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 2024

Zinnwald Lithium plc ('Zinnwald Lithium' or the 'Company')

 

Final Results

 

Rapidly advancing the EU's second largest hard rock lithium project

 

Zinnwald Lithium plc, the European focused lithium company developing the integrated Zinnwald Lithium Project (the 'Project') in Germany, is pleased to announce its final audited results for the year ended 31 December 2023.

 

The Company's Annual Report and Financial Statements for the year ended 31 December 2023 will be posted to shareholders today and will be available on its website www.zinnwaldlithium.com.

 

HIGHLIGHTS

12 Months to 31 December 2023

·    Fundraise of £18.75m completed in March 2023, including AMG Critical Minerals N.V becoming a 25% shareholder.

·    Completed 84 hole, 27,000m in-fill drilling programme.

·    Commenced detailed mine design based on large dimension lithological units.

·    Completed mineral processing pilot tests in December 2023 confirming good lithium ('Li') recoveries and main stream front end flowsheet design.

·    Commenced basic engineering for the mineral processing flowsheet in December 2023. 

·    Advanced regional exploration strategy with the granting of the Bärenstein exploration licence, the acquisition of the drill core and geological data from the previous holders of the Sadisdorf exploration licence, the start of further exploration drilling at Falkenhain; and the extension of the Altenberg licence to February 2027.

·    Further strengthened the Owners' team in Germany with Marko Uhlig appointed as Managing Director of Zinnwald Lithium GmbH, as well as several key appointments across a number of functional areas including mining engineering, mineral processing and permitting.

·    Appointed Tamesis Partners LLP as joint corporate broker which published its first independent research note on the Company. 

·    Completed sale of Erris Zinc Ltd to Ocean Partners.

·    The closing cash balance for the Group at the period end was €14.3m; as at today's date, the Group's cash balance is €12.3m.

 

Post period end to 21 March 2024

·    Publication of updated Mineral Resource Estimate ('MRE') confirming a 445% increase in tonnes and a 243% increase in contained lithium.

·    MRE and mineral processing testwork confirmed the feasibility of including Albite Granites in production plans.

·    Confirmed Zinnwaldite concentrate suitability for Metso's alkaline process; no additives or high temperatures required to achieve Li-recovery to solution clearly above 95%.

·    Ongoing work to optimise the Project with Bankable Feasibility Study ('BFS') now expected in late 2024 dependent on availability of pilot testing facilities.

 

CHAIRMAN'S STATEMENT

Demand for electric vehicles ('EVs') grew strongly in 2023 despite some coverage in the press to the contrary.  A closer look at the actual numbers indicated that global plug-in vehicle sales reached 14.2 million vehicles, a year-on-year increase of 35%. Plug in vehicles represented ~16% of global light vehicle sales in 2023 against a backdrop of recovering demand for light vehicles generally.  Beyond EV growth as renewable energy technologies become more widespread, lithium-ion batteries have become indispensable for storing this clean energy. Consequently, ensuring a local and sustainable supply of lithium within Europe has become a matter of strategic importance for energy security and economic development.

 

Supporting new lithium mining operations within Europe presents a unique opportunity for local communities to participate in the continent's energy transition. By tapping into domestic lithium resources, Europe can reduce its reliance on imports from countries with uncertain political landscapes and questionable environmental standards to not only enhance the bloc's energy security but also foster economic growth and job creation within local communities.

 

Furthermore, promoting local lithium mining operations aligns with Europe's commitment to environmental sustainability and social responsibility. Unlike some lithium extraction processes in other parts of the world, European mining operations are required to adhere to stringent social and environmental standards and employ eco-friendly practices. With this in mind, by investing in new mining technologies and adhering to strict environmental regulations, we aim to minimise our ecological footprint and mitigate potential negative impacts on local ecosystems and communities to become one of the most sustainable integrated LiOH producers in the world. 

 

Against this backdrop, we were delighted to announce, post period end in February, a 445% increase in the mineral resource estimate ('MRE') at our core license area, which is a brownfield site with some existing infrastructure situated in the old mining region of Saxony, Germany (the 'Project'). This expansion, which takes the total lithium content of the Project to 2.7Mt LCE, solidifies its position as the second largest hard rock lithium project in the EU both in terms of resource size and contained lithium content and underscores its strategic significance within the region.

 

The incorporation of mineralised granite into the resource and subsequent mine planning will enable us to implement more streamlined bulk underground mining methods, which will boost productivity and profitability beyond the projections outlined in the Preliminary Economic Assessment ('PEA') released in 2022.

 

Notably, while the MRE covers the 2.6 km2 core mining license, our exploration rights cover approximately 10 km2 in the area and we hope to identify additional lithium resources which will extend the lifetime of the Project.

 

In terms of the lithium market, 2023 was an interesting year.  By the end of 2022, lithium prices had reached nearly $80,000 per tonne as EV manufacturers and original equipment manufacturers ('OEMs') scrambled to secure lithium sources. This reversed in 2023, and now LiOH prices are hovering at around $13,250 per tonne. In our view, and that of a number of other market commentators, current prices are as unsustainable as the highs of 2022 and as such our expectation is that they will revert to higher levels once inventory across the industry come back in line with historic norms. In addition, our November 2022 PEA suggested operating costs per tonne LiOH of US$6,200, which underscores the viability of the Project even in a weak market.

 

Longer term, analysts suggest that the price of lithium will return to levels around $25,000 to $35,000 per tonne; this is supported by robust demand forecasts. In Europe in particular, demand is forecast to rise by over 300% from 2023 to 2030.  Notably, very little of this demand can be met by domestic projects, even if the majority of them come on stream which is far from certain.  To address this imbalance, the EU should shortly pass into law the Critical Raw Materials Act ('CRMA'), which provides for the possibility to expedite permitting processes and deliver mechanisms to support financing for projects designated as "Strategic".  As our project meets all the criteria for this status, we are hopeful that it will be classified as such.

 

The urgent need for strategic planning and investment in the European lithium supply chain presents a promising opportunity for Zinnwald Lithium as we are hopeful of commencing operations as the supply deficit becomes pronounced.

 

Our focus is therefore on delivering a bankable feasibility study, anticipated in Q4 2024, and thereafter securing funding to build an integrated LiOH project near the heart of Europe's chemical and automotive industries.

 

In summary, the importance of lithium in Europe cannot be overstated, particularly in the context of the continent's transition towards clean energy and sustainable development. We envisage our project playing a key role in helping Europe reach its climate goals and look forward to updating the market as we achieve key milestones during 2024. 

 

Finally, I would like to thank our shareholders and stakeholders for their ongoing support.

 

Jeremy Martin

Non-Executive Chairman

 

THE ZINNWALD LITHIUM PROJECT

The Zinnwald Lithium project is located in east Germany, some 35 km from Dresden and adjacent to the border with the Czech Republic.  The Project concept is for a fully integrated underground mine and associated, on site, mineral and chemical processing to produce a battery grade lithium hydroxide. The Company's business model is predicated around utilising its inherent advantages to enable it to become a sustainable project serving the European lithium market.  Europe does not currently have a domestic source of lithium supply and there are relatively few projects within the EU.  The EU will shortly be passing the CRMA into law and the Company intends to apply for designation as a "Strategic Project" under this legislation as soon as applications start. The Company believes that it has a strong case to meet the key criteria set out in the CRMA to qualify as a Strategic Project, namely:

·    Meaningful contribution to EU Supply.  Zinnwald's 2022 PEA already identifies a 12,000 tpa production (equivalent to up to 800,000 EVs per annum) and a greater than 35-year mine life.  The updated MRE shows the Project shows a significantly increased resource that is the second largest in the EU and should support a materially higher annual production and an even longer mine life. 

·    Technically feasible within reasonable timeframe.  The Company has demonstrated the feasibility of its flowsheet as part of the PEA and has been able to produce multiple kgs of battery grade Lithium hydroxide.  Its flowsheet is based on the integration of individual parts that are well established in other industries.  As part of its forthcoming BFS, the Company is working with one of Europe's largest engineering and production companies, Metso, to potentially integrate its technologies and processes into its own flowsheet. 

·    Implemented sustainably.  The Zinnwald Project is a brownfield mining one in an area that has a tradition of mining stretching back 800 years.  There is extensive infrastructure in the immediate area that could both accelerate the time of construction, as well as offer an opportunity to site some of the mineral processing works underground.  The Project's flowsheet is also designed to minimise waste products, as well as producing co-products (Fertiliser, PCC) that are important to other local industries.  The Project will also be permitted under German / EU regulations, which are probably the most stringent globally from an environmental point of view.

·    Cross border benefits.  The Company is already engaged with consultants, designers and equipment suppliers in other parts of the EU.  The Project will likely source a number of its reagents from suppliers in other EU countries, always taking into account optimal sourcing strategies.  The end product of Lithium Hydroxide could be used in various of the Gigafactories proposed for nearby countries in the EU (e.g.: Poland, Czech) and thereafter back to German and European OEMs, where the finished batteries would be delivered. 

 

Geology and License Areas

The Project is in a granite hosted Sn/W/Li belt that has been mined historically for tin, tungsten and lithium at different times over the past 400 years. Lithium is contained in lithium-bearing mica, which is called "zinnwaldite" takings its name from the nearby village. Several lithium focused projects in Europe are focused on the exploitation of zinnwaldite ore. The Project comprises five license areas:

 

The Zinnwald Mining License

The Zinnwald Mining License covers the core project area where a resource has been defined. The license covers 256.5 ha and is valid to 31 December 2047.  In February 2024, we announced an updated Mineral Resource Estimate at this license area that showed a 445% increase over the previous MRE issued in May 2018, as follows:

·    Measured resource containing 11.3 Mt at a grade of 3,420 ppm Li and an Indicated resource containing 182.2 Mt at a grade of 2,140 ppm This represents approximately 2.3 million tonnes of lithium carbonate equivalent ('LCE') or 429,000 tonnes of contained Lithium.

·    Estimated Inferred Mineral Resources of 33.3 Mt at a grade of 2,140 ppm containing 71,000 t Li metal (approximately 379,000 tonnes LCE).

 

This updated MRE establishes the Project as the second largest resource in the EU and the third largest in Europe as a whole.  The chart below puts the Project in context of the other European hard rock lithium projects.

 

 

Falkenhain, Altenberg, Sadisdorf and Bärenstein exploration licence areas

·    Falkenhain - the licence covers an area of 2,957,000 m² and, in 2022, the licence was extended for a further three years to 31 December 2025.  The Company has commenced a 10 drill-hole exploration programme at this licence area.

