TIDMZNWD
RNS Number : 9124T
Zinnwald Lithium PLC
22 March 2023
Prior to publication, the information contained within this
announcement was deemed by the Company to constitute inside
information as stipulated under the UK Market Abuse Regulation.
With the publication of this announcement, this information is now
considered to be in the public domain.
Zinnwald Lithium plc / EPIC: ZNWD.L / Market: AIM / Sector:
Mining
22 March 2023
Zinnwald Lithium plc ("Zinnwald Lithium" or the "Company")
Final Results
Zinnwald Lithium plc, the German focused lithium development
company, is pleased to announce its final audited results for the
year ended 31 December 2022.
The Company's Annual Report and Financial Statements for the
year ended 31 December 2022 will be posted to shareholders today
and will be available on its website www.zinnwaldlithium.com.
OVERVIEW
Building value at strategically located integrated Lithium
Hydroxide ("LiOH") project in Germany
-- March 2022 - proved the viability of LiOH production &
potential to produce economically significant amounts of
commercially saleable by-products including fertiliser.
-- September 2022 - published a PEA reporting positive
economics: pre-tax NPV8 of US$1,605m, IRR of 39.0%, $192m EBITDA
and a payback of 3.3 years.
-- Continued to strengthen the team as the Project advances towards construction.
Key corporate activity post period end
-- February 2023 - appointed Tamesis Partners as joint corporate
broker and financial adviser to broaden interaction with
institutional investors focused on the mining space.
-- March 2023 - signed agreement with Ocean Partners Ltd for it
to acquire Erris Zinc Ltd, which owns the Abbeytown Project, in
return for a royalty and future cash payment once Abbeytown goes
into production.
-- Today - secured first industrial cornerstone investor, AMG
Advanced Metallurgical Group ("AMG"), which will acquire a 25%
stake in Zinnwald as part of a wider placing, done at a premium to
current share price, raising a minimum of GBP14m (EUR16m).
Outlook
-- Multiple work streams underway including advancing the BFS
towards completion by the end of the year.
-- Robust cash position with EUR2.1m cash at 21 March 2023,
excluding the expected minimum GBP14m net proceeds from the
fundraise announced today.
-- Ideally positioned to build value given high demand for
domestic supplies of sustainable critical minerals including
lithium.
CHAIRMAN'S STATEMENT
As the largest provider of climate financing in the world, the
EU, together with its member states, is focused on facilitating a
green transition and tackling the adverse effects of climate
change. However, its planned reforms are simply not possible
without the rapid transition to electric vehicles and a large scale
build out of energy storage capacity. Central to this is an order
of magnitude increase in the supply of batteries.
The need to source a supply of critical materials that support
green energy technologies from within the continent is clear. This
was highlighted by European Commission president Ursula von Leyden
who said in her October 2022 State of the Union address, "lithium
and rare earths are already replacing gas and oil at the heart of
our economy". Accordingly, a new Critical Raw Material Act (the
"CRMA") was introduced on 16 March 2023 to address risks to supply
and advance new domestic mining projects. The CRMA proposes a
comprehensive set of actions to ensure the European Union's access
to a secure, diversified, affordable and sustainable supply of
critical raw materials, including lithium. The CRMA also sets clear
benchmarks for domestic capacities along the strategic raw material
supply chain and to diversify EU supply including at least 10% of
the EU's annual consumption for extraction and 40% for
processing.
This bodes well for Zinnwald as it develops its 100% owned
integrated lithium hydroxide ('LiOH') project in Germany positioned
to support the European battery storage and EV manufacturing
sectors from the end of 2026.
Having proved the viability of LiOH production in March 2022, as
well as the potential to produce economically significant amounts
of commercially saleable by-products, our focus then turned to the
re-design of the Project that culminated in the publishing of a PEA
that fully described the new technical plan for the Project in
September. This reported positive economics: pre-tax NPV8 of
US$1,605m, IRR of 39.0%, $192m EBITDA and a payback of just 3.3
years.
The PEA emphasised other positive attributes of the Project
including its location in a mining district at an historic
underground mine with existing infrastructure, availability of
skilled labour, and support of the Saxony authorities and local
community. Furthermore, it highlighted the Project's strong ESG
credentials with the potential to be a zero-waste project with
high-demand by-products including fertiliser, limited water use,
and low-cost sustainable mining strategy focused on minimising C02
emissions.
We are now seeking to further optimise the Project's economics
by evaluating the potential to increase the mining rate resulting
in higher lithium product output. During 2022, the relevant
approvals required to commence two drilling campaigns were sought
and subsequently granted enabling the start of an infill drill
campaign at the key Zinnwald Lithium Deposit in July, and an
exploration drill campaign at one of our satellite deposits,
Falkenhain, in September. Initial results from these programmes
indicate the potential for an increased resource at Zinnwald and
the potential for significant lithium resources at Falkenhain which
could represent possible feed material for the core project. The
data acquired will be collated to optimise the mining plan and fed
into the Bankable Feasibility Study ('BFS'), which we currently
anticipate publishing towards the end of the year.
In tandem, other sizeable work programmes are underway to refine
and optimise our plans including the development of processing
technologies, continued Environmental Impact Assessment ('EIA') and
other permit application processes, the evaluation of options for
the construction strategy and further work/negotiations on
infrastructure aspects of the Project.
Corporate
Today we have announced a major milestone in the development of
the Company in the securing of our first industrial cornerstone
investor, AMG Advanced Metallurgical Group ("AMG"). As part of a
wider placing, to be done at a material premium to our current
share price, we will raise a minimum of GBP14m and AMG will acquire
a 25% stake in Zinnwald. This is a significant endorsement of our
strategy to have AMG as a partner, which is one of the most
advanced Lithium companies in both Germany and the wider EU. We are
also pleased that our existing substantial shareholders, Henry
Maxey and Mark Tindall have all elected to subscribe to maintain
their shareholdings.
At the start of 2023 we appointed Tamesis Partners as joint
corporate broker and financial adviser. Tamesis has initiated
research coverage of the Company. We look forward to working with
Tamesis to broaden our interaction with institutional investors
focused on the mining space.
In addition, we were pleased to announce that we have entered
into an agreement with Ocean Partners Ltd for it to acquire our
subsidiary Erris Zinc Ltd, which owns the Abbeytown Project, in
return for a royalty and future cash payment once Abbeytown goes
into production. As we previously stated, our core focus is on the
Zinnwald Lithium Project and we believe that Abbeytown will be
better advanced as part of a business focused on the commodity and
the region. As such we are confident that Ocean Partners will be
excellent stewards of the project and that the transaction will
deliver value to Zinnwald from this asset.
Financial Overview
The Group maintains a disciplined approach to expenditure and
has a EUR2.1m cash position as at 21 March 2023, which excludes the
expected minimum EUR16m proceeds from the fund raise announced
today.
Outlook
As the leading battery technology in use today, lithium-ion
batteries are destined to be an enduring technology and whilst the
record levels of lithium pricing reached during 2022 may not be
repeated demand is expected to remain high. Benchmark Mineral
Intelligence suggests that we need to increase production of
lithium-ion batteries from 0.6TWh a year to 20TWh by 2050, which
will require a 20-fold increase in lithium supply, while the IAE
says 50 new average sized lithium mines are needed by 2030 to fill
the projected supply gap. Zinnwald expects to deliver one of those
mines.
In line with this, we are pushing forward as hard as possible on
multiple work streams including advancing the BFS towards
completion by the end of the year. I look forward to providing
updates on our progress as we focus on ensuring the underlying
value of our asset is more fully reflected in our share price.
Finally, the progress made during the year is testament to our
team, which we continue to strengthen as the Project advances
towards construction. I would like to take this opportunity to
thank them all for their continued hard work and I look forward to
working with them in the year ahead as we focus on delivering on
our overriding objective, which remains to generate value for all
our shareholders.
Jeremy Martin
Non-Executive Chairman
22 March 2023
THE ZINNWALD LITHIUM PROJECT
The Zinnwald Lithium project (the "Project") is located in
southeast Germany, some 35 km from Dresden and adjacent to the
border of the Czech Republic. The Project concept is for an
underground mine and associated, on site, mineral and chemical
processing to produce a battery grade lithium hydroxide.
The Companies business model is predicated around utilising its
inherent advantages to enable it to become a sustainable project
serving the European lithium market:
-- Location : German project in the heart of the European
automotive and chemical industries and within close proximity of
several major battery "Gigafactories" currently in production or
planned. It is one of the few lithium projects that will provide
domestic European primary lithium supply. Security of supply and
shorter supply chains are becoming increasingly important. Europe
does not currently have a domestic source of lithium supply and
there are relatively few projects within the EU
-- Established mining region : The Project is located in an
established mining area that has been mined historically for 400
years and as recently as the early 1990s. Mining is well understood
by local communities and authorities and the State of Saxony, in
which the project is located, recently published a raw materials
strategy highlighting the role that mining for critical raw
materials can play.
-- Low impact : The Project is based around an existing
underground mine, thereby minimising surface impact. Existing
infrastructure in the area will be utilised to access and exploit
the ore body which will further minimise the impact on the
environment and communities. In addition, the Project has been
designed with the potential to be a low or "zero-waste" operation
as the majority of both its mined product and co-products have
their own large-scale end-markets:
o Its initial mined waste product, quartz sand, is benign and
can be used in the construction industry.
o The leach residue from the chemical process can be used as
back-fill in the mine
o Its primary co-product is high grade Potassium Sulphate, which
is primarily used as a fertiliser and for which the market is
large.
o Its secondary co-product is Precipitated Calcium Carbonate
("PCC") typically used as a filler in the paper making process.
-- High Regulatory standards : The Project will be permitted
under EU environmental rules, which are some of the strictest
globally. OEMs will be able rely on the production being in
compliance with EU Battery Chain directives. Furthermore, the Board
and management are committed to maintaining the highest levels of
transparency and corporate governance consistent with being a UK
listed Plc.
-- Sustainable : The Project incorporates several key elements
that are advantageous in terms of sustainability relative to
competing global sources of lithium supply
o The process has limited water use relative, in particular, to
brine producers.
o The process flowsheet is less energy intensive than
traditional spodumene-based production as it involves a single
pyrometallurgical step at a lower temperature than is required in a
spodumene-based process.
o Overall transport costs and emissions are reduced by being an
integrated operation located close to end markets especially when
compared to Australian sourced spodumene concentrate processed in
China.
o German energy sources currently include a higher overall "low
carbon" component than some regions that are currently important
suppliers of lithium.
-- Leading Partners : The Company is committed to working with
highly credible partners that can help to ensure the delivery of a
landmark Project. International technical partners currently
include SRK, Metso:Outotec, K-Utec, Epiroc and GLU/GICON.
Geology and License Areas
The Project is in a granite hosted Sn/W/Li belt that has been
mined historically for tin, tungsten, and lithium at different
times over the past 400 years. Lithium is contained in
lithium-bearing mica, which is called "zinnwaldite", a member of
the siderophyllite-polylithionite series, which contains up to 1.9
wt.% lithium. It is enriched in 10 parallel to subparallel zones
below the historic tin mineralization. Individual lithium- bearing
greisen beds show vertical thicknesses of more than 40m. The
mineral assemblage consists of quartz, Li-F-mica (zinnwaldite),
topaz, fluorite and associated cassiterite, wolframite and minor
scheelite and sulfides.
