REG - Zinnwald Lithium PLC - Final Results
22/03/2023 17:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230322:nRSV9124Ta&default-theme=true
RNS Number : 9124T Zinnwald Lithium PLC 22 March 2023
Prior to publication, the information contained within this announcement was
deemed by the Company to constitute inside information as stipulated under the
UK Market Abuse Regulation. With the publication of this announcement, this
information is now considered to be in the public domain.
Zinnwald Lithium plc / EPIC: ZNWD.L / Market: AIM / Sector: Mining
22 March 2023
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
2022.
The Company's Annual Report and Financial Statements for the year ended 31
December 2022 will be posted to shareholders today and will be available on
its website www.zinnwaldlithium.com.
OVERVIEW
Building value at strategically located integrated Lithium Hydroxide ("LiOH")
project in Germany
· March 2022 - proved the viability of LiOH production &
potential to produce economically significant amounts of commercially saleable
by-products including fertiliser.
· September 2022 - published a PEA reporting positive economics:
pre-tax NPV8 of US$1,605m, IRR of 39.0%, $192m EBITDA and a payback of 3.3
years.
· Continued to strengthen the team as the Project advances towards
construction.
Key corporate activity post period end
· February 2023 - appointed Tamesis Partners as joint corporate
broker and financial adviser to broaden interaction with institutional
investors focused on the mining space.
· March 2023 - signed agreement with Ocean Partners Ltd for it to
acquire Erris Zinc Ltd, which owns the Abbeytown Project, in return for a
royalty and future cash payment once Abbeytown goes into production.
· Today - secured first industrial cornerstone investor, AMG
Advanced Metallurgical Group ("AMG"), which will acquire a 25% stake in
Zinnwald as part of a wider placing, done at a premium to current share price,
raising a minimum of £14m (€16m).
Outlook
· Multiple work streams underway including advancing the BFS
towards completion by the end of the year.
· Robust cash position with €2.1m cash at 21 March 2023,
excluding the expected minimum £14m net proceeds from the fundraise announced
today.
· Ideally positioned to build value given high demand for domestic
supplies of sustainable critical minerals including lithium.
CHAIRMAN'S STATEMENT
As the largest provider of climate financing in the world, the EU, together
with its member states, is focused on facilitating a green transition and
tackling the adverse effects of climate change. However, its planned reforms
are simply not possible without the rapid transition to electric vehicles and
a large scale build out of energy storage capacity. Central to this is an
order of magnitude increase in the supply of batteries.
The need to source a supply of critical materials that support green energy
technologies from within the continent is clear. This was highlighted by
European Commission president Ursula von Leyden who said in her October 2022
State of the Union address, "lithium and rare earths are already replacing gas
and oil at the heart of our economy". Accordingly, a new Critical Raw Material
Act (the "CRMA") was introduced on 16 March 2023 to address risks to supply
and advance new domestic mining projects. The CRMA proposes a comprehensive
set of actions to ensure the European Union's access to a secure, diversified,
affordable and sustainable supply of critical raw materials, including
lithium. The CRMA also sets clear benchmarks for domestic capacities along
the strategic raw material supply chain and to diversify EU supply including
at least 10% of the EU's annual consumption for extraction and 40% for
processing.
This bodes well for Zinnwald as it develops its 100% owned integrated lithium
hydroxide ('LiOH') project in Germany positioned to support the European
battery storage and EV manufacturing sectors from the end of 2026.
Having proved the viability of LiOH production in March 2022, as well as the
potential to produce economically significant amounts of commercially saleable
by-products, our focus then turned to the re-design of the Project that
culminated in the publishing of a PEA that fully described the new technical
plan for the Project in September. This reported positive economics: pre-tax
NPV8 of US$1,605m, IRR of 39.0%, $192m EBITDA and a payback of just 3.3 years.
The PEA emphasised other positive attributes of the Project including its
location in a mining district at an historic underground mine with existing
infrastructure, availability of skilled labour, and support of the Saxony
authorities and local community. Furthermore, it highlighted the Project's
strong ESG credentials with the potential to be a zero-waste project with
high-demand by-products including fertiliser, limited water use, and low-cost
sustainable mining strategy focused on minimising C02 emissions.
We are now seeking to further optimise the Project's economics by evaluating
the potential to increase the mining rate resulting in higher lithium product
output. During 2022, the relevant approvals required to commence two drilling
campaigns were sought and subsequently granted enabling the start of an infill
drill campaign at the key Zinnwald Lithium Deposit in July, and an exploration
drill campaign at one of our satellite deposits, Falkenhain, in September.
Initial results from these programmes indicate the potential for an increased
resource at Zinnwald and the potential for significant lithium resources at
Falkenhain which could represent possible feed material for the core
project. The data acquired will be collated to optimise the mining plan and
fed into the Bankable Feasibility Study ('BFS'), which we currently anticipate
publishing towards the end of the year.
In tandem, other sizeable work programmes are underway to refine and optimise
our plans including the development of processing technologies, continued
Environmental Impact Assessment ('EIA') and other permit application
processes, the evaluation of options for the construction strategy and further
work/negotiations on infrastructure aspects of the Project.
Corporate
Today we have announced a major milestone in the development of the Company in
the securing of our first industrial cornerstone investor, AMG Advanced
Metallurgical Group ("AMG"). As part of a wider placing, to be done at a
material premium to our current share price, we will raise a minimum of £14m
and AMG will acquire a 25% stake in Zinnwald. This is a significant
endorsement of our strategy to have AMG as a partner, which is one of the most
advanced Lithium companies in both Germany and the wider EU. We are also
pleased that our existing substantial shareholders, Henry Maxey and Mark
Tindall have all elected to subscribe to maintain their shareholdings.
At the start of 2023 we appointed Tamesis Partners as joint corporate broker
and financial adviser. Tamesis has initiated research coverage of the
Company. We look forward to working with Tamesis to broaden our interaction
with institutional investors focused on the mining space.
In addition, we were pleased to announce that we have entered into an
agreement with Ocean Partners Ltd for it to acquire our subsidiary Erris Zinc
Ltd, which owns the Abbeytown Project, in return for a royalty and future cash
payment once Abbeytown goes into production. As we previously stated, our
core focus is on the Zinnwald Lithium Project and we believe that Abbeytown
will be better advanced as part of a business focused on the commodity and the
region. As such we are confident that Ocean Partners will be excellent
stewards of the project and that the transaction will deliver value to
Zinnwald from this asset.
Financial Overview
The Group maintains a disciplined approach to expenditure and has a €2.1m
cash position as at 21 March 2023, which excludes the expected minimum €16m
proceeds from the fund raise announced today.
Outlook
As the leading battery technology in use today, lithium-ion batteries are
destined to be an enduring technology and whilst the record levels of lithium
pricing reached during 2022 may not be repeated demand is expected to remain
high. Benchmark Mineral Intelligence suggests that we need to increase
production of lithium-ion batteries from 0.6TWh a year to 20TWh by 2050, which
will require a 20-fold increase in lithium supply, while the IAE says 50 new
average sized lithium mines are needed by 2030 to fill the projected supply
gap. Zinnwald expects to deliver one of those mines.
In line with this, we are pushing forward as hard as possible on multiple work
streams including advancing the BFS towards completion by the end of the year.
I look forward to providing updates on our progress as we focus on ensuring
the underlying value of our asset is more fully reflected in our share price.
Finally, the progress made during the year is testament to our team, which we
continue to strengthen as the Project advances towards construction. I would
like to take this opportunity to thank them all for their continued hard work
and I look forward to working with them in the year ahead as we focus on
delivering on our overriding objective, which remains to generate value for
all our shareholders.
Jeremy Martin
Non-Executive Chairman
22 March 2023
THE 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 concept is for an underground mine and associated, on site,
mineral and chemical processing to produce a battery grade lithium hydroxide.
The Companies business model is predicated around utilising its inherent
advantages to enable it to become a sustainable project serving the European
lithium market:
· Location: German project in the heart of the European automotive
and chemical industries and within close proximity of several major battery
"Gigafactories" currently in production or planned. It is one of the few
lithium projects that will provide domestic European primary lithium supply.
Security of supply and shorter supply chains are becoming increasingly
important. Europe does not currently have a domestic source of lithium supply
and there are relatively few projects within the EU
· Established mining region: The Project is located in an
established mining area that has been mined historically for 400 years and as
recently as the early 1990s. Mining is well understood by local communities
and authorities and the State of Saxony, in which the project is located,
recently published a raw materials strategy highlighting the role that mining
for critical raw materials can play.
