REG - Zinnwald Lithium PLC - Final Results
22/03/2024 07:00
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RNS Number : 8611H Zinnwald Lithium PLC 22 March 2024
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Zinnwald Lithium plc / EPIC: ZNWD.L / Market: AIM / Sector: Mining
22 March 2024
Zinnwald Lithium plc ('Zinnwald Lithium' or the 'Company')
Final Results
Rapidly advancing the EU's second largest hard rock lithium project
Zinnwald Lithium plc, the European focused lithium company developing the
integrated Zinnwald Lithium Project (the 'Project') in Germany, is pleased to
announce its final audited results for the year ended 31 December 2023.
The Company's Annual Report and Financial Statements for the year ended 31
December 2023 will be posted to shareholders today and will be available on
its website www.zinnwaldlithium.com.
HIGHLIGHTS
12 Months to 31 December 2023
· Fundraise of £18.75m completed in March 2023, including AMG Critical
Minerals N.V becoming a 25% shareholder.
· Completed 84 hole, 27,000m in-fill drilling programme.
· Commenced detailed mine design based on large dimension lithological
units.
· Completed mineral processing pilot tests in December 2023 confirming
good lithium ('Li') recoveries and main stream front end flowsheet design.
· Commenced basic engineering for the mineral processing flowsheet in
December 2023.
· Advanced regional exploration strategy with the granting of the
Bärenstein exploration licence, the acquisition of the drill core and
geological data from the previous holders of the Sadisdorf exploration
licence, the start of further exploration drilling at Falkenhain; and the
extension of the Altenberg licence to February 2027.
· Further strengthened the Owners' team in Germany with Marko Uhlig
appointed as Managing Director of Zinnwald Lithium GmbH, as well as several
key appointments across a number of functional areas including mining
engineering, mineral processing and permitting.
· Appointed Tamesis Partners LLP as joint corporate broker which
published its first independent research note on the Company.
· Completed sale of Erris Zinc Ltd to Ocean Partners.
· The closing cash balance for the Group at the period end was
€14.3m; as at today's date, the Group's cash balance is €12.3m.
Post period end to 21 March 2024
· Publication of updated Mineral Resource Estimate ('MRE') confirming a
445% increase in tonnes and a 243% increase in contained lithium.
· MRE and mineral processing testwork confirmed the feasibility of
including Albite Granites in production plans.
· Confirmed Zinnwaldite concentrate suitability for Metso's alkaline
process; no additives or high temperatures required to achieve Li-recovery to
solution clearly above 95%.
· Ongoing work to optimise the Project with Bankable Feasibility Study
('BFS') now expected in late 2024 dependent on availability of pilot testing
facilities.
CHAIRMAN'S STATEMENT
Demand for electric vehicles ('EVs') grew strongly in 2023 despite some
coverage in the press to the contrary. A closer look at the actual numbers
indicated that global plug-in vehicle sales reached 14.2 million vehicles, a
year-on-year increase of 35%. Plug in vehicles represented ~16% of global
light vehicle sales in 2023 against a backdrop of recovering demand for light
vehicles generally. Beyond EV growth as renewable energy technologies become
more widespread, lithium-ion batteries have become indispensable for storing
this clean energy. Consequently, ensuring a local and sustainable supply of
lithium within Europe has become a matter of strategic importance for energy
security and economic development.
Supporting new lithium mining operations within Europe presents a unique
opportunity for local communities to participate in the continent's energy
transition. By tapping into domestic lithium resources, Europe can reduce its
reliance on imports from countries with uncertain political landscapes and
questionable environmental standards to not only enhance the bloc's energy
security but also foster economic growth and job creation within local
communities.
Furthermore, promoting local lithium mining operations aligns with Europe's
commitment to environmental sustainability and social responsibility. Unlike
some lithium extraction processes in other parts of the world, European mining
operations are required to adhere to stringent social and environmental
standards and employ eco-friendly practices. With this in mind, by investing
in new mining technologies and adhering to strict environmental regulations,
we aim to minimise our ecological footprint and mitigate potential negative
impacts on local ecosystems and communities to become one of the most
sustainable integrated LiOH producers in the world.
Against this backdrop, we were delighted to announce, post period end in
February, a 445% increase in the mineral resource estimate ('MRE') at our core
license area, which is a brownfield site with some existing infrastructure
situated in the old mining region of Saxony, Germany (the 'Project'). This
expansion, which takes the total lithium content of the Project to 2.7Mt LCE,
solidifies its position as the second largest hard rock lithium project in the
EU both in terms of resource size and contained lithium content and
underscores its strategic significance within the region.
The incorporation of mineralised granite into the resource and subsequent mine
planning will enable us to implement more streamlined bulk underground mining
methods, which will boost productivity and profitability beyond the
projections outlined in the Preliminary Economic Assessment ('PEA') released
in 2022.
Notably, while the MRE covers the 2.6 km2 core mining license, our exploration
rights cover approximately 10 km2 in the area and we hope to identify
additional lithium resources which will extend the lifetime of the Project.
In terms of the lithium market, 2023 was an interesting year. By the end of
2022, lithium prices had reached nearly $80,000 per tonne as EV manufacturers
and original equipment manufacturers ('OEMs') scrambled to secure lithium
sources. This reversed in 2023, and now LiOH prices are hovering at around
$13,250 per tonne. In our view, and that of a number of other market
commentators, current prices are as unsustainable as the highs of 2022 and as
such our expectation is that they will revert to higher levels once inventory
across the industry come back in line with historic norms. In addition, our
November 2022 PEA suggested operating costs per tonne LiOH of US$6,200, which
underscores the viability of the Project even in a weak market.
Longer term, analysts suggest that the price of lithium will return to levels
around $25,000 to $35,000 per tonne; this is supported by robust demand
forecasts. In Europe in particular, demand is forecast to rise by over 300%
from 2023 to 2030. Notably, very little of this demand can be met by
domestic projects, even if the majority of them come on stream which is far
from certain. To address this imbalance, the EU should shortly pass into law
the Critical Raw Materials Act ('CRMA'), which provides for the possibility to
expedite permitting processes and deliver mechanisms to support financing for
projects designated as "Strategic". As our project meets all the criteria
for this status, we are hopeful that it will be classified as such.
The urgent need for strategic planning and investment in the European lithium
supply chain presents a promising opportunity for Zinnwald Lithium as we are
hopeful of commencing operations as the supply deficit becomes pronounced.
Our focus is therefore on delivering a bankable feasibility study, anticipated
in Q4 2024, and thereafter securing funding to build an integrated LiOH
project near the heart of Europe's chemical and automotive industries.
In summary, the importance of lithium in Europe cannot be overstated,
particularly in the context of the continent's transition towards clean energy
and sustainable development. We envisage our project playing a key role in
helping Europe reach its climate goals and look forward to updating the market
as we achieve key milestones during 2024.
Finally, I would like to thank our shareholders and stakeholders for their
ongoing support.
Jeremy Martin
Non-Executive Chairman
THE ZINNWALD LITHIUM PROJECT
The Zinnwald Lithium project is located in east Germany, some 35 km from
Dresden and adjacent to the border with the Czech Republic. The Project
concept is for a fully integrated underground mine and associated, on site,
mineral and chemical processing to produce a battery grade lithium hydroxide.
The Company's business model is predicated around utilising its inherent
advantages to enable it to become a sustainable project serving the European
lithium market. Europe does not currently have a domestic source of lithium
supply and there are relatively few projects within the EU. The EU will
shortly be passing the CRMA into law and the Company intends to apply for
designation as a "Strategic Project" under this legislation as soon as
applications start. The Company believes that it has a strong case to meet the
key criteria set out in the CRMA to qualify as a Strategic Project, namely:
· Meaningful contribution to EU Supply. Zinnwald's 2022 PEA already
identifies a 12,000 tpa production (equivalent to up to 800,000 EVs per annum)
and a greater than 35-year mine life. The updated MRE shows the Project
shows a significantly increased resource that is the second largest in the EU
and should support a materially higher annual production and an even longer
mine life.
· Technically feasible within reasonable timeframe. The Company has
demonstrated the feasibility of its flowsheet as part of the PEA and has been
able to produce multiple kgs of battery grade Lithium hydroxide. Its
flowsheet is based on the integration of individual parts that are well
established in other industries. As part of its forthcoming BFS, the Company
is working with one of Europe's largest engineering and production companies,
Metso, to potentially integrate its technologies and processes into its own
flowsheet.