The Project comprises four license areas, as follows:
The advanced Zinnwald core project area
The Zinnwald core project area covers 256.5 ha and already has a
30-year mining licence to 31 December 2047. In May 2019, our now
100% owned subsidiary, Deutsche Lithium GmbH ("Deutsche Lithium" or
"DL") first announced an identified resource at this license area
as follows:
-- Measured plus Indicated Mineral Resource estimate containing
35.51 Mt at a grade of 3,519 ppm containing 124,974 t Li at cut-off
grade of 2,500 ppm Li. This represents approximately 665,000 tonnes
of lithium carbonate equivalent ('LCE'), comprising approximately
357,500 tonnes of LCE in Measured Resources and approximately
307,500 tonnes of LCE in Indicated Resources
-- Estimated Inferred Mineral Resources of 4.87 Mt at a grade of
3,549 ppm containing 17,266 t Li metal (approximately 92,000 tonnes
LCE)
Falkenhain, Altenberg and Sadisdorf satellite areas
-- Falkenhain - the license covers an area of 2,957,000 m(2)
and, in 2022, the license was extended for a further three years to
31 December 2025. DL commenced a 10 drill-hole exploration
programme in September 2022 with the results from the first drill
hole published in January 2023.
-- Altenberg DL - the license covers an area of 42,252,700 m(2)
and is valid to 15 February 2024. DL is currently evaluating
historical data, which will be used to define new exploration
targets in the area.
-- Sadisdorf - the license covers an area of 2,250,300 m(2) and
is valid to 30 June 2026. Historical exploration work at the
Sadisdorf Licence by previous licence holders resulted in a
December 2017 historic JORC compliant inferred mineral resource of
25 million tons with an average grade of 0.45% Li2O (average 2,053
ppm lithium head grade ). DL is reviewing and evaluating this
historic data to determine further exploration steps.
Project Plans - Revised Strategy
The Group's management team took the decision following the
completion of the acquisition of the remaining 50% of DL in June
2021 to reposition the Project to better reflect the significant
and rapid developments in the Global and European Lithium markets.
The Project's revised strategy is now to focus on a larger scale
operation that produces battery-grade LiOH products; to optimise
the Project from a cost perspective; and also to minimise the
potential impact on the environment and local communities. All
aspects of the Project from mining through to production of the end
product will now be located near to the deposit itself in an area
with developed infrastructure, energy sources, services,
facilities, and access roads and rail. Power and water are provided
by existing regional supply networks. It is also located close to
the heart of the German automotive and chemical industries.
To progress this revised strategy, the Group has taken a number
of steps in the further definition, design and study work required,
which culminated in the publication on 7(th) September 2022 of the
"Preliminary Economic Assessment ("PEA") for the revised Zinnwald
Lithium Project.
PEA Mine Plan
The Project includes an underground mine with a nominal output
of approximately 880,000 t/a ore at estimated 3,004 ppm Li and
75,000 t/a barren rock. Ore haulage is via a 7km partly existing
network of underground drives and adits from the "Zinnerz
Altenberg" tin mine which closed in 1991. The mining operation for
the Project is planned as an underground mine development using a
main ramp for access to the mine and for ore transportation from
the mine to the surface via access tunnels. The estimated mine life
covers >35 years of production. The optimisation of bulk-mining
methods has been a key consideration to realise increased total
mined tonnage. The cross-section map of the area shown below shows
the drainage access tunnel, the two access mining tunnels and the
historic talings facility at IAA Bielatal.
PEA Processing Flowsheet and Metallurgical Test Work
The Zinnwald Lithium Process Plant is designed to process
880,000 dmt/a of ROM feed, at an average grade of 0.30 wt.% Li, to
produce a minimum of 12,011 t/a of battery grade LiOH*H2O
(equivalent to 10,530 t/a LCE) and 56,887 t/a of K2SO4 and about
16,000 t/a PCC (precipitated calcium carbonate) by-products. The
flowsheet, as shown below is based on calcium sulfate/calcium
carbonate roasting and consists of the following major unit
processes. The Flowsheet test work has been based on an original
100t lithium-mica greisen ore sample that has produced 50 kg of a
reference LiOH product sample as well as for the locked cycle test
for process verification as part of the process design work.
Permitting and Environmental Studies
The overall permitting pathway for the project is subdivided
between processes to be permitted under the Mining Act, which
includes the mine, its associated infrastructure and the mechanical
separation plant approved under a Mandatory Framework Operation
Plan (MFOP) and the Bundesimmissionsschutzgesetz (BImSchG) (Federal
Emission Protection Act) and the Water Authority for all aspects
relevant to water use, potential for water pollution etc.
Economic Analysis in the PEA
The economic analysis included in the PEA (shown below)
demonstrates the financial viability of the Project. Based on the
assumptions detailed in this report the Project supports a Pre-tax
Net Present Value ("NPV") of US$1.6 billion (at a discount rate of
8%, "NPV8)") and a pre-tax Internal Rate of Return ("IRR") of 39%.
The after tax NPV8 is US$1.0 billion and post tax IRR is 29.3% The
Project has a mine life of over 35 years and the payback period is
less than four years post commencement of production. The full
report is published on the Company's website at
https://www.zinnwaldlithium.com/investors/reports-and-presentations/
PEA Key Indicators Unit Value
Pre-tax NPV (at 8 % discount) US$ 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 US$ per tonne
by-product credits) LiOH 10,872
------------------ --------
Average LOM Unit Operating Costs (post US$ per tonne
by-product credits) 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 EUR per tonne 875
------------------ --------
Project Development Plan
The preliminary project schedule outlined below is based on the
assumption that the Project will be fully funded throughout both
its next stage of producing a BFS and then into construction; all
environmental and other regulatory permits will be granted without
delays; external agencies and suppliers will be cooperative; and
management of the execution will be by competent EPCM / EPC
groups.
STRATEGIC REPORT
Extracts from the Company's Strategic Report are set out
below.
Highlights
12 Months to 31 December 2022
-- Completion of PEA on revised Project plan showing robust economic results.
-- Testwork confirmed viability to produce battery-grade Lithium Hydroxide
-- Testwork confirmed viability to produce economically significant by-products.
-- Hyper-spectral scanning tested to produce accurate
quantitative information on ore types and grades.
-- Lithological ore-sorting proven to be viable in pilot tests.
-- Commencement of in-fill drilling campaign at Zinnwald license area.
-- Commencement of exploration drilling campaign at Falkenhain license area.
-- Commenced discussions with owners of local infrastructure.
-- Engaged SRK Consulting (UK) Ltd to provide competent person support.
-- Joined the EU funded Horizon Europe "Exploration Information Systems" project.
-- Strengthened the operational team in Germany.
-- Entered into Option Agreement to acquire more land in vicinity of Altenberg.
Post period end to 21 March 2023
-- First Industrial Cornerstone Investor (AMG) and wider Placing raising a minimum of GBP14m.
-- First drill results on Falkenhain exploration license.
-- Appointment of Tamesis Partners as co-broker and first research published.
-- Simplified and focused the Company by selling the non-core Abbeytown Lead-Zinc Project.
Strategic Review
Company Overview - Background and evolution
The Group was originally established in 2012 as a mineral
exploration and development company and made its IPO on AIM in
December 2017. In October 2020, the Company completed its
transformation into a lithium-focused development company with the
acquisition (via a reverse-takeover) of Bacanora Lithium Plc's 50%
ownership and joint operational control of Deutsche Lithium Gmbh
whose principal asset is the Zinnwald Lithium Project. In June
2021, the Company completed the acquisition of the remaining 50% of
Deutsche Lithium from SolarWorld AG, a company which had been in
administration since 1 August 2017. This gave the Company full
ownership and full operational control of Deutsche Lithium.
In December 2021, Bacanora distributed its entire holding of
30.9% of the Company's shares to its own shareholders as part of
the terms of its takeover by Ganfeng Lithium Ltd. This expunged
most of the agreements between the Company and Bacanora that had
been put in place at the time of the RTO. The sole remaining
agreement is the Royalty Agreement covering 50% of the Project,
which remains in place.
Company Strategy
The Zinnwald Lithium Project, as set out above, is the Company's
core development asset and the sole focus of the Board and its
strategy. This strategy continues to be underpinned by a
technically led team with extensive experience in bringing projects
from the feasibility stage through to mine production, as well as
the capital markets experience to source the funding required for
these types of mining projects. The Company will focus on further
de-risking the project as it is advanced towards a development
decision. Key work areas include:
-- Complete a Bankable Feasibility Study on the Revised Project following on from the PEA.
-- Further refine the Processing Flowsheet that supports the
primary production of battery grade lithium hydroxide and its
co-products, Potassium Sulphate (fertilizer) and Precipitated
Calcium Carbonate.
-- Expansion of the size of the Project by increasing Mineral
Resource Estimates to include the "Albite Granites" and increase
size of annual mining throughput with improved ore-sorting
technologies.
-- Identification of and negotiation with further long-term cornerstone investors.
-- Identification of and negotiation with off-take partners that
could include battery manufacturers, chemical producers or
commodity traders.
-- Identification of and negotiation with potential project
financing partners that could include banks and national and
trans-national development organisations.
-- Exploration work to advance the satellite licenses to
increase the potential size of the overall resource.
-- Advance the plant engineering towards AAC Class 3.
-- Minimising the carbon footprint by optimising Lithium plant location and transportation.
-- Finalisation of the selection of the optimal chemical processing site location.
-- Negotiation with the holders (principally the German state)
of existing mining infrastructure in the vicinity of the Project
that has the potential to enhance the project economics.
-- Advancing the permitting process for the construction and operation of the mine; and
-- Ensuring the social license to operate by extensive public participation.
The Company recognises the importance of general public and the
NGOs in the permitting processes and has committed to proactively
engage with all the stakeholders in its projects.
Operational Review
Germany
During 2022, the Group has made significant progress on the
Project, including the publication of its PEA on the Revised
Project. For further details see the section on Zinnwald Lithium
Project above. As part of this progress the Group completed the
following matters during the year, and after the year end, to
underpin the Project plans.
RESOURCE DEVELOPMENT
The Company has already commenced an infill drilling programme
at the core Zinnwald license with the objective of better defining
the Resources and Reserves that lie within the ore body, as well as
determine the detailed early years' mining plan. This will likely
lead to revised Resource and Reserves Estimate to be included in
the BFS. The Company has also commenced an exploration drilling
campaign at its nearby Falkenhain license to determine the
potential for expansion of both the project's resources and the
production level.
The Company has engaged SRK Consulting (UK) Ltd to provide
competent person support for the drill campaign and geometallurgy.
The drilling is being conducted by GEOPS Bolkan Drilling Services
Ltd. The Company has also leased and taken occupancy of new
warehouse space in Freiberg that is being used for core storage and
core logging and processing of new drill core. The facility has
been outfitted with the latest safe and environmentally friendly
equipment.
In-fill drilling at Zinnwald Lithium Deposit
In August 2022, the Company received its final permits and
started an in-fill drilling programme at the core Zinnwald Lithium
license. The purpose of the in-fill drilling programme is to study
the mining scale variability of the ore with the view of applying
larger scale mining methods. The ultimate aim is also to support
the plan to consider the Albite Granites (previously referred to as
"Ore Type 2" in the PEA) for the Mineral Resource and future mine
plan, with potential to materially increase the total Mineral
Resource.
As at the end of 2022, the Company had completed 13 drill holes
and 4,311m at the core Zinnwald deposit. The results of the assay
at the first four drill holes were announced in detail in an RNS on
23 November 2022. In summary the included long mineralised
intervals such as 2,503ppm Li over 86.4m and 1,846ppm Li over 121m
within which there are several high-grade core intervals including
of 4,286ppm Li over 4.6m and 4,345ppm Li over 6.5m. So far in 2023,
the Company has completed a further 15 drill holes, taking the
total drilling to 9,587m. Further assay results will be published
in due course.
Exploration drilling at Falkenhain Licence Area
In September 2022, the Company received its final permits and
started an exploration drilling programme at Falkenhain. This
exploration licence is located 7km north from the core Zinnwald
License. The licence area was historically extensively explored for
occurrences of tin and tungsten with drilling undertaken most
recently from 1963 to 1990. The Company has performed a detailed
review of the historic data including assaying samples of the
surviving core from these campaigns. The outcome from this work has
identified the potential for a lithium resource.