· Low impact: The Project is based around an existing underground
mine, thereby minimising surface impact. Existing infrastructure in the area
will be utilised to access and exploit the ore body which will further
minimise the impact on the environment and communities. In addition, the
Project has been designed with the potential to be a low or "zero-waste"
operation as the majority of both its mined product and co-products have their
own large-scale end-markets:
o Its initial mined waste product, quartz sand, is benign and can be used in
the construction industry.
o The leach residue from the chemical process can be used as back-fill in
the mine
o Its primary co-product is high grade Potassium Sulphate, which is
primarily used as a fertiliser and for which the market is large.
o Its secondary co-product is Precipitated Calcium Carbonate ("PCC")
typically used as a filler in the paper making process.
· High Regulatory standards: The Project will be permitted under EU
environmental rules, which are some of the strictest globally. OEMs will be
able rely on the production being in compliance with EU Battery Chain
directives. Furthermore, the Board and management are committed to maintaining
the highest levels of transparency and corporate governance consistent with
being a UK listed Plc.
· Sustainable: The Project incorporates several key elements that
are advantageous in terms of sustainability relative to competing global
sources of lithium supply
o The process has limited water use relative, in particular, to brine
producers.
o The process flowsheet is less energy intensive than traditional
spodumene-based production as it involves a single pyrometallurgical step at a
lower temperature than is required in a spodumene-based process.
o Overall transport costs and emissions are reduced by being an integrated
operation located close to end markets especially when compared to Australian
sourced spodumene concentrate processed in China.
o German energy sources currently include a higher overall "low carbon"
component than some regions that are currently important suppliers of lithium.
· Leading Partners: The Company is committed to working with highly
credible partners that can help to ensure the delivery of a landmark
Project. International technical partners currently include SRK,
Metso:Outotec, K-Utec, Epiroc and GLU/GICON.
Geology and License Areas
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. Lithium is contained in lithium-bearing mica, which is called
"zinnwaldite", a member of the siderophyllite-polylithionite series, which
contains up to 1.9 wt.% lithium. It is enriched in 10 parallel to subparallel
zones below the historic tin mineralization. Individual lithium- bearing
greisen beds show vertical thicknesses of more than 40m. The mineral
assemblage consists of quartz, Li-F-mica (zinnwaldite), topaz, fluorite and
associated cassiterite, wolframite and minor scheelite and sulfides.
The Project comprises four license 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, our now 100% owned
subsidiary, Deutsche Lithium GmbH ("Deutsche Lithium" or "DL") first announced
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. This 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, Altenberg and Sadisdorf satellite areas
· Falkenhain - the license covers an area of 2,957,000 m² and, in
2022, the license was extended for a further three years to 31 December
2025. DL commenced a 10 drill-hole exploration programme in September 2022
with the results from the first drill hole published in January 2023.
· Altenberg DL - the license covers an area of 42,252,700 m² and
is valid to 15 February 2024. DL is currently evaluating historical data,
which will be used to define new exploration targets in the area.
· Sadisdorf - the license covers an area of 2,250,300 m² and is
valid to 30 June 2026. 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). DL is reviewing and evaluating
this historic data to determine further exploration steps.
Project Plans - Revised Strategy
The Group's management team took the decision following the completion of the
acquisition of the remaining 50% of DL in June 2021 to reposition the Project
to better reflect the significant and rapid developments in the Global and
European Lithium markets. The Project's revised strategy is now to focus on
a larger scale operation that produces battery-grade LiOH products; to
optimise the Project from a cost perspective; and also to minimise the
potential impact on the environment and local communities. All aspects of the
Project from mining through to production of the end product will now be
located near to the deposit itself in an area with developed infrastructure,
energy sources, services, facilities, and access roads and rail. Power and
water are provided by existing regional supply networks. It is also
located close to the heart of the German automotive and chemical industries.
To progress this revised strategy, the Group has taken a number of steps in
the further definition, design and study work required, which culminated in
the publication on 7(th) September 2022 of the "Preliminary Economic
Assessment ("PEA") for the revised Zinnwald Lithium Project.
PEA Mine Plan
The Project includes an underground mine with a nominal output of
approximately 880,000 t/a ore at estimated 3,004 ppm Li and 75,000 t/a barren
rock. Ore haulage is via a 7km partly existing network of underground drives
and adits from the "Zinnerz Altenberg" tin mine which closed in 1991. The
mining operation for the Project is planned as an underground mine development
using a main ramp for access to the mine and for ore transportation from the
mine to the surface via access tunnels. The estimated mine life covers
>35 years of production. The optimisation of bulk-mining methods has been a
key consideration to realise increased total mined tonnage. The cross-section
map of the area shown below shows the drainage access tunnel, the two access
mining tunnels and the historic talings facility at IAA Bielatal.
PEA Processing Flowsheet and Metallurgical Test Work
The Zinnwald Lithium Process Plant is designed to process 880,000 dmt/a of ROM
feed, at an average grade of 0.30 wt.% Li, to produce a minimum of 12,011 t/a
of battery grade LiOH*H2O (equivalent to 10,530 t/a LCE) and 56,887 t/a of
K2SO4 and about 16,000 t/a PCC (precipitated calcium carbonate) by-products.
The flowsheet, as shown below is based on calcium sulfate/calcium carbonate
roasting and consists of the following major unit processes. The Flowsheet
test work has been based on an original 100t lithium-mica greisen ore sample
that has produced 50 kg of a reference LiOH product sample as well as for the
locked cycle test for process verification as part of the process design work.
Permitting and Environmental Studies
The overall permitting pathway for the project is subdivided between processes
to be permitted under the Mining Act, which includes the mine, its associated
infrastructure and the mechanical separation plant approved under a Mandatory
Framework Operation Plan (MFOP) and the Bundesimmissionsschutzgesetz (BImSchG)
(Federal Emission Protection Act) and the Water Authority for all aspects
relevant to water use, potential for water pollution etc.
Economic Analysis in the PEA
The economic analysis included in the PEA (shown below) demonstrates the
financial viability of the Project. Based on the assumptions detailed in this
report the Project supports a Pre-tax Net Present Value ("NPV") of US$1.6
billion (at a discount rate of 8%, "NPV8)") and a pre-tax Internal Rate of
Return ("IRR") of 39%. The after tax NPV8 is US$1.0 billion and post tax IRR
is 29.3% The Project has a mine life of over 35 years and the payback period
is less than four years post commencement of production. The full report is
published on the Company's website at
https://www.zinnwaldlithium.com/investors/reports-and-presentations/
(https://www.zinnwaldlithium.com/investors/reports-and-presentations/)
PEA Key Indicators Unit Value
Pre-tax NPV (at 8 % discount) US$ m 1,605
Pre-tax IRR % 39.0%
Post-tax NPV (at 8 % discount) US$ m 1,012
Post-tax IRR % 29.3%
Simple Payback (years) Years 3.3
Initial Construction Capital Cost US$ m 336.5
Average LOM Unit Operating Costs (pre by-product credits) US$ per tonne LiOH 10,872
Average LOM Unit Operating Costs (post by-product credits) US$ per tonne LiOH 6,200
Average LOM Revenue US$ m 320.7
Average Annual EBITDA with by-products US$ m 192.0
Annual Average LiOH Production Tonnes per annum 12,011
LiOH Price assumed in model US$ per tonne $22,500
Annual Average SOP Production Tonnes per annum 56,887
Blended SOP Price assumed in model € per tonne 875
Project Development Plan
The preliminary project schedule outlined below is based on the assumption
that the Project will be fully funded throughout both its next stage of
producing a BFS and then into construction; all environmental and other
regulatory permits will be granted without delays; external agencies and
suppliers will be cooperative; and management of the execution will be by
competent EPCM / EPC groups.
STRATEGIC REPORT
Extracts from the Company's Strategic Report are set out below.
Highlights
12 Months to 31 December 2022
· Completion of PEA on revised Project plan showing robust economic
results.
· Testwork confirmed viability to produce battery-grade Lithium
Hydroxide
· Testwork confirmed viability to produce economically significant
by-products.
· Hyper-spectral scanning tested to produce accurate quantitative
information on ore types and grades.
· Lithological ore-sorting proven to be viable in pilot tests.
· Commencement of in-fill drilling campaign at Zinnwald license
area.