· Implemented sustainably. The Zinnwald Project is a brownfield
mining one in an area that has a tradition of mining stretching back 800
years. There is extensive infrastructure in the immediate area that could
both accelerate the time of construction, as well as offer an opportunity to
site some of the mineral processing works underground. The Project's
flowsheet is also designed to minimise waste products, as well as producing
co-products (Fertiliser, PCC) that are important to other local industries.
The Project will also be permitted under German / EU regulations, which are
probably the most stringent globally from an environmental point of view.
· Cross border benefits. The Company is already engaged with
consultants, designers and equipment suppliers in other parts of the EU. The
Project will likely source a number of its reagents from suppliers in other EU
countries, always taking into account optimal sourcing strategies. The end
product of Lithium Hydroxide could be used in various of the Gigafactories
proposed for nearby countries in the EU (e.g.: Poland, Czech) and thereafter
back to German and European OEMs, where the finished batteries would be
delivered.
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" takings its name from the nearby village. Several lithium
focused projects in Europe are focused on the exploitation of zinnwaldite ore.
The Project comprises five license areas:
The Zinnwald Mining License
The Zinnwald Mining License covers the core project area where a resource has
been defined. The license covers 256.5 ha and is valid to 31 December 2047.
In February 2024, we announced an updated Mineral Resource Estimate at this
license area that showed a 445% increase over the previous MRE issued in May
2018, as follows:
· Measured resource containing 11.3 Mt at a grade of 3,420 ppm Li and
an Indicated resource containing 182.2 Mt at a grade of 2,140 ppm This
represents approximately 2.3 million tonnes of lithium carbonate equivalent
('LCE') or 429,000 tonnes of contained Lithium.
· Estimated Inferred Mineral Resources of 33.3 Mt at a grade of 2,140
ppm containing 71,000 t Li metal (approximately 379,000 tonnes LCE).
This updated MRE establishes the Project as the second largest resource in the
EU and the third largest in Europe as a whole. The chart below puts the
Project in context of the other European hard rock lithium projects.
Falkenhain, Altenberg, Sadisdorf and Bärenstein exploration licence areas
· Falkenhain - the licence covers an area of 2,957,000 m² and, in
2022, the licence was extended for a further three years to 31 December
2025. The Company has commenced a 10 drill-hole exploration programme at
this licence area.
· Altenberg - the licence covers an area of 42,252,700 m² and in
October 2023 the term of the licence was extended.to February 2027. The
Company is currently evaluating historical data, which will be used to define
new exploration targets in the area.
· Sadisdorf - the licence 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 Mt with an average grade of 0.45% Li2O
(average 2,053 ppm lithium head grade). The Company acquired the core and
geological data prepared by the previous owners during 2023 and is reviewing
and evaluating this data to determine further exploration steps.
· Barenstein - this licence covers an area of 4,934 hectares and was
awarded in July 2023. As shown in the map below, the Bärenstein licence
closes the gap between the Falkenhain and Altenberg licences. This greenfield
licence holds significant mineral potential and was historically mined for tin
and silver between the 15th and 19th centuries. The Bärenstein licence area
includes land that is being evaluated for the future mining and processing
operations of the Project.
Project Plans and Timeline
The Group's strategy is to focus on advancing a large scale fully integrated
operation that produces battery-grade lithium products; to optimise the
Project from a cost perspective; and 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 are planned to 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 strategy, the Group has taken a number of steps in the
further definition, design and study work required, which culminated in the
publication on 7th September 2022 of the "Preliminary Economic Assessment
("PEA") for the revised Zinnwald Lithium Project. The Company issued its
updated MRE in February 2024, as noted above. The Company is now working on
its Bankable Feasibility Study to further advance the Project towards
construction and operation and expects to issue this in late 2024.
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 an access tunnel to access the deposit from its base. This tunnel, a
portion of which is pre-existing infrastructure, will also be used for ore
transportation from the mine to the processing area. Ventilation and
emergency access will also be provided by the construction of a ventilation
decline and existing shafts. The estimated mine life covers >35 years of
production. The optimisation of bulk-mining methods has been a key
consideration to allow increased total mined tonnage. The cross-section shown
below indicates the drainage access tunnel, the access tunnel extension and
the ventilation decline as well as the historic tailings facility at IAA
Bielatal.
PEA Processing Flowsheet and Metallurgical Testwork
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 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 (summarised 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$1.0 billion and post-tax IRR
is 29.3% The Project has a mine life of over 35 years and the payback period
is less than four years post commencement of production. The full report is
published on the Company's website at
https://www.zinnwaldlithium.com/investors/reports-and-presentations/
PEA Key Indicators Unit Value
Pre-tax NPV (at 8 % discount) US$ 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
STRATEGIC REPORT
Extracts from the Company's Strategic Report are set out below.
Strategic Review
Company Overview - Background and evolution
The Group was originally established in 2012 as a mineral exploration and
development company and undertook 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 was the Zinnwald Lithium Project. Deutsche Lithium
GmbH has subsequently been renamed Zinnwald Lithium GmbH ('ZLG'). In June
2021, the Company completed the acquisition of the remaining 50% of ZLG 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
ZLG.
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 reverse
takeover. 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 financing decision.
Key work areas include:
· Expansion of the potential scale of the Project through resource
expansion (both at the core licence area and satellite exploration licences),
optimised mine planning, including the application of bulk mining techniques
and infrastructure and site planning;
· Further refine the Processing Flowsheet that supports the primary
production of battery grade lithium products including improvements in
recoveries, reduced waste generation and the production of valuable
by-products;
· Complete a Bankable Feasibility Study on the Project following on
from the 2022 PEA;
· 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;
· Advance the plant engineering towards AAC Class 3;
· Minimising the carbon footprint through project wide optimisation
(transport, material flow, flow sheet, site location);
· Finalisation of the selection of the optimal site locations;
· Negotiation with the holders (principally the German state) of
existing mining infrastructure in the vicinity of the Project that has the
potential to enhance the project economics;
· Advancing the permitting process for the construction and operation
of the mine; and
· Ensuring the social license to operate by extensive public
participation.
The Company recognises the importance of the general public and NGOs in the
permitting processes and has committed to proactively engage with all the
stakeholders in its projects.
Operational Review
Germany
During 2023 and into 2024, the Group has made significant progress on the
Project, including the publication of an updated MRE that showed a 445%
increase in tonnes of ore and a 243% increase in contained lithium. As part
of this progress, the Group completed the following matters during the year,
and after the year end, to underpin the Project continued development.
FUNDRAISE
On 29 March 2023, Zinnwald completed a £18.75m fundraise at a 26% premium to
its share price at close on 22 March 2023. This raise was cornerstoned by
AMG, existing significant shareholders, and new German institutional
investors. These funds have enabled the Group to accelerate its various
workstreams and will finance it beyond completion of the BFS. As part of the
investment from AMG, Zinnwald has welcomed Dr Stefan Scherer to the Board.
RESOURCE DEVELOPMENT
In fill and Resource Delineation Drill Programme
The successful fundraise completed at the end of March 2023 enabled the
Company to significantly accelerate its resource delineation drilling
activities. On 15 September 2023, the Company finished its drill programme at
its core Zinnwald Licence area, totalling 26,969m of diamond core drilling
across 84 drill holes. This campaign more than doubled the total number of
holes completed in the licence area, including the historic drill campaigns.
The Company was able to deploy up to six drill rigs simultaneously, which
allowed the completion of the programme within a tight timeframe. The
Company's purpose-built core facility allowed the processing of more than 400
metres of core per week with the achievement of greater than 95% core
recovery. The results of the infill drilling campaign increased the
Company's level of confidence in the geological model of the orebody and were
published in the updated MRE in February 2024 (see below).
Updated Mineral Resource Estimate
On 21 February 2024, the Company published its updated independent Mineral
Resource Estimate ('MRE') that showed a substantial increase in its Mineral
Resource at the Project with a 3.4x increase in contained lithium in the
Measured and Indicated categories. This establishes the Project as the second
largest hard rock lithium project by both resource size and contained lithium
in the EU and clearly highlights its scale and strategic importance.