·    Altenberg - the licence covers an area of 42,252,700 m² and in October 2023 the term of the licence was extended.to February 2027.  The Company is currently evaluating historical data, which will be used to define new exploration targets in the area.

·    Sadisdorf - the licence covers an area of 2,250,300 m² and is valid to 30 June 2026. Historical exploration work at the Sadisdorf licence by previous licence holders resulted in a December 2017 historic JORC compliant inferred mineral resource of 25 Mt with an average grade of 0.45% Li2O (average 2,053 ppm lithium head grade).  The Company acquired the core and geological data prepared by the previous owners during 2023 and is reviewing and evaluating this data to determine further exploration steps.

·    Barenstein - this licence covers an area of 4,934 hectares and was awarded in July 2023.  As shown in the map below, the Bärenstein licence closes the gap between the Falkenhain and Altenberg licences. This greenfield licence holds significant mineral potential and was historically mined for tin and silver between the 15th and 19th centuries.  The Bärenstein licence area includes land that is being evaluated for the future mining and processing operations of the Project.

 

Project Plans and Timeline

The Group's strategy is to focus on advancing a large scale fully integrated operation that produces battery-grade lithium products; to optimise the Project from a cost perspective; and to minimise the potential impact on the environment and local communities. All aspects of the Project from mining through to production of the end product are planned to be located near to the deposit itself in an area with developed infrastructure, energy sources, services, facilities, and access roads and rail. Power and water are provided by existing regional supply networks.   It is also located close to the heart of the German automotive and chemical industries. 

 

To progress this strategy, the Group has taken a number of steps in the further definition, design and study work required, which culminated in the publication on 7th September 2022 of the "Preliminary Economic Assessment ("PEA") for the revised Zinnwald Lithium Project.  The Company issued its updated MRE in February 2024, as noted above. The Company is now working on its Bankable Feasibility Study to further advance the Project towards construction and operation and expects to issue this in late 2024.

 

PEA Mine Plan

The Project includes an underground mine with a nominal output of approximately 880,000 t/a ore at estimated 3,004 ppm Li and 75,000 t/a barren rock. Ore haulage is via a 7km partly existing network of underground drives and adits from the "Zinnerz Altenberg" tin mine which closed in 1991. The mining operation for the Project is planned as an underground mine development using an access tunnel to access the deposit from its base. This tunnel, a portion of which is pre-existing infrastructure, will also be used  for ore transportation from the mine to the processing area.  Ventilation and emergency access will also be provided by the construction of a ventilation decline and existing shafts.  The estimated mine life covers >35 years of production. The optimisation of bulk-mining methods has been a key consideration to allow increased total mined tonnage. The cross-section shown below indicates the drainage access tunnel, the access tunnel extension and the ventilation decline as well as the historic tailings facility at IAA Bielatal.

 

 

PEA Processing Flowsheet and Metallurgical Testwork

The Zinnwald Lithium Process Plant is designed to process 880,000 dmt/a of ROM feed, at an average grade of 0.30 wt.% Li, to produce a minimum of 12,011 t/a of battery grade LiOH*H2O (equivalent to 10,530 t/a LCE) and 56,887 t/a of K2SO4 and about 16,000 t/a PCC (precipitated calcium carbonate) by-products.  The flowsheet shown below is based on calcium sulfate/calcium carbonate roasting and consists of the following major unit processes. The flowsheet test work has been based on an original 100t lithium-mica greisen ore sample that has produced 50 kg of a reference LiOH product sample as well as for the locked cycle test for process verification as part of the process design work.

 

 

Permitting and Environmental Studies

The overall permitting pathway for the Project is subdivided between processes to be permitted under the Mining Act, which includes the mine, its associated infrastructure and the mechanical separation plant approved under a Mandatory Framework Operation Plan (MFOP) and the Bundesimmissionsschutzgesetz (BImSchG) (Federal Emission Protection Act) and the Water Authority for all aspects relevant to water use, potential for water pollution etc.

 

Economic Analysis in the PEA

The economic analysis included in the PEA (summarised below) demonstrates the financial viability of the Project. Based on the assumptions detailed in this report the Project supports a Pre-tax Net Present Value ("NPV") of US$1.6 billion (at a discount rate of 8%, "NPV8)") and a pre-tax Internal Rate of Return ("IRR") of 39%. The after tax NPV8 is US$1.0 billion and post-tax IRR is 29.3% The Project has a mine life of over 35 years and the payback period is less than four years post commencement of production.  The full report is published on the Company's website at https://www.zinnwaldlithium.com/investors/reports-and-presentations/

 

PEA Key Indicators	Unit	Value
Pre-tax NPV (at 8 % discount)	US$ m	1,605
Pre-tax IRR	%	39.0%
Post-tax NPV (at 8 % discount)	US$ m	1,012
Post-tax IRR	%	29.3%
Simple Payback (years)	Years	3.3
Initial Construction Capital Cost	US$ m	336.5
Average LOM Unit Operating Costs (pre by-product credits)	US$ per tonne LiOH	10,872
Average LOM Unit Operating Costs (post by-product credits)	US$ per tonne LiOH	6,200
Average LOM Revenue	US$ m	320.7
Average Annual EBITDA with by-products	US$ m	192.0
Annual Average LiOH Production	Tonnes per annum	12,011
LiOH Price assumed in model	US$ per tonne	$22,500
Annual Average SOP Production	Tonnes per annum	56,887
Blended SOP Price assumed in model	€ per tonne	875

 

STRATEGIC REPORT

Extracts from the Company's Strategic Report are set out below.

 

Strategic Review

Company Overview - Background and evolution

The Group was originally established in 2012 as a mineral exploration and development company and undertook its IPO on AIM in December 2017. In October 2020, the Company completed its transformation into a lithium-focused development company with the acquisition (via a reverse takeover) of Bacanora Lithium Plc's 50% ownership and joint operational control of Deutsche Lithium GmbH whose principal asset was the Zinnwald Lithium Project. Deutsche Lithium GmbH has subsequently been renamed Zinnwald Lithium GmbH ('ZLG').  In June 2021, the Company completed the acquisition of the remaining 50% of ZLG from SolarWorld AG, a company which had been in administration since 1 August 2017.  This gave the Company full ownership and full operational control of ZLG. 

 

In December 2021, Bacanora distributed its entire holding of 30.9% of the Company's shares to its own shareholders as part of the terms of its takeover by Ganfeng Lithium Ltd.  This expunged most of the agreements between the Company and Bacanora that had been put in place at the time of the reverse takeover. The sole remaining agreement is the Royalty Agreement covering 50% of the Project, which remains in place.

 

Company Strategy

The Zinnwald Lithium Project, as set out above, is the Company's core development asset and the sole focus of the Board and its strategy.  This strategy continues to be underpinned by a technically led team with extensive experience in bringing projects from the feasibility stage through to mine production, as well as the capital markets experience to source the funding required for these types of mining projects.  The Company will focus on further de-risking the Project as it is advanced towards a financing decision. Key work areas include:

·    Expansion of the potential scale of the Project through resource expansion (both at the core licence area and satellite exploration licences), optimised mine planning, including the application of bulk mining techniques and infrastructure and site planning;

·    Further refine the Processing Flowsheet that supports the primary production of battery grade lithium products including improvements in recoveries, reduced waste generation and the production of valuable by-products;

·    Complete a Bankable Feasibility Study on the Project following on from the 2022 PEA;

·    Identification of and negotiation with further long-term cornerstone investors;

·    Identification of and negotiation with off-take partners that could include battery manufacturers, chemical producers or commodity traders;

·    Identification of and negotiation with potential project financing partners that could include banks and national and trans-national development organisations;

·    Advance the plant engineering towards AAC Class 3;

·    Minimising the carbon footprint through project wide optimisation (transport, material flow, flow sheet, site location);

·    Finalisation of the selection of the optimal site locations;

·    Negotiation with the holders (principally the German state) of existing mining infrastructure in the vicinity of the Project that has the potential to enhance the project economics;

·    Advancing the permitting process for the construction and operation of the mine; and

·    Ensuring the social license to operate by extensive public participation.

 

The Company recognises the importance of the general public and NGOs in the permitting processes and has committed to proactively engage with all the stakeholders in its projects.

 

Operational Review

Germany

During 2023 and into 2024, the Group has made significant progress on the Project, including the publication of an updated MRE that showed a 445% increase in tonnes of ore and a 243% increase in contained lithium.  As part of this progress, the Group completed the following matters during the year, and after the year end, to underpin the Project continued development.

 

FUNDRAISE

On 29 March 2023, Zinnwald completed a £18.75m fundraise at a 26% premium to its share price at close on 22 March 2023.  This raise was cornerstoned by AMG, existing significant shareholders, and new German institutional investors.  These funds have enabled the Group to accelerate its various workstreams and will finance it beyond completion of the BFS. As part of the investment from AMG, Zinnwald has welcomed Dr Stefan Scherer to the Board.

 

RESOURCE DEVELOPMENT

In fill and Resource Delineation Drill Programme

The successful fundraise completed at the end of March 2023 enabled the Company to significantly accelerate its resource delineation drilling activities. On 15 September 2023, the Company finished its drill programme at its core Zinnwald Licence area, totalling 26,969m of diamond core drilling across 84 drill holes.  This campaign more than doubled the total number of holes completed in the licence area, including the historic drill campaigns. The Company was able to deploy up to six drill rigs simultaneously, which allowed the completion of the programme within a tight timeframe.  The Company's purpose-built core facility allowed the processing of more than 400 metres of core per week with the achievement of greater than 95% core recovery.  The results of the infill drilling campaign increased the Company's level of confidence in the geological model of the orebody and were published in the updated MRE in February 2024 (see below). 

 

Updated Mineral Resource Estimate

On 21 February 2024, the Company published its updated independent Mineral Resource Estimate ('MRE') that showed a substantial increase in its Mineral Resource at the Project with a 3.4x increase in contained lithium in the Measured and Indicated categories. This establishes the Project as the second largest hard rock lithium project by both resource size and contained lithium in the EU and clearly highlights its scale and strategic importance. 