· Commencement of exploration drilling campaign at Falkenhain
license area.
· Commenced discussions with owners of local infrastructure.
· Engaged SRK Consulting (UK) Ltd to provide competent person
support.
· Joined the EU funded Horizon Europe "Exploration Information
Systems" project.
· Strengthened the operational team in Germany.
· Entered into Option Agreement to acquire more land in vicinity of
Altenberg.
Post period end to 21 March 2023
· First Industrial Cornerstone Investor (AMG) and wider Placing
raising a minimum of £14m.
· First drill results on Falkenhain exploration license.
· Appointment of Tamesis Partners as co-broker and first research
published.
· Simplified and focused the Company by selling the non-core
Abbeytown Lead-Zinc Project.
Strategic Review
Company Overview - Background and evolution
The Group was originally established in 2012 as a mineral exploration and
development company and made its IPO on AIM in December 2017. 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.
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. The
sole remaining agreement is the Royalty Agreement covering 50% of the Project,
which remains in place.
Company Strategy
The Zinnwald Lithium Project, as set out above, is the Company's core
development asset and the sole focus of the Board and its strategy. This
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 Company will focus on
further de-risking the project as it is advanced towards a development
decision. Key work areas include:
· Complete a Bankable Feasibility Study on the Revised Project
following on from the PEA.
· Further refine the Processing Flowsheet that supports the primary
production of battery grade lithium hydroxide and its co-products, Potassium
Sulphate (fertilizer) and Precipitated Calcium Carbonate.
· Expansion of the size of the Project by increasing Mineral
Resource Estimates to include the "Albite Granites" and increase size of
annual mining throughput with improved ore-sorting technologies.
· Identification of and negotiation with further long-term
cornerstone investors.
· Identification of and negotiation with off-take partners that
could include battery manufacturers, chemical producers or commodity traders.
· Identification of and negotiation with potential project
financing partners that could include banks and national and trans-national
development organisations.
· Exploration work to advance the satellite licenses to increase
the potential size of the overall resource.
· Advance the plant engineering towards AAC Class 3.
· Minimising the carbon footprint by optimising Lithium plant
location and transportation.
· 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 general public and the NGOs in the
permitting processes and has committed to proactively engage with all the
stakeholders in its projects.
Operational Review
Germany
During 2022, the Group has made significant progress on the Project, including
the publication of its PEA on the Revised Project. For further details see
the section on Zinnwald Lithium Project above. As part of this progress
the Group completed the following matters during the year, and after the year
end, to underpin the Project plans.
RESOURCE DEVELOPMENT
The Company has already commenced an infill drilling programme at the core
Zinnwald license with the objective of better defining the Resources and
Reserves that lie within the ore body, as well as determine the detailed early
years' mining plan. This will likely lead to revised Resource and Reserves
Estimate to be included in the BFS. The Company has also commenced an
exploration drilling campaign at its nearby Falkenhain license to determine
the potential for expansion of both the project's resources and the production
level.
The Company has engaged SRK Consulting (UK) Ltd to provide competent person
support for the drill campaign and geometallurgy. The drilling is being
conducted by GEOPS Bolkan Drilling Services Ltd. The Company has also leased
and taken occupancy of new warehouse space in Freiberg that is being used for
core storage and core logging and processing of new drill core. The facility
has been outfitted with the latest safe and environmentally friendly
equipment.
In-fill drilling at Zinnwald Lithium Deposit
In August 2022, the Company received its final permits and started an in-fill
drilling programme at the core Zinnwald Lithium license. The purpose of the
in-fill drilling programme is to study the mining scale variability of the ore
with the view of applying larger scale mining methods. The ultimate aim is
also to support the plan to consider the Albite Granites (previously referred
to as "Ore Type 2" in the PEA) for the Mineral Resource and future mine plan,
with potential to materially increase the total Mineral Resource.
As at the end of 2022, the Company had completed 13 drill holes and 4,311m at
the core Zinnwald deposit. The results of the assay at the first four drill
holes were announced in detail in an RNS on 23 November 2022. In summary the
included long mineralised intervals such as 2,503ppm Li over 86.4m and
1,846ppm Li over 121m within which there are several high-grade core intervals
including of 4,286ppm Li over 4.6m and 4,345ppm Li over 6.5m. So far in
2023, the Company has completed a further 15 drill holes, taking the total
drilling to 9,587m. Further assay results will be published in due course.
Exploration drilling at Falkenhain Licence Area
In September 2022, the Company received its final permits and started an
exploration drilling programme at Falkenhain. This exploration licence is
located 7km north from the core Zinnwald License. The licence area was
historically extensively explored for occurrences of tin and tungsten with
drilling undertaken most recently from 1963 to 1990. The Company has performed
a detailed review of the historic data including assaying samples of the
surviving core from these campaigns. The outcome from this work has identified
the potential for a lithium resource.
The Company has designed an exploration drill campaign of ten diamond drill
holes to test the historic drill data and better determine the resource
potential of the licence. The first drill hole was completed to a depth of
600m and the assay results published on 30 January 2023 showing significant
intercepts of thick high-grade lithium mineralisation including 80m at an
average 2,879 ppm Li and 51m at an average 3,421 ppm Li.
In September 2022, the Company was informed by the Saxony Mining Authority
("SOBA") that its application to extend its exploration license at Falkenhain
was successful. The exploration license is now valid until the 31 December
2025.
PROCESSING AND FLOWSHEET
Mining and Geometallurgy - TheiaX, Metso-Outotec, Tomra, UVR FIA
TheiaX GmbH, a local German company, reported initial hyperspectral core
scanning tests on both existing drill core from previous drilling campaigns,
and crushed ore samples from the previous pilot tests. The hyperspectral
scanning produced clear quantitative information on Zinnwaldite (Li-mineral),
Muscovite, Clay minerals and Topaz from both the drill core and the crushed
product. In comparison to standard one metre assay intervals, the
hyperspectral imaging produced information on five cm intervals and detected
lower grade inclusions from the core giving a very clear indication that
online hyperspectral imaging could be used for value-based bulk or particle
sorting of crushed ore.
After successful preliminary test work, pilot ore-sorting tests were carried
out by Tomra in Hamburg, Germany to test the amenability of Zinnwaldite ore
for particle sorting. All Zinnwaldite lithologies, ore and waste, were
tested. The pilot confirmed that >10 mm crushed material particles can be
effectively sorted with off-the-self ore-sorters.
The objective of these testwork campaigns is to reduce ore processing costs by
removing waste and low-grade material from the Mineral Processing circuit
before the expensive grinding, drying and magnetic separation stages, as well
as minimising the quantity of fine material produced as by-product. It could
also lead to an increase in total Mineral Resources. The current Mineral
Resource excludes Ore Type 1 lenses thinner than two meters due to processing
cost per tonne waste rock mined. With better understanding of the small-scale
grade variation and application of sorting process, it may be possible to
lower the Li cut-off grade of Ore Type 1. In addition, a considerable amount
of lithium at the Project is contained in the "Greisenized Granite" rock,
which could potentially be included in Mineral Resources. This material can be
understood as an alteration halo surrounding the Ore Type 1 and is estimated
at 214 Mt at a Li grade of 1700 ppm. It is currently not included in the
Project's Mineral Resources of 40.4 million tonnes (35.5 million tonnes
measured and indicated plus 4.9 million tonnes inferred), as set out in the
PEA.
Additional tests to further confirm the mineral processing assumptions for the
Albite Granites as part of the future mining feed are being undertaken at UVR
FIA GmbH in Freiberg. This principally considers the processing
characteristics, mineralogy, and geo-metallurgy of the Albite Granite, which
also holds significant amounts of lithium bearing mineralisation.
Pyrometallurgy - IBU-tec
Calcination (roasting of pre-treated Zinnwaldite concentrate) testwork was
carried out by IBU-tec Advanced Materials AG. The calcination testwork focused
on pre-treatment of the concentrate with different additives, agglomeration
and roasting of the agglomerate. The test targeted the possibility of
utilising cheaper additives and a higher leach rate of lithium and potassium
from calcine. The tests for calcine leaching of the calcined material were
carried out by K-UTEC.
The tests indicated that Flue Gas Desulfurization ('FGD') Gypsum is suitable
for the purpose. FGD Gypsum is readily available and inexpensive and would
represent a cost saving versus using primary gypsum. The tests also showed an
increased lithium recovery rate of 90% (previously 87%) and an increased
potassium recovery rate of 70% (previously 50%) from Zinnwaldite ore compared
with what was demonstrated in the 2019 FS.