The MRE incorporated 26,911 metres of new diamond core drilling across 84
drill holes and a reinterpreted and updated geological model since the
previous MRE which was released in September 2018. In addition to the
high-grade greisen mineralisation, focus of the recent 2022/2023 drilling was
the lithium mineralisation hosted by the broader zone of altered albite
granite, which includes internal lenses of higher-grade greisen. The inclusion
of the mineralised granite in the resource and ultimately the mine plan will
allow more efficient bulk underground mining techniques with the potential to
meaningfully increase the lithium production from what was contemplated in the
PEA published in 2022. Highlights of the MRE included:
· A 445 % increase in tonnes and a 243% increase in contained lithium
('Li') in the Measured and Indicated category versus the previous 2018 MRE;
· Total contained Li of 429kt compared with the 2018 MRE of 125kt in
the Measured and Indicated category.
· 11.3 Mt grading 3,420ppm Li (0.736% Li2O) in the Measured category;
· 193.5 Mt grading 2,220ppm Li (0.478% Li2O) in the Measured and
Indicated category;
· 33.3 Mt grading 2,140 ppm Li (0.461% Li2O) in the Inferred category;
· Increase in overall tonnage predominantly due to the incorporation of
a broad zone of mineralised granite, as well as contribution of an extra
26,911 metres of new drilling over 84 holes;
· Measured classification only applied to the external greisen domains
due to a higher metallurgical confidence; Snowden Optiro recommends further
metallurgical variability testwork in the broad mineralisation zone domain to
further increase confidence;
· Demonstrated dimensions of the mineralised zone (true thickness c. 80
metres) and continuity of ore supports highly efficient mining methods with
minimal waste rock production; and
· Mineral Resources reported using a 1,100ppm Li cutoff grade and a
stope optimisation to constrain an RPEEE Resource.
The MRE (detailed below) was prepared in accordance with National Instrument
43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities
Administrators ("NI 43-101") by independent consulting firm Snowden Optiro Ltd
("Datamine International") of Bristol, United Kingdom.
Table 0.1, Mineral Resource Statement for Zinnwald Lithium Project,
effective 20th February 2024.
Classification Domain Tonnes Mean Grade Contained Metal
(Mt) Li (ppm) Li2O (%) Li (kt) LCE (kt)
Measured External Greisen (1) 11.3 3,420 0.736 39 206
Mineralised Zone (2) - - - - -
Internal Greisen - - - - -
Mineralised Granite - - - - -
SubTotal (1) and (2) 11.3 3,420 0.736 39 206
Indicated External Greisen (1) 2.1 3,510 0.756 7 40
Mineralised Zone (2) 180.0 2,120 0.456 383 2,037
Internal Greisen 14.6 3,320 0.715 49 259
Mineralised Granite 165.4 2,020 0.435 334 1,778
SubTotal (1) and (2) 182.2 2,140 0.461 390 2,077
Measured + Indicated SubTotal 193.5 2,220 0.478 429 2,283
Inferred External Greisen (1) 0.8 3,510 0.756 3 15
Mineralised Zone (2) 32.5 2,110 0.454 68 364
Internal Greisen 0.6 2,880 0.620 2 9
Mineralised Granite 31.9 2,090 0.450 67 355
SubTotal (1) and (2) 33.3 2,140 0.461 71 379
Mine Planning Activities
As the drilling programme, geological modelling, geotechnical investigations
and minerals processing testwork progressed, strategic mine planning was
started by the Company and SRK. This work is ongoing with the laterally and
vertically extensive Albite Granite domain that now forms part of the
Project's MRE included in the mine plan.
It is envisaged that the revised mine design will incorporate the strategy of
higher productivity mining methods, as well as operating the mine using a
fully electrified trackless equipment fleet. This current work focuses on
the understanding of key drivers of costs and efficiency across the entire
production operation, taking all technical aspects of the Project into
consideration. Detailed understanding of geotechnical aspects at Zinnwald as
well as downstream process efficiencies and cost assumptions are crucial to
adequately determine future metrics defining the Cut-off-Grade ('COG') and
optimal production capacity scenarios.
Large scale sub-level stoping with subsequent backfill has been determined to
be the optimal mining method. Sub-level stoping offers higher capacity, lower
operating expenditure and easier backfill process than room and pillar-method
assumed in the earlier studies. The large dimensions of both the High Grade
External Greisen domain as well as the Albite Granite domain, now confirmed
with the new MRE, will allow substantially higher lithium grade than the
life-of-mine average during the early production years.
PROCESS DEVELOPMENT / TESTWORK / ENGINEERING
During 2023, working with several partners including Metso and UVR FIA in
Freiberg, the Company has continued its various mineral processing,
calcination and hydrometallurgical testwork programmes. The initial results
from the pilot and bench scale testwork are encouraging as further described
below and will assist in delivering additional engineering parameters that
will feed into downstream engineering design. The processing testwork has
utilised representative samples generated from core from the Company's 84-hole
drilling campaign including both ore types, the High Grade Greisen ('HGG') and
Albite Granite ('AG').
Mineral Processing
Pilot scale mineral processing testwork was completed in December 2023 at the
GTK pilot facilities in Finland, by GTK and Metso experts. The primary goal of
this work was to confirm previous testwork results on a representative sample
that now also includes the lithium bearing Albite. The results of these
tests confirmed the conclusions of the bench scale tests performed in the
summer of 2023 that mineral processing of run-of-mine ore is achievable using
a mainstream front-end flowsheet consisting of a comminution circuit and a
rougher-scavenger wet magnetic separation circuit.
Metso was supplied with a representative two-ton bulk sample to model the
initial 15 years of mine life incorporating a mix of both HGG and AG. The
main findings were:
· A main stream mineral processing flow sheet can be applied;
· A simulated Run of Mine sample Li-recovery is c.80 % with a mass pull
of c.18%;
· The same mineral processing flow sheet is suitable for both of the
ore types; and
· Both of the ore types can be processed individually or at any mix
without compromising the recoveries.
The mineral processing flowsheet was designed by Metso, with basic engineering
initiated in December 2023. The equipment selection was completed in February
2024.
Pyro- and Hydrometallurgy
To ensure the suitability of Zinnwaldite for Metso's proprietary alkaline
leaching, a sample of Zinnwaldite concentrate generated in the mineral
processing pilot testwork was calcined and subsequently leached at bench scale
at Metso's facilities in Pori, Finland. The encouraging main findings are:
· No additives needed in calcination;
· Significantly less waste material produced;
· Temperature clearly below 1000°C; and
· Li recovery to solution clearly above 95%.
The alkaline processing route has the potential to offer significant
advantages in terms of overall recovery, efficiency and reduced impact on the
environment.
The Company is now moving on to the calcination pilot testwork at IBU-tec's
facility in Weimar, Germany, under Metso's supervision, to confirm the
parameters of the calcination flowsheet.
A representative sample of Zinnwaldite concentrate has also been provided to
K-Utec for tests to confirm that the large-scale tests previously performed by
K-Utec based on HGG concentrate are applicable to the material derived from a
combination of both pre types.
Hydrogeology
In February 2024, the Company completed its hydrogeological drill programme
that comprised eight groundwater ('GW') monitoring wells and was started in
September 2023. These included six deep wells extending to reach the
mineralised Albite Granite, and two shallow drill wells intended to penetrate
the Rhyolite rock of the hanging wall. All of these wells will be converted
to long term ground water monitoring wells to collate data on an ongoing
basis. This represents an essential piece of work for both technical and
planning as well as environmental impact assessment ('EIA') permitting
requirements.
The results of this programme will support the production of a hydrogeological
underground and surface model. This model will include information received
from Geomet in regard to data on the Czech side of the border to support the
development of a combined cross-border hydrogeological model. This represents
an essential piece of work for both technical and planning as well as
environmental impact assessment ('EIA') permitting requirements. The Company
is supported by a group of consultants in this effort, including SRK,
Geologische Landesuntersuchung Freiberg GmbH ('GLU'), Fugro and ERM.
OTHER OPERATIONAL MATTERS
Infrastructure
In 2023, the Company continued its work on defining the optimal solutions for
the required infrastructure based on the potential for higher production
levels supported by the results of the drilling campaign and the metallurgical
testwork carried out. The Company appointed Fichtner GmbH, a major German
consulting group with experience concerning materials handling, road, and rail
infrastructure as well as all civil works. The Group will, using trade-off
studies, evaluate the most suitable, economical, and environmentally friendly
options for all surface facilities.