 

The MRE incorporated 26,911 metres of new diamond core drilling across 84 drill holes and a reinterpreted and updated geological model since the previous MRE which was released in September 2018.  In addition to the high-grade greisen mineralisation, focus of the recent 2022/2023 drilling was the lithium mineralisation hosted by the broader zone of altered albite granite, which includes internal lenses of higher-grade greisen. The inclusion of the mineralised granite in the resource and ultimately the mine plan will allow more efficient bulk underground mining techniques with the potential to meaningfully increase the lithium production from what was contemplated in the PEA published in 2022.  Highlights of the MRE included:

·    A 445 % increase in tonnes and a 243% increase in contained lithium ('Li') in the Measured and Indicated category versus the previous 2018 MRE;

·    Total contained Li of 429kt compared with the 2018 MRE of 125kt in the Measured and Indicated category.

·    11.3 Mt grading 3,420ppm Li (0.736% Li2O) in the Measured category;

·    193.5 Mt grading 2,220ppm Li (0.478% Li2O) in the Measured and Indicated category;

·    33.3 Mt grading 2,140 ppm Li (0.461% Li2O) in the Inferred category;

·    Increase in overall tonnage predominantly due to the incorporation of a broad zone of mineralised granite, as well as contribution of an extra 26,911 metres of new drilling over 84 holes;

·    Measured classification only applied to the external greisen domains due to a higher metallurgical confidence; Snowden Optiro recommends further metallurgical variability testwork in the broad mineralisation zone domain to further increase confidence;

·    Demonstrated dimensions of the mineralised zone (true thickness c. 80 metres) and continuity of ore supports highly efficient mining methods with minimal waste rock production; and

·    Mineral Resources reported using a 1,100ppm Li cutoff grade and a stope optimisation to constrain an RPEEE Resource.

 

The MRE (detailed below) was prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators ("NI 43-101") by independent consulting firm Snowden Optiro Ltd ("Datamine International") of Bristol, United Kingdom.

 

Table ‎0.1, Mineral Resource Statement for Zinnwald Lithium Project, effective 20th February 2024.

 

Classification	Domain	Tonnes	Mean Grade		Contained Metal
		(Mt)	Li (ppm)	Li2O (%)	Li (kt)	LCE (kt)
Measured	External Greisen (1)	11.3	3,420	0.736	39	206
	Mineralised Zone (2)	-	-	-	-	-
	Internal Greisen	-	-	-	-	-
	Mineralised Granite	-	-	-	-	-
	SubTotal (1) and (2)	11.3	3,420	0.736	39	206
Indicated	External Greisen (1)	2.1	3,510	0.756	7	40
	Mineralised Zone (2)	180.0	2,120	0.456	383	2,037
	Internal Greisen	14.6	3,320	0.715	49	259
	Mineralised Granite	165.4	2,020	0.435	334	1,778
	SubTotal (1) and (2)	182.2	2,140	0.461	390	2,077
Measured + Indicated SubTotal		193.5	2,220	0.478	429	2,283
Inferred	External Greisen (1)	0.8	3,510	0.756	3	15
	Mineralised Zone (2)	32.5	2,110	0.454	68	364
	Internal Greisen	0.6	2,880	0.620	2	9
	Mineralised Granite	31.9	2,090	0.450	67	355
	SubTotal (1) and (2)	33.3	2,140	0.461	71	379

 

Mine Planning Activities

As the drilling programme, geological modelling, geotechnical investigations and minerals processing testwork progressed, strategic mine planning was started by the Company and SRK.  This work is ongoing with the laterally and vertically extensive Albite Granite domain that now forms part of the Project's MRE included in the mine plan. 

 

It is envisaged that the revised mine design will incorporate the strategy of higher productivity mining methods, as well as operating the mine using a fully electrified trackless equipment fleet.  This current work focuses on the understanding of key drivers of costs and efficiency across the entire production operation, taking all technical aspects of the Project into consideration. Detailed understanding of geotechnical aspects at Zinnwald as well as downstream process efficiencies and cost assumptions are crucial to adequately determine future metrics defining the Cut-off-Grade ('COG') and optimal production capacity scenarios.

 

Large scale sub-level stoping with subsequent backfill has been determined to be the optimal mining method. Sub-level stoping offers higher capacity, lower operating expenditure and easier backfill process than room and pillar-method assumed in the earlier studies.  The large dimensions of both the High Grade External Greisen domain as well as the Albite Granite domain, now confirmed with the new MRE, will allow substantially higher lithium grade than the life-of-mine average during the early production years.

 

PROCESS DEVELOPMENT / TESTWORK / ENGINEERING

During 2023, working with several partners including Metso and UVR FIA in Freiberg, the Company has continued its various mineral processing, calcination and hydrometallurgical testwork programmes.  The initial results from the pilot and bench scale testwork are encouraging as further described below and will assist in delivering additional engineering parameters that will feed into downstream engineering design.  The processing testwork has utilised representative samples generated from core from the Company's 84-hole drilling campaign including both ore types, the High Grade Greisen ('HGG') and Albite Granite ('AG').

 

Mineral Processing

Pilot scale mineral processing testwork was completed in December 2023 at the GTK pilot facilities in Finland, by GTK and Metso experts. The primary goal of this work was to confirm previous testwork results on a representative sample that now also includes the lithium bearing Albite.  The results of these tests confirmed the conclusions of the bench scale tests performed in the summer of 2023 that mineral processing of run-of-mine ore is achievable using a mainstream front-end flowsheet consisting of a comminution circuit and a rougher-scavenger wet magnetic separation circuit. 

 

Metso was supplied with a representative two-ton bulk sample to model the initial 15 years of mine life incorporating a mix of both HGG and AG.  The main findings were:

·    A main stream mineral processing flow sheet can be applied;

·    A simulated Run of Mine sample Li-recovery is c.80 % with a mass pull of c.18%;

·    The same mineral processing flow sheet is suitable for both of the ore types; and   

·    Both of the ore types can be processed individually or at any mix without compromising the recoveries.

 

The mineral processing flowsheet was designed by Metso, with basic engineering initiated in December 2023. The equipment selection was completed in February 2024.

 

Pyro- and Hydrometallurgy

To ensure the suitability of Zinnwaldite for Metso's proprietary alkaline leaching, a sample of Zinnwaldite concentrate generated in the mineral processing pilot testwork was calcined and subsequently leached at bench scale at Metso's facilities in Pori, Finland.  The encouraging main findings are:

·    No additives needed in calcination;

·    Significantly less waste material produced;

·    Temperature clearly below 1000°C; and

·    Li recovery to solution clearly above 95%.

 

The alkaline processing route has the potential to offer significant advantages in terms of overall recovery, efficiency and reduced impact on the environment.

 

The Company is now moving on to the calcination pilot testwork at IBU-tec's facility in Weimar, Germany, under Metso's supervision, to confirm the parameters of the calcination flowsheet. 

A representative sample of Zinnwaldite concentrate has also been provided to K-Utec for tests to confirm that the large-scale tests previously performed by K-Utec based on HGG concentrate are applicable to the material derived from a combination of both pre types.

 

Hydrogeology

In February 2024, the Company completed its hydrogeological drill programme that comprised eight groundwater ('GW') monitoring wells and was started in September 2023. These included six deep wells extending to reach the mineralised Albite Granite, and two shallow drill wells intended to penetrate the Rhyolite rock of the hanging wall.  All of these wells will be converted to long term ground water monitoring wells to collate data on an ongoing basis.  This represents an essential piece of work for both technical and planning as well as environmental impact assessment ('EIA') permitting requirements.

 

The results of this programme will support the production of a hydrogeological underground and surface model.  This model will include information received from Geomet in regard to data on the Czech side of the border to support the development of a combined cross-border hydrogeological model. This represents an essential piece of work for both technical and planning as well as environmental impact assessment ('EIA') permitting requirements.  The Company is supported by a group of consultants in this effort, including SRK, Geologische Landesuntersuchung Freiberg GmbH ('GLU'), Fugro and ERM.

 

OTHER OPERATIONAL MATTERS

Infrastructure

In 2023, the Company continued its work on defining the optimal solutions for the required infrastructure based on the potential for higher production levels supported by the results of the drilling campaign and the metallurgical testwork carried out. The Company appointed Fichtner GmbH, a major German consulting group with experience concerning materials handling, road, and rail infrastructure as well as all civil works. The Group will, using trade-off studies, evaluate the most suitable, economical, and environmentally friendly options for all surface facilities.

 

The Company also undertook the digitisation of historic mine plans of the Zinnerz mine in Altenberg, in collaboration with the owner of the historic Zinnerz Altenberg mine, the LMBV. The digital plans now cover more than three production and mine infrastructure levels of the historic mine and are vital in the process of developing detailed construction plans and mine designs that will also include utilisation of the existing historic mine infrastructure in Altenberg. This would result in significantly reduced disruption to local residents by hauling the ore underground on the 500m RL elevation towards the processing site, northeast of Altenberg.

 

The Company has also continued with its evaluations for tailings management, supported by Knight Piesold (UK), which specialise in tailings management and engineering. The Company is strongly committed to progress planning for a Dry Stack Facility ('DSF'), for which multiple design and site options are being evaluated.

 

Exploration Licenses

Whilst the primary focus is on the development of its core Zinnwald Licence, the Company continues to advance targets on its other 100% owned prospective exploration licence areas including Falkenhain, Altenberg, Bärenstein and Sadisdorf that surround the Zinnwald licence (See Project overview above for more detail).  The Altenberg exploration licence was renewed in November 2023 for a further three years to February 2027. The Company now has licences over almost 10,000 hectares in an area that has been one of the mainstays of German mining for almost 800 years.  The Company believes that these licence areas have the potential for additional satellite resources to support the longer-term expansion of the Zinnwald Project as a whole and potentially provide an additional production opportunity to further expand one of Europe's largest lithium opportunities.

 

Co-Broker Appointment

In February 2023, the Company appointed Tamesis Partners LLP as joint corporate broker and it published the first independent research note on the Company.  Tamesis is a specialist ECM and advisory house with a focus on the mining sector. Tamesis will support the Company with research coverage and access to an incremental audience of institutional and strategic investors.

 

Staffing in Germany

The Group has further strengthened the team in Germany in 2023, adding skills in several key disciplines including geology, mining and logistics.  The Company appointed Marko Uhlig as Joint Managing Director of Zinnwald Lithium GmbH.  Marko is a seasoned professional manager with a wealth of commercial experience gained over a career of more than 30 years. He has worked in Germany as well as internationally for companies including ThyssenKrupp AG and SKW Metallurgie AG and is a graduate of Freiberg University.  The local Project team now comprises 15 full time staff of which five are female. The Company also employs six full time consultants with expertise across all the areas of the Project's flowsheet and development plan.  In total the Group has twenty two full-time professionals (including employees and full time consultants) working across disciplines in both the Freiberg and London office locations. In addition to the professionals working directly for the Company, more than 30 professionals work for the Project in partner organisations. 