Hydrometallurgy - Production of battery-grade LiOH and co-products - K-UTEC
In March 2022, the Company announced the successful completion of pilot scale
testwork that demonstrated the technical and economic viability of producing
high purity (>99.9% purity) lithium hydroxide from Zinnwaldite concentrate
is technically and economically viable. The test work also confirmed the
potential to produce economically significant amounts of commercially saleable
co-products, such as high-purity potassium sulphate ("SOP") and precipitated
calcium carbonate ("PCC").
In these tests, almost 50kg of battery grade LiOH was produced out of several
tons of Zinnwaldite concentrate. The test work was conducted in Germany by a
leading industry specialist, K-UTEC AG Salt Technologies ('K-UTEC') and
verified by a third-party laboratory through chemical and physical analysis.
The lithium recovery from the Zinnwaldite concentrate to the LiOH was proven
to be above 80% and comparable to lithium processes from other types of
lithium resources. Non-saleable side streams were proven to contain very low
amounts of soluble, possibly environmentally problematic elements.
The Company further commissioned K-UTEC to conduct a technical scoping study
for SOP and PCC product optimisation, which confirmed the ratios of high
grade technical / fertiliser grade SOP products that can be achieved. This
work specifically considered the operational aspects of producing various
quantities of SOP products and will form the basis for higher level
engineering studies.
OTHER OPERATIONAL MATTERS
Access to infrastructure
In March 2022, the Company was granted access to portions of the existing
mining infrastructure in the vicinity of the Project for inspection purposes.
This infrastructure includes a 4km drainage tunnel, and disused ventilation
and access shafts, which potentially could be used as part of its
operations. The infrastructure was found to be in excellent condition and
easily accessible. The Company continues to develop its plans for the possible
utilisation of this infrastructure to beneficially impact the Project and is
also in discussion with the owners of the assets for access and usage.
Land in Altenberg
In August 2022, the Company announced that it had entered into an option
agreement with Projektgesellschaft Altenberg mbH, an entity owned by the town
of Altenberg in Germany, that gives the Company the right to acquire
approximately 14,000 square metres of industrial land in the Europark
industrial area near to Altenberg. The option agreement is valid
until August 2025. The land subject to the option agreement is adjacent to
land already owned by the Company and combined would bring the Company's total
land holding in this area to approximately 30,000 square metres. This
industrial land has the potential to be used for access and other operational
aspects of the Zinnwald Lithium Project.
Partnerships
The Group has further strengthened its relationships with leading partners,
whose credibility the Group believes will ultimately support its position with
future project finance partners:
· SRK Consulting UK Ltd is providing Competent Person ("CP")
support and guidance for the Project.
· TheiaX GmbH is assisting with cutting edge hyperspectral scanning
of drill-core to be used in the geo-metallurgical optimisation of the Project.
· Metso Outotec is providing expert support in advancing the
mineral processing concept and engineering, including verification of historic
engineering, the development of a conceptual study to produce engineering
deliverables to enable a smoother transition into basic engineering and
support of further development stages of the Project.
· Epiroc is developing plans for an electrically powered mining
operation.
· GICON / GLU is proving support in the permitting process of
mining assets in the state of Saxony.
Co-Broker Appointment
In February 2023, the Company appointed Tamesis Partners LLP as joint
corporate broker and it published the first independent research note on the
Company. Tamesis is a specialist ECM and advisory house with a focus on the
mining sector. Tamesis will support the Company with research coverage and
access to an incremental audience of institutional and strategic investors.
Staffing in Germany
The Group has further strengthened the team in Germany in 2022, adding skills
in several key disciplines including geology, mining, and logistics.
ESG and Sustainability
Progress in relation to Permitting, Environmental, Social and Governmental
engagement are covered in detail in the report of the Sustainability Committee
below.
Lithium Market in 2022
Building on an extremely strong performance in 2021, the lithium market in
2022 continued to perform with spot prices exceeding US$80,000 ton. Contract
pricing, typically a better indicator of overall supply-demand dynamics, was
also very robust with SQM, one of the world's biggest suppliers, announcing an
average price for 2022 of US$52,000/t. Pricing is supported by a growing
consensus around a supply / demand imbalance, with several market commentators
anticipating a persistent deficit of supply. The impact on long term lithium
hydroxide price expectations has been a consistent rise. In Q3 2021, Benchmark
Minerals (a leading lithium industry consultancy) forecast a long-tern price
of $12,110, but this was before the step change in balance in the market. In
March 2022, Roskill forecast an inflation adjusted long term price of $23,609
per tonne through to 2036 with a nominal rate of $33,200/t by 2036. In its
year-end review, Fastmarkets produced a 10 year forecast for Lithium prices
that showed prices above $30,000 per tonne for the rest of the decade and
still above $25,000 per tonne by 2032. Zinnwald in its PEA assumed a long
term price of $22,500/t.
The global lithium market is expanding rapidly due to an increase in the use
of lithium-ion batteries for electric vehicle and energy storage applications.
In recent years, the compound annual growth rate of lithium for battery
applications was over 22% and is projected by Roskill to be more than 20% per
year to 2028. This expansion is being driven by global policies to support
decarbonisation via electrification. This is underpinned by Carbon Emission
Legislation (COP26, EU Green Recovery, Paris Accord); Government regulation
and subsidies; and Automakers commitment to EVs. Global electric car sales
totalled 4.2 million units in 2021, more than double the level in 2020 and up
~ 200% versus 2019 with no slowdown anticipated in 2022.
Benchmark Minerals highlighted that there are 282 Gigafactories at various
stages of production/ construction, up from only 3 in 2015 (by May 2022, this
number had gone over 300). If all these plants came online in the planned
10-year timeframe, it would equate to 5,777 GWh of battery capacity,
equivalent to 109 million EVs. This would require 5m tonnes of lithium each
year, as compared with 480,000 tonnes produced in 2021. It noted that the
lack of supply is not due to any geological constraints but to a simple lack
of capital investment to build future mines and estimated $42bn needs to be
spent by 2030 to meet anticipated demand for lithium.
Arguably the most transformative event in the lithium industry in 2022 came in
August when the US Government announced the Inflation Reduction Act ("IRA"),
which is described as the largest piece of federal legislation to address
climate change ever promulgated. It comprises a total of $391billion in
provisions relating to energy security and climate change and includes $270
billion in tax incentives. Some of the largest allocation areas included
$128 billion for renewable energy and grid storage and $13 billion for
electrical vehicle incentives. As part of this Act, in October 2022, the
White House made $2.8 billion of direct grants to boost domestic EV battery
production ranging from recycling facilities to lithium processing plants.
Companies such as Albermarle, Piedmont Lithium and Lilac Solutions all
received sizeable grants in relation to lithium processing facilities.
The IRA triggered a strong response from the EU driven by concerns around the
scale of incentives and subsidies and the risk to European industry. In
January 2023, the European Commission set out its own "Green Deal Industrial
Plan" that aims to ease state aid rules that would "enhance the
competitiveness of Europe's net-zero industry and support the fast transition
to climate neutrality. The Commission will also protect the single market from
unfair trade in the clean-tech sector and will use its instruments to ensure
that foreign subsidies do not distort competition in the single market, also
in the clean-tech sector." The Plan is based on four pillars: simplifying
regulations; speeding up access to finance; skills development; and open trade
to provide a 'more supportive environment' to boost the EU's manufacturing
capacity for the green transition to meet its climate targets. Brussels wants
Europe to be the first climate-neutral continent by 2050, and to cut its
emissions by at least 55% by 2030. A "Net Zero Industry Act" is due in 2023
with the potential for a longer term European Sovereignty Fund to invest in
emerging technologies.
Ireland
During the period, the Group retained its sole license at Abbeytown and has
met all expenditure requirements to maintain the license through to June
2023. On 13 March 2023, the Company announced the terms of an acquisition
agreement with Ocean Partners Ltd for them to acquire Erris Zinc Ltd, the
owner of the Abbeytown Lead-Zinc license in Ireland. Ocean Partners shall
acquire Erris Zinc for €1 and commit to spend €130,000 over the next three
years to the end of 2025 on exploration work at Abbeytown. Zinnwald shall
receive a 1% Net Smelter Royalty and a €200,000 cash payment due six months
after commencement of commercial production from Abbeytown. Zinnwald shall
have the right to buy back Erris Zinc for €1 in March 2025, if the committed
exploration spend has not been made.