The Company has designed an exploration drill campaign of ten
diamond drill holes to test the historic drill data and better
determine the resource potential of the licence. The first drill
hole was completed to a depth of 600m and the assay results
published on 30 January 2023 showing significant intercepts of
thick high-grade lithium mineralisation including 80m at an average
2,879 ppm Li and 51m at an average 3,421 ppm Li.
In September 2022, the Company was informed by the Saxony Mining
Authority ("SOBA") that its application to extend its exploration
license at Falkenhain was successful. The exploration license is
now valid until the 31 December 2025.
PROCESSING AND FLOWSHEET
Mining and Geometallurgy - TheiaX, Metso-Outotec, Tomra, UVR
FIA
TheiaX GmbH, a local German company, reported initial
hyperspectral core scanning tests on both existing drill core from
previous drilling campaigns, and crushed ore samples from the
previous pilot tests. The hyperspectral scanning produced clear
quantitative information on Zinnwaldite (Li-mineral), Muscovite,
Clay minerals and Topaz from both the drill core and the crushed
product. In comparison to standard one metre assay intervals, the
hyperspectral imaging produced information on five cm intervals and
detected lower grade inclusions from the core giving a very clear
indication that online hyperspectral imaging could be used for
value-based bulk or particle sorting of crushed ore.
After successful preliminary test work, pilot ore-sorting tests
were carried out by Tomra in Hamburg, Germany to test the
amenability of Zinnwaldite ore for particle sorting. All
Zinnwaldite lithologies, ore and waste, were tested. The pilot
confirmed that >10 mm crushed material particles can be
effectively sorted with off-the-self ore-sorters.
The objective of these testwork campaigns is to reduce ore
processing costs by removing waste and low-grade material from the
Mineral Processing circuit before the expensive grinding, drying
and magnetic separation stages, as well as minimising the quantity
of fine material produced as by-product. It could also lead to an
increase in total Mineral Resources. The current Mineral Resource
excludes Ore Type 1 lenses thinner than two meters due to
processing cost per tonne waste rock mined. With better
understanding of the small-scale grade variation and application of
sorting process, it may be possible to lower the Li cut-off grade
of Ore Type 1. In addition, a considerable amount of lithium at the
Project is contained in the "Greisenized Granite" rock, which could
potentially be included in Mineral Resources. This material can be
understood as an alteration halo surrounding the Ore Type 1 and is
estimated at 214 Mt at a Li grade of 1700 ppm. It is currently not
included in the Project's Mineral Resources of 40.4 million tonnes
(35.5 million tonnes measured and indicated plus 4.9 million tonnes
inferred), as set out in the PEA.
Additional tests to further confirm the mineral processing
assumptions for the Albite Granites as part of the future mining
feed are being undertaken at UVR FIA GmbH in Freiberg. This
principally considers the processing characteristics, mineralogy,
and geo-metallurgy of the Albite Granite, which also holds
significant amounts of lithium bearing mineralisation.
Pyrometallurgy - IBU-tec
Calcination (roasting of pre-treated Zinnwaldite concentrate)
testwork was carried out by IBU-tec Advanced Materials AG. The
calcination testwork focused on pre-treatment of the concentrate
with different additives, agglomeration and roasting of the
agglomerate. The test targeted the possibility of utilising cheaper
additives and a higher leach rate of lithium and potassium from
calcine. The tests for calcine leaching of the calcined material
were carried out by K-UTEC.
The tests indicated that Flue Gas Desulfurization ('FGD') Gypsum
is suitable for the purpose. FGD Gypsum is readily available and
inexpensive and would represent a cost saving versus using primary
gypsum. The tests also showed an increased lithium recovery rate of
90% (previously 87%) and an increased potassium recovery rate of
70% (previously 50%) from Zinnwaldite ore compared with what was
demonstrated in the 2019 FS.
Hydrometallurgy - Production of battery-grade LiOH and
co-products - K-UTEC
In March 2022, the Company announced the successful completion
of pilot scale testwork that demonstrated the technical and
economic viability of producing high purity (>99.9% purity)
lithium hydroxide from Zinnwaldite concentrate is technically and
economically viable. The test work also confirmed the potential to
produce economically significant amounts of commercially saleable
co-products, such as high-purity potassium sulphate ("SOP") and
precipitated calcium carbonate ("PCC").
In these tests, almost 50kg of battery grade LiOH was produced
out of several tons of Zinnwaldite concentrate. The test work was
conducted in Germany by a leading industry specialist, K-UTEC AG
Salt Technologies ('K-UTEC') and verified by a third-party
laboratory through chemical and physical analysis. The lithium
recovery from the Zinnwaldite concentrate to the LiOH was proven to
be above 80% and comparable to lithium processes from other types
of lithium resources. Non-saleable side streams were proven to
contain very low amounts of soluble, possibly environmentally
problematic elements.
The Company further commissioned K-UTEC to conduct a technical
scoping study for SOP and PCC product optimisation, which confirmed
the ratios of high grade technical / fertiliser grade SOP products
that can be achieved. This work specifically considered the
operational aspects of producing various quantities of SOP products
and will form the basis for higher level engineering studies.
OTHER OPERATIONAL MATTERS
Access to infrastructure
In March 2022, the Company was granted access to portions of the
existing mining infrastructure in the vicinity of the Project for
inspection purposes. This infrastructure includes a 4km drainage
tunnel, and disused ventilation and access shafts, which
potentially could be used as part of its operations. The
infrastructure was found to be in excellent condition and easily
accessible. The Company continues to develop its plans for the
possible utilisation of this infrastructure to beneficially impact
the Project and is also in discussion with the owners of the assets
for access and usage.
Land in Altenberg
In August 2022, the Company announced that it had entered into
an option agreement with Projektgesellschaft Altenberg mbH, an
entity owned by the town of Altenberg in Germany, that gives the
Company the right to acquire approximately 14,000 square metres of
industrial land in the Europark industrial area near to Altenberg.
The option agreement is valid until August 2025. The land subject
to the option agreement is adjacent to land already owned by the
Company and combined would bring the Company's total land holding
in this area to approximately 30,000 square metres. This industrial
land has the potential to be used for access and other operational
aspects of the Zinnwald Lithium Project.
Partnerships
The Group has further strengthened its relationships with
leading partners, whose credibility the Group believes will
ultimately support its position with future project finance
partners:
-- SRK Consulting UK Ltd is providing Competent Person ("CP")
support and guidance for the Project.
-- TheiaX GmbH is assisting with cutting edge hyperspectral
scanning of drill-core to be used in the geo-metallurgical
optimisation of the Project.
-- Metso Outotec is providing expert support in advancing the
mineral processing concept and engineering, including verification
of historic engineering, the development of a conceptual study to
produce engineering deliverables to enable a smoother transition
into basic engineering and support of further development stages of
the Project.
-- Epiroc is developing plans for an electrically powered mining operation.
-- GICON / GLU is proving support in the permitting process of
mining assets in the state of Saxony.
Co-Broker Appointment
In February 2023, the Company appointed Tamesis Partners LLP as
joint corporate broker and it published the first independent
research note on the Company. Tamesis is a specialist ECM and
advisory house with a focus on the mining sector. Tamesis will
support the Company with research coverage and access to an
incremental audience of institutional and strategic investors.
Staffing in Germany
The Group has further strengthened the team in Germany in 2022,
adding skills in several key disciplines including geology, mining,
and logistics.
ESG and Sustainability
Progress in relation to Permitting, Environmental, Social and
Governmental engagement are covered in detail in the report of the
Sustainability Committee below.
Lithium Market in 2022
Building on an extremely strong performance in 2021, the lithium
market in 2022 continued to perform with spot prices exceeding
US$80,000 ton. Contract pricing, typically a better indicator of
overall supply-demand dynamics, was also very robust with SQM, one
of the world's biggest suppliers, announcing an average price for
2022 of US$52,000/t. Pricing is supported by a growing consensus
around a supply / demand imbalance, with several market
commentators anticipating a persistent deficit of supply. The
impact on long term lithium hydroxide price expectations has been a
consistent rise. In Q3 2021, Benchmark Minerals (a leading lithium
industry consultancy) forecast a long-tern price of $12,110, but
this was before the step change in balance in the market. In March
2022, Roskill forecast an inflation adjusted long term price of
$23,609 per tonne through to 2036 with a nominal rate of $33,200/t
by 2036. In its year-end review, Fastmarkets produced a 10 year
forecast for Lithium prices that showed prices above $30,000 per
tonne for the rest of the decade and still above $25,000 per tonne
by 2032. Zinnwald in its PEA assumed a long term price of
$22,500/t.
The global lithium market is expanding rapidly due to an
increase in the use of lithium-ion batteries for electric vehicle
and energy storage applications. In recent years, the compound
annual growth rate of lithium for battery applications was over 22%
and is projected by Roskill to be more than 20% per year to 2028.
This expansion is being driven by global policies to support
decarbonisation via electrification. This is underpinned by Carbon
Emission Legislation (COP26, EU Green Recovery, Paris Accord);
Government regulation and subsidies; and Automakers commitment to
EVs. Global electric car sales totalled 4.2 million units in 2021,
more than double the level in 2020 and up 200% versus 2019 with no
slowdown anticipated in 2022.
Benchmark Minerals highlighted that there are 282 Gigafactories
at various stages of production/ construction, up from only 3 in
2015 (by May 2022, this number had gone over 300). If all these
plants came online in the planned 10-year timeframe, it would
equate to 5,777 GWh of battery capacity, equivalent to 109 million
EVs. This would require 5m tonnes of lithium each year, as compared
with 480,000 tonnes produced in 2021. It noted that the lack of
supply is not due to any geological constraints but to a simple
lack of capital investment to build future mines and estimated
$42bn needs to be spent by 2030 to meet anticipated demand for
lithium.
Arguably the most transformative event in the lithium industry
in 2022 came in August when the US Government announced the
Inflation Reduction Act ("IRA"), which is described as the largest
piece of federal legislation to address climate change ever
promulgated. It comprises a total of $391billion in provisions
relating to energy security and climate change and includes $270
billion in tax incentives. Some of the largest allocation areas
included $128 billion for renewable energy and grid storage and $13
billion for electrical vehicle incentives. As part of this Act, in
October 2022, the White House made $2.8 billion of direct grants to
boost domestic EV battery production ranging from recycling
facilities to lithium processing plants. Companies such as
Albermarle, Piedmont Lithium and Lilac Solutions all received
sizeable grants in relation to lithium processing facilities.
The IRA triggered a strong response from the EU driven by
concerns around the scale of incentives and subsidies and the risk
to European industry. In January 2023, the European Commission set
out its own "Green Deal Industrial Plan" that aims to ease state
aid rules that would "enhance the competitiveness of Europe's
net-zero industry and support the fast transition to climate
neutrality. The Commission will also protect the single market from
unfair trade in the clean-tech sector and will use its instruments
to ensure that foreign subsidies do not distort competition in the
single market, also in the clean-tech sector." The Plan is based on
four pillars: simplifying regulations; speeding up access to
finance; skills development; and open trade to provide a 'more
supportive environment' to boost the EU's manufacturing capacity
for the green transition to meet its climate targets. Brussels
wants Europe to be the first climate-neutral continent by 2050, and
to cut its emissions by at least 55% by 2030. A "Net Zero Industry
Act" is due in 2023 with the potential for a longer term European
Sovereignty Fund to invest in emerging technologies.