 

ESG and Sustainability

Progress in relation to Permitting, Environmental, Social and Governmental engagement are covered in detail in the report of the Sustainability Committee below.

 

Lithium Market in 2023

Developments in EU

In December 2023, the EU Parliament formally adopted the proposed regulation for the Critical Raw Materials Act ('CRMA') and the European Council is expected to approve it by the end of March 2024 with the regulation coming into force in April 2024.  The CRMA proposes benchmarks of 10% of the EU's annual consumption of lithium for extraction and 50% for processing; proposals to simplify permitting procedures; and a plan to identify selected strategic projects to benefit from EU financial support. The CRMA also sets time frames for strategic projects to secure permits - a maximum 15 months for processing and recycling projects and 27 months for mining. EU countries will be required to designate single points of contact to process permit applications, with strategic projects given priority status. They will also have to develop national programmes for exploring geological resources.

 

Once the CRMA passes into law, the EU Commission has said it will invite applications to be designated as a formal "strategic" project.  The Company intends to apply for this designation as soon as applications start and believes that it has a strong case to meet these key criteria, as outlined in the Project Overview above.

 

In the last few months alone, there have been a number of potential long-term announcements from EU and German bodies in regard to both grant and long-term equity partners.  In October 2023, the German Government published a new funding guideline to promote investment in the development and expansion of production capacity along the entire battery value chain. In November 2023, the EU announced the 4th cash call for €4 billion under the EU Innovation Fund that expects to issue grants of up to €40 billion over 2021-2030. In January 2024, EIT InnoEnergy launched a €500m European battery raw materials equity investment fund.  In February 2024, the German government earmarked €1bn for equity investment in critical raw materials projects to be administered by the KFW development bank.  The Company has already started engagement with various of these bodies and will continue to do so, as the Project moves towards its Financing Investment Decision ("FID").

 

General Lithium Market in 2023 and BFS Pricing

2023 saw a severe retrace of the widely quoted spot price for lithium products into China from the highs of $80,000 per tonne in 2022 to around $15,000 per tonne in early 2024.  The lithium market has grown very rapidly from being a relatively small niche market from a global perspective. Partly as a consequence of this, the pricing of lithium has historically been quite volatile if looked at over a purely short-term basis.  The price tends to overshoot in the short term on both the high and low side, as shown in the swings from 2022 to 2023. However, pricing remains materially higher than the prices seen in the previous cyclical low of 2018-19. 

 

While the marked prices swings have principally been observed in the spot market, which is a relatively small part of the overall lithium market, this more than 80% decline appears also to have occurred in the contract market.  This is borne out by the reported results for 2023 for two of the largest companies in the industry, SQM and Albermarle.  In 2023, SQM's average quarterly price declined from $59,000 in Q4 2022 to $16,000 in Q4 2023.  Albermarle reported similar declines but described current prices last week as 'unsustainable' and expects through-cycle prices must be between $20k-30k/t LCE to incentivise necessary supply, with $20k/t the minimum price to support over 100 projects.  Albermarle forecasts lithium market demand to see 2.5 times growth over 2024-2030 from circa 1mt in 2023 to 3.3mt by 2030.  It expects this to be driven by an increase in global average EV battery size of 50Kwh in 2023 to 68 Kwh by 2030 and EV production rising from 14.9m EVs in 2023 to 46.8m by 2030 (a 50% penetration rate). 

 

It is important to note that the Company deliberately took a conservative long term price assumption of $22,500/t in its PEA in 2022 to ensure the robustness of its financial forecasts.  This can be shown in comparison to other projects that have issued Studies since Zinnwald's PEA was published with their assumed pricing noted below:

 

The financial analysis included in the 2022 PEA indicated that the Project could be relatively robust financially even at a reduced lithium price.  There are large parts of the current supply chain, most notably Chinese lepidolite production, that is materially higher cost than the Project is estimated to be.  The Company will commission a market study to justify pricing assumptions to be used in the BFS nearer to the time of publication.

 

Ireland

In order to focus its efforts on the Project, in March 2023, Zinnwald reached an agreement with Ocean Partners UK Ltd for it to acquire Erris Zinc Ltd, the Company's subsidiary that owns the Abbeytown Zinc License in Ireland ('Abbeytown').  On 24 June 2023, the Irish GeoSciences Department approved the transaction, and the sale was completed. Zinnwald shall receive a 1% Net Smelter Royalty and a €200,000 cash payment due six months after commencement of commercial production from Abbeytown. As agreed in the Sale and Purchase Agreement, the Company also has the right to buy Erris Zinc Ltd back for €1 if the additional exploration spend of €100,000 over 2024 to 2025 is not made by March 2025. 

 

Shareholder Evolution in 2023

During 2023, the Company's share price has broadly tracked its peers in the wider lithium space, all of whom have been negatively impacted by the 80% decline in the lithium price.  The one major evolution in 2023 is that the  Company has undertaken a formal review of its underlying beneficial shareholder base that shows an ever-increasing ownership by German and EU investors.  Based on the latest share register, the Company now shows UK holders at 46%, large German institutional and corporate investors at 31%, other German and EU investors at 13% and Rest of the World at 10%.

 

Outlook

The Company's strategy is centred on developing a project that is not only significant in scale but also economically attractive and founded on a robust technical and sustainable framework. Current and ongoing workstreams are pivotal to this strategy, with significant progress already achieved and several key milestones on the horizon. These include ongoing metallurgical testwork, continuous advancement of hydrogeological drilling campaigns, and detailed mining planning. Concurrently, the team is engaged in permitting and commercial activities.

 

The scale of the increase in the Company's MRE together with the encouraging initial testwork results related to the Metso alkaline leaching process are being evaluated in detail. Taken together, they have the potential to materially increase the possible scale of the Project as well as reduce its impact in terms of the volumes of waste material produced. Working through the implications of these to optimise the Project will have an impact on the expected timing of the BFS, which is now expected to be published in late 2024. An external factor beyond the Company's control that could affect this timing is the availability of pilot testing facilities.  However, the Company is working closely with its technology partners to minimise the potential for this.

 

The Company remains well financed with a current cash position of €12.3m and the Board looks forward to updating the market on progress on all fronts as its various workstreams continue.

 

Financial Review

Notwithstanding that the Company is a UK Plc admitted to trading on AIM, the Company presents its accounts in its functional currency of Euros, since the majority of its expenditure, including that of its subsidiary Zinnwald Lithium, is denominated in this currency.

 

The Group is still at an exploration and development stage and not yet producing minerals, which would generate commercial income.  The Group is not expected to report overall profits until it is able to profitably commercialise its Zinnwald Lithium project in Germany.

 

During the year, the Group made an operating loss of €2.9m compared with a loss of €2.4m in 2022.  In 2023, administrative expenses increased to €2.6m compared with €1.9m in 2022, which reflects the material increase in staffing levels as the Project has increased its workstreams. It also includes the costs related to being a public listed company, including the costs of non-executive directors, brokers, nominated adviser and other advisers. There was also a share-based payment expense of €0.5m in both 2023 and 2022, arising from the issuance of new Options and RSUs in each period.  These increases were partially offset by increased rental income of €0.2m from the sub-leasing of space at its offices and core shed in Freiberg.

 

During the year, the Group made an overall loss before taxation of €2.6m compared with a loss of €2.4m for the year ended 31 December 2022. This included interest income of €0.3m on the Group's cash balances.

 

The Total Net Assets of the Group increased to €39.8m as at 31 December 2023 from €20.8m at 31 December 2022 primarily due to the March 2023 fund raise of £18.75m, which was used to finance significant expenditure on areas such as drilling, staff/consultant costs, permitting and testwork.  This increased the Group's Intangible asset balance to €27.7m at year end from 19.0m at the end of 2022 and cash balances increased to €14.3m from €3.2m at the end of 2022.

 

The closing cash balance for the Group at the period end was €14.3m. As at today's date, the Group's cash balance is €12.3m.

 

 

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2023

		31 December 2023	31 December 2022
	Notes	€	€
Continuing operations
Administrative expenses		(2,560,466)	(1,850,129)
Other operating income	‎7	183,143	42,948
Share based payments charge	‎23	(528,626)	(545,225)
Operating Loss		(2,905,949)	(2,352,406)
Finance income	‎9	282,229	190
Loss before taxation		(2,623,720)	(2,352,216)
Tax	‎10	(18,785)	-
Loss for the financial year	‎27	(2,642,505)	(2,352,216)
Other Comprehensive Income		38	(138)
Total comprehensive loss for the year		(2,642,467)	(2,352,354)
Earnings per share from continuing operations attributable to the owners of the parent company	‎11
Basic (cents per share)		(0.61)	(0.80)

 

Total loss and comprehensive loss for the year is attributable to the owners of the parent company.