Share Price performance in 2022
The Board shares the frustration of shareholders at the weakness of the
Company's share price in 2022. The wider equity markets, especially for
smaller companies, have been under sustained pressure in 2022 primarily due to
macro-economic factors including rising interest rates, uncertainty caused by
the conflict in Ukraine and low anticipated economic growth. Zinnwald has
had two specific equity events that occurred at the end of December 2021 (the
distribution of 91m Zinnwald shares owned by Bacanora Lithium Plc on
completion of its takeover by Ganfeng Lithium Ltd; and the expiration of the
lock-in on the majority of the 50m Zinnwald shares originally issued to
creditors of the SolarWorld AG estate) which resulted in there being a number
of material shareholders that were unlikely to be natural holders of the
Company's shares. The Board understands that majority of these shareholders
have sold all or the majority of their holdings over the course of 2022. The
Board believes that this "overhang" has now cleared, as evidenced by the
improved share price performance so far in 2023. The Board is grateful for
the new and existing shareholders that have absorbed this volume of shares.
Outlook
The Company is primarily focused on the delivery of a BFS by the end of 2023,
further building on the technical concept detailed in the PEA published in
September 2022. The PEA demonstrated a robust Project with very attractive
economics and the team is working hard to advance this to the next stage.
The funds raised in the share placing announced today will primarily be used
to deliver this BFS, and thereafter to finance the detailed engineering and
design work required to reach a Final Investment Decision.
As part of this BFS work, the Company near-term priorities are the completion
of the in-fill drill campaign at Zinnwald, which should result in the
completion of an updated Mineral Resources and Reserves Estimate (MRE), as
well as determine the detailed early years' mining plan. The Project's
historic MRE was based solely on the Greisen beds and excluded the Albite
Granites. One of the goals of the ongoing in-fill drilling programme is to
materially increase the MRE, which could, in turn, accommodate greater mining
capacity for an expanded Li-product output. Historic estimates quantified the
tonnage potential of the Albite Granites alone at above 200Mt, an estimate
that the Company is working to verify. The Company will also continue its
exploration drilling campaign at its nearby Falkenhain license to determine
the potential for expansion of both the project's resources and the production
level.
The Company will continue to develop the technologies planned for its
processes. Individual processing methods and stages are well established in
mining and other industries. As the recognition of Zinnwaldite as a source for
battery metals is more recent, the application of methods such as
high-intensity magnetic separation has not previously been used in
beneficiation of this specific type of lithium ore but is utilised and well
established in the beneficiation of other ore types. Evaporators and
crystallizers are common processing methods in the production of fertiliser
salts. The Company has also completed the initial phases of testing bulk and
particle sorting techniques designed to increase the type of resource
available to the Project. The Company will also continue to refine its plans
for reducing its overall CO(2) footprint and operating costs, such as via the
use of electric mining equipment.
The Company has already commenced its EIA and other permit process, including
baseline studies and other reports. This will be a high priority area over
the coming quarters.
The Company will continue to liaise with individual, State and Federal owners
of local infrastructure regarding access rights and/or acquisition. The
Company will also advance negotiations for service contracts for electric
power and natural gas with local power companies as well as supply contracts
for required reagents and materials.
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
31 December 2022 31 December 2021
Notes € €
Continuing operations
Exploration projects impairment - (1,583,566)
Administrative expenses (1,850,129) (1,122,534)
Other operating income 42,948 779
Share based payments charge 25 (545,225) (7,779)
Operating Loss (2,352,406) (2,713,100)
Revaluation gain on joint venture 7 - 1,038,252
Share of loss of joint venture 10 - (52,911)
Finance income 9 191 455
Loss before taxation (2,352,215) (1,727,304)
Tax on loss 12 - -
Loss for the financial year 30 (2,352,215) (1,727,304)
Other Comprehensive Income (138) 181
Total comprehensive loss for the year (2,352,353) (1,727,123)
Earnings per share from continuing operations attributable to the owners of 13
the parent company
Basic (cents per share) (0.80) (0.74)
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 2022
31 December 2022 31 December 2021
Notes € €
Non-current assets
Intangible Assets 14 18,966,165 16,165,085
Property, plant and equipment 15 327,528 48,621
Right of Use Assets 16 185,285 -
19,478,978 16,213,706
Current assets
Trade and other receivables 20 309,795 121,845
Cash and cash equivalents 3,164,585 8,291,991
3,474,380 8,413,836
Total Assets 22,953,358 24,627,542
Current liabilities
Trade and other payables 21 583,660 638,660
Lease Liabilities 16 140,149 -
723,809 638,660
Net current assets 2,750,570 7,715,176
Non-current Liabilities
Deferred tax liability 22 (1,382,868) (1,382,868)
Lease Liabilities > 1 Year 16 (47,795) -
(1,430,663) (1,382,868)
Total Liabilities (2,154,472) (2,021,528)
Net Assets 20,798,886 22,606,014
Equity
Share capital 26 3,316,249 3,316,249
Share premium 27 20,289,487 20,289,487
Other reserves 28 1,367,868 822,781
Retained earnings 30 (4,174,718) (1,822,503)
Total equity 20,798,886 22,606,014
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Notes Share Capital Share premium account Other reserves Retained earnings Total
€ € € € €
Balance at 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 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 25 - - 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 and 1 January 2022 3,316,249 20,289,487 822,781 (1,822,503) 22,606,014
Year ended 31 December 2022
Loss for the year - - - (2,352,215) (2,352,215)
Other comprehensive income
Currency translation differences - - (138) - (138)
Total comprehensive income for the year - - (138) (2,352,215) (2,352,353)
Credit to equity for equity settled share-based payments 25 - - 545,225 - 545,225
Total transactions with owners recognised directly in equity - - 545,225 - 545,225
Balance at 31 December 2022 3,316,249 20,289,487 1,367,868 (4,174,718 20,798,886
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
Year ended 31 December 2022 Year ended 31 December 2021
Notes € € € €
Cash flows from operating activities
Cash used in operations 33 (1,904,776) (495,174)
Net cash outflow from operating activities (1,904,776) (495,174)
Cash flows from investing activities
Investment in Deutsche Lithium as Joint Venture - (735,800)
Purchase of remaining 50% of Deutsche Lithium - (1,500,000)
Cash acquired on purchase of Deutsche Lithium - 486,213
Exploration expenditure in Germany (2,802,075) (948,157)
Exploration expenditure in Ireland and Sweden - (37,455)
Purchase of property, plant and equipment (351,217) (8,437)
Proceeds on disposal of equipment 26,471
Interest received 191 455
Net cash used in investing activities (3,126,630) (2,743,181)
Cash flows from financing activities
Proceeds from the issue of shares - 6,927,255
Share issue costs - (243,436)
Lease payments (96,000) -
Net cash generated from financing activities (96,000) 6,683,819
Net (decrease) / increase in cash and cash equivalents (5,127,406) 3,445,464
Cash and cash equivalents at beginning of year 8,291,991 4,846,527
Cash and cash equivalents at end of year 3,164,585 8,291,991
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1. Accounting Policies
1.1 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 Group consists of Zinnwald Lithium Plc and its wholly owned subsidiaries
as follows as at 31 December 2022.
Name of undertaking Registered office Nature of business Class of shares held Direct holding Indirect holding
Deutsche Lithium Holdings Ltd United Kingdom Exploration Ordinary 100.0% -
Erris Zinc Limited Ireland Exploration Ordinary 100.0% -
Deutsche Lithium GmbH Germany Exploration Ordinary - 100.0%
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 Junger-Loewe-Schacht 10, 09599, 09599, Freiberg,
Germany.
1.2 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 2022 was
1.12759.
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.
1.3 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.
All financial statements are made up to 31 December 2022. 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.
1.4 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 Group had a
cash balance of €2.1m at the year end and keeps a tight control over all
expenditure. The Board has a strategy to enable the curtailing of a number of
areas of expenditure to enable it to meet its minimum fixed costs for the next
12 months, even without raising further funds, whilst still maintaining all
licenses in good standing. However, as announced at the date of this report,
it is completing a material fund raise to finance further development of the
Project and meet Group expenditures. Thus, the going concern basis of
accounting in preparing the Financial Statements continues to be adopted.
1.5 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.