The Company also undertook the digitisation of historic mine plans of the
Zinnerz mine in Altenberg, in collaboration with the owner of the historic
Zinnerz Altenberg mine, the LMBV. The digital plans now cover more than three
production and mine infrastructure levels of the historic mine and are vital
in the process of developing detailed construction plans and mine designs that
will also include utilisation of the existing historic mine infrastructure in
Altenberg. This would result in significantly reduced disruption to local
residents by hauling the ore underground on the 500m RL elevation towards the
processing site, northeast of Altenberg.
The Company has also continued with its evaluations for tailings management,
supported by Knight Piesold (UK), which specialise in tailings management and
engineering. The Company is strongly committed to progress planning for a Dry
Stack Facility ('DSF'), for which multiple design and site options are being
evaluated.
Exploration Licenses
Whilst the primary focus is on the development of its core Zinnwald Licence,
the Company continues to advance targets on its other 100% owned prospective
exploration licence areas including Falkenhain, Altenberg, Bärenstein and
Sadisdorf that surround the Zinnwald licence (See Project overview above for
more detail). The Altenberg exploration licence was renewed in November 2023
for a further three years to February 2027. The Company now has licences over
almost 10,000 hectares in an area that has been one of the mainstays of German
mining for almost 800 years. The Company believes that these licence areas
have the potential for additional satellite resources to support the
longer-term expansion of the Zinnwald Project as a whole and potentially
provide an additional production opportunity to further expand one of Europe's
largest lithium opportunities.
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 2023, adding skills
in several key disciplines including geology, mining and logistics. The
Company appointed Marko Uhlig as Joint Managing Director of Zinnwald Lithium
GmbH. Marko is a seasoned professional manager with a wealth of commercial
experience gained over a career of more than 30 years. He has worked in
Germany as well as internationally for companies including ThyssenKrupp AG and
SKW Metallurgie AG and is a graduate of Freiberg University. The local
Project team now comprises 15 full time staff of which five are female. The
Company also employs six full time consultants with expertise across all the
areas of the Project's flowsheet and development plan. In total the Group
has twenty two full-time professionals (including employees and full time
consultants) working across disciplines in both the Freiberg and London office
locations. In addition to the professionals working directly for the Company,
more than 30 professionals work for the Project in partner organisations.
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 2023
Developments in EU
In December 2023, the EU Parliament formally adopted the proposed regulation
for the Critical Raw Materials Act ('CRMA') and the European Council is
expected to approve it by the end of March 2024 with the regulation coming
into force in April 2024. The CRMA proposes benchmarks of 10% of the EU's
annual consumption of lithium for extraction and 50% for processing; proposals
to simplify permitting procedures; and a plan to identify selected strategic
projects to benefit from EU financial support. The CRMA also sets time frames
for strategic projects to secure permits - a maximum 15 months for processing
and recycling projects and 27 months for mining. EU countries will be required
to designate single points of contact to process permit applications, with
strategic projects given priority status. They will also have to develop
national programmes for exploring geological resources.
Once the CRMA passes into law, the EU Commission has said it will invite
applications to be designated as a formal "strategic" project. The Company
intends to apply for this designation as soon as applications start and
believes that it has a strong case to meet these key criteria, as outlined in
the Project Overview above.
In the last few months alone, there have been a number of potential long-term
announcements from EU and German bodies in regard to both grant and long-term
equity partners. In October 2023, the German Government published a new
funding guideline to promote investment in the development and expansion of
production capacity along the entire battery value chain. In November 2023,
the EU announced the 4th cash call for €4 billion under the EU Innovation
Fund that expects to issue grants of up to €40 billion over 2021-2030. In
January 2024, EIT InnoEnergy launched a €500m European battery raw materials
equity investment fund. In February 2024, the German government earmarked
€1bn for equity investment in critical raw materials projects to be
administered by the KFW development bank. The Company has already started
engagement with various of these bodies and will continue to do so, as the
Project moves towards its Financing Investment Decision ("FID").
General Lithium Market in 2023 and BFS Pricing
2023 saw a severe retrace of the widely quoted spot price for lithium products
into China from the highs of $80,000 per tonne in 2022 to around $15,000 per
tonne in early 2024. The lithium market has grown very rapidly from being a
relatively small niche market from a global perspective. Partly as a
consequence of this, the pricing of lithium has historically been quite
volatile if looked at over a purely short-term basis. The price tends to
overshoot in the short term on both the high and low side, as shown in the
swings from 2022 to 2023. However, pricing remains materially higher than the
prices seen in the previous cyclical low of 2018-19.
While the marked prices swings have principally been observed in the spot
market, which is a relatively small part of the overall lithium market, this
more than 80% decline appears also to have occurred in the contract market.
This is borne out by the reported results for 2023 for two of the largest
companies in the industry, SQM and Albermarle. In 2023, SQM's average
quarterly price declined from $59,000 in Q4 2022 to $16,000 in Q4 2023.
Albermarle reported similar declines but described current prices last week as
'unsustainable' and expects through-cycle prices must be between $20k-30k/t
LCE to incentivise necessary supply, with $20k/t the minimum price to support
over 100 projects. Albermarle forecasts lithium market demand to see 2.5
times growth over 2024-2030 from circa 1mt in 2023 to 3.3mt by 2030. It
expects this to be driven by an increase in global average EV battery size of
50Kwh in 2023 to 68 Kwh by 2030 and EV production rising from 14.9m EVs in
2023 to 46.8m by 2030 (a 50% penetration rate).
It is important to note that the Company deliberately took a conservative long
term price assumption of $22,500/t in its PEA in 2022 to ensure the robustness
of its financial forecasts. This can be shown in comparison to other
projects that have issued Studies since Zinnwald's PEA was published with
their assumed pricing noted below:
The financial analysis included in the 2022 PEA indicated that the Project
could be relatively robust financially even at a reduced lithium price.
There are large parts of the current supply chain, most notably Chinese
lepidolite production, that is materially higher cost than the Project is
estimated to be. The Company will commission a market study to justify
pricing assumptions to be used in the BFS nearer to the time of publication.
Ireland
In order to focus its efforts on the Project, in March 2023, Zinnwald reached
an agreement with Ocean Partners UK Ltd for it to acquire Erris Zinc Ltd, the
Company's subsidiary that owns the Abbeytown Zinc License in Ireland
('Abbeytown'). On 24 June 2023, the Irish GeoSciences Department approved
the transaction, and the sale was completed. Zinnwald shall receive a 1% Net
Smelter Royalty and a €200,000 cash payment due six months after
commencement of commercial production from Abbeytown. As agreed in the Sale
and Purchase Agreement, the Company also has the right to buy Erris Zinc Ltd
back for €1 if the additional exploration spend of €100,000 over 2024 to
2025 is not made by March 2025.
Shareholder Evolution in 2023
During 2023, the Company's share price has broadly tracked its peers in the
wider lithium space, all of whom have been negatively impacted by the 80%
decline in the lithium price. The one major evolution in 2023 is that the
Company has undertaken a formal review of its underlying beneficial
shareholder base that shows an ever-increasing ownership by German and EU
investors. Based on the latest share register, the Company now shows UK
holders at 46%, large German institutional and corporate investors at 31%,
other German and EU investors at 13% and Rest of the World at 10%.
Outlook
The Company's strategy is centred on developing a project that is not only
significant in scale but also economically attractive and founded on a robust
technical and sustainable framework. Current and ongoing workstreams are
pivotal to this strategy, with significant progress already achieved and
several key milestones on the horizon. These include ongoing metallurgical
testwork, continuous advancement of hydrogeological drilling campaigns, and
detailed mining planning. Concurrently, the team is engaged in permitting and
commercial activities.
The scale of the increase in the Company's MRE together with the encouraging
initial testwork results related to the Metso alkaline leaching process are
being evaluated in detail. Taken together, they have the potential to
materially increase the possible scale of the Project as well as reduce its
impact in terms of the volumes of waste material produced. Working through the
implications of these to optimise the Project will have an impact on the
expected timing of the BFS, which is now expected to be published in late
2024. An external factor beyond the Company's control that could affect this
timing is the availability of pilot testing facilities. However, the Company
is working closely with its technology partners to minimise the potential for
this.
The Company remains well financed with a current cash position of €12.3m and
the Board looks forward to updating the market on progress on all fronts as
its various workstreams continue.