 

 

GROUP STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2023

 

		31 December 2023	31 December 2022
	Notes	€	€
Non-current assets
Intangible Assets	‎12	27,652,152	18,966,165
Property, plant and equipment	‎13	386,788	327,528
Right of Use Assets	‎14	-	185,285
		28,038,940	19,478,978
Current assets
Trade and other receivables	‎‎18	357,463	309,795
Right of Use Assets < 1 year	14	46,131	-
Cash and cash equivalents		14,306,191	3,164,585
		14,709,785	3,474,380
Total Assets		42,748,725	22,953,358
Current liabilities
Trade and other payables	‎19	(1,469,564)	(583,661)
Lease Liabilities	‎14	(47,795)	(140,149)
		(1,517,359)	(723,810)
Net current assets		13,192,426	2,750,570
Non-current Liabilities
Deferred tax liability	‎20	(1,382,868)	(1,382,868)
Lease Liabilities > 1 Year	‎14	-	(47,795)
		(1,382,868)	(1,430,663)
Total Liabilities		(2,900,227)	(2,154,473)
Net Assets		39,848,498	20,798,885
Equity
Share capital	‎24	5,365,379	3,316,248
Share premium	‎25	39,403,810	20,289,487
Other reserves	‎26	1,896,531	1,367,867
Retained losses	‎27	(6,817,222)	(4,174,717)
Total equity		39,848,498	20,798,885

 

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2023

 

	Notes	Share Capital	Share premium account	Other reserves	Retained earnings	Total
		€	€	€	€	€
Balance at 1 January 2022		3,316,248	20,289,487	822,780	(1,822,501)	22,606,014
Year ended 31 December 2022
Loss for the year		-	-	-	(2,352,216)	(2,352,216)
Other comprehensive income:
Currency translation differences		-	-	(138)	-	(138)
Total comprehensive loss for the year		-	-	(138)	(2,352,216)	(2,352,354)
Issue of share capital	‎24	-	-	-	-	-
Share issue costs		-	-	-	-	-
Credit to equity for equity settled share-based payments	‎23	-	-	545,225	-	545,225
Total transactions with owners recognised directly in equity		-	-	545,225	-	545,225
Balance at 31 December 2022 and 1 January 2023		3,316,248	20,289,487	1,367,867	(4,174,717)	20,798,885
Year ended 31 December 2023
Loss for the year		-	-	-	(2,642,505)	(2,642,505)
Other comprehensive income
Currency translation differences		-	-	38	-	38
Total comprehensive income for the year		-	-	38	(2,642,505)	(2,642,467)
Issue of share capital	‎24	2,049,131	19,282,326	-	-	21,331,457
Share issue costs		-	(168,003)	-	-	(168,003)
Credit to equity for equity settled share-based payments	‎23	-	-	528,626	-	528,626
Total transactions with owners recognised directly in equity		2,049,131	19,114,323	528,626	-	21,692,080
Balance at 31 December 2023		5,365,379	39,403,810	1,896,531	(6,817,222)	39,848,498

 

 

GROUP STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2023

		Year ended 31 December 2023		Year ended 31 December 2022
	Notes	€	€	€	€
Cash flows from operating activities
Cash used in operations	‎31		(1,359,464)		(1,904,775)
Net cash outflow from operating activities			(1,359,464)		(1,904,775)
Cash flows from investing activities
Exploration expenditure in Germany	12	(8,687,649)		(2,802,075)
Purchase of property, plant and equipment	13	(112,964)		(351,217)
Proceeds on disposal of equipment		-		26,471
Interest received		282,229		190
Net cash used in investing activities			(8,518,384)		(3,126,631)
Cash flows from financing activities
Proceeds from the issue of shares		21,331,457		-
Share issue costs		(168,003)		-
Lease payments		(144,000)		(96,000)
Net cash generated from financing activities			21,019,454		(96,000)
Net increase / (decrease) in cash and cash equivalents			11,141,606		(5,127,406)
Cash and cash equivalents at beginning of year			3,164,585		8,291,991
Cash and cash equivalents at end of year			14,306,191		3,164,585

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

 

1.    Accounting Policies

Company Information

Zinnwald Lithium Plc (the "Company") is a public limited company which is listed on the AIM Market of the London Stock Exchange domiciled and incorporated in England and Wales. The registered office address is 29-31 Castle Street, High Wycombe, Buckinghamshire, United Kingdom, HP13 6RU.

 

The group consists of Zinnwald Lithium Plc and its wholly owned subsidiaries as follows as at 31 December 2023:

 

Name of undertaking	Registered office	Nature of business	Class of shares held	Direct holding	Indirect holding
Zinnwald Lithium Holdings Ltd	United Kingdom	Exploration	Ordinary	100.0%	-
Zinnwald Lithium GmbH	Germany	Exploration	Ordinary	-	100.0%
Zinnwald Lithium Services GmbH	Germany	Leasing	Ordinary	-	100.0%

On 1 December 2017, Zinnwald Lithium Plc acquired the entire issued share capital of Zinnwald Lithium Holdings Ltd ("ZLH", formerly known as Erris Resources (Exploration) Ltd) by way of a share for share exchange.  This transaction was treated as a group reconstruction and accounted for using the reverse merger accounting method.  Its registered office address is 29-31 Castle Street, High Wycombe, Bucks, HP13 6RU.

 

On 29 October 2020, Zinnwald Lithium Plc acquired 50% of the issued share capital of Zinnwald Lithium GmbH ("ZLG", formerly known as Deutsche Lithium GmbH).  On 24 June 2021, the Company acquired the remaining 50% of the issued share capital of ZLG.  ZLG is a company registered in Germany.  Its registered office is at Am Junger-Lowe-Schacht 10, 09599, Freiberg, Germany.

 

On 22 February 2023, ZLH incorporated a new company, Zinnwald Lithium Services GmbH ("ZLS") for the purpose of holding all rental and similar operational leases for the Group's operations in Germany. ZLG is a company registered in Germany.  Its registered office is at Am Junger-Lowe-Schacht 10, 09599, Freiberg, Germany

 

On 13 June 2023, Zinnwald Lithium Plc disposed of the entire issued share capital of Erris Zinc Limited, which it had owned since incorporation in 2018.  All intangible assets relating to the Abbeytown project and all intercompany loans to Erris Zinc had been fully impaired and written off in prior periods.  The disposal proceeds was €1 for the share capital and a €3,672 loss on disposal in the period.

 

Basis of preparation

These financial statements have been prepared in accordance with UK-adopted International Accounting Standards and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS (except as otherwise stated).

 

The financial statements are prepared in euros, which is the functional currency of the company and the group's presentation currency, since the majority of its expenditure, including funding provided to ZLG and ZLS, is denominated in this currency. Monetary amounts in these financial statements are rounded to the nearest €.

 

The € to GBP exchange rate used for translation as at 31 December 2023 was €1.153509.

 

The consolidated financial statements have been prepared under the historical cost convention, unless stated otherwise within the accounting policies. The principal accounting policies adopted are set out below.

 

Basis of consolidation         

The consolidated financial statements incorporate those of Zinnwald Lithium Plc and all of its subsidiaries (i.e., entities that the group controls when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity).

 

All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

 

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

 

Subsidiaries are fully consolidated from the date on which control is transferred to the group.  They are deconsolidated from the date on which control ceases.

 

Going concern

At the time of approving the financial statements, the directors have a reasonable expectation that the group and company have adequate resources to continue in operational existence for the foreseeable future. The Group had a cash balance of €14.3m at the year end and keeps a tight control over all expenditure. The group is fully financed through to at least the completion of its Bankable Feasibility Study ("BFS") later in 2024 and thereafter into 2025. The  Board maintains an ongoing strategy to enable the curtailing of a number of areas of expenditure to enable it to meet its minimum fixed costs for the next 12 months, even without raising further funds, whilst still maintaining all licenses in good standing.  Thus, the going concern basis of accounting in preparing the Financial Statements continues to be adopted.

 

Intangible assets

Capitalised Exploration and Evaluation costs

Exploration and evaluation assets are capitalised as Intangible Assets and represent the costs incurred on the exploration and evaluation of potential mineral resources,  They include direct costs (such as permitting costs, drilling, assays and flowsheet testwork done by consulting engineers), licence payments and fixed salary/consultant costs, capitalised in accordance with IFRS 6 "Exploration for and Evaluation of Mineral Resources".  Exploration and Evaluation assets are initially measured at historic cost.  Exploration and Evaluation Costs are assessed for impairment when facts and circumstances suggest that the carrying amount of an asset may exceed its recoverable amount.  Any impairment is recognised directly in profit or loss.

 

Property, plant and equipment

Property, plant and equipment are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses. Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

 

Leasehold land and buildings	No deprecation is charged on these balances
Plant and equipment	25% on cost
Fixtures and fittings	25% on cost
Computers	25% on cost
Motor vehicles	16.7% on cost for new vehicles, 33.3% on cost for second-hand vehicles
Low-value assets (Germany)	100% on cost on acquisition for items valued at less than €800

 

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset and is recognised in the income statement.

 

Non-current investments

In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.

 

Impairment of non-current assets

At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

Intangible assets not yet ready to use and not yet subject to amortisation are reviewed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable.

 

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

 

Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits held at call with banks.

 

Right of Use Assets and Lease Liabilities

On 1 January 2019, the group adopted IFRS 16, which supersedes IAS 17 and sets out principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract. All leases are accounted for by recognising a right-of-use assets due to a lease liability except for:

·      Lease of low value assets; and

·      Leases with duration of 12 months or less

The group reviews its contracts and agreements on an annual basis for the impact of IFRS 16. The group has such short duration leases and lease payments are charged to the income statement with the exception of the Group's lease for the Freiberg office and core shed.

 

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the group's incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.

 

On initial recognition, the carrying value of the lease liability also includes:

·      amounts expected to be payable under any residual value guarantee;

·      the exercise price of any purchase option granted in favour of the group if it is reasonably certain to assess that option;

·      any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.

 

Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

·      lease payments made at or before commencement of the lease;

·      initial direct costs incurred; and

·      the amount of any provision recognised where the group is contractually required to dismantle, remove or restore the leased asset.

 

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.

 

Financial assets

Financial assets are recognised in the group's and company's statement of financial position when the group and company become party to the contractual provisions of the instrument.

 

Financial assets are classified into specified categories at initial recognition and subsequently measured at amortised cost, fair value through other comprehensive income, or fair value through profit or loss.  The classification of financial assets at initial recognition that are debt instruments depends on the financial assets cash flow characteristics and the business model for managing them.

 

Financial assets are initially measured at fair value plus transaction costs.  In order for a financial asset to be classified and measured at amortised cost, it needs to give rise to cash flows that are "solely payments of principal and interest SPPI" on the principal amount outstanding.

 

Financial assets at amortised cost (debt instruments)

Financial assets at amortised cost are subsequently measured using the effective interest rate method and are subject to impairment.  The group's and company's financial assets at amortised cost comprise trade and other receivables and cash and cash equivalents.

 

Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.  The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period.  The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition.

 

Impairment of financial assets

Financial assets are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

 

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.

 

Financial liabilities

Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.  They are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

 

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period.  The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the net carrying amount on initial recognition.

 

Derecognition of financial liabilities

Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.

 

Equity instruments

Equity instruments issued by the group are recorded at the proceeds received, net of direct issue costs.

 

Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of non-current assets.

 

The cost of any unused holiday entitlement is recognised in the period in which the employee's services are received.

Termination benefits are recognised immediately as an expense when the group and company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

 

Retirement benefits

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

 

Equity

Share capital       

Ordinary shares are classified as equity.