Ireland
During the period, the Group retained its sole license at
Abbeytown and has met all expenditure requirements to maintain the
license through to June 2023. On 13 March 2023, the Company
announced the terms of an acquisition agreement with Ocean Partners
Ltd for them to acquire Erris Zinc Ltd, the owner of the Abbeytown
Lead-Zinc license in Ireland. Ocean Partners shall acquire Erris
Zinc for EUR1 and commit to spend EUR130,000 over the next three
years to the end of 2025 on exploration work at Abbeytown. Zinnwald
shall receive a 1% Net Smelter Royalty and a EUR200,000 cash
payment due six months after commencement of commercial production
from Abbeytown. Zinnwald shall have the right to buy back Erris
Zinc for EUR1 in March 2025, if the committed exploration spend has
not been made.
Share Price performance in 2022
The Board shares the frustration of shareholders at the weakness
of the Company's share price in 2022. The wider equity markets,
especially for smaller companies, have been under sustained
pressure in 2022 primarily due to macro-economic factors including
rising interest rates, uncertainty caused by the conflict in
Ukraine and low anticipated economic growth. Zinnwald has had two
specific equity events that occurred at the end of December 2021
(the distribution of 91m Zinnwald shares owned by Bacanora Lithium
Plc on completion of its takeover by Ganfeng Lithium Ltd; and the
expiration of the lock-in on the majority of the 50m Zinnwald
shares originally issued to creditors of the SolarWorld AG estate)
which resulted in there being a number of material shareholders
that were unlikely to be natural holders of the Company's shares.
The Board understands that majority of these shareholders have sold
all or the majority of their holdings over the course of 2022. The
Board believes that this "overhang" has now cleared, as evidenced
by the improved share price performance so far in 2023. The Board
is grateful for the new and existing shareholders that have
absorbed this volume of shares.
Outlook
The Company is primarily focused on the delivery of a BFS by the
end of 2023, further building on the technical concept detailed in
the PEA published in September 2022. The PEA demonstrated a robust
Project with very attractive economics and the team is working hard
to advance this to the next stage. The funds raised in the share
placing announced today will primarily be used to deliver this BFS,
and thereafter to finance the detailed engineering and design work
required to reach a Final Investment Decision.
As part of this BFS work, the Company near-term priorities are
the completion of the in-fill drill campaign at Zinnwald, which
should result in the completion of an updated Mineral Resources and
Reserves Estimate (MRE), as well as determine the detailed early
years' mining plan. The Project's historic MRE was based solely on
the Greisen beds and excluded the Albite Granites. One of the goals
of the ongoing in-fill drilling programme is to materially increase
the MRE, which could, in turn, accommodate greater mining capacity
for an expanded Li-product output. Historic estimates quantified
the tonnage potential of the Albite Granites alone at above 200Mt,
an estimate that the Company is working to verify. The Company will
also continue its exploration drilling campaign at its nearby
Falkenhain license to determine the potential for expansion of both
the project's resources and the production level.
The Company will continue to develop the technologies planned
for its processes. Individual processing methods and stages are
well established in mining and other industries. As the recognition
of Zinnwaldite as a source for battery metals is more recent, the
application of methods such as high-intensity magnetic separation
has not previously been used in beneficiation of this specific type
of lithium ore but is utilised and well established in the
beneficiation of other ore types. Evaporators and crystallizers are
common processing methods in the production of fertiliser salts.
The Company has also completed the initial phases of testing bulk
and particle sorting techniques designed to increase the type of
resource available to the Project. The Company will also continue
to refine its plans for reducing its overall CO(2) footprint and
operating costs, such as via the use of electric mining
equipment.
The Company has already commenced its EIA and other permit
process, including baseline studies and other reports. This will be
a high priority area over the coming quarters.
The Company will continue to liaise with individual, State and
Federal owners of local infrastructure regarding access rights
and/or acquisition. The Company will also advance negotiations for
service contracts for electric power and natural gas with local
power companies as well as supply contracts for required reagents
and materials.
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2022
31 December 31 December
2022 2021
Notes EUR EUR
Continuing operations
Exploration projects impairment - (1,583,566)
Administrative expenses (1,850,129) (1,122,534)
Other operating income 42,948 779
Share based payments charge 25 (545,225) (7,779)
Operating Loss (2,352,406) (2,713,100)
Revaluation gain on joint venture 7 - 1,038,252
Share of loss of joint venture 10 - (52,911)
Finance income 9 191 455
Loss before taxation (2,352,215) (1,727,304)
Tax on loss 12 - -
Loss for the financial year 30 (2,352,215) (1,727,304)
Other Comprehensive Income (138) 181
Total comprehensive loss for the
year (2,352,353) (1,727,123)
Earnings per share from continuing
operations attributable to the
owners of the parent company 13
Basic (cents per share) (0.80) (0.74)
Total loss and comprehensive loss for the year is attributable
to the owners of the parent company.
GROUP STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
31 December 31 December
2022 2021
Notes EUR EUR
Non-current assets
Intangible Assets 14 18,966,165 16,165,085
Property, plant and equipment 15 327,528 48,621
Right of Use Assets 16 185,285 -
19,478,978 16,213,706
Current assets
Trade and other receivables 20 309,795 121,845
Cash and cash equivalents 3,164,585 8,291,991
3,474,380 8,413,836
Total Assets 22,953,358 24,627,542
Current liabilities
Trade and other payables 21 583,660 638,660
Lease Liabilities 16 140,149 -
723,809 638,660
Net current assets 2,750,570 7,715,176
Non-current Liabilities
Deferred tax liability 22 (1,382,868) (1,382,868)
Lease Liabilities > 1 Year 16 (47,795) -
(1,430,663) (1,382,868)
Total Liabilities (2,154,472) (2,021,528)
Net Assets 20,798,886 22,606,014
Equity
Share capital 26 3,316,249 3,316,249
Share premium 27 20,289,487 20,289,487
Other reserves 28 1,367,868 822,781
Retained earnings 30 (4,174,718) (1,822,503)
Total equity 20,798,886 22,606,014
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2022
Notes Share Share Other Retained Total
Capital premium reserves earnings
account
EUR EUR EUR EUR EUR
Balance at 1 January
2021 2,278,155 7,362,699 814,821 (95,199) 10,360,476
Year ended 31 December
2021
Loss for the year - - - (1,727,304) (1,727,304)
Other comprehensive
income:
Currency translation
differences - - 181 - 181
Total comprehensive
income for the year 181 (1,727,304) (1,727,123)
Issue of share capital 1,038,094 13,217,816 - - 14,255,910
Share issue costs - (291,028) - - (291,028)
Credit to equity for
equity settled share-based
payments 25 - - 7,779 - 7,779
Total transactions with
owners recognised directly
in equity 1,038,094 12,926,788 7,779 , 13,972,661
Balance at 31 December
2021 and 1 January 2022 3,316,249 20,289,487 822,781 (1,822,503) 22,606,014
Year ended 31 December
2022
Loss for the year - - - (2,352,215) (2,352,215)
Other comprehensive
income
Currency translation
differences - - (138) - (138)
Total comprehensive
income for the year - - (138) (2,352,215) (2,352,353)
Credit to equity for
equity settled share-based
payments 25 - - 545,225 - 545,225
Total transactions with
owners recognised directly
in equity - - 545,225 - 545,225
Balance at 31 December
2022 3,316,249 20,289,487 1,367,868 (4,174,718 20,798,886
GROUP STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2022
Year ended 31 Year ended 31
December 2022 December 2021
Notes EUR EUR EUR EUR
Cash flows from operating
activities
Cash used in operations 33 (1,904,776) (495,174)
Net cash outflow from operating
activities (1,904,776) (495,174)
Cash flows from investing
activities
Investment in Deutsche Lithium
as Joint Venture - (735,800)
Purchase of remaining 50%
of Deutsche Lithium - (1,500,000)
Cash acquired on purchase
of Deutsche Lithium - 486,213
Exploration expenditure in
Germany (2,802,075) (948,157)
Exploration expenditure in
Ireland and Sweden - (37,455)
Purchase of property, plant
and equipment (351,217) (8,437)
Proceeds on disposal of equipment 26,471
Interest received 191 455
Net cash used in investing
activities (3,126,630) (2,743,181)
Cash flows from financing
activities
Proceeds from the issue of
shares - 6,927,255
Share issue costs - (243,436)
Lease payments (96,000) -
Net cash generated from
financing activities (96,000) 6,683,819
Net (decrease) / increase
in cash and cash equivalents (5,127,406) 3,445,464
Cash and cash equivalents
at beginning of year 8,291,991 4,846,527
Cash and cash equivalents
at end of year 3,164,585 8,291,991
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
1. Accounting Policies
1.1 Company Information
Zinnwald Lithium Plc ("the Company") is a public limited company
which is listed on the AIM Market of the London Stock Exchange
domiciled and incorporated in England and Wales. The registered
office address is 29-31 Castle Street, High Wycombe,
Buckinghamshire, United Kingdom, HP13 6RU.
The Group consists of Zinnwald Lithium Plc and its wholly owned
subsidiaries as follows as at 31 December 2022.
Name of undertaking Registered Nature of Class of Direct Indirect
office business shares held holding holding
Deutsche Lithium United Kingdom Exploration Ordinary 100.0% -
Holdings Ltd
Erris Zinc Limited Ireland Exploration Ordinary 100.0% -
Deutsche Lithium
GmbH Germany Exploration Ordinary - 100.0%
On 1 December 2017, Zinnwald Lithium Plc acquired the entire
issued share capital of Deutsche Lithium Holdings Ltd (formerly
Erris Resources (Exploration) Ltd) by way of a share for share
exchange. This transaction has been treated as a group
reconstruction and accounted for using the reverse merger
accounting method. Its registered office address is 29-31 Castle
Street, High Wycombe, Bucks, HP13 6RU.
On 26 February 2018, Zinnwald Lithium Plc acquired the entire
issued share capital of Erris Zinc Limited on incorporation. Erris
Zinc Limited is a company registered in Ireland. Its registered
office address is The Bungalow, Newport Road, Castlebar, Co. Mayo.
F23YF24.
On 29 October 2020, Zinnwald Lithium Plc acquired 50% of the
issued share capital of Deutsche Lithium GmbH ("Deutsche Lithium").
On 24 June 2021, the Company acquired the remaining 50% of the
issued share capital of Deutsche Lithium. Deutsche Lithium is a
company registered in Germany. Its registered office is at Am
Junger-Loewe-Schacht 10, 09599, 09599, Freiberg, Germany.
1.2 Basis of preparation
These financial statements have been prepared in accordance with
UK-adopted International Accounting Standards and IFRIC
interpretations and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS (except as otherwise
stated).
The financial statements are prepared in euros, which is the
functional currency of the Company and the Group's presentation
currency, since the majority of its expenditure, including funding
provided to Deutsche Lithium, is denominated in this currency.
Monetary amounts in these financial statements are rounded to the
nearest EUR.
The EUR to GBP exchange rate used for translation as at 31
December 2022 was 1.12759.
The consolidated financial statements have been prepared under
the historical cost convention, unless stated otherwise within the
accounting policies. The principal accounting policies adopted are
set out below.
1.3 Basis of consolidation
The consolidated financial statements incorporate those of
Zinnwald Lithium Plc and all of its subsidiaries (i.e., entities
that the group controls when the group is exposed to, or has rights
to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the
entity).
In regard to its shareholding in Deutsche Lithium, for the
period from 1 January 2021 to 24 June 2021, the Board concluded
that whilst it had significant influence over Deutsche Lithium (50%
shareholding, 1 of the 2 co-managing directors and a casting vote
on operational matters), it did not have control over that company
and consequently the investment was accounted for using equity
accounting rather than consolidated. On conclusion of the
acquisition of the remaining 50% of Deutsche Lithium on 24 June
2021, the Company now consolidates the full results of Deutsche
Lithium. Business combinations are accounted for using the
acquisition method. Identifiable assets acquired and liabilities
assumed are measured at their fair values at the acquisition
date.