1.6 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 No deprecation is charged
on these balances
Plant and equipment 25% on
cost
Fixtures and fittings
25% on cost
Computers
25% on cost
Motor
vehicles
16.7% on cost for new vehicles, 33.3% on cost for second-hand vehicles
Low-value assets (Germany) 100% on cost on
acquisition for items valued at less than €800
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.
1.7 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.
1.8 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.
1.9 Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with
banks.
1.10 Right of Use Assets and Lease Liabilities
On 1 January 2019, the Group adopted IFRS 16, which supersedes IAS 17 and sets
out principles for the recognition, measurement, presentation and disclosure
of leases for both parties to a contract. All leases are accounted for by
recognising a right-of-use assets due to a lease liability except for:
· Lease of low value assets; and
· Leases with duration of 12 months or less
The Group reviews its contracts and agreements on an annual basis for the
impact of IFRS 16. The Group has such short duration leases and lease payments
are charged to the income statement with the exception of the Group's lease
for the Freiberg office and core shed.
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease unless (as is
typically the case) this is not readily determinable, in which case the
group's incremental borrowing rate on commencement of the lease is used.
Variable lease payments are only included in the measurement of the lease
liability if they depend on an index or rate. In such cases, the initial
measurement of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also
includes:
· amounts expected to be payable under any residual value
guarantee;
· the exercise price of any purchase option granted in favour of
the group if it is reasonably certain to assess that option;
· any penalties payable for terminating the lease, if the term of
the lease has been estimated on the basis of termination option being
exercised.
Right of use assets are initially measured at the amount of the lease
liability, reduced for any lease incentives received, and increased for:
· lease payments made at or before commencement of the lease;
· initial direct costs incurred; and
· the amount of any provision recognised where the group is
contractually required to dismantle, remove or restore the leased asset
Subsequent to initial measurement lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
for lease payments made. Right-of-use assets are amortised on a straight-line
basis over the remaining term of the lease or over the remaining economic life
of the asset if, rarely, this is judged to be shorter than the lease term.
1.11 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.
1.12 Equity instruments
Equity instruments issued by the group are recorded at the proceeds received,
net of direct issue costs.
1.13 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.
1.14 Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an
expense as they fall due.
1.15 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.
1.16 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.
1.17 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.
1.18 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.
1.19 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.
1.20 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').
1.21 New standards, amendments and interpretations not yet adopted
Aside from the impact of IFRS 16, as noted above, 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 4 and IFRS 17 - Insurance Contracts (effective 1
January 2023)
• IAS 12 amendments - Income Taxes: Deferred tax
relating to single transaction (effective 1 January 2023)
• IAS 1 amendments - Presentation of Financial
Statements: Classification of Liabilities as Current or Non-Current (effective
1 January 2023)
• IAS 1 amendments - Presentation of Financial
Statements: Disclosure of Accounting Policies (effective 1 January 2023), and
• IAS 8 amendments - Changes in Accounting Estimates and
Errors: Definition of Accounting Estimates (effective 1 January 2023)
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 applied 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
Group capitalised exploration costs had a carrying value as at 31 December
2022 of €18,966,165 (2021: €16,165,085), which solely relate to the
Zinnwald Lithium Project, Management tests annually whether capitalised
exploration costs have a carrying value in accordance with the accounting
policy stated in note 1.6. 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 Germany, Deutsche Lithium's core mining license at Zinnwald is valid to 31
December 2047, which underpins the PEA published in September 2022. Deutsche
Lithium has additional exploration licenses at Falkenhaim (recently renewed
for a further three years to 31 December 2025), at Altenberg to 15 February
2024 and at Sadisdorf to 30 June 2026. The PEA showed a material increase in
size and output of the Project and underpinned a pre-tax NPV of $1.6m and a
post-tax NPV of $1.0m and post-tax IRR of 29%. Accordingly, the Board has
concluded that no impairment charge is required for these assets.
In Ireland, the Group retains a single license at the Abbeytown Zinc Project
(PL 3735), which is valid to 2025. The historic exploration work identified
excellent mineralisation in its drill holes and the metallurgical review has
shown a good quality concentrate can be produced. The Group is no longer
focussed on Ireland and put the license on care and maintenance in 2021 whilst
it looked for a Partner to take the asset forward. The Company fully
impaired the carrying value of this asset in its 2021 accounts and accordingly
no further impairments are required. In March 2023, the Group announced that
it would be selling the Abbeytown Project to Ocean Partners Ltd in return for
a 1% Net Smelter Royalty and a €200,000 payment due six months after the
start of commercial production.
In Sweden, in 2021 the Company surrendered all assets and licenses to the
Swedish authorities. The assets had been fully impaired in previous periods
and all balances have been removed from the Group accounts in 2022.
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 Euros, as the majority of its
current and planned expenditure will be on the Zinnwald Lithium Project in
Germany. The Company took advantage of the strong GBP:Euro exchange rate at
the end of 2021 to convert £5m of cash raised in December 2021 into Euros to
match its planned spend for 2022.
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. The Group's cash and
cash equivalents is held at major financial institutions.
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. The Group has no material fixed cost overheads other than its costs
of being listed on the AIM market and its lease in Freiberg. None of its
employee contracts have notice periods of longer than six months and its
exploration expenditure is inherently discretionary.
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
primarily relates to the historic Abbeytown Zinc Project.
Non-core Assets Germany UK Total
2022 2022 2022 2022
€ € € €
Administrative expenses (6,308) (453,620) (1,364,522) (1,824,450)
Share based payment charge - - (545,225) (545,225)
Project impairment - - - -
Gain/loss on foreign exchange - - (25,679) (25,679)
Other operating income - 42,948 191 43,139
Loss from operations per reportable segment (6,308) (410,672) (1,935,235) (2,352,215)
Reportable segment assets 8,837 19,225,340 3,719,181 22,953,358
Reportable segment liabilities - 1,855,795 296,677 2,154,472
Non-core Assets Germany UK Total
2021 2021 2021 2021
€ € € €
Administrative expenses (6,270) (151,979) (1,206,383) (1,364,632
Share based payment charge - - (7779) (7779)
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)
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
5 Operating loss
Group
2022 2021
€ €
Operating loss for the year is stated after charging / (crediting)
Exchange (gains)/losses 25,679 (242,098)
Depreciation of property, plant and equipment 49,990 7,077
Depreciation of Right of Use Assets 93,405
Amortisation of intangible assets 995 829
Ireland and Sweden exploration projects impairment - 1,583,566
Share-based payment expense 545,225 7,779
Operating lease charges 70,591 39,098
Exploration costs expensed 412,722 143,735
6 Auditor's remuneration
Fees payables to the company's auditor and associates 2022 2021
€ €
For audit services
Audit of group, parent company and subsidiary undertakings 62,774 41,952
For other services
Taxation compliance services 4,343 3,500
7 Other gains and losses
2022 2021
€ €
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 Company
2022 2021 2022 2021
Number Number Number Number
Directors 5 5 5 5
Employees 14 6 1 -
19 11 6 5
Their aggregate remuneration comprised Group Company
2022 2021 2022 2021
€ € € €
Wages and salaries 1,300,065 870,447 709,370 589,688
Social security costs 142,586 111,925 86,266 71,302
Pension costs 98,457 38,005 52,067 38,005
1,541,109 1,020,377 847,703 698,995
Aggregate remuneration expenses of the group include €559 516 (2021:
€225,499) of costs capitalised and included within non-current assets of the
group.
Aggregate remuneration expenses of the company include €nil (2021: €Nil)
of costs capitalised and included within non-current assets of the group.
Directors' remuneration is disclosed in note 32.
9 Finance income
Group
2022 2021
€ €
Interest income
Interest on bank deposits 191 455
10 Share of results in Joint Venture
Group
2022 2021
€ €
Share of loss in joint venture - (52,911)
11 Impairments
Impairment tests have been carried out where appropriate and the following
impairment losses have been recognised in profit or loss:
2022 2021
Notes € €
In respect of
Intangible assets 14 - 1,583,566
Recognised in
Administrative expenses - 1,583,566
The impairment losses in respect of financial assets are recognised in other
gains and losses in the income statement.