Share premium    

Share premium represents the excess of the issue price over the par value on shares issued.  Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

 

Merger reserve

A merger reserve was created in 2017 on purchase of the entire share capital of Erris Resources (Exploration) Ltd which was completed by way of a share for share exchange, and which has been treated as a group reconstruction and accounted for using the reverse merger accounting method.

 

Share-based payment reserve

The share-based payment reserve is used to recognise the fair value of equity-settled share-based payment transactions.

 

Share-based payments

Equity-settled share-based payments with employees and others providing services are measured at the fair value of the equity instruments at the grant date.  Fair value is measured by use of an appropriate pricing model.  Equity-settled share-based payment transactions with other parties are measured at the fair value of the goods and services, except where the fair value cannot be estimated reliably, in which case they are valued at the fair value of the equity instrument granted.

 

The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest.  A corresponding adjustment is made to equity.

 

When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification.  Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment.  The share-based payment expense is not adjusted if the modified fair value is less than the original fair value.

 

Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.

 

Foreign exchange

Foreign currency transactions are translated into the functional currency using the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in administrative expenses in the income statement for the period.

 

The financial statements are presented in the functional currency of Euros, since the majority of exploration expenditure is denominated in this currency.

 

Exceptional items

Items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the group.  They are items that are material, either because of their size or nature, or that are non-recurring.

 

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer, who is considered to be the group's chief operating decision-maker ('CODM').

 

New standards, amendments and interpretations not yet adopted

There were no new standards or amendments to standards adopted by the group and company during the year which had a material impact on the financial statements.

 

At the date of approval of these financial statements, the following standards and amendments were in issue but not yet effective, and have not been early adopted:

·      Amendments to IAS 1: Presentation of Financial Statements: Classification of Liabilities as Current or Non-current (Effective date 1 January 2024)

·      Amendments to IAS 1: Classification of Liabilities as Current or Non-current - Deferral of Effective Date (Effective date 1 January 2024)

·      Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback (Effective date 1 January 2024).  The Group does not have any sale and leaseback agreements.

·      Amendments to IAS 1 Presentation of Financial Statements: Non-current Liabilities with Covenants (Effective date 1 January 2024).  The Group has no non-current liabilities with covenants.

·      Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance Arrangements  (Effective date 1 January 2024).  The Group has no supplier finance arrangements.

·      Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rate: Lack of Exchangeability (Effective date TBC)*

 

*subject to UK endorsement

 

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the group or company.

 

2.    Judgements and key sources of estimation uncertainty

In the application of the accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

 

Critical judgements

The following judgements and estimates have had the most significant effect on amounts recognised in the financial statements.

 

Share-based payments

Estimating fair value for share based payment transactions requires determination of the most appropriate valuation model, which depends on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option or appreciation right, volatility and dividend yield and making assumptions about them. For the measurement of the fair value of equity settled transactions with employees at the grant date, the group and company use the Black Scholes model.

 

Impairment of Capitalised Exploration Costs

Group capitalised exploration costs had a carrying value as at 31 December 2023 of €27,652,152  (2022: €18,966,165), which solely relate to the Zinnwald Lithium Project, Management tests annually whether capitalised exploration costs have a carrying value in accordance with the accounting policy stated in note 1.6. Each exploration project is subject to a review either by a consultant or an appropriately experienced Director to determine if the exploration results returned to date warrant further exploration expenditure and have the potential to result in an economic discovery.

 

This review takes into consideration long-term metal prices, anticipated resource volumes and grades, permitting and infrastructure as well as the likelihood of on-going funding from equity investors or other sources of long term funding. In the event that a project does not represent an economic exploration target and results indicate that there is no additional upside, or that future funding is unlikely, a decision will be made to discontinue exploration.

 

In Germany, ZLGs core mining license at Zinnwald is valid to 31 December 2047, which underpins the PEA published in September 2022.  In November 2023, the group published an updated Mineral Resource Estimate that showed a materially increased resource that underpins both the size of the Project and its long mine life.  ZLG has additional exploration licenses at Falkenhain valid to 31 December 2025, at Altenberg to 15 February 2027, at Sadisdorf to 30 June 2026 and at Bärenstein, newly granted in 2023 and valid to 30 June 2028.  The 2022 PEA showed a material increase in size and output of the Project and underpinned a pre-tax NPV of $1.6 billion and a post-tax NPV of $1.0 billion and post-tax IRR of 29%.  Accordingly, the Board has concluded that no impairment charge is required for these assets.

 

On 13 June 2023, the group sold Erris Zinc Ltd to Ocean Partners Ltd in return for a 1% Net Smelter Royalty and a €200,000 payment due six months after the start of commercial production. The Company had fully impaired the carrying value of these Ireland assets in its 2021 accounts and accordingly no further impairments are required.  The group consolidated the results of Erris Zinc up to the date of disposal, although the expensed amounts are not material to the group results.

 

3.    Financial Risk and Capital Risk Management

The Group's and Company's activities expose it to a variety of financial risks: market risk (primarily currency risks), credit risk and liquidity risk.  The overall risk management programme focusses on currency and working capital management.

 

Foreign Exchange Risk

The Company operates internationally and is exposed to foreign exchange risk arising from one main currency exposure, namely GBP for its Head Office costs and the value of its shares for fund-raising and Euros for a material part of its operating expenditure. The Group's Treasury risk management policy is currently to hold most of its cash reserves in Euros, as the majority of its current and planned expenditure will be on the Zinnwald Lithium Project in Germany.  The Company took advantage of the strong GBP:Euro exchange rate to convert £13m of the £18.75m cash raised in March 2023 into Euros to match its planned spend for 2023 and into 2024.

 

Credit and Interest Rate Risk

The group and company have no borrowings and a low level of trade creditors and have minimal credit or interest rate risk exposure. The Group's cash and cash equivalents is held at major financial institutions.

 

Working Capital and Liquidity Risk

Cashflow and working capital forecasting is performed in the operating entities of the group and consolidated at a group level basis for monthly reporting to the Board. The Directors monitor these reports and rolling forecasts to ensure the group has sufficient cash to meet its operational needs. The Board has a policy of maintaining at least a GBP 0.5m cash reserve headroom. The group has no material fixed cost overheads other than its costs of being listed on the AIM market and its lease in Freiberg.  None of its employee contracts have notice periods of longer than six months and its exploration expenditure is inherently discretionary.

 

4.    Segmental reporting

The Group operates in the UK and Germany.  Activities in the UK include the Head Office corporate and administrative costs whilst the activities in Germany relate to ongoing development work at the group's wholly owned Zinnwald Lithium Project. The reports used by the Board and Management are based on these geographical segments.  Non-core Assets related to the historic Abbeytown Zinc Project, which was sold in April 2023.

	Non-core Assets	Germany	UK	Total
	2023	2023	2023	2023
	€	€	€	€
Administrative expenses	(8,837)	(872,958)	(1,717,060)	(2,598,855)
Share based payment charge	-	-	(528,626)	(528,626)
Project impairment	-	-	-	-
Gain/loss on foreign exchange	-	-	42,240	42,240
Other operating income	-	183,143	-	183,143
Finance income	-	-	282,229	282,229
Interest paid	-	(3,851)	-	(3,851)
Tax	-	(18,785)	-	(18,785)
Loss from operations per reportable segment	(8,837)	(715,451)	(1,921,217)	(2,642,505)
Reportable segment assets	-	27,046,520	15,702,205	42,748,725
Reportable segment liabilities	-	2,436,646	463,381	2,900,227
	Non-core Assets	Germany	UK	Total
	2022	2022	2022	2022
	€	€	€	€
Administrative expenses	(6,308)	(448,366)	(1,364,522)	(1,819,196)
Share based payment charge	-	-	(545,225)	(545,225)
Project impairment	-	-	-	-
Gain/loss on foreign exchange	-	-	(25,679)	(25,679)
Other operating income	-	42,948	-	42,948
Finance income	-	-	190	190
Interest paid	-	(5,254)	-	(5,254)
Loss from operations per reportable segment	(6,308)	(410,672)	(1,935,236)	(2,352,216)
Reportable segment assets	8,837	19,225,340	3,719,181	22,953,358
Reportable segment liabilities	-	1,855,795	298,678	2,154,473

 

 

5.    Operating loss

	2023	2022
	€	€
Operating loss for the year is stated after charging / (crediting)
Exchange (gains)/losses	(42,240)	25,679
Loss on disposal of subsidiary	3,672	-
Amortisation of intangible assets	1,662	995
Depreciation of property, plant and equipment	53,741	49,990
Depreciation of Right of Use Assets	139,154	93,405
Share-based payment expense	528.626	545,225
Operating lease charges	41,105	70,591
Exploration costs expensed	687,224	412,722

 

6.    Auditor's remuneration

Fees payables to the company's auditor	2023	2022
	€	€
For audit services
Annual Audit of group, parent company and subsidiary undertakings	41,979	36,523
Review of interim group financial statements	3,274
	45,254	36,523
For other services
Taxation compliance services	5,354	4,527

 

7.    Other operating income

	2023	2022
	€	€
Other operating income	183,143	42,948

 

Other operating income primarily comprises includes rental and utilities income from sub-lessors at the Group's offices in Freiberg.

 

8.    Employees

The average monthly number of persons (including directors) employed by the group and company during the year was:

	Group		Company
	2023	2022	2023	2022
	Number	Number	Number	Number
Directors	6	5	6	5
Employees	20	14	1	1
	26	19	7	6
Their aggregate remuneration comprised	Group		Company
	2023	2022	2023	2022
	€	€	€	€
Wages and salaries	1,621,204	1,300,065	819,393	709,370
Social security costs	200,980	142,586	101,657	86,266
Pension costs	139,841	98,457	64,571	52,067
	1,962,025	1,541,109	985,621	847,703

 

Aggregate remuneration expenses of the group include €942,695 (2022: €628,051) of costs capitalised and included within non-current assets of the group.

 

Aggregate remuneration expenses of the company include €63,543 (2022: €68,535) of costs capitalised and included within non-current assets of the group.

 

Directors' remuneration is disclosed in report of Remuneration Committee.

 

9.    Finance income

	Group
	2023	2022
	€	€
Interest income
Interest on bank deposits	282,229	190

 

 

10.  Taxation

	Group
Income Tax Expense	2023	2022
	€	€
UK Corporation tax expense - current year	-	-
Overseas current tax expense - current year	18,785	-
Total current tax expense	18,785	-
	€	€
Loss before taxation	(2,642,505)	(2,352,216)
Expected tax credit based on the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%)	(502,076)	(446,921)
Disallowable expenses	119,407	105,822
Non-taxable gains	-	-
Unutilised tax losses carried forward	394,237	341,099
Difference in overseas tax rate	7,216
Taxation (credit) / charge for the year	18,785	-

Losses available to carry forward amount to €7,539,000 (2022: €5,525,000).  No deferred tax asset has been recognised on these losses, as the probability and timing of available future taxable profits is not something that can currently be estimated.