All financial statements are made up to 31 December 2022. Where
necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with
those used by other members of the group.
All intra-group transactions, balances and unrealised gains on
transactions between group companies are eliminated on
consolidation. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred.
Subsidiaries are fully consolidated from the date on which
control is transferred to the group. They are deconsolidated from
the date on which control ceases.
1.4 Going concern
At the time of approving the financial statements, the directors
have a reasonable expectation that the group and company have
adequate resources to continue in operational existence for the
foreseeable future. The Group had a cash balance of EUR2.1m at the
year end and keeps a tight control over all expenditure. The Board
has a strategy to enable the curtailing of a number of areas of
expenditure to enable it to meet its minimum fixed costs for the
next 12 months, even without raising further funds, whilst still
maintaining all licenses in good standing. However, as announced at
the date of this report, it is completing a material fund raise to
finance further development of the Project and meet Group
expenditures. Thus, the going concern basis of accounting in
preparing the Financial Statements continues to be adopted.
1.5 Intangible assets
Capitalised Exploration and Evaluation costs
Capitalised Exploration and Evaluation Costs consist of direct
costs, licence payments and fixed salary/consultant costs,
capitalised in accordance with IFRS 6 "Exploration for and
Evaluation of Mineral Resources". The Group and Company recognises
expenditure in Exploration and Evaluation assets when it determines
that those assets will be successful in finding specific mineral
assets. Exploration and Evaluation assets are initially measured at
cost. Exploration and Evaluation Costs are assessed for impairment
when facts and circumstances suggest that the carrying amount of an
asset may exceed its recoverable amount. Any impairment is
recognised directly in profit or loss.
1.6 Property, plant and equipment
Property, plant and equipment are initially measured at cost and
subsequently measured at cost, net of depreciation and any
impairment losses. Depreciation is recognised so as to write off
the cost or valuation of assets less their residual values over
their useful lives on the following bases:
Leasehold land and buildings No deprecation is charged on these balances
Plant and equipment 25% on cost
Fixtures and fittings 25% on cost
Computers 25% on cost
Motor vehicles 16.7% on cost for new vehicles, 33.3% on cost for
second-hand vehicles
Low-value assets (Germany) 100% on cost on acquisition for items
valued at less than EUR800
The gain or loss arising on the disposal of an asset is
determined as the difference between the sale proceeds and the
carrying value of the asset and is recognised in the income
statement.
1.7 Non-current investments
In the parent company financial statements, investments in
subsidiaries and joint ventures are initially measured at cost and
subsequently measured at cost less any accumulated impairment
losses.
1.8 Impairment of non-current assets
At each reporting period end date, the group reviews the
carrying amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs.
Intangible assets not yet ready to use and not yet subject to
amortisation are reviewed for impairment whenever events or
circumstances indicate that the carrying value may not be
recoverable.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
profit or loss, unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a
revaluation decrease.
1.9 Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held
at call with banks.
1.10 Right of Use Assets and Lease Liabilities
On 1 January 2019, the Group adopted IFRS 16, which supersedes
IAS 17 and sets out principles for the recognition, measurement,
presentation and disclosure of leases for both parties to a
contract. All leases are accounted for by recognising a
right-of-use assets due to a lease liability except for:
-- Lease of low value assets; and
-- Leases with duration of 12 months or less
The Group reviews its contracts and agreements on an annual
basis for the impact of IFRS 16. The Group has such short duration
leases and lease payments are charged to the income statement with
the exception of the Group's lease for the Freiberg office and core
shed.
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in
the lease unless (as is typically the case) this is not readily
determinable, in which case the group's incremental borrowing rate
on commencement of the lease is used. Variable lease payments are
only included in the measurement of the lease liability if they
depend on an index or rate. In such cases, the initial measurement
of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments
are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease
liability also includes:
-- amounts expected to be payable under any residual value guarantee;
-- the exercise price of any purchase option granted in favour
of the group if it is reasonably certain to assess that option;
-- any penalties payable for terminating the lease, if the term
of the lease has been estimated on the basis of termination option
being exercised.
Right of use assets are initially measured at the amount of the
lease liability, reduced for any lease incentives received, and
increased for:
-- lease payments made at or before commencement of the lease;
-- initial direct costs incurred; and
-- the amount of any provision recognised where the group is
contractually required to dismantle, remove or restore the leased
asset
Subsequent to initial measurement lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset
if, rarely, this is judged to be shorter than the lease term.
1.11 Financial assets
Financial assets are recognised in the group's and company's
statement of financial position when the group and company become
party to the contractual provisions of the instrument.
Financial assets are classified into specified categories at
initial recognition and subsequently measured at amortised cost,
fair value through other comprehensive income, or fair value
through profit or loss. The classification of financial assets at
initial recognition that are debt instruments depends on the
financial assets cash flow characteristics and the business model
for managing them.
Financial assets are initially measured at fair value plus
transaction costs. In order for a financial asset to be classified
and measured at amortised cost, it needs to give rise to cash flows
that are "solely payments of principal and interest SPPI" on the
principal amount outstanding.
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured
using the effective interest rate method and are subject to
impairment. The group's and company's financial assets at amortised
cost comprise trade and other receivables and cash and cash
equivalents.
Interest is recognised by applying the effective interest rate,
except for short-term receivables when the recognition of interest
would be immaterial. The effective interest method is a method of
calculating the amortised cost of a debt instrument and of
allocating the interest income over the relevant period. The
effective interest rate is the rate that exactly discounts
estimated future cash receipts through the expected life of the
debt instrument to the net carrying amount on initial
recognition.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at
each reporting end date.
Financial assets are impaired where there is objective evidence
that, as a result of one or more events that occurred after the
initial recognition of the financial asset, the estimated future
cash flows of the investment have been affected.
Derecognition of financial assets
Financial assets are derecognised only when the contractual
rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and
rewards of ownership to another entity.
Financial liabilities
Other financial liabilities
Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs. They are
subsequently measured at amortised cost using the effective
interest method, with interest expense recognised on an effective
yield basis.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability to the net
carrying amount on initial recognition.
Derecognition of financial liabilities
Financial liabilities are derecognised when the group's
contractual obligations expire or are discharged or cancelled.
1.12 Equity instruments
Equity instruments issued by the group are recorded at the
proceeds received, net of direct issue costs.
1.13 Employee benefits
The costs of short-term employee benefits are recognised as a
liability and an expense, unless those costs are required to be
recognised as part of the cost of non-current assets.
The cost of any unused holiday entitlement is recognised in the
period in which the employee's services are received.
Termination benefits are recognised immediately as an expense
when the group and company is demonstrably committed to terminate
the employment of an employee or to provide termination
benefits.
1.14 Retirement benefits
Payments to defined contribution retirement benefit schemes are
charged as an expense as they fall due.
1.15 Equity
Share capital
Ordinary shares are classified as equity.
Share premium
Share premium represents the excess of the issue price over the
par value on shares issued. Incremental costs directly attributable
to the issue of new ordinary shares or options are shown in equity
as a deduction, net of tax, from the proceeds.
Merger reserve
A merger reserve was created on purchase of the entire share
capital of Erris Resources (Exploration) Ltd which was completed by
way of a share for share exchange and which has been treated as a
group reconstruction and accounted for using the reverse merger
accounting method.
Share-based payment reserve
The share-based payment reserve is used to recognise the fair
value of equity-settled share-based payment transactions.
1.16 Share-based payments
Equity-settled share-based payments with employees and others
providing services are measured at the fair value of the equity
instruments at the grant date. Fair value is measured by use of an
appropriate pricing model. Equity-settled share-based payment
transactions with other parties are measured at the fair value of
the goods and services, except where the fair value cannot be
estimated reliably, in which case they are valued at the fair value
of the equity instrument granted.
The fair value determined at the grant date is expensed on a
straight-line basis over the vesting period, based on the estimate
of shares that will eventually vest. A corresponding adjustment is
made to equity.
When the terms and conditions of equity-settled share-based
payments at the time they were granted are subsequently modified,
the fair value of the share-based payment under the original terms
and conditions and under the modified terms and conditions are both
determined at the date of the modification. Any excess of the
modified fair value over the original fair value is recognised over
the remaining vesting period in addition to the grant date fair
value of the original share-based payment. The share-based payment
expense is not adjusted if the modified fair value is less than the
original fair value.
Cancellations or settlements (including those resulting from
employee redundancies) are treated as an acceleration of vesting
and the amount that would have been recognised over the remaining
vesting period is recognised immediately.
1.17 Foreign exchange
Foreign currency transactions are translated into the functional
currency using the rates of exchange prevailing at the dates of the
transactions. At each reporting end date, monetary assets and
liabilities that are denominated in foreign currencies are
retranslated at the rates prevailing on the reporting end date.
Gains and losses arising on translation are included in
administrative expenses in the income statement for the period.
The financial statements are presented in the functional
currency of Euros, since the majority of exploration expenditure is
denominated in this currency.
1.18 Exceptional items
Items are disclosed separately in the financial statements where
it is necessary to do so to provide further understanding of the
financial performance of the group. They are items that are
material, either because of their size or nature, or that are
non-recurring.
1.19 Joint Arrangements
Up to 24 June 2021, the Group's core activities in relation to
the Zinnwald Lithium project were conducted through joint
arrangements in which two or more parties have joint control. A
joint arrangement is classified as either a joint operation or a
joint venture, depending on the rights and obligations of the
parties to the arrangement.
Joint operations arise when the Group has a direct ownership
interest in jointly controlled assets and obligations for
liabilities. The Group does not currently hold this type of
arrangement.
Joint ventures arise when the Group has rights to the net assets
of the arrangement. For these arrangements, the Group uses equity
accounting and recognises initial and subsequent investments at
cost, adjusting for the Group's share of the joint venture's income
or loss, dividends received and other comprehensive income
thereafter. When the Group's share of losses in a joint venture
equals or exceeds its interest in a joint venture it does not
recognise further losses. The transactions between the Group and
the joint venture are assessed for recognition in accordance with
IFRS.
No gain on acquisition, comprising the excess of the Group's
share of the net fair value of the investee's identifiable assets
and liabilities over the cost of investment, has been recognised in
profit or loss. The net fair value of the identifiable assets and
liabilities have been adjusted to equal cost.
Joint ventures are tested for impairment whenever objective
evidence indicates that the carrying amount of the investment may
not be recoverable under the equity method of accounting. The
impairment amount is measured as the difference between the
carrying amount of the investment and the higher of its fair value
less costs of disposal and its value in use. Impairment losses are
reversed in subsequent periods if the amount of the loss decreases
and the decrease can be related objectively to an event occurring
after the impairment was recognised.
1.20 Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the Chief Executive Officer, who is
considered to be the group's chief operating decision-maker
('CODM').
1.21 New standards, amendments and interpretations not yet adopted
Aside from the impact of IFRS 16, as noted above, there were no
new standards or amendments to standards adopted by the group and
company during the year which had a material impact on the
financial statements.
At the date of approval of these financial statements, the
following standards and amendments were in issue but not yet
effective, and have not been early adopted:
-- IFRS 4 and IFRS 17 - Insurance Contracts (effective 1 January 2023)
-- IAS 12 amendments - Income Taxes: Deferred tax relating to
single transaction (effective 1 January 2023)
-- IAS 1 amendments - Presentation of Financial Statements:
Classification of Liabilities as Current or Non-Current (effective
1 January 2023)
-- IAS 1 amendments - Presentation of Financial Statements:
Disclosure of Accounting Policies (effective 1 January 2023),
and
-- IAS 8 amendments - Changes in Accounting Estimates and
Errors: Definition of Accounting Estimates (effective 1 January
2023)
There are no other IFRSs or IFRIC interpretations that are not
yet effective that would be expected to have a material impact on
the group or company.