12 Taxation
Group
2022 2021
€ €
Loss before taxation (2,352,215) (1,727,304)
Expected tax credit based on the standard rate of corporation tax in the UK of (446,921) (328,188)
19.00% (2021: 19.00%)
Disallowable expenses 171,828 11,531
Non-taxable gains - (197,268)
Unutilised tax losses carried forward 275,093 513,925
Taxation (credit) / charge for the year - -
Losses available to carry forward amount to €5,525,000 (2021:
€3,730,000). 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
2022 2021
€ €
Weighted average number of ordinary shares for basic earnings per share 293,395,464 232,669,857
Effect of dilutive potential ordinary shares
- Weighted average number of outstanding share options 5,695,342 2,265,890
Weighted average number of ordinary shares for diluted earnings per share 299,090,806 234,935,747
Earnings
Continuing operations (2,352,215) (1,727,304)
Loss for the period for continuing operations
Earnings for basic and diluted earnings per share distributable to equity (2,352,215) (1,727,304)
shareholders of the company
Earnings per share for continuing operations
Basic and diluted earnings per share
Basic earnings per share (0.80) (0.74)
There is no difference between the basic and diluted earnings per share for
the period ended 31 December 2022 or 2021 as the effect of the exercise of
options would be anti-dilutive.
14 Intangible Assets
Group Goodwill Germany Ireland Total
Exploration and Evaluation costs
€ € € €
Cost
At 1 January 2021 - - 2,023,706 2,023,706
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 assets (5,531,474) 5,531,474 - -
Deferred tax provision on fair value - 1,382,868 - 1,382,868
Additions - group funded - 948,156 35,566 983,822
At 31 December 2021 - 16,165,914 2,059,272 18,225,286
Additions - group funded - 2,802,075 - 2,802,075
At 31 December 2022 - 18,967,989 2,059,272 21,027,261
Amortisation and impairment
At 1 January 2022 - 829 2,059,272 2,060,101
Amortisation charged for the year - 995 - 995
At 31 December 2022 - 1,824 2,059,272 2,061,096
Carrying amount
At 31 December 2022 - 18,966,165 - 18,966,165
At 31 December 2021 - 16,165,085 - 16,165,085
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 Project. The licenses for the old Sweden Gold Projects were returned to
the Swedish authorities in 2021 and accordingly are excluded.
The Company has had no directly owned intangible assets since 2020.
15 Property plant and equipment
Group Leasehold, land and buildings Fixtures, fittings and equipment Motor vehicles Total
€ € € €
Cost
At 1 January 2022 9,817 24,642 32,427 66,886
Additions - group funded 31,173 263,695 56,349 351,217
Disposals - group - (10,864) (22,183) (33,047)
Exchange adjustments - (278) - (278)
At 31 December 2022 40,990 277,195 66,593 384,778
Depreciation and impairment
At 1 January 2022 - 13,143 5,122 18,265
Depreciation charged for the year - 37,498 12,492 49,990
Depreciation on disposals - (10,864) - (10,864)
Exchange adjustments - (141) - (141)
At 31 December 2022 - 39,636 17,614 57,250
Carrying amount
At 31 December 2022 40,990 237,559 48,979 327,528
At 31 December 2021 9,817 11,499 27,305 48,621
Company Computers
€
Cost
At 1 January 2022 4,665
Additions - group funded 696
Exchange adjustments (278)
At 31 December 2022 5,083
Depreciation and impairment
At 1 January 2022 1,364
Depreciation charged for the year 1,291
Exchange adjustments (139)
At 31 December 2022 2,516
Carrying amount
At 31 December 2022 2,567
At 31 December 2021 3,301
16 Right of Use Assets and Lease Liabilities
In May 2022, Deutsche Lithium GmbH entered into a commercial lease agreement
for and office and core shed property in Freiberg, Germany. The duration of
the lease is for 2 years. The instalments for the lease are €12,000 per
month, fixed for the duration of the lease.
The right of use asset and lease liability was recognised on 1 May 2022 on
inception of the lease. Movements in the period are shown as follows:
€
Right of use asset
Initial Recognition on 1 May 2022 278,690
Depreciation charged in the period (93,405)
Balance as at 31 December 2022 185,285
Lease Liability
Initial Recognition on 1 May 2022 266,690
Interest charged for the period 5,254
Lease payments in the period (84,000)
Balance as at 31 December 2022 187,944
- Recognised in Short Term Payables 140,149
- Recognised in Payables >1 year 47,795
17 Fixed asset investments
Company 2022 2021
€ €
Investments in subsidiaries 14,523,375 14,523,375
Investments in subsidiaries are recorded at cost, which is the fair value of
the consideration paid.
Movement in non-current investments
Shares in group undertakings
Cost
At 1 January 2022 and at 31 December 2022 14,523,375
Carrying amount
At 31 December 2021 and at 31 December 2022 14,523,375
The investment in Deutsche Lithium Holdings Ltd comprises the following
balances
€
Original investment in DLH - Prior to AIM IPO in 2017
Initial acquisition of shares in Erris Resources Ltd (now DLH) 169,089
Acquisition of remaining 50% of Deutsche Lithium GmbH
Carrying value of investment in Deutsche Lithium GmbH at 24 June 2021 4,534,972
Shares issued to acquire the remaining 50% 7,281,062
Cash paid to acquire the remaining 50% 1,500,000
Fair Value adjustment on revaluation 1,038,252
Value of Investment 14,523,375
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
Release of obligation 333,100
Net Value of second acquisition 7,961,749 Value of second Acquisition 8,781,062
Carrying Value at 24 June 2021 4,534,972
Gain recognised on revaluation 1,038,252
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 payment of €1.5m 1,500,000
Issuance of 49,999,996 new ordinary shares 7,281,062
Total consideration 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 - re-allocated to Deutsche Lithium intangible exploration assets at 5,531,474
31 December 2021
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 Company
2022 2021 2022 2021
€ € € €
Financial instruments at amortised cost
Trade and other receivables 309,795 121,845 5,204,018 1,233,814
Cash and bank balances 3,164,585 8,291,991 2,748,145 7,998,680
3,474,380 8,413,836 7,952,163 9,232,494
Financial liabilities at amortised cost
Trade and other payables 583,660 614,859 75,780 270,430
583,660 614,859 75,780 270,430
20 Trade and other receivables
Group Company
2022 2021 2022 2021
Amounts falling due within one year: € € € €
Amounts owed by group undertakings - - 5,157,859 1,179,869
Other receivables 248,692 83,982 14,026 21,891
Prepayments and accrued income 61,103 37,863 32,133 32,054
309,795 121,845 5,204,018 1,233,814
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 Company
2022 2021 2022 2021
Euros 256,008 63,591 271,911 156,367
British Pounds 53,787 58,254 4,932,107 1,077,447
309,795 121,845 5,204,018 1,233,814
21 Trade and other payables
Group Company
2022 2021 2022 2021
Amounts falling due within one year: € € € €
Trade payables 321,277 313,391 10,468 66,498
Other taxation and social security 34,974 23,802 34,974 23,802
Other payables 13,082 13,509 - -
Accruals and deferred income 214,327 287,958 65,312 180,130
583,660 638,660 110,754 270,430
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 Company
2022 2021 2022 2021
Euros 459,637 330,443 -
British Pounds 124,023 308,217 270,430
583,660 638,660 270,430
22 Deferred taxation
The following are the major deferred tax liabilities and assets recognised by
the group and company, and movements thereon:
Group Liabilities Liabilities
2022 2021
€ €
Deutsche Lithium intangible assets - fair value adjustment 1,382,868 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.
23 Retirement benefit schemes
Defined contribution scheme 2022 2021
€ €
Charge to profit or loss in respect of defined contribution schemes 52,067 38,005
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.
24 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.
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 2022 Year ended 31 December 2021
Average exercise price in £ per share Number of Options Average exercise price in £ per share Number of Options
At beginning of year £0.0920 1,900,000 £0.094 3.350.000
Granted during the year £0.1810 4,000,000 - -
Lapsed during the year £0.0965 (1,700,000) £0.085 (300,000)
Exercised during the year - - - (1,150,000)
At end of year £0.1748 4,200,000 £0.092 1,900,000
Exercisable at the year end 1,533,333 1,900,000
Weighted average remaining exercise period, years 3.99 1.27
Option classification
Issue Date No of Options Exercise Price Expiry Date
29 October 2020 200,000 £0.05 28 October 2025
15 January 2022 4,000,000 £0.1810 15 January 2027
4,200,000 £0.1748
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.
