share premium - 4,431,671
Loss for the year (1,727,304) (2,215,238)
Dividends in specie - (490,888)
At the end of the year (1,822,503) (95,199)
32 Events after the reporting date
The assessment of the COVID-19 situation continues to evolve, as the changes
to the COVID-19 virus and lock-down impacts continue. The success of the
long-term vaccination programme has improved matters in the UK and Europe.
This will continue to have some implications for the operations of the Group
in the future, for example through restricting travel movements
internationally and domestically and therefore delaying development
activities. Due to the nature of present activities, the impact has been
minimal to date. Management will continue to assess the impact of COVID-19 on
the Group and Company, however, it is not possible to quantify the impact, if
any, at this stage.
On 17 January 2022, the Company announced the grant of 1,909,530 Restricted
Stock Units (RSUs) and 4,000,000 Options. The RSUs were issued to Executive
Management under the RSU Scheme approved by shareholders in October 2020 and
related to the first performance period from 1st October 2020 to 31st December
2021. The Options were primarily issued to Employees and Consultants under
the terms of the Option Scheme approved by shareholders in 2017.
33 Related party transactions
Remuneration of key management personnel
The remuneration of key management personnel is as follows.
Remuneration Pension Share Option Charge Remuneration Pension Share Option Charge
€ € € € € €
Jeremy Martin 58,289 - 3,889 36,664 - 1,863
Anton du Plessis 375,454 26,128 - 118,453 6,588 -
Cherif Rifaat 116,578 11,877 - 78,969 5,511 -
Graham Brown 34,974 - 3,890 28,767 - 1,862
Jeremy Taylor-Firth - - - 20,306 - -
Peter Secker - - - - - -
585,295 38,005 7,779 283,159 12,099 3,725
Transactions with related parties
During the year the group entered into the following transactions with related
parties:
Consultancy and expenses
2021 2020
€ €
Group
Erris Gold Resources 14,289 -
Key management personnel - 50,648
Company
Key management personnel - 15,585
Aggregate consultancy and expenses include €nil (2020: €26,123) of costs
capitalised and included within non-current assets. There were no amounts
outstanding at the year end.
Henry Maxey, a substantial shareholder in the Company, entered into an
agreement with the Company (the "Commitment Agreement") to subscribe for New
Ordinary Shares in the December 2021 Placing for up to a value of £4.0
million. The Board considered that the Commitment Agreement was an important
factor in the Placing proceeding and, as part thereof, therefore issued
258,064 New Ordinary Shares to Mr Maxey, equivalent to approximately £40,000
at the Placing Price.
34 Cash (used in)/generated from group
operations
2021 2020
€ €
Loss for the year after tax (1,727,304) (2,215,238)
Adjustments for:
Investment income (455) (367)
Gain on disposal of property, plant and equipment - (5,300)
Impairment of intangible assets in Ireland and Sweden 1,583,566 592,465
Depreciation and impairment of property, plant and equipment 7,906 243
Gain on remeasurement of initial interest in Joint Venture (1,038,252)
Share of loss of Joint Venture 52,911 32,579
Equity-settled share-based payment expense 7,779 3,725
Movements in working capital:
Decrease/(increase) in trade and other receivables 79,969 (135,629)
Increase in trade and other payables 538,706 16,435
Cash used in operations (495,174) (1,711,087)
*ENDS*
For further information visit www.zinnwaldlithium.com or contact:
Anton du Plessis Zinnwald Lithium plc info@zinnwaldlithium.com (mailto:info@zinnwaldlithium.com)
David Hart/Liz Kirchner Allenby Capital Limited +44 (0) 20 3328 5656
Nominated Adviser
Michael Seabrook Oberon Capital Ltd +44 (0) 20 3179 5300
Robert Hayward Broker
Isabel de Salis/Catherine Leftley St Brides Partners Ltd info@stbridespartners.co.uk (mailto:info@stbridespartners.co.uk)
Financial PR
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