2 Judgements and key sources of estimation uncertainty
In the application of the accounting policies, the directors are
required to make judgements, estimates and assumptions about the
carrying amount of assets and liabilities that are not readily
apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised where the revision
affects only that period, or in the period of the revision and
future periods where the revision affects both current and future
periods.
Critical judgements
The following judgements and estimates have had the most
significant effect on amounts recognised in the financial
statements.
Share-based payments
Estimating fair value for share based payment transactions
requires determination of the most appropriate valuation model,
which depends on the terms and conditions of the grant. This
estimate also requires determination of the most appropriate inputs
to the valuation model including the expected life of the share
option or appreciation right, volatility and dividend yield and
making assumptions about them. For the measurement of the fair
value of equity settled transactions with employees at the grant
date, the Group and Company use the Black Scholes model.
Joint venture investment
The Group applied IFRS 11 to all joint arrangements and
classifies them as either joint operations or joint ventures,
depending on the contractual rights and obligations of each
investor. The Group held 50% of the voting rights of its joint
arrangement with SolarWorld AG. The Group determined itself to have
joint control over this arrangement as under the contractual
agreements, unanimous consent is required from all parties to the
agreements for certain key strategic, operating, investing and
financing policies. The Group's joint arrangement was structured
through a limited liability entity, Deutsche Lithium GmbH, and
provided the Group and SolarWorld AG (parties to the joint venture
agreement) with rights to the net assets of Deutsche Lithium under
the arrangements. Therefore, this arrangement was classified as a
joint venture up to 24 June 2021 when the Company acquired the
remaining 50% of Deutsche Lithium and thereafter consolidated its
full results.
The investment was assessed at each reporting period date for
impairment. An impairment is recognised if there is objective
evidence that events after the recognition of the investment have
had an impact on the estimated future cash flows which can be
reliably estimated. In addition, the assessment as to whether
economically recoverable reserves exist is itself an estimation
process. Under IFRS 3, on acquisition of the additional stake in
the joint venture, the Company remeasured the fair value of its
original investment in the joint venture and recognised a gain.
Impairment of Capitalised Exploration Costs
Group capitalised exploration costs had a carrying value as at
31 December 2022 of EUR18,966,165 (2021: EUR16,165,085), which
solely relate to the Zinnwald Lithium Project, Management tests
annually whether capitalised exploration costs have a carrying
value in accordance with the accounting policy stated in note 1.6.
Each exploration project is subject to a review either by a
consultant or an appropriately experienced Director to determine if
the exploration results returned to date warrant further
exploration expenditure and have the potential to result in an
economic discovery. This review takes into consideration long-term
metal prices, anticipated resource volumes and grades, permitting
and infrastructure as well as the likelihood of on-going funding
from joint venture partners. In the event that a project does not
represent an economic exploration target and results indicate that
there is no additional upside, or that future funding from joint
venture partners is unlikely, a decision will be made to
discontinue exploration.
In Germany, Deutsche Lithium's core mining license at Zinnwald
is valid to 31 December 2047, which underpins the PEA published in
September 2022 . Deutsche Lithium has additional exploration
licenses at Falkenhaim (recently renewed for a further three years
to 31 December 2025) , at Altenberg to 15 February 2024 and at
Sadisdorf to 30 June 2026. The PEA showed a material increase in
size and output of the Project and underpinned a pre-tax NPV of
$1.6m and a post-tax NPV of $1.0m and post-tax IRR of 29%.
Accordingly, the Board has concluded that no impairment charge is
required for these assets.
In Ireland, the Group retains a single license at the Abbeytown
Zinc Project (PL 3735), which is valid to 2025. The historic
exploration work identified excellent mineralisation in its drill
holes and the metallurgical review has shown a good quality
concentrate can be produced. The Group is no longer focussed on
Ireland and put the license on care and maintenance in 2021 whilst
it looked for a Partner to take the asset forward. The Company
fully impaired the carrying value of this asset in its 2021
accounts and accordingly no further impairments are required. In
March 2023, the Group announced that it would be selling the
Abbeytown Project to Ocean Partners Ltd in return for a 1% Net
Smelter Royalty and a EUR200,000 payment due six months after the
start of commercial production.
In Sweden, in 2021 the Company surrendered all assets and
licenses to the Swedish authorities. The assets had been fully
impaired in previous periods and all balances have been removed
from the Group accounts in 2022.
3 Financial Risk and Capital Risk Management
The Group's and Company's activities expose it to a variety of
financial risks: market risk (primarily currency risks), credit
risk and liquidity risk. The overall risk management programme
focusses on currency and working capital management.
Foreign Exchange Risk
The Company operates internationally and is exposed to foreign
exchange risk arising from one main currency exposure, namely GBP
for its Head Office costs and the value of its shares for
fund-raising and Euros for a material part of its operating
expenditure. The Group's Treasury risk management policy is
currently to hold most of its cash reserves in Euros, as the
majority of its current and planned expenditure will be on the
Zinnwald Lithium Project in Germany. The Company took advantage of
the strong GBP:Euro exchange rate at the end of 2021 to convert
GBP5m of cash raised in December 2021 into Euros to match its
planned spend for 2022.
Credit and Interest Rate Risk
The Group and Company have no borrowings and a low level of
trade creditors and have minimal credit or interest rate risk
exposure. The Group's cash and cash equivalents is held at major
financial institutions.
Working Capital and Liquidity Risk
Cashflow and working capital forecasting is performed in the
operating entities of the Group and consolidated at a Group level
basis for monthly reporting to the Board. The Directors monitor
these reports and rolling forecasts to ensure the Group has
sufficient cash to meet its operational needs. The Board has a
policy of maintaining at least a GBP 0.5m cash reserve headroom.
The Group has no material fixed cost overheads other than its costs
of being listed on the AIM market and its lease in Freiberg. None
of its employee contracts have notice periods of longer than six
months and its exploration expenditure is inherently
discretionary.
4 Segmental reporting
The Group operates principally in the UK and Germany with a
largely dormant subsidiary in Ireland. Activities in the UK include
the Head Office corporate and administrative costs whilst the
activities in Germany relate to the work done by Deutsche Lithium
on the Group's primary asset of the Zinnwald Lithium Project. The
reports used by the Board and Management are based on these
geographical segments. As noted earlier, the results of Germany
were reported as an Investment in Joint Venture for the period to
24 June 2021, and from thereon are reported on a fully consolidated
basis. Non-core Assets primarily relates to the historic Abbeytown
Zinc Project.
Non-core Germany UK Total
Assets
2022 2022 2022 2022
EUR EUR EUR EUR
Administrative expenses (6,308) (453,620) (1,364,522) (1,824,450)
Share based payment
charge - - (545,225) (545,225)
Project impairment - - - -
Gain/loss on foreign
exchange - - (25,679) (25,679)
Other operating income - 42,948 191 43,139
Loss from operations
per reportable segment (6,308) (410,672) (1,935,235) (2,352,215)
Reportable segment assets 8,837 19,225,340 3,719,181 22,953,358
Reportable segment liabilities - 1,855,795 296,677 2,154,472
Non-core Germany UK Total
Assets
2021 2021 2021 2021
EUR EUR EUR EUR
Administrative expenses (6,270) (151,979) (1,206,383) (1,364,632
Share based payment
charge - - (7779) (7779)
Project impairment (1,583,566) - - (1,583,566)
Gain/loss on foreign
exchange (1) - 242,099 242,098
Other operating income - 779 1,038,707 1,039,486
Share of loss from joint
venture - (52,911) - (52,911)
Loss from operations
per reportable segment (1,589,837) (204,111) 66,644 (1,727,304)
Reportable segment assets 15,144 16,242,874 8,369,525 24,627,543
Reportable segment liabilities - 1,664,143 357,386 2,021,529
5 Operating loss
Group
2022 2021
EUR EUR
Operating loss for the year is stated
after charging / (crediting)
Exchange (gains)/losses 25,679 (242,098)
Depreciation of property, plant and equipment 49,990 7,077
Depreciation of Right of Use Assets 93,405
Amortisation of intangible assets 995 829
Ireland and Sweden exploration projects
impairment - 1,583,566
Share-based payment expense 545,225 7,779
Operating lease charges 70,591 39,098
Exploration costs expensed 412,722 143,735
6 Auditor's remuneration
Fees payables to the company's auditor and associates 2022 2021
EUR EUR
For audit services
Audit of group, parent company and subsidiary
undertakings 62,774 41,952
For other services
Taxation compliance services 4,343 3,500
7 Other gains and losses
2022 2021
EUR EUR
Gain on re-measurement of initial 50% interest
in Deutsche Lithium - 1,038,252
8 Employees
The average monthly number of persons (including directors)
employed by the group and company during the year was:
Group Company
2022 2021 2022 2021
Number Number Number Number
Directors 5 5 5 5
Employees 14 6 1 -
19 11 6 5
Their aggregate remuneration Group Company
comprised
2022 2021 2022 2021
EUR EUR EUR EUR
Wages and salaries 1,300,065 870,447 709,370 589,688
Social security costs 142,586 111,925 86,266 71,302
Pension costs 98,457 38,005 52,067 38,005
1,541,109 1,020,377 847,703 698,995
Aggregate remuneration expenses of the group include EUR559 516
(2021: EUR225,499) of costs capitalised and included within
non-current assets of the group.
Aggregate remuneration expenses of the company include EURnil
(2021: EURNil) of costs capitalised and included within non-current
assets of the group.
Directors' remuneration is disclosed in note 32 .
9 Finance income
Group
2022 2021
EUR EUR
Interest income
Interest on bank deposits 191 455
10 Share of results in Joint Venture
Group
2022 2021
EUR EUR
Share of loss in joint venture - (52,911)
11 Impairments
Impairment tests have been carried out where appropriate and the
following impairment losses have been recognised in profit or
loss:
2022 2021
Notes EUR EUR
In respect of
Intangible assets 14 - 1,583,566
Recognised in
Administrative expenses - 1,583,566
The impairment losses in respect of financial assets are
recognised in other gains and losses in the income statement.
12 Taxation
Group
2022 2021
EUR EUR
Loss before taxation (2,352,215) (1,727,304)
Expected tax credit based on the standard rate
of corporation tax in the UK of 19.00% (2021:
19.00%) (446,921) (328,188)
Disallowable expenses 171,828 11,531
Non-taxable gains - (197,268)
Unutilised tax losses carried forward 275,093 513,925
Taxation (credit) / charge for the year - -
Losses available to carry forward amount to EUR5,525,000 (2021:
EUR3,730,000). No deferred tax asset has been recognised on these
losses, as the probability of available future taxable profits is
not currently quantifiable.
13 Earnings per share
2022 2021
EUR EUR
Weighted average number of ordinary shares
for basic earnings per share 293,395,464 232,669,857
Effect of dilutive potential ordinary shares
* Weighted average number of outstanding share options 5,695,342 2,265,890
Weighted average number of ordinary shares
for diluted earnings per share 299,090,806 234,935,747
Earnings
Continuing operations (2,352,215) (1,727,304)
Loss for the period for continuing operations
Earnings for basic and diluted earnings per
share distributable to equity shareholders
of the company (2,352,215) (1,727,304)
Earnings per share for continuing operations
Basic and diluted earnings per share
Basic earnings per share (0.80) (0.74)
There is no difference between the basic and diluted earnings
per share for the period ended 31 December 2022 or 2021 as the
effect of the exercise of options would be anti-dilutive.