Financial Review
Notwithstanding that the Company is a UK Plc admitted to trading on AIM, the
Company presents its accounts in its functional currency of Euros, since the
majority of its expenditure, including that of its subsidiary Zinnwald
Lithium, is denominated in this currency.
The Group is still at an exploration and development stage and not yet
producing minerals, which would generate commercial income. The Group is not
expected to report overall profits until it is able to profitably
commercialise its Zinnwald Lithium project in Germany.
During the year, the Group made an operating loss of €2.9m compared with a
loss of €2.4m in 2022. In 2023, administrative expenses increased to
€2.6m compared with €1.9m in 2022, which reflects the material increase in
staffing levels as the Project has increased its workstreams. It also includes
the costs related to being a public listed company, including the costs of
non-executive directors, brokers, nominated adviser and other advisers. There
was also a share-based payment expense of €0.5m in both 2023 and 2022,
arising from the issuance of new Options and RSUs in each period. These
increases were partially offset by increased rental income of €0.2m from the
sub-leasing of space at its offices and core shed in Freiberg.
During the year, the Group made an overall loss before taxation of €2.6m
compared with a loss of €2.4m for the year ended 31 December 2022. This
included interest income of €0.3m on the Group's cash balances.
The Total Net Assets of the Group increased to €39.8m as at 31 December 2023
from €20.8m at 31 December 2022 primarily due to the March 2023 fund raise
of £18.75m, which was used to finance significant expenditure on areas such
as drilling, staff/consultant costs, permitting and testwork. This increased
the Group's Intangible asset balance to €27.7m at year end from 19.0m at the
end of 2022 and cash balances increased to €14.3m from €3.2m at the end of
2022.
The closing cash balance for the Group at the period end was €14.3m. As at
today's date, the Group's cash balance is €12.3m.
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
31 December 2023 31 December 2022
Notes € €
Continuing operations
Administrative expenses (2,560,466) (1,850,129)
Other operating income 7 183,143 42,948
Share based payments charge 23 (528,626) (545,225)
Operating Loss (2,905,949) (2,352,406)
Finance income 9 282,229 190
Loss before taxation (2,623,720) (2,352,216)
Tax 10 (18,785) -
Loss for the financial year 27 (2,642,505) (2,352,216)
Other Comprehensive Income 38 (138)
Total comprehensive loss for the year (2,642,467) (2,352,354)
Earnings per share from continuing operations attributable to the owners of 11
the parent company
Basic (cents per share) (0.61) (0.80)
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 2023
31 December 2023 31 December 2022
Notes € €
Non-current assets
Intangible Assets 12 27,652,152 18,966,165
Property, plant and equipment 13 386,788 327,528
Right of Use Assets 14 - 185,285
28,038,940 19,478,978
Current assets
Trade and other receivables 18 357,463 309,795
Right of Use Assets < 1 year 14 46,131 -
Cash and cash equivalents 14,306,191 3,164,585
14,709,785 3,474,380
Total Assets 42,748,725 22,953,358
Current liabilities
Trade and other payables 19 (1,469,564) (583,661)
Lease Liabilities 14 (47,795) (140,149)
(1,517,359) (723,810)
Net current assets 13,192,426 2,750,570
Non-current Liabilities
Deferred tax liability 20 (1,382,868) (1,382,868)
Lease Liabilities > 1 Year 14 - (47,795)
(1,382,868) (1,430,663)
Total Liabilities (2,900,227) (2,154,473)
Net Assets 39,848,498 20,798,885
Equity
Share capital 24 5,365,379 3,316,248
Share premium 25 39,403,810 20,289,487
Other reserves 26 1,896,531 1,367,867
Retained losses 27 (6,817,222) (4,174,717)
Total equity 39,848,498 20,798,885
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
Notes Share Capital Share premium account Other reserves Retained earnings Total
€ € € € €
Balance at 1 January 2022 3,316,248 20,289,487 822,780 (1,822,501) 22,606,014
Year ended 31 December 2022
Loss for the year - - - (2,352,216) (2,352,216)
Other comprehensive income:
Currency translation differences - - (138) - (138)
Total comprehensive loss for the year - - (138) (2,352,216) (2,352,354)
Issue of share capital 24 - - - - -
Share issue costs - - - - -
Credit to equity for equity settled share-based payments 23 - - 545,225 - 545,225
Total transactions with owners recognised directly in equity - - 545,225 - 545,225
Balance at 31 December 2022 and 1 January 2023 3,316,248 20,289,487 1,367,867 (4,174,717) 20,798,885
Year ended 31 December 2023
Loss for the year - - - (2,642,505) (2,642,505)
Other comprehensive income
Currency translation differences - - 38 - 38
Total comprehensive income for the year - - 38 (2,642,505) (2,642,467)
Issue of share capital 24 2,049,131 19,282,326 - - 21,331,457
Share issue costs - (168,003) - - (168,003)
Credit to equity for equity settled share-based payments 23 - - 528,626 - 528,626
Total transactions with owners recognised directly in equity 2,049,131 19,114,323 528,626 - 21,692,080
Balance at 31 December 2023 5,365,379 39,403,810 1,896,531 (6,817,222) 39,848,498
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
Year ended 31 December 2023 Year ended 31 December 2022
Notes € € € €
Cash flows from operating activities
Cash used in operations 31 (1,359,464) (1,904,775)
Net cash outflow from operating activities (1,359,464) (1,904,775)
Cash flows from investing activities
Exploration expenditure in Germany 12 (8,687,649) (2,802,075)
Purchase of property, plant and equipment 13 (112,964) (351,217)
Proceeds on disposal of equipment - 26,471
Interest received 282,229 190
Net cash used in investing activities (8,518,384) (3,126,631)
Cash flows from financing activities
Proceeds from the issue of shares 21,331,457 -
Share issue costs (168,003) -
Lease payments (144,000) (96,000)
Net cash generated from financing activities 21,019,454 (96,000)
Net increase / (decrease) in cash and cash equivalents 11,141,606 (5,127,406)
Cash and cash equivalents at beginning of year 3,164,585 8,291,991
Cash and cash equivalents at end of year 14,306,191 3,164,585
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
1. Accounting Policies
Company Information
Zinnwald Lithium Plc (the "Company") is a public limited company which is
listed on the AIM Market of the London Stock Exchange domiciled and
incorporated in England and Wales. The registered office address is 29-31
Castle Street, High Wycombe, Buckinghamshire, United Kingdom, HP13 6RU.
The group consists of Zinnwald Lithium Plc and its wholly owned subsidiaries
as follows as at 31 December 2023:
Name of undertaking Registered office Nature of business Class of shares held Direct holding Indirect holding
Zinnwald Lithium Holdings Ltd United Kingdom Exploration Ordinary 100.0% -
Zinnwald Lithium GmbH Germany Exploration Ordinary - 100.0%
Zinnwald Lithium Services GmbH Germany Leasing Ordinary - 100.0%
On 1 December 2017, Zinnwald Lithium Plc acquired the entire issued share
capital of Zinnwald Lithium Holdings Ltd ("ZLH", formerly known as Erris
Resources (Exploration) Ltd) by way of a share for share exchange. This
transaction was treated as a group reconstruction and accounted for using the
reverse merger accounting method. Its registered office address is 29-31
Castle Street, High Wycombe, Bucks, HP13 6RU.
On 29 October 2020, Zinnwald Lithium Plc acquired 50% of the issued share
capital of Zinnwald Lithium GmbH ("ZLG", formerly known as Deutsche Lithium
GmbH). On 24 June 2021, the Company acquired the remaining 50% of the issued
share capital of ZLG. ZLG is a company registered in Germany. Its
registered office is at Am Junger-Lowe-Schacht 10, 09599, Freiberg, Germany.
On 22 February 2023, ZLH incorporated a new company, Zinnwald Lithium Services
GmbH ("ZLS") for the purpose of holding all rental and similar operational
leases for the Group's operations in Germany. ZLG is a company registered in
Germany. Its registered office is at Am Junger-Lowe-Schacht 10, 09599,
Freiberg, Germany
On 13 June 2023, Zinnwald Lithium Plc disposed of the entire issued share
capital of Erris Zinc Limited, which it had owned since incorporation in
2018. All intangible assets relating to the Abbeytown project and all
intercompany loans to Erris Zinc had been fully impaired and written off in
prior periods. The disposal proceeds was €1 for the share capital and a
€3,672 loss on disposal in the period.