 

Foreign tax liabilities are calculated at the prevailing tax rates applicable in the overseas tax jurisdictions, being Germany.

 

11.  Earnings per share

	2023	2022
	€	€
Weighted average number of ordinary shares for basic earnings per share	430,096,224	293,395,464
Effect of dilutive potential ordinary shares
-     Weighted average number of outstanding share options	6,106,301	5,695,342
Weighted average number of ordinary shares for diluted earnings per share	436,202,525	299,090,806
Earnings
Continuing operations	(2,642,505)	(2,352,216)
Loss for the period for continuing operations
Earnings for basic and diluted earnings per share distributable to equity shareholders of the company	(2,642,505)	(2,352,216)
Earnings per share for continuing operations
Basic and diluted earnings per share
Basic earnings per share - cents	(0.61)	(0.80)

 

There is no difference between the basic and diluted earnings per share for the period ended 31 December 2023 or 2022 as the effect of the exercise of options would be anti-dilutive.

 

12.  Intangible Assets

Group	Germany	Ireland	Total
	€	€	€
Cost
At 1 January 2022	16,165,915	2,059,272	18,225,187
Additions - group funded	2,802,075	-	2,802,075
At 31 December 2022	18,967,989	2,059,272	21,027,261
Additions - group funded	8,687,649	-	8,687,649
Disposals	-	(2,059,272)	(2,059,272)
At 31 December 2023	27,655,638	-	27,655,638
Amortisation and impairment
At 1 January 2022	829	2,059,272	2,060,101
Amortisation charged for the year	995	-	995
At 31 December 2022	1,824	2,059,272	2,061,096
Amortisation charged for the year	1,662	-	1,662
Disposals		(2,059,272)	(2,059,272)
At 31 December 2023	3,486	-	3,486
Carrying amount
At 31 December 2023	27,652,152	-	27,652,152
At 31 December 2022	18,966,165	-	18,966,165

 

Intangible assets comprise capitalised exploration and evaluation costs (direct costs, licence fees and fixed salary / consultant costs) of the Zinnwald Lithium project in Germany, as well as the fully impaired Ireland Zinc Project that was sold in April 2023. 

 

The Company has had no directly owned intangible assets since 2020.

 

 

13.  Property plant and equipment

Group	Leasehold, land and buildings	Fixtures,  fittings and equipment	Motor vehicles	Total
	€	€	€	€
Cost
At 1 January 2023	40,990	277,196	66,593	384,779
Additions - group funded	30,000	82,964	-	112,964
Exchange adjustments	-	103	-	103
At 31 December 2023	70,990	360,263	66,593	497,846
Depreciation and impairment
At 1 January 2023	-	39,638	17,614	57,252
Depreciation charged for the year	-	40,555	13,286	53,741
Exchange adjustments	-	65	-	65
At 31 December 2023	-	80,158	30,900	111,058
Carrying amount
At 31 December 2023	70,990	280,105	35,693	386,788
At 31 December 2022	40,990	237,559	48,979	327,528

 

Company				Computers
				€
Cost
At 1 January 2023				5,082
Additions - group funded				1,654
Exchange adjustments				103
At 31 December 2023				6,839
Depreciation and impairment
At 1 January 2023				2,515
Depreciation charged for the year				1,566
Exchange adjustments				65
At 31 December 2023				4,146
Carrying amount
At 31 December 2023				2,693
At 31 December 2022				2,568

 

14.  Right of Use Assets and Lease Liabilities

In May 2022, Zinnwald Lithium GmbH entered into a commercial lease agreement for and office and core shed property in Freiberg, Germany.  The duration of the lease is for 2 years.  The instalments for the lease are €12,000 per month, fixed for the duration of the lease.  The right of use asset and lease liability was recognised on 1 May 2022 on inception of the lease.  Movements in the year are shown as follows:

	€
Right of use asset
Initial Recognition on 1 May 2022	278,690
Depreciation charged in 2022	(93,405)
Balance as at 31 December 2022	185,285
Depreciation charged in 2023	(139,154)
Balance as at 31 December 2023	46,131
Lease Liability
Initial Recognition on 1 May 2022	266,690
Interest charged in 2022	5,254
Lease payments in 2022	(84,000)
Balance as at 31 December 2022	187,944
Interest charged in 2023	3,851
Lease payments in 2023	(144,000)
Balance as at 31 December 2023	47,795
-       Recognised in Short Term Payables	47,795
-       Recognised in Payables >1 year	-

 

15.  Investments

Company				2023	2022
				€	€
Investments in subsidiaries				14,523,374	14,523,375

 

Investments in subsidiaries are recorded at cost, which is the fair value of the consideration paid.

 

Movement in non-current investments

			Shares in group undertakings
Cost
At 1 January 2023			14,523,375
Disposals			(1)
At 31 December 2023			14,523,374
Carrying amount
At 31 December 2023			14,523,374
At 31 December 2022			14,523,375

The disposal in 2023 relates to the sale of the €1 share capital of Erris Zinc Ltd to Ocean Capital Partners in June 2023.

 

16.  Trade and other receivables - credit risk

Fair value of trade and other receivables

The directors consider that the carrying amount of trade and other receivables is equal to their fair value.

 

17.  Financial Instruments

	Group		Company
	2023	2022	2023	2022
	€	€	€	€
Financial instruments at amortised cost
Trade and other receivables	221,114	248,692	15,052,474	5,171,885
Cash and bank balances	14,306,191	3,164,585	13,724,866	2,748,145
	14,527,305	3,413,277	28,777,340	7,920,030
Financial liabilities at amortised cost
Trade and other payables	1,469,564	583,661	236,118	110,754
	1,469,564	583,661	236,188	110,754

 

18.  Trade and other receivables

	Group		Company
	2023	2022	2023	2022
Amounts falling due within one year:	€	€	€	€
Amounts owed by group undertakings	-	-	15,031,910	5,157,859
Trade receivables	4,418	-	-	-
Other receivables	216,696	248,692	20,566	14,026
Prepayments and accrued income	136,349	61,103	122,622	32,133
	357,463	309,795	15,175,098	5,204,018

 

Other receivables primarily comprise VAT recoverable, which were received following the year end.

The carrying amounts of the Group and Company's trade and other receivables are denominated in the following currencies:

	Group		Company
	2023	2022	2023	2022
Euros	210,328	256,008	575,045	271,911
British Pounds	147,135	53,787	14,600,052	4,932,107
	357,463	309,795	15,175,097	5,204,018

 

19.  Trade and other payables

	Group		Company
	2023	2022	2023	2022
Amounts falling due within one year:	€	€	€	€
Trade payables	234,817	321,277	94,945	10,468
Other taxation and social security	54,082	34,974	35,022	34,974
Other payables	30,892	13,082	275	-
Accruals and deferred income	1,149,773	214,327	105,876	65,313
	1,469,564	583,660	236,118	110,755

All Trade payables have been settled since the year end. 

The carrying amounts of the Group and Company's current liabilities are denominated in the following currencies:

	Group		Company
	2023	2022	2023	2022
Euros	1,144,295	459,637	64	-
British Pounds	325,268	124,023	236,055	110,755
	1,469,563	583,660	236,118	110,755

20.  Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:

Group				Liabilities	Liabilities
				2023	2022
				€	€
Zinnwald Lithium intangible assets - fair value adjustment				1,382,868	1,382,868

 

The deferred tax liability set out above relates to a 25% provision made on the fair value uplift of the company's acquisition of control of Zinnwald Lithium GmbH.

 

21.  Retirement benefit schemes

Defined contribution scheme				2023	2022
				€	€
Charge to profit or loss in respect of defined contribution schemes				64,571	52,067

 

A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.

 

22.  Share based Incentives

The Directors believe that the success of the Group will depend to a significant degree on the performance of the Group's senior management team.  The Directors also recognise the importance of ensuring that the management team are well motivated and identify closely with the success of the Group.   The Company adopted an initial Share Option Plan in December 2017 and will continue to issue options to key employees, consultants and Non-Executive Directors.  In October 2020, the Company's shareholders approved additional short-term and long-term incentive schemes for Executive Management, the key terms of which are detailed in the Remuneration Committee report.

 

Share Option Plan (2017)

Movements in the number of share options, under the Share Option Plan (2017), outstanding and their related weighted average exercise prices are as follows:

 

	Year ended 31 December 2023					Year ended 31 December 2022
	Average exercise price in £ per share			Number of Options		Average exercise price in £ per share		Number of Options
At beginning of year	£0.1748			4,200,000		£0.0920		1,900,000
Granted during the year	£0.1041			2,450,000		£0.1810		4,000,000
Lapsed during the year	-			-		£0.0965		(1,700,000)
Exercised during the year	-			-		-		-
At end of year	£0.1487			6,650,000		£0.1748		4,200,000
Exercisable at the year end				3,683,333				1,533,333
Weighted average remaining exercise period, years				3.44				3.99

 

Option classification
	Issue Date	No of Options	Exercise Price	Expiry Date
	29 October 2020	200,000	£0.0500	28 October 2025
	15 January 2022	4,000,000	£0.1810	15 January 2027
	23 March 2023	2,450,000	£0.1041	23 March 2028
		6,650,000	£0.1487

 

RSU Scheme (2020)

Movements in the number of RSUs, under the RSU Plan (2020), outstanding and their related weighted average exercise prices are as follows:

	Year ended 31 December 2023		Year ended 31 December 2022
	Ave Exercise Price	Options	Ave Exercise Price	Options
Beginning of Period	n/a	1,909,531	-	-
Granted	n/a	3,406,779	n/a	1,909,531
Lapsed	-	-	-	-
Exercised	-	-	-	-
At end of period	n/a	5,316,310	n/a	1,909,531
Weighted Ave remaining yrs		0.80		1.50

 

RSU Classification
Issue Date	No of RSUs	Vesting date
15 January 2022	1,909,531	16 January 2024
23 March 2023	3,406,779	23 March 2025

 

PSU Scheme (2020)

The first awards of PSUs under the new scheme were made on 15 January 2024, based on the initial performance period from 1 October 2020 to 31 December 2023.  A total of 4,500,000 PSUs were issued, which will be included on the register for inclusion in the 2024 accounts.