14 Intangible Assets
Group Goodwill Germany Ireland Total
Exploration and Evaluation
costs
EUR EUR EUR EUR
Cost
At 1 January 2021 - - 2,023,706 2,023,706
Revaluation - on acquisition
of subsidiary 1,038,252 - - 1,038,252
Additions on acquisition
of subsidiary 4,493,222 8,303,416 - 12,796,638
Reallocated to Germany E&E
assets (5,531,474) 5,531,474 - -
Deferred tax provision on
fair value - 1,382,868 - 1,382,868
Additions - group funded - 948,156 35,566 983,822
At 31 December 2021 - 16,165,914 2,059,272 18,225,286
Additions - group funded - 2,802,075 - 2,802,075
At 31 December 2022 - 18,967,989 2,059,272 21,027,261
Amortisation and impairment
At 1 January 2022 - 829 2,059,272 2,060,101
Amortisation charged for
the year - 995 - 995
At 31 December 2022 - 1,824 2,059,272 2,061,096
Carrying amount
At 31 December 2022 - 18,966,165 - 18,966,165
At 31 December 2021 - 16,165,085 - 16,165,085
Intangible assets comprise capitalised exploration and
evaluation costs (direct costs, licence fees and fixed salary /
consultant costs) of the Zinnwald Lithium project in Germany, as
well as the now fully impaired Ireland Zinc Project. The licenses
for the old Sweden Gold Projects were returned to the Swedish
authorities in 2021 and accordingly are excluded.
The Company has had no directly owned intangible assets since
2020.
15 Property plant and equipment
Group Leasehold, Fixtures, Motor vehicles Total
land and fittings
buildings and equipment
EUR EUR EUR EUR
Cost
At 1 January 2022 9,817 24,642 32,427 66,886
Additions - group funded 31,173 263,695 56,349 351,217
Disposals - group - (10,864) (22,183) (33,047)
Exchange adjustments - (278) - (278)
At 31 December 2022 40,990 277,195 66,593 384,778
Depreciation and impairment
At 1 January 2022 - 13,143 5,122 18,265
Depreciation charged for the
year - 37,498 12,492 49,990
Depreciation on disposals - (10,864) - (10,864)
Exchange adjustments - (141) - (141)
At 31 December 2022 - 39,636 17,614 57,250
Carrying amount
At 31 December 2022 40,990 237,559 48,979 327,528
At 31 December 2021 9,817 11,499 27,305 48,621
Company Computers
EUR
Cost
At 1 January 2022 4,665
Additions - group funded 696
Exchange adjustments (278)
At 31 December 2022 5,083
Depreciation and impairment
At 1 January 2022 1,364
Depreciation charged for the
year 1,291
Exchange adjustments (139)
At 31 December 2022 2,516
Carrying amount
At 31 December 2022 2,567
At 31 December 2021 3,301
16 Right of Use Assets and Lease Liabilities
In May 2022, Deutsche Lithium GmbH entered into a commercial
lease agreement for and office and core shed property in Freiberg,
Germany. The duration of the lease is for 2 years. The instalments
for the lease are EUR12,000 per month, fixed for the duration of
the lease.
The right of use asset and lease liability was recognised on 1
May 2022 on inception of the lease. Movements in the period are
shown as follows:
EUR
Right of use asset
Initial Recognition on 1 May 2022 278,690
Depreciation charged in the period (93,405)
Balance as at 31 December 2022 185,285
Lease Liability
Initial Recognition on 1 May 2022 266,690
Interest charged for the period 5,254
Lease payments in the period (84,000)
Balance as at 31 December 2022 187,944
* Recognised in Short Term Payables 140,149
* Recognised in Payables >1 year 47,795
17 Fixed asset investments
Company 2022 2021
EUR EUR
Investments in subsidiaries 14,523,375 14,523,375
Investments in subsidiaries are recorded at cost, which is the
fair value of the consideration paid.
Movement in non-current investments
Shares in group undertakings
Cost
At 1 January 2022 and at 31 December 2022 14,523,375
Carrying amount
At 31 December 2021 and at 31 December 2022 14,523,375
The investment in Deutsche Lithium Holdings Ltd comprises the
following balances
EUR
Original investment in DLH - Prior to AIM IPO in 2017
Initial acquisition of shares in Erris Resources Ltd
(now DLH) 169,089
Acquisition of remaining 50% of Deutsche Lithium GmbH
Carrying value of investment in Deutsche Lithium GmbH
at 24 June 2021 4,534,972
Shares issued to acquire the remaining 50% 7,281,062
Cash paid to acquire the remaining 50% 1,500,000
Fair Value adjustment on revaluation 1,038,252
Value of Investment 14,523,375
Remeasurement of fair value of initial holding in Deutsche
Lithium
Under IFRS 3, on acquisition of the controlling stake, the
Company remeasured the fair value of its original investment in
Deutsche Lithium. In terms of calculating that revaluation and any
resulting gain or loss, the Directors noted that both transactions
were conducted on an arms-length basis with unconnected
third-parties. The Directors considered that there was a
significant control premium in acquiring the second 50% of Deutsche
Lithium and used an estimate of 30% in its calculations of the
revaluation of the fair value of the initial shareholding.
EUR EUR
Control premium (30%)
Value of second acquisition 8,781,062 of Net Value 2,388,525
Fair Value of original
Less: Cash in company (486,213) investment 5,573,224
Less: Free Carry eliminated (333,100) Cash 486,213
Release of obligation 333,100
Net Value of second acquisition 7,961,749 Value of second Acquisition 8,781,062
Carrying Value at 24 June
2021 4,534,972
Gain recognised on revaluation 1,038,252
On consolidation as at 24 June 2021, a calculation was required
under normal acquisition rules to calculate the goodwill arising at
the date of acquisition, but taking into consideration the 50%
already owned at that date. The previously held 50% investment in
Deutsche Lithium at Fair Value is derecognised and replaced with
the assets and liabilities of Deutsche Lithium, so that going
forward it is consolidated in full as normal as a subsidiary
undertaking. The Directors have concluded that there should be no
adjustment to the carrying value of Deutsche Lithium's Net Assets.
The Directors undertook a detailed review of Deutsche Lithium's
balance sheet at the time of the Company's acquisition of the
remaining 50% of Deutsche Lithium it did not own and concluded that
no adjustments were required. Since that date, Deutsche Lithium has
continued with the same accounting policies, which are in
accordance with those of the Company.
Fair Value of consideration given to acquire the controlling EUR
interest
Cash payment of EUR1.5m 1,500,000
Issuance of 49,999,996 new ordinary shares 7,281,062
Total consideration 8,781,062
Fair value of 50% investment in Deutsche Lithium as at
24 June 2021 5,573,224
14,354,286
Fair value of net assets acquired in Deutsche Lithium as
at 24 June 2021 (8,822,812)
Goodwill - re-allocated to Deutsche Lithium intangible
exploration assets at 31 December 2021 5,531,474
18 Trade and other receivables - credit risk
Fair value of trade and other receivables
The directors consider that the carrying amount of trade and
other receivables is equal to their fair value.
No significant balances are impaired at the reporting end
date.
19 Financial Instruments
Group Company
2022 2021 2022 2021
EUR EUR EUR EUR
Financial instruments at
amortised cost
Trade and other receivables 309,795 121,845 5,204,018 1,233,814
Cash and bank balances 3,164,585 8,291,991 2,748,145 7,998,680
3,474,380 8,413,836 7,952,163 9,232,494
Financial liabilities at
amortised cost
Trade and other payables 583,660 614,859 75,780 270,430
583,660 614,859 75,780 270,430
20 Trade and other receivables
Group Company
2022 2021 2022 2021
Amounts falling due within EUR EUR EUR EUR
one year:
Amounts owed by group undertakings - - 5,157,859 1,179,869
Other receivables 248,692 83,982 14,026 21,891
Prepayments and accrued income 61,103 37,863 32,133 32,054
309,795 121,845 5,204,018 1,233,814
Other receivables primarily comprise VAT recoverable, which were
received following the year end.
The carrying amounts of the Group and Company's trade and other
receivables are denominated in the following currencies:
Group Company
2022 2021 2022 2021
Euros 256,008 63,591 271,911 156,367
British Pounds 53,787 58,254 4,932,107 1,077,447
309,795 121,845 5,204,018 1,233,814
21 Trade and other payables
Group Company
2022 2021 2022 2021
Amounts falling due within EUR EUR EUR EUR
one year:
Trade payables 321,277 313,391 10,468 66,498
Other taxation and social security 34,974 23,802 34,974 23,802
Other payables 13,082 13,509 - -
Accruals and deferred income 214,327 287,958 65,312 180,130
583,660 638,660 110,754 270,430
All Trade payables have been settled since the year end.
The carrying amounts of the Group and Company's current
liabilities are denominated in the following currencies:
Group Company
2022 2021 2022 2021
Euros 459,637 330,443 -
British Pounds 124,023 308,217 270,430
583,660 638,660 270,430
22 Deferred taxation
The following are the major deferred tax liabilities and assets
recognised by the group and company, and movements thereon:
Group Liabilities Liabilities
2022 2021
EUR EUR
Deutsche Lithium intangible assets -
fair value adjustment 1,382,868 1,382,868
The deferred tax liability set out above relates to a 25%
provision made on the fair value uplift of the company's
acquisition of control of Deutsche Lithium GmbH.
23 Retirement benefit schemes
Defined contribution scheme 2022 2021
EUR EUR
Charge to profit or loss in respect of
defined contribution schemes 52,067 38,005
A defined contribution pension scheme is operated for all
qualifying employees. The assets of the scheme are held separately
from those of the group in an independently administered fund.
24 Share based Incentives
The Directors believe that the success of the Group will depend
to a significant degree on the performance of the Group's senior
management team. The Directors also recognise the importance of
ensuring that the management team are well motivated and identify
closely with the success of the Group. The Company adopted an
initial Share Option Plan in December 2017 and will continue to
issue options to key employees, consultants and Non-Executive
Directors. In October 2020, the Company's shareholders approved two
additional new short-term and long-term incentive schemes for
Executive Management, the key terms of which are detailed in the
Remuneration Committee report.
Share Option Plan (2017)
Movements in the number of share options, under the Share Option
Plan (2017), outstanding and their related weighted average
exercise prices are as follows:
Year ended 31 December 2022 Year ended 31 December
2021
Average exercise Number of Average exercise Number
price in GBP Options price in GBP of Options
per share per share
At beginning of GBP0.0920 1,900,000 GBP0.094 3.350.000
year
Granted during GBP0.1810 4,000,000 - -
the year
Lapsed during the
year GBP0.0965 (1,700,000) GBP0.085 (300,000)
Exercised during
the year - - - (1,150,000)
At end of year GBP0.1748 4,200,000 GBP0.092 1,900,000
Exercisable at
the year end 1,533,333 1,900,000
Weighted average remaining exercise
period, years 3.99 1.27
Option classification
Issue Date No of Options Exercise Expiry Date
Price
29 October 200,000 GBP0.05 28 October
2020 2025
15 January 4,000,000 GBP0.1810 15 January
2022 2027
4,200,000 GBP0.1748
RSU Scheme (2020)
The first awards of RSUs under the new scheme were made on 15
January 2022 relating to the initial performance period from 1
October 2020 to 31 December 2021. A total of 1,909,531 RSUs were
issued, which will be included on the register for next year's
disclosure.
Movements in the number of RSUs, under the RSU Plan (2020),
outstanding and their related weighted average exercise prices are
as follows
Year ended 31 December Year ended 31 December
2022 2021
Ave Exercise Options Ave Exercise Options
Price Price
Beginning of Period - - - -
Granted n/a 1,909,531 - -
Lapsed - - - -
Exercised - - - -
At end of period n/a 1,909,531 - -
Weighted Ave remaining 1.50 -
yrs
RSU Classification
Issue Date No of RSUs Vesting date
15 Jan-22 1,909,531 16 January 2024
The awards of 3,406,780 RSUs for the 2022 Performance Period
will be issued in March 2023 following publication of these
accounts.