Movements in the number of RSUs, under the RSU Plan (2020), outstanding and
their related weighted average exercise prices are as follows
Year ended 31 December 2022 Year ended 31 December 2021
Ave Exercise Price Options Ave Exercise Price Options
Beginning of Period - - - -
Granted n/a 1,909,531 - -
Lapsed - - - -
Exercised - - - -
At end of period n/a 1,909,531 - -
Weighted Ave remaining yrs 1.50 -
RSU Classification
Issue Date No of RSUs Vesting date
15 Jan-22 1,909,531 16 January 2024
The awards of 3,406,780 RSUs for the 2022 Performance Period will be issued in
March 2023 following publication of these accounts.
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.
The third awards of PSUs will be made in January 2026 relating to the third
performance period from 1 January 2023 to 31 December 2025.
25 Share based payment transactions
Group Company
2022 2021 2022 2021
€ € € €
Expenses recognised in the year
Options issued under the Share Option Plan (2017) 347,400 7,779 347,400 7,779
RSUs issued under the RSU Scheme (2020) 197,825 - 197,825 -
545,225 7,779 545,225 7,779
Awards made under the various share incentive schemes will be expensed over
the relevant vesting periods for each scheme.
26 Share Capital
Group and Company
2022 2021
Ordinary share capital € €
Issued and fully paid
293,395,464 ordinary shares of 1p each 3,316,249 3,316,249
3,316,249 3,316,249
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 Number Ordinary
Value
€ €
Ordinary shares of 1p each
At 1 January 2022 293,395,464 3,316,249
Issue of fully paid shares (cash subscription) - -
At 31 December 2022 293,395,464 3,316,249
27 Share Premium account
Group Company
2022 2021 2022 2021
€ € € €
At beginning of year 20,289,487 7,362,699 20,289,487 7,362,699
Issue of new shares - 13,114,010 - 13,114,010
Exercise of share options - 103,806 - 103,806
Share issue expenses - (291,028) - (291,028)
20,289,487 20,289,487 20,289,487 20,289,487
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.
28 Other reserves
Merger reserve Share based payment reserve Translation reserve Total
Group € € € €
At 1 January 2021 688,732 126,070 19 814,821
Additions - 7,779 181 7,960
At 31 December 2021 688,732 133,849 200 822,781
Additions - 545,225 (138) 545,087
At 31 December 2022 688,732 679,074 62 1,367,868
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.
Share based payment reserve Translation reserve Total
Company € € €
At 1 January 2021 126,070 19 126,089
Additions 7,779 181 7,960
At 31 December 2021 133,849 200 134,049
Additions 545,225 (138) 545,087
At 31 December 2022 679,074 62 679,136
29 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.
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. On 13 March 2023, the
Company announced an agreement to sell Erris Zinc Ltd, which owns the
Abbeytown Project to Ocean Partners Ltd. As part of this transaction, this
Royalty will be novated from DLH to Erris Zinc Ltd ahead of completion of the
sale.
The Osisko royalty does not apply to the Zinnwald Lithium project.
30 Retained earnings
Group Company
2022 2021 2022 2021
€ € € €
At the beginning of the year (1,822,503) (95,199) (251,044) 989,461
Loss for the year (2,352,215) (1,727,304) (1,666,477) (1,240,505)
At the end of the year (4,174,718) (1,822,503) (1,917,521) (251,044)
31 Events after the reporting date
On 30 January 2023, the Company announced the first drill hole results from
the planned 10 hole exploration dill hole campaign at Falkenhain. This first
drill hole was completed to a depth of 600m and the assay results showed
significant intercepts of thick high-grade lithium mineralisation including
80m at an average 2,879 ppm Li and 51m at an average 3,421 ppm Li.
On 6 February 2023, the Company appointed Tamesis Partners LLP as joint
corporate broker and they published the first independent research note on the
Company. Tamesis is a specialist ECM and advisory house with a focus on the
mining sector. Tamesis will support the Company with research coverage and
access to an incremental audience of institutional and strategic investors.
On 13 March 2023, the Company announced the terms of an acquisition agreement
with Ocean Partners Ltd for them to acquire Erris Zinc Ltd, the owner of the
Abbeytown Lead-Zinc license in Ireland. Ocean Partners shall acquire Erris
Zinc for €1 and commit to spend €130,000 over the next three years to the
end of 2025 on exploration work at Abbeytown. Zinnwald shall receive a 1%
Net Smelter Royalty and a €200,000 cash payment due six months after
commencement of commercial production from Abbeytown. Zinnwald shall have
the right to buy back Erris Zinc for €1 in March 2025, if the committed
exploration spend has not been made.
32 Related party transactions
Remuneration of key management personnel
The remuneration of key management personnel is as follows.
2022 2021
Remuneration Pension Share option charge Remuneration Pension Share option charge
€ € € € € €
Jeremy Martin 76,150 - 21,712 58,289 - 3,889
Anton du Plessis 295,229 29,959 135,222 375,454 26,128 -
Cherif Rifaat 175,732 17,832 62,603 116,578 11,877 -
Graham Brown 46,862 - 13,027 34,974 - 3,890
Peter Secker 46,862 - 13,027 - - -
640,835 47,791 245,593 585,295 38,005 7,779
Transactions with related parties
During the year the group entered into the following transactions with related
parties:
Consultancy and expenses
2022 2021
€ €
Group
Erris Gold Resources - 14,289
Aggregate consultancy and expenses include €nil (2020: €Nil) of costs
capitalised and included within non-current assets. There were no amounts
outstanding at the year end.
In 2021, 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.
There were no related party transactions in 2022.
33 Cash (used in)/generated from group operations
2022 2021
€ €
Loss for the year after tax (2,352,215) (1,727,304)
Adjustments for:
Investment income (191) (455)
Lease interest 5,254 -
Gain on disposal of equipment (4,288) -
Impairment of intangible assets in Ireland and Sweden - 1,583,566
Depreciation of property, plant and equipment 49,990 7,077
Depreciation of Right of Use Assets 93,405 -
Amortisation of intangible assets 995 829
Gain on remeasurement of initial interest in Joint Venture - (1,038,252)
Share of loss of Joint Venture - 52,911
Equity-settled share-based payment expense 545,225 7,779
Movements in working capital:
(Increase) / decrease in trade and other receivables (187,951) 79,969
(Decrease) / increase in trade and other payables (55,000) 538,706
Cash used in operations (1,904,776) (495,174)
34 Cash (used in)/generated from operations - company
2022 2021
€ €
Loss for the year after tax (1,666,477) (1,240,505)
Adjustments for:
Investment income (191) (455)
Group loan impairments - 1,298,726
Gain on remeasurement of initial interest in Joint Venture - (1,038,252)
Depreciation and impairment of property, plant and equipment 1,291 (1,039)
Share of loss of Joint Venture - 52,911
Equity-settled share-based payment expense 545,225 7,779
Movements in working capital:
Decrease in trade and other receivables 7,787 27,400
(Decrease)/increase in trade and other payables (159,675) 281,919
Cash used in operations (1,272,040) (609,438)
*ENDS*
For further information visit www.zinnwaldlithium.com or contact:
Anton du Plessis Zinnwald Lithium plc info@zinnwaldlithium.com
Cherif Rifaat
David Hart Allenby Capital +44 (0) 20 3328 5656
Dan Dearden-Williams (Nominated Adviser)
Michael Seabrook Oberon Capital Ltd +44 (0) 20 3179 5300
Adam Pollock (Joint Broker)
Richard Greenfield Tamesis Partner LLP +44 (0) 20 3882 2868
Charles Bendon (Joint Broker)
Isabel de Salis St Brides Partners zinnwald@stbridespartners.co.uk (mailto:zinnwald@stbridespartners.co.uk)
Paul Dulieu (Financial PR)
Notes
AIM quoted Zinnwald Lithium plc (EPIC: ZNWD.L) is focussed on becoming an
important supplier of lithium hydroxide to Europe's fast-growing battery
sector. The Company owns 100% of the Zinnwald Lithium Project in Germany,
which has an approved mining licence, is located in the heart of Europe's
chemical and automotive industries, and has the potential to be one of
Europe's more advanced battery grade lithium projects.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FLFVRVIIFFIVRecent news on Zinnwald Lithium
See all newsREG - Zinnwald Lithium PLC - Director/PDMR Shareholding
AnnouncementREG - Zinnwald Lithium PLC - Final Results
AnnouncementREG - Zinnwald Lithium PLC - Operational Update
AnnouncementREG - Zinnwald Lithium PLC - 445% Increase in Mineral Resource Estimate
AnnouncementREG - Zinnwald Lithium PLC - Total Voting Rights
Announcement