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 ZLG and ZLS, 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 2023 was
€1.153509.
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.
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).
All financial statements are made up to 31 December 2023. 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.
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 €14.3m at the year end and keeps a tight control over all
expenditure. The group is fully financed through to at least the completion of
its Bankable Feasibility Study ("BFS") later in 2024 and thereafter into 2025.
The Board maintains an ongoing 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. Thus, the going concern basis of accounting
in preparing the Financial Statements continues to be adopted.
Intangible assets
Capitalised Exploration and Evaluation costs
Exploration and evaluation assets are capitalised as Intangible Assets and
represent the costs incurred on the exploration and evaluation of potential
mineral resources, They include direct costs (such as permitting costs,
drilling, assays and flowsheet testwork done by consulting engineers), licence
payments and fixed salary/consultant costs, capitalised in accordance with
IFRS 6 "Exploration for and Evaluation of Mineral Resources". Exploration
and Evaluation assets are initially measured at historic 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.
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.
Non-current investments
In the parent company financial statements, investments in subsidiaries are
initially measured at cost and subsequently measured at cost less any
accumulated impairment losses.
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.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with
banks.
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.
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.
Equity instruments
Equity instruments issued by the group are recorded at the proceeds received,
net of direct issue costs.
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.
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an
expense as they fall due.
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 in 2017 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.
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.
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.
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.
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').
New standards, amendments and interpretations not yet adopted
There were no new standards or amendments to standards adopted by the group
and company during the year which had a material impact on the financial
statements.
At the date of approval of these financial statements, the following standards
and amendments were in issue but not yet effective, and have not been early
adopted:
· Amendments to IAS 1: Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current (Effective date 1
January 2024)
· Amendments to IAS 1: Classification of Liabilities as Current or
Non-current - Deferral of Effective Date (Effective date 1 January 2024)
· Amendments to IFRS 16 Leases: Lease Liability in a Sale and
Leaseback (Effective date 1 January 2024). The Group does not have any sale
and leaseback agreements.
· Amendments to IAS 1 Presentation of Financial Statements:
Non-current Liabilities with Covenants (Effective date 1 January 2024). The
Group has no non-current liabilities with covenants.
· Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial
Instruments: Disclosures: Supplier Finance Arrangements (Effective date 1
January 2024). The Group has no supplier finance arrangements.
· Amendments to IAS 21 The Effects of Changes in Foreign Exchange
Rate: Lack of Exchangeability (Effective date TBC)*
*subject to UK endorsement
There are no other IFRSs or IFRIC interpretations that are not yet effective
that would be expected to have a material impact on the group or company.
2. Judgements and key sources of estimation uncertainty
In the application of the accounting policies, the directors are required to
make judgements, estimates and assumptions about the carrying amount of assets
and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised where the revision affects only that period, or in the
period of the revision and future periods where the revision affects both
current and future periods.
Critical judgements
The following judgements and estimates have had the most significant effect on
amounts recognised in the financial statements.
Share-based payments
Estimating fair value for share based payment transactions requires
determination of the most appropriate valuation model, which depends on the
terms and conditions of the grant. This estimate also requires determination
of the most appropriate inputs to the valuation model including the expected
life of the share option or appreciation right, volatility and dividend yield
and making assumptions about them. For the measurement of the fair value of
equity settled transactions with employees at the grant date, the group and
company use the Black Scholes model.
Impairment of Capitalised Exploration Costs
Group capitalised exploration costs had a carrying value as at 31 December
2023 of €27,652,152 (2022: €18,966,165), 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 equity investors or other sources of long
term funding. 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 is unlikely, a decision will be made to discontinue
exploration.
In Germany, ZLGs core mining license at Zinnwald is valid to 31 December 2047,
which underpins the PEA published in September 2022. In November 2023, the
group published an updated Mineral Resource Estimate that showed a materially
increased resource that underpins both the size of the Project and its long
mine life. ZLG has additional exploration licenses at Falkenhain valid to 31
December 2025, at Altenberg to 15 February 2027, at Sadisdorf to 30 June 2026
and at Bärenstein, newly granted in 2023 and valid to 30 June 2028. The
2022 PEA showed a material increase in size and output of the Project and
underpinned a pre-tax NPV of $1.6 billion and a post-tax NPV of $1.0 billion
and post-tax IRR of 29%. Accordingly, the Board has concluded that no
impairment charge is required for these assets.
On 13 June 2023, the group sold Erris Zinc Ltd 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. The Company had fully impaired the carrying
value of these Ireland assets in its 2021 accounts and accordingly no further
impairments are required. The group consolidated the results of Erris Zinc
up to the date of disposal, although the expensed amounts are not material to
the group results.
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 to
convert £13m of the £18.75m cash raised in March 2023 into Euros to match
its planned spend for 2023 and into 2024.
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 in the UK and Germany. Activities in the UK include the
Head Office corporate and administrative costs whilst the activities in
Germany relate to ongoing development work at the group's wholly owned
Zinnwald Lithium Project. The reports used by the Board and Management are
based on these geographical segments. Non-core Assets related to the
historic Abbeytown Zinc Project, which was sold in April 2023.
Non-core Assets Germany UK Total
2023 2023 2023 2023
€ € € €
Administrative expenses (8,837) (872,958) (1,717,060) (2,598,855)
Share based payment charge - - (528,626) (528,626)
Project impairment - - - -
Gain/loss on foreign exchange - - 42,240 42,240
Other operating income - 183,143 - 183,143
Finance income - - 282,229 282,229
Interest paid - (3,851) - (3,851)
Tax - (18,785) - (18,785)
Loss from operations per reportable segment (8,837) (715,451) (1,921,217) (2,642,505)
Reportable segment assets - 27,046,520 15,702,205 42,748,725
Reportable segment liabilities - 2,436,646 463,381 2,900,227
Non-core Assets Germany UK Total
2022 2022 2022 2022
€ € € €
Administrative expenses (6,308) (448,366) (1,364,522) (1,819,196)
Share based payment charge - - (545,225) (545,225)
Project impairment - - - -
Gain/loss on foreign exchange - - (25,679) (25,679)
Other operating income - 42,948 - 42,948
Finance income - - 190 190
Interest paid - (5,254) - (5,254)
Loss from operations per reportable segment (6,308) (410,672) (1,935,236) (2,352,216)
Reportable segment assets 8,837 19,225,340 3,719,181 22,953,358
Reportable segment liabilities - 1,855,795 298,678 2,154,473
5. Operating loss
2023 2022
€ €
Operating loss for the year is stated after charging / (crediting)
Exchange (gains)/losses (42,240) 25,679
Loss on disposal of subsidiary 3,672 -
Amortisation of intangible assets 1,662 995
Depreciation of property, plant and equipment 53,741 49,990
Depreciation of Right of Use Assets 139,154 93,405
Share-based payment expense 528.626 545,225
Operating lease charges 41,105 70,591
Exploration costs expensed 687,224 412,722
6. Auditor's remuneration
Fees payables to the company's auditor 2023 2022
€ €
For audit services
Annual Audit of group, parent company and subsidiary undertakings 41,979 36,523
Review of interim group financial statements 3,274
45,254 36,523
For other services
Taxation compliance services 5,354 4,527
7. Other operating income
2023 2022
€ €
Other operating income 183,143 42,948
Other operating income primarily comprises includes rental and utilities
income from sub-lessors at the Group's offices in Freiberg.
8. Employees
The average monthly number of persons (including directors) employed by the
group and company during the year was:
Group Company
2023 2022 2023 2022
Number Number Number Number
Directors 6 5 6 5
Employees 20 14 1 1
26 19 7 6
Their aggregate remuneration comprised Group Company
2023 2022 2023 2022
€ € € €
Wages and salaries 1,621,204 1,300,065 819,393 709,370
Social security costs 200,980 142,586 101,657 86,266
Pension costs 139,841 98,457 64,571 52,067
1,962,025 1,541,109 985,621 847,703
Aggregate remuneration expenses of the group include €942,695 (2022:
€628,051) of costs capitalised and included within non-current assets of the
group.
Aggregate remuneration expenses of the company include €63,543 (2022:
€68,535) of costs capitalised and included within non-current assets of the
group.
Directors' remuneration is disclosed in report of Remuneration Committee.