PSU Scheme (2020)
The first awards of PSUs under the new scheme are expected to be
issued in January 2024, based on the initial performance period
from 1 October 2020 to 31 December 2023. The maximum potential
issuance under the first performance period is 6.000,000 PSUs, if
all performance metrics are achieved.
The second awards of PSUs will be made in January 2025 relating
to the second performance period from 1 January 2022 to 31 December
2024.
The third awards of PSUs will be made in January 2026 relating
to the third performance period from 1 January 2023 to 31 December
2025.
25 Share based payment transactions
Group Company
2022 2021 2022 2021
EUR EUR EUR EUR
Expenses recognised in the
year
Options issued under the Share
Option Plan (2017) 347,400 7,779 347,400 7,779
RSUs issued under the RSU Scheme
(2020) 197,825 - 197,825 -
545,225 7,779 545,225 7,779
Awards made under the various share incentive schemes will be
expensed over the relevant vesting periods for each scheme.
26 Share Capital
Group and Company
2022 2021
Ordinary share capital EUR EUR
Issued and fully paid
293,395,464 ordinary shares of 1p each 3,316,249 3,316,249
3,316,249 3,316,249
The Group's share capital is issued in GBP GBP but is converted
into the functional currency of the Group (Euros) at the date of
issue of the shares.
Reconciliation of movements during the year:
Ordinary Ordinary
Number Value
EUR EUR
Ordinary shares of 1p each
At 1 January 2022 293,395,464 3,316,249
Issue of fully paid shares (cash subscription) - -
At 31 December 2022 293,395,464 3,316,249
27 Share Premium account
Group Company
2022 2021 2022 2021
EUR EUR EUR EUR
At beginning of year 20,289,487 7,362,699 20,289,487 7,362,699
Issue of new shares - 13,114,010 - 13,114,010
Exercise of share options - 103,806 - 103,806
Share issue expenses - (291,028) - (291,028)
20,289,487 20,289,487 20,289,487 20,289,487
In 2020, the Company's share premium account was cancelled by
Special Resolution and by Court Order on 15 September 2020 and the
funds were converted to retained earnings.
28 Other reserves
Merger reserve Share based Translation Total
payment reserve reserve
Group EUR EUR EUR EUR
At 1 January 2021 688,732 126,070 19 814,821
Additions - 7,779 181 7,960
At 31 December 2021 688,732 133,849 200 822,781
Additions - 545,225 (138) 545,087
At 31 December 2022 688,732 679,074 62 1,367,868
A merger reserve was created in 2017 on the purchase of the
entire share capital of Erris Resources (Exploration) Ltd (now
renamed Deutsche Lithium Holdings Ltd) which was completed by way
of a share for share exchange and which has been treated as a group
reconstruction and accounted for using the reverse merger
accounting method.
Share based Translation Total
payment reserve reserve
Company EUR EUR EUR
At 1 January 2021 126,070 19 126,089
Additions 7,779 181 7,960
At 31 December 2021 133,849 200 134,049
Additions 545,225 (138) 545,087
At 31 December 2022 679,074 62 679,136
29 Financial commitments, guarantees and contingent liabilities
Bacanora Royalty Agreement
The Company and Bacanora entered into on completion of the
Acquisition a royalty agreement which provides, that the Company
agrees to pay Bacanora a royalty of 2 per cent. of the net profit
received by the Company pursuant to its 50 per cent. shareholding
in Deutsche Lithium and earned in relation to the sale of lithium
products or minerals by Deutsche Lithium's projects on the Zinnwald
and Falkenhain licence areas. The royalty fee shall be paid in
Euros and paid by Deutsche Lithium half yearly. The agreement is
for an initial term of 40 years and shall automatically extend for
additional 20-year terms until mining and processing operations
cease at Deutsche Lithium's projects at the Zinnwald and Falkenhain
licence areas. The Company has undertaken to Bacanora to abide by
certain obligations in relation to Deutsche Lithium's projects at
the Zinnwald and Falkenhain licence areas such as complying with
applicable laws and ensure that these projects are operated in
accordance with the underlying licences and concessions granted to
Deutsche Lithium. The Company shall have the right, but not the
obligation, to extinguish at any time its right to pay a royalty
fee to Bacanora prior to the expiry of the term by paying a one-off
payment of EUR2,000,000.
Whilst the Directors acknowledge this contingent liability, at
this stage, it is not considered that the outcome can be considered
probable or reasonably estimable and hence no provision has been
made in the financial statements. The Directors note that the
Royalty is only applicable to 50% of Deutsche Lithium's production
and does not apply to the additional 50% of Deutsche Lithium
acquired by the Company in June 2021. The Directors also note that
the Royalty obligation will remain due to Bacanora after the
completion of the acquisition of Bacanora by Ganfeng Lithium
Limited.
Osisko Royalty Agreements
Deutsche Lithium Holdings Ltd ("DLH", formerly Erris Resources
(Exploration) Ltd ("ERL") entered into Osisko Royalty Agreement 1
with Osisko on 16 September 2016 pursuant to which it granted a
royalty to Osisko for a 1 per cent. net smelter return on the sale
or disposition of all minerals provided from the Abbeytown Project.
The royalty is based on published spot prices in relation to
minerals delivered for processing and actual amounts received where
raw ore or concentrates are sold. Osisko shall be entitled to elect
to receive the royalty on precious metals in kind rather than cash.
This royalty was granted to Osisko in consideration of Osisko's
payment of C$500,000 to DLH. The royalty is perpetual and as such
the agreement (and obligation on DLH to pay the royalty) shall
continue indefinitely. Whilst the Directors acknowledge this
contingent liability, at this stage, it is not considered that the
outcome can be considered probable or reasonably estimable and
hence no provision has been made in the financial statements. On 13
March 2023, the Company announced an agreement to sell Erris Zinc
Ltd, which owns the Abbeytown Project to Ocean Partners Ltd. As
part of this transaction, this Royalty will be novated from DLH to
Erris Zinc Ltd ahead of completion of the sale.
The Osisko royalty does not apply to the Zinnwald Lithium
project.
30 Retained earnings
Group Company
2022 2021 2022 2021
EUR EUR EUR EUR
At the beginning of the year (1,822,503) (95,199) (251,044) 989,461
Loss for the year (2,352,215) (1,727,304) (1,666,477) (1,240,505)
At the end of the year (4,174,718) (1,822,503) (1,917,521) (251,044)
31 Events after the reporting date
On 30 January 2023, the Company announced the first drill hole
results from the planned 10 hole exploration dill hole campaign at
Falkenhain. This first drill hole was completed to a depth of 600m
and the assay results showed significant intercepts of thick
high-grade lithium mineralisation including 80m at an average 2,879
ppm Li and 51m at an average 3,421 ppm Li.
On 6 February 2023, the Company appointed Tamesis Partners LLP
as joint corporate broker and they published the first independent
research note on the Company. Tamesis is a specialist ECM and
advisory house with a focus on the mining sector. Tamesis will
support the Company with research coverage and access to an
incremental audience of institutional and strategic investors.
On 13 March 2023, the Company announced the terms of an
acquisition agreement with Ocean Partners Ltd for them to acquire
Erris Zinc Ltd, the owner of the Abbeytown Lead-Zinc license in
Ireland. Ocean Partners shall acquire Erris Zinc for EUR1 and
commit to spend EUR130,000 over the next three years to the end of
2025 on exploration work at Abbeytown. Zinnwald shall receive a 1%
Net Smelter Royalty and a EUR200,000 cash payment due six months
after commencement of commercial production from Abbeytown.
Zinnwald shall have the right to buy back Erris Zinc for EUR1 in
March 2025, if the committed exploration spend has not been
made.
32 Related party transactions
Remuneration of key management personnel
The remuneration of key management personnel is as follows.
2022 2021
Remuneration Pension Share Remuneration Pension Share
option option
charge charge
EUR EUR EUR EUR EUR EUR
Jeremy Martin 76,150 - 21,712 58,289 - 3,889
Anton du
Plessis 295,229 29,959 135,222 375,454 26,128 -
Cherif Rifaat 175,732 17,832 62,603 116,578 11,877 -
Graham Brown 46,862 - 13,027 34,974 - 3,890
Peter Secker 46,862 - 13,027 - - -
640,835 47,791 245,593 585,295 38,005 7,779
Transactions with related parties
During the year the group entered into the following
transactions with related parties:
Consultancy and
expenses
2022 2021
EUR EUR
Group
Erris Gold Resources - 14,289
Aggregate consultancy and expenses include EURnil (2020: EURNil)
of costs capitalised and included within non-current assets. There
were no amounts outstanding at the year end.
In 2021, Henry Maxey, a substantial shareholder in the Company,
entered into an agreement with the Company (the "Commitment
Agreement") to subscribe for New Ordinary Shares in the December
2021 Placing for up to a value of GBP4.0 million. The Board
considered that the Commitment Agreement was an important factor in
the Placing proceeding and, as part thereof, therefore issued
258,064 New Ordinary Shares to Mr Maxey, equivalent to
approximately GBP40,000 at the Placing Price.
There were no related party transactions in 2022.
33 Cash (used in)/generated from group operations
2022 2021
EUR EUR
Loss for the year after tax (2,352,215) (1,727,304)
Adjustments for:
Investment income (191) (455)
Lease interest 5,254 -
Gain on disposal of equipment (4,288) -
Impairment of intangible assets in Ireland
and Sweden - 1,583,566
Depreciation of property, plant and equipment 49,990 7,077
Depreciation of Right of Use Assets 93,405 -
Amortisation of intangible assets 995 829
Gain on remeasurement of initial interest
in Joint Venture - (1,038,252)
Share of loss of Joint Venture - 52,911
Equity-settled share-based payment expense 545,225 7,779
Movements in working capital:
(Increase) / decrease in trade and other
receivables (187,951) 79,969
(Decrease) / increase in trade and other
payables (55,000) 538,706
Cash used in operations (1,904,776) (495,174)
34 Cash (used in)/generated from operations - company
2022 2021
EUR EUR
Loss for the year after tax (1,666,477) (1,240,505)
Adjustments for:
Investment income (191) (455)
Group loan impairments - 1,298,726
Gain on remeasurement of initial interest
in Joint Venture - (1,038,252)
Depreciation and impairment of property,
plant and equipment 1,291 (1,039)
Share of loss of Joint Venture - 52,911
Equity-settled share-based payment expense 545,225 7,779
Movements in working capital:
Decrease in trade and other receivables 7,787 27,400
(Decrease)/increase in trade and other payables (159,675) 281,919
Cash used in operations (1,272,040) (609,438)
*ENDS*
For further information visit www.zinnwaldlithium.com or
contact:
Anton du Plessis Zinnwald Lithium info@zinnwaldlithium.com
Cherif Rifaat plc
David Hart Allenby Capital
Dan Dearden-Williams (Nominated Adviser) +44 (0) 20 3328 5656
---------------------- --------------------------------
Michael Seabrook Oberon Capital Ltd
Adam Pollock (Joint Broker) +44 (0) 20 3179 5300
---------------------- --------------------------------
Tamesis Partner
Richard Greenfield LLP
Charles Bendon (Joint Broker) +44 (0) 20 3882 2868
---------------------- --------------------------------
Isabel de Salis St Brides Partners zinnwald@stbridespartners.co.uk
Paul Dulieu (Financial PR)
---------------------- --------------------------------
Notes
AIM quoted Zinnwald Lithium plc (EPIC: ZNWD.L) is focussed on
becoming an important supplier of lithium hydroxide to Europe's
fast-growing battery sector. The Company owns 100% of the Zinnwald
Lithium Project in Germany, which has an approved mining licence,
is located in the heart of Europe's chemical and automotive
industries, and has the potential to be one of Europe's more
advanced battery grade lithium projects.
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END
FR FLFVRVIIFFIV
(END) Dow Jones Newswires
March 22, 2023 13:00 ET (17:00 GMT)
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