 

23.  Share based payment transactions

	Group		Company
	2023	2022	2023	2022
	€	€	€	€
Expenses recognised in the year
Options issued under the Share Option Plan (2017)	174,633	347,400	174,633	347,400
RSUs issued under the RSU Scheme (2020)	353,993	197,825	353,993	197,825
	528,626	545,225	528,626	545,225

 

Awards made under the various share incentive schemes will be expensed over the relevant vesting periods for each scheme. 

 

24.  Share Capital

	Group and Company
	2023	2022
Ordinary share capital	€	€
Issued and fully paid
473,524,624 ordinary shares of 1p each	5,365,379	3,316,248
	5,365,379	3,316,248

 

The Group's share capital is issued in GBP £ but is converted into the functional currency of the Group (Euros) at the date of issue of the shares.

 

Reconciliation of movements during the year:			Ordinary Number	Ordinary Value
			€	€
Ordinary shares of 1p each
At 1 January 2023			293,395,464	3,316,248
Issue of fully paid shares (cash subscription)			180,129,160	2,049,131
At 31 December 2023			473,524,624	5,365,379

25.  Share Premium account

	Group		Company
	2023	2022	2023	2022
	€	€	€	€
At beginning of year	20,289,487	20,289,487	20,289,487	20,289,487
Issue of new shares	19,282,326	-	19,282,326	-
Exercise of share options	-	-	-	-
Share issue expenses	(168,003)	-	(168,003)	-
	39,403,810	20,289,487	39,403,810	20,289,487

26.  Other reserves

 

	Merger reserve	Share based payment reserve	Translation reserve	Total
Group	€	€	€	€
At 1 January 2022	688,731	133,849	200	822,780
Additions	-	545,225	(138)	545,087
At 31 December 2022	688,731	679,074	62	1,367,867
Additions	-	528,626	38	528,664
At 31 December 2023	688,731	1,207,700	100	1,896,531

 

	Share based payment reserve	Translation reserve	Total
Company	€	€	€
At 1 January 2022	133,849	200	134,049
Additions	545,225	(138)	545,087
At 31 December 2022	679,074	62	679,136
Additions	528,626	38	528,664
At 31 December 2023	1,207,700	100	1,207,800

 

27.  Retained earnings

	Group		Company
	2023	2022	2023	2022
	€	€	€	€
At the beginning of the year	(4,174,717)	(1,822,501)	(1,917,521)	(251,044)
Loss for the year	(2,642,505)	(2,352,216)	(869,556)	(1,666,477)
At the end of the year	(6,817,222)	(4,174,717)	(2,787,077)	(1,917,521)

28.  Financial commitments, guarantees and contingent liabilities

Bacanora Royalty Agreement

The company and Bacanora entered into on completion of the Acquisition a royalty agreement which provides that the Company agrees to pay Bacanora a royalty of 2 per cent. of the net profit received by the company pursuant to its 50 per cent. shareholding in Zinnwald Lithium GmbH ("ZLG") and earned in relation to the sale of lithium products or minerals by ZLG's projects on the Zinnwald and Falkenhain licence areas. The royalty fee shall be paid in Euros and paid by ZLG half yearly. The agreement is for an initial term of 40 years and shall automatically extend for additional 20 year terms until mining and processing operations cease at ZLG's projects at the Zinnwald and Falkenhain licence areas. The company has undertaken to Bacanora to abide by certain obligations in relation to ZLG's projects at the Zinnwald and Falkenhain licence areas such as complying with applicable laws and ensure that these projects are operated in accordance with the underlying licences and concessions granted to Zinnwald Lithium.  The company shall have the right, but not the obligation, to extinguish at any time its right to pay a royalty fee to Bacanora prior to the expiry of the term by paying a one-off payment of €2,000,000. 

 

Whilst the Directors acknowledge this contingent liability, at this stage, it is not considered that the outcome can be considered probable or reasonably estimable and hence no provision has been made in the financial statements.  The Directors note that the Royalty is only applicable to 50% of ZLG's production and does not apply to the additional 50% of ZLG acquired by the Company in June 2021.  The Directors also note that the Royalty obligation remains due to Bacanora, which now a wholly owned subsidiary of Ganfeng Lithium Limited.

 

Osisko Royalty Agreements

As part of the sale of Erris Zinc Ltd to Ocean Capital Partners on 13 June 2023, the historic royalty due by the group to Osisko Gold Royalties was novated to Erris Zinc ahead of completion. Accordingly, this historic contingent liability has now been removed from the group.  The Osisko royalty did not apply to the Zinnwald Lithium project.

 

29.  Contingent assets

Agreements with Ocean Capital Partners

Under the terms of the sale of Erris Zinc Limited to Ocean Capital Partners on 13 June 2023, the Company was granted a 1% Net Smelter Royalty and a €200,000 cash payment due six months after the start of commercial production.  As agreed in the Sale and Purchase Agreement, the company also has the right to buy Erris Zinc Ltd back for €1 if the additional exploration spend of €100,000 over 2024 to 2025 is not made by March 2025.  Whilst the Directors acknowledge these contingent assets, at this stage, it is not considered that the outcome can be considered certain to be recognised and receivable and hence no asset has been recognised in the financial statements.

 

30.  Events after the reporting date

On 15 January 2024, the Company made a grant of a total of 4,228,475 RSUs and 4,350,000 Options under the Company's Long-Term Incentive Plans relating to performance in 2023, and a total of 4,500,000 PSUs relating to performance from 1 October 2020 to 31 December 2023.  The RSUs and PSUs were issued to Executive Management under the relevant schemes approved by shareholders in October 2020. The Options were primarily issued to Employees and Consultants under the terms of the Option Scheme approved by shareholders in 2017.

 

On 15 January 2024, the first tranche of 1,909,531 RSUs originally issued in January 2022 reached their vesting date, and in accordance with the rules of the scheme, vested at a price of 7.11p being the 20 Day VWAP price at close on 12 January 2024.  At its discretion, the Board has elected to pay the net amount due after tax under these awards in shares rather than cash.  Accordingly, 1,012,051 new ordinary shares were issued to recipients and following admission of these new shares to AIM, the Company now has 474,536,675 ordinary shares in issue.

 

On 21 February 2024, the Company published the results of its updated independent Mineral Resource Estimate ("MRE") for the Zinnwald lithium project.  This updated MRE showed a 445 % increase in tonnes and a 243% increase in contained lithium ("Li") to 429kt in the Measured and Indicated category versus the previous 2018 MRE. This establishes the Project as the second largest hard rock lithium project in the EU.  The updated MRE includes 11.3 Mt grading 3,420ppm Li (0.736% Li2O) in the Measured category, 193.5 Mt grading 2,220ppm Li (0.478% Li2O) in the Measured and Indicated category, and 33.3 Mt grading 2,140 ppm Li (0.461% Li2O) in the Inferred category.   The increase in overall tonnage is predominantly due to the incorporation of a broad zone of mineralised granite, as well as contribution of an extra 26,911 metres of new drilling over 84 holes.   This updated MRE has been prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators ("NI 43-101") by independent consulting firm Snowden Optiro Ltd ("Datamine International") of Bristol, United Kingdom. 

 

31.  Related party transactions

No consultancy fees or expenses were incurred with Related Parties in either 2023 or 2022.

As part of the March 2023 fund raise, Henry Maxey, a substantial shareholder in the Company, entered into a subscription agreement ("subscription agreement) with the Company to subscribe for 26,337,585 new ordinary Shares at the Placing Price of 10.41p for a value of approximately £2.7 million.  As part of this subscription agreement, Mr Maxey was granted a pre-emptive right to maintain his shareholding in any future fund raises.

Anton du Plessis and Cherif Rifaat, directors of the Company, subscribed for 720,000 and 675,000 new ordinary shares at the Placing Price of 10.41p and on the same terms as other subscribers in the placing.

 

32.  Cash (used in)/generated from group operations

	2023	2022
	€	€
Loss for the year after tax	(2,642,505)	(2,352,216)
Adjustments for:
Investment income	(282,229)	(190)
Lease interest	3,851	5,254
Gain on disposal of equipment	-	(4,288)
Depreciation of property, plant and equipment	53,741	49,990
Depreciation of Right of Use Assets	139,154	93,405
Amortisation of intangible assets	1,662	995
Loss on disposal of subsidiary	3,672	-
Equity-settled share-based payment expense	528,626	545,225
Movements in working capital:
(Increase) in trade and other receivables	(52,089)	(187,950)
Increase / (decrease) in trade and other payables	886,653	(55,000)
Cash used in operations	(1,359,464)	(1,904,775)

33.  Cash (used in)/generated from operations - company

	2023	2022
	€	€
Loss for the year after tax	(869,556)	(1,666,477)
Adjustments for:
Investment income	(282,229)	(191)
Group loan interest	(708,861)	-
Depreciation and impairment of property, plant and equipment	1,566	1,291
Loss on disposal of subsidiary	1	-
Equity-settled share-based payment expense	528,626	545,225
Movements in working capital:
(Increase) / decrease in trade and other receivables	(97,029)	7,787
Increase / (decrease) in trade and other payables	125,364	(159,675)
Cash used in operations	(1,302,118)	(1,272,040)

 

 

 

*ENDS*

 

 For further information visit www.zinnwaldlithium.com or contact:

 

Anton du Plessis Cherif Rifaat	Zinnwald Lithium plc	info@zinnwaldlithium.com
David Hart Dan Dearden-Williams	Allenby Capital (Nominated Adviser)	+44 (0) 20 3328 5656
Michael Seabrook Adam Pollock	Oberon Capital Ltd (Joint Broker)	+44 (0) 20 3179 5300
Richard Greenfield Charles Bendon	Tamesis Partner LLP (Joint Broker)	+44 (0) 20 3882 2868
Isabel de Salis Paul Dulieu	St Brides Partners (Financial PR)	zinnwald@stbridespartners.co.uk

 

Notes

AIM quoted Zinnwald Lithium plc (EPIC: ZNWD.L) is focused on becoming an important supplier of lithium hydroxide to Europe's fast-growing battery sector. The Company owns 100% of the Zinnwald Lithium Project in Germany, which has an approved mining licence, is located in the heart of Europe's chemical and automotive industries and has the potential to be one of Europe's more advanced battery grade lithium projects.