9. Finance income
Group
2023 2022
€ €
Interest income
Interest on bank deposits 282,229 190
10. Taxation
Group
Income Tax Expense 2023 2022
€ €
UK Corporation tax expense - current year - -
Overseas current tax expense - current year 18,785 -
Total current tax expense 18,785 -
€ €
Loss before taxation (2,642,505) (2,352,216)
(502,076) (446,921)
Expected tax credit based on the standard rate of corporation tax in the UK of
19.00% (2021: 19.00%)
Disallowable expenses 119,407 105,822
Non-taxable gains - -
Unutilised tax losses carried forward 394,237 341,099
Difference in overseas tax rate 7,216
Taxation (credit) / charge for the year 18,785 -
Losses available to carry forward amount to €7,539,000 (2022:
€5,525,000). No deferred tax asset has been recognised on these losses, as
the probability and timing of available future taxable profits is not
something that can currently be estimated.
Foreign tax liabilities are calculated at the prevailing tax rates applicable
in the overseas tax jurisdictions, being Germany.
11. Earnings per share
2023 2022
€ €
Weighted average number of ordinary shares for basic earnings per share 430,096,224 293,395,464
Effect of dilutive potential ordinary shares
- Weighted average number of outstanding share options 6,106,301 5,695,342
Weighted average number of ordinary shares for diluted earnings per share 436,202,525 299,090,806
Earnings
Continuing operations (2,642,505) (2,352,216)
Loss for the period for continuing operations
Earnings for basic and diluted earnings per share distributable to equity (2,642,505) (2,352,216)
shareholders of the company
Earnings per share for continuing operations
Basic and diluted earnings per share
Basic earnings per share - cents (0.61) (0.80)
There is no difference between the basic and diluted earnings per share for
the period ended 31 December 2023 or 2022 as the effect of the exercise of
options would be anti-dilutive.
12. Intangible Assets
Group Germany Ireland Total
€ € €
Cost
At 1 January 2022 16,165,915 2,059,272 18,225,187
Additions - group funded 2,802,075 - 2,802,075
At 31 December 2022 18,967,989 2,059,272 21,027,261
Additions - group funded 8,687,649 - 8,687,649
Disposals - (2,059,272) (2,059,272)
At 31 December 2023 27,655,638 - 27,655,638
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
Amortisation charged for the year 1,662 - 1,662
Disposals (2,059,272) (2,059,272)
At 31 December 2023 3,486 - 3,486
Carrying amount
At 31 December 2023 27,652,152 - 27,652,152
At 31 December 2022 18,966,165 - 18,966,165
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 fully impaired Ireland
Zinc Project that was sold in April 2023.
The Company has had no directly owned intangible assets since 2020.
13. Property plant and equipment
Group Leasehold, land and buildings Fixtures, fittings and equipment Motor vehicles Total
€ € € €
Cost
At 1 January 2023 40,990 277,196 66,593 384,779
Additions - group funded 30,000 82,964 - 112,964
Exchange adjustments - 103 - 103
At 31 December 2023 70,990 360,263 66,593 497,846
Depreciation and impairment
At 1 January 2023 - 39,638 17,614 57,252
Depreciation charged for the year - 40,555 13,286 53,741
Exchange adjustments - 65 - 65
At 31 December 2023 - 80,158 30,900 111,058
Carrying amount
At 31 December 2023 70,990 280,105 35,693 386,788
At 31 December 2022 40,990 237,559 48,979 327,528
Company Computers
€
Cost
At 1 January 2023 5,082
Additions - group funded 1,654
Exchange adjustments 103
At 31 December 2023 6,839
Depreciation and impairment
At 1 January 2023 2,515
Depreciation charged for the year 1,566
Exchange adjustments 65
At 31 December 2023 4,146
Carrying amount
At 31 December 2023 2,693
At 31 December 2022 2,568
14. Right of Use Assets and Lease Liabilities
In May 2022, Zinnwald 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 year are shown as follows:
€
Right of use asset
Initial Recognition on 1 May 2022 278,690
Depreciation charged in 2022 (93,405)
Balance as at 31 December 2022 185,285
Depreciation charged in 2023 (139,154)
Balance as at 31 December 2023 46,131
Lease Liability
Initial Recognition on 1 May 2022 266,690
Interest charged in 2022 5,254
Lease payments in 2022 (84,000)
Balance as at 31 December 2022 187,944
Interest charged in 2023 3,851
Lease payments in 2023 (144,000)
Balance as at 31 December 2023 47,795
- Recognised in Short Term Payables 47,795
- Recognised in Payables >1 year -
15. Investments
Company 2023 2022
€ €
Investments in subsidiaries 14,523,374 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 2023 14,523,375
Disposals (1)
At 31 December 2023 14,523,374
Carrying amount
At 31 December 2023 14,523,374
At 31 December 2022 14,523,375
The disposal in 2023 relates to the sale of the €1 share capital of Erris
Zinc Ltd to Ocean Capital Partners in June 2023.
16. 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.
17. Financial Instruments
Group Company
2023 2022 2023 2022
€ € € €
Financial instruments at amortised cost
Trade and other receivables 221,114 248,692 15,052,474 5,171,885
Cash and bank balances 14,306,191 3,164,585 13,724,866 2,748,145
14,527,305 3,413,277 28,777,340 7,920,030
Financial liabilities at amortised cost
Trade and other payables 1,469,564 583,661 236,118 110,754
1,469,564 583,661 236,188 110,754
18. Trade and other receivables
Group Company
2023 2022 2023 2022
Amounts falling due within one year: € € € €
Amounts owed by group undertakings - - 15,031,910 5,157,859
Trade receivables 4,418 - - -
Other receivables 216,696 248,692 20,566 14,026
Prepayments and accrued income 136,349 61,103 122,622 32,133
357,463 309,795 15,175,098 5,204,018
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
2023 2022 2023 2022
Euros 210,328 256,008 575,045 271,911
British Pounds 147,135 53,787 14,600,052 4,932,107
357,463 309,795 15,175,097 5,204,018
19. Trade and other payables
Group Company
2023 2022 2023 2022
Amounts falling due within one year: € € € €
Trade payables 234,817 321,277 94,945 10,468
Other taxation and social security 54,082 34,974 35,022 34,974
Other payables 30,892 13,082 275 -
Accruals and deferred income 1,149,773 214,327 105,876 65,313
1,469,564 583,660 236,118 110,755
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
2023 2022 2023 2022
Euros 1,144,295 459,637 64 -
British Pounds 325,268 124,023 236,055 110,755
1,469,563 583,660 236,118 110,755
20. Deferred taxation
The following are the major deferred tax liabilities and assets recognised by
the group and company, and movements thereon:
Group Liabilities Liabilities
2023 2022
€ €
Zinnwald 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 Zinnwald
Lithium GmbH.
21. Retirement benefit schemes
Defined contribution scheme 2023 2022
€ €
Charge to profit or loss in respect of defined contribution schemes 64,571 52,067
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.
22. 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 additional 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 2023 Year ended 31 December 2022
Average exercise price in £ per share Number of Options Average exercise price in £ per share Number of Options
At beginning of year £0.1748 4,200,000 £0.0920 1,900,000
Granted during the year £0.1041 2,450,000 £0.1810 4,000,000
Lapsed during the year - - £0.0965 (1,700,000)
Exercised during the year - - - -
At end of year £0.1487 6,650,000 £0.1748 4,200,000
Exercisable at the year end 3,683,333 1,533,333
Weighted average remaining exercise period, years 3.44 3.99
Option classification
Issue Date No of Options Exercise Price Expiry Date
29 October 2020 200,000 £0.0500 28 October 2025
15 January 2022 4,000,000 £0.1810 15 January 2027
23 March 2023 2,450,000 £0.1041 23 March 2028
6,650,000 £0.1487
RSU Scheme (2020)
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 2023 Year ended 31 December 2022
Ave Exercise Price Options Ave Exercise Price Options
Beginning of Period n/a 1,909,531 - -
Granted n/a 3,406,779 n/a 1,909,531
Lapsed - - - -
Exercised - - - -
At end of period n/a 5,316,310 n/a 1,909,531
Weighted Ave remaining yrs 0.80 1.50
RSU Classification
Issue Date No of RSUs Vesting date
15 January 2022 1,909,531 16 January 2024
23 March 2023 3,406,779 23 March 2025
PSU Scheme (2020)
The first awards of PSUs under the new scheme were made on 15 January 2024,
based on the initial performance period from 1 October 2020 to 31 December
2023. A total of 4,500,000 PSUs were issued, which will be included on the
register for inclusion in the 2024 accounts.
23. Share based payment transactions
Group Company
2023 2022 2023 2022
€ € € €
Expenses recognised in the year
Options issued under the Share Option Plan (2017) 174,633 347,400 174,633 347,400
RSUs issued under the RSU Scheme (2020) 353,993 197,825 353,993 197,825
528,626 545,225 528,626 545,225
Awards made under the various share incentive schemes will be expensed over
the relevant vesting periods for each scheme.
24. Share Capital
Group and Company
2023 2022
Ordinary share capital € €
Issued and fully paid
473,524,624 ordinary shares of 1p each 5,365,379 3,316,248
5,365,379 3,316,248
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 2023 293,395,464 3,316,248
Issue of fully paid shares (cash subscription) 180,129,160 2,049,131
At 31 December 2023 473,524,624 5,365,379
25. Share Premium account
Group Company
2023 2022 2023 2022
€ € € €
At beginning of year 20,289,487 20,289,487 20,289,487 20,289,487
Issue of new shares 19,282,326 - 19,282,326 -
Exercise of share options - - - -
Share issue expenses (168,003) - (168,003) -
39,403,810 20,289,487 39,403,810 20,289,487
26. Other reserves
Merger reserve Share based payment reserve Translation reserve Total
Group € € € €
At 1 January 2022 688,731 133,849 200 822,780
Additions - 545,225 (138) 545,087
At 31 December 2022 688,731 679,074 62 1,367,867
Additions - 528,626 38 528,664
At 31 December 2023 688,731 1,207,700 100 1,896,531
Share based payment reserve Translation reserve Total
Company € € €
At 1 January 2022 133,849 200 134,049
Additions 545,225 (138) 545,087
At 31 December 2022 679,074 62 679,136
Additions 528,626 38 528,664
At 31 December 2023 1,207,700 100 1,207,800
27. Retained earnings
Group Company
2023 2022 2023 2022
€ € € €
At the beginning of the year (4,174,717) (1,822,501) (1,917,521) (251,044)
Loss for the year (2,642,505) (2,352,216) (869,556) (1,666,477)
At the end of the year (6,817,222) (4,174,717) (2,787,077) (1,917,521)
28. 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 Zinnwald Lithium GmbH ("ZLG") and earned in
relation to the sale of lithium products or minerals by ZLG's projects on the
Zinnwald and Falkenhain licence areas. The royalty fee shall be paid in Euros
and paid by ZLG 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 ZLG's projects at the Zinnwald and Falkenhain
licence areas. The company has undertaken to Bacanora to abide by certain
obligations in relation to ZLG'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 Zinnwald 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 ZLG's
production and does not apply to the additional 50% of ZLG acquired by the
Company in June 2021. The Directors also note that the Royalty obligation
remains due to Bacanora, which now a wholly owned subsidiary of Ganfeng
Lithium Limited.
Osisko Royalty Agreements
As part of the sale of Erris Zinc Ltd to Ocean Capital Partners on 13 June
2023, the historic royalty due by the group to Osisko Gold Royalties was
novated to Erris Zinc ahead of completion. Accordingly, this historic
contingent liability has now been removed from the group. The Osisko royalty
did not apply to the Zinnwald Lithium project.
29. Contingent assets
Agreements with Ocean Capital Partners
Under the terms of the sale of Erris Zinc Limited to Ocean Capital Partners on
13 June 2023, the Company was granted a 1% Net Smelter Royalty and a
€200,000 cash payment due six months after the start of commercial
production. As agreed in the Sale and Purchase Agreement, the company also
has the right to buy Erris Zinc Ltd back for €1 if the additional
exploration spend of €100,000 over 2024 to 2025 is not made by March 2025.
Whilst the Directors acknowledge these contingent assets, at this stage, it is
not considered that the outcome can be considered certain to be recognised and
receivable and hence no asset has been recognised in the financial statements.
30. Events after the reporting date
On 15 January 2024, the Company made a grant of a total of 4,228,475 RSUs and
4,350,000 Options under the Company's Long-Term Incentive Plans relating to
performance in 2023, and a total of 4,500,000 PSUs relating to performance
from 1 October 2020 to 31 December 2023. The RSUs and PSUs were issued to
Executive Management under the relevant schemes approved by shareholders in
October 2020. The Options were primarily issued to Employees and Consultants
under the terms of the Option Scheme approved by shareholders in 2017.
On 15 January 2024, the first tranche of 1,909,531 RSUs originally issued
in January 2022 reached their vesting date, and in accordance with the rules
of the scheme, vested at a price of 7.11p being the 20 Day VWAP price at close
on 12 January 2024. At its discretion, the Board has elected to pay the net
amount due after tax under these awards in shares rather than cash.
Accordingly, 1,012,051 new ordinary shares were issued to recipients and
following admission of these new shares to AIM, the Company now
has 474,536,675 ordinary shares in issue.
On 21 February 2024, the Company published the results of its updated
independent Mineral Resource Estimate ("MRE") for the Zinnwald lithium
project. This updated MRE showed a 445 % increase in tonnes and a 243%
increase in contained lithium ("Li") to 429kt in the Measured and Indicated
category versus the previous 2018 MRE. This establishes the Project as the
second largest hard rock lithium project in the EU. The updated MRE includes
11.3 Mt grading 3,420ppm Li (0.736% Li2O) in the Measured category, 193.5 Mt
grading 2,220ppm Li (0.478% Li2O) in the Measured and Indicated category, and
33.3 Mt grading 2,140 ppm Li (0.461% Li2O) in the Inferred category. The
increase in overall tonnage is predominantly due to the incorporation of a
broad zone of mineralised granite, as well as contribution of an extra 26,911
metres of new drilling over 84 holes. This updated MRE has been prepared
in accordance with National Instrument 43-101 Standards of Disclosure for
Mineral Projects of the Canadian Securities Administrators ("NI 43-101") by
independent consulting firm Snowden Optiro Ltd ("Datamine International") of
Bristol, United Kingdom.
31. Related party transactions
No consultancy fees or expenses were incurred with Related Parties in either
2023 or 2022.
As part of the March 2023 fund raise, Henry Maxey, a substantial shareholder
in the Company, entered into a subscription agreement ("subscription
agreement) with the Company to subscribe for 26,337,585 new ordinary Shares at
the Placing Price of 10.41p for a value of approximately £2.7 million. As
part of this subscription agreement, Mr Maxey was granted a pre-emptive right
to maintain his shareholding in any future fund raises.
Anton du Plessis and Cherif Rifaat, directors of the Company, subscribed for
720,000 and 675,000 new ordinary shares at the Placing Price of 10.41p and on
the same terms as other subscribers in the placing.
32. Cash (used in)/generated from group operations
2023 2022
€ €
Loss for the year after tax (2,642,505) (2,352,216)
Adjustments for:
Investment income (282,229) (190)
Lease interest 3,851 5,254
Gain on disposal of equipment - (4,288)
Depreciation of property, plant and equipment 53,741 49,990
Depreciation of Right of Use Assets 139,154 93,405
Amortisation of intangible assets 1,662 995
Loss on disposal of subsidiary 3,672 -
Equity-settled share-based payment expense 528,626 545,225
Movements in working capital:
(Increase) in trade and other receivables (52,089) (187,950)
Increase / (decrease) in trade and other payables 886,653 (55,000)
Cash used in operations (1,359,464) (1,904,775)
33. Cash (used in)/generated from operations - company
2023 2022
€ €
Loss for the year after tax (869,556) (1,666,477)
Adjustments for:
Investment income (282,229) (191)
Group loan interest (708,861) -
Depreciation and impairment of property, plant and equipment 1,566 1,291
Loss on disposal of subsidiary 1 -
Equity-settled share-based payment expense 528,626 545,225
Movements in working capital:
(Increase) / decrease in trade and other receivables (97,029) 7,787
Increase / (decrease) in trade and other payables 125,364 (159,675)
Cash used in operations (1,302,118) (1,272,040)
*ENDS*
For further information visit www.zinnwaldlithium.com or contact:
Anton du Plessis Zinnwald Lithium plc info@zinnwaldlithium.com (mailto: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 focused 